CHAPTER 1 NATURE, FORM, AND KINDS OF AGENCY

(1868 – 1884)

1868 – Definition of Agency

Five Characteristics of Agency:

1. Consensual
2. Principal
3. Nominate
4. Unilateral
5. Preparatory

Five Essential Elements of Agency:

1. Consent
2. Object
3. Representative
4. Acted within Authority
5. Competent to be a principal and agent

Agency character in Jurisprudence:

1. Personal
2. Representative
3. Derivative

Capacity Requirement:

1. Principals – Any person who is capacitated before the eyes of the law (1327; 1329)
2. Agents – No need to possess full capacity, as long as not totally incapacitated; Must be competent to bind himself

Two General Acts that can’t be delegated to agents:

1. Personal Acts – if personal performance is required by law or public policy or the agreement of the parties, the doing of the act
by a person on behalf of another does not constitute performance by the latter.

Ex:
a. Right to vote during an election in a corporation under section 25 of the Corporation Code
b. Making of a will pursuant to Art. 784
c. Statements which are required to be done personally
d. A member of the board of directors acting in proxy capacity B.P. 68
e. An agent can’t delegate to sub-agent performance of acts where he was appointed to do in person 1892 – 1893

2. Criminal Acts or Acts Not Allowed by Law – An attempt to delegate to another authority to do an act which, if done by the
principal would be illegal, is void.

Ex:
a. Ownership of an alien of a land in the country through a Filipino agent is against the law (Article 12 sec. 3, 7)
b. Persons prohibited from acquiring property because of their relation with the persons under their charge 1491

Nature of Relations Between Agent and Principal

1. Fiduciary in Nature (based on trust and confidence)

2. Agent estopped from asserting adverse interest to the principal
3. Agent can’t act for an adverse party (unless he acts with the knowledge and consent of both)
4. Agent must not use or disclose secret information

Agency Distinguished from the Following Contracts:

1. Loan
2. Lease of Service
3. Independent Contact
4. Partnership
5. Negotiorum Gestio
 6. Brokerage
7. Sale

1869 – Kinds of Agency

Kinds of Agency are differentiated from the following general denominations:

1. Creation
2. Character
3. Extent of Business Covered
4. Authority Conferred
5. Nature and Effects

1870 Form of Acceptance of Agent

1. Express
2. Implied from his acts which carry out the agency (subdivided to 1871 and 1872)
3. Silence
4. Inaction according to the circumstances

1871 – Acceptance between present persons(personal delivery of Principal)

1872– Acceptance when absent (transmittal only of the Principal)

1. When Principal transmits power of attorney and it was received without objection
2. When Principal entrusts by letter or telegram a power of attorney to the agent with which he was habitually engaged in
and did not reply to it

1873 – Communication or Giving of Notice of Agency

1. By way of special information, the person appointed as agent is considered such with respect to the person to whom it
was given; or
2. If by public advertisement, the agent is considered as such with regard to any person. Public advertisement may be
made in any form (newspaper, radio, posters, billboards)

Agency presumed to exist whether there is actually an agency or not

Manner of revocation us be done in the same manner it was conferred.

1874 – sale of piece of land without authority in writing is void

unenforceable, not necessarily void – Article 1403 2 (e) [need for proof through written, otherwise unenforceable]

1875 – Agency Presumed for Compensation

1876- Kind of agency as to extent of business covered

Three Classifications of Agent:

1. Universal agent – authorized to do all acts that the principal may personal do, and which he can lawfully delegate to another the
power of doing, presumed to have universal authority

2. General agent – authorized to transact all the business of his principal in relation to a particular trade, business or employment

3. Special Agent – one authorized to act in one or more specific transactions/ particular occasion only

Special types of Agent:

1. Attorney at law – represents client in legal matters

2. Auctioneer – business is to sell property for others
3. Broker – one whose business is to act as intermediary between two parties such as insurance and real estate brokers
4. Factor – one whose business is to receive and sell goods for a commission (entrusted with possession)
5. Cashier in Bank – represents a banking institution in its financial transactions
6. Attorney-in-fact – given authority to do a particular act not of legal character.
1877 – Agency couched in General Terms

Agency couched in general terms may be general agency or special agency (1876)

Agency couched in general terms grants only acts of administration even if the principal would state:

1. He withholds no power from the exercise of the agent

2. Agent may execute acts appropriate to carry out the agency
3. Authorizes a general or unlimited management

Acts of Administration is a question of fact, because the agency relationship sometimes exists for a specific business, that, even if it
were required of the agent to produce an SPA, an act may done not as act of strict dominion but mere act of administration

Ex:
a. Person employed to sell goods in a retail store may sell the goods without need of a special power of attorney because
the ‘selling’ is the act of administration
b. Attorney-in-fact authorized to pay debts and employ services of a lawyers to defend the principal’s interest impliedly
authorized to pay for attorney’s fees for services

1878 – SPECIAL POWER OF ATTORNEY

a. Payment (1232)
b. Novation
c. Compromise (2028) (arbitration 2042) and the three waivers
d. Waive obligation gratuitously
e. Sale of immovable
f. Make gifts, other than customary ones (or gifts to employees)
g. Loan
h. Lease more than a year
i. Gratuitous service
j. Contract of Partnership
k. Obligation principal as guarantor or surety
l. Create or convey real rights over immovable property without special power
m. Accept or repudiate an inheritance
n. Ratify obligations contracted before the agency
o. Strict Dominion

1879 – Vice versa rule on mortgage and sale through agent

1880 – exclusion of arbitration from power to compromise

1881 – definition of authority of agent

1882 – acts beneficial even if beyond instruction to the principal

Authority of the agent – power of the agent to affect the legal relations of the principal by acts done in accordance with the
principal’s manifestation of consent to him

Distinguish Authority from Power

1. Authority – Source i.e. Authority from Principal to sell

2. Power – Effect i.e. Authority from principal gives the agent the power to sell.

Kinds or Types of Authority

1. Actual – Actually granted (express or implied)

2. Express – conferred by words (1869)
3. Implied – incidental to the transaction or reasonable necessary to accomplish the purpose of the agency
4. apparent or ostensible – conferred by conduct or even by silence (another name for authority by estoppel) [also an
implied form]
5. General – covers all business of the principal
6. Special – particular transaction
7. By necessity – demanded by virtue of the existence of an emergency
When may Principal be Bound by Acts of Agent:

1. Standard Requisites:
a. Agent acts within the scope of authority
b. He acted on behalf of the principal
2. Ratification by principal
3. Acts more advantageous to principal

When Principal Bound by Acts of Agent beyond his Powers:

1. The acts of the principal contributed to deceive third persons in good faith
2. Limitations upon the power created by him could not have been known by the third person
3. Principal placed to the agent instruments signed by P in blank
4. Ratified the acts

1883 – Kinds of Principal (and also agent acting as per identity)

Kinds of Principal:

1. Disclosed principal – if at the time of the transaction contracted by the agent, the other party thereto has notice that the agent
is acting for a principal and of the principal’s identity

2. Partially disclosed – if the other party has notice that the agent is or may be acting for a principal but has no notice of the
principal’s identity

3. Undisclosed – The other party has no notice of the principal

AGENCY WITH UNDISCLOSED PRINCIPAL; Effects

1. Agent directly responsible

a. Agent authorized to act on behalf of the principal
b. Acts in agent’s own name

Thus, the Principal reserves no right of action against Agent or Third persons

UNLESS, contract involves things belonging to principal, PRINCIPAL IS BOUND

CASES:

THE CONCEPT OF AGENCY

1. G.R. No. 167552 April 23, 2007 EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner, vs. EDWIN
CUIZON and ERWIN CUIZON, Respondents.

Principle – An agent, who acts as such, is not personally liable to the party with whom he contracts, except when he expressly
binds himself to the obligation or when he exceeds the limits of his authority such party sufficient notice of his powers. However,
in case of excess of authority by the agent, the law does not say that a third person can recover from both the principal and the
agent.

FACTS:

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., the petitioner, is engaged in the business of importation and distribution of various
European industrial equipment for customers here in the Philippines. One of its customers is Impact Systems Sales, which is a sole
proprietorship owned by respondent ERWIN Cuizon, and the manager thereof is respondent EDWIN Cuizon. Both Respondents are
full-blooded brothers.
Respondents urgently sought to buy from petitioner 1-unit of sludge pump valued at ₱250,000. However, petitioner refused to
deliver the sludge pump to respondents without their having fully settled their indebtedness to petitioner. Thus, EDWIN, as
manager of Impact Systems Sales, and ALBERTO, as general manager of petitioner, executed a Deed of Assignment of receivables
in favor of petitioner.

The Deed of Assignment states, among others, that said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto
the ASSIGNEE his receivables from Toledo Power Corporation in the amount of ₱365,000, as payment for the purchase of one unit
of Selwood Spate Sludge Pump. Subsequently, petitioner delivered to respondents the sludge pump.

Despite the existence of the Deed of Assignment, the respondent-ERWIN proceeded to collect from Toledo Power
Company the amount of ₱365,135.29. Alarmed by this development, petitioner’s counsel sent respondents a final demand letter
which the respondents failed to abide. Consequently, petitioner instituted a complaint for sum of money and damages with
application for preliminary attachment against the respondents before the Regional Trial Court. Petitioner alleged therein, that
while said collection did not revoke the agency relations of respondents, ERWIN’s action repudiated EDWIN’s power to sign the
Deed of Assignment. As EDWIN did not sufficiently notify petitioner of the extent of his powers as an agent, petitioner claims that
he should be made personally liable for the obligations of his principal.

EDWIN filed his Answer in which he alleged that he is not a real party in interest in this case because he was acting as a mere agent
of Impact Systems Sales in his transaction with the petitioner, and the latter was aware of such fact. Subsequently, the RTC issued
an Order dropping EDWIN as a party defendant in this case.
Aggrieved by the trial court’s Order, petitioner brought the matter to the Court of Appeals which, however, affirmed in its Decision
the Order of the trial court. Petitioner’s motion for reconsideration was denied by the appellate court. Hence, petitioner filed a
petition for review by certiorari before the Supreme Court, assailing said Decision of the Court of Appeals.

ISSUE:

Did EDWIN exceed his authority when he signed the Deed of Assignment and thereby making him personally liable to
petitioner.

HELD:
No.

According to the Supreme Court, in the absence of an agreement to the contrary, a managing agent may enter into any
contracts that he deems reasonably necessary or require for the protection of the interests of his principal entrusted to his
management.

In this case, the Deed of Assignment clearly states that respondent EDWIN signed thereon as the manager of Impact
Systems. EDWIN entered into an Assignment of Contract with petitioner because he deems it reasonably necessary so that the
latter would then deliver the sludge pump to respondents, without which, the business of EDWIN’s principal (ERWIN) would have
been adversely affected and in such case, EDWIN would have violated his fiduciary relation with his principal-ERWIN.

In a contract of agency, a person binds himself to render some service or to do something in

representation or on behalf of another with the latter’s consent. The underlying principle of
the contract of agency is to accomplish results by using the services of others – to do a great
variety of things like selling, buying, manufacturing, and transporting. Its purpose is to extend
the personality of the principal or the party for whom another acts and from whom he or she
derives the authority to act. It is said that the basis of agency is representation, that is, the
agent acts for and on behalf of the principal on matters within the scope of his authority and
said acts have the same legal effect as if they were personally executed by the principal. By
this legal fiction, the actual or real absence of the principal is converted into his legal or
juridical presence – qui facit per alium facit per se.

The elements of the contract of agency are: (1) consent, express or implied, of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation to a third
person; (3) the agent acts as a representative and not for himself; (4) the agent acts within
the scope of his authority.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally
liable to the party with whom he contracts. The same provision, however, presents two
instances when an agent becomes personally liable to a third person.

The first is when he expressly binds himself to the obligation and the
second is when he exceeds his authority.

In the last instance, the agent can be held liable if he does not give the third party
sufficient notice of his powers. We hold that respondent EDWIN does not fall within any of
the exceptions contained in this provision.
The powers of an agent are particularly broad in the case of one acting as a general
agent or manager; such a position presupposes a degree of confidence reposed and
investiture with liberal powers for the exercise of judgment and discretion in transactions
and concerns which are incidental or appurtenant to the business entrusted to his care and
management. In the absence of an agreement to the contrary, a managing agent may enter
into any contracts that he deems reasonably necessary or requisite for the protection of the
interests of his principal entrusted to his management.

Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-
within his authority when he signed the Deed of Assignment. To recall, petitioner refused to
deliver the one unit of sludge pump unless it received, in full, the payment for Impact
Systems’ indebtedness. We may very well assume that Impact Systems desperately needed
the sludge pump for its business since after it paid the amount of fifty thousand pesos
(₱50,000.00) as down payment on 3 March 1995, it still persisted in negotiating with
petitioner which culminated in the execution of the Deed of Assignment of its receivables
from Toledo Power Company on 28 June 1995. The significant amount of time spent on the
negotiation for the sale of the sludge pump underscores Impact Systems’ perseverance to get
hold of the said equipment. There is, therefore, no doubt in our mind that respondent
EDWIN’s participation in the Deed of Assignment was "reasonably necessary" or was
required in order for him to protect the business of his principal. Had he not acted in the way
he did, the business of his principal would have been adversely affected and he would have
violated his fiduciary relation with his principal.

2. RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner,

vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF
APPEALS, respondents.

FACTS:. Concepcion and Gerundia both surnamed Rallos were sisters and registered co-
owners of a parcel of land. The sisters executed a special power of attorney in favor of
their brother, Simeon Rallos, authorizing him to sell for and in their behalf. Concepcion
Rallos died. Simeon Rallos sold the undivided shares of his sisters Concepcion and
Gerundia to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. The deed
of sale was registered in the Registry of Deeds of Cebu,

Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a

complaint in the Court of First Instance of Cebu, praying (1) that the sale of the undivided
share of the deceased Concepcion Rallos in lot 5983 be d unenforceable, and said share be
reconveyed to her estate; (2) that the Certificate of 'title issued in the name of Felix Go
Chan & Sons Realty Corporation be cancelled and another title be issued in the names of
the corporation and the "Intestate estate of Concepcion Rallos" in equal undivided and (3)
that plaintiff be indemnified by way of attorney's fees and payment of costs of suit. Named
party defendants were Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the
Register of Deeds of Cebu, but subsequently, the latter was dropped from the complaint.
The complaint was amended twice; defendant Corporation's Answer contained a
crossclaim against its co-defendant, Simon Rallos while the latter filed third-party
complaint against his sister, Gerundia Rallos While the case was pending in the trial court,
both Simon and his sister Gerundia died and they were substituted by the respective
administrators of their estates.

HELD: It is a basic axiom in civil law embodied in our Civil Code that no one may contract
in the name of another without being authorized by the latter, or unless he has by law a
right to represent him. A contract entered into in the name of another by one who has no
authority or the legal representation or who has acted beyond his powers, shall be
unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf
it has been executed, before it is revoked by the other contracting party. Article 1403 (1)
of the same Code also provides:

ART. 1403. The following contracts are unenforceable, unless they are justified:

(1) Those entered into in the name of another person by one who hi - been given no
authority or legal representation or who has acted beyond his powers; ...

Out of the above given principles, sprung the creation and acceptance of the relationship of
agency whereby one party, caged the principal (mandante), authorizes another, called the
agent (mandatario), to act for and in his behalf in transactions with third persons. The
essential elements of agency are: (1) there is consent, express or implied of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation to a
third person; (3) the agents acts as a representative and not for himself, and (4) the agent
acts within the scope of his authority.

Agency is basically personal representative, and derivative in nature. The authority of the
agent to act emanates from the powers granted to him by his principal; his act is the act of
the principal if done within the scope of the authority. Qui facit per alium facit se. "He who
acts through another acts himself".

2. There are various ways of extinguishing agency, but her We are concerned only with
one cause — death of the principal Paragraph 3 of Art. 1919 of the Civil Code which was
taken from Art. 1709 of the Spanish Civil Code provides:

ART. 1919. Agency is extinguished.

3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ...
(Emphasis supplied)

By reason of the very nature of the relationship between Principal and agent, agency is
extinguished by the death of the principal or the agent. This is the law in this jurisdiction.
 Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for
the law is found in the juridical basis of agency which is representation Them being an in.
integration of the personality of the principal integration that of the agent it is not
possible for the representation to continue to exist once the death of either is
establish. Pothier agrees with Manresa that by reason of the nature of agency, death is a
necessary cause for its extinction. Laurent says that the juridical tie between the principal
and the agent is severed ipso jure upon the death of either without necessity for the heirs
of the fact to notify the agent of the fact of death of the former.

The same rule prevails at common law — the death of the principal effects instantaneous
and absolute revocation of the authority of the agent unless the Power be coupled with an
interest. 10 This is the prevalent rule in American Jurisprudence where it is well-settled
that a power without an interest confer. red upon an agent is dissolved by the principal's
death, and any attempted execution of the power afterward is not binding on the heirs or
representatives of the deceased.

3. FABIOLA SEVERINO, plaintiff and appellee, vs. GUILLERMO SEVERINO, defendant and appellant. FELICITAS
VILLANUEVA, intervenor and appellee.

G.R. No. 18058, January 16, 1923

Principle:
The relations of an agent to his principal are fiduciary and in regard to the property forming the subject-matter of the agency, he is
estopped from acquiring or asserting a title adverse to that of the principal. An action in personam will lie against an agent to
compel him to return or retransfer to
his principal, or the latter's estate, the real property committed to his custody as such agent and also to execute the necessary
documents of conveyance to effect such retransfer.

Facts:
Defendant Guillermo Severino, after the death of his brother (Melecio Severino), was the latter’s administrator and as such,
continued to occupy the land owned by Melecio. Eventually, cadastral proceedings were instituted for the registration of the land
titles. Guillermo claimed such land and since no opposition was presented, the court decreed the title in his favor. Melecio’s
daughter and sole heir, plaintiff Fabiola Severino, compelled Guillermo to convey to her the land. It bears noting that Fabiola was a
minor during the time of the cadastral proceedings. Felicitas Villanueva, in her capacity as administratrix of the estate of Melecio
Severino, has filed a complaint in intervention claiming the same relief as the original plaintiff, except in so far as she prays that the
conveyance be made, or damages paid, to the estate
instead of to the plaintiff Fabiola Severino.

Issue:
Whether or not Guillermo can be compelled to convey the land to Fabiola even if there is already a title in Guillermo’s name.

Ruling:
Yes. The relations of an agent to his principal are fiduciary. Guillermo’s position as agent is analogous to that of a trustee and he
cannot consistently, with the principles of good faith, be allowed to create in himself an interest in opposition to that of his
principal or cestui que trust. Whatever a trustee does for the advantage of the trust estate inures to the benefit of the cestui que
trust.

A receiver, trustee, attorney, agent, or any other person occupying fiduciary relations respecting property or persons, is utterly
disabled from acquiring for his own benefit the property committed to his custody for management. This rule is entirely
independent of the fact whether any fraud has intervened. No fraud in fact need be shown, and no excuse will be heard from the
trustee. It is to avoid the necessity of any such inquiry that the rule takes so general a form. The rule stands on the moral obligation
to refrain from placing one’s self in positions which ordinarily excite conflicts between self-interest and integrity. It seeks to
remove the temptation that might arise out of such a relation to serve one’s self-interest at the expense of one’s integrity and duty
to another, by making it impossible to profit by yielding to temptation. It applies universally to all who come within its principle.

4. Rallos vs. Felix Go Chan

G.R. No. L-24332, January 31, 1978

PRINCIPLE: "ART. 1919 of the Civil Code - Agency is extinguished:

 1. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ..."
FACTS:

On April 21, 1954, a Special Power of Attorney was executed by sisters Concepcion and Gerundia in favor of their brother Simeon
for the sale of a parcel of land co-owned by the two. On September 12, 1955, 6 months after Conception died, Simeon sold the
undivided shares of his sisters to herein respondent Felix Go Chan & Realty Corp. Petitioner Ramon Rallos, administrator of the late
Concepcion’s estate, prayed that the sale of the undivided share of the deceased be invalidated and a new certificate be issued in
the name of respondent corporation and Concepcion’s intestate estate, plus damages. CFI ruled in favor of petitioner and granted
the payers but CA reversed the decision. Respondent’s MR was further denied.

ISSUE:

Whether the sale entered into by an agent is valid although executed after death of the principal.

RULING:

No, the sale is void because Simeon’s authority as an agent of Concepcion was extinguished upon her death.

Article 1317 provides that no one may contract in the name of another without being authorized or unless he has, by law, a right to
represent him. Article 1919 furthers that the death of the principal terminates the agency. The case at bar is also not among the
exceptions whereby an agent’s acts bind the principal even after the latter’s death because of Simeon’s knowledge of Concepcion’s
death is material. Hence, the sale was null and void.

5. ORIENT AIR SERVICES v. CA

Principles:
In an agent-principal relationship, the personality of the principal is extended through the facility of the agent. Such a
relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any
court.

Facts:
American Airlines, Inc. and Orient Air Services entered into a General Sales Agency Agreement, whereby the former
authorized the latter to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation.
American Airlines terminated the Agreement alleging that Orient Air failed to promptly remit net proceeds of sales from January to
March 1981. American Air instituted a suit against Orient Air with CFI Manila for Accounting with
Preliminary Attachment/Garnishment, Mandatory Injunction and Restraining Order.

Orient Air answered with counterclaim denying the material allegation and contends the following: American Air still
owed Orient Air a balance in unpaid overriding commission. Orient Air contends American Air’s precipitous conduct had
occasioned prejudice to its business interests.

Trial Court ruled in favor of Orient Air ordering American Air to reinstate defendant as its general sales agent for
passenger transportation in the Philippines in accordance with the said GSA Agreement.
Court of Appeals affirmed the decision of the Trial Court.

Issue:
Whether the respondent appellate court correctly ruled that Orient Air be reinstated again as sales agent of American Air

Ruling:
SC affirmed the decision of the CA however, set aside the portion of the ruling by the appellate court reinstating Orient Air as
agent of American air.

Such would be violative of the principles and essence of agency, defined by law as a contract whereby "a person binds himself to
render some service or to do something in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE
LATTER."
Such a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by
any court.

6. Bordador v. Luz
G.R. No. 130148
December 15, 1997
Principle: “In contract of agency, there must be a consent or authority of the principal whom represented by the agent in
rendering his service or doing something on behalf of said principal.” – Mura ra nag MU, ayaw sa pag-assume, siguradua sa kay
masakitan lang niya ka.

Facts:
The Bordador’s were in the business of purchase and sale of jewelry, and Brigida Luz was their regular customer. Deganos, the
brother of Luz, received pieces of jewelry worth P382, 816.00, covered by seventeen receipts, eleven of them indicating that they
were received on behalf a certain Evelyn Aquino, and six indicated that they were received on behalf of Luz.

Deganos was supposed to sell the items, remit the proceeds, and return the unsold ones to the Bordadors. However, he was
only able to remit P53, 207.00, failing to pay the balance of the sales proceeds and returning any unsold items. The Bordadors filed
a complaint before the barangay court, where Deganos along with the Bordador Luz signed a compromise agreement promising to
pay the unpaid account of P765, 463.98. Deganos, however, failed to comply.

A civil case for the recovery of sum of money was instituted against Deganos and Brigida Luz in the Malolos RTC. Brigida’s
husband, Ernesto was impleaded as well. Four years later in 1994, a criminal case for estafa was filed, which was still pending when
this decision was promulgated.

Petitioners claimed that Deganos was acting as the agent of Luz and because he failed to pay for the pieces of jewelry, the sps.
Luz, as principals, are solidarily liable. The respondents countered that only Deganos was liable, that Brigida never authorized him
to receive jewelry on her behalf, neither did she receive the articles in question.

The RTC ruled that there was no agency between Luz and Deganos. It was Bordador who indicated that the items were received
on behalf of Luz. Even if there was a contract of agency, there was no memorandum to this effect and was therefore
unenforceable.

CA affirmed the judgment.

Issue:
Whether or not Deganos is the agent of Bordador.

Ruling:
No.
Evidence doesn’t support Bordador’s claim that Deganos was an agent of Luz and that the latter should be consequently be held
solidarily liable with Deganos of his obligation to the petitioners.

The basis for agency is representation. Here, there is no showing that Brigida consented to
the acts of Deganos or authorized him to act on her behalf, much less with respect to the
particular transactions involved. Petitioners' attempt to foist liability on respondent spouses
through the supposed agency relation with Deganos is groundless and ill-advised.

Besides, it was grossly and inexcusably negligent of petitioners to entrust to Deganos, not
once or twice but on at least six occasions as evidenced by six receipts, several pieces of
jewelry of substantial value without requiring a written authorization from his alleged
principal. A person dealing with an agent is put upon inquiry and must discover upon his peril
the authority of the agent.

The records show that neither an express nor an implied agency was proven to have existed
between Deganos and Brigida D. Luz. Evidently, petitioners, who were negligent in their
transactions with Deganos, cannot seek relief from the effects of their negligence by conjuring
a supposed agency relation between the two respondents where no evidence supports such
claim.

7. APEX MINING CO., INC. vs. SOUTHEAST MINDANAO GOLD MINING CORP., G.R. Nos. 152613 & 152628 June 23, 2006
Topic: Concept of Agency
Principle: For a contract of agency to exist, it is essential that the principal consents that the other party, the agent, shall act on its
behalf and the agent consents so as to act.

Facts:
Marcopper Mining Corporation (MMC) filed mining claims for areas adjacent to the area covered by the mining claims of Banad
and his group.

MMC filed Exploration Permit Application with the Bureau of Mines and Geo-Sciences (BMG), and the BMG issued to MCC
Exploration Permit No. 133 (EP 133). MMC filed a petition for cancellation of mining claims of Apex and Small Scale Mining permits.
BMG dismissed MMC’s petition on the ground that the area covered by the Apex mining claims and MMC’s permit to explore was
not a forest reservation. It further declared null and void MMC’s EP 133 and sustained the validity of Apex mining claims over the
disputed area.

On appeal, the DENR reversed the decision of BMG and declared MMC’s EP 133 valid and subsisting.

MMC assigned EP 133 to Southeast Mindanao Gold Mining Corporation (SEM), a domestic corporation which is alleged to be a
100% -owned subsidiary of MMC.

SME filed an MPSA application under EP 133. BMG accepted and registered SEM’s MPSA application and the Deed of Assignment
over EP 133 executed in its favor by MMC. Apex questions the validity of MMC’s EP 133 and its subsequent transfer to SME
asserting that MMC failed to comply with the terms and conditions in its exploration permit, thus, MMC and its successor-in-
interest SEM lost their rights in the Diwalwal Gold Rush Area. Apex pointed out that MMC violated four conditions in its permit.

Similarly, the Mines Adjudication Board (MAB) underscores that SEM did not acquire any right from MMC by virtue of the transfer
of EP 133 because the transfer directly violates the express condition of the exploration permit stating that "it shall be for the
exclusive use and benefit of the permittee or his duly authorized agents." According to the MAB, the assignment by MMC of EP
133 in favor of SEM did not make the latter the duly authorized agent of MMC since the concept of an agent under EP 133 is not
equivalent to the concept of assignee.

Issue:
Whether or not the assignment of EP 133 was valid.

Ruling:

Condition number 6 categorically states that the permit shall be for the exclusive use and benefit of MMC or its duly
authorized agents. While it may be true that SEM, the assignee of EP 133, is a 100% subsidiary corporation of MMC, records
are bereft of any evidence showing that the former is the duly authorized agent of the latter. For a contract of agency to exist,
it is essential that the principal consents that the other party, the agent, shall act on its behalf, and the agent consents so as to
act. In the case of Yu Eng Cho v. Pan American World Airways, Inc., this Court had the occasion to set forth the elements of
agency, viz:
(1) consent, express or implied, of the parties to establish the relationship;
(2) the object is the execution of a juridical act in relation to a third person;
(3) the agent acts as a representative and not for himself;
(4) the agent acts within the scope of his authority.
The existence of the elements of agency is a factual matter that needs to be established or proven by evidence. The burden of
proving that agency is extant in a certain case rests in the party who sets forth such allegation. This is based on the principle
that he who alleges a fact has the burden of proving it. It must likewise be emphasized that the evidence to prove this fact
must be clear, positive and convincing.

In the instant Petitions, it is incumbent upon either MMC or SEM to prove that a contract of agency actually exists between
them so as to allow SEM to use and benefit from EP 133 as the agent of MMC. SEM did not claim nor submit proof that it is the
designated agent of MMC to represent the latter in its business dealings or undertakings. SEM cannot, therefore, be
considered as an agent of MMC which can use EP 133 and benefit from it. Since SEM is not an authorized agent of MMC, it
goes without saying that the assignment or transfer of the permit in favor of SEM is null and void as it directly contravenes
the terms and conditions of the grant of EP 133.

Furthermore, the concept of agency is distinct from assignment. In agency, the agent acts not on his own behalf but on
behalf of his principal. While in assignment, there is total transfer or relinquishment of right by the assignor to the
assignee. The assignee takes the place of the assignor and is no longer bound to the latter.

The deed of assignment clearly stipulates:

1. That for ONE PESO (P1.00) and other valuable consideration received by the ASSIGNOR from the ASSIGNEE, the ASSIGNOR
hereby ASSIGNS, TRANSFERS and CONVEYS unto the ASSIGNEE whatever rights or interest the ASSIGNOR may have in the
area situated in Monkayo, Davao del Norte and Cateel, Davao Oriental, identified as Exploration Permit No. 133 and
Application for a Permit to Prospect in Bunawan, Agusan del Sur respectively.
Bearing in mind the just articulated distinctions and the language of the Deed of Assignment, it is readily obvious that the
assignment by MMC of EP 133 in favor of SEM did not make the latter the former’s agent. Such assignment involved actual
transfer of all rights and obligations MMC have under the permit in favor of SEM, thus, making SEM the permittee. It is not a
mere grant of authority to SEM, as an agent of MMC, to use the permit. It is a total abdication of MMC’s rights over the permit.
Hence, the assignment in question did not make SEM the authorized agent of MMC to make use and benefit from EP 133.
The condition stipulating that the permit is for the exclusive use of the permittee or its duly authorized agent is not without
any reason. Exploration permits are strictly granted to entities or individuals possessing the resources and capability to
undertake mining operations. Without such a condition, non-qualified entities or individuals could circumvent the strict
requirements under the law by the simple expediency acquiring the permit from the original permittee.

No. Condition number 6 of EP 133 categorically states that the permit shall be for the exclusive use and benefit of MMC or its duly
authorized agents. While it may be true that SEM, the assignee of EP 133, is a 100% subsidiary corporation of MMC, records are
bereft of any evidence showing that the former is the duly authorized agent of the latter. For a contract of agency to exist, it is
essential that the principal consents that the other party, the agent, shall act on its behalf, and the agent consents so as to act.

It is incumbent upon either MMC or SEM to prove that a contract of agency actually exists between them so as to allow SEM to use
and benefit from EP 133 as the agent of MMC. SEM did not claim nor submit proof that it is the designated agent of MMC to
represent the latter in its business dealings or undertakings.

SEM cannot, therefore, be considered as an agent of MMC which can use EP 133 and benefit from it. Since SEM is not an
authorized agent of MMC, it goes without saying that the assignment or transfer of the permit in favor of SEM is null and void as it
directly contravenes the terms and conditions of the grant of EP 133.

Furthermore, the concept of agency is distinct from assignment. In agency, the agent acts not on his own behalf but on behalf of
his principal. While in assignment, there is total transfer or relinquishment of right by the assignor to the assignee The assignee
takes the place of the assignor and is no longer bound to the latter.

The Court did not lend recognition to the Court of Appeals’ theory that SEM, being a 100% subsidiary of MMC, is automatically an
agent of MMC. A corporation is an artificial being created by operation of law, having the right of succession and the powers,
attributes, and properties expressly authorized by law or incident to its existence.36 It is an artificial being invested by law with a
personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it
may be related. Resultantly, absent any clear proof to the contrary, SEM is a separate and distinct entity from MMC.

8. Domingo De La Cruz vs. Northern Theatrical Enterprise Incorporation

G.R. No. L7089
Date: August 31, 1954

PRINCIPLE: ARTICLE 1886: By the contract of agency a person binds himself to render service or to do something in representation
or on behalf of another, with the consent or authority of the latter.

Facts: Domingo De La Cruz hired as a special guard by Northern theatrical Enterprise Incorporation whose duties were to guard the
main entrance of the theater. In time of his duty, Domingo carries with him a revolver. One afternoon, Benjamin Martin wanted to
crash the main entrance of the theater but then Domingo refused to let him in without fist presenting his ticket. Angered by the
refusal of Domingo, Benjamin attacked him with a bolo. By ways of defending himself, Domingo shot Benjamin resulting to his
death. Domingo was charged with two homicide cases and was later on acquitted. Upon his acquittal, Domingo demanded that
Northern Theatrical to reimburse him of his expenses, a total of P15,000. His contention was that he was an agent of Northern and
being an agent he is entitled to reimbursement incurred by him in connection with the agency.

Issue: Whether or not the relationship between Domingo and Northern is that of a principal and agent.

No, We agree with the trial court that the relationship between the movie corporation and the
Ruling:
plaintiff was not that of principal and agent because the principle of representation was in no way
involved. Plaintiff was not employed to represent the defendant corporation in its dealings with
third parties. He was a mere employee hired to perform a certain specific duty or task, that of acting
as special guard and staying at the main entrance of the movie house to stop gate crashers and to
maintain peace and order within the premises. The question posed by this appeal is whether an
employee or servant who in line of duty and while in the performance of the task assigned to him,
performs an act which eventually results in his incurring in expenses, caused not directly by his
master or employer or his fellow servants or by reason of his performance of his duty, but rather by
a third party or stranger not in the employ of his employer, may recover said damages against his
employer.

9. Tuazon v Heirs of Ramos

G.R No. 156262
July 14, 2005
Principle:
The basis of agency is representation. There must be, on the part of the principal, an actual intention to appoint, an intention
naturally inferable from the principal’s words or actions. Likewise, there must be an intention on the part of the agent to accept
the appointment and act upon it. Absent such mutual intent, there is generally no agency.

Facts:
This case involves a collection of a sum of money which results from the bouncing check issued by Evangeline Santos, indorsed by
the spouse Leonilo and Maria Tuazon in payment of the remaining unpaid cavans of rice. Despite repeated demands from the heirs
of Ramos, spouses Tuazon failed to pay and instead claimed that they are merely acting as agents and should not be held liable.

Issue:
WON spouses Tuazon are considered agents of Ramos?

Held:
NO.
In a contract of agency, one binds oneself to render some service or to do something in
representation or on behalf of another, with the latter’s consent or authority. The following
are the elements of agency: (1) the parties’ consent, express or implied, to establish the
relationship; (2) the object, which is the execution of a juridical act in relation to a third
person; (3) the representation, by which the one who acts as an agent does so, not for oneself,
but as a representative; (4) the limitation that the agent acts within the scope of his or her
authority. As the basis of agency is representation, there must be, on the part of the principal,
an actual intention to appoint, an intention naturally inferable from the principal’s words or
actions. In the same manner, there must be an intention on the part of the agent to accept the
appointment and act upon it. Absent such mutual intent, there is generally no agency.
This Court finds no reversible error in the findings of the courts a quo that petitioners were
the rice buyers themselves; they were not mere agents of respondents in their rice
dealership. The question of whether a contract is one of sale or of agency depends on the
intention of the parties.
The declarations of agents alone are generally insufficient to establish the fact or
extent of their authority. The law makes no presumption of agency; proving its existence,
nature and extent is incumbent upon the person alleging it. In the present case, petitioners
raise the fact of agency as an affirmative defense, yet fail to prove its existence.
The Court notes that petitioners, on their own behalf, sued Evangeline Santos for collection of
the amounts represented by the bounced checks, in a separate civil case that they sought to
be consolidated with the current one. If, as they claim, they were mere agents of respondents,
petitioners should have brought the suit against Santos for and on behalf of their alleged
principal, in accordance with Section 2 of Rule 3 of the Rules on Civil Procedure. Their filing a
suit against her in their own names negates their claim that they acted as mere agents in
selling the rice obtained from Bartolome Ramos.
 10. VICTORIAS MILLING CO., INC v. CAG.R. No. 117356June 19, 2000
PRINCIPLE:
Article 1868: By the contract of agency a person binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter.

The question of whether a contract is one of sale or agency depends on the intention of the parties as gathered from the whole
scope and effect of the language employed.

FACTS:
Petitioner Victorias Milling is in to regular dealings with St. Therese Merchandising (STM) in the latter’s purchase of sugar.
Petitioner issues a Shipping List/Delivery Receipts (SLDRs) as proof of purchase. The subject in this instant case is SLDR No. 1214M
whom STM sold to private respondent Consolidated Sugar Corporation (CSC). CSC wrote petitioner that it had been authorized by
STM to withdraw the sugar covered by SLDR No. 1214M. Enclosed in the letter was a letter of authority from STM authorizing CSC
to “withdraw for and in our behalf the refined sugar covered by SLDR No. 1214.”

ISSUE:

Whether or not private respondent CSC was an agent of STM.

RULING:
NO.

Petitioner heavily relies upon STM’s letter of authority allowing CSC to withdraw sugar against SLDR No. 1214M to show that the
latter was STM’s agent. The pertinent portion of said letter reads:

“This is to authorize Consolidated Sugar Corporation or its representative to withdraw for and in our behalf the refined sugar
covered by Shipping List/Deliver Receipt = Refined Sugar (SDR) No. 1214 dated October 16, 1989 in the total quantity of 25,000
bags.”

It is clear from Article 1868 that the basis of agency is representation. On the part of the principal, there must be an actual
intention to appoint or an intention naturally inferable from his words and actions; and on the part of the agent, there must be an
intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency. One factor
which most clearly distinguishes agency from other legal concepts is control; one person – the agent – agrees to act under the
control or direction of another – the principal. Indeed, the very word “agency” has come to connote control by the principal. The
control factor, more than any other, has caused the courts to put contracts between principal and agent in separate category.

In the instant case, it appears plain to us that private responded CSC was a buyer of the SLDR form, and not an agent of STM.
Private respondent CSC was not subject to STM’s control. The question of whether a contract is one of sale or agency depends on
the intention of the parties as gathered from the whole scope and effect of the language employed. That the authorization given to
CSC contained the phrase “for and in our (STM’s) behalf” did not establish an agency. Ultimately, what is decisive is the intention of
the parties. That no agency was meant to be established by the CSC and STM is clearly shown by CSC’s communication to
petitioner that SLDR No. 1214M had been “sold and endorsed” to it. The use of the words “sold and endorsed” means that STM
and CSC intended a contract of sale, and not of agency. Hence, on this score, no error was committed by CA when it held that CSC
was not STM’s agent and could independently sue petitioner.

12. WILLIAM UY and RODEL ROXAS, vs.COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY,
G.R. No. 120465. September 9, 1999

Principle:
Article 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond
the value of the property he received from the decedent.
If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated
his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting
parties must have clearly and deliberately conferred a favor upon a third person.
Article 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter.

Facts:
William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land in Benguet. Uy and Roxas offered to sell the parcels of
land to NHA for a housing project. NHA passed a resolution approving the acquisition of lands and they executed Deed of Absolute
Sale. However, only 5 of the 8 parcels of land were paid by NHA because of the report received by Land Geosciences Bureau of
DENR that the remaining areas are prone to landslide and therefore not suitable for developing a housing project.NHA offered to
pay danos perjuicios to the land owners. Uy and Roxas filed a complaint for damages to NHA. They filed the complaint not in behalf
of their principals but in their own name as agents directly damages by the termination of the contract. The damages consist
mainly of “unearned income” and advances.
Issue:
WON Uy and Roxas, as agents, can file a complaint for damages in their own name and in their own behalf.
Ruling:
No, they are mere agents of the owners of the land subject for sale. As agents, they only render some service or do something in
representation or on behalf of their principals. They are not parties to the contract of sale between their principals and NHA. They
are not the real party in interest. The petitioners have not also shown that they are assignees of their principals to the subject
contracts.

13. Laureano T. Angeles vs. Philippine National Railways (PNR) and Rodolfo Flores, August 31, 2006 G.R. No. 150128

Facts:
Respondent Philippine National Railways (PNR) informed a certain Gaudencio Romualdez (Romualdez, hereinafter) that it has
accepted the latter’s offer to buythe PNR’s scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga at P1,300.00 and
P2,100.00 per metric ton, respectively, for the total amount of P96,600.00. Romualdez paid the purchase price and addressed a
letter to Atty. CiprianoDizon, PNR’s Acting Purchasing Agent. The letter authorized LIZETTE R. WIJANCOto be his (Romualdez)
lawful representative in the withdrawal of the scrap/unserviceable rails awarded to him. Furthermore, the original copy of the
award which indicates the waiver of rights, interest and participation in favor of Lizetter R. Wijanco was also given.
The Lizette R. Wijanco was petitioner's now deceased wife. That very same day, Lizette requested the PNR to transfer the location
of withdrawal for the reason that the scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga were not ready for
hauling.The PNR granted said request and allowed Lizette to withdraw scrap/unserviceable rails in Murcia, Capas and San Miguel,
Tarlac instead. However, PNR subsequently suspended the withdrawal in view of what it considered as documentary discrepancies
coupled by reported pilferages of over P500,000.00 worth of PNR scrap properties in Tarlac.Consequently, the spouses Angeles
demanded the refund of the amount of P96,000.00. The PNR, however, refused to pay, alleging that as per delivery receipt duly
signed by Lizette, 54.658 metric tons of unserviceable rails had already been withdrawn. The spouses Angeles filed suit against the
PNR for specific performance and damages before the Regional Trial Court. Lizette W. Angeles passed away and was substituted by
her heirs, among whom is her husband, herein petitioner Laureno T. Angeles.
The trial court, on the postulate that the spouses Angeles are not the real parties-in-interest, rendered judgment dismissing their
complaint for lack of cause of action. As held by the court, Lizette was merely a representative of Romualdez in the withdrawal of
scrap or unserviceable rails awarded to him and not an assignee to the latter's rights with respect to the award. Petitioner
appealed with the Court of Appeals which dismissed the appeal and affirmed that of the trial court.

Issue:
Whether or not the CA erred in affirming the trial court's holding that petitioner and his spouse, as plaintiffs a quo, had no cause of
action as they were not the real parties-in-interest in this case.

Held:

No.The CA’s conclusion, affirmatory of that of the trial court, is that Lizette was not an assignee, but merely an agent whose
authority was limited to the withdrawal of the scrap rails, hence, without personality to sue.Where agency exists, the third party's
(in this case, PNR's) liability on a contract is to the principal and not to the agent and the relationship of the third party to the
principal is the same as that in a contract in which there is no agent. Normally, the agent has neither rights nor liabilities as against
the third party. He cannot thus sue or be sued on the contract. Since a contract may be violated only by the parties thereto as
against each other, the real party-in-interest, either as plaintiff or defendant in an action upon that contract must, generally, be a
contracting party.
The legal situation is, however, different where an agent is constituted as an assignee. In such a case, the agent may, in his own
behalf, sue on a contract made for his principal, as an assignee of such contract. The rulerequiring every action to be prosecuted in
the name of the real party-in-interest recognizes the assignment of rights of action and also recognizesthat when one has a right
assigned to him, he is then the real party-in-interest and may maintain an action upon such claim or right.

WHEREFORE, the petition is DENIED and the assailed decision of the CA is AFFIRMED.Costs against the petitioner.

14. ONG v. CA
G.R. No. 119858; April 29, 2003

FACTS: That on or about July 23, 1990, Benito Ong, representing ARMAGRI International Corporation, conspiring and confederating
together did then and there willfully, unlawfully and feloniously defraud the SOLIDBANK Corporation represented by its
Accountant, DEMETRIO LAZARO, in the following manner, to wit: the said accused received in trust from said SOLIDBANK
Corporation, 10,000 bags of urea valued at P, 2,050,000 specified in a Trust Receipt Agreement and covered by a Letter of Credit
No. DOM GD 90-009 in favor of the Fertiphil Corporation.
Under the express obligation on the part of the said accused to account for said goods to Solidbank Corporation and/or remit the
proceeds of the sale thereof within the period specified in the Agreement or return the goods, if unsold immediately or upon
demand.
However, Ong, once in possession of said goods, far from complying with the aforesaid obligation failed and refused and still fails
and refuses to do so despite repeated demands made upon him to that effect and with intent to defraud, willfully, unlawfully and
feloniously misapplied, misappropriated and converted the same or the value thereof to his own personal use and benefit, to the
damage and prejudice of the said Solidbank Corporation in the aforesaid amount of P2,050,000.00 Philippine Currency.
Petitioner contends that in signing the trust receipts, he merely acted as an agent of ARMAGRI. Petitioner asserts that nowhere in
the trust receipts did he assume personal responsibility for the undertakings of ARMAGRI which was the entrustee.

ISSUE: WON PETITIONER WAS NECESSARILY THE ONE RESPONSIBLE FOR THE OFFENSE, BY THE MERE CIRCUMSTANCE THAT
PETITIONER ACTED AS AGENT AND SIGNED FOR THE ENTRUSTEE CORPORATION

HELD: No, ARMGAGRI Corp. did not violate the Trust Receipts Law
The Supreme Court held that the Trust Receipts Law recognizes the impossibility of imposing the penalty of imprisonment on a
corporation. Hence, if the entrustee is a corporation, the law makes the officers or employees or other persons responsible for the
offense liable to suffer the penalty of imprisonment. The reason is obvious: corporations, partnerships, associations and other
juridical entities cannot be put to jail. Hence, the criminal liability falls on the human agent responsible for the violation of the
Trust Receipts Law.
In the instant case, the Bank was the entruster while ARMAGRI was the entrustee. Being the entrustee, ARMAGRI was the one
responsible to account for the goods or its proceeds in case of sale. However, the criminal liability for violation of the Trust
Receipts Law falls on the human agent responsible for the violation.

Petitioner, who admits being the agent of ARMAGRI, is the person responsible for the offense for two reasons. First, petitioner is
the signatory to the trust receipts, the loan applications and the letters of credit. Second, despite being the signatory to the trust
receipts and the other documents, petitioner did not explain or show why he is not responsible for the failure to turn over the
proceeds of the sale or account for the goods covered by the trust receipts.

15. PNB v. Ritratto – G.R. No. 142616 – 362 SCRA 216

Principle: The Doctrine of Piercing the Corporate veil is an equitable doctrine developed to address situations where the separate
corporate personality of a corporation is abused or used for wrongful purposes. It applies when the corporate fiction is used to
defeat public convenience, justify wrong, protect fraud or defend crime, or when it is made a shield to confuse the legitimate
issues, or where a corporation is the mere alter ego or business conduit of a person, or where the corporation is so organized and
controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another
corporation.

Facts:
PNB-IFL, a subsidiary company of PNB extended credit to Ritratto and secured by the real estate mortgages on four parcels of land.
Since there was default, PNB-IFL thru PNB, foreclosed the property and were subject to public auction. Ritratto Group filed a
complaint for injunction. PNB filed a motion to dismiss on the grounds of failure to state a cause of action and the absence of any
privity between respondents and petitioner.

Issue: WON PNB privy to the loan contracts entered into by respondent & PNB-IFL being that PNB-IFL is owned by PNB?

Ruling:
No. The contract questioned is one entered into between Ritratto and PNB-IFL. PNB was admittedly an agent of the latter who
acted as an agent with limited authority and specific duties under a special power of attorney incorporated in the real estate
mortgage.
The mere fact that a corporation owns all of the stocks of another corporation, taken alone is not sufficient to justify their being
treated as one entity. If used to perform legitimate functions, a subsidiary’s separate existence may be respected, and the liability
of the parent corporation as well as the subsidiary will be confined to those arising in their respective business. The courts may, in
the exercise of judicial discretion, step in to prevent the abuses of separate entity privilege and pierce the veil of corporate entity.
The Doctrine of Piercing the Corporate veil is an equitable doctrine developed to address situations where the separate corporate
personality of a corporation is abused or used for wrongful purposes. It applies when the corporate fiction is used to defeat public
convenience, justify wrong, protect fraud or defend crime, or when it is made a shield to confuse the legitimate issues, or where a
corporation is the mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its
affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.
Test in determining the applicability of the doctrine of piercing the veil:
1. Control, not mere majority or complete control, but complete domination, not only of finances but of policy and business
practice.
2. Such control must have been used by the defendant to commit fraud or wrong
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
The absence of any one of these elements prevents piercing the corporate veil. In applying the “instrumentality” or “alter ego”
doctrine, the courts are concerned with reality and not form, with how the corporation operated and the individual defendant’s
relationship to the operation.
Doctrine of piercing the veil based on alter ego or instrumentality finds no application in this case for the following reasons:
1. PNB-IFL is a wholly owned subsidiary of petitioner PNB.
2. There is no showing of the indicative factors that the former corporation is a mere instrumentality of the latter.
3. There is no demonstration that any of the evils sought to be prevented by the doctrine of piercing the corporate veil exists.

16. Case: FERNANDO vs GSIS GR. No. L-18287

Principle: Authority of a corporation to its officers and agents

FACTS

The plaintiff, Trinidad J. Francisco, in consideration of a loan mortgaged in favor of the defendant, Government Service Insurance
System a parcel of land known as Vic-Mari Compound, located at Baesa, Quezon City. The System extrajudicially foreclosed the
mortgage on the ground that up to that date the plaintiff-mortgagor was in arrears on her monthly instalments. The System itself
was the buyer of the property in the foreclosure sale. The plaintiff’s father, Atty. Vicente J. Francisco, sent a letter to the general
manager of the defendant corporation, Mr. Rodolfo P. Andal. And latter the System approved the request of Francisco to redeem
the land through a telegram. Defendant received the payment and it did not, however, take over the administration of the
compound. The System then sent a letter to Francisco informing of his indebtedness and the 1 year period of redemption has been
expired. And the System argued that the telegram sent to Francisco saying that the System has approved the request in redeeming
the property is incorrect due to clerical problems.

ISSUE/S
Whether or not the System is liable for the acts of its employees regarding the telegram?

RULING
Yes. There was nothing in the telegram that hinted at any anomaly, or gave ground to suspect its veracity, and the plaintiff,
therefore, can not be blamed for relying upon it. There is no denying that the telegram was within Andal’s apparent authority.
Hence, even if it were the board secretary who sent the telegram, the corporation could not evade the binding effect produced by
the telegram. Knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment,
and in relation to matters within the scope of his authority, is notice to the corporation, whether he communicates such
knowledge or not. Yet, notwithstanding this notice, the defendant System pocketed the amount, and kept silent about the
telegram not being in accordance with the true facts, as it now alleges. This silence, taken together with the unconditional
acceptance of three other subsequent remittances from plaintiff, constitutes in itself a binding ratification of the original
agreement.

17. SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC. v. NLRC

SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC. v. NLRC
G.R. No. 161757; January 25, 2006
Ponente: J. Carpio-Morales

Principle: The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third
persons.

FACTS:

Petitioner, Sunace International Management Services (Sunace), deployed to Taiwan Divina A. Montehermozo (Divina) as a
domestic helper under a 12-month contract effective February 1, 1997. The deployment was with the assistance of a Taiwanese
broker, Edmund Wang, President of Jet Crown International Co., Ltd.
After her 12-month contract expired on February 1, 1998, Divina continued working for her Taiwanese employer, Hang Rui Xiong,
for two more years, after which she returned to the Philippines on February 4, 2000.
Shortly after her return or ona February 14, 2000, Divina filed a complaint before the National Labor Relations Commission (NLRC)
against Sunace, one Adelaide Perez, the Taiwanese broker, and the employer-foreign principal alleging that she was jailed for three
months and that she was underpaid

Reacting to Divina's Position Paper, Sunace filed on April 25, 2000 an ". . . ANSWER TO COMPLAINANT'S POSITION PAPER" alleging
that Divina's 2-year extension of her contract was without its knowledge and consent, hence, it had no liability attaching to any
claim arising therefrom, and Divina in fact executed a Waiver/Quitclaim and Release of Responsibility and an Affidavit of
Desistance, copy of each document was annexed to said

The Labor Arbiter, rejected Sunace's claim that the extension of Divina's contract for two more years was without its knowledge
and consent.

ISSUE:
Whether the act of the foreigner-principal in renewing the contract of Divina be attributable to Sunace

HELD:

No, the act of the foreigner-principal in renewing the contract of Divina is not attributable to Sunace.

There being no substantial proof that Sunace knew of and consented to be bound under the 2-year employment contract
extension, it cannot be said to be privy thereto. As such, it and its "owner" cannot be held solidarily liable for any of Divina's claims
arising from the 2-year employment extension.

Furthermore, as Sunace correctly points out, there was an implied revocation of its agency relationship with its foreign principal
when, after the termination of the original employment contract, the foreign principal directly negotiated with Divina and entered
into a new and separate employment contract in Taiwan.

19. G.R. No. 94071 March 31, 1992

NEW LIFE ENTERPRISES and JULIAN SY, petitioners,
vs.
HON. COURT OF APPEALS, EQUITABLE INSURANCE CORPORATION, RELIANCE SURETY AND INSURANCE CO., INC. and WESTERN
GUARANTY CORPORATION, respondents.

Principle: Knowledge of the agent of the existence thereof, not knowledge of the insurance company. The theory of imputed
knowledge, that the knowledge of the agent is presumed to be known by the principal is not enough.
Facts:
Julian Sy, owner of New Life Enterprises, insured his building in 3 different insurance agencies for 350,000, 1,000,000, and 200,000.
When his building and the goods inside burned down, he claimed for insurance indemnities, but these were rejected by the three
companies for violation of policy conditions.
Sy filed for 3 different suits in the trial court, where he won all suits against the insurance companies. The court of appeals
reversed the decision of the trial court.

Julian Sy owner of New Life Enterprises, the partnership engaged in the sale of construction materials insured the stocks in trade of
New Life Enterprises with Western Guaranty Corporation, Reliance Surety and Insurance Co., Inc., and Equitable Insurance
Corporation.
When his building occupied by the New Life Enterprises was gutted by fire. , he claimed for insurance indemnities, but these were
rejected by the three companies for breach of policy conditions which requires the insured to give notice of any insurance or
insurances already effected covering the stocks in trade.
Petitioners admit that the respective insurance policies issued by private respondents did not state or endorse thereon the other
insurance coverage obtained or subsequently effected on the same stocks in trade for the loss of which compensation is claimed
by petitioners. The coverage by other insurance or co-insurance effected or subsequently arranged by petitioners were neither
stated nor endorsed in the policies of the three (3) private respondents.
Petitioners contend that they are not to be blamed for the omissions, alleging that insurance agents knew about the existence of
the additional insurance coverage and that they were not informed about the requirement that such other or additional insurance
should be stated in the policy, as they have not even read policies.

Issue: W/N the petitioner was not to be blamed for the omissions alleging that the insurance agents knew about the existence of
the additional insurance coverage.

Ruling: NO.
The terms of the contract are clear and unambiguous. The insured is specifically required to disclose to the insurer any other
insurance and its particulars which he may have effected on the same subject matter. The knowledge of such insurance by the
insurer’s agents, even assuming the acquisition thereof by the former, is not the "notice" that would estop the insurers from
denying the claim. Besides, the so-called theory of imputed knowledge, that is, knowledge of the agent is knowledge of the
principal, aside from being of dubious applicability here has likewise been roundly refuted by respondent court whose factual
findings we find acceptable. Thus, it points out that while petitioner Julian Sy claimed that he had informed insurance agent
Alvarez regarding the co-insurance on the property, he contradicted himself by inexplicably claiming that he had not read the
terms of the policies; that Yap Dam Chuan could not likewise have obtained such knowledge for the same reason, aside from the
fact that the insurance with Western was obtained before those of Reliance and Equitable; and that the conclusion of the trial
court that Reliance and Equitable are "sister companies" is an unfounded conjecture drawn from the mere fact that Yap Kam
Chuan was an agent for both companies which also had the same insurance claims adjuster. Availment of the services of the same
agents and adjusters by different companies is a common practice in the insurance business and such facts do not warrant the
speculative conclusion of the trial court.

20. Caram vs Laureta

Principle:
Applying the principle of agency, Caram as principal, should also be deemed to have acted in bad faith.

Facts:
On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land in favor of Laureta. The deed of absolute sale was not
registered because it was not acknowledged before a notary public or any other authorized officer . At the time the sale was
executed, there was no authorized officer before whom the sale could be acknowledged inasmuch as the civil government in
Tagum, Davao was not as yet organized. However, Marcos Mata delivered to Laureta the peaceful and lawful possession of the
premises of the land together with the pertinent papers thereof such as the Owner's Duplicate OCT, sketch plan, tax declaration,
tax receipts and other papers related thereto. Since the time of conveyance, Laureta had been in continuous, adverse and
notorious occupation of said land, without being molested, disturbed or stopped by any of the defendants or their representatives.
On May 5, 1947, the same land was sold by Marcos Mata to Fermin Caram, Jr. The deed of sale in favor of Caram was
acknowledged before Atty. Abelardo Aportadera.
Laureta filed in CFI Davao an action for nullity, recovery of ownership and/or reconveyance against Mata, Caram and the Register
of Deeds of Davao City. Mata answered by alleging that Marcos was subjected to duress, threat and intimidation into selling his
only property to Laureta. Caram, on the other hand, alleged that he has no knowledge or information about the previous
encumbrances, transactions, and alienations until the filing of the complaints.
Trial Court ruled in favor of Laureta, which the Court of Appeals also affirmed.

Issue:
1. Whether or not, Irespe and Aportadera were attorneys-in-fact of Caram for the purpose of buying the property in question.
2. Whether or not, Irespe and Atty. Aportadera acted in Bad Faith.
3. Whether or not Caram can be considered to have acted in bad faith because of his agents.

Ruling:
1. YES.
The facts of record show that Mata, the vendor, and Caram, the second vendee had never met. During the trial, Marcos testified
that he knows Atty. Aportadera but did not know Caram. Thus, the sale of the property could have only been through Caram's
representatives, Irespe and Aportadera. The petitioner, in his answer, admitted that Atty. Aportadera acted as his notary public
and attorney-in-fact at the same time in the purchase of the property.
2. YES.
The SC agreed with the Trial Court’s finding that Irespe and Aportadera, acting as agents of Caram, purchased the property of Mata
in bad faith. Even if Irespe and Aportadera did not have actual knowledge of the first sale, still their actions have not satisfied the
requirement of good faith.
Irespe and Aportadera had knowledge of circumstances which ought to have put them on inquiry. Both of them knew that Mata's
certificate of title together with other papers pertaining to the land was taken by soldiers under the command of Col. Laureta.
Added to this is the fact that at the time of the second sale Laureta was already in possession of the land. The rule of caveat
emptor requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendor's
title takes all the risks and losses consequent to such failure.
3. YES.
Applying the principle of agency, Caram as principal, should also be deemed to have acted in bad faith.

22. DOMINION INSURANCE VS. CA

GR # 129919
February 6, 2002

Principle:

When a special power of attorney is required for the agent to do a certain act, the agent, in the performance of such act, must
comply with the specifications embodied in the special power of attorney giving him authority to do such.

Facts:
Guevarra (plaintiff) instituted a claim for sum of money against Dominion Insurance Corporation. He sought to recover the sum of
P156,473.90 which he claimed to have advanced in his capacity as manager of defendant to satisfy certain claims filed by
defendant’s clients. Dominion denied any liability to Guevarra and instituted a counterclaim for premium allegedly unremitted by
Guevarra.

Pre-trial conferences was scheduled but never pushed through over the course of six months. When the case was again called for
pre-trial, only Guevarra and counsel were present. The trial court declared Dominion in default and denied any consideration. RTC
ruled that Dominion was to pay Guevarra in the amount of P156,473.90 claimed as the total amount advanced as payment of the
claims of Dominion’s client which was also affirmed by the CA.
Issue:
Whether or not Guevarra acted within his authority as agent of Dominion?

Ruling:

No. By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of
another, with the consent or authority of the latter. The basis for agency is representation. On the part of the principal, there must
be an actual intention to appoint or an intention naturally inferrable from his words or actions; and on the part of the agent, there
must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency.

A perusal of the “Special Power of Attorney” would show that Dominion and Guevarra intended to enter into a principal-agent
relationship. Despite the word “special,” the contents of the document reveal that what was constituted was a general agency. The
agency comprises all the business of the principal, but, couched in general terms, is limited only to acts of administration. A general
power permits the agent to do all acts for which the law does not require a special power. Art. 1878 enumerates the instances
when a special power of attorney is required, including (1) to make such payments as are not usually considered as acts of
administration; (15) any other act of strict dominion. The payment of claims is not an act of administration. The settlement of
claims is not included among the acts enumerated in the Special Power of Attorney, neither is it of a character similar to the acts
enumerated therein. A special power of attorney would have been required before Guevarra could settle the insurance claims of
the insured. Guevarra’s authority to settle claims is embodied in the Memorandum of Management Agreement which enumerated
the scope of Guevarra’s duties and responsibilities. However, the Memorandum showed the instruction of Dominion that payment
of claims shall come from a revolving fund. Having deviated from the instructions of the principal, the expenses that Guevarra
incurred in the settlement of the claims of the insured may not be reimbursed from Dominion.

However, while the law on agency prohibits Guevarra from obtaining reimbursement, his right to recovery may still be justified
under the general law on Obligations and Contracts, particularly, Art. 1236.

25. Duñgo v. Lopena G.R. No. L-18377 December 29, 1962

PRINCIPLE:

A third person cannot bind another to a compromise agreement unless he, the third person, has obtained a special power of
attorney for that purpose from the party intended to be bound.

FACTS:

Anastacio Duñgo and Rodrigo S. Gonzales purchased 3 parcels of land from Adriano Lopena and Rosa Ramos with the remaining
balance payable on installment secured by mortgage over the same property. The vendees defaulted on the first installment. A
compromise agreement was submitted to the lower court for approval. It was signed by Adriano Lopena and Rosa Ramos on one
hand, and Rodrigo S. Gonzales, on the other. However, Rodrigo S. Gonzales represented that his signature was for both himself and
the herein petitioner. Anastacio Duñgo's counsel was present at the preparation of the compromise agreement and this counsel
affixed his signature thereto. When Anastacio Duñgo and Rodrigo S. Gonzales failed to pay the balance of their indebtedness the
mortgage was foreclosed. Anastacio Duñgo filed a motion to set aside all the proceedings on the ground that the compromise
agreement was void ab initio with respect to him because he did not sign the same. Consequently, he argued, all subsequent
proceedings under and by virtue of the compromise agreement, including the foreclosure sale were void and null as regards him.

ISSUE:

Was the compromise agreement of January 15, 1960, the Order of the same date approving the same, and, all the proceedings
subsequent thereto, valid or void insofar as the petitioner herein is concerned?

HELD:

The compromise agreement was valid and enforceable. Art. 1878 of the Civil Code, a third person cannot bind another to a
compromise agreement unless he, the third person, has obtained a special power of attorney for that purpose from the party
intended to be bound. Although the Civil Code expressly requires a special power of attorney in order that one may compromise
an interest of another, it is neither accurate nor correct to conclude that its absence renders the compromise agreement void. In
such a case, the compromise is merely unenforceable. Contracts are unenforceable, unless they are ratified. Here, Anastacio
Duñgo ratified the compromise agreement conclusively established by the Tri-Party Agreement. Also, when it appears that the
client, on becoming aware the compromise and the judgment thereon, fails to repudiate promptly the action of his attorney, he
will not afterwards be heard to contest its validity. Also, compromise agreement, the principal provision of the said instrument was
for his benefit.

26. Vicente v. Geraldez

In 1967, HI Cement Corporation was granted authority to operate mining facilities in Bulacan. However, the areas allowed for it to
explore cover areas which were also being explored by Ignacio Vicente, Juan Bernabe, and Moises Angeles. And so a dispute arose
between the three and HI Cement as neither side wanted to give up their mining claims over the disputed areas. Eventually, HI
Cement filed a civil case against the three. During pre-trial, the possibility of an amicable settlement was explored where HI
Cement offered to purchase the areas of claims of Vicente et al at the rate of P0.90 per square meter. Vicente et al however
wanted P10.00 per square meter.
In 1969, the lawyers of HI Cement agreed to enter into a compromise agreement with the three whereby commissioners shall be
assigned by the court for the purpose of assessing the value of the disputed areas of claim. An assessment was subsequently made
pursuant to the compromise agreement and the commissioners recommended a price rate of P15.00 per square meter. One of the
lawyers of HI Cement, Atty. Francisco Ventura, then notified the Board of Directors of HI Cement for the approval of the
compromise agreement. But the Board disapproved the compromise agreement hence Atty. Ventura filed a motion with the court
to disregard the compromise agreement. Vicente et al naturally assailed the motion. Vicente et al insisted that the compromise
agreement is binding because prior to entering into the compromise agreement, the three lawyers of HI Cement declared in open
court that they are authorized to enter into a compromise agreement for HI Cement; that one of the lawyers of HI Cement, Atty.
Florentino Cardenas, is an executive official of HI Cement; that Cardenas even nominated one of the commissioners; that such act
ratified the compromise agreement even if it was not approved by the Board. HI Cement, in its defense, averred that the lawyers
were not authorized and that in fact there was no special power of attorney executed in their favor for the purpose of entering
into a compromise agreement. Judge Ambrosio Geraldez ruled in favor of HI Cement.
ISSUE:
Whether or not a compromise agreement entered into by a lawyer purportedly in behalf of the corporation is valid without a
written authority.
HELD:
No. Corporations may compromise only in the form and with the requisites which may be necessary to alienate their property.
Under the corporation law the power to compromise or settle claims in favor of or against the corporation is ordinarily and
primarily committed to the Board of Directors but such power may be delegated. The delegation must be clearly shown for as a
general rule an officer or agent of the corporation has no power to compromise or settle a claim by or against the corporation,
except to the extent that such power is given to him either expressly or by reasonable implication from the circumstances. In the
case at bar, there was no special power of attorney authorizing the three lawyers to enter into a compromise agreement. This is
even if the lawyers declared in open court that they are authorized to do so by the corporation (in this case, the transcript of
stenographic notes does not show that the lawyers indeed declare such in open court). The fact that Cardenas, an officer of HI
Cement, acted in effecting the compromise agreement, i.e. nominating a commissioner, does not ratify the compromise
agreement. There is no showing that Cardenas’ act binds HI Cement; no proof that he is authorized by the Board; no proof that
there is a provision in the articles of incorporation of HI Cement that he can bind the corporation.

27. COSMIC LUMBER CORPORATION, Petitioner, v.

COURT OF APPEAL and ISIDRO PEREZ, Respondents.
G.R. No. 114311 November 29, 1996

PRINCIPLES:

No conferment of the power to sell can be validly inferred from the specific authority "to enter into a compromise agreement"
because of the explicit limitation fixed by the grantor that the compromise entered into shall only be so far as it shall protect the
rights and interest of the corporation to physically possess the lots.

FACTS:

COSMIC LUMBER CORPORATION thru its General Manager executed on a Special Power of Attorney appointing Paz G. Villamil-
Estrada as attorney-in-fact to initiate, institute and file any court action for the ejectment of third persons and/or squatters of 443,
for the said squatters to remove their houses and vacate the premises in order that the corporation may take material possession
of the entire lot, and for this purpose, to appear at the pre-trial conference and enter into any stipulation of facts and/or
compromise agreement so far as it shall protect the rights and interest of the corporation in the aforementioned lots.

In March 1985 Villamil-Estrada instituted an action for the ejectment of Perez from Lot No. 443 before the RTC of Dagupan,
docketed as Civil Case No. D-7750.

In November 1985, Villamil-Estrada entered into a Compromise Agreement with respondent Perez selling the 333 square meters
portion of Lot 443 to Perez for a price of P80.00 per square meter. The Compromise Agreement was approved by the trial court.

Although the decision became final and executory it was not executed within the 5-year period from date of its finality allegedly
due to the failure of Petitioner to produce the owner's duplicate copy of the title. Thus in January 1993, Perez filed a complaint to
revive the judgment, docketed as Civil Case No. D-10459.
Petitioner asserts that it was only when the summons in Civil Case No. D-10459 for the revival of judgment was served upon it that
it came to know of the compromise agreement entered into between Paz G. Villamil-Estrada and respondent Isidro Perez upon
which the trial court based its decision of 26 July 1993 in Civil Case No. D-7750.

Petitioner sought annulment of the decision before the CA on the ground that the compromise agreement was void because: (a)
the attorney-in-fact did not have the authority to sell the property (b) the authority of the attorney-in-fact was confined to the
institution and filing of an ejectment case, the eviction of third persons/squatters from the lot; and (c) while the special power of
attorney made mention of an authority to enter into a compromise agreement, such authority was in connection with, and limited
to, the eviction of third persons/squatters thereat, in order that the corporation may take material possession of the entire lot.

The CA dismissed the complaint on the basis of its finding that lack of authority to sell the subject property is not as a ground for
annulment of judgment because it does not affect the jurisdiction of the trial court over the action nor does it amount to extrinsic
fraud.

ISSUE/S:

Whether an authority to sell can be inferred from the authority to enter into a compromise agreement when such authority to
compromise is with explicit limitation that it be entered only in so far as it shall protect the rights and interest of the grantor to
physically possess lots.

RULING:

We agree with petitioner. The authority granted Villamil-Estrada under the special power of attorney was explicit and exclusionary:
for her to institute any action in court to eject all persons foundo on Lot 443 so that petitioner could take material possession
thereof, and for this purpose, to appear at the pre-trial and enter into any stipulation of facts and/or compromise agreement but
only insofar as this was protective of the rights and interests of petitioner in the property. Nowhere in this authorization was
Villamil-Estrada granted expressly or impliedly any power to sell the subject property nor a portion thereof. Neither can a
conferment of the power to sell be validly inferred from the specific authority "to enter into a compromise agreement" because of
the explicit limitation fixed by the grantor that the compromise entered into shall only be "so far as it shall protect the rights and
interest of the corporation in the aforementioned lots." In the context of the specific investiture of powers to Villamil-Estrada,
alienation by sale of an immovable certainly cannot be deemed protective of the right of petitioner to physically possess the same,
more so when the land was being sold for a price of P80.00 per square meter, very much less than its assessed value of P250.00
per square meter, and considering further that petitioner never received the proceeds of the sale.

When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing;
otherwise, the sale shall be void. Thus the authority of an agent to execute a contract for the sale of real estate must be conferred
in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding
contract containing terms and conditions which are in the contract he did execute. A special power of attorney is necessary to
enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable
consideration. The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must
be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. For the principal to
confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and
unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no such construction
shall be given the document.

It is therefore clear that by selling to respondent Perez a portion of petitioner's land through a compromise agreement, Villamil-
Estrada acted without or in obvious authority. The sale ipso jure is consequently void. So is the compromise agreement. This being
the case, the judgment based thereon is necessarily void.

28. Lilian Mercado, et al. v. Allied Banking Corporation

G.R. No. 171460, 27 July 2007

PRINCIPLE
A special power of attorney must be strictly construed and pursued. The instrument will be held to grant only those powers which
are specified therein, and the agent may neither go beyond nor deviate from the power of attorney. Where powers and duties are
specified and defined in an instrument, all such powers and duties are limited and are confined to those which are specified and
defined, and all other powers and duties are excluded.

FACTS
A certain Perla Mercado, during her lifetime, owned several properties in the Philippines. On 28 May 1992, she executed a Special
Power of Attorney in favor of her husband, Julian, over several pieces of property under her name. Among those powers vested
upon him was the authority to mortgage Perla’s parcel of land covered by TCT NO. RT-106338 with an area of 805 square meters
and registered with the Registry of Deeds of Pasig (now Makati).
By virtue of the said SPA, Julian obtained a loan twice from respondent Allied Banking, secured by the same real estate mortgage
constituted on TCT No. RT-18206 (106338) which covers a parcel of land with an area of 805 square meters, registered with the
Registry of Deeds of Quezon City. However, it appears that there was no property identified in the SPA as TCT No. RT-18206
(106338) and registered with the Registry of Deeds of Quezon City. What was identified in the SPA instead was the property
covered by TCT No. RT-106338 registered with the Registry of Deeds of Pasig.
Subsequently, Julian defaulted payment of his loan obligation. Thus, respondent initiated extra-judicial foreclosure proceedings
over the subject property which was subsequently sold at public auction wherein the respondent was declared as the highest
bidder. A year later, petitioners initiated with the RTC an action for the annulment of REM constituted over the subject property on
the ground that the same was not covered by the SPA and that the said SPA, at the time the loan obligations were contracted, no
longer had force and effect since it was previously revoked by Perla on 10 March 1993, as evidenced by the Revocation of SPA
signedi by the latter.

The RTC declared the real estate mortgage constituted over the subject property null and void. On appeal, the CA reversed the
lower court’s decision and upheld the validity of the REM constituted over the subject property on the strength of the SPA. Hence,
this petition.

ISSUE
Whether or not the property subject to real estate mortgage was covered under the SPA executed by Perla in favor of Julian.

RULING
NO. The Court is convinced that the property covered by TCT No. 106338 registered with the Registry of Deeds of Pasig (now
Makati) is the same as the subject property covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds of
Quezon City. The records of the case are stripped of supporting proofs to verify the respondent's claim that the two titles cover the
same property. It failed to present any certification from the Registries of Deeds concerned to support its assertion. Neither did
respondent take the effort of submitting and making part of the records of this case copies of TCTs No. RT-106338 of the Registry
of Deeds of Pasig (now Makati) and RT18206 (106338) of the Registry of Deeds of Quezon City, and closely comparing the technical
descriptions of the properties covered by the said TCTs.

Having arrived at the conclusion that Julian was not conferred by Perla with the authority to mortgage the subject property under
the terms of the SPA, the real estate mortgages Julian executed over the said property are therefore unenforceable. Assuming
arguendo that the subject property was indeed included in the SPA executed by Perla in favor of Julian, the said SPA was revoked
by virtue of a public instrument executed by Perla on 10 March 1993.

--------------------
The subject property was not among those enumerated therein. There was nothing in the language of the SPA from which the
Court could deduce the intention of Perla to include the subject property therein. The further explained that they cannot attribute
such intention to Perla who executed the SPA when the language of the instrument is bare of any indication suggestive of such
intention. Otherwise, it would run afoul of the express tenor of the SPA and thus defeat Perla’s true intention.

Equally relevant is the rule that a power of attorney must be strictly construed and pursued. The instrument will be held to grant
only those powers which are specified therein, and the agent may neither go beyond nor deviate from the power of
attorney. Where powers and duties are specified and defined in an instrument, all such powers and duties are limited and are
conned to those which are specified and defined, and all other
powers and duties are excluded.

29. BPI vs De Coster GR NO. 23181

Principle: A power of attorney “to loan and borrow money” and to mortgage the principal’s property does not carry with it or
imply that the agent has a legal right to make the principal liable for the personal debts of the agent.

Facts: While the de Coster is residing in Paris, France, Jean Poizat her husband executed a promissory note for P292,000.00 for a
loan and a real mortgage on her behalf, making her liable jointly and severally along with her husband and his firm, by virtue of a
power of attorney that she left with her husband. In addition, a chattel mortgage was also executed by Jean Poizat and J.M. Poizat
& Co. on two steamships belonging to the Poizat Vegetable Oil Mills. The note in question became long past due and owing

The lower court ruled that the defendants are liable to BPI. Wife returned to the Philippines to question the validity of the service
of the summons (since she has been residing in Paris for 16 years now), the validity of the promissory note and the validity of the
real mortgage.

Issue: WON the principal wife is liable for the mortgage executed by her agent husband.
Ruling: No. The note and mortgage show upon their face that at the time they were executed, the agent-husband was attorney-in-
fact for the defendant wife, and the bank knew or should have known the nature and extent of his authority and the limitations
upon his power.

Par. 5 of the power of attorney authorizes the agent husband for and in the name of his wife to “loan or borrow any sums of
money or fungible things etc”. This is taken to mean that he only had the power to loan his wife’s money and to borrow money for
or on account of his wife as her agent and attorney-in-fact, it does not carry with it or imply that he had the legal right to make his
wife liable as a surety for the preexisting debt of a third person.

The note which binds the wife and upon which the mortgage was executed was found to be for a preexisting debt of the husband
and of his firm. The wife was not a party to this original debt and the power of attorney does not authorize the husband to make
the wife liable as a surety to the debt of a third person.

The fact that an agent failed and neglected to perform his duties and to represent the interests of his principal is not a bar to the
principal obtaining legal relief for the negligence of her agent, provided that the application for such a relief is duly and properly
made under the provisions of section 113 (Code of Civil Procedure).

When the note which a real mortgage is supposed to secure is found to be VOID as to the principal, then it follows that the
mortgageis also VOID as to the principal

30. PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. MAXIMO STA. MARIA, ET AL., defendant,

VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO and LEONILA, all surnamed STA. MARIA,defendants-appellants.

PRINCIPLE: a special power of attorney to mortgage real estate is limited to such authority to mortgage and does not bind the
grantor personally to other obligations contracted by the grantee, in the absence of any ratification or other similar act that would
estop the grantor from questioning or disowning such other obligations contracted by the grantee.

FACTS: Philippine National Bank (PNB) filed this action on February 10, 1961 against defendant Maximo Sta. Maria and his six
brothers and sisters, defendants-appellants, Valeriana, Emeteria, Teofilo, Quintin, Rosario and Leonila, all surnamed Sta. Maria (
the Sta. Marias’ ), and the Associated Insurance & Surety Co., Inc. as surety, for the collection of certain amounts representing
unpaid balances on two agricultural sugar crop loans due allegedly from defendants.
The said sugar crop loans were obtained by defendant Maximo Sta. Maria from PNB under a special power of attorney, executed
in his favor by his six brothers and sisters, defendants-appellants herein, to mortgage a 16-odd hectare parcel of land, jointly
owned by all of them, In addition, Valeriana Sta. Maria alone also executed in favor of her brother, Maximo, a special power of
attorney to borrow money and mortgage any real estate owned by her. By virtue of the two above powers, Maximo Sta. Maria
applied for two separate crop loans.

ISSUE: W/O Maximo Sta. Maria acted within the powers granted by the SPA.

HELD: No. Maximo Sta. Maria went beyond the powers granted to him by the SPA.
The authority granted by the Sta. Marias’ (except Valeriana) unto their brother, Maximo, was merely to mortgage the property
jointly owned by them. They did not grant Maximo any authority to contract for any loans in their names and behalf. Maximo
alone, with Valeriana who authorized him to borrow money, must answer for said loans and the other defendants-appellants' only
liability is that the real estate authorized by them to be mortgaged would be subject to foreclosure and sale to respond for the
obligations contracted by Maximo. But they cannot be held personally liable for the payment of such obligations, as erroneously
held by the trial court.

31. INSULAR DRUG CO. V. PHILIPPINE NATION BANK, G.R. NO. L-38816, NOVEMBER 3, 1933

Principle: “Any person taking checks made payable to a corporation, which can act only by agent does so at his peril, and must
same by the consequences if the agent who indorses the same is without authority.”

Facts:

One hundred thirty-two (132) checks made out in the name of the Insular Drug Co., Inc., covering a total of ₱18,285.92 were
brought to the branch office of the Philippine National Bank (PNB) in Iloilo by Foerster, a salesman of Insular Drug. Co., Foerster’s
wife, and Foerster’s clerk. The checks placed in the personal account of Foerster. After the indorsement on the checks was written
by the Manager of PNB, the amounts stated were subsequently withdrawn by U.E., Foerster, and Carmen E. de Foerster. However,
upon the discovery of the anomalies by the Manila Office of the drug company through its investigation of the transaction made by
Foerster, the latter committed suicide. There is no evidence showing that the bank knew that Foerster was misappropriating the
funds of his principal.
Issue:
Whether or not the bank incurred the liability to pay Insular Drug Co..
Held:
Yes.
A salesman (agent) who was given authority to collect money that belonged to his principal do not have the implied authority to
indorse checks received in payment. Further, “any person taking checks made payable to a corporation, which can act only by
agent does so at his peril, and must same by the consequences if the agent who indorses the same is without authority.”
In this case, the bank could not be relieved of its responsibility by relying to the effect that Foerster had implied authority to
indorse all checks made out in the name of the Insular Drug Co. Not only did the bank permit Foerster to indorse checks and then
place them to his personal account, but it went farther and permitted Foerster's wife and clerk to indorse the checks. The right of
an agent to indorse commercial paper is a very responsible power and will not be lightly inferred.

32.:C.N. HODGES vs. CARLOTA SALAS and PAZ SALAS (GR No. G.R. No. L-42958. October 21, 1936)

Facts:
The defendants, Salas and Salas, executed a Power of Attorney in favor of their brother-in law Felix S. Yulo to enable him to obtain
a loan and secure it with a mortgage on the real property described in transfer certificate of title No. 3335. Under the said Power
of Attorney, Yulo obtained a loan, hence binding his principals jointly and severally to pay it within 10 years subject to interest. In
effect he signed a promissory note for the amount borrowed and executed a deed of mortgage of the real property.
However, the amount loaned was not delivered to Yulo but rather the plaintiff and the agent, Yulo had an agreement that the
amount be used to pay the personal debts of the agent.
The defendants failed to pay at maturity the interest stipulated which should have been paid one year in advance. Thus, plaintiff,
Hodges therefore brought an action for foreclosure of the mortgage. The defendants then counters such action that Yulo acted in
excess of his authority.
Issue:
Whether or not, Felix Yulo, being the agent, was authorized to borrow money and use it as he wished for his personal gain by
virtue of the authority conferred by the defendants.
Ruling:
In the case of Manila Trading & Supply Co. vs. Uy Tiepo, the court held that an agent who used the borrowed money for his
personal gain or benefit is deemed to have exceeded the authority conferred upon him under the power of attorney in which case
should have been specific and limited to a certain extent.
As substantially provided under Article 1881 of the Civil Code that an agent must act within the scope of his authority and may do
such acts as may be conducive to the accomplishment of the purpose of the agency.
In the case at bar, Yulo exceeded the authority provided under the Power of Attorney by using the loaned money for his personal
benefit.

34. BRAVO-GUERRERO v. BRAVO

G.R. NO. 152658
July 29, 2005

Principle: There is no need to execute a separate and special power of attorney if the act or transaction specified can be included
in the general power

Facts: Grandparents-spouses Bravo owned two parcel of lands in Makati, the wife executed GPA in favor of her husband. These
properties were subsequently sold by the grandfather to their grandchildren. Such properties were mortgaged to PNB and DBP and
the grandchildren-heirs assumed the payment. Later on, one of the grandchildren moved for the partition of the properties as co-
owners but the buyers refused. The grandchildren contested the sale for lack of consideration. The trial court upheld the validity of
the sale which was reversed by CA for lack of consent on the part of the grandmother.
Issue: WON the GPA granted by grandmother was valid
Held: Yes. Sale of conjugal property by husband is only voidable if without wife’s consent. The sale can only be contested by the
wife, and this is not the case. The grandmother executed a GPA specifying the authority of his husband, thus, meeting the
requirement of authorization specified in Art. 1878. There was no need to execute a separate and special power of attorney as it
can be included in the general power when it is specified therein the act or transaction for which the special power is required.

CHAPTER 2 OBLIGATIONS OF THE AGENT

(1884 – 1909)

1884 – agent bound by his acceptance to carry out the agency and is liable for non performance

General Obligations:

1. Good faith and loyalty to his trust

 2. Obedience to principal’s instruction
3. Exercise of reasonable care

Specific Obligations of the Principal

1. To carry out the agency according to its terms 1884

2. To answer for the damages which through his non performance the principal may suffer 1884
3. To finish the business already begun on the death of the principal, should delay detail any danger 1884
4. To observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by
the owner in case he declines an agency, until agent is appointed 1885
5. To advance the necessary funds should there be a stipulation to that effect 1886
6. To act in accordance with the instructions of the principal 1887
7. Not to carry out the agency if its execution would manifestly result in loss or damage to the principal (1888)
8. To answer for damages should he prefer in case of conflict, his own interests to those of the principal (1889)
9. Not to loan to himself without the consent of the principal when he has bee authorized to lend at interest (1890)
10. To render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the
agency (1891)
11. Distinguish goods by countermarks and designate the merchandise respectively belonging to each principal, in the case
of a commission agent who handles goods of the same kind and mark, which belong to different owners (1904)
12. To be responsible in certain cases for the acts of the substitute appointed by him (1892)
13. To pay interest on funds he has applied to his own use (1896)
14. TO inform the principal, where an authorized sale of credit has been made, of such sale (1906)
15. To bear the risk of collection, should he receive also on a sale, a guarantee commission (1907)
16. To indemnify the principal for damages for his failure to collect the credits of his principal at the time that they become
due (1908)
17. To answer for his fraud or negligence (1909)

1885 – obligations of person who declines an agency

It also creates an obligation on the owner to act as soon as practicable to:

1. Appoint a new agent; or
2. Taking charge of the goods

1886 – Stipulation of advancing

1887 – agent bound by the instruction of the principal

Instructions – private direction which the principal may give the agent in regard to the manner of performing his duties as such
agent but of which a third party is ignorant. They are said to be secret if the principal intended them not to be made known to such
party.

Duty of Obedience – it is the fundamental duty of the agent to obey all the reasonable and lawful instructions given to him by his
principal.

Liability for loss or damage – If the agent exceeds or violates the instructions, he will be liable.

1888 – Do not carry out the agency if it shall result to loss or damage to principal

1889 –agent’s liability for damages if he prefers his own interest

1890 – Obligation not to loan

1891 – Duty to Account

1892 – SUBAGENTS

Liability against him if he:

1. He was not given the power to appoint one
2. When he was given such power, but without designating the person, and the person appointed was notoriously
incompetent or insolvent

1893 – An action against the sub agent

Subagent – is a person to whom the agent delegates as his agent, the performance of an act for the principal which the agent has
been empowered to perform through his representative

Effects of Substitution

1. Substitution prohibited
2. Substitution authorized
3. Substitution not authorized, but not prohibited

1894 – Agents jointly liable, not solidary

1895 – condition on solidary liability
1896 – Agent owes interest on the sums he has applied to his own use from the day on which he did so

Necessity of demand principle

1897 – Personal liability of the agent

1898 – agent contracting in the name of the principal
1899 – Effect of ignorance of agent
1900 – Scope of agent’s authority as to third persons
1901 – Agent’s lack of authority; when not as defense
1902 – presentation of power of attorney
1903 – Commission agent as to goods received
1904 – obligation of commission agent against co-mingling

1905 –right of principal where sale on credit was without authority

1. He may require payment in cash, in which case, any interest or benefit from the sale shall belong to the agent since the
principal cannot be allowed to enrich himself at the agent’s expense; or
2. He may ratify the sale on credit in which case it will have all the risks and advantages to him

1906 – authorized sale on credit

1907 – guarantee commission

Guarantee commission – (del credere commission) is one where in consideration of an increased commission the factor or
commission agent guarantees to the principal the payment of debts arising through his agency.

Its purpose is to compensate the agent for the risks he will have to bear in the collection of the credit due the principal

1908 – Obligation of commission agent to collect credits of principal

JULIO DANON, plaintiff-appellee, vs.

ANTONIO A. BRIMO & CO., defendant-appellant

PRINCIPLE - The duty assumed by the broker is to bring the minds of the buyer and seller to an agreement for a sale, and the
price and terms on which it is to be made, and until that is done his right to commissions does not accrue. A broker is never
entitled to commissions for unsuccessful efforts.

FACTS:

ANTONIO A. BRIMO & CO., the defendant company, through Antonio A. Brimo, its manager, employed the Plaintiff-
Julio to look for a purchaser of its factory known as "Holland American Oil Co.," for the sum of P1,200,000, payable in cash. Mr.
Brimo agreed and promised to pay to Plaintiff-Julio a commission of 5% provided that Julio could sell said factory for that
amount, without a definite period of time fixed within which the plaintiff should effect the sale.

Another broker, Sellner, was also negotiating the sale, or trying to find a purchaser for the same property. Plaintiff-
Julio was aware that he was not alone in the field, and his whole effort was to forestall his competitor by being the first to find a
purchaser and effect the sale.

Immediately after having an interview with Mr. Brimo, Plaintiff-Julio went to see Mr. Mauro Prieto, the president of
the Santa Ana Oil Mill, a corporation, and offered to sell to him the defendant's property at P1,200,000.

Subsequently, Mr. Prieto asked for an appointment with Mr. Brimo to perfect the negotiation. In the meantime,
Sellner, the other broker referred to, had found a purchaser for the same property, who ultimately bought it for P1,300,000. For
that reason Mr. Prieto, the would be purchaser found by the plaintiff, never came to see Mr. Brimo to perfect the proposed
negotiation.

Despite the unconsummated sale of the subject factory to Santa Ana Oil Mill (with Mr. Prieto as President thereof),
plaintiff endeavored to procure another purchaser and found a Mr. Leas, who delivered to the plaintiff a letter addressed to Mr.
Brimo, offering to buy the factory in question at P1,200,000. However, the offer was not accepted by Brimo because while he
was reading the letter of Leas, Sellner came in, drew Brimo into another room, and then and there closed the deal at
P1,300,000.

Thus, Plaintiff-Julio instituted an action to recover the sum of P60,000, alleged to be the value of services rendered to
the defendant by the plaintiff as a broker.

ISSUE:

Whether the plaintiff had performed all that was required of him under that contract to entitle him to recover the
sum of P60,000, claimed by him as compensation for his services.

RULING:

No.

According to the Supreme Court, the duty assumed by the broker is to bring the minds of the buyer and seller to an
agreement for a sale, and the price and terms on which it is to be made, and until that is done his right to commissions does not
accrue. A broker is never entitled to commissions for unsuccessful efforts.

In the case at bar, Plaintiff-Jose failed to bring the minds of Mr. Brimo, the would be buyer, and the seller, which is the
defendant-corporation, to an agreement for the sale of the subject- factory, and the price and terms on which it is to be made.
Therefore, plaintiff’s right to recover the sum of P60,000, alleged to be the value of services rendered to the defendant by the
plaintiff as a broker, does not accrue.

ALFRED HAHN vs COURT OF APPEALS AND BMW G.R. No. 113074; January 22, 1997

FACTS:
Alfred Hahn is a Filipino citizen doing business under the name and style “Hahn-Manila.” On the other hand, private
respondent Bayerische Motoren Werke Aktiengesellschaft (BMW) is a non-resident foreign corporation existing under the laws
of the former Federal Republic of Germany with principal office at Munich, Germany.

On March 7, 1967, petitioner executed in favor of private respondent a “Deed of Assignment with Special Power of
Attorney”. Per the agreement, “the parties continued business relations as has been usual in the past without a formal
contract.”

But on February 16, 1993, in a meeting with a BMW representative and the president of Columbia Motors
Corporation (CMC), Jose Alvarez, petitioner was informed that BMW was arranging to grant the exclusive dealership of BMW
cars and products to CMC, which had expressed interest in acquiring the same.

On February 24, 1993, petitioner received confirmation of the information from BMW which, in a letter, expressed
dissatisfaction with various aspects of the petitioner’s business, mentioning among other things, decline in sales, deteriorating
services, and inadequate showroom and warehouse facilities, and petitioner’s alleged failure to comply with the standards for
an exclusive BMW dealer.

Nonetheless, BMW expressed willingness to continue business relations with the petitioner on the basis of a “standard
BMW importer” contract, otherwise, it said, if this was not acceptable to petitioner, BMW would have no alternative but to
terminate petitioner’s exclusive dealership effective June 30, 1997.

Because of Hahn’s insistence on the former business relations, BMW withdrew on March 26, 1993 its offer of a
“standard importer contract” and terminated the exclusive dealer relationship effective June 30, 1993.
 On April 29, 1993, BMW proposed that Hahn and CMC jointly import and distribute BMW cars and parts, but Hahn found
the proposal unacceptable.

Thus, on May 14, 1993, Hahn filed a complaint for specific performance and damages against BMW to compel it to
continue the exclusive dealership. Later, he filed an amended complaint to include temporary restraining order and for writs of
preliminary, mandatory and prohibitory injunction to enjoin BMW from terminating his exclusive dealership.

The case was raffled to RTC Branch 104 of Quezon City and the said court issued a temporary restraining order on
June 14, 1993.

A copy of the order, complaint and summons were served through the Department of Trade and Industry (DTI) and the
same was sent to BMW by the DTI through registered mail, and was received on June 24, 1993.

On June 17, 1993, the hearing on writ of preliminary injunction proceeded ex parte and on July 13, 1993, the court
issued an order granting the writ of preliminary injunction upon putting up a bond of ₱100,000.00.

On July 1, 1993 BMW moved to dismiss the case on the ground that the court did not acquire jurisdiction over it
through the service of summons at the DTI.

The trial court deferred the resolution of the motion to dismiss until after trial on the merits for the reason that the
grounds advanced by BMW on its motion did not seem indubitable.

Without seeking for reconsideration, BMW filed a petition for certiorari; thus, this petition.

ISSUE:

Whether or not Alfred Hahn is the agent or distributor in the Philippines of private respondent BMW.

RULING:

Yes. Hahn claimed he took orders for BMW cars and transmitted them to BMW. Upon reception of the orders, BMW
fixed the down payment and pricing charges, notified Hahn of the scheduled production month for the orders, and reconfirmed
the orders by signing and returning to Hahn the acceptance sheets. Payment was made by the buyer directly to BMW. Title to
cars purchased passed directly to the buyer and Hahn never paid for the purchase price of BMW cars sold in the Philippines.
Hahn was credited with a commission equal to 14% of the purchase price upon the invoicing of the vehicle order by BMW. Upon
confirmation in writing that the vehicles had been registered in the Philippines and serviced by him Hahn received an additional
3% of the full purchase price. Hahn performed after-sale services, including warranty services, for which he received
reimbursement from BMW. All orders were on invoices and forms of BMW. These allegations were substantially admitted BMW
its petition for certiorari before the Courts of Appeal.

Contrary to the appellate court’s conclusion, this arrangement shows an agency. An agent receives a commission
upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller
together, even if no sale is eventually made.

As to the service centers and the showrooms which he said he had put up at his own expense, Hahn said that he has
to follow BMW specification as exclusive dealer of BMW in the Philippines. According to Hahn, BMW periodically inspected the
service centers to see to it that BMW standards were maintained. Indeed, it would seem from BMW’s letter to Hahn that it was
for Hahn’s alleged failure to maintain BMW standards that BMW was terminating Hahn’s dealership.
The fact that Hahn invested his own money to put up these service centers and showrooms does not necessarily prove
that he is not necessarily prove that he is not an agent of BMW. For as already noted, there are facts in the record which
suggest that BMW exercise control over Hahn’s activities as a dealer and made regular inspection of Hahn’s premises to enforce
compliance with BMW standards and specifications.

This court held that these acts constituted doing business in the Philippines. The arrangement showed that the foreign
corporation’s purpose was to penetrate the Philippine market and establish its presence in the Philippines.
 In addition, BMW held out private respondent Hahn as its exclusive distributor in the Philippines, even as it
announced in the Asian region that Hahn was the “official BMW Agent” in the Philippines.

The Court of Appeals also found that petitioner Alfred Hahn dealt in other products and not exclusively in BMW
products, and, on this basis, ruled that Hahn was not an agent of BMW. This finding is based entirely on allegations of BMW in
its motion to dismiss filed by the trial court and in its petition for certiorari before the Court of Appeals. But this allegation was
denied by Hahn and therefore the Court of Appeals should not have cited it as if it were the fact.

TAN VS GULLAS

Principle: An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay
merely by bringing the buyer and the seller together, even if no sale is eventually made.

Facts:
Sps. Gullas were registered owners of a parcel of land. They executed a Special Power of Attorney authorizing Tan, a licensed real
estate broker to negotiate for the sale of the land. This was non- exclusive and effective for one month. Tan contacted The
Sisters of Mary School, a religious organization, if the latter is interested in acquiring a property. The Sisters, who had seen and
inspected the land found it suitable for their purpose and expressed their desire to buy it but they requested that the selling
price be reduced. Gullas agreed to sell the property to The Sisters of Mary. After the conclusion of sale, Tan filed a complaint
against Gullas for recovery of their broker’s fee. They alleged that they were the efficient procuring cause in bringing about the
sale but their efforts in consummating the sale were frustrated by the respondents. In evident of bad
faith, malice, and to evade payment of broker’s fee, Gullas dealt directly with The Sisters of Mary whom Tan introduced to them.

Issue: Whether or not the petitioner is a broker and entitled to the brokerage commission.

Ruling:

Yes.

The law defines broker, as one who is engaged, for others, on a commission, negotiating contracts relative to property with the
custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the name of
those employed him. The law further state that broker is one whose occupation is to bring the parties together, in matters of
trade, commerce or navigation.

In this case, the records show that Tan is a licensed real estate broker and he was responsible for the introduction of the
representatives of The Sisters of Mary to Gullas.

The law distinguished an agent from broker. An agent receives a commission upon the successful conclusion of a sale, while a
broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made.

Therefore, Tan as broker should be entitled to the commission over the subject property upon successful conclusion of sale
through their efforts.

Phil. Health Care Providers, Inc. (MAXICARE) v. ESTRADA / CARA Services GR: 1711052 / Jan. 28, 2008

FACTS: Maxicare is a domestic corporation engaged in selling health insurance plans whose Chairman Dr. Roberto K.
Macasaet, Chief Operating Officer Virgilio del Valle, and Sales/Marketing Manager Josephine Cabrera were impleaded as
defendants-appellants.

On September 15, 1990, Maxicare allegedly engaged the services of Carmela Estrada who was doing business under
the name of CARA HEALTH [SERVICES] to promote and sell the prepaid group practice health care delivery program called
MAXICARE Plan with the position of Independent Account Executive. Maxicare formally appointed Estrada as its “General
Agent,” evidenced by a letter-agreement dated February 16, 1991.
 Maxicare alleged that it followed a “franchising system” in dealing with its agents whereby an agent had to first
secure permission from Maxicare to list a prospective company as client. [Estrada] alleged that it did apply with Maxicare for
the MERALCO account and other accounts, and in fact, its franchise to solicit corporate accounts, MERALCO account included,
was renewed on February 11, 1991.

Plaintiff-appellee Estrada submitted proposals and made representations to the officers of MERALCO
regarding the MAXICARE Plan but when MERALCO decided to subscribe to the MAXICARE Plan, [Maxicare] directly negotiated
with MERALCO regarding the terms and conditions of the agreement and left plaintiff-appellee Estrada out of the discussions on
the terms and conditions.

On March 24, 1992, plaintiff-appellee Estrada, through counsel, demanded from Maxicare that it be paid
commissions for the MERALCO account and nine (9) other accounts. In reply, Maxicare, through counsel, denied [Estrada’s]
claims for commission for the MERALCO and other accounts because Maxicare directly negotiated with MERALCO and the
other accounts(,) and that no agent was given the go signal to intervene in the negotiations for the terms and conditions and the
signing of the service agreement with MERALCO and the other accounts so that if ever Maxicare was indebted to Estrada, it
was only for P1,555.00 and P43.l2 as commissions on the accounts of Overseas Freighters Co. and Mr. Enrique Acosta,

After trial, the RTC found Maxicare liable for breach of contract and ordered it to pay Estrada actual damages in the amount
equivalent to 10% of P20,169,335.00, representing her commission for the total premiums paid by Meralco to Maxicare from the
year 1991 to 1996, plus legal interest computed from the filing of the complaint on March 18, 1993, and attorney’s fees in the
amount of P100,000.00.

On appeal, the CA affirmed in toto the RTC’s decision.

Issues:

1. Whether the Court of Appeals committed serious error in affirming Estrada’s entitlement to
commissions for the execution of the service agreement between Meralco and Maxicare.

2. Corollarily, whether Estrada is entitled to commissions for the two (2) consecutive renewals of
the service agreement effective on December 1, 1992 and December 1, 1995.

Held:
Yes. Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed
by the appellate court, are accorded the highest degree of respect and are considered conclusive between the parties.

Contrary to Maxicare’s assertion, the trial and the appellate courts carefully considered the factual backdrop of
the case as borne out by the records. Both courts were one in the conclusion that Maxicare successfully landed the
Meralco account for the sale of healthcare plans only by virtue of Estrada’s involvement and participation in the
negotiations.

At the very least, Estrada penetrated the Meralco market, initially closed to Maxicare, and laid the groundwork
for a business relationship. The only reason Estrada was not able to participate in the collection and remittance of
premium dues to Maxicare was because she was prevented from doing so by the acts of Maxicare, its officers, and
employees.

CARLOS SANCHEZ, Petitioners, vs.

MEDICARD PHILIPPINES, INC., DR. NICANOR MONTOYA and CARLOS
EJERCITO, Respondent.

Principle: The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with
third persons.

FACTS: Medicard Inc. appointed petitioner Carlos Sanchez as its special corporate agent and they gave him a commission based
on the "cash brought in." through Sanchez’s efforts, Medicard and Unilab executed a Health Care Program Contract. Unilab paid
Medicard P4,148,005.00 representing the premium for one (1) year. Medicard then handed petitioner 18% of said amount or
P746,640.90 representing his commission. Again, through Sanchez’s initiative, the agency contract between Medicard and
Unilab was renewed for another year. Prior to the expiration of the renewed contract, Medicard proposed an increase of the
premium which Unilab rejected "for the reason that it was too high,". In a letter dated October 3, 1990, Unilab confirmed its
decision not to renew the health program. Meanwhile, in order not to prejudice its personnel by the termination of their health
insurance, Unilab negotiated with Dr. Montoya (Medicard’s president and general manager) and other officers of Medicard, to
discuss new ways in order to continue the insurance coverage. Under the new scheme, Unilab shall pay Medicard only the
amount corresponding to the actual hospitalization expenses incurred by each personnel plus 15% service fee. Medicard did not
give petitioner any commission under the new scheme. Aggrieved, Sanchez demanded from Medicard payment of P338,000.00
as his commission plus damages, but the latter refused to heed his demand.

ISSUE: Whether or not Sanchez is entitled to a commission.

HELD: No, Sanchez is not entitled of commission as the contract of agency is deemed revoked.

It is dictum that in order for an agent to be entitled to a commission, he must be the procuring cause of the sale, which
simply means that the measures employed by him and the efforts he exerted must result in a sale. Based on the facts, it may be
recalled that through petitioner's efforts, Medicard was able to enter into a Contract with Unilab, two times, However before
the expiration of the renewed contract, Unilab rejected the proposal. Medicard then requested petitioner to reduce his
commission should the contract be renewed on its third year, but he was obstinate. It is clear that since petitioner refused to
reduce his commission, Medicard directly negotiated with Unilab, thus revoking its agency contract with petitioner. Such
revocation is authorized by Article 1924 of the Civil Code which provides: "The agency is revoked if the principal directly manages
the business entrusted to the agent, dealing directly with third persons."

Moreover, as found by the lower courts, petitioner did not render services to Medicard, his principal, to entitle him to
a commission. There is no indication from the records that he exerted any effort in order that Unilab and Medicard, after the
expiration of the Health Care Program
Contract, can renew it for the third time. In fact, his refusal to reduce his commission constrained Medicard to negotiate
directly with Unilab. We find no reason in law or in equity to rule that he is entitled to a commission.

INFANTE v CUNANAN G.R. No. L-5180, August 31, 1953

DOCTRINE: Where one of the parties to an agency takes advantage of the benevolence of the other and acts in a manner that
would promote his own selfish interest, this act is unfair as would amount to bad faith. This act cannot be sanctioned without
according to the party prejudiced the reward which is due him.

FACTS: Herein petitioner was the owner of two parcels of land, together with a house built thereon. She contracted the services
of respondents, to sell the property for a price of P30,000 subject to the condition that the purchaser would assume the
mortgage existing thereon in the favor of the Rehabilitation Finance Corporation. Petitioner agreed to pay them a commission
of 5 per cent on the purchase price plus whatever overprice they may obtain for the property.
Respondents found one Pio S. Noche who was willing to buy the property under the terms agreed upon with petitioner, but
when they introduced him to defendant, the latter informed them that she was no longer interested in selling the property and
succeeded in making them sign a document stating therein that the written authority she had given them was already can-
celled.
However, petitioner dealt directly with Pio S. Noche selling to him the property for P31,000. Upon learning this transaction,
plaintiffs demanded from defendant the payment of their commission, but she refused and so they brought the present
action. The lower court ruled in favor of the defendants and rendered judgement sentensing the petitioner to pay the
defendants the sum of P2,500 with legal interest thereon. This decision was affirmed in toto by the Court of Appeals. Hence,
this petition.

ISSUE: Whether or not petitioner Infante is liable as principal to pay the commission promised to the agents.

HELD: Yes. That petitioner had changed her mind even if respondents had found a buyer who was willing to close the deal, is a
matter that would not give rise to a legal consequence if respondents agree to call off the transaction in deference to the
request of the petitioner. But the situation varies if one of the parties takes advantage of the benevolence of the other and
acts in a manner that would promote his own selfish interest. This act is unfair as would amount to bad faith. This act cannot
be sanctioned without according to the party prejudiced the reward which is due him. This is the situation in which
respondents were placed by petitioner. Petitioner took advantage of the services rendered by respondents, but believing that
she could evade payment of their commission, she made use of a ruse by inducing them to sign the deed of cancellation.
This act of subversion cannot be sanctioned and cannot serve as basis for petitioner to escape payment of the commission
agreed upon.

Lim vs. Saban, GR No. 163720, December 16, 2004

Facts:
The late Eduardo Ybañez (Ybañez), the owner of a 1,000-square meter lot in Cebu City (the "lot"), entered into an Agreement and
Authority to Negotiate and Sell (Agency Agreement) with respondent Florencio Saban (Saban) on February 8, 1994. Under the
Agency Agreement, Ybañez authorized Saban to look for a buyer of the lot for Two Hundred Thousand Pesos (P200,000.00) and
to mark up the selling price to include the amounts needed for payment of taxes, transfer of title and other expenses incident
to the sale, as well as Saban’s commission for the sale.

Through Saban’s efforts, Ybañez and his wife were able to sell the lot to the petitioner Genevieve Lim (Lim) and the spouses
Benjamin and Lourdes Lim (the Spouses Lim) on March 10, 1994. The price of the lot as indicated in the Deed of Absolute Sale is
Two Hundred Thousand Pesos (P200,000.00) It appears, however, that the vendees agreed to purchase the lot at the price of Six
Hundred Thousand Pesos (P600,000.00), inclusive of taxes and other incidental expenses of the sale. After the sale, Lim
remitted to Saban the amounts of One Hundred Thirteen Thousand Two Hundred Fifty Seven Pesos (P113,257.00) for payment
of taxes due on the transaction as well as Fifty Thousand Pesos (P50,000.00) as broker’s commission. Lim also issued in the name
of Saban four postdated checks in the aggregate amount of Two Hundred Thirty Six Thousand Seven Hundred Forty Three Pesos
(P236,743.00).

Subsequently, Ybañez sent a letter dated June 10, 1994 addressed to Lim. In the letter Ybañez asked Lim to cancel all the checks
issued by her in Saban’s favor and to "extend another partial payment" for the lot in his (Ybañez’s) favor.

After the four checks in his favor were dishonored upon presentment, Saban filed a Complaint for collection of sum of money
and damages against Ybañez and Lim with the Regional Trial Court (RTC) of Cebu City on August 3, 1994.

Saban alleged that Ybañez told Lim that he (Saban) was not entitled to any commission for the sale since he concealed the
actual selling price of the lot from Ybañez and because he was not a licensed real estate broker.

Saban further averred that Ybañez and Lim connived to deprive him of his sales commission by withholding payment of the first
three checks.

Ybañez died during the pendency of the case before the RTC. Upon motion of his counsel, the trial court dismissed the case only
against him without any objection from the other parties.

On October 27, 2003, the appellate court promulgated its Decision reversing the trial court’s ruling. It held that Saban was
entitled to his commission amounting to P236,743.00.

The Court of Appeals ruled that Ybañez’s revocation of his contract of agency with Saban was invalid because the agency was
coupled with an interest and Ybañez effected the revocation in bad faith in order to deprive Saban of his commission and to keep
the profits for himself.

Issues:
1. Whether or not the contract of agency entered between Ybanez and Saban was revoked after the sale was
consummated?
2. Does the agency entered into between the parties can be considered as agency coupled with interest?
3. Whether or not Saban is entitled to receive his commission from the sale; and, assuming that Saban is entitled
thereto, whether it is Lim who is liable to pay Saban his sales commission.

Held:
1. No. The agency was not revoked since Ybañez requested that Lim make stop payment orders for the checks payable
to Saban only after the consummation of the sale on March 10, 1994. At that time, Saban had already performed his
obligation as Ybañez’s agent when, through his (Saban’s) efforts, Ybañez executed the Deed of Absolute Sale of the lot
with Lim and the Spouses Lim.

To deprive Saban of his commission subsequent to the sale which was consummated through his efforts would be a
breach of his contract of agency with Ybañez which expressly states that Saban would be entitled to any excess in the
purchase price after deducting the P200,000.00 due to Ybañez and the transfer taxes and other incidental expenses of
22
the sale.

Saban had completely performed his obligations under his contract of agency with Ybañez by finding a suitable buyer
to preparing the Deed of Absolute Sale between Ybañez and Lim and her co-vendees. Moreover, the contract of
 agency very clearly states that Saban is entitled to the excess of the mark-up of the price of the lot after deducting
Ybañez’s share of P200,000.00 and the taxes and other incidental expenses of the sale.

2. No. Under Article 1927 of the Civil Code, an agency cannot be revoked if a bilateral contract depends upon it, or if it is
the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the
contract of partnership and his removal from the management is unjustifiable. Stated differently, an agency is
deemed as one coupled with an interest where it is established for the mutual benefit of the principal and of the
agent, or for the interest of the principal and of third persons, and it cannot be revoked by the principal so long as the
interest of the agent or of a third person subsists. In an agency coupled with an interest, the agent’s interest must be in
the subject matter of the power conferred and not merely an interest in the exercise of the power because it entitles
him to compensation. When an agent’s interest is confined to earning his agreed compensation, the agency is not one
coupled with an interest, since an agent’s interest in obtaining his compensation as such agent is an ordinary incident of
the agency relationship.

Saban’s right to receive compensation for negotiating as broker for Ybañez arises from the Agency Agreement between
them. Lim is not a party to the contract. However, the record reveals that she had knowledge of the fact that
Ybañez set the price of the lot at P200,000.00 and that the P600,000.00—the price agreed upon by her and
Saban—was more than the amount set by Ybañez because it included the amount for payment of taxes and for Saban’s
commission as broker for Ybañez.

Lim’s act of issuing the four checks amounting to P236,743.00 in Saban’s favor belies her claim that she and her co-vendees did
not agree to purchase the lot at P600,000.00. The only logical conclusion is that Lim changed her mind about agreeing to
purchase the lot at P600,000.00 after talking to Ybañez and ultimately realizing that Saban’s commission is even more than
what Ybañez received as his share of the purchase price as vendor. Obviously, this change of mind resulted to the prejudice of
Saban whose efforts led to the completion of the sale between the latter, and Lim and her co-vendees. This the Court cannot
countenance.

Considering the circumstances surrounding the case, and the undisputed fact that Lim had not yet paid the balance of
P200,000.00 of the purchase price of P600,000.00, it is just and proper for her to pay Saban the balance of P200,000.00.

Furthermore, since Ybañez received a total of P230,000.00 from Lim, or an excess of P30,000.00 from his asking price of
P200,000.00, Saban may claim such excess from Ybañez’s estate, if that remedy is still available, in view of the trial court’s
dismissal of Saban’s complaint as against Ybañez, with Saban’s express consent, due to the latter’s demise on November 11,
1994.

Prats v. Court of Appeals G.R. No. L-39822, January 31, 1978

Ponencia: Fernandez, J.

Doctrine:

The principal has the obligation to pay commissions to his agent, subject to thelimitations of the stipulations in the agency.
Based on equity, however, in this case, it is butproper to give compensation to the efforts of the agent, which helped further
theprincipal’s interest.

Facts:

In 1968, Antonio Prats, under the name of “ Philippine Real Estate Exchange” instituted against Alfonso Doronilla and PNB a
case to recover a sum of money and damages. Doronilla had for sometime tried to sell his 300 hectares of land and he had
designated several agents for that purpose at one time. He offered the property to the Social Security System but was unable to
consummate the sale. Subsequently he gave a written authority in writing to Prats to negotiate the sale of the property. Such
authorization was published by Prats in the Manila Times. The parties agreed that Prats will be entitled to 10% commission
and if he will be able to sell it over its price, the excess shall be credited to the latter plus his commission. Thereafter, Prats
negotiated the land to the SSS. SSS invited Doronilla for a conference but the latter declined and instead instructed that the
former should deal with Prats directly. Doronilla had received the full payment from SSS. When Prats demanded from him his
professional fees as real estate broker, Doronilla refused to pay. Doronilla alleged that Prats had no right to demand the
payment not rendered according to their agreement and that the authority extended to Prats had expired prior to the closing
of the sale Issue:

Whether petitioner was the efficient procuring cause in bringing about the sale of respondent’s land to the SSS.

Ruling:
 The Supreme Court ruled that Prats was not the efficient procuring cause of the sale. It was not categorical that it was through
Prats efforts that meeting with the SSS official to close the sale took place. The court concluded that the meeting took place
independently because the SSS had manifested disinterest in Prats intervention. However, in equity, the court noted that Prats
had diligently taken steps to bring back together Doronilla and SSS. Prats efforts somehow were instrumental in bringing them
together again and finally consummating the sale although such finalization was after the expiration of Prats extended exclusive
authority. Doronilla was ordered to pay Prats for his efforts and assistance in the transaction.

MANOTOK BROTHERS, INC. vs. THE HONORABLE COURT OF APPEALS, THE

HONORABLE JUDGE OF THE REGIONAL TRIAL COURT OF MANILA (Branch VI), and SALVADOR SALIGUMBA
G.R. No. 94753. April 7, 1993.

Doctrine: When there is a close, proximate and causal connection between the agent's efforts and labor and the principal's sale
of his property, the agent is entitled to a commission.

Facts: Manotok Brothers Inc. (petitioner) is the owner of a certain parcel of land and building which were formerly leased by the
City of Manila. By means of a letter, petitioner authorized Salvador Saligumba (respondent) to negotiate with the City of Manila
the sale of the said property. Petitioner agreed to pay respondent 5% commission in the event the sale is finally consummated
and paid. On November 16, 1967, the corporation authorized respondent to finalize and consummate the sale of the property to
the City of Manila and extended respondent’s authority for another 180 days, to end at May 14, 1968. The City of Manila on April
26, 1968, passed Ordinance No. 6603, appropriating the sum of P410,816.00 for the purchase of the said property. Said
ordinance however, was signed by the City Mayor only on May 17, 1968, 183 days after the respondent’s authorization.
Notwithstanding the sale, respondent never received any commission, which should have amounted to P20,554.50. Petitioner
refused to pay respondent as the former does not recognize the latter's role as agent in the transaction by reason that at the
consummation of the sale, his authority has expired.

Private respondent filed a complaint against petitioner. He claimed that it was because of his efforts that the Municipal Board of
Manila passed Ordinance No. 6603 which appropriated the sum for the payment of the property subject of the sale. Petitioner
claimed otherwise. It denied the claim of private respondent on the ground that respondent would be entitled to a commission
only if the sale was consummated and the price paid within the period given in the respective letters of authority. RTC ruled in
favor of respondent. Respondent Court of Appeals affirmed the said ruling of the trial court. Petitioner filed a Motion for
Reconsideration but was denied, hence this present case.

Issue: WON respondent is entitled to the five percent (5%) agent's commission.

Ruling: YES. At first sight, it would seem that private respondent is not entitled to any commission as he was not successful in
consummating the sale between the parties, for the sole reason that when the Deed of Sale was finally executed, his extended
authority had already expired. Going deeper however into the case would reveal that it is within the coverage of the exception
rather than of the general rule, the exception being that enunciated in the case of Prats vs. Court of Appeals. In the said case,
this Court ruled in favor of claimant-agent, despite the expiration of his authority, when a sale was finally consummated. This
Court ruled that when there is a close, proximate and causal connection between the agent's efforts and labor and the
principal's sale of his property, the agent is entitled to a commission.

We agree with respondent Court that the City of Manila ultimately became the purchaser of petitioner's property mainly
through the efforts of private respondent. Without discounting the fact that when Municipal Ordinance No. 6603 was signed by
the City Mayor on May 17, 1968, private respondent's authority had already expired, it is to be noted that the ordinance was
approved on April 26, 1968 when private respondent's authorization was still in force. Moreover, the approval by the City Mayor
came only three days after the expiration of private respondent's authority. The decision of the Court of Appeals is AFFIRMED.

SAYRUDDIN, KEN LANVIN

UNILAND RESOURCES vs. DEVELOPMENT BANK OF THE PHILIPPINESG.R. No.

Principle: A middleman who, in the first place had no authority, express or implied, from the seller to broker the transaction, has
no right to claim for commission even though the sale was eventually consummated between the parties introduced by said
middleman.

Facts:

DBP sold their two properties- a warehouse lot and an office building lot in a public bidding. Uniland, a private corporation
engaged in real state brokerage, without securing the accreditation from DBP as their broker, was able to convince
Charges Realty Corp to purchase the warehouse lot. Uniland communicated this to DBP during the pre-bidding conference
and eventually the sale was consummated.
 After the sale, Uniland through its President, sent two letters to DBP asking for the payment of its broker's fee in
instrumenting the sale of its (DBP's) warehouse lot to Charges Realty Corp. Uniland contends that an implied agency existed
and argued that DBP should have stopped, disauthorized and outrightly prevented them from dealing the warehouse lot from
the inception.

Issue:

Whether or not a contract of agency existed between DBP and Uniland.

Ruling:

No. In the course of petitioner Uniland’s dealings with the respondent DBP, it was always made clear to them that
only accredited brokers may look for buyers on behalf of DBP. It is obvious that Uniland was never able to secure the required
accreditation from respondent DBP to transact business on behalf of the latter. The letters sent by petitioner to the higher
officers of the DBP are merely indicative of petitioner's desire to secure such accreditation. At best these missives are self-
serving; the most that they prove is that they were sent by petitioner and received by respondent DBP, which clearly never
agreed to be bound thereto. As correctly declared by the trial court there was no express reply from the DBP as to the
accreditation sought by petitioner. From the very beginning, therefore, petitioner was aware that it had no express authority
from DBP to find buyers of its properties.

Petitioner belittled the formality of accreditation as merely a mechanical act, which requires not much discretion,
as long as a person or entity looks for a buyer and initiate or promote the interests of the seller. Being engaged in business,
petitioner should do better to adopt the opposite attitude and appreciate that formalities, such as the need for accreditation,
result from the evolution of sound business practices for the protection and benefit of all parties concerned. They are
designed and adopted specifically to prevent the occurrence of situations similar to that obtaining in this case.

VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR, AMELIA,
VICENTE JR., SALVADOR, IRENE and JOSELITO, all surnamed DOMINGO G.R. No. L-30573; October 29, 1971

DOCTRINE: An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee without
revealing the same to his principal is guilty of a breach of his loyalty to the latter and forfeits his right to collect his
commission that may be due to him, even if the principal does not suffer any injury by reason of such breach.

FACTS: This is a case of Vicente M. Domingo who granted Gregorio Domingo, a real estate broker, the exclusive agency to sell
his lot at the rate of P2.00 per square meter or for the amount of P176,954.00 with a commission of 5% on the total price.
Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer, promising him one-half of the 5%
commission.Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer.

Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per square meter. Vicente
directed Gregorio to tell Oscar de Leon to raise his offer. After several conferences between Gregorio and Oscar de Leon, the
latter raised his offer to P109,000.00 on June 20 and Vicente agreed.

Upon demand of Vicente, Oscar de Leon issued to him a check in the amount of P1,000.00 as earnest money, after which
Vicente advanced to Gregorio the sum of P300.00. Oscar de Leon confirmed his former offer to pay for the property at
P1.20 per square meter in another letter. Subsequently, Vicente asked for an additional amount of P1,000.00 as earnest
money, which Oscar de Leon promised to deliver to him.

Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the sum of 1,000.00 for succeeding in persuading
Vicente to sell his lot at P1.20 per square meter or a total in round figure of P109,000.00. This gift of P1,000.00 was not
disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the additional amount of P1,000.00 by way of earnest money.

When the deed of sale was not executed on August 1, 1956 as stipulated nor on August 16, 1956 as extended by Vicente, Oscar
told Gregorio that he did not receive his money from his brother in the United States, for which reason he was giving up the
negotiation including the amount of P 1,000 given as earnest money to Vicente and the P 1,000 given to Gregorio as propina or
gift.

Oscar de Leon did not meet Gregorio and only to learn that Vicente sold his property to the same buyer, Oscar de Leon and his
wife, he demanded in writing payment of his commission on the sale price of P109,000.00. Vicente stated that Gregorio is not
entitled to the 5% commission because he sold the property not to Gregorio's buyer, Oscar de Leon, but to another buyer,
Amparo Diaz, wife of Oscar de Leon.

ISSUE:
Whether Gregorio was entitled to receive the 5% commission

HELD:

No, Gregorio is not entitled to receive the 5% commission.

The Supreme Court held that the law imposes upon the agent the absolute obligation to make a full disclosure or complete
account to his principal of all his transactions and other material facts relevant to the agency, so much so that the law as
amended does not countenance any stipulation exempting the agent from such an obligation and considers such an exemption
as void.

Hence, by taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a position wholly
inconsistent with that of being an agent for his principal, who has a right to treat him, insofar as his commission is concerned,
as if no agency had existed. The fact that the principal may have been benefited by the valuable services of the said agent does
not exculpate the agent who has only himself to blame for such a result by reason of his treachery or perfidy.

BALTAZAR v. OMBUDSMAN G.R. No. 136433; December 6, 2006

PRINCIPLE:

The Agency cannot be further delegated. The legal maxim potestas delegata non delegare potest; a power once delegated
cannot be re-delegated, is a principle of agency.

Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible
for the acts of the substitute:

(1) When he was not given the power to appoint one;

(2) When he was given such power, but without designating the person, and the person appointed was notoriously
incompetent or insolvent.

All acts of the substitute appointed against the prohibition of the principal shall be void.

FACTS:

Paciencia Regala owns a seven (7)-hectare fishpond located at Sasmuan, Pampanga. Her Attorney- in-Fact Faustino R. Mercado
leased the fishpond for PhP 230,000.00 to Eduardo Lapid for a three (3)-year period. Lessee Eduardo Lapid in turn sub-leased
the fishpond to Rafael Lopez for PhP 50,000.00 during the last seven (7) months of the original lease. Respondent Ernesto
Salenga was hired by Eduardo Lapid as fishpond watchman (bante-encargado). In the sub-lease, Rafael Lopez rehired
respondent Salenga.

Meanwhile, on March 11, 1993, respondent Salenga, through a certain Francis Lagman, sent his January 28, 1993 demand letter
to Rafael Lopez and Lourdes Lapid for unpaid salaries and non- payment of the 10% share in the harvest.

On June 5, 1993, sub-lessee Rafael Lopez wrote a letter to respondent Salenga informing the latter that for the last two (2)
months of the sub-lease, he had given the rights over the fishpond to Mario Palad and Ambit Perez for PhP 20,000.00. This
prompted respondent Salenga to file a Complaint before the Provincial Agrarian Reform Adjudication Board (PARAB).

On November 24, 1994, pending resolution of the agrarian case, the instant case was instituted by petitioner Antonio Baltazar,
an alleged nephew of Faustino Mercado, through a Complaint- Affidavit against private respondents before the Office of the
Ombudsman.

Petitioner charged private respondents of conspiracy through the issuance of the TRO in allowing respondent Salenga to retain
possession of the fishpond, operate it, harvest the produce, and keep the sales under the safekeeping of other private
respondents Petitioner asserts that he is duly authorized by Faustino Mercado to institute the suit and presented a Special
Power of Attorney (SPA) from Faustino Mercado.
 ISSUE:
Whether Faustino Mercado can delegate his agency to his nephew Antonio Baltazar

RULING:

No, Faustino Mercado cannot delegate his agency to his nephew Antonio Baltazar.

The Supreme Court held that petitioner's principal, Faustino Mercado, is an agent himself and as such cannot further delegate
his agency to another. Otherwise put, an agent cannot delegate to another the same agency. The legal maxim potestas
delegata non delegare potest; a power once delegated cannot be re-delegated, while applied primarily in political law to the
exercise of legislative power, is a principle of agency. For another, a re-delegation of the agency would be detrimental to the
principal as the second agent has no privity of contract with the former. In the instant case, petitioner has no privity of contract
with Paciencia Regala, owner of the fishpond and principal of Faustino Mercado.

37
Moreover, while the Civil Code under Article 1892 allows the agent to appoint a substitute, such is not the situation in the instant
case. The SPA clearly delegates the agency to petitioner to pursue the case and not merely as a substitute. Besides, it is clear in the
aforecited Article that what is allowed is a substitute and not a delegation of the agency.

Clearly, petitioner is neither a real party in interest with regard to the agrarian case, nor is he a real party in interest in the
criminal proceedings conducted by the Ombudsman as elevated to the Sandiganbayan. He is not a party who will be benefited
or injured by the results of both cases.

Serona v. People of the Philippines, G.R. No. 130423, Novermber 18, 2002

DOCTRINES:
 The law on agency in our jurisdiction allows the appointment by an agent of a substitute or sub-agent in the absence of
an express agreement to the contrary between the agent and the principal.
 An agent who is not prohibited from appointing a sub-agent but does so without express authority is responsible
for the acts of the sub-agent.

FACTS:
Quilatan delivered to Serona several pieces of jewelry, which the latter would sell on commission basis. The terms of the oral
contract were that Serona should remit payment or return the jewelry if not sold, both within thirty days. Serona’s failure to
pay/return prompted Quilatan to require the former to execute a document evidencing her debt of 567,750. Unknown to Quilatan,
Serona delivered the jewelries to Marichu Labrador (Labrador) to sell on commission basis. Serona failed to collect from Labrador,
which caused Serona’s failure to pay its obligation to Quilatan.

Subsequent to the submission of final demand a complaint affidavit against Serona was filed and the subsequent filing of an
information for Estafa under Article 315 with the RTC.

The RTC rendered a decision finding Serona guilty as charged which was affirmed by the CA with modification on the
penalty imposed.

ISSUES:
1) Whether or not there was an abuse of confidence on the part of petitioner Serona in entrusting the subject jewelries to a
sub-agent also for sale on commission.
2) Whether or not there was misappropriation or conversion on the part of petitioner Serona when she failed to pay
and/or return the jewelries after the end of the agreed term.

SC RULING:

1) NO. An agent who is not prohibited from appointing a sub-agent but does so without express authority is responsible
for the acts of the sub-agent. Serona did not ipso facto
commit the crime of estafa through conversion or misappropriation by delivering the jewelries to a sub-agent for sale on
commission basis. The law on agency in our jurisdiction allows the appointment by an agent of a substitute or sub-agent in
the absence of an express agreement to the contrary between the agent and the principal. In the case at bar, the
appointment of Labrador as petitioner’s sub-agent was not expressly prohibited by Quilatan, as the acknowledgement
receipt does not contain any such limitation. Neither does it appear that petitioner was verbally forbidden by Quilatan from
passing on the jewelries to another person before the acknowledgement receipt was executed or at any other time. Thus, it
 cannot be said that petitioner’s act of entrusting the jewelries to Labrador us characterized by abuse of confidence
because such an act was not proscribed and is, in fact, legally sanctioned.

2) NO. It was established that the inability of petitioner as agent to comply with her duty to return either the pieces of jewelry
or the proceeds of its sale to her principal Quilatan as due, in turn, to the failure of sub-agent Labrador to abide by her
agreement with petitioner. Notably, Labrador testified that she obligated herself to sell the jewelry in behalf of petitioner
also on commission basis or return the same of not sold. In other words, the pieces of jewelry were given by petitioner to
achieve the very sane end for which they were delivered to her in the first place.

Consequently, there was no conversion since the pieces of jewelry were not devoted to a purpose or use different from that
agreed upon. Similarly, it cannot be said that petitioner misappropriated the jewelry or delivered them to Labrador without
the right to do so. Aside from the fact that no condition or limitation was imposed on the mode or manner by which
petitioner was to effectuate the sale, it is also consistent with the usual practice for the seller to necessarily part with the
valuables in order to find a buyer and allow inspection of the items for sale.

Serona was acquitted for the the crime of estafa, but was held civilly liable. The rule is that an accused acquitted of estafa may
nevertheless be held civilly liable where the facts established by the evidence so warrant.

WOODCHILD VS ROXAS

FACTS:

Roxas, president of RECCI, was approved by the company’s BOD through a resolution to sell Lot No. 491-A-3-B-2. Woodchild
bought the lot to construct its warehouse building and a portion of the adjoining, Lot No. 291-A-3-B-1, as a road for its 45-
foot container van.

On September 5, 1991, a Deed of Absolute Sale in favor of WHI was issued, under which the Lot was sold for P5,000,000, receipt
of which was acknowledged by Roxas under the following terms and conditions:

The Vendor agree (sic), as it hereby agrees and binds itself to give Vendee the beneficial use of and a right of way from
Sumulong Highway to the property herein conveyed consists of 25 square meters wide to be used as the latter's egress from and
ingress to and an additional 25 square meters in the corner of Lot No. 491-A-3-B-1, as turning and/or maneuvering area for
Vendee's vehicles.

The Vendor agrees that in the event that the right of way is insufficient for the Vendee's use (ex entry of a 45-foot container)
the Vendor agrees to sell additional square meters from its current adjacent property to allow the Vendee full access and full
use of the property.

the respondent posits that Roxas was not so authorized under the May 17, 1991 Resolution of its Board of Directors to impose a
burden or to grant a right of way in favor of the petitioner on Lot No. 491-A-3-B-1, much less convey a portion thereof to the
petitioner. Hence, the respondent was not bound by such provisions contained in the deed of absolute sale.

ISSUE:

Whether or not the respondent is bound by the provisions in the deed of absolute sale granting to the petitioner beneficial use
and a right of way over a portion of Lot accessing to the Sumulong Highway and granting the option to the petitioner to buy a
portion thereof, and, if so, whether such agreement is enforceable against the respondent?

HELD:

No.

Generally, the acts of the corporate officers within the scope of their authority are binding on the corporation. However, under
Article 1910 of the New Civil Code, acts done by such officers beyond the scope of their authority cannot bind the corporation
unless it has ratified such acts expressly or tacitly, or is estopped from denying them.

Thus, contracts entered into by corporate officers beyond the scope of authority are unenforceable against the corporation
unless ratified by the corporation.

Evidently, Roxas was not specifically authorized under the said resolution to grant a right of way in favor of the petitioner on a
portion of Lot No. 491-A-3-B-1 or to agree to sell to the petitioner a portion thereof. The authority of Roxas, under the resolution,
to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086 did not include the authority to sell a portion of the adjacent lot, Lot No.
491- A-3-B-1, or to create or convey real rights thereon. Neither may such authority be implied from the authority granted to
Roxas to sell Lot No. 491-A-3-B-2 to the petitioner "on such terms and conditions which he deems most reasonable and
advantageous."
The general rule is that the power of attorney must be pursued within legal strictures, and the agent can neither go beyond it; nor
beside it. The act done must be legally identical with that authorized to be done.30 In sum, then, the consent of the respondent
to the assailed provisions in the deed of absolute sale was not obtained; hence, the assailed provisions are not binding on it.

There can be no apparent authority of an agent without acts or conduct on the part of the principal and such acts or conduct of
the principal must have been known and relied upon in good faith and as a result of the exercise of reasonable prudence by a
third person as claimant and such must have produced a change of position to its detriment.

The apparent power of an agent is to be determined by the acts of the principal and not by the acts of the agent.

Case: Guinhawa (JG) v. People, G.R. No. 162822. August 25, 2005

(Gibaligya pagbalik ang van nga nadumbol na sauna, gatuo ang nipalit nga brand new, diay tu, ilad raning tanan)

Principle:
The Agent; Authority distinguished from power
Case law has it that wherever the doing of a certain act, or the transaction of a given affair, or the performance of certain
business is confided to an agent, the authority to so act will generally carry with it by implication the authority to do all the
collateral acts which are the natural and ordinary incidents of the main act or business authorized.

ART. 1881. The agent must act within the scope of his authority. He may do such acts as may be conducive to the
accomplishment of the purpose of the agency.
ART. 1882. The limits of the agent’s authority shall not be considered exceeded should it have been performed in a manner more
advantageous to the principal than that specified by him.

Facts:
Jaime Guinhawa (JG) is engaged in the business of selling brand new motor vehicles and
employs Gil Azotea (GA) as his sales manager. JG purchased a brand new Mitsubishi L-300 Versa Van which his driver, Leopoldo
Olayan drove. Olayan suffered a heart attack and the van went out of control and ditched into the canal. The incident was
reported and recorded in the policeblotter. The van was repaired and later offered for sale in JG’s showroom.
Spouses Silo (SS) purchased the van. GA, the sales manager, suggested that the couple make a downpayment and pay
the balance of the purchase price by installments via a bank loan (UCPB) with the van as collateral.
On 11 October 1995, the couple arrived in JG’s office to take delivery of the van. JG executed the deed of sale, and the couple
paid the downpayment and afterwhich, were furnished a Service Manual which contained the warranty terms and conditions.
GA instructed the couple on how to start the van and to operate its radio. No test drive was conducted. The mechanic later
discovered that some parts underneath the van had been welded. JG dismissed the defects as mere factory defects.
The couple stopped paying the monthly amortization on their loan, pending the replacement of the van; this caused the bank to
file a petition for the foreclosure of the chattel mortgage and the sale of the van at public auction.
Josephine Silo filed a complaint for the rescission of the sale and the refund of their money before the DTI but was later
withdrawn. A criminal complaint for violation of paragraph 1, Article 318 of the RPC was later filed against JG.
The trial court rendered judgment convicting JG, declaring that the accused made false pretenses or
misrepresentations that the van was a brand new one when, in fact, it had figured in an accident and sustained serious
damages before it was sold to the private complainant. JG appealed the decision to the RTC which later affirmed the appealed
judgment. JG filed a petition for review with the CA which ruled that the private complainant had the right to assume that the
van was brand new because JG held himself out as a dealer of brand new vans. The act of displaying the van in the showroom
without notice to any would-be buyer that it was not a brand new unit was tantamount to deceit. Thus, in concealing the van’s
true condition from the buyer, JG committed deceit. Now, the present petition for review on certiorari.

Issue:
Whether petitioner’s contention that he is not criminally liable for any representation GA
may have made to the private complainant, that the van was brand new is tenable.

Ruling:
No. The Court agrees with the petitioner’s contention that there is no evidence on record that he made direct and
positive representations or assertions to the private complainant that the van was brand new. The record shows that Spouses Silo
were, in fact, attended to by GA. However, it bears stressing that the representation may be in the form of words, or conduct
resorted to by an individual to serve as an advantage over another. This representation was accentuated by the fact that the
petitioner gave the Service Manual to the private complainant, which manual contained the warranty terms and conditions,
signifying that the van was "brand new." Both JG and GA deliberately concealed these facts so as not to derail the sale and the
profit from the transaction. The CA is correct in ruling that fraud or deceit may be committed by omission.
Case law has it that where the vendee made only a partial investigation and relies, in part, upon the representation of
the vendee, and is deceived by such representation to his injury, he may maintain an action for such deceit. The petitioner
cannot pin criminal liability for his fraudulent omission on his general manager, GA. Both are equally liable for their collective
fraudulent silence.
Case law has it that wherever the doing of a certain act or the transaction of a given affair, or the performance of
certain business is confided to an agent, the authority to so act will, in accordance with a general rule often referred to, carry
with it by implication the authority to do all of the collateral acts which are the natural and ordinary incidents of the main act or
business authorized.

BOARD OF LIQUIDATORS vs.HEIRS OF MAXIMO M. KALAW

FACTS: Kalaw is the General Manager and Board Chairman of NACOCO(National Coconut Corporation). In 1947, NACOCO
contracted to sell coconut product with several buyers. That year, there were four typhoons that hit Phil. Coconut trees
throughout the country suffered extensive damage. Copra production decreased. When it became clear that the contracts
would be unprofitable Kalaw submitted them to the board for approval. Which was approved by the Board. As was to be
expected, NACOCO but partially performed the contracts.the buyers filed a case for the full performance of the Contract.
settlements were paid. NACOCO seeks to recover from Kalaw the said paid settlements. For bad faith and/or breach trust for
having approved the contracts.According to Kalaw he did so acted for the best interest of the Corp.Trial Court decided for
Kalaw.
ISSUE:

Whether the case at bar is to be taken out of the general concept of the powers of a general manager

Held:
The movement of the market requires that sales agreements be entered into, even though the goods are not yet in the hands of
the seller. Known in business parlance as forward sales, it is concededly the practice of the trade. Above all, NACOCO's limited
funds necessitated a quick turnover. Copra contracts then had to be executed on short notice — at times within twenty-four
hours. To be appreciated then is the difficulty of calling a formal meeting of the board So pleased was NACOCO's board of
directors that, on December 5, 1946, in Kalaw's absence, it voted to grant him aspecial bonus "in recognition of the signal
achievement rendered by him in putting the Corporation's business on a self-sufficient basis within a few months after
assuming office, despite numerous handicaps and difficulties." These previous contract it should be stressed, were signed by
Kalaw without prior authority from the board. Existence of such authority is established, by proof of the course of business,
theusage and practices of the company and by the knowledgewhich the board of directors has, or must be presumed to have,
of acts and doings of its subordinates in and about the affairs of the corporation. If the by-laws were to be literally followed, the
board should give its stamp of prior approval on all corporate contracts. But that board itself, by its acts and through
acquiescence, practically laid aside the by-law requirement of prior approval. Under the given circumstances, the Kalaw
contracts are valid corporate acts. Bad faith does not simply connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty thru some motive or interest
or ill will; it partakes of the nature of fraud. Applying this precept to the given facts herein, we find that there was no "dishonest
purpose," or "some moral obliquity," or "conscious doing of wrong," or "breach of a known duty," or "Some motive or interest
or ill will" that "partakes of the nature of fraud."

SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC., petitioner,

vs.
COURT OF APPEALS, MOTORICH SALES CORPORATION, NENITA LEE GRUENBERG, ACL DEVELOPMENT CORP. and JNM REALTY
AND
DEVELOPMENT CORP., respondents.

Principle:

A corporate officer or agent may represent and bind the corporation in transactions with third persons to the extent that the
authority to do so has been conferred upon him, and this includes powers which have been intentionally conferred, and also
such powers as, in the usual course of the particular business, are incidental to, or may be implied from, the powers
intentionally conferred, powers added by custom and usage, as usually pertaining to the particular officer or agent, and such
apparent powers as the corporation has caused persons dealing with the officer or agent to believe that it has conferred.

Facts:
San Juan Structural and Steel Fabricators, Inc entered into an agreement with defendant-appellee Motorich Sales
Corporation through its treasurer Nenita Gruenberg for the transfer to it of a parcel of land identified as Lot 30, Block 1 of the
 Acropolis Greens Subdivision, and paid earnest money of 100,000, the balance to be paid on or before March 2, 19889; that
on March 2, 1989, San Juan was ready with the amount corresponding to the balance, that plaintiff-appellant and defendant-
appellee were supposed to meet in the plaintiff-appellant’s office but defendant- appellee’s treasurer, Nenita Lee Gruenbeg
did not appear; that defendant-appelle despite repeated demands and in utter disregard of its commitments had refused to
execute the transfer of rights/deed of assignment which is necessary to transfer the certificate of title; that as a result of
defendants-appellees Nenita and Motorich’s bad faith in refusing to execute a formal transfer of rights/deed of assignment,
plaintiff-appellant suffered moral and nominal damages which may be assessed against defendant-appellees in the sum of
P500,000; that as a result of an unjustified and unwarranted failure to execute the required transfer or formal deed of sale in
favor of plaintiff-appellant, defendant-appellees should be assessed exemplary damages in the sum of P100,000; that by
reason of the said bad faith in refusing to execute a transfer in favor of plaintiff-appellant the latter lost opportunity to
construct a residential building in the sum of P100,000 and that as a consequence of such bad faith, it has been constrained
to obtain the services of counsel at an agreed fee of P100,000 plus appearance fee of for every appearance in court hearings.

Issues: Whether or not the corporation’s treasurer act can bind the corporation. Whether or not the doctrine of piercing the veil of
corporate entity is applicable.

Held: No. Such contract cannot bind Motorich, because it never authorized or ratified such sale.

A corporation is a juridical person separate and distinct from its stockholders or members. Accordingly, the property of
the corporation is not the property of the corporation is not the property of its stockholders or members and may not be
sold by the stockholders or members without express authorization from the corporation’s board of directors.

Section 23 of BP 68 provides the Board of Directors or Trustees – Unless otherwise provided in this code, the corporate
powers of all corporations formed under this code shall be exercised, all business conducted, and all property of such
corporations controlled and held by the board of directors or trustees to be elected from among the stockholders of stocks, or
where there is no stock, from among the members of the corporations, who shall hold office for 1 year and until their
successors are elected and qualified.

As a general rule, the acts of corporate officers within the scope of their authority are binding on the corporation. But when
these officers exceed their authority, their actions, cannot bind the corporation, unless it has ratified such acts as is estopped
from disclaiming them.

Because Motorich had never given a written authorization to respondent Gruenbeg to sell its parcel of land, we hold that the
February 14, 1989 agreement entered into by the latter with petitioner is void under Article 1874 of the Civil Code. Being
inexistent and void from the beginning, said contract cannot be ratified The statutorily granted privilege of a corporate veil may
be used only for legitimate purposes. On equitable consideration,the veil can be disregarded when it is utilized as a shield to
commit fraud, illegality or inequity, defeat public convenience; confuse legitimate issues; or serve as a mere alter ego or
business conduit of a person or an instrumentality, agency or adjunct of another corporation.

We stress that the corporate fiction should be set aside when it becomes a shield against liability for fraud, or an illegal act on
inequity committed on third person. The question of piercing the veil of corporate fiction is essentially, then a matter of proof.
In the present case, however, the court finds no reason to pierce the corporate veil of respondent Motorich. Petitioner utterly
failed to establish the said corporation was formed, or that it is operated for the purpose of shielding any alleged fraudulent or
illegal activities of its officers or stockholders; or that the said veil was used to conceal fraud, illegality or inequity at the
expense of third persons like petitioner.

AF Realty v. Dieselman G.R. No. 111448 January 16, 2002

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

Facts:
Manuel C Cruz, Jr (Cruz, Jr), a member of the board of directors of Dieselman, authorized Cristeta Polintan (Polintan) to negotiate
the sale of a lot. Cruz Jr, has no written authority from Dieselman to sell the lot.

In turn Polintan authorized Noble to sell the same lot. Noble sold the property to AF Realty & Development, Inc. Zenaida
 Ranullo of AF Realty accepted the offer and paid an initial down payment and is willing to pay the balance.

Cruz, Sr, president of Dieselman terminated the offer and demanded from AF Realty the return of the title of the lot earlier
delivered by Polintan Claiming that there was a perfect contract of sale between them, AF Realty filed with the RTC a complaint
against Dieselman and Cruz, Jr to compel the latter to execute and delivery a final deed of sale.

Meanwhile, Dieselman and Midas executed Deed of Absolute Sale of the same property. Midas filed a Motion for Leave to
Intervene so that Dieselman cannot be compelled to sell and convey it to AF Realty.

The trial court ruled that the contract of sale between Dieselman and AF Realty was perfected because the acts of Cruz, Jr
bound Dieselman in the sale of the lot.

CA reversed the decision of the RTC holding that Cruz Jr,, was not authorized in writing by Dieselman to sell the subject
property to AF Realty, hence the sale was not perfected and that the Deed of Absolute Sale between Dieselma and Midas is
valid.

ISSUE:

Is CA correct in reversing the decision of trial court declaring the Deed of Absolute Sale between Midas and Dieselma valid?

RULING:

YES.

Involved in this case is a sale of land through an agent. Thus, the law on agency under the Civil Code takes precedence.

Article 1874 if the same Code provides that when a sale of piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void In the instant case, Cruz, Jr. has no written authority
from the board of directors of Dieselman to sell or to negotiate the sale of the lot, much less to appoint other persons for the
same purpose. Cruz, Jr.'s lack of such authority precludes him from conferring any authority to Polintan involving the subject
realty. Necessarily, neither could Polintan authorize Felicisima Noble. Clearly, the collective acts of Cruz, Jr., Polintan and
Noble cannot bind Dieselman in the purported contract of sale. Since the sale to Midas was authorized by a board resolution of
Dieselman, the sale to Midas is valid.

Hence, CA didn’t err in reversing the decision of the trial court.

FRANCISCO v. GSIS
G.R. No. L-18287, March 30, 1963

Principle of Apparent Authority:

“If a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts
for it, the corporation will be estopped to deny that such apparent authority is real, as to innocent third persons dealing in good
faith with such officers or agents.”

“Knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment,
and in relation to matters within the scope of his authority, is notice to the corporation, whether he communicates such
knowledge or not.”

Facts:
 On Oct. 10, 1956, Trinidad Francisco, in consideration of a loan extended to it, mortgaged
to GSIS a parcel of land known as VIC-MARI compound. On Jan. 6, 1959 the mortgage was extrajudicially foreclosed. GSIS
acquired ownership of the land.

Vicente Francisco, Trinidad’s father, sent a letter dated Feb. 20, 1959 to GSIS proposing a redemption of the property.
He later received a telegram from the General Manager Andal saying that GSIS approved redemption. After the redemption had
already concluded and all of the arrearages have been paid.
On Jan. 1960, Trinidad, thinking that she had already redeemed the property suddenly received letters from the GSIS the
General Manager Andal asking for the “proposal for the payment of her indebtedness”. Francisco’s father protested claiming
that he had already redeemed the property as per the letter he sent GSIS.

Nevertheless, GSIS continued to demand foreclosure. They claimed that the telegram assenting to the proposal letter
of Francisco’s father should be disregarded as it failed to express the contents of the board resolution due to the error of its
minor employees in couching the correct wording of the telegram. The board resolution approving the letter contained the
condition that Francisco’s father should also pay the expenses in the foreclosure of the mortgage. The remittances already made
by him were not sufficient to cover this.

Trinidad thus instituted the present suit.

The trial court ruled in favor of Trinidad. It found that the letter dated Feb. 20, 1959 had been unqualifiedly accepted
and was binding and the plaintiff need not pay the extra charges being demanded.

Issue:
Whether or not the offer made by Vicente Francisco was accepted by the corporation?
Ruling:
YES. A person who knows that the officer or agent of the corporation habitually transacts
certain kinds of business for such corporation under circumstances
which necessarily show knowledge on the part of those charged
with the conduct of the corporate business assumes, as he has the
right to assume, that such agent or officer is acting within the
scope of his authority. If a private corporation intentionally or
negligently clothes its officers or agents with apparent power to
perform acts for it, the corporation will be estopped to deny that
such apparent authority is real, as to innocent third persons dealing
in good faith with such officers or agents.
In this case, the telegram was within Andal’s apparent
authority. Assuming that it was sent by the Board Secretary in his
name but without his knowledge, third persons are not duty
bound to disbelieve the acts of a corporation’s officers, especially
when it appears regular on its face.
Furthermore, the Civil Code provides for ratification,
wherein a party with knowledge of the reason which renders the
contract voidable and such reason having ceased, the person who
has a right to invoke it executes an act which necessarily implies
an intention to waive his right.
In this case, GSIS ratified its acceptance of Vicente Francisco’s offer
when it failed to refute it in the letter sent by Trinidad Francisco to
Mr. Andal which quoted verbatim the telegram of acceptance. This
was in itself notice to the corporation of the terms of the allegedly
unauthorized telegram.
Since a corporation cannot see, or know, anything
except through its officers, knowledge of facts acquired or
possessed by an officer or agent of a corporation in the course of
his employment, and in relation to matters within the scope of
his authority, is notice to the corporation, whether he
communicates such knowledge or not.
GSIS pocketed the amount and kept silent about the
telegram. This silence, taken together with the unconditional
acceptance of three other subsequent remittances from plaintiff,
constitutes in itself a binding ratification of the original
agreement.
FOR THE FOREGOING REASONS, the appealed decision is hereby
affirmed.
BRITISH AIRWAYS V. CA, G.R. No. 121824, January 29, 1998
Principle: “Agent is responsible for any negligence in the
performance of its function and is liable for damages which
the principal may suffer by reason of its negligent act.”
FACTS:
Mahtani booked a British Airways (BA) ticket for his flight from
Manila to Bombay. Since BA had no direct flights from Manila to
Bombay, he had to take a flight to HongKong via PAL, and upon
arrival in HK he had to take a connecting flight to Bombay on board
BA. He checked in at the PAL counter in Manila his 2 pieces of luggage
which was supposed to be transferred to the BA flight bound for
Bombay. However, upon reaching Bombay, he discovered that his
luggage was missing and that upon inquiry from the BA
representatives, he was told that the same might be diverted to
London. After one week, BA finally advised him to file a claim by
accomplishing the Property Irregularity Report. Thereafter, filed his
claim for damages against BA and Mr. Gumar, the one who prepared
his travel plan. BA contended that Mahtani did not have cause of
action against it. BA also filed a third party complaint against PAL ,
considered as agent of BA, alleging that the reason for the non-
transfer of the luggage was due to the latter’s late arrival in HK, thus
leaving hardly any time for the proper transfer of Mahtani’s luggage
to the BA aircraft bound for Bombay. PAL disclaimed liability arguing
that there was adequate time to transfer the luggage to BA facilities
in HK.Trial court rendered its decision in favor of Mahtani. The third
party complaint against PAL was dismissed for lack of cause of
action. CA affirmed in toto.
ISSUE:
Whether or not third party complaint against PAL was correctly
dismissed by the lower courts.
RULING: No, dismissal was not correct. Though, the contract of air
transportation was exclusive between Mahtani and BA. It must be
noted, however , it is undisputed that PAL, in transporting Mahtani
from Manila to HK, acted as the agent of BA. It is a well-settled rule
that an agent is also responsible for any negligence in the
performance of its function and is liable for damages which the
principal may suffer by reason of its negligent act. Since the instant
petition was based on breach of contract of carriage, Mahtani can
only sue BA and not PAL, since the latter was not a party to the
contract. However, this is not to say that PAL is relieved from any
liability due to any of its negligent act. The third party complaint
against PAL must have not been dismissed for the fact it is but
logical, fair and equitable to allow BA to sue PAL for indemnification,
if it is proven that the latter's negligence was the proximate cause of
Mahtani's unfortunate experience, instead of totally absolving PAL
from any liability.
Gregorio Araneta, Inc. versus Paz Tuason de Paterno GR. No. L-
2886, August 22, 1952
PRINCIPLE:
Agency is defined in article 1709 in broad term, and we have not
come across any commentary or decision dealing directly with
the precise meaning of agency as employed in article 1459. But in
the opinion of Manresa(10 Manresa 4th ed. 100), agent in the
sense there used is one who accepts another's representation to
perform in his name certain acts of more or less transcendency,
while Scaevola (Vol. 23, p. 403) says that the agent's in capacity
to buy his principal's property rests in the fact that the agent and
the principal form one juridicial person.
FACTS:
Paz Tuason de Paterno is the registered owner of a big block of
residential land in the district of Santa Mesa, Manila. The land was
subdivided into city lots most of which were occupied by lessees who
had contracts of lease which were to expire on December 31, 1952.
A salient stipulation in the contracts was that in the event the owner
and lessor should decide to sell the property the lessees were to be
given priority over other buyers if they should desire to buy their
leaseholds. Smaller lots were occupied by tenants without formal
contract. In 1940 and 1941 Paz DePaterno obtained from Jose Vidal
several loans amounting to P90,098 and constituted a first mortgage
on the aforesaid property to secure the debt. In January and April
1943, she obtained additional loans of P30,000 and P20,000 upon
the same security. In each of these two, the previous contract of
mortgage was renewed, and the amounts received were
consolidated. In the first novated contract.
the time of payment was fixed at two years and in the second
and last at four years. In 1943, Paz decided to sell the entire
property for P400,000 and entered into negotiations with
Gregorio Araneta, Inc. They executed a contract called "Promesa
de Compra y Venta" or Promise to Buy and Sell (Exhibit 1). The
contract indicated that subject to the preferred right of the
lessees and that of Jose Vidal as mortgagee, Paz De Paterno would
sell to Gregorio Araneta, Inc. and the latter would buy for the said
amount of P400,000 the entire estate under these terms.
Letters were sent the lessees giving them until August 31, 1943,
an option to buy the lots they occupied. Some of the lessees
bought their part of the property and were given their deeds of
conveyance. De Paterno and Araneta executed a deed of
absolute deed of sale (Exhibit A) over Lots 1, 8-16 and 18 which
have an aggregate area of 14,810.20 square meters with the
exclusion of the lots sold to tenants and those which were
mortgaged to Vidal. A day before the execution of the said deed
of absolute sale, a day after the signing of the agreement to buy
and sell between De Paterno and Araneta, De Paterno had
offered to Vidal the check for P143,150 to settle her mortgage
obligation. Vidal refused to receive that check or to cancel the
mortgage, contending that by the separate agreement before,
payment of mortgage was not to be effected totally or partially
before the end of four years from April, 1943. This prompted De
Paterno to file an action against Vidal but this never came to trial
and the record and the checks were destroyed during the war
operations. Araneta then, filed an action against De Paterno to
compel the latter to deliver to him a clear title to the lots and a
deed of cancellation of Vidal’s mortgage. Vidal filed a cross-claim
against De Paterno for the foreclosure of the mortgage.
Issue:
Whether or not there was an agent-principal relationship
between Jose Araneta (president of Gregorio
Araneta, Inc.) and de Paterno
Ruling:
No. Tested Jose Araneta was not an agent within the meaning of
article 1459. By Exhibits 7 and 8 he was to be nothing more than
a go-between or middleman between the defendant and the
purchaser, bringing them together to make the contract
themselves. There was no confidence to be betrayed. Jose
Araneta was not authorized to make a binding contract for the
defendant.
Murao v People
G. R. No. 141485 June 30, 2005
Topic: The Agent
Principle: All profits made and any advantage gained by an agent
in the execution of his agency should belong to the principal
Facts:
Murao, the owner of Lorna Murao Industrial Commercial
Enterprises (LMICE), entered into a dealership agreement with
Chito Frederico for the marketing, distribution and refilling of fire
extinguishers in Puerto Princesa City. Regardless of Chito’s non-
compliance with the conditions under the Dealership Agreement,
was still allowed to act as a part-time sales agent entitled to a
percentage commission from the sales of fire extinguishers.
Frederico, on behalf of LMICE, transacted with the City
Government of Puerto Princesa for the refill of 202 fire
extinguishers, which was split into two purchase orders. Nelio
Huertazuela, the branch manager of LMICE, claimed the check
from the City Government of Puerto Princesa and deposited it
under the current account of LMICE with PCIBank.
Frederico demanded from Huertazuela his commission, but the
latter refused to pay. Frederico then filed a complaint for estafa
against Murao and Huertazuela. The RTC found Murao and
Huertazuela guilty of estafa. It ruled that although the
relationship between complaining witness Chito Federico and
LMIC is not fiduciary in nature, still the clause "any other obligation
involving the duty to make delivery of or to return" personal
property is broad enough to include a "civil obligation.
Issue:
Whether or not Frederico, due to his righ tto commission, can
claim ownership over the payment of the City Government of
Puerto Princesa to LMICE.
Ruling:
No. His right to a commission does not make private complainant
Federico a joint owner of the money paid to LMICE by the City
Government of Puerto Princesa, but merely establishes the
relation of agent and principal. It is unequivocal that an agency
existed between LMICE and private complainant Federico. Article
1868 of the Civil Code defines agency as a special contract
whereby "a person binds himself to render some service or to do
something in representation or on behalf of another, with the
consent or authority of the latter." Although private complainant
Federico never had the opportunity to operate as a dealer for
LMICE under the terms of the Dealership Agreement, he was
allowed to act as a sales agent for LMICE.
All profits made and any advantage gained by an agent in the
execution of his agency should belong to the principal. In the
 instant case, whether the transactions negotiated by the sales
agent were for the sale of brand new fire extinguishers or for the
refill of empty tanks, evidently, the business belonged to LMICE.
Consequently, payments made by clients for the fire
extinguishers pertained to LMICE. When petitioner Huertazuela,
as the Branch Manager of LMICE in Puerto Princesa City, with the
permission of petitioner Murao, the sole proprietor of LMICE,
personally picked up Check No. 611437 from the City
Government of Puerto Princesa, and deposited the same under
the Current Account of LMICE with PCIBank, he was merely
collecting what rightfully belonged to LMICE.
LMICE had a right to the full amount paid by the City Government of
Puerto Princesa. Since LMICE, through petitioners, directly collected
the payment, then it was already in possession of the amount, and
no transfer of juridical possession thereof was involved herein. Given
that private complainant Federico could not claim ownership over
the said payment or any portion thereof, LMICE had nothing at all to
deliver and return to him. The obligation of LMICE to pay private
complainant Federico his commission does not arise from any duty
to deliver or return the money to its supposed owner, but rather
from the duty of a principal to give just compensation to its agent for
the services rendered by the latter.
METROPOLITAN BANK & TRUST COMPANY VS. COURT OF APPEALS
G.R. NO. 88866 FEBRUARY 18, 1991
PRINCIPLE: Article 1909 – The agent is responsible not
only for fraud, but also for negligence, which shall be
judged with more or less rigor by the courts,
according to whether the agency was or was not for
compensation.
Facts: Eduardo Gomez opened an account with Golden
Savings over a period of two months 38 treasury warrants
with a total of P1,755,228.37, all drawn by the Philippine Fish
Marketing Authority. All these warrants were subsequently
indorsed by Gloria Castillo as cashier of Golden Savings and
deposited it in the Metrobank branch in Calapan, Mindoro.
Then were sent for clearing by the branch office to the
principal office of Metrobank then forwarded to Bureau of
Treasury for special clearing.
After two weeks, Gloria went time and again to ask if
the warrants had been cleared. She was told to wait. Because of
Gloria’s repeated inquires and also as an accommodation for
“valued clients” petitioner decided to allow Golden Savings to
withdraw from the proceeds of the warrant. Three withdrawals
made subsequently after the go signal of the petitioner.
Unfortunately, the treasury warrants were dishonored allegedly
because of forgery of the signature of the drawers, not. Due to
the dishonored warrant, Metrobank asked for the
reimbursement of the three withdrawals that were made.
Golden Savings had no clearing facilities of their own. It relied on
Metrobank to determine the validity of the warrants though its
own services Metrobank was acting only as an agent for Golden
Savings. That being an agent he can not be liable to the
principal.
Issue: Whether or not Metrobank acting only as a collecting
agent for Golden Savings be liable as principal.
Ruling: Yes, Metrobank is liable. In Article 1909, The agent is
responsible not only for fraud, but also for the negligence, which
shall be judged with more or less rigor by the courts according to
whether the agency was or was not for a compensation. The
negligence of Metrobank has been sufficiently established. It was
the clearance from Metrobank that Golden Savings allowed the
withdrawal thereof from the proceeds of the warrants without such
assurance, Golden Savings would not have allowed it. There was no
reason why it should not have waited until the treasury warrants
had been cleared; it would not have lost a single centavo by waiting.
Its reason was only “exasperated” (irritated) over the persistent
inquiries of Gloria.
DBP v CA G.R. No. 118342
5 January 1998
PRINCIPLE:
The agent who acts as such is not personally liable to the party
with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party
sufficient notice of his powers.
The liability of an agent who exceeds the scope of his authority
depends upon whether the third person is aware of the limits of the
agent's powers. If the third person dealing with an agent
unaware of the limits of the authority conferred by the principal
on the agent and he (third person) has been deceived by the non-
disclosure thereof by the agent, then the latter is liable for
damages to him (V Tolentino, Commentaries and Jurisprudence
on the Civil Code of the Philippines, p. 422 [1992], citing Sentencia
[Cuba] of September 25, 1907). The rule that the agent is liable
when he acts without authority is founded upon the supposition
that there has been some wrong or omission on his part either in
misrepresenting, or in affirming, or concealing the authority
under which he assumes to act (Francisco, V., Agency 307 [1952],
citing Hall v. Lauderdale, 46 N.Y. 70, 75). Inasmuch as the non-
disclosure of the limits of the agency carries with it the
implication that a deception was perpetrated on the
unsuspecting client, the provisions of Articles 19, 20 and 21 of the
Civil Code of the Philippines come into play.
FACTS:
Juan B. Dans, together with his wife Candida, his son and
daughter-in-law, applied for a loan of P500,000.00 with the
Development Bank of the Philippine on May 1987. The loan was
approved by the bank in August 1987 but in the reduced amount
of P300,000. As the principal mortgagor, Dans, then 76 years of
age, was advised by DBP to obtain a mortgage redemption
insurance (MRI) with the DBP Mortgage Redemption Insurance
Pool (DBP MRI Pool).
On September 3, 1987, Dans died of cardiac arrest. DBP MRI
notified DBP was not eligible for the coverage of the insurance for
he was beyond the maximum age of 60. The wife, Candida, filed a
complaint to the RTC against DBP and DBP MRI pool for the
‘Collection of Sum of money with Damages’. Prior to that, DBP
 offered Mrs. Dans a refund of the MRI payment but she refused
for insisting that the family must receive the amount equivalent
of the loan. DBP also offered and ex gratia for a settlement worth
P30,000 but Mrs. Dans refused to take it.
ISSUE:
Whether or not the DBP MRI Pool should be held liable on the
ground that the contract was already perfected.
RULING:
No. DBP MRI Pool is not liable. Though the power to approve the
insurance is lodged to the pool, it did not approve the application
of Mr. Dans. Thus, there was no perfected contract between the
insurance pool and Mr. Dans.
In dealing with Dans, DBP was wearing two legal hats: the first as
a lender, and the second as an insurance agent. As an insurance
agent, DBP made believed that the family already fulfilled the
requirements of the said insurance although DBP had a full
knowledge that the application would never be approved. DBP
acted beyond the scope of its authority for accepting applications
for the MRI. If the third person who contracted is unaware of the
authority conferred by the principal on the agent and he has
been deceived, the latter is liable for damages.
The DBP’s liability, however, cannot be for the entire value of the
insurance policy. To assume that were it not for DBP’s
concealment of the limits of its authority, Dans would have
secured an MRI from another insurance company, and therefore
would have been fully insured by the time he died, is highly
speculative. Considering his advanced age, there is no absolute
certainty that Dans could obtain an insurance coverage from
another company. It must also be noted that Dans died almost
immediately, i.e., on the nineteenth day after applying for the MRI,
and on the twenty- third day from the date of release of his loan.
Wherefore, petitioner DBP is ORDERED: (1) to REIMBURSE
respondent Estate of Juan B. Dans the amount of P1,476.00 with
legal interest from the date of the filing of the complaint until
fully paid; and (2) to PAY said Estate the amount of Fifty
Thousand Pesos (P50,000.00) as moral damages and the amount
of Ten Thousand Pesos (P10,000.00) as attorney’s fees. With
costs against petitioner.
HARTFORD BEAUMONT, assignee of W. Borck, Plaintiff-Appellee, v.
MAURO PRIETO, BENITO LEGARDA; JR.,
and BENITO VALDES as administrator of the estate of Benito
Legarda, deceased, and BENITO
VALDES, Defendants-Appellants
Principle:
When the agent acts in his own name he is not personally liable to
the person with whom he enters into a contract when things
belonging to the principal are the subject thereof, yet such third
person has a right of action not only against the principal but also
against the agent, when the rights and obligations which are the
subject-matter of the litigation cannot be legally and juridically
determined without hearing both of them. (Article 1883)
Facts:
Negotiations having been had, prior to December 4, 1911, between
W. Borck and Benito Valdes, relative to the purchase, at first, of a
part of the Nagtajan Hacienda.
Valdes sent Borck the following letter: (Offer) MANILA, December 4,
1911.
Mr. W. BORCK,
Real Estate Agent,
Manila, P.I.
SIR: In compliance with your request I herewith give you an
option for three months to buy the property of Mr. Benito
Legarda known as the Nagtahan Hacienda, situated in the
district of Sampaloc, Manila, and consisting of about,
1,993,000 sq. meters of land, for the price of its assessed
government valuation.
 The petitioner accepted the offer, provided that he
would be allowed to inspect the Title and other
documents pertaining to such.
 The defendants had persistently refused to deliver to
him the property titles and other documents relative
to said property and to execute any instrument of
conveyance thereof in his favor; that the plaintiff, on
account of said refusal on the part of the defendant
Valdes
 The plaintiff’s action is based on the failure of the
defendant Valdes, as the agent or attorney in fact of
the other defendant Benito Legarda, to perform the
obligation contracted by the said Benito Valdes to
sell to the plaintiff the property belonging to the said
Legarda.
 Inasmuch as it was set forth in the document Exhibit E
that the property known as the NagtajanHacienda, (an
option ,to buy which was given by the defendant
Valdes to the plaintiff Borck) belonged to Benito
Legarda; as negotiations had been undertaken prior to
the execution of the said document,between the
plaintiff Borck and the defendant Valdes with respect
to the m-latters set forth in that document, by virtue of
which Borch knew that Valdes was Legarda’s agent or
attorney-in-fact, although it appears in said instrument
that the agent Valdes acted in his own name.
 Legarda (principal) requested to be removed as one of
the Parties because the act of
Valdes (agent) was of his own.
Issue:
W/N Borck has a cause of action against Legarda (Principal)
Ruling:
Held: YES. Although, according to article 1717 of the Civil Code (now
Article 1883) when the agent acts in his own name he is not
personally liable to the person with whom he enters into a contract
when things belonging to the principal are the object thereof, yet
such third person has a right of action not only against the principal
but also against the agent, when the rights and obligations which are
the subject-matter of the litigation cannot be legally and juridically
determined without hearing both of them.
1909 – Liability of agent for fraud and negligence
 CHAPTER 3 OBLIGATIONS OF THE PRINCIPAL
(1910 – 1918)
1910 – Compliance of the Principal to the contracted obligations of
the agent
Specific Obligations of Principal to Agent
1. Comply with all the obligations which the agent may have
contracted within the scope of his authority (1910, 1881)
and in the name of the principal (1868, 1883)
2. To advance to the agent, should the latter so request, the
sums necessary for the execution of the agency (1912)
3. To reimburse the agent for all advances made by him
provided the agent is free from fault
4. To indemnify the agent for all the damages which the
execution of the agency ay have caused the latter without
fault or negligence on his part (1913)
5. To pay the agent the compensation agreed upon, or if no
compensation was specified, the reasonable value of the
agent’s services (1875, 1306)
Ratification – is the adoption by a person of a prior act which did not
bind him, but which was done or professed to be done on his
account thus giving effect to the acts as if originally authorized by
him
VOID ACTS CANNOT BE RATIFIED, IT BEING INOPERATIVE FROM ITS
INCEPTION
Acts that may be ratified:
1. Valid acts
2. Voidable acts
3. Unrevoked acts of the third party
1911 – solidary liability of principal and agent when agent exceeds
authority yet principal allowed him to act as if he were authorized
This rule establishes the concept of agency by estoppel
Distinguish Estoppel from Apparent Authority and Implied Agency
Apparent Authority – is that which though not actually granted, the
principal knowingly permits the agent to exercise or holds him out as
possessing
Authority by Estoppel – arises in those cases where the principal by
his culpable negligence permits his agent to exercise powers not
granted to him, even though the principal may have no notice or
knowledge of the conduct of the agent
Implied Agency – is an actual and existing agency relationship
distinguished by the manner in which it was created
1912 – advancing of funds (importan review)
1913 – Obligation to indemnify agent
1914 – Right of retention
For failing to reimburse based from 1912 and 1913, the agent may
retain in pledge the object of the agency as a right over the thing
prior to being reimbursed.
1915 – When Principals solidarily liable to agency
Three requisites:
1. There are two or more principals
2. The principals have all concurred in he appointment of the
same agent; and
3. The agent is appointed for a common transaction or
undertaking
1916 Two persons contract separately with agent and principal
Two persons may contract separately with the agent and the
principal with regard to the same thing. If the two contracts are
incompatible with each other, the one of prior date shall be
preferred. Subject to the rules under 1544:
If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first
taken possession thereof in good faith if it should be movable
property. Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first recorded it
in the Registry of Property. Should there be no inscription, the
ownership shall pertain to the person who in good faith, was the
first in the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith.
1917 – Liability to third persons of agent or principal
1918 – Principal; when excused from liability
1. If the agent acted in contravention of the principal’s
instructions, unless the latter should wish to avail himself
of the benefits derived from the contract;
2. When the expenses were due to the fault of the agent;
3. When the agent incurred them with knowledge that an
unfavorable result would ensue, if the principal was not
aware thereof;
4. When it was stipulated that the expenses would be borne
by the agent, or that the latter would be allowed only a
certain sum.
CHAPTER 4 MODES OF EXTINGUISHMENT OF AGENCY
(1919 – 1932)
1919 – 6 LISTED MODES
Contract of Agency may be extinguished by this list but it is not
exclusive.
It may, therefore, be generally extinguished by the following general
denominations:
1. Agreement
2. Subsequent Acts of the parties
3. Operation of Law
Rules on Determination of Confidential Information:
1. Whether the knowledge or information, the use of which
the complainant seeks to enjoin, is confidential;
2. Whether it be confidential in whole or in part, its use
ought to be prevented
 the interest of the agent or of a third person subsists. In an agency
coupled with an interest, the agents interest must be in the subject
Rules on Destruction of Thing: matter of the power conferred and not merely an interest in the
1. General Rule – absence of the agreement, the agency exercise of the power because it entitles him to compensation.
terminates; When an agents interest is confined to earning his agreed
2. Exceptions – compensation, the agency is not one coupled with an interest, since
a. If substitution is possible; an agents interest in obtaining his compensation as such agent is an
b. Partial loss or destruction of the subject matter ordinary incident of the agency relationship (Lim v Saban)

Other causes may exist for the extinguishment of the Agency

Relationship 1928 - Renunciation

Other modes: 1. Without just cause – duty to notify renunciation and bears
damages;
1. Extinguishment of the obligation 2. With Just cause
2. War
3. Legal Impossibility 1929 – Continuing management after renunciation
4. Termination of the sub-agent’s authority from the
termination of the agent When Agency Persists Despite Death of Principal
5. Occurrence of a specified event
1. 1930 constitution for: (1) common interest of the principal
and agent; (2) Interest of a third person who has accepted
1920 – Revocation of the Agency by the Principal the stipulation in his favor
2. 1931 – Done without knowledge of death of Principal
Revocation – is the act of the Principal which is done by terminating
the agency relationship in accordance with his will. 1932 – Duty to notify principal by the heirs of the agent

Principal’s Revocation of the Agency:

1. 1920 – Revocation
2. 1925 – Two Principal Rule

Express Revocation:

1. 1921 – contracting with specified persons

2. 1922 – Third party with no knowledge of the revocation

Implied Revocation:

1. 1923 – New Agent appointed for the same business

2. 1924 – Direct management (exemption: if interest is to manage it
together with the agent
3. 1926 – Revocation of GPA by SPA

1926 – GPA v SPA on special matters

1927 – When is agency irrevocable

1. Agency cannot be revoked if a bilateral contract depends

upon it,
2. It is the means of fulfilling an obligation already contracted
3. Partner is appointed manager of a partnership

Agency Coupled with an Interest

An agency coupled with an interest is when the agent receives an

estate or interest in the property that is the subject of the agency.
The agent in this relationship holds or controls the principal's
property and has legal rights against interference by outside parties.

Stated differently, an agency is deemed as one coupled with an

interest where it is established for the mutual benefit of the
principal and of the agent, or for the interest of the principal and of
third persons, and it cannot be revoked by the principal so long as