1
OBLIGATION OF THE AGENT
1. BRITISH AIRWAYS VS CA, 285 SCRA
450
FACTS:
Private respondent decided to visit
his relative in Bombay, India. Since
petitioner had no direct flights from Manila
to Bombay, private respondent had to take a
flight to Hongkong via PAL, and upon arrival
in Hongkong he had to take a connecting
flight to Bombay on board the petitioner.
Prior to his departure, private respondent
checked in at respondent PAL's counter in
Manila his two pieces of luggage confident
that upon reaching Hongkong, the same
would be transferred to the petitioner's flight
bound for Bombay. When private respondent
arrived in Bombay he discovered that his
luggage was missing and that upon inquiry
from the petitioner's representative, he was
told that the same might have been diverted
to London. After waiting for his luggage for
one week, petitioner finally advised him to
file a claim. Back in the Philippines, private
respondent filed with the trial court his
complaint for damages and attorney's fees
against petitioner. Petitioner contends that
that private respondent did not have a cause
of action against it. Petitioner likewise filed a
third-party complaint against respondent
PAL as the non-transfer of his luggage was
due to the latter's late arrival in Hongkong.
Respondent PAL disclaimed any liability.
The trial court rendered its decision in favor
of the private respondent. The third-party
complaint against third-party defendant PAL
was dismissed for lack of cause of action.
Petitioner appealed to the Court of Appeals
which, however, affirmed the trial court's
findings in toto.
ISSUE:
What is PAL’s participation in the
contract of carriage between British Airways
and private respondent? Is PAL an agent of
British Airways and, thus, also liable for the
damages?
ABANTAS. ABINAL. IGNALIG. JARANILLA. TIOSEN.
RULING:
The Court cannot agree with the
dismissal of the third-complaint. The
contractual relationship between petitioner
and respondent PAL is one of agency, the
former being the principal, since it was the
one which issued the confirmed ticket, and
the latter the agent. Also, it is worth
mentioning that both BA and PAL are
members of the International Air Transport
Association (IATA), wherein member
airlines are regarded as agents of each other
in the issuance of the tickets and other matters
pertaining to their relationship. Since the
instant petition was based on breach of
contract of carriage, private respondent can
only sue petitioner alone, and not respondent
PAL, since the latter was not a party to the
contract. However, respondent PAL is not
relieved from any liability due to any of its
negligent acts. It is but logical, fair and
equitable to allow petitioner to sue
respondent PAL for indemnification, if it is
proven that the latter's negligence was the
proximate cause of private respondent's
unfortunate experience, instead of totally
absolving respondent PAL from any liability.
Syllabus:
A. CIVIL LAW; COMMON CARRIERS;
AIRLINE'S CONTRACT OF CARRIAGE;
TYPES. — The nature of an airline's contract
of carriage partakes of two types, namely: a
contract to deliver a cargo or merchandise to
its destination and a contract to transport
passengers to their destination. A business
intended to serve the travelling public
primarily, it is imbued with public interest,
hence, the law governing common carriers
imposes an exacting standard. Neglect or
malfeasance by the carrier's employees could
predictably furnish bases for an action for
damages.
B. ID.; ID.; ID.; DAMAGES, LIABILITY OF
AIRLINE FOR MISPLACED LUGGAGE. —
In the instant case, it is apparent that the
 2
contract of carriage was between Mahtani and
BA. Moreover, it is indubitable that his
luggage never arrived in Bombay on time.
Therefore, as in a number of cases we have
assessed the airlines' culpability in the form of
damages for breach of contract involving
misplaced luggage.
C. ID.; ID.; ID.; ID.; ID.; CLAIMANT MUST
SATISFACTORILY PROVE EXISTENCE
OF FACTUAL BASIS. — In determining the
amount of compensatory damages in this kind
of cases, it is vital that the claimant
satisfactorily prove during the trial the
existence of the factual basis of the damages
and its causal connection to defendant's acts.
D. ID.; ID.; ID.; LIABILITY NOT LIMITED BY
ARTICLE 22(1) OF THE WARSAW
CONVENTION. — Admittedly, in a contract
of air carriage a declaration by the passenger
of a higher value is needed to recover a greater
amount. (Article 22[1] of the Warsaw
Convention). American jurisprudence
provides that an air carrier is not liable for the
loss of baggage in an amount in excess of the
limits specified in the tariff which was filed
with the proper authorities, such tariff being
binding on the passenger regardless of the
passenger's lack of knowledge thereof or
assent thereto. This doctrine is recognized in
this jurisdiction. Notwithstanding the
foregoing, we have, nevertheless, ruled against
blind reliance on adhesion contracts where the
facts and circumstances justify that they
should be disregarded.
E. ID.; ID.; ID.; BENEFITS OF LIMITED
LIABILITY, SUBJECT TO WAIVER; CASE
AT BAR. — Benefits of limited liability are
subject to waiver such as when the air carrier
failed to raise timely objections during the trial
when questions and answers regarding the
actual claims and damages sustained by the
passenger were asked. Given the foregoing
postulates, the inescapable conclusion is that
BA had waived the defense of limited liability
when it allowed Mahtani to testify as to the
actual damages he incurred due to the
misplacement of his luggage, without any
objection. It is a well-settled doctrine that
where the proponent offers evidence deemed
by counsel of the adverse party to be
inadmissible for any reason, the latter has the
right to object. However, such right is a mere
privilege which can be waived. Necessarily,
ABANTAS. ABINAL. IGNALIG. JARANILLA. TIOSEN.
the objection must be made at the earliest
opportunity, lest silence when there is
opportunity to speak may operate as a waiver
of objections. BA has precisely failed in this
regard. To compound matters for BA, its
counsel failed, not only to interpose a timely
objection, but even conducted his own cross-
examination as well.
F. REMEDIAL LAW; EVIDENCE; FACTUAL
FINDINGS OF THE TRIAL COURT,
AFFIRMED BY THE COURT OF
APPEALS, ENTITLED TO GREAT
RESPECT. — Needless to say, factual
findings of the trial court, as affirmed by the
Court of Appeals, are entitled to great respect.
Since the actual value of the luggage involved
appreciation of evidence, a task within the
competence of the Court of Appeals, its ruling
regarding the amount is assuredly a question
of fact, thus, a finding not reviewable by this
Court.
G. ID.; ACTIONS; THIRD-PARTY
COMPLAINT, NATURE. — In Firestone
Tire and Rubber Company of the Philippines
v. Tempengko, we expounded on the nature of
a third-party complaint thus: "The third-party
complaint is, therefore, a procedural device
whereby a 'third party' who is neither a party
nor privy to the act or deed complained of by
the plaintiff may be brought into the case with
leave of court, by the defendant who acts as
third-party plaintiff to enforce against such
third-party defendant a right for contribution,
indemnity, subrogation or any other relief, in
respect of the plaintiff's claim. The third-party
complaint is actually independent of and
separate and distinct from the plaintiff's
complaint. Were it not for this provision of the
Rules of Court, it would have to be filed
independently and separately from the original
complaint by the defendant against the third-
party. But the Rules permit defendant to bring
in a third-party defendant or so to speak, to
litigate his separate cause of action in respect
of plaintiff's claim against a third party in the
original and principal case with the object of
avoiding circuitry of action and unnecessary
proliferation of law suits and of disposing
expeditiously in one litigation the entire
subject matter arising from one particular set
of facts.
H. CIVIL LAW; COMMON CARRIERS;
AIRLINE'S CONTRACT OF CARRIAGE;
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CARRIAGE PERFORMED BY
SUCCESSIVE CARRIER, REGARDED AS
SINGLE OPERATION; CARRIER ISSUING
TICKET CONSIDERED THE PRINCIPAL
WHILE THE OTHER
ARE SUB-CONTRACTORS OR AGENTS.
— The contract of air transportation was
exclusively between Mahtani and BA, the
latter merely endorsing the Manila to
Hongkong leg of the former's journey to PAL,
as its subcontractor or agent. In fact, the fourth
paragraph of the "Conditions of Contracts" of
the ticket issued by BA to Mahtani confirms
that the contract was one of continuous air
transportation from Manila to Bombay. "4. . . .
carriage to be performed hereunder by several
successive carriers is regarded as a single
operation." Prescinding from the above
discussion, it is undisputed that PAL, in
transporting Mahtani from Manila to
Hongkong, acted as the agent of BA.
I. ID.; ID.; ID.; ID.; ID.; AGENT
RESPONSIBLE FOR ANY NEGLIGENCE
AND LIABLE FOR DAMAGES WHICH
THE PRINCIPAL MAY SUFFER. —
Parenthetically, the Court of Appeals should
have been cognizant of the well-settled rule
that an agent is also responsible for any
negligence in the performance of its function
and is liable for damages which the principal
may suffer by reason of its negligent act.
Hence, the Court of Appeals erred when it
opined that BA, being the principal, had no
cause of action against PAL, its agent or sub-
contractor. Also, it is worth mentioning that
both BA and PAL are members of the
International Air Transport Association
(IATA), wherein member airlines are regarded
as agents of each other in the issuance of the
tickets and other matters pertaining to their
relationship. Therefore, in the instant case, the
contractual relationship between BA and PAL
is one of agency, the former being the
principal, since it was the one which issued the
confirmed ticket, and the latter the agent.
J. REMEDIAL LAW; ACTIONS; THIRD-
PARTY COMPLAINT; PROCEDURAL
REMEDY AVAILABLE TO PRINCIPAL
CARRIER FOR CLAIMS FILED BY
PASSENGER FOR LOSS OF LUGGAGE IN
AGENT CARRIER. — Since the instant
petition was based on breach of contract of
carriage, Mahtani can only sue BA alone, and
not PAL, since the latter was not a party to the
ABANTAS. ABINAL. IGNALIG. JARANILLA. TIOSEN.
contract. However, this is not to say that PAL
is relieved from any liability due to any of its
negligent acts. In China Air Lines, Ltd. v.
Court of Appeals, while not exactly in point,
the case, however, illustrates the principle
which governs this particular situation. In that
case, we recognized that a carrier (PAL),
acting as an agent of another carrier, is also
liable for its own negligent acts or omission in
the performance of its duties. Accordingly, to
deny BA the procedural remedy of filing a
third-party complaint against PAL for the
purpose of ultimately determining who was
primarily at fault as between them, is without
legal basis. After all, such proceeding is in
accord with the doctrine against multiplicity of
cases which would entail receiving the same or
similar evidence for both cases and enforcing
separate judgments therefor. It must be borne
in mind that the purpose of a third-party
complaint is precisely to avoid delay and
circuity of action and to enable the controversy
to be disposed of in one suit. It is but logical,
fair and equitable to allow BA to sue PAL for
indemnification, if it is proven that the latter's
negligence was the proximate cause of
Mahtani's unfortunate experience, instead of
totally absolving PAL from any liability.
2. PNB VS MANILA SURETY, 14 SCRA
776
FACTS:
The PNB opened a letter of credit
and advanced $120,000.00 to Edington Oil
Refinery for 8,000 tons of hot asphalt, of
which 2,000 tons worth P279,000.00 were
delivered to Adams & Taguba Corp.
(ATACO) under a trust receipt guaranteed by
Manila Surety & Fidelity Co. To pay for the
asphalt ATACO constituted PNB its assignee
and attorney-in-fact to receive and collect
payments from the Bureau of Public Works.
ATACO delivered asphalt worth
P431,466.52 to the Bureau of Public Works,
PNB regularly collected the payments
amounting to P106,382.01, until they ceased
to collect payments. Then in 1962 PNB found
that there were more payables to ATACO
from the Bureau of Public Works. PNB sued
ATACO and the Surety, to recover the
 4
balance of P158,563.18 when their demands
for payment were refused.
The trial court ordered ATACO and
the Surety to pay PNB the sum of
P174,462.34, and the total amount payable by
the Surety shall not exceed P75,000.00. PNB
recoursed to the Court of Appeals, which
rendered an adverse decision and modified
the judgement of the court of origin as to the
Surety’s liability. Motions for
reconsideration were also denied.
ISSUE:
Whether or not it is the duty of the
surety and not that of the creditor, to see to it
that the obligor fulfils his obligation, and that
the creditor owed the surety no duty of active
diligence to collect any sum from the
principal debtor.
RULING:
The appealed decision is
AFFIRMED.
HELD:
The Court of Appeals did not hold
the bank answerable for negligence in failing
to collect from the principal debtor but for its
negligence in collecting the sum due to the
debtor from the Bureau of Public Works,
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 care of a good father of a family and
becomes liable for the damages which the
principal may suffer through his non
performance.
Even if the assignment with power
of attorney from the principal debtor were
considered as more additional security, by
allowing the assigned funds to be exhausted
without notifying the surety, the Bank
deprived the former of any possibility of
recoursing against that security. The Bank
exonerated the surety, pursuant to Art. 2080
0f the Civil Code.
SYLLABUS
ABANTAS. ABINAL. IGNALIG. JARANILLA. TIOSEN.
A. AGENCY; DUTY OF AGENT TO ACT
WITH THE CASE OF A GOOD FATHER
OF A FAMILY. — 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.
B. ID.; ID.; BANK LIABLE FOR NEGLECT
IN COLLECTING SUMS DUE ITS
DEBTOR. — A bank is answerable for
negligence in failing to collect the sums due
its debtor from the latter's own debtor,
contrary to said bank's duty as holder of an
exclusive and irrevocable power of attorney
to make such collections.
C. SURETYSHIP; SURETY RELEASED
WHEN ASSIGNED FUNDS PERMITTED
BY CREDITOR TO BE EXHAUSTED
WITHOUT NOTIFYING FORMER. — By
allowing the assigned funds to be exhausted
without notifying the surety, the creditor
deprives the surety of any possibility of
recoursing against that security, and therefore
the surety is released.
3. VICENTE DOMINGO V. GREGORIO
DOMINGO, 42 SCRA 411
FACTS:
June 2, 1956, Vicente (petitioner),
owner of lot No. 883 of Piedad Estate with a
total area of 88,477 sq.m., contracted the
service of Gregorio (respondent), a real estate
broker with an exclusive agency to sell the
said property, at the rate of P2.00 per sq.m..
Stated in their agency contract, that should
Vicente sold the subject lot or by anyone else
during the 30-day duration of agency or
should the property be sold by Vincent within
3 months from the termination of the agency,
Gregorio would be entitled to a commission
of 5% from the total price. On the following
day, Gregorio authorized the service of
Teofilo Purisima, to look for a buyer and
promised Purisima the one-half of 5%
commission. Thereafter, Purisima introduced
Oscar de Leon, a prospective buyer.
Oscar, offered to purchase the
property but at the rate of P1.20 per sq.m.. An
agreement between Vincente and De Leon
existed when Gregorio communicated the
 5
same to Vicente. And because Gregorio
succeeded in persuading Vicente for a lower
price, De Leon gave Gregorio a “propina” or
a gift amounting to P1,000, to which was not
disclosed by Gregorio to Vicente and neither
did De Leon pay Vicente the additional
amount of P1,000 as a way of earnest money.
Later, De Leon informed Gregorio that he did
not receive the money that was supposed to
be sent by his brother from US, causing for
him to give up the negotiation.
After several weeks, when Gregorio
did not see De Leon, Gregorio went to
Vicente for the alleged 5% commission, if the
sale is consummated within 3 months after
the expiration of the 30-day period of the
exclusive agency in his favor from the
execution of the agency contract. Gregorio
read the contract (Exhibit A) and Vicente
grabbed the original of Exhibit "A" and tore
it to pieces. Gregorio held his peace, not
wanting to antagonize Vicente further,
because he had still duplicate of Exhibit "A".
From his meeting with Vicente, Gregorio
proceeded to the office of the Register of
Deeds of Quezon City, where he discovered
deed of sale executed on September 17, 1956
by Amparo Diaz, wife of Oscar de Leon, over
their house and lot No. 40 Denver Street,
Cubao, Quezon City, in favor Vicente as
down payment by Oscar de Leon on the
purchase price of Vicente's lot No. 883 of
Piedad Estate.
ISSUE:
W/N (related to obligation of an
agent) the failure on the part of Gregorio to
disclose to Vicente the payment to him by
Oscar de Leon of the amount of One
Thousand Pesos (P1,000.00) as gift or
"propina," constitutes to a fraud as to cause a
forfeiture of his commission on the sale price.
RULING:
Yes. The duties and liabilities of a
broker to his employer are essentially those
which an agent owes to his principal. Art.
1891. Provides that “Every agent is bound to
render an account of his transactions and to
deliver to the principal whatever he may have
received by virtue of the agency, even though
it may not be owing to the principal. Every
stipulation exempting the agent from the
ABANTAS. ABINAL. IGNALIG. JARANILLA. TIOSEN.
obligation to render an account shall be
void,” stresses the highest loyalty that is
required to an agent.
The aforementioned provisions
demand the utmost good faith, fidelity,
honesty, candor and fairness on the part of the
agent, the real estate broker in this case, to his
principal, the vendor. The law imposes upon
the agent the absolute obligation to make a
full disclosure or complete account to his
principal of all his transactions and other
material facts relevant to the agency, so much
so that the law as amended does not
countenance any stipulation exempting the
agent from such an obligation and considers
such an exemption as void. The duty of an
agent is likened to that of a trustee. This is not
a technical or arbitrary rule but a rule founded
on the highest and truest principle of morality
as well as of the strictest justice.
4. MURAO & HUARTALEZA v. PEOPLE
OF THE PHILIPPINES, 462 SCRA 366
FACTS:
Pablito Murao is the sole owner of
Lorna Murao Industrial Commercial
Enterprises (LMICE), a company engaged in
the business of selling and refilling fire
extinguishers, with branches in Palawan,
Naga, Legaspi, Mindoro, Aurora, Quezon,
Isabela, and Laguna. (Petitioner) Nelio
Huertazuela is the Branch Manager of
LMICE in Puerto Princesa City, Palawan.
On 01 September 1994, Murao and
(private complainant) Chito Federico entered
into a Dealership (Oral) Agreement for the
marketing, distribution, and refilling of fire
extinguishers within Puerto Princesa City.
According to the agreement, private
complainant Federico, as a dealer for
LMICE, could obtain fire extinguishers from
LMICE at a 50% discount, provided that he
sets up his own sales force, acquires and
issues his own sales invoice, and posts a bond
with LMICE as security for the credit line
extended to him by LMICE. Failing to
comply with the conditions under the said
Dealership Agreement, private complainant
Federico, nonetheless, was still allowed to act
as a part-time sales agent for LMICE entitled
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to a percentage commission from the sales of
fire extinguishers.
Federico made his first successful
transaction as a sales agent of LMICE by
selling 2 fire extinguishers amounting to
P7,200 that which he obtained from (buyer)
Landbank of the Philippines, Puerto Princesa
Branch. In return, LBP issued a check with
“LMICE as the payee c/o to Chito Federico.”
Federico proceeded to encash the check and
remitted only P2,436.40 to LMICE and took
the remaining amount as his commission
from the sale.
Murao complained that Ferederico
was not authorized to encash the check, but
despite such irregularities, Murao forgave
Ferederico, as the latter promised to make-up
for his misdeeds in the following transaction.
Later, on behalf of LMICE, Federico
facilitated a transaction with the City of
Gov’t of Puerto Princesa for the refill of 202
fire extinguishers (subject of the present
petition is limited to the 154 of 202 units of
extinguishers). In return, City Gov’t of
Puerto Princesa issued a check in favor of the
LMICE amounting to P300, 572.73. On the
same, Huertazuela claimed the check and
deposited the same under the account of
LMICE with PCIBank.
17 June 1994, private complainant
Federico went to see petitioner Huertazuela
at the LMICE branch office in Puerto
Princesa City to demand for the amount of
₱154,500.00 as his commission but
Huertazuela refused to adhere to the request
because the two of them could not agree on
the proper amount.
Later that, Federico went to the
police station to file an Affidavit-Complaint
for estafa against Murao and Huartaleza.
ISSUE:
W/N, Murao and Huertazuela are
guilty of estafa.
RULING:
No. For the petitioners to be guilty
of estafa the following must exist first in
relation to Principal-agent relation. Art. 1868
of the Civil Code defines agency as a special
ABANTAS. ABINAL. IGNALIG. JARANILLA. TIOSEN.
contract whereby "a person binds himself to
render some service or to do something in
representation or on behalf of another, with
the consent or authority of the latter."
Federico, acted as a (sales) agent when he
negotiated for and behalf of the LMICE for
the refill and delivery of fire extinguishers in
2 occasions: with LBP and City Gov’t of
Puerto Princesa. But Since LMICE is the
lawful owner of the entire proceeds of the
check payment from the City Government of
Puerto Princesa and it was the petitioner who
collected the payment on behalf of LMICE
did not receive the same or any part thereof
in trust, or on commission, or for
administration, or under any other obligation
involving the duty to make delivery of, or to
return, the same to private complainant
Federico, thus, there exist no fiduciary
relationship between Murao (& Huertaleza)
and Federico. A fiduciary relationship
between the complainant and the accused is
an essential element of estafa by
misappropriation or conversion, without
which the Murao & Huertaleza could not
have committed estafa.
The obligation of LMICE to pay
private complainant Federico his commission
does not arise from any duty to deliver or
return the money to its supposed owner, but
rather from the duty of a principal to give just
compensation to its agent for the services
rendered by the latter.
5. ESCUETA v. LIM, 512 SCRA 411
FACTS:
Respondent Rufino Lim, herein
respondent, averred that she had bought the
hereditary properties of the Petitioners Rubio
and heirs of Baloloy. On April 10, 1990
Petitioners executed a Contract of Sale and
received from Respondent Lim a down
payment of 102,169.86 and 450,000
respectively and the balance will be paid after
the titles are transferred into Lim’s name.
Rubio and the heirs of Baloloy refused to
deliver the title to Lim despite her offer of the
payment of the balance. Despite the existence
of a Contract of Sale between Lim and Rubio
and the heirs of Baloloy, Corazon Escueta
having knowledge thereof executed a
simulated sale involving the lots. As for the
Baloloys, they argued that they already
 7
withdrawn their offer to sell for the reason
that respondent failed to pay the balance on
time hence the Contract of Sale has no more
force and effect. As to Rubio, it alleged that
Lim has no cause of action since, Rubio
appointed her daughter Patricia Llamas to be
his attorney-in-fact, and not in favor of
Victoria Laygo Lim who represented Rubio
in the sale between the Respondent Rufina
Lim. The RTC declared the Petitioners in
default. CA affirmed RTC decision with
amendments. Hence, this petition.
ISSUE
Whether or not the Contract of Sale
between Rufina Lim and the Petitioners
Rubio and Baloloys is valid.
HELD
Yes, the Contract of Sale is valid.
RULING
The Court held that the Contract of
Sale between the petitioner and respondent is
valid and binding. Rubio argued that Victoria
has no authority to represent him in the Sale
of the disputed properties since Rubio
appointed her daughter as his attorney-in-fact
and not Victoria. Art. 1892 provides:
Article 1892 of the Civil Code
provides:
Art. 1892. The agent may appoint a
substitute if the principal has not prohibited
him from doing so; but he shall be
responsible for the acts of the substitute:
(1) When he was not given the
power to appoint one
In the case above, Rubio made his
daughter Patricia to be her Attorney-in –fact,
and according to the above article, Patricia is
not prohibited to appoint a substitute as a
representative of Rubio. Patricia, acting on
the authority given to her, appointed Victoria
as her substitute hence the transaction
between Victoria and Respondent is valid.
Art. 1317 further provides:
ABANTAS. ABINAL. IGNALIG. JARANILLA. TIOSEN.
Art. 1317. A contract entered into in
the name of another by one who has no
authority or legal representation, or who has
acted beyond his powers, shall be
unenforceable, unless it is ratified, expressly
or impliedly, by the person on whose behalf
it has been executed, before it is revoked by
the other contracting party.
A contract entered into in the name
of another by one who has no authority or
legal representation, or who has acted beyond
his powers, shall be unenforceable, unless it
is ratified, expressly or impliedly, by the
person on whose behalf it has been executed,
before it is revoked by the other contracting
party.
The acceptance of Rubio of the
down payment and encashment of the said
checks serves as the ratification of Rubio of
the Sale of the Properties with the respondent
Rufina Lim.
6. CAOILE V. CA. 226 SCRA 658
FACTS:
Soledad de Jesus met Erlinda
Domingo (Domingo), a resident of Sterling
Life Homes, Las Piñas, Metro Manila.
Soledad de Jesus told Domingo that she was
interested in buying a residential lot. Upon
reaching home, Domingo got in touch with
her Gatchalian, who is also a resident of
Sterling Life Homes, and informed her of
Soledad de Jesus' desire to buy a residential
lot. Gatchalian told Domingo that she knew
of a lot for sale in the subdivision. A Caridad
Tameta also informed Soledad about the said
lot. Soledad, together with Tess Tameta
(sister of Caridad), Domingo and Gatchalian,
inspected the lot, which was identified as Lot
No. 5, Block 8 of the subdivision. She
decided to buy it.
Soledad went to the developer of
Sterling Life Homes Subdivision. Soledad
was introduced to Anita Caoile, Chief
Accountant and Assistant Vice-President of
Sterling Life Assurance Corporation. Anita
assured Soledad that the lot was for sale and
gave the latter a photocopy of the certificate
of title in the name of the corporation. Anita
required Soledad to pay P10,000.00 as a
deposit for the lot, which the latter paid as
 8
evidenced by a receipt signed by Anita Caoile
as "agent." The total agreed price for the lot
was P120,000.00 or P500.00 per square
meter. Soledad verified the status of the
property from the Register of Deeds of
Makati and was informed that the lot was not
mortgaged and was still in the name of the
Sterling Life Assurance Corporation.
Soledad paid a second installment in the
amount of P61,000.00 to Anita Caoile, a
receipt for which was signed by Anita as
"agent" and by Gatchalian, also as "agent."
Soledad paid another installment in the
amount of P39,000.00 to Anita Caoile when
the latter went alone to the former's house.
Anita issued a receipt therefor. Soledad paid
the balance of P10,000.00 to Anita Caoile on
21 March 1986 and the latter issued a
consolidated receipt, under oath, in the total
sum of P120,000.00 "as full payment of Lot
5, Block 8, Sterling Life Homes Subdivision,
Pamplona, Las Piñas."
After Soledad had fully paid the
price of the lot, Soledad de Jesus demanded
from Anita Caoile the delivery of the Deed of
Sale and the Transfer Certificate of Title but
the latter could not comply. Soledad
discovered upon inquiry from Alberto N.
Villareal, that Anita was not authorized to
sell the lot, that Lot No. 5 was sold to one
Ruben Rodis under a Memorandum of
Agreement dated 29 December 1977 and a
Contract to Sell, that Anita was forced to
resign from Sterling Life Assurance
Corporation because of the anomalies she
committed in the corporation, and that she
had not been reporting for work since May
1986. Soledad thus led a complaint for a sum
of money against Caoile, Domingo,
Gatchalian and Sterling Life Assurance
Corporation with the Regional Trial Court of
Manila. The Regional Trial Court ruled
against Caoile only. Caoile then appealed to
the Court of Appeals.
ISSUE
Whether on the sole basis of the
receipt for P61,000.00, which she signed as
"agent" with Anita Caoile, the petitioner
became solidarily liable with Anita.
HELD
ABANTAS. ABINAL. IGNALIG. JARANILLA. TIOSEN.
The trial court, however, observed
and concluded that: "It was the defendant
Caoile who prepared the receipt for
P61,000.00. According to defendant
Gatchalian, she was asked by the defendant
Caoile to sign the said receipt for P61,000.00
as a witness thereof. Defendant Gatchalian
did not sign any other receipts." There is as
well no evidence to show that it was
Gatchalian who received the P61,000.00.
That Soledad did not include Gatchalian as a
co-respondent of Anita in the estafa case and
did not demand reimbursement from
Gatchalian before ling Civil Case No. 86-
36543 are strong indications that the latter
never received anything on account of the
subject transaction. More importantly, it was
established that on 21 March 1986, Anita
Caoile executed and issued to Soledad de
Jesus a sworn consolidated receipt. Said
receipt includes the P61,000.00 indicated in
Exhibit "A-1." This is an admission by Anita
that the total purchase price of P120,000.00
was in fact received by her alone. As
correctly found by the trial court, no
conspiracy among Caoile, Domingo and
Gatchalian was proven by Soledad de Jesus.
7. NATIONAL POWER CORPORATION,
v. NATIONAL MERCHANDISING
CORPORATION and DOMESTIC
INSURANCE COMPANY OF THE
PHILIPPINES, 117 SCRA 789
FACTS:
The National power corporation
(NPC) entered into a contract of sale with
National Merchandising Corporation
representative of a new york based
international commodities for the sale of
sulfur used in fertilization. The I.C instructed
NMC to stipulate that the sale was subject to
the availability of a steamer. Domestic
insurance company executed a performance
bond in favor of the NPC to guarantee the
seller’s obligation. The New York supplier
was not able to deliver the sulfur due to its
inability to secure shipping space.
Consequently, the NPC rescinded the
contract for non-performance of the
 9
obligation and filed a case against the NMC
and the insurance company for breach of
contract asking for liquidated damages
amounting to 360,357 with interest. NMC
argued that the delivery of the sulfur was
conditioned on the availability of a vessel to
carry the shipment and that Namerco acted
within the scope of its authority as agent in
signing the contract of sale. After
examination of the contract, NMC stipulated
that that non-availability of a steamer was not
a justification for non-payment of liquidated
damages in which case contrary to the
instruction of his principal.
ISSUE:
W/O NMC is acted within the scope
of his authority
RULING:
No, National Merchandising
Corporation exceeded its authority as agent of his
principal thereby making himself personally
liable to National Power Corporation. Contrary.
NMC exceed his authority by not complying with
the instruction of his principal but instead acted
on the contrary. Hence, Under Article 1897 of the
Civil Code the agent who exceeds the limits of his
authority without giving the party with whom he
contracts sufficient notice of his powers is
personally liable to such party. Moreover, NPC
can held NMC liable on the ground that Article
1403 of the Civil Code which provides that a
contract entered into in the name of another
person by one who has acted beyond his powers
is unenforceable in which case it refers to the
unenforceability of the contract against the
principal but against NMC who NPC sought to be
held liable. On the other hand, the insurance
company contains that the latter in snot liable to
NPC because the bond was posted not for NMC
but to his principal. This contention is untenable
because it was NMC who solicited the bond to the
insurance company and not his principal. National
Merchandising Corporation and Domestic
Insurance Company of the Philippines are ordered
to pay solidarily to the National Power
ABANTAS. ABINAL. IGNALIG. JARANILLA. TIOSEN.
Corporation the sum of P45,100.00 as liquidated
damages.
8. EUROTECH INDUSTRIAL
TECHNOLOGIES, INC. vs. EDWIN
CUIZON and ERWIN CUIZON, 521
SCRA 584
FACTS:
Eurotech industrial technologies
inc., is a company engaged in the business of
importation and distribution of various
European industrial equipment for customers
here in the Philippines. One of its customers
is Impact Systems Sales which is a sole
proprietorship owned by respondent ERWIN
Cuizon. On the other hand, EDWIN cuizon is
the sales manager of Impact system sales.
Edwin bought one unit of sludge pump
valued at ₱250,000.00 with the down
payment of 50,000. When the unit arrived,
the eurotech refused to deliver the item until
the obligation has been paid. Hence, EDWIN
Alberto de Jesus, general manager of
petitioner, executed a Deed of Assignment of
receivables in favor of petitioner stating that
EDWIN has an outstanding recievables from
Toledo Power Corporation in the amount of
365,000.00 and assign the same to the
assignee, which is herein petitioner.
consequently, the unit has been delivered to
herein respondents. Eurotech alleged despite
the existence of the deed of assignment; the
Erwin collected the said receivables. Hence,
petitioner instituted a complaint for sum of
money, damages, with application for
preliminary attachment against herein
respondents. Edwin did not deny the
transaction. however, by way of affirmative
defense, Edwin alleged that he is merely an
agent of Impact system sale and the petitioner
is aware of his position.
ISSUE:
 10
1. W/O Edwin is an agent of Impact system
sale
2. W/O Edwin acted within the scope of his
authority as agent
RULING:
Yes, Edwin is an agent of the Impact
system sale and Edwin acted within the scope
of this authority as agent. The complaint
shows that in the Deed of Assignment,
defendant Edwin B. Cuizon acted in behalf of
or represented Impact Systems Sales; that
Impact Systems Sale is a single
proprietorship entity and the complaint
shows that defendant Erwin H. Cuizon is the
proprietor. On the other hand, the Plaintiff
Corporation is represented by its general
manager Alberto de Jesus in the contract deed
of assignment. the complaint also reveals that
Impact Systems Sales which is owned solely
by defendant Erwin H. Cuizon, made a down
payment of ₱50,000.00 two days after the
execution of deed of assignment, thereby
showing that Impact Systems Sales ratified
the act of Edwin B. Cuizon; the records
further show that plaintiff knew that Impact
Systems Sales, the principal, ratified the act
of Edwin B. Cuizon, the agent, when it
accepted the down payment of ₱50,000.00.
Plaintiff, therefore, cannot say that defendant
Edwin B. Cuizon deceived it, since in the
instant case the principal has ratified the act
of its agent and plaintiff knew about said
ratification. Plaintiff could not say that Edwin
B. Cuizon entered into the subject contract in
excess of his powers since Impact Systems
Sales made a down payment of ₱50,000.00
two days later. Article 1897 provides that 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. Further,
Article 1868 provides that n a contract of
agency, a person binds himself to render
some service or to do something in
representation or on behalf of another with
the latter’s consent. Its purpose is to extend
the personality of the principal or the party
for whom another acts and from whom he or
she derives the authority to act. The Supreme
court also held that we Edwin Cuizon acted
ABANTAS. ABINAL. IGNALIG. JARANILLA. TIOSEN.
well-within his authority when he signed the
Deed of Assignment. To recall, petitioner
refused to deliver the one unit of sludge pump
unless it received, in full, the payment for
Impact Systems’ indebtedness. We may very
well assume that Impact Systems desperately
needed the sludge pump for its business since
after it paid the amount of 50,000.00 as down
payment. it still persisted in negotiating with
petitioner which culminated in the execution
of the Deed of Assignment of its receivables
from Toledo Power Company. The
significant amount of time spent on the
negotiation for the sale of the sludge pump
underscores Impact Systems perseverance to
get hold of the said equipment. There is,
therefore, no doubt in our mind that
respondent EDWIN’s participation in the
Deed of Assignment was "reasonably
necessary" or was required in order for him
to protect the business of his principal. Had
he not acted in the way he did, the business
of his principal would have been adversely
affected and he would have violated his
fiduciary relation with his principal. Thus,
Edwin is not a real party in interest. Therefore
he should be excluded in the case.
9. BACALTOS COAL MINES V. CA, 245 SCRA
460
FACTS:
Under and by virtue of an
Authorization issued by GERMAN A.
BACALTOS to RENE ROSEL
SAVELLON, the Trip Charter Party was
executed “by and between BACALTOS
COAL MINES, represented … by its Chief
Operating Officer, RENE ROSEL
SAVELLON” and private respondent San
Miguel Corporation (hereinafter SMC).
Thereunder, Savellon claims that Bacaltos
Coal Mines is the owner of the vessel M/V
Premship II and that for P650,000.00 to be
paid within seven days after the execution of
the contract, it “lets, demises” the vessel to
charterer SMC “for three round trips to
Davao.”
As payment of the aforesaid
consideration, SMC issued a check payable
 11
to “RENE SAVELLON IN TRUST FOR
BACALTOS COAL MINES” for which
Savellon issued a receipt under the heading
of BACALTOS COAL MINES.
The vessel was able to make only
one trip. Its demands to comply with the
contract having been unheeded, SMC filed
against the petitioners and Rene Savellon the
complaint for specific performance and
damages.
In their Answer, the petitioners
alleged that Savellon was not their Chief
Operating Officer and that the powers
granted to him are only those clearly
expressed in the Authorization which do not
include the power to enter into any contract
with SMC. They further claimed that if it is
true that SMC entered into a contract with
them, it should have ISSUEd the check in
their favor.
RTC ruled in favor of SMC holding
petitioners Bacaltos Coal Mines and German
A. Bacaltos and their co-defendant Rene R.
Savellon jointly and severally liable to
private respondent SMC under a Trip Charter
Party. RTC ruled that the Authorization given
by German Bacaltos to Savellon necessarily
included the power to enter into the Trip
Charter Party.
CA affirmed RTC’s decision.
ISSUE:
Whether Savellon was duly
authorized by the petitioners to enter into the
Trip Charter Party under and by virtue of an
Authorization given by German Bacaltos.
RULING:
Every person dealing with an agent
is put upon inquiry and must discover upon
his peril the authority of the agent. If he does
not make such inquiry, he is chargeable with
knowledge of the agent’s authority, and his
ignorance of that authority will not be any
excuse. Person dealing with an assumed
agent, whether the assumed agency be a
general or special one, are bound at their
ABANTAS. ABINAL. IGNALIG. JARANILLA. TIOSEN.
peril, if they would hold the principal, to
ascertain not only the fact of the agency but
also the nature and extent of the authority,
and in case either is controverted, the burden
of the proof is upon them to establish it.
The person dealing with the agent
must also act with ordinary prudence and
reasonable diligence. Obviously, if he knows
or has good reason to believe that the agent is
exceeding his authority, he cannot claim
protection. So if the suggestions of probable
limitations be of such a clear and reasonable
quality, or if the character assumed by the
agent is of such a suspicious or unreasonable
nature, or if the authority which he seeks to
exercise is of such an unusual or improbable
character, as would suffice to put an
ordinarily prudent man upon his guard, the
party dealing with him may not be shut his
eyes to the real state of the case, but should
either refuse to deal with the agent at all, or
should ascertain from the principal the true
conditions of affairs.
In the instant case, since the agency
of Savellon is based on a written document,
the Authorization of 1 March 1988, the extent
and scope of his powers must be determined
on the basis thereof.
There is only one express power
granted to Savellon, viz., to use the coal
operating contract for any legitimate purpose
it may serve. The enumerated “five
prerogatives” — to employ the term used by
the Court of Appeals — are nothing but the
specific prerogatives subsumed under or
classified as part or as examples of the power
to use the coal operating contract. The clause
“but not by the way of limitation” which
precedes the enumeration could only refer to
or contemplate other prerogatives which
must exclusively pertain or relate or be
germane to the power to use the coal
operating contract. The conclusion then of
the Court of Appeals that the Authorization
includes the power to enter into the Trip
Charter Party because the “five prerogatives”
are prefaced by such clause, is seriously
flawed. It fails to note that the broadest scope
of Savellon’s authority is limited to the use of
the coal operating contract and the clause
cannot contemplate any other power not
included in the enumeration or which are
 12

unrelated either to the power to use the coal Metrobank as a collecting agent of
operating contract or to those already Golden Savings will be held liable.Art. 1909.
enumerated. In short, while the clause allows — The agent is responsible not only for
some room for flexibility, it can comprehend fraud, but also for negligence, which shall be
only additional prerogatives falling within judged 'with more or less rigor by the courts,
the primary power and within the same class according to whether the agency was or was
as those enumerated.
not for a compensation.The negligence of
Metrobank has been sufficiently established.
Wherefore, decision of CA is To repeat for emphasis, it was the clearance
REVERSED and SET ASIDE. given by it that assured Golden Savings it was
already safe to allow Gomez to withdraw the
proceeds of the treasury warrants he had
deposited Metrobank misled Golden Savings.
There may have been no express clearance,
as Metrobank insists (although this is refuted
10. METROPOLITAN BANK & TRUST by Golden Savings) but in any case that
COMPANY VS. COURT OF APPEALS clearance could be implied from its allowing
Golden Savings to withdraw from its account
FACTS: not only once or even twice but three times.
Eduardo Gomez opened an account The total withdrawal was in excess of its
with Golden Savings and deposited 38 original balance before the treasury warrants
treasury warrants. All warrants were were deposited, which only added to its belief
subsequently indorsed by Gloria Castillo as that the treasury warrants had indeed been
Cashier of Golden Savings and deposited to cleared.
its Savings account in Metrobank branch in
Calapan, Mindoro. They were sent for
clearance. Meanwhile, Gomez is not allowed
to withdraw from his account, later, however,
“exasperated” over Floria repeated inquiries
and also as an accommodation for a “valued”
client Metrobank decided to allow Golden
Savings to withdraw from proceeds of the
warrants. In turn, Golden Savings
subsequently allowed Gomez to make
withdrawals from his own account.
Metrobank informed Golden Savings that 32
of the warrants had been dishonored by the
Bureau of Treasury and demanded the refund
by Golden Savings of the amount it had
previously withdrawn, to make up the deficit
in its account. The demand was rejected.
Metrobank then sued Golden Savings.

ISSUE:

WON Metrobank as a collecting

agent of Golden Savings will be held liable.

RULING:

ABANTAS. ABINAL. IGNALIG. JARANILLA. TIOSEN.