1. PNB v.
MANILA SURETY (AJ) Order, with full power and authority to execute and deliver on our behalf,
July 30, 1965 | Reyes, J.B.L. | Diligence required of an agent
Petitioners: PHILIPPINE NATIONAL BANK
Respondents: MANILA SURETY and FIDELITY CO., INC. and THE
COURT OF APPEALS
Recit-Ready:
PNB opened a letter of credit to Edgington Oil Refinery, where some of the
asphalt was released to ATACO and guaranteed by Manila Surety. To pay for
the asphalt, ATACO constituted PNB to receive and collect from the Bureau of
Public Works the amount of the funds. For unknown reasons, PNB ceased to
collect from the Bureau of Public Works.
The issue is whether PNB is liable for its neglect in collecting the sums due its
debtor. The SC held that PNB’s neglect is contrary to its duty as holder of an
exclusive and irrevocable power of attorney to make such collections, since an
agent is required to act with the care of a good father of a family.
Doctrine:
An agent is required to act with the care of a good father of a family and
becomes liable for the damages which the principal may suffer through his non-
performance.
FACTS:
1. PNB opened a letter of credit and advanced $120,000.00 to Edgington Oil
Refinery for 8,000 tons of hot asphalt. Of this amount, 2,000 tons worth
P279,000.00 were released and delivered to Adams & Taguba Corporation
(known as ATACO) under a trust receipt guaranteed by Manila Surety &
Fidelity Co. up to the amount of P75,000.00.
2. To pay for the asphalt, ATACO constituted PNB, its assignee and
attorney-in-fact, to receive and collect from the Bureau of Public Works
the amount of the funds payable to the assignor.
3. The conditions of this assignment are as follows:
1. The same shall remain irrevocable until the said credit accommodation
is fully liquidated.
2. The PHILIPPINE NATIONAL BANK is hereby appointed as our
Attorney-in-Fact for us and in our name, place and stead, to collect and to
receive the payments to be made by virtue of the aforesaid Purchase
receipt for all payments made to it; to endorse for deposit or encashment
checks, money order and treasury warrants which said Bank may receive,
and to apply said payments to the settlement of said credit
accommodation.
This power of attorney shall also remain irrevocable until our total
indebtedness to the said Bank have been fully liquidated.
4. ATACO delivered to the Bureau of Public Works asphalt. PNB regularly
collected. Thereafter, for unexplained reasons, PNB ceased to collect, until
in 1952 its investigators found that more moneys were payable to ATACO
from the Public Works office.
5. PNB sued both ATACO and Manila Surety in the CFI of Manila to
recover the balance of P158,563.18. The CFI ordered the latter to pay
PNB.
6. The CA modified the CFI’s decision because PNB have been negligent in
having stopped collecting from the Bureau of Public Works the moneys
falling due in favor of the principal debtor, ATACO.
7. PNB contends that contends the power of attorney obtained from ATACO
was merely in additional security in its favor, and that it was the duty of
the surety, and not that of the creditor, that the obligor fulfills his
obligation, and that the creditor owed the surety no duty of active diligence
to collect any sum from the principal debtor
ISSUES:
Is PNB liable for its neglect in collecting the sums due its debtor? YES.
RATIO:
1. PNB’s neglect in collecting the sums due to the debtor from the Bureau of
Public Works is contrary to its duty as holder of an exclusive and
irrevocable power of attorney to make such collections, since an agent is
required to act with the care of a good father of a family
2. The Bank's power to collect was expressly made irrevocable, so that the
Bureau of Public Works could very well refuse to make payments to the
principal debtor itself, and a fortiori reject any demands by the surety.
3. Even if the assignment with power of attorney from the principal debtor
were considered as mere additional security still, by allowing the assigned
funds to be exhausted without notifying the surety, the Bank deprived the
Surety of any possibility of recoursing against that security, and therefor
the surety is released.
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2. NEPOMUCENO vs. HEREDIA (Abi)
February 27, 1907 | Carson | Obligations of an Agent
Petitioners: Felisa Nepomuceno and Marciana Canon
Respondents: Genaro Heredia
Recit-Ready:
Heredia, as the agent of Canon and Nepomuceno (Principals), executed a deed
of conditional sale on the land of Marcelo. The title of the land was placed under
Heredia’s name. Subsequently, the principals then directed Heredia to execute a
memorandum before the notary public stating that it was the principals who
furnished the money for the land.
More than a year after the transaction, a cloud was cast on the title to the land by
the institution of proceedings for the recovery of possession by third parties.
Consequently, the pricipals instituted an action for the recovery of their
investment from Heredia, claiming that Heredia wasn’t their agent and he was
acting in his own name.
Doctrine:
Based on the evidence, it can be shown that the actions of Heredia were done at
the express direction of the principal. Even if that was not the case, the actions
ISSUES:
of Heredia was ratified and approved by the Principal’s request for and
acceptance of the memorandum setting out the facts and by their continuance in
the enjoyment of the profits of the transaction after the purchase and without
making any effort to have the title transferred in their own names.
RATIO:
FACTS:
1. Heredia is the business adviser of Marciana Canon, and as such had in his
hands P 1,500. About the same time, Felisa Nepomuceno had an
unsecured debt due her of P500 from Marcelo Leaño.
2. When Nepomuceno demanded for security, her debtor proposed instead a
deed of conditional sale to a certain land in consideration of 2,000 pesos.
The P 500 debt will be credited on the on the purchase price and the
remaining P1,500 will be payed by Nepomuceno. Knowing that the
Heredia had Canon’s money, Nepomuceno proposed to Canon that they
make a joint investment in the land.
3. Nepomuceno and Canon (Principals) then directed Heredia to draw up the
necessary documents. Subsequently, a deed of conditional sale of the land
with right to repurchase the land was executed. After the payment of
P1,500, the title to the land under the deed was placed in the name of the
Heredia. A few days after, Heredia, at the request of his principals,
executed before a notary public a memorandum of the fact that his
principals had furnished the money for the purchase of the land.
4. More than a year after the transactions, a cloud was cast on the title to the
land by the institution of proceedings for the recovery of possession by
third parties (Notably during the year, Marcelo was paying the principals
for possessing the property) Consequently, the Principals brought an
action in which they are seeking to recover from Heredia the whole of the
amount of money invested alleging with that purchase of the land was not
made in accordance with their instructions, or on their account.
5. The contentions of the Parties are:
a. Principals insists that the Heredia took the deed to the land in his
own name without their knowledge or consent. Therefore, Heredia
was acting in his own name and account
b. Heredia is appealing that the trial court erred in its decision in
saying that while acting as their agent, Heredia invested their
money in land to which the vendor had not a good and suffcient
title, contrary to the tenor of his instructions.
1. Whether or not Heredia is an Agent of Nepomuceno and Canon?
2. Whether or not Heredia exercised reasonable care and diligence in the
performance of his duty
1. Based on the evidence, it can be shown that the actions of Heredia were
done at the express direction of the principal. Even if that was not the case,
the actions of Heredia was ratified and approved by the Principal’s request
for and acceptance of the memorandum setting out the facts and by their
continuance in the enjoyment of the profits of the transaction after the
purchase and without making any effort to have the title transferred in
their own names.
2. The Principals further allege that Heredia, without express authority from
them, undertook to extend, and did extend, the period within which the
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 vendor had the privilege or repurchase, but this action was also ratifed,
approved, and acquiesced in by Principals.
3. Finally, the CFI held that Heredia failed to make the investment in
accordance with his agreement and did not exercise resonable care and
diligence since the Principals suffered injury due to his negligence in
ascertaining the ownership rights of Marcelo. However, there is nothing in
the record which would indicate that Heredia failed to exercise reasonable
care and diligence in the performance of his duty as such agent, or that he
undertook to guarantee the vendors title to the land purchased by direction
of the Principals. Consequently, the trial court’s decision in making
Heredia liable is reversed.
3. Severino v. Severino (Mr. Lovestruck 🥵)
January 16, 1923 | J. Ostrand | Principal and Agent; Adverse Title; Estoppel
Petitioners: Fabiola Severino
Respondents: Guillermo Severino
Recit-Ready:
Upon the death of Melencio Severino, his brother Guillermo who is also his
agent, decided to register the 4 parcels of land in question under his name.
Melencio's daughter Fabiola, as well Felecitas Villanueva, administratrix of
Melencio's estate filed a case for the reconveyance of the subject properties. The
court ruled that Guillermo as agent, is estopped from registering the land of his
principal. This is because 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
stopped from acquiring or asserting a title adverse to that of the principal.
Therefore the court dismissed Guillermo's appeal.
(Weird to kasi si Guillermo yung nag-appeal pero name of plaintiff pa rin
nauna.)
Doctrine:
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 stopped from acquiring
or asserting a title adverse to that of the principal.
FACTS:
1. Fabiola Severino is the natural daughter and sole heir of one Melecio
Severino, deceased. She brought a case to court to compel the defendant
Guillermo Severino to convey to her four parcels of land or in default
thereof to pay her the sum of P800,000 in damages for wrongfully causing
said land to be registered in his own name.
2. 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.
3. The lower court rendered a judgment recognizing the plaintiff Fabiola
Severino as the acknowledged natural child of the said Melecio Severino
and ordering the defendant to convey 428 hectares of the land in question
to the intervenor as administratrix of the estate of the said Melecio
Severino, to deliver to her the proceeds in his possession of a certain
mortgage placed thereon by him and to pay the costs.
4. From this judgement, defendant appeals.
5. During Melencio Severino's lifetime the land was worked by the
defendant, Guillermo Severino, his brother, as administrator for and on his
behalf.
6. After Melencio’s death, the Guillermo Severino continued to occupy the
land.
7. In 1916 a parcel survey was made of the lands in the municipality of Silay,
including the land here in question, and cadastral proceedings were
instituted for the registration of the land titles within the surveyed area.
8. In the cadastral proceedings the land herein question was described as four
separate lots consisting one continuous tract. Fabiola Severino was still a
minor at this period.
9. Guillermo Severino, through counsel filed answers in said proceedings
claiming the lots mentioned as his property.
10. No opposition was presented in the proceedings to the claims of Guillermo
Severino and the court therefore decreed the title in his favor, in pursuance
of which decree certificates of title were issued to him in the month of
March, 1917.
ISSUES:
1. WON Guillermo Severino can validly register the tracts of land in question
under his name although he is merely an agent of the previous owner, his
brother Melencio Severino. NO!
RATIO:
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1. Guillermo Severino came into the possession of the property here in 9. An agent is not only estopped from denying hi principal’s title to the
question as the agent of the deceased Melecio Severino in the property, but he is also disable from acquiring interests therein adverse to
administration of the property. those of his principal during the term of the agency.
2. His testimony in the case of Montelibano v. Severino that from the year 10. Before the issuance of the decree of registration it was the undoubted duty
1902 up to the time the testimony was given, in the year 1913, he had been of the Guillermo Severino to restore the property committed to his custody
continuously in charge and occupation of the land as the encargado or to his principal, or to the latter’s estate, and that the principal had a right of
administrator of Melecio Severino. action in personam to enforce the performance of this duty and to compel
3. He had always known the land as the property of Melecio Severino; and the defendant to execute the necessary conveyance to that effect.
that the possession of the latter had been peaceful, continuous, and 11. The only question remaining for consideration is, therefore, whether the
exclusive. decree of registration extinguished this personal right of action.
4. In his answer filed in the same case, Guillerml Severkno, through his 12. Torrens titles being based on judicial decrees there is a strong presumption
attorney, disclaimed all personal interest in the land and averred that it was in favor of their regularity or validity, and in order to maintain an action
wholly the property of this brother Melecio. such as the present the proof as to the fiduciary relation of the parties and
5. Neither is it disputed that the possession enjoyed by Guillermo Severino at of the breach of trust must be clear and convincing. Such proof is not
the time of obtaining his decree was of the same character as that held lacking in this case.
during the lifetime of his brother, except in so far as shortly before the trial 13. But once the relation and the breach of trust on the part of the fiduciary is
of the cadastral case the defendant had secured from his brothers and thus established, there is no reason, neither practical nor legal, why he
sisters a relinquishment in his favor of such rights as they might have in should not be compelled to make such reparation as may lie within his
the land. power for the injury caused by his wrong, and as long as the land stands
6. The relations of an agent to his principal are fiduciary and it is an registered in the name of the party who is guilty of the breach of trust and
elementary and very old rule that in regard to property forming the no rights of innocent third parties are adversely affected, there can be no
subject-matter of the agency, he is estopped from acquiring or reason why such reparation should not, in the proper case, take the form of
asserting a title adverse to that of the principal. a conveyance or transfer of the title to the cestui que trust.
7. His position is analogous to that of a trustee and he cannot consistently, 14. No reasons of public policy demand that a person guilty of fraud or breach
with the principles of good faith, be allowed to create in himself an interest of trust be permitted to use his certificate of title as a shield against the
in opposition to that of his principal or cestui que trust. consequences of his own wrong.
8. "A receiver, trustee, attorney, agent, or any other person occupying
fiduciary relations respecting property or persons, is utterly disabled from 4. HODGES v. SALAS (Chesu)
acquiring for his own benefit the property committed to his custody for October 21, 1936 | Imperial, J. | Scope of Agent’s Authority
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
Petitioners: C.N. Hodges
be heard from the trustee. It is to avoid the necessity of any such inquiry
Respondents: Carlota Salas, Paz Salas
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
Recit-Ready:
excite conflicts between self-interest and integrity. It seeks to remove the
The Salases executed a power of attorney in favor of Felix Yulo to enable him to
temptation that might arise out of such a relation to serve one’s self-
obtain a loan and secure it with a real estate mortgage. Yulo obtained the loan
interest at the expense of one’s integrity and duty to another, by making it
but the proceeds thereof were not delivered to him. He instead used a part of the
impossible to profit by yielding to temptation. It applies universally to all
loan for his own benefit. The Salases failed to pay the obligation. Hodges
who come within its principle."
instituted an action to foreclose the REM. The Court held that Yulo had acted

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 beyond the scope of the authority given to him. It should be understood that the
ISSUES:
agent was obliged to turn over the money to the principals or, at least, place it at
Whether the agent’s act of employing part of the loan to pay his personal debts was
their disposal. There is nothing in the power of attorney to indicate that the
ratified by the defendants (NO)
defendants had authorized him to convert the money obtained by him to his
personal use.
RATIO:
Doctrine:
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 agency.
FACTS:
1. On September 2, 1923, the defendants 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. The power of attorney was registered in the
registry of deeds of the Province of Occidental Negros.
2. Acting under said power of attorney, Felix S. Yulo, on March 27, 1926,
obtained a loan of P28,000 from plaintiff, binding his principals jointly
and severally, to pay it within ten (10) years, with interest at 12 per cent
per annum payable annually in advance, to which effect he signed a
promissory note for said amount and executed a deed of mortgage of the
real property with its improvements described in transfer certificate of title
No. 3335, plus 10 per cent more on the unpaid capital as attorney’s fees in
the event plaintiff would be constrained to file a case in court to recover
the loan or its balance.
3. The sum of P28,000 was not delivered to Felix S. Yulo, but by agreement
between him and the plaintiff, it was employed as follows: P3,360 advance
interest from March 27, 1926 to March 26, 1927, P8,188.29 payment for
mortgage constituted on TCT 3335, P2,000 payment for agent’s personal
account re purchase price of real property on Ortiz street, P3,391 personal
check issued to Felix S. Yulo, P9,200 paid to Rafael Santos to cancel
mortgage of Salas, P1,800 amount delivered to agent Felix S. Yulo.
4. The agent, Felix S. Yulo used a part of the loan for his own benefit. On the
next maturity date, the defendants failed to pay interest stipulated which
should have been paid one year in advance.
5. An action was brought by the plaintiff to foreclose the real estate mortgage
constituted by the defendants to secure a loan in the Courts of First
Instance. The plaintiff lost in the CFI. Plaintiff appealed from the
judgment of the CFI in absolving the defendants from the complaint.
1. The pertinent clauses of the power of attorney from which may be
determined the intention of the principals in authorizing their agent to
obtain a loan, securing it with their real property, were quoted at the
beginning.
2. The terms thereof are limited; the agent was thereby authorized only
to borrow any amount of money which he deemed necessary. There is
nothing, however, to indicate that the defendants had likewise
authorized him to convert the money obtained by him to his personal
use.
3. With respect to a power of attorney of special character, it cannot be
interpreted as also authorizing the agent to dispose of the money as he
pleased, particularly when it does not appear that such was the intention of
the principals, and in applying part of the funds to pay his personal
obligations, he exceeded his authority
4. In the case like the present one, it should be understood that the agent was
obliged to turn over the money to the principals or, at least, place it at their
disposal.
5. The plaintiff contends that the agent's act of employing part of the loan to
pay his personal debts was ratified by the defendants in their letter to him
dated August 21, 1927. This court has carefully read the contents of said
document and has found nothing implying ratification or approval of the
agent's act.
6. In it the defendants confined themselves to stating that they would notify
their agent of the maturity of the obligation contracted by him. They said
nothing about whether or not their agent was authorized to use the funds
obtained by him in the payment of his personal obligations.
7. Defendants Salas will not pay the full amount of the loan to plaintiffs
Hodges but will only pay the sums P 19, 133.50 and P1, 781.17
5. US v. KIENE (Paula)
March 12, 1907| Carson, J.| Topic
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 5. The name of the accused is attached to this document, and one of the
Petitioners: THE UNITED STATES
witnesses, the district agent of the China Mutual LifeInsurance Company,
Respondents: ALEC KIENE
stated that it was the contract of agency it purported to be, but failed to
state specifically that the signature attached thereto was the signature of
Recit-Ready:
the defendant, though he declared that he knew his signature and had seen
The defendant was an insurance agent. As agent, he received the sum of 1539.20
him write it on various occasions.
on account of his employer China Mutual Life Insurance Company. He refused
to turn over the said amount to his employer. Because of this, he was convicted
of the crime of estafa.
ISSUES: WHETHER OR NOT AN AGENT IS BOUND TO DELIVER THE
The Court held that the obligation of the defendant to deliver the funds in
FUNDS TO THE PRINCIPAL
question to his employers is determined by the provision of article 1720 of the
Civil Code, which is as follows:"Every agent is bound to give an account of his
transactions and to pay to the principal all that he may have received by virtue of
RULING: YES
the agency, even though what has been received is not owed to the principal. the
existence of the agency and the collection of the funds on account of the
1. We do not deem it necessary to review the action of the court in admitting
principal having been established, the obligation to deliver these funds to the
this document in evidence, because we are of opinion that the obligation of
principal must be held to have been imposed upon the agent by virtue of the
the defendant to deliver the funds in question to his employers is
contract of agency.
determined by the provision of article 1720 of the Civil Code, which is as
follows:"Every agent is bound to give an account of his transactions and to
pay to the principal all that he may have received by virtue of the agency,
Doctrine:
even though what has been received is not owed to the principal.
Every agent is bound to give an account of his transactions and to pay to the
principal all that he may have received by virtue of the agency, even though
2. Nothing to the contrary appearing in the record, and the existence of the
what has been received is not owed to the principal.
agency and the collection of the funds on account of the principal having
been established, the obligation to deliver these funds to the principal must
FACTS: be held to have been imposed upon the agent by virtue of the contract of
agency.
1. The defendant was an insurance agent.
2. As such agent there was paid over to him for the account of his employers,
the China Mutual Life Insurance Company, the sum of 1,539.20 pesos, 6. DEL ROSARIO v. LA BADENIA (Laurena)
which he failed and refused to turn over to them. January 27, 1916 | EN BANC | Topic
3. For his failure and refusal so to do, he was convicted of the crime of estafa
in the Court of First Instance of the city Manila in sentenced to be
Petitioners: TEOFILA DEL ROSARIO DE COSTA and BERNARDO
imprisoned for one year and six months in Bilibid, and to pay the costs of
COSTA
the trial.
Respondents: LA BADENIA, a corporation
4. Counsel for the defendant contends that the trial court erroneously
Recit-Ready:
admitted in evidence a certain document purporting to be a contract of
Plaintiffs Spouses Teofila del Rosario de Costa and her husband, Bernardino
agency signed by the defendant.
Costa are residents of Legaspi, Albay, and the defendant corporation La Badenia

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is engaged in the manufacture and sale of tobacco products with its head office in the name of the principal, when it appears that the general agent was clothed
in the city of Manila In 1911, La Badenia Co. inaugurated an extensive selling with such broad powers as to justify the inference that he was authorized to
campaign for the purpose of introducing its products to the retail trade Celestino execute contracts of this kind, and it not appearing from the record what
Aragon, a general agent of the defendant La Badenia Co. He established a limitations, if any, were placed upon his powers to act for his principal.
central distributing agency or depot at Legaspi with the plaintiff, Teofila del
Rosario de Costa, nominally in charge, though her husband, Bernardino de
FACTS:
Costa appears to have been the actual manager of the agency. The business
1. Plaintiffs Spouses Teofila del Rosario de Costa and her husband,
relations between the plaintiffs Spouses Teofila and Bernardino and the
Bernardino Costa are residents of Legaspi, Albay, and the defendant
defendant La Badenia extended from February 1, 1911, to March 24, 1912. The
corporation La Badenia is engaged in the manufacture and sale of tobacco
record shows that all goods sent to Legaspi were charged by the head office at
products with its head office in the city of Manila
Manila against the general agent, Aragon, while on the books kept by Aragon
2. In 1911, La Badenia Co. inaugurated an extensive selling campaign for the
these goods were charged against the plaintiffs Spouses Teofila and Bernardino,
purpose of introducing its products to the retail trade
and as goods were withdrawn by himself, he credited the amount of the
3. Celestino Aragon, a general agent of the defendant La Badenia Co. He
withdrawals to the account of the plaintiffs to March 24, 1912, and during this
established a central distributing agency or depot at Legaspi with the
time no settlement of their accounts was ever had. accounts incident to the
plaintiff, Teofila del Rosario de Costa, nominally in charge, though her
business were carried on the books of Aragon. The plaintiffs Teofilo and
husband, Bernardino de Costa appears to have been the actual manager of
Bernardo do not appear to have kept a separate set of books. On March 24,
the agency
1912, the general agent had a settlement with the plaintiffs and acknowledged
4. The business relations between the plaintiffs Spouses Teofila and
over his signature that these books showed a balance in favor of the plaintiffs
Bernardino and the defendant La Badenia extended from February 1,
amounting to P1,795.25 Defendant La Badenia Co. refused to pay over to
1911, to March 24, 1912
plaintiffs the balance of P1,795.25, claiming that plaintiffs Spouses Teofilo and
5. The record shows that all goods sent to Legaspi were charged by the head
Bernardo had been improperly allowed a credit of P1,850.68 which represented
office at Manila against the general agent, Aragon, while on the books
unpaid accounts due the business in Legaspi for cigars and cigarettes sold by it.
kept by Aragon these goods were charged against the plaintiffs Spouses
W/N Plaintiffs Spouses Teofilo and Bernardo are agents of defendant La
Teofila and Bernardino, and as goods were withdrawn by himself, he
Badenia Co. - Yes, they are agents. es, Spouses Teofilo and Bernardo are
credited the amount of the withdrawals to the account of the plaintiffs to
agents of La Badenia Co. They were not conducting an independent business but
March 24, 1912, and during this time no settlement of their accounts was
were the agents of the defendant La Badenia Co. operating under the supervision
ever had
of the general agent, Aragon. Since the head office of La Badenia Co. was fully
6. Goods were withdrawn from the depository at Legaspi from time to time
informed of plaintiffs' Spouses Teofilo and Bernardo relations with the general
by the general agent for shipment to other points; goods were likewise
agent Aragon in extending the sales of its products. Plaintiffs Spouses made
withdrawn by plaintiffs Teofilo and Bernardo and shipped to neighboring
direct remittances to the head office in Manila and these remittances were
towns without any intervention on the part of the general agent.
credited to the account of the agency at Legaspi, and acknowledgment was made
7. All accounts incident to the business were carried on the books of Aragon.
directly to the plaintiff Spouses Teofilo and Bernardo. Also, the La Badenia
The plaintiffs Teofilo and Bernardo do not appear to have kept a separate
head office and general agent Aragon did not make any distinction between the
set of books. The account as carried on the books of Aragon, the general
business done by Aragon and that done by the plaintiffs.
agent, was between Teofila del Rosario de Costa and La Badenia
8. On March 24, 1912, the general agent had a settlement with the plaintiffs
and acknowledged over his signature that these books showed a balance
Doctrine:
in favor of the plaintiffs amounting to P1,795.25
The principal is liable upon subagency contracts entered into by a general agent

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 9. When this final settlement of accounts was had on the 24th of March,
1912, both Aragon and the plaintiff, Teofila del Rosario de Costa,
confirmed it as a true statement of the account.
10. Defendant La Badenia Co. refused to pay over to plaintiffs the balance of
P1,795.25, claiming that plaintiffs Spouses Teofilo and Bernardo had been
improperly allowed a credit of P1,850.68 which represented unpaid
accounts due the business in Legaspi for cigars and cigarettes sold by it.
Defendant La Badenia Contention: Plaintiffs Spouses Teofilo and Bernardo
were simply merchants who purchased the goods at fixed wholesale prices and
sold them on their own account, and that they were never employed as their agents
Plaintiffs Spouses Teofilo and Bernardo's Contention: They were the agents of
the defendant La Badenia Co. and that they received commissions on the sales
made by the agency; and that they were authorized to extend a reasonable credit
under the supervision of the general agent.
Lower Court's Ruling: Specific goods sold to the delinquent debtors, whose
unpaid accounts form the basis of this litigation, had already been paid for by the
plaintiffs Teofilo and Bernardo and that this was conclusive evidence that the
plaintiffs were not acting as the agents of the defendant corporation
SC: Reversed the ruling of the Lower Court (discussion in Ratio)
ISSUES:
1. W/N Plaintiffs Spouses Teofilo and Bernardo are agents of defendant La
Badenia Co. - Yes, they are agents
2. W/N La Badenia Co. is liable to pay the sum of P1,795.25 a balance
alleged to be due Teofila del Rosario de Costa as the agent of the
defendant corporation for services rendered and expenses incurred in the
sale of its products. - Yes
RATIO:
1. 1st Issue: Yes, Spouses Teofilo and Bernardo are agents of La Badenia
Co. They were not conducting an independent business but were the
agents of the defendant La Badenia Co. operating under the supervision of
the general agent, Aragon.
Petitioners: The Municipal Council of Iloilo
2. Since the head office of La Badenia Co. was fully informed of plaintiffs'
Respondents: Jose Evangelista et al, Tan Ong Sze Vda. de Tan Toco
Spouses Teofilo and Bernardo relations with the general agent Aragon in
extending the sales of its products.
Recit-Ready: The Court of First Instance of Iloilo rendered judgement in a civil
3. Plaintiffs made direct remittances to the head office in Manila and these
remittances were credited to the account of the agency at Legaspi, and
acknowledgment was made directly to the plaintiff Spouses Teofilo and
Bernardo
4. The La Badenia head office and general agent Aragon did not make any
distinction between the business done by Aragon and that done by the
plaintiffs.
5. It is held that the purchases, sales and remittances made by the plaintiffs
are part of the work of the Legaspi agency under the control and
supervision of Aragon
6. The active management and participation of the plaintiffs in the conduct of
the business at Legaspi are fully recognized in the letters written by the
assistant manager of the defendant La Badenia to one of the plaintiffs,
Bernardo
7. This letter is sufficient to show that the defendant was fully aware of
plaintiffs' connection with the agency at Legaspi, and recognized them
as agents of the company, and clearly did not consider them as
independent merchants buying solely on their own account, but rather as
subagents working under the supervision of the general agent, Aragon.
8. 2nd Issue (not agency related): La Badenia Corp. is liable for the for the
sum of P1,795.25, with legal interest thereon from August 5, 1914, the
date of filing the complaint, until paid
7. Municipal Council of Iloilo v Evangelista(Hazel F.)
Nov. 17, 1930 | Villareal J. | Topic
Agency - Chapter 2 Cases | Block 2A 2022 | Ateneo Law School 8
 of said judgement in payment of professional services rendered by him to
case wherein the appellant Tan Toco was the plaintiff and the Municipality of
said widow and her co-heirs.
Iloilo, the defendant, and the former sought to recover of the latter the value of a
strip of land belonging to said plaintiff taken by the defendant to widen a public
ISSUE: Whether Tan Boon Tiong, as attorney-in-fact of the appellant, was
street. Antero Soriano appeared to claim the amount of the judgment as it had
empowered by his principal to make an assignment of credits, rights and interests,
been assigned to him and by him, in turn, assigned to Mauricio Cruz & Co., Inc.
in payment of debts for professional services rendered by lawyers, in Paragraph VI
The issue is whether Tan Boon Tiong, as attorney-in-fact of the appellant, was
of the power of attorney.
empowered by his principal to make an assignment of credits, in payment of
debts for professional services rendered by lawyers. The Court ruled that an
RATIO:
agent or attorney-in-fact empowered to pay the debts of the principal, and to
1. Tan Boon Tiong is authorized to employ and contract for the services of
employ attorneys to defend the latter's interests, is impliedly empowered to pay
lawyers upon such conditions as he may deem convenient, to take charge
the attorney's fees for services rendered in the interests of said principal, and
of any actions necessary or expedient for the interests of his principal, and
may satisfy them by an assignment of a judgment rendered in favor of said
to defend suits brought against her. This power necessarily implies the
principal.Tan Boon Tiong is authorized to employ and contract for the services
authority to pay for the professional services thus engaged. In the present
of lawyers upon such conditions as he may deem convenient, to take charge of
case, the assignment made by Tan Boon Tiong, as attorney-in-fact for the
any actions necessary or expedient for the interests of his principal, and to
appellant, in favor of Attorney Antero Soriano for professional services
defend suits brought against her. This power necessarily implies the authority to
rendered in other cases in the interests of the appellant and her coheirs,
pay for the professional services thus engaged.
was that credit which she had against the municipality of Iloilo, and such
assignment was equivalent to the payment of the amount of said credit to
Doctrine:
Antero Soriano for professional services.
An agent or attorney-in-fact empowered to pay the debts of the principal, and to
2. With regard to the failure of the other attorney-in-fact of the appellant, Tan
employ attorneys to defend the latter's interests, is impliedly empowered to pay
Montano, authorized by Exhibit 1 — Tan Toco, to consent to the deed of
the attorney's fees for services rendered in the interests of said principal, and
assignment, the latter being also authorized to pay, in the name and behalf
may satisfy them by an assignment of a judgment rendered in favor of said
of the principal, all her debts and the liens and encumbrances of her
principal.
property, the very fact that different letters of attorney were given to each
of these two representatives shows that it was not the principal's intention
When a person appoints two agents independently, the consent of one will not
that they should act jointly in order to make their acts valid. Furthermore,
be required to validate the acts of the other, unless that appears positively to
the appellant was aware of that assignment and she not only did not
have been the principal's attention.
repudiate it, but she continued employing Attorney Antero Soriano to
represent her in court.
FACTS:
1. The Court of First Instance of Iloilo rendered judgement in a civil case 8. LYONS v. ROSENSTOCK (Pia)
wherein the appellant Tan Toco was the plaintiff and the Municipality of 17 March 1932 | Street, J. | Topic
Iloilo, the defendant, and the former sought to recover of the latter the
value of a strip of land belonging to said plaintiff taken by the defendant to
Petitioners: E. S. LYONS, plaintiff-appellant
widen a public street.
Respondents: C. W. ROSENSTOCK, Executor of the Estate of Henry W.
2. Antero Soriano appeared to claim the amount of the judgment as it had
Elser, deceased, defendant-appellee
been assigned to him and by him, in turn, assigned to Mauricio Cruz &
Co., Inc. This claim is confined to the claim of Mauricio Cruz & Co as
Recit-Ready:
alleged assignee of the rights of the late Attorney Antero Soriano by virtue
Agency - Chapter 2 Cases | Block 2A 2022 | Ateneo Law School 9

An action was instituted in CFI Manila, by E. S. Lyons against C. W.
Rosenstock, as executor of the estate of H. W. Elser, deceased. The purpose of
the action is to recover 446 2/3 shares of the stock of J. K. Pickering & Co., Ltd.,
together with dividends which accrued on said stock with lawful interest. He
contends that when Elser placed a mortgage for P50,000 upon the equity of
redemption in the Carriedo property, Lyons, as half owner of said property,
became, as it were, involuntarily the owner of an undivided interest in the
property acquired partly by that money; and it is insisted for him that, in
consideration of this fact, he is entitled to the four hundred forty-six and two-
thirds shares of J. K. Pickering & Company, with the earnings thereon, as
claimed in his complaint.
The SC finds appellant’s contentions untenable as it is clear that Elser, in buying
the San Juan Estate, was NOT acting for any partnership composed of himself
and Lyons, and the law cannot be distorted into a proposition which would make
Lyons a participant in this deal contrary to his express determination.
Doctrine:
A trust does NOT ordinarily attach with respect to property acquired by a person
who uses money belonging to another. Of course, if an actual relation of
partnership had existed in the money used, the case might be different and much
emphasis is laid in the appellant's brief upon the relation of partnership which, it
is claimed, existed. But there was clearly no general relation of partnership,
under Art. 1678 of the Civil Code.
FACTS:
1. Before his death, Elser had been a resident of the Manila where he was
engaged in buying, selling, and administering real estate. In several
ventures of this kind, Lyons, had joined with him, the profits being shared
by the two in equal parts.
2. Lyons, whose regular vocation was that of a missionary, of the Methodist
Episcopal Church, went on leave to the United States. On the eve of his
departure, Elser made a written statements showing that Lyons was, at that
time, half owner with Elser of three particular pieces of real property.
Concurrently with this act Lyons execute in favor of Elser a general power
of attorney empowering him to manage anddispose of said properties at
will and to represent Lyons fully and amply, to the mutual advantage of
both.
3. In 1920, the attention of Elser was drawn to a piece of land, he discerned
opportunity for the development of a suburban improvement.This property
referred to as the San Juan Estate. To afford a little time for maturing his
plans, Elser purchased an option. The amounts paid for this option and its
extension were supplied by Elser entirely from his own funds. In the end
he was able from his own means, and with the assistance which he
obtained from others, to acquire said estate.
a. The amount required for the first payment was P150,000, and as
Elser had available only about P120,000, including the P20,000
advanced upon the option, it was necessary to raise the remainder
by obtaining a loan for P50,000. This amount was finally obtained
from a Chinese merchant of the city named Uy Siuliong. This loan
was secured through Uy Cho Yee, son of the lender; and in order
to get the money it was necessary for Elser not only to give a
personal note signed by himself and his two associates in the
projected enterprise, but also by the Fidelity & Surety Company.
b. The money thus raised was delivered to Elser. With this money
and what he already had in bank Elser purchased the SanJuan
Estate. For the purpose of the further development of the property
a limited partnership had been organized by Elser and three
associates, under the name of J. K. Pickering & Company; and
when the transfer of the property was effected the deed was made
directly to this company. As Elser was the principal capitalist in
the enterprise he received by far the greater number of the shares.
4. Elser hoped that Lyons might be induced to come in with him and supply
part of the means necessary to carry the enterprise through. Elser wrote
Lyons a letter, informing him that he had made an offer for a big
subdivision and that, if it should be acquired and Lyons would come in,
the two would be well fixed. Elser cabled Lyons that he had bought the
San Juan Estate and thought it advisable for Lyons to resign his position
with the mission board in New York. On the same date he wrote Lyons a
letter explaining some details of the purchase.
5. Lyons did not want to join in the purchase of the San Juan Estate. One
source of embarrassment which had operated on Lyson to bring him to the
resolution to stay out of this venture, was that the board of mission was
averse to his engaging in business activities other than those in which the
church was concerned. Upon receipt of this letter Elser was of course
informed that it would be out of the question to expect assistance from
Lyons in carrying out the San Juan project. No further efforts to this end
were therefore made by Elser.6. When Elser was concluding the
transaction for the purchase of the San Juan Estate, his book showed that
he was indebted to Lyons tothe extent of, possibly, PHP11,669.72, which
Agency - Chapter 2 Cases | Block 2A 2022 | Ateneo Law School 10
 had accrued to Lyons from profits and earnings derived from other
properties; and when the J.K. Pickering & Company was organized and
stock issued, Elser indorsed to Lyons 200 of the shares allocated to
himself, as he then believed that Lyons would be one of his associates in
the deal. The par value of these 200 shares was more than P8,000 in excess
of the amount which Elser in fact owed to Lyons; and when the latter
returned to the Philippines, he accepted these shares and sold them for his
own benefit. After Lyons' return to the Philippines he acted for a time as
one of the members of the board of directors of the J. K. Pickering &
Company, his qualification for this office being derived precisely from the
ownership of these shares.
6. When Elser obtained the loan of P50,000 to complete the amount needed
for the first payment on the San Juan Estate, thelender, Uy Siuliong,
insisted that he should procure the signature of the Fidelity & Surety Co.
But before signing the note with Elser and his associates, the Fidelity &
Surety Co. insisted upon having security for the liability thus assumed by
it. To meet this requirement, Elser mortgaged to the Fidelity & Surety Co.
the equity of redemption in the property owned by himself and Lyonson
Carriedo Street.
7. This mortgage was executed, at which time Elser expected that Lyons
would come in on the purchase of the San Juan Estate. But when he
learned from the letter from Lyons, that the latter had determined not to
come into this deal, Elser began to castaround for means to relieve the
Carriedo property of the encumbrance which he had placed upon it. For
this purpose, he addressed a letter to the Fidelity & Surety Co., asking it to
permit him to substitute a property owned by himself and 1,000 shares of
the J. K. Pickering & Company, in lieu of the Carriedo property, as
security. The Fidelity & Surety Co. agreed to the proposition. The latter
thereupon in turn executed a cancellation of the mortgage on the Carriedo
property and delivered it to Elser. But notwithstanding the fact that these
documents were executed and delivered, the new mortgage and the release
of the old were never registered.
8. As the development of the San Juan Estate was a success from the start,
Elser paid the note of P50,000 to Uy Siuliong, although it was not due
until more than five months later. It will thus be seen that the mortgaging
of the Carriedo property never resulted in damage to Lyons to the extent of
a single cent and although the court refused to allow the defendant to
prove the Elser was solvent at this time in an amount much greater than
the entire encumbrance placed upon the property, it is evident that the risk
imposed upon Lyons was negligible. It is also plain that no money actually
deriving from this mortgage was ever applied to the purchase of the San
Juan Estate.What really happened was the Elser merely subjected the
property to a contingent liability, and no actual liability ever resulted
therefrom.The financing of the purchase of the San Juan Estate, apart from
the modest financial participation of his three associates in the San
Juandeal, was the work of Elser accomplished entirely upon his own
account.
9. The case for the plaintiff supposes that, when Elser placed a mortgage for
P50,000 upon the equity of redemption in the Carriedo property, Lyons, as
half owner of said property, became, as it were, involuntarily the owner of
an undivided interest in the property acquired partly by that money; and it
is insisted for him that, in consideration of this fact, he is entitled to the
four hundred forty-six and two-thirds shares of J. K. Pickering &
Company, with the earnings thereon, as claimed in his complaint. Lyons
tells us that he did not know until after Elser's death that the money
obtained from Uy Siuliong in the manner already explained had been used
to held finance the purchase of the San Juan Estate. Other correspondence
shows that Elser had apparently been trying to buy the Ronquillo property,
andLyons leads us to infer that he thought that the money obtained by
mortgaging the Carriedo property had been used in the purchase of this
property.
10. Elser's widow and one of his clerks testified that about June 15, 1920,
Elser cabled Lyons something to this effect;: "I have mortgaged the
property on Carriedo Street, secured by my personal note. You are amply
protected. I wish you to join me in the San Juan Subdivision.Borrow all
money you can." Lyons says that no such cablegram was received by him,
and we consider this point of fact of little moment,since the proof shows
that Lyons knew that the Carriedo mortgage had been executed, and after
his arrival in Manila he consented for the mortgage to remain on the
property until it was paid off, as shortly occurred. It may well be that
Lyons did not at first clearly understand all the ramifications of the
situation, but he knew enough, we think, to apprise him of the material
factors in the situation, and we concur in the conclusion of the trial court
that Elser did not act in bad faith and was guilty of no fraud
ISSUES:
1. W/N there was a general relation of partnership? NO
RATIO:
Agency - Chapter 2 Cases | Block 2A 2022 | Ateneo Law School 11
 1. The position of the appellant is untenable. If Elser had used any money
actually belonging to Lyons in this deal, he would under Art. 1724 of the
The SC ruled that Chua cannot hold SBC personally or solidarily liable with
Civil Code and Art. 264 of the Code of Commerce, be obligated to pay
First Insurance since SBC is merely an agent. Agents are not solidarily nor
interest upon the money so applied to his own use.
personally liable when they are acting within the scope of their authority from
2. Under the law prevailing in this jurisdiction, a trust does NOT ordinarily
their disclosed principal. The Insurance Code also provides that no personal
attach with respect to property acquired by a person who uses money
liability exists for the agent to answer for the claims against the principal. Lastly,
belonging to another. Of course, if an actual relation of partnership had
the agent is not the proper party since the agent is not the real party-in-interest in
existed in the money used, the case might be different and much emphasis
the case.
is laid in the appellant's brief upon the relation of partnership which, it is
claimed, existed. But there was clearly no general relation of partnership,
Doctrine:
under Art. 1678 of the Civil Code.
A settling agent acting within the scope of its authority, cannot be held
3. It is clear that Elser, in buying the San Juan Estate, was NOT acting for
personally and/or solidarily liable for the obligations of its disclosed principal
any partnership composed of himself and Lyons, and the law cannot be
merely because there is allegedly a need for a speedy settlement of the claim of
distorted into a proposition which would make Lyons a participant in this
private respondent.
deal contrary to his express determination.
4. It seems to be supposed that the doctrines of equity worked out in the
jurisprudence of England and the United States with reference to trust FACTS:
supply a basis for this action. The doctrines referred to operate, however, 1. Chua bought and imported to the Philippines 50 metric tons of Dicalcium
only where money belonging to one person is used by another for the Phosphate, Feed Grade F-15% packed in 1,250 bags valued at
acquisition of property which should belong to both; it takes but little US$13,000.00 from a Taiwanese company.
discernment to see that the situation here involved is not one for the 2. The shipment was insured by First Insurance 'against all risks' at the port
application of that doctrine, for no money belonging to Lyons or any of departure with the note 'Claim, if any, payable in U.S. currency at
partnership composed of Elser and Lyons was in fact used by Elser in the Manila and with defendant Smith, Bell, and Co. stamped at the lower left
purchase of the San Juan Estate side of the policy as 'Claim Agent.'
3. The surveyor’s report showed that 600 bags were damaged. Hence, Chua
claimed compensation from the Claim Agent, Smith, Bell & Co (SBC).
9. Smith, Bell & Co., Inc. v. CA & Chua (Pram) 4. SBC informed First Insurance and relayed to Chua that its principal
February 6, 1997 | Panganiban, J. | Liability of an Agent Disclosing his Principal offered only 50% of the claim or US$3,616.17 as redress, on the alleged
ground of discrepancy between the amounts contained in the shipping
agent's reply to the claimant of only US$90.48 with that of Metroport's
Petitioners: SMITH, BELL & CO., INC.
(the arrastre operator).
Respondents: COURT OF APPEALS and JOSEPH BENGZON CHUA
5. Chua expressed his refusal to 'redress' offer, contending that the
discrepancy was a result of loss from vessel to arrastre to consignees'
Recit-Ready:
warehouse which losses were still within the 'all risk' insurance cover. No
Chua imported goods from Taiwan and the shipment was insured by First
settlement of the claim having been made, the plaintiff then caused the
Insurance having SBC as its Claim Agent. Almost half of the shipment reached
instant case to be filed.
Manila damaged and Chua claimed redress from SBC. First Insurance only
allowed 50% of Chua’s claim to be granted but Chua did not accept such offer
ISSUE:
of redress. Hence, he filed a case against SBC. SBC claims that it is not liable
1. Whether or not a local settling or claim agent of a disclosed principal — a
for the amount claimed by Chua since it is merely a claim agent.
foreign insurance company — can be held jointly and severally liable with
Agency - Chapter 2 Cases | Block 2A 2022 | Ateneo Law School 12
 said principal under the latter's marine cargo insurance policy, given that
wife, demanded payment of the face value of the MRI or an amount equivalent
the agent is not a party to the insurance contract? NO.
to the loan. The SC ruled that the DBP is not authorized to accept applications
for MRI when its clients are more than 60 years of age. Hence, DBP exceeded
RATIO:
the scope of its authority when it accepted Dan's application for MRI. The SC
1. Based on existing jurisprudence, a settling agent acting within the scope of
cited the 1987 Constitution, saying “the agent who acts as such is not personally
its authority, cannot be held personally and/or solidarily liable for the
liable to the party with whom he contracts, unless he expressly binds himself or
obligations of its disclosed principal merely because there is allegedly a
exceeds the limits of his authority without giving such party sufficient notice of
need for a speedy settlement of the claim of private respondent.
his powers.” Inasmuch as the non-disclosure of the limits of the agency carries
2. A solidary obligation cannot lightly be inferred. It must be positively and
with it the implication that a deception was perpetrated on the unsuspecting
clearly expressed. The contention that, in the end, it would really be First
client, the provisions of Articles 19, 20 and 21 of the Civil Code of the
Insurance Company, Ltd. which would be held liable is specious and
Philippines come into play.
cannot be accepted. Such a stance would inflict injustice upon petitioner
which would be made to advance the funds to settle the claim without any
Doctrine: The liability of an agent who exceeds the scope of his authority
assurance that it can collect from the principal which disapproved such
depends upon whether the third person is aware of the limits of the agent's
claim, in the first place.
powers. There is no showing that Dans knew of the limitation on DBP's
3. The Insurance Code is quite clear as to the purpose and role of a resident
authority to solicit applications for MRI. If the third person dealing with an
agent. Such agent, as a representative of the foreign insurance company, is
agent is unaware of the limits of the authority conferred by the principal on the
tasked only to receive legal processes on behalf of its principal and not to
agent and he (third person) has been deceived by the non-disclosure thereof by
answer personally for any insurance claims.
the agent, then the latter is liable for damages to him. The rule that the agent is
4. Lastly, being a mere agent and representative, petitioner is also not the real
liable when he acts without authority is founded upon the supposition that there
party-in-interest in this case. An action is brought for a practical purpose,
has been some wrong or omission on his part either in misrepresenting, or in
that is, to obtain actual and positive relief. If the party sued is not the
affirming, or concealing the authority under which he assumes to act.
proper party, any decision that may be rendered against him would be
futile, for the decision cannot be enforced or executed.
FACTS:
10. DEVELOPMENT BANK OF THE PHILIPPINES v. CA (Pilar) 1. In May 1987, Juan B. Dans, his wife Candida, his son and daughter-in-
G.R. No. 109937 | March 21, 1994 | Quiason law, applied for a loan of P500,000.00 with the DBP Basilan Branch.
2. Dans, then 76 years of age, was advised by DBP to obtain a mortgage
redemption insurance (MRI) with the DBP Mortgage Redemption
Petitioners: Development Bank of the Philippines
Insurance Pool (DBP MRI Pool).
Respondents: Court of Appeals, Estate of the Late Juan B. Dans, represented by
3. A loan reduced to P300,000.00, was approved by DBP and released on
Candida B. Dans, and the DBP Mortgage Redemption Insurance Pool
August 11, 1987. DBP deducted the amount of P1,476.00 as payment for
the MRI premium.
Recit-Ready: Juan B. Dans applied for a loan of P500,000.00 with the DBP
4. Dans accomplished and submitted the "MRI Application for Insurance"
Basilan Branch, who then compelled him to apply with the DBP MRI Pool for
and the "Health Statement for DBP MRI Pool."
MRI coverage. When Dan's loan was released, DBP already deducted from the
5. The MRI premium of Dans, less the DBP service fee of 10 percent, was
proceeds the MRI premium, and made Dans fill up and sign his application for
credited by DBP to the savings account of the DBP MRI Pool, of which
MRI, as well as his health statement. Dans then died of cardiac arrest. The DBP
the DBP MRI Pool was advised.
MRI Pool notified DBP that Dans was not eligible for MRI coverage, being over
6. On September 3, 1987, Dans died of cardiac arrest. The DBP relayed this
the acceptance age limit of 60 years at the time of application. Candida, Dans’s
information to the DBP MRI Pool. On September 23, 1987, the DBP MRI
Agency - Chapter 2 Cases | Block 2A 2022 | Ateneo Law School 13
 Pool notified DBP that Dans was not eligible for MRI coverage, because
the age acceptance limit is 60 years at the time of application.
7. DBP apprised Candida of the disapproval of Dans’s application. The DBP
offered to refund the premium of P1,476.00 that Dans paid, but Candida
refused to accept it, and demanded payment of the face value of the MRI
or an amount equivalent to the loan.
8. She also refused to accept an offer of an ex gratia settlement of P30,000.00
9. Dans’s estate (estate), through Candida, filed a complaint with the RTC
Branch I, Basilan, against DBP and the DBP MRI Pool for "Collection of
Sum of Money with Damages." The estate alleged that Dans became
insured by the DBP MRI Pool when DBP, knowing Dans' age at the time
of application, required him to apply for MRI, and later collected the
insurance premium.
10. The Estate therefore prayed: (1) that the sum of P139,500.00, which it paid
under protest for the loan, be reimbursed; (2) that the mortgage debt of the
deceased be declared fully paid; and (3) that damages be awarded.
11. On March 10, 1990, the RTC rendered a decision in favor of Estate and
against DBP. The DBP MRI Pool was absolved from liability, after the
RTC found no privity of contract between it and Dans. The RTC declared
DBP in estoppel for having led Dans into applying for MRI and actually
collecting the premium and the service fee, despite knowledge of his age
ineligibility.
12. On Appeal, the CA affirmed the Decision of the RTC.
ISSUES: W/N DBP and the DBP MRI Pool are liable to the Estate of Dans for the
payment of the MRI? Yes, DBP is liable, but not the MRI pool.
RATIO:
1. The MRI pool, having the power to approve applications, did not approve
Dans’ application, nor is there a showing that it accepted the sum of
P1,476.00, which DBP credited to its account knowing it was payment for
Dans's premium. Hence, there was no perfected contract of insurance;
thus, the DBP MRI Pool cannot be held liable on a contract that does not
exist.
1. Instead of allowing Dans to look for his own insurance carrier or some
other form of insurance policy, DBP compelled him to apply with the DBP
MRI Pool for MRI coverage. When Dan's loan was released on August 11,
1987, DBP already deducted from the proceeds thereof the MRI premium,
and made Dans fill up and sign his application for MRI, as well as his
health statement. The DBP submitted the application form and health
statement to MRI Pool.
2. In dealing with Dans, DBP was a lender, and an insurance agent. As an
insurance agent, DBP made Dans go through application for said
insurance, leading him and his family to believe that they had already
fulfilled all the requirements for the MRI and that the issuance of their
policy was forthcoming. However, given the maximum age for the MRI
acceptance, DBP had full knowledge that Dan's application was never
going to be approved.
3. Under Article 1987 of the Civil Code of the Philippines, "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 DBP is not
authorized to accept applications for MRI when its clients are more than
60 years of age. Hence, DBP exceeded the scope of its authority when it
accepted Dan's application for MRI. (see doctrine)
4. 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 19,1 202 and 213 of the Civil Code of the
Philippines come into play.
5. 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. Hence, DBP’s liability is not for the entire insurance
policy.
6. Considering that DBP had offered to pay P30,000.00 to respondent Estate
in ex gratia settlement of its claim and that DBP's non-disclosure of the
limits of its authority amounted to a deception to its client, an award of
moral damages in the amount of P50,000.00 would be reasonable.The
award of attorney's fees is also just and equitable under the circumstances.
1 ARTICLE 19. Every person must, in the exercise of his rights and in the performance of
his duties, act with justice give everyone his due and observe honesty and good faith.
2 ARTICLE 20. Every person who, contrary to law, willfully or negligently causes damage
to another, shall indemnify the latter for the same.
3 ARTICLE 21. Any person who willfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the latter for the
damage.
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 11. BA Finance Corporation v. CA & Traders Royal Bank (Pram) their defense. BA, on the other hand, raised the defense of lack of
July 3, 1992 | Medialdea, J. | Liability of an Agent when Contract Invalid authority of its credit administrator to bind the corporation.

ISSUE:
Petitioners: BA FINANCE CORPORATION,
1. Is BA Finance liable for the acts of Philip Wong despite the latter’s lack of
Respondents: HON. COURT OF APPEALS and TRADERS ROYAL BANK
authority? NO.
Recit-Ready:
RATIO:
Gaytano got a business loan from TRB. The same loan was guaranteed by BA
1. The burden is on TRB to satisfactorily prove that the credit administrator
Finance through a letter sent by its credit administrator, Philip Wong. A part of
with whom they transacted acted within the authority given to him by his
the debt remained unpaid and TRB claimed the unpaid amount from BA Finance
principal, BA Finance.
but the latter denied any guaranty it executed in favor of Gaytano since Wong
2. The only evidence presented by TRB was the testimony of Philip Wong,
was never authorized to enter into any guaranty agreements.
credit administrator, who testified that he had authority to issue guarantees
as can be deduced from the wording of the memorandum given to him by
The SC ruled that TRB was not able to satisfactorily prove that the credit
petitioner corporation on his lending authority.
administrator with whom they transacted with (Wong) acted within the authority
3. The said memorandum which allegedly authorized Wong not only to
given to him by his principal, BA Finance. The said memorandum which
approve and grant loans but also to enter into contracts of guaranty in
allegedly authorized Wong not only to approve and grant loans but also to enter
behalf of the corporation said nothing expressly about him as the credit
into contracts of guaranty in behalf of the corporation said nothing expressly
administrator having the power to issue guarantees.
about him as the credit administrator having the power to issue guarantees.
4. Guaranty is not presumed, it must be expressed and cannot be extended
Further, the representation of one who acts as agent cannot by itself serve as
beyond its specified limits.
proof of his authority to act as agent or of the extent of his authority as agent.
5. The sole allegation of the credit administrator in the absence of any other
proof that he is authorized to bind petitioner in a contract of guaranty with
Doctrine:
third persons should not be given weight. The representation of one who
Persons dealing with an assumed agent, whether the assumed agency be a
acts as agent cannot by itself serve as proof of his authority to act as agent
general or special one are bound at their peril, if they would hold the principal
or of the extent of his authority as agent.
liable, to ascertain not only the fact of agency but also the nature and extent of
authority, and in case either is controverted, the burden of proof is upon them to
establish it.
12. NATIONAL POWER CORPORATION v. NATIONAL
FACTS: MERCHANDISING CORPORATION (Sam)
1. Renato Gaytano applied for and was granted a loan with respondent Oct. 23, 1982| Aquino| Art. 1897-1898
Traders Royal Bank (TRB) in the amount of P60,000.00.
2. In a letter to TRB, Philip Wong as credit administrator of BA Finance
Petitioners: National Power Corporation
Corporation for and on behalf of the latter, undertook to guarantee the loan
Respondents: National Merchandising Corp. and Domestic Insurance Company
of the Gaytano spouses.
of the Philippines
3. Partial payments were made on the loan leaving an unpaid balance. Since
the Gaytano spouses refused to pay their obligation, TRB filed a complaint
Recit-Ready:
for a sum of money against the Gaytano spouses and BA Finance as
On October 17, 1956, the National Power Corporation and National
alternative defendant. The Gaytano spouses did not present evidence for
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Merchandising Corporation (Namerco), as the representative of the International
FACTS:
Commodities Corporation (ICC), executed in Manila a contract for the purchase
1. On October 17, 1956, the National Power Corporation and National
by the NPC from the New York firm of four thousand long tons of crude sulfur
Merchandising Corporation (Namerco), as the representative of the
for its Maria Cristina Fertilizer Plant in Iligan City at a total price of $212,120.
International Commodities Corporation (ICC), executed in Manila a
A performance bond, Php90,134.20, was executed by Domestic Insurance Co. In
contract for the purchase by the NPC from the New York firm of four
favor of NPC to guarantee the seller’s obligation.
thousand long tons of crude sulfur for its Maria Cristina Fertilizer Plant in
It was stipulated in the contract of sale that the seller would deliver the sulfur
Iligan City at a total price of $212,120. A performance bond,
at Iligan City within sixty days from notice of the establishment in its favor of a
Php90,134.20, was executed by Domestic Insurance Co. In favor of NPC
letter of credit for $212,120. The notice of that letter of credit was received by
to guarantee the seller’s obligation.
cable by the New York firm (ICC) on November 15, 1956. Thus, the deadline
2. It was stipulated in the contract of sale that the seller would deliver the
for the delivery of the sulfur was January 15, 1957. However, the New York
sulfur at Iligan City within sixty days from notice of the establishment in
supplier was not able to deliver the sulfur due to its inability to secure
its favor of a letter of credit for $212,120 and that failure to effect delivery
shipping space. The Government Corporate Counsel in his letter to Sycip dated
would subject the seller and its surety to the payment of liquidated
May 8, 1957 rescinded the contract of sale and on November 5, 1957, the NPC
damages at the rate of two-fifth of one percent of the full contract price for
sued the New York firm, Namerco and the Domestic Insurance Company for the
the first thirty days of default and four-fifth of one percent for every day
recovery of the stipulated liquidated damages.
thereafter until complete delivery is made.
The issue in this case is whether or not Namerco is liable to pay for
3. In a letter dated November 12, 1956, the NPC advised John Z. Sycip, the
unliquidated damages. The court held that Namerco is liable because it acted in
president of Namerco, of the opening on November 8 of a letter of credit
excess of authority given to it by ICC pursuant to article 1897 of the Civil Code,
for $212,120 in favor of International Commodities Corporation which
the agent who exceeds the limits of his authority without giving the party with
would expire on January 31, 1957. Notice of that letter of credit was
whom he contracts sufficient notice of his powers is personally liable to such
received by cable by the New York firm on November 15, 1956. Thus, the
party. It exceeded its authority when ICC in its cable to Namerco dated August
deadline for the delivery of the sulfur was January 15, 1957.
9, 1956 stated that the sale was subject to availability of a steamer, but Namerco
4. New York supplier was not able to deliver the sulfur due to its inability
did not disclose that cable to the NPC and, contrary to its principal's instruction,
to secure shipping space. During the period from January 20 to 26, 1957
it agreed that nonavailability of a steamer was not a justification for nonpayment
there was a shutdown of the NPC's fertilizer plant because there was no
of the liquidated damages. ICC also advised Namerco that the latter should not
sulfur. No fertilizer was produced.
sign the contract unless it (Namerco) wished to assume sole responsibility for
5. The Government Corporate Counsel in his letter to Sycip dated May 8,
the shipment and the latter still signed the contract on the ground that its
1957 rescinded the contract of sale due to the New York supplier's
performance bond will be forfeited.
nonperformance of its obligations and demanded payment of
Php360,572.80 as liquidated damages.
Doctrine:
6. On November 5, 1957, the NPC sued the New York firm, Namerco and
Art. 1897. The agent who acts as such is not personally liable to the party with
the Domestic Insurance Company for the recovery of the stipulated
whom he contracts, unless he expressly binds himself or exceeds the limits of
liquidated damages.
his authority without giving such party sufficient notice of his powers.
Art. 1898. If the agent contracts in the name of the principal, exceeding the
ISSUES:
scope of his authority, and the principal does not ratify the contract, it shall be
1. Whether or not Namerco is liable to pay for unliquidated damages? [YES]
void if the party with whom the agent contracted is aware of the limits of the
powers granted by the principal. In this case, however, the agent is liable if he
RATIO:
undertook to secure the principal's ratification.

Agency - Chapter 2 Cases | Block 2A 2022 | Ateneo Law School 16

1. In the contract of sale itself item 15 of the invitation to bid is reproduced
Petitioners: Nicholas Cervantes
in Article 9 which provides that "it is clearly understood that in no event
Respondents: COURT OF APPEALS AND THE PHILIPPINE AIRLINES,
shall the seller be entitled to an extension of time or be exempt from the
INC
payment of liquidated damages herein specified for reason of lack of
bottom or vessel."
Recit-Ready:
2. The ICC in its cable to Namerco dated August 9, 1956 stated that the sale
On March 27, 1989, Philippine Air Lines, Inc. (PAL) issued to Nicholas
was subject to availability of a steamer. However, Namerco did not
Cervantes a round trip plane ticket for Manila-Honolulu-Los Angeles-Honolulu-
disclose that cable to the NPC and, contrary to its principal's instruction, it
Manila, which ticket expressly provided an expiry date of one year from
agreed that nonavailability of a steamer was not a justification for
issuance, i.e., until March 27, 1990. On March 23, 1990, the petitioner used it.
nonpayment of the liquidated damages.
Upon his arrival in Los Angeles on the same day, he immediately booked his
3. Namerco acted beyond the bounds of its authority because it violated its
Los Angeles-Manila return ticket with the PAL office, and it was confirmed for
principal's cabled instructions:
the April 2, 1990 flight. However, upon learning that the same PAL plane would
a. that the delivery of the sulfur should be "C & F Manila", not "C &
make a stop-over in San Francisco, and considering that he would be there on
F Iligan City";
April 2, 1990, petitioner made arrangements with PAL for him to board the
b. that the sale be subject to the availability of a steamer and
flight in San Francisco instead of boarding in Los Angeles. On April 2, 1990,
c. that the seller should be allowed to withdraw right away the full
when the petitioner checked in at the PAL counter in San Francisco, he was not
amount of the letter of credit and not merely eighty percent
allowed to board by the PAL personnel due to the expiration of validity of his
thereof.
ticket. Thus, Cervantes filed a Complaint for Damages for breach of contract of
4. Under article 1897 of the Civil Code, the agent who exceeds the limits of
carriage and before the Regional Trial Court, Branch 32, Surigao del Norte. He
his authority without giving the party with whom he contracts sufficient
claimed that the act of the PAL agents in confirming his ticket extended its
notice of his powers is personally liable to such party.
period of validity.
5. The truth is that even before the contract of sale was signed Namerco was
The said agents acted without authority when they confirmed the flights of the
already aware that its principal was having difficulties in booking shipping
petition
space. In a cable dated October 16, 1956, or one day before the contract of
sale was signed, the ICC advised Namerco that the latter should not
sign the contract unless it (Namerco) wished to assume sole
Doctrine:
responsibility for the shipment.
1. Under Article 1898 of the New Civil Code, the acts of an agent beyond
6. Sycip replied in his letter to the seller dated also October 16, 1956, that he
the scope of his authority do not bind the principal, unless the latter
had no choice but to finalize the contract of sale because the NPC would
ratifies the same expressly or impliedly. Furthermore, when the third
forfeit Namerco's bidder's bond in the sum of P45,100 posted by the
person knows that the agent was acting beyond his power or authority,
Domestic Insurance Company if the contract was not formalized.
the principal cannot be held liable for the acts of the agent. If the said
7. Three days later, on October 19, the ICC cabled Namerco that the firm
third person is aware of such limits of authority, he is to blame, and is
did not consider itself bound by the contract of sale and that Namerco
not entitled to recover damages from the agent, unless the latter
signed the contract on its own responsibility.
undertook to secure the principal's ratification.

13. Cervantes v. CA (Erin) FACTS:

Date | Ponente | Topic 1. Philippines Air Lines, Inc. (PAL), issued to the herein petitioner, Nicholas
Cervantes (Cervantes), a round trip plane ticket for Manila-Honolulu-Los

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 Angeles-Honolulu-Manila, which ticket expressly provided an expiry of
date of one year from issuance, i.e., until March 27, 1990.
2. Upon arrival in LA, petitioner made arrangements with PAL for him to
board the flight in San Francisco instead of boarding in Los Angeles on a
April 2, 1990 flight.
3. On April 2, 1990, when the petitioner checked in at the PAL counter in
San Francisco, he was not allowed to board. T
ISSUES:
1. Did the actions of the two (2) agents/ employees of PAL, in effect, extend
the validity or lifetime of the ticket in question? NO
RATIO:
1. Both agents had no authority to do so. Appellant knew this from the very
start when he called up the Legal Department of appellee in the
Philippines before he left for the United States of America. He had first
hand knowledge that the ticket in question would expire on March 27,
1990 and that to secure an extension, he would have to file a written
request for extension at the PAL's office in the Philippines (TSN,
Testimony of Nicholas Cervantes, August 2, 1991, pp. 20-23). Despite this
knowledge, appellant persisted to use the ticket in question."
2. From the aforestated facts, it can be gleaned that the petitioner was fully
aware that there was a need to send a letter to the legal counsel of PAL for
the extension of the period of validity of his ticket.
3. Since the PAL agents are not privy to the said Agreement and petitioner
knew that a written request to the legal counsel of PAL was necessary, he
cannot use what the PAL agents did to his advantage. The said agents,
according to the Court of Appeals, acted without authority when they
confirmed the flights of the petitioner.
4. Under Article 1898 11 of the New Civil Code, the acts of an agent beyond
the scope of his authority do not bind the principal, unless the latter ratifies
the same expressly or impliedly. Furthermore, when the third person
(herein petitioner) knows that the agent was acting beyond his power or
authority, the principal cannot be held liable for the acts of the agent. If the
said third person is aware of such limits of authority, he is to blame, and is
not entitled to recover damages from the agent, unless the latter undertook
to secure the principal's ratification.
14. CASON v. F.W. RICKARDS and SMITH, BELL & CO (Brian)
Jan 11, 1909 | Tracey |
Petitioners: MONICA CASON
Respondents: F.W. RICKARDS and SMITH, BELL & CO
Recit-Ready:
Doctrine:
1. When money is received as a deposit by an agent, and that money is
by the agent turned over to his principal, with notice that it is the
money of the depositor, the principal is bound to deliver it to the
depositor, even if his agent was not authorized to receive such
deposit.
Facts:
1. The defendant Rickards was the agent of the other defendant,
Smith, Bell & Co.
2. While he was such agent he received from the plaintiff Carson, as
a deposit, the sum of 2,000 pesos.
3. When he left the employ of the defendant company the 2,000
pesos were, by his orders, delivered to another agent of Smith,
Bell & Co and Smith, Bell & Co. received ad used the same.
4. This money was not mingled with other money belonging either to
Richards or to Smith, Bell & Co., and at the time of its delivery by
Rickards to the other agent he notified Smith, Bell & Co. that it
was not the money of Smith, Bell & Co., but was the money of the
plaintiff.
5. The lower court held that Smith, Bell & Co was responsible
Issue: W/N Smith Bell & Co is bound to pay Carson the she turned over to
Rickards
Held: Yes. Smith Bell & Co is liable.
Ratio:
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1. The question as to whether Rickards was authorized by Smith,
Bell & Co. to receive deposits of this character for third persons is
a matter of no consequence. The identical money which he
received from the plaintiff was by him turned over to Smith, Bell
& Co., with notice that it was the money of the plaintiff, and they
now have it in their possession, and are therefore bound to pay it
to her.
2. At the trial of this case Rickards testified that a few days after he
received the 2,000 pesos from the plaintiff, he received from her
an order or warrant upon the Spanish treasury for the sum of 4,200
pesos; that he wrote Smith, Bell & Co., asking if it could be
collected.
3. Rickards testified that he received the money and paid all of it out
in the business of Smith, Bell & Co.; that after he had received it
he entered upon the books of Smith, Bell & Co. a credit in favor of
the plaintiff of 4,200 pesos, less 5 percent commission for
collection, of which commission Smith, Bell & Co. received the
benefit. He also testified that he had seen the books of Smith, Bell
& Co contained an entry or entries of the receipt by Smith, Bell &
Co. of this 4,200 pesos.
- If this testimony is to be believed there is no doubt as to
the liability of Smith, Bell & Co. to repay to the plaintiff
the sum of 4,200 pesos, less a commission of 5 per cent.
4. The question as to the general authority of Rickards to receive
money on deposit for Smith, Bell & Co. has nothing to do with
this cause of action, for Rickards testified that he received express
directions in regard to this particular transaction.
15.Eugenio v Court of Appeals (Vincie)
Date | Ponente | Topic
Petitioners: NORA S. EUGENIO and ALFREDO Y. EUGENIO
Respondents: HON. COURT OF APPEALS and PEPSI-COLA
BOTTLING COMPANY OF THE PHILIPPINES, INC.
Recit-Ready:
(check facts)
Doctrine:
An act is deemed to have been performed within the scope of the agent’s
authority, if such is within the terms of the power of attorney, as written, even if
the agent has in fact exceeded the limits of his authority according to the
understanding between the principal and his agent.
FACTS:
1. Nora S. Eugenio was a dealer of the soft drink products of private
respondent corporation.
2. Private respondent filed a complaint for a sum of money against
petitioners alleging that on several occasions in 1979 and 1980, petitioners
purchased and received on credit various products.
3. Petitioners had an outstanding account of P94, 651.00 which they failed to
pay despite oral and written demands.
4. In their defense, petitioners presented four trade provisional receipts
(TPRs) allegedly issued to and received by them from private respondent’s
Route Manager Jovencio Estrada showing payments in the total sum of
P80,500.00.
5. Petitioners contended that had the amounts in the TPRs been credited in
their favor, they would not be indebted to Pepsi-Cola.
6. Petitioners maintain that the signature purporting to be that of petitioner
Nora S. Eugenio in Sales Invoice No. 85366 amounting to P5,631.00 is a
falsification.
7. In sum, petitioners argue that if the aforementioned amounts were credited
in their favor, it would be respondent corporation which would be indebted
to them in the sum of P3,546.02 representing overpayment.
8. RTC and CA ruled in favor of respondent.
9. Hence, this petition before SC.
ISSUES:
1. Whether or not the amounts in the aforementioned trade provisional
receipts be credited in favor of Eugenio?
RATIO:
1. Eugenio submitted the TPR's to Atty. Rosario (Pepsi's lawyer).
2. After which, Rosario ordered Daniel Azurin (asst.personnel manager) to
conduct an investigation to verify the claim of the petitioners. According
to Azurin, Estrada denied that he issued and signed the TPR's.
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 3. Azurin testified to this in Court (However, Estrada never did. He failed to
to the RTC of Marinduque claiming moral damages based on Article 19 and 20
appear and was never found.
of the Civil Code. RTC ruled in favor of Sosa on the ground that there was a
4. Therefore, his testimony is barred by the Hearsay Evidence Rule).
perfected contract of sale. CA affirmed in toto. The pertinent issue in this case is
Furthermore, the “investigation” conducted was really more of an
W/N Popong Bernardo signed in his personal capacity or as Toyota’s agent. The
interview without any safeguards and did not give Eugenio opportunity to
SC held that Sosa was not dealing with Toyota but with Popong Bernardo and
object or cross-examine Estrada.
that the latter did not misrepresent that he had the authority to sell any Toyota
5. The other points of Estrada (and Pepsi) were all invalid since Estrada was
vehicle. He knew that Bernardo was only a sales representative of Toyota and
nowhere to be found and Pepsi failed to comply with the pertinent rules for
hence a mere agent of the latter. It was incumbent upon Sosa to act with
the admission of the evidence by which it sought to prove its contentions.
ordinary prudence and reasonable diligence to know the extent of Bernardo's
6. Pepsi therefore was unable to rebut the aforestated presumptions in favor
authority as an agent in respect of contracts to sell Toyota's vehicles. A person
of valid payment by petitioners
dealing with an agent is put upon inquiry and must discover upon his peril the
7. Assuming in this case that Pepsi never received the amounts reflected in
authority of the agent.
the TPR's, Pepsi still failed to prove that Estrada (its duly authorized
Doctrine:
agent) did not receive the amounts.
A person dealing with an agent is put upon inquiry and must discover upon his
8. In so far as Eugenio is concerned, their obligation is extinguished when
peril the authority of the agent.
they paid Estrada using Pepsi's official receipt.
9. The substantive law is that payment shall be made to the person in whose
favor the obligation has been constituted, or his successor in interest, or FACTS:
any person authorized to receive it. 1. In June 1989, Luna Sosa wanted to buy a Toyota Lite Ace but had
difficulty looking for an available unit. Upon contacting Toyota Shaw, he
was told there was an available unit. Sosa and his son Gilbert then went to
16. Toyota Shaw Inc. v. CA (Rica) said branch and met with Popong Bernardo, a sales rep of Toyota.
May 23, 1995 | Davide Jr | Inquiry on agent’s capacity
2. Sosa wanted the Lite Ace not later than June 17, 1989 because his family
and a balikbayan guest will be going home to their hometown Marinduque
Petitioner: Toyota Shaw Inc.
to celebrate Sosa’s birthday. (There was also his pride because he didn’t
Respondent: Court of Appeals and Luna Sosa
want to be a laughing stock by the people in the province just because he
already boasted about the car he did not have.)
Recit-Ready: Sosa wanted to buy a Lite Ace but was having difficulty doing
3. Bernardo assured Sosa that a unit would be ready for pick up at 10:00 a.m.
such until he contacted Toyota Shaw which presented an available unit. The said
on 17 June 1989. Bernardo then signed the aforequoted "Agreements
car was to be used to travel with his family and a balikbayan guest to his
Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also
hometown in Marinduque. Additionally, he did not want to be a laughing stock
agreed upon by the parties that the balance of the purchase price would be
of the townspeople in said province. As such, he and his son Gilbert signed an
paid by credit financing through B.A. Finance, and for this Gilbert, on
agreement with Toyota Sales Rep Popong Bernardo agreeing to sell a Lite Ace
behalf of his father, signed the documents of Toyota and B.A. Finance
on June 17, 1989. The payment scheme was a downpayment of 100,000 and the
pertaining to the application for financing.
installments to be secured by BA Finance. Sosa and Gilbert paid the 100,000
already but the car was not delivered on the agreed date and time. According to
4. The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the
Sosa, Bernardo said that someone more powerful got the unit - “nasulot ng mas
downpayment of P100,000.00. They met Bernardo who then accomplished
malakas.” On the other hand, Toyota avers that they refused to deliver on the
a printed Vehicle Sales Proposal (VSP) on which Gilbert signed under the
ground that BA did not approve of the payment security. Sosa brought the case
subheading CONFORME. This document shows that the customer's name
Agency - Chapter 2 Cases | Block 2A 2022 | Ateneo Law School 20
 is "MR. LUNA SOSA" with home address at No. 2316 Guijo Street,
United Parañaque II; that the model series of the vehicle is a "Lite Ace
1500" described as "4 Dr minibus"; that payment is by "installment," to be
financed by "B.A.," with the initial cash outlay of 100,000
5. On 17 June 1989, Sosa and Gilbert met Bernardo at the latter's office but
were informed by Bernardo that the car could not be delivered because
"nasulot ang unit ng ibang malakas."
6. Toyota contends, however, that the Lite Ace was not delivered to Sosa
because of the disapproval by B.A. Finance of the credit financing
application of Sosa.
7. After it became clear that the Lite Ace would not be delivered to him, Sosa
asked that his downpayment be refunded. Toyota did so on the very same
day by issuing a Far East Bank check for the full amount of P100,000.00.
8. Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June
1989 and signed by him, he demanded the refund, within five days from
receipt, of the downpayment of P100,000.00 plus interest from the time he
paid it and the payment of damages with a warning that in case of Toyota's
failure to do so he would be constrained to take legal action. The second,
dated 4 November 1989 and signed by M. O. Caballes, Sosa's counsel,
demanded one million pesos representing interest and damages, again,
with a warning that legal action would be taken if payment was not made
within three days but Toyota refused.latter filed on 20 November 1989
with Branch 38 of the Regional Trial Court (RTC) of Marinduque a
complaint against Toyota for damages under Articles 19 and 21 of the
Civil Code in the total amount of P1,230,000.00.
9. In its answer to the complaint, Toyota alleged that no sale was entered into
between it and Sosa, that Bernardo had no authority to sign Exhibit "A"
for and in its behalf, and that Bernardo signed Exhibit "A" in his personal
capacity. As special and affirmative defenses, it alleged that: the VSP did
not state date of delivery; Sosa had not completed the documents required
by the financing company, and as a matter of policy, the vehicle could not
and would not be released prior to full compliance with financing
requirements, submission of all documents, and execution of the sales
agreement/invoice; the P100,000.00 was returned to and received by Sosa;
the venue was improperly laid; and Sosa did not have a sufficient cause of
action against it. It also interposed compulsory counterclaims.
10. RTC: In favor of Sosa because Exhibit "A," the "AGREEMENTS
BETWEEN MR. SOSA AND POPONG BERNARDO," was a valid
perfected contract of sale between Sosa and Toyota which bound Toyota
to deliver the vehicle to Sosa, and further agreed with Sosa that Toyota
acted in bad faith in selling to another the unit already reserved for him.
Pertinently, they ruled that Bernardo’s capacity was not made known to
Sosa and so it is presumed that Bernardo is acting in behalf of Toyota and
as such the company must be liable. CA affirmed in toto.
ISSUES:
1. W/N Bernardo was acting in his personal capacity and not on behalf of
Toyota - YES
RATIO:
1. The title of the agreement required Sosa to look further into the extent of
Bernardo’s agency
a. The title was: AGREEMENTS BETWEEN MR. SOSA &
POPONG BERNARDO OF TOYOTA SHAW, INC.
i. Sosa was not dealing with Toyota but with Popong
Bernardo and that the latter did not misrepresent that he
had the authority to sell any Toyota vehicle. He knew that
Bernardo was only a sales representative of Toyota and
hence a mere agent of the latter. It was incumbent upon
Sosa to act with ordinary prudence and reasonable
diligence to know the extent of Bernardo's authority as
an agent in respect of contracts to sell Toyota's
vehicles. A person dealing with an agent is put upon
inquiry and must discover upon his peril the authority
of the agent.
OTHER IMMATERIAL ISSUES
1. W/N sale was perfected as evidenced by agreements signed - No, the
agreements were merely preparatory to the perfection of sale. These
evidence the negotiation stage in the contract of sale.
2. W/N the refusal/failure to deliver was arbitrary and based on the palakasan
- No, Sosa’s contention was merely an afterthought for defense.
3. W/N moral damages shall be awarded - No. There was no perfected
contract and as such there is no legal basis that warrants moral damages.
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 2. Squibb filed suit to collect for the goods delivered to Green Valley but
unpaid. The RTC ruled in favor of Squibb which was affirmed by the
17. GREEN VALLEY v. IAC (AJ) Court of Appeals.
December 26, 1984 | Abad Santos | Art. 1905 3. Green Valley claimed that the contract with Squibb was a mere agency to
sell; that it never purchased goods from Squibb; that the goods received
were on consignment only with the obligation to turn over the proceeds,
Petitioners: GREEN VALLEY POULTRY & ALLIED PRODUCTS, INC
less its commission, or to return the goods if not sold, and since it had sold
Respondents: THE INTERMEDIATE APPELLATE COURT and E.R.
the goods but had not been able to collect from the purchasers thereof, the
SQUIBB & SONS PHILIPPINE CORPORATION
action was premature.
4. Squibb claimed that the contract was one of sale so that Green Valley was
Recit-Ready:
obligated to pay for the goods received upon the expiration of the 60-day
E.R. Squibb & Sons Philippine Corporation appointed Green Valley Poultry &
credit period.
Allied Products, Inc. as a non-exclusive distributor for Squibb Veterinary
Products. Because the goods were unpaid, Squibb filed a collection suit against
ISSUES:
Green Valley. However, Green Valley argued that the contract is a mere agency
1. Is the agreement between Green Valley and Squibb an agency to sell? NO
to sell.
The SC held that it is a sales contract. Nevertheless, even if it is a contract of
RATIO:
agency to sell, Green Valley is still liable under Art, 1905 because it sold on
1. The agreement between the parties was a sales contract.
credit without authority from its principal.
2. Whether viewed as an agency to sell or as a contract of sale, the liability of
Doctrine:
Green Valley is indubitable. Even if it is a contract of agency to sell,
Art. 1905. The commission agent cannot, without the express or implied consent
Green Valley is liable because it sold on credit without authority from its
of the principal, sell on credit. Should he do so, the principal may demand from
principal. The Civil Code has a provision exactly in point. It reads:
him payment in cash, but the commission agent shall be entitled to any interest
Art. 1905. The commission agent cannot, without the express or implied
or benefit, which may result from such sale.
consent of the principal, sell on credit. Should he do so, the principal may
demand from him payment in cash, but the commission agent shall be
FACTS: entitled to any interest or benefit, which may result from such sale.
1. E.R. Squibb & Sons Philippine Corporation appointed Green Valley
Poultry & Allied Products, Inc. as a non-exclusive distributor for Squibb 18.
Veterinary Products. A portion of the contract reads: INTERNATIONAL FILMS (CHINA), LTD. vs. THE LYRIC FILM
It is understood that Green Valley Poultry and Allied Products, Inc. will EXCHANGE, INC., (Abi)
accept turn-over orders from Squibb representatives for delivery to customers in November 19, 1936 | Villa-real | Negligence of Agent (1909)
your area. If for credit or other valid reasons a turn-over order is not served, the
Squibb representative will be notified within 48 hours and hold why the order will
Petitioners: International Films (China), Ltd
not be served.
Respondents: The Lyric Film Exchange, Inc
It is understood that Green Valley Poultry & Allied Products, Inc. will put
Recit-Ready:
up a bond of P20,000.00 from a mutually acceptable bonding company.
International Films leased to Lyric Film a film entitled Monte Carlo Madness
Payment for Purchases of Squibb Products will be due 60 days from date
through their agent Bernard Gabelman. After the film’s showing, Lyric film
of invoice or the nearest business day thereto. No payment win be accepted in the
wished to return the film, however, Bernard instead requested that the film be
form of post-dated checks. Payment by check must be on current dating.
kept at Lyric Film’s vault since International Films did not have one.

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Unfortunately, before the film was returned, the bodega of Lyric Film was
burned down together with the film. The film wasn’t covered by the insurance.
International Films now claims that Lyric Film is responsible for the film.
Doctrine:
The contract between Bernard and Lyric Film was a subagency or a submandate.
Lyric Films is not liable for the destruction by fire of the film in question
because, as a mere submandatary or subagent, it was not obliged to fulfill more
than the contents of the mandate and to answer for the damages caused to the
principal by his failure to do so. The fact that the film was not insured against
fire does not constitute fraud or negligence on the part of Lyric Film because as
a subagent, it received no instruction to that effect from its principal and the
insurance of the film does not form a part of the obligation imposed upon it by
law. Consequently, Lyric Film is not liable for the accidental destruction thereof
by fire.
FACTS:
1. Bernard Gabelman was the Philippine agent of International Films
(China), Ltd. by virtue of a power of attorney. International Films through
Bernard, leased the film "Monte Carlo Madness" to Lyric Film Exchange,
Inc. One of the conditions of the contract was that the defendant company
would answer for the loss of the film in question whatever the cause.
2. After the last showing of the movie, Vicente Albo, then chief of the film
department of Lyric Film telephoned Bernard and asked where to return
the film. In answer, Bernard instead asked whether he could deposit the
film in the vault of the Lyric Film since International Films did not have a
safety vault required by the Bureau of Fire.
3. O'Malley (Vicente Albo's chief) answered that the deposit could not be
made since the film isn’t covered by the insurance carried by the Lyric
Film. Despite that, Bernard verbally requested Vicente Albo to permit him
to deposit the film in the vault of the Lyric Film under Bernard’s own
responsibility. In exchange, the film would be shown in other theaters.
O'Malley agreed and the film was deposited in the vault of the defendant
company under Bernard's responsibility.
4. Bernard was then suceeded by Lazarus Joseph as International Film’s
agent. Bernard informed the Lazarus of the deposit of the film in the vault
as well as of the verbal contract entered into between him and the Lyric
Film whereby the latter would act as a subagent of the International Films
with authority to show the film "Monte Carlo Madness" in any theater
where Lyric Film wish to show it. Before the film was returned, the bodega
of the Lyric Film was burned together with the film.
ISSUES:
1. Whether or not Lyric Film is responsible for the destruction by fire of the
film in question, entitled "Monte Carlo Madness" since they failed to
insure it.
a. No, since Lyric Film had no obligation to insure the film since
International Films did not require such insurance. Consequently
Lyric Film is not liable under Art 1909 since there was no
negligence for failing to insure the film.
RATIO:
1. International Films claims that Lyric Film’s failure to return the film
"Monte Carlo Madness" was due to the fact that the period for the delivery
has been extended in order that it might be shown in Cebu, in accordance
with an understanding had between Lazarus Joseph. Lyric Film on the
other hand, claims that when it wanted to return the film to Bernard,
Bernard not having a safety vault, requested Vicente Albo, to keep said
film in the vault under Gabelman's own responsibility, verbally stipulating
at the same time that the defendant company, as subagent of the
International Films (China) Ltd., might show the film in question in its
theaters.
2. The verbal contract between Bernard and Vicente was a subagency or a
submandate. Lyric Films is not civilly liable for the destruction by fire of
the film in question because, as a mere submandatary or subagent, it was
not obliged to fulfill more than the contents of the mandate and to answer
for the damages caused to the principal by his failure to do so. 4
3. The fact that the film was not insured against fire does not constitute fraud
or negligence on the part of Lyric Film because as a subagent, it received
no instruction to that effect from its principal and the insurance of the film
does not form a part of the obligation imposed upon it by law.
Consequently, Lyric Film is not liable for the accidental destruction
thereof by fire.5
4 Article 1884 (Former 1718). The agent is bound by his acceptance to carry out the agency, and is liable for the
damages which, through his non-performance, the principal may suffer.
He must also finish the business already begun on the death of the principal, should delay entail any danger.
5Article 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 a compensation.
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Note: The agent is responsible to the principal if there was negligence on his/her part. In this case, there was no
negligence
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