Agency, Trust, and Partnership Doctrines

Agency, Trust and Partnership- Doctrines
Atty. Genilo
1 Case Name: Westmont Investment Corp. v. Francis Jr.
 In contract of agency, a person binds himself of some service or in
representation or on behalf of another, with the latter’s consent.
 The requisites of agency are (1) Consent of both parties, (2) Object is the
execution of a juridical act in relation to a third person, (3) the agent will act as a
representative not for himself, (4)The agent will act under the scope of his
authority.
2 Case Name: Nielson v. Lepanto G.R. No. L021601
Contract of Agency Lease of Services
 Based on representation  Based on

 Agent is destined to execute juridical acts employment
 Power to bring out business relations between his  Non-juridical
principal and third person acts only
3 Case Name: Tan v. Gullas

 An agent receives a commission upon the successful conclusion of a sale. On the
other hand, a broker earns his pay merely by bringing the buyer and the seller
together, even if no sale is eventually made." Clearly, therefore, petitioners, as
brokers, should be entitled to the commission whether or not the sale of the
property subject matter of the contract was concluded through their efforts.
 *Broker defined. A "broker" is "one who is engaged, for others, on a commission,
negotiating contracts relative to property with the custody of which he has no
concern; the negotiator between other parties, never acting in his own name but
in the name of those who employed him. . . . a broker is one whose occupation
is to bring the parties togeth
4 Case Name: Sps. Viloria v. Continental Airlines

 If the passenger's cause of action against the airline company is premised on
culpa aquiliana or quasi-delict for a tort committed by the employee of the airline
company's agent, there must be an independent showing that the airline
company was at fault or negligent or has contributed to the negligence or
tortuous conduct committed by the employee of its agent.
 The mere fact that the employee of the airline company's agent has committed a
tort is not sufficient to hold the airline company liable.
 If the passenger's cause of action for damages against the airline company is
based on contractual breach or culpa contractual, it is not necessary that there
be evidence of the airline company's fault or negligence. All that he has to prove
is the existence of the contract and the fact of its non-performance by the
carrier.
5 Case Name: Amon Trading v. CA

 As between 2 innocent parties, the one who made it possible for the wrong to be
done should be the one to bear the resulting loss.
 Art. 1868 provides: By the contract of agency, a person binds himself to render
some service or to do something in representation or on behelf of another, with
the consent or authority of the latter. In Victorias Milling vs. CA, the basis of
agency is representation, where on the part of the principal, there must be an
actual intention to appoint, and on the part of the agent, accept and act on it.
6 Case Name: Orient Air Services v. CA

 Whether or not Peña is an agent?
 Ruling: Based on the evidence on records and the proceedings below, the Court
concludes that Urban Bank constituted Atty. Peña as its agent to secure
possession of the Pasay property. This conclusion, however, is not determinative
of the basis of the amount of payment that must be made to him by the bank.
The context in which the agency was created lays the basis for the amount of
compensation Atty. Peña is entitled to.
7 Case Name: Victorias Milling Co. v. CA

 The question of whether a contract is one of sale or agency depends on the
intention of the parties as gathered from the whole scope and effect of the
language employed.
 The authorization given to CSC contained the phrase “for and in our (STM)
behalf” did not establish an agency. Ultimately, what is decisive is the intention
of the parties. That no agency was meant to be established by the CSC and STM
is clearly shown by CSC’s communication to petitioner that SLDR No. 1214M had
been “sold and endorsed” to it. This means that STM and CS intended a contract
of sale, and not an agency.
8 Case Name: Lim v. CA

 Rosa Lim’s signature indeed appears on the upper portion of the receipt
immediately below the description of the items taken.
 The Supreme Court finds that this fact does not have the effect of altering the
terms of the transaction from a contract of agency to sell on commission basis to
a contract of sale. Neither does it indicate absence or vitiation of consent thereto
on the part of Rosa Lim which would make the contract void or voidable.
 The moment she affixed her signature thereon, petitioner became bound by all
the terms stipulated in the receipt. She, thus, opened herself to all the legal
obligations that may arise from their breach.
 However, there are some provisions of the law which require certain formalities
for particular contracts.
o The first is when the form is required for the validity of the contract;
o the second is when it is required to make the contract effective as against
third parties such as those mentioned in Articles 1357 and 1358; and
o the third is when the form is required for the purpose of proving the
existence of the contract, such as those provided in the Statute of Frauds
in article 1403.
o A contract of agency to sell on commission basis does not belong to any
of these three categories, hence it is valid and enforceable in whatever
form it may be entered into.
 Furthermore, there is only one type of legal instrument where the law strictly
prescribes the location of the signature of the parties thereto.
o The parties did not execute a notarial will but a simple contract of agency
to sell on commission basis, thus making the position of petitioner’s
signature thereto immaterial.
9 Case Name: Linan v. Puno

 The words "administer,purchase, sell," etc., seem to be used coordinately.
Each has equal force with the other. There seems to be no good reason for
saying that Puno had authority to administer and not to sell when "to sell" was
as advantageous to the plaintiff in the administration of his affairs as "to
administer."
 To hold that the power was "to administer" only when the power "to sell" was
equally conferred would be to give effect to a portion of the contract only. That
would give to special words of the contract a special and limited meaning to the
exclusion of other general words of equal import.
10 Case Name: Conde v. CA

 The Alteras did not repudiate the deed that Paciente Cordero had signed. If, as
alleged, Dominga never extended any effort to procure the signature of Pio
Altera after he had recovered from his illness, neither did the Alteras repudiate
the deed that Cordero executed.
 Thus, an implied agency must be held to have been created from their silence or
lack of action, or their failure to repudiate the agency.
11 Case Name: Oliver v. PSB

 Article 1881 of the New Civil Code provides that the agent must act within
the scope of his authority. He may do such acts as may be conducive to the
accomplishment of the purpose of the agency.
 Thus, as long as the agent acts within the scope of the authority given by his
principal, the actions of the former shall bind the latter.
 PSBank was likewise liable for failing to exercise the highest degree of diligence
required of bank transactions. the bank therein allowed an unauthorized person
to withdraw from its depositor's savings account, thus, it failed to exercise the
required diligence of banks and must be held liable.
 the bank should be solidarily liable with its employee for the damages committed
to its depositor.
o Under Article 2180 of the Civil Code, employers shall be held primarily
and solidarily liable for damages caused by their employees acting within
the scope of their assigned tasks.
12 Case Name: Jusayan v. Sombilla

 In agency, the agent binds himself to render some service or to do something in
representation or on behalf of the principal, with the consent or authority of the
latter. The basis of the civil law relationship of agency is representation, the
elements of which are, namely:
(a) the relationship is established by the parties' consent, express or implied;
(b) the object is the execution of a juridical act in relation to a third person;
(c) the agent acts as representative and not for himself; and
(d) the agent acts within the scope of his authority
 The verbal agreement between Timoteo and Jorge left all matters of agricultural
production to the sole discretion of Jorge and practically divested Timoteo of the
right to exercise his authority over the acts to be performed by Jorge.
 On the other hand, to prove the tenancy relationship, Jorge presented
handwritten receipts indicating that the sacks of palay delivered to and received
by one Corazon Jusayan represented payment of rental.
o In this regard, rental was the legal term for the consideration of the lease.
Consequently, the receipts substantially proved that the contractual
relationship between Jorge and Timoteo was a lease.
13 Case Name: Yun Kwan Byung v. PAGCOR
 The basis for agency is representation, that is, the agent acts for and on behalf
of the principal on matters within the scope of his authority and said acts have
the same legal effect as if they were personally executed by the principal. On the
part of the principal, there must be an actual intention to appoint or an intention
naturally inferable from his words or actions, while on the part of the agent,
there must be an intention to accept the appointment and act on it. Absent such
mutual intent, there is generally no agency.
 An agency by estoppel, which is similar to the doctrine of apparent authority
requires proof of reliance upon the representations, and that, in turn, needs
proof that the representations predated the actions taken in reliance. There can
be no apparent authority of an agent without acts or conduct on the part of the
principal and such acts or conduct of the parties must have been known and
relied upon in good faith, and such must have produced a change of position to
its detriment.
14 Case Name: Dizon v. CA

 The basis for agency is representation and a person dealing with an agent is put
upon inquiry and must discover upon his peril the authority of the agent.
 As provided in Article 1868 “by the contract of agency, a person binds himself to
render some service or to do something in representation or on behalf of
another, with the consent or authority of the latter.
 Rule in dealing with an agent: “every person dealing with an agent is put 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. Persons, dealing with an assumed agent
whether the assumed agent be a general or special one, are bound at their 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 proof is upon them to establish it.”
15 Case Name:Siasat v. IAC

 There are three kinds of agents: universal, general, or special.
o A universal agent is one authorized to do all acts for his principal which
can lawfully be delegated to an agent. So far as such a condition is
possible, such an agent may be said to have universal authority.
o A general agent is one authorized to do all acts pertaining to a business
of a certain kind or at a particular place, or all acts pertaining to a
business of a particular class or series. He has usually authority either
expressly conferred in general terms or in effect made general by the
usages, customs or nature of the business which he is authorized to
transact.
An agent, therefore, who is empowered to transact all the business of his
principal of a particular kind or in a particular place, would, for this
reason, be ordinarily deemed a general agent.
o A special agent is one authorized to do some particular act or to act
upon some particular occasion. lie acts usually in accordance with specific
instructions or under limitations necessarily implied from the nature of the
act to be done.
 One does not have to undertake a close scrutiny of the document embodying the
agreement between the petitioners and the respondent to deduce that the latter
was instituted as a general agent. Indeed, it can easily be seen by the way
general words were employed in the agreement that no restrictions were
intended as to the manner the agency was to be carried out or in the place
where it was to be executed. The power granted to the respondent was so broad
that it practically covers the negotiations leading to, and the execution of, a
contract of sale of petitioners' merchandise with any entity or organization.
16 Case Name: Bautista-Spille v. NICORP

 The contract to sell is unenforceable because the consent of petitioner was not
obtained.
 The well-established rule is when a sale of a parcel of land or any interest
therein is through an agent, the authority of the latter shall be in writing,
otherwise the sale shall be void. Articles 1874 and 1878 of the Civil Code.
 To reiterate, such authority must be conferred in writing and must express the
powers of the agent in clear and unmistakable language in order for the principal
to confer the right upon an agent to sell the real property.
o It is a general rule that a power of attorney must be strictly construed,
and courts will not infer or presume broad powers from deeds which do
not sufficiently include property or subject under which the agent is to
deal.
o Thus, when the authority is couched in general terms, without mentioning
any specific power to sell or mortgage or to do other specific acts of strict
dominion, then only acts of administration are deemed conferred.
 Nowhere in the General Power of Attorney was Benjamin granted, expressly or
impliedly, any power to sell the subject property or a portion thereof.
o The authority expressed in the General Power of Attorney was couched in
very broad terms covering petitioner's businesses and properties.
 NICORP cannot be considered a purchaser in good faith.
o The well-settled rule is that a person dealing with an assumed agent is
bound to ascertain not only the fact of agency but also the nature and
extent of the agent's authority.
o The law requires a higher degree of prudence from one who buys from a
person who is not the registered owner.
o He is expected to examine all factual circumstances necessary for him to
determine if there are any flaws in the title of the transferor, or in his
capacity to transfer the land.
o In ascertaining good faith, or the lack of it, which is a question of
intention, courts are necessarily controlled by the evidence as to the
conduct and outward acts by which alone the inward motive may, with
safety, be determined.
o Good faith, or want of it, is not a visible, tangible fact that can be seen or
touched, but rather a state or condition of mind which can only be judged
by actual or fancied token or signs.
17 Case Name: Urban Bank, INC. v. Magdaleno Pena

 By affirming this ruling of the trial court, respondent appellate court, in effect,
compels American Air to extend its personality to Orient Air.
o Such would be violative of the principles and essence of agency, defined
by law as a contract whereby “a person binds himself to render some
service or to do something in representation or on behalf of another,
WITH THE CONSENT OR AUTHORITY OF THE LATTER.”
 In an agent-principal relationship, the personality of the principal is extended
through the facility of the agent.
o In so doing, the agent, by legal fiction, becomes the principal, authorized
to perform all acts which the latter would have him do.
o Such a relationship can only be effected with the consent of the principal,
which must not, in any way, be compelled by law or by any court.
18 Case Name: Yu Chuck v. Kong Li Po

 At the time the contract was entered into, he was general business manager of
the newspaper, Kong Li Po, and had implied authority to employ, making the
defendant newspaper corporation bound by his action.
 While he had implied authority to bind the defendant corporation by a
reasonable and usual contract of employment with the plaintiffs, the court ruled
that the contract in question can be so considered.
 Not only is the term of employment unusually long, but the conditions are so
onerous to the defendant that the possibility of the corporation being thrown into
insolvency thereby is expressly contemplated in the same contract.
19 Case Name: Aggabao v. Parulan Jr.

 We resolve the issue against the vendees and sustain the CA's finding that the
vendees were not buyers in good faith, because they did not exercise the
necessary prudence to inquire into the wife's authority to sell.
o We hold that the sale of conjugal property without the consent of the
husband was void.
o Article 124, Family Code, applies to sale of conjugal properties made after
the effectivity of the Family Code.
o Since the sale was made in 1991, or after the effectivity of the Family
Code. The proper law to apply is Article 124 of the Family Code, for it is
settled that any alienation or encumbrance of conjugal property made
during the effectivity of the Family Code is governed by Article 124 of the
Family Code.
 The power of administration does not include acts of disposition or encumbrance,
which are acts of strict ownership.
o As such, an authority to dispose cannot proceed from an authority to
administer, and vice versa, for the two powers may only be exercised by
an agent by following the provisions on agency of the Civil Code (from
Article 1876 to Article 1878).
20 Case Name: Dominion Insurance v. CA

 A perusal of the Special Power of Attorney would show that petitioner and
respondent Guevarra intended to enter into a principal-agent relationship.
o Despite the word "special" in the title of the document, the contents
reveal that what was constituted was actually a general agency.
o The agency comprises all the business of the principal, but, couched in
general terms, it is limited only to acts of administration.
o A general power permits the agent to do all acts for which the law does
not require a special power.
o Thus, the acts enumerated in or similar to those enumerated in the
Special Power of Attorney do not require a special power of attorney.
o Article 1878, Civil Code, enumerates the instances when a special power
of attorney is required.
 The payment of claims is not an act of administration.
o The settlement of claims is not included among the acts enumerated in
the Special Power of Attorney, neither is it of a character similar to the
acts enumerated therein.
o Guevarra was authorized to pay the claim of the insured, but the payment
shall come from the revolving fund or collection in his possession.
 *WON Guevarra is entitled to reimbursement. Having deviated from the
instructions of the principal, the expenses that Guevarra incurred in the
settlement of the claims of the insured may not be reimbursed from petitioner
Dominion.
o However, while the law on agency prohibits respondent Guevarra from
obtaining reimbursement, his right to recover may still be justified under
the general law on obligations and contracts (Art. 1236, Civil Code).
21 Case Name: Doles v. Angeles

 The court held that the question of whether an agency has been created is
ordinarily a question which may be established by direct or circumstantial
evidence.
o The question is ultimately the intention.
 Agency may even be implied from words and conduct of parties. Though the
facts or extent of authority of the agents may not, as a general rule, bue
established from the declarations of the agents alone. If one professes to act as
agent for another, she may be estopped to deny her agency both as against the
asserted principal and the third persons in which she is engaged.
 If their respective principals do not actually and personally know each other,
such does not affect their juridical standing as agents, especially since the
purpose of agency is to extend the personality of the principal through the
facility of the agent.
22 Case Name: Lim v. People

 There was an agency between Ayroso and Lim (Agency to sell the goods)
o It was clear in that agreement that as soon as the Tobacco was sold, Lim
has an obligation to give the definite proceeds to Ayroso.
o There was no transfer of ownership; it is merely a representation on part
of Lim.
o This part of their agreement clearly suggests that there is an agency
between them and not a sale.
23
Lim Tiu v. Ruiz y Rementeria
Art. 1883. If an agent acts in his own name, the principal has no right of action
against the persons with whom the agent has contracted; neither have such persons
against the principal.
In such case the agent is the one directly bound in favor of the person with whom he
has contracted, as if the transaction were his own, except when the contract involves
things belonging to the principal.
The provisions of this article shall be understood to be without prejudice to the actions
between the principal and agent
SALE OF MERCHANDISE BY AGENT WITHOUT DISCLOSING THE PRINCIPAL.—When
an agent transacts business in his own name it shall not be necessary for him to state
who is the principal and he shall be directly liable as if the business were for his own
account, to the persons with whom he transacts the same, said persons not having
any right of action against the principal nor the latter against the former.
24
Phil. National Bank v. Agudelo y Gonzaga
Art. 1883 - If an agent acts in his own name, the principal has no right of action
When an agent negotiates a loan in his own name and executes a promissory note
under his personal signature without express authority from his principal, giving as
security therefore real estate belonging to the latter, also in his own name and not in
the name and in representation of said principal, the obligation so contracted by him is
personal and is not binding upon the aforesaid principal
25
Olaguer v. Purugganan, Jr.
Article 381 of the New Civil Code: When a person disappears from his domicile,
his whereabouts being unknown, and without leaving an agent to administer his
property, the judge, at the instance of an interested party, a relative, or a friend, may
appoint a person to represent him in all that may be necessary. This same rule shall
be observed when under similar circumstances the power conferred by the absentee
has expired.
-Limiting the definitions of “absence” to that provided under Article 381 of the Civil
Code and “incapacity” under Article 38 of the same code, negates the effect of the
power of attorney by creating absurd, if not impossible, legal situations:
-Art. 381 provides the necessary stringent standards that would justify the
appointment of a representative by a judge.
-One of the main standards Art 381 enumerates is that no agent has been
appointed to administer the property
-In the present case, Olaguer himself had already authorized agents to do
specific acts of administration and thus, no longer necessitated the construction of
“incapacity” to minority, insanity, imbecility, the state of being deaf-mute, prodigality,
and civil interdiction” as provided under Art 381, would render the SPA ineffective
- Art 1919(3) of the Civil Code, provides that the death, civil interdiction,
insanity or insolvency of the principal or of the agent extinguishes the agency; it would
be impossible, for Olaguer to require himself to qualify as a minor, an imbecile, a deaf-
mute, or a prodigal before the SPA becomes operative. Since if he did, then he himself
would not be able to administer his own property.
-SPA must be strictly construed- It is a general rule that the power of attorney must
be strictly construed. The instrument should always be deemed to give such powers as
essential or usual in effectuating the express powers.
26
Syjuco and Viardo v. Syjuco
Art. 1717. If the contractor bound himself to furnish the material, he shall suffer the
loss if the work should be destroyed before its delivery, save when there has been
delay in receiving it
Art 1717 of CC states that, when an agent acts in his own name, the principal shall
have no right of action against the person with whom the agent has contracted, cases
involving things belonging to the principal are excepted. Such exception pertains to
the agent’s apparent representation yields to the principal’s true representation and
that, in reality and in effect, the contract must be considered as entered into between
the principal and the third person. And consequently, if the obligations belong to the
former, to him alone must also belong the rights arising from the contract.
27
V-Gent Inc. v. Morning Star Travel and Tours, Inc.
Art. 1863. In setting accounts after dissolution the liabilities of the partnership shall
be entitled to payment in the following order:
(1) Those to creditors, in the order of priority as provided by law, except those to
limited partners on account of their contributions, and to general partners;
(2) Those to limited partners in respect to their share of the profits and other
compensation by way of income on their contributions;
(3) Those to limited partners in respect to the capital of their contributions;
(4) Those to general partners other than for capital and profits;
(5) Those to general partners in respect to profits;
(6) Those to general partners in respect to capital.
Subject to any statement in the certificate or to subsequent agreement, limited
partners share in the partnership assets in respect to their claims for capital, and in
respect to their claims for profits or for compensation by way of income on their
contribution respectively, in proportion to the respective amounts of such claims.
The Rules of Court provides that “An agent acting in his own name and for the benefit
of an undisclosed principal may sue or be sued without joining the principal except
when the contract involves things belonging to the principal.” (This rule is consistent
with Art. 1863)
28
Bank of P.I. v. Laingo
Art. 1884. 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.
Art. 1887. In the execution of the agency, the agent shall act in accordance with the
instructions of the principal.
In default thereof, he shall do all that a good father of a family would do, as required
by the nature of the business
The provision is clear that an agent is bound to carry out the agency. The relationship
existing between principal and agent is a fiduciary one, demanding conditions of trust
and confidence. It is the duty of the agent to act in good faith for the advancement of
the interests of the principal
29
British Airways v. CA
liable for the damages which, through his non-performance, the principal may suffer.
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.
30
Phil. National Bank v. Welsh Fairchild
liable for the damages which, through his non-performance, the principal may suffer
 An agent who acts for principal in the making of a contract does not become
personally bound to the other party in the sense that an action can ordinarily be
maintained upon such contract directly against the agent
 The agent in any event must be precluded from doing any positive act that
could prevent performance on the part of his principal. This much, ordinary
good faith towards the other contracting party requires
31
BA Finance v. CA
Art. 1884. 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.
In granting B.A. Finance Corporation the aforementioned powers and prerogatives, the
Cuady spouses created in the former’s favor an agency. Thus, under Article 1884 of
the Civil Code of the Philippines, B.A. Finance Corporation is bound by its acceptance
to carry out the agency, and is liable for damages which, through its nonperformance,
the Cuadys, the principal in the case at bar, may suffer.
32
PNB v. Manila Surety
Art. 1887. In the execution of the agency, the agent shall act in accordance with the
instructions of the principal.
The Court of Appeals did not hold the Bank answerable for negligence in failing to
collect from the principal debtor but for its neglect in collecting the sums 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 the care of a good father of a family and becomes liable for the damages
which the principal may suffer through his non-performance.
Certainly, the Bank could not expect that the Bank would diligently perform its duty
under its power of attorney, but because they could not have collected from the
Bureau even if they had attempted to do so. It must not be forgotten that 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
33
Cadwallader v. Smith Bell
TOPIC: When agents committed a breach of duty (fraud); annulment of contract
1. Such conduct on the part of the agent constitutes fraud, entitling the principal
to annul the contract of sale.
2. Upon annulment the parties should be restored to their original position by
mutual restitution.
34
Strong v. Guiterrez Repide
TOPIC: Fraud
3. To compromise, alienate, mortgage, or to execute any other act of strict
ownership, must have an express commission so to do. "The express mandate"
required by article 1713 of the Civil Code to enable an appointee of an "agency
stated in general terms only" to sell must be one that expressly mentions a sale
or that includes a sale as a necessary ingredient of the act mentioned.
4. Being a director, owner of some of the company’s stocks, administrator general
of the company engaged in negotiations with the sale of the lands to the
government which greatly enhances the value of the stock, one must act in
good faith and to disclose facts which might affect the value of the stock.
35
Cosmic Lumber v. Court of Appeals
TOPIC: Authority of an agent-acting on behalf of the principal---SPA
DOCTRINE: When the sale of a piece of land or any interest thereon is through an
agent, the authority of the latter shall be in writing; otherwise, the sale shall be
void. Thus the authority of an agent to execute a contract for the sale of real estate
must be conferred in writing and must give him specific authority, either to conduct
the general business of the principal or to execute a binding contract containing terms
and conditions which are in the contract he did execute.
For the principal to confer the right upon an agent to sell real estate, a power of
attorney must so express the powers of the agent in clear and unmistakable language.
36
Barton v. Leyte Asphalt
TOPIC: Authority of an Agent to Sell
DOCTRINE: PRINCIPAL AND AGENT; AUTHORITY OF SELLING AGENT; SALES TO
SUBAGENT.—An agent who is clothed with authority to sell a given commodity cannot
bind the principal by selling to himself, either directly or indirectly. It results that the
principal is not obligated to fill orders taken by the agent from his own subagent,
unless the principal ratifies such sale with full knowledge of the facts.
37
Hernandez v. Hernandez
Art. 1888. An agent shall not carry out an agency if its execution would manifestly
result in loss or damage to the principal.
Cecilio violated the fiduciary relationship of an agent and a principal. The relation of an
agent to his principal is fiduciary and it is elementary that in regard to property subject
matter of the agency, an agent is estopped from acquiring or asserting a title adverse
to that of the principal. His position is analogous to that of a trustee and he cannot,
consistently with the principles of good faith, be allowed to create in himself an
interest in opposition to that of his principal.
38
Domingo v. Domingo
Art. 1891. 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 obligation to render an account shall
be void
Articles 1891 and 1909 of the Civil Code demand the utmost good faith, fidelity,
honesty, candor and fairness on the part of the agent to his principal. The agent has
an 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.
39
Ojinaga v. Estate of Perez
be void
[Dissenting] The mere fact that the agent, by some means or other, by stating facts or
refusing to state all of the facts, induces the principal to accept a certain amount as
the profits made in the course of the agency, this fact can not be used for the purpose
of preventing the principal from recovering the true amount when the true amount is
actually discovered.
40
Sazon v. Vasquez-Menancio
be void
It is evident that the reason behind the failure of petitioner to render an accounting to
respondent is immaterial. What is important is that the former fulfill her duty to render
an account of the relevant transactions she entered into as respondent's agent.
41
Guzman v. Court of Appeals

Art. 1914. The agent may retain in pledge the things which are the object of the
agency until the principal effects the reimbursement and pays the indemnity set forth
in the two preceding articles.
AGENCY; NATURE OP POSSESSION OP AGENT OP THE GOODS RECEIVED IN
AGENCY.—An agent, unlike a servant or messenger, has both the physical and judicial
possession of the goods received in agency, or the proceeds thereof, which takes the
place of the goods after their sale by the agent. His duty to turn over the proceeds of
the agency depends upon his discharge, as well as the resul'* of the accounting
between him and the principal; and he may set up his right of possession as against
that of the principal until the agency is terminated.
42
Int’l Films (China) v. Lyric Film
Art. 1718. The contractor who has undertaken to put only his work or skill, cannot
claim any compensation if the work should be destroyed before its delivery, unless
there has been delay in receiving it, or if the destruction was caused by the poor
quality of the material, provided this fact was communicated in due time to the owner.
If the material is lost through a fortuitous event, the contract is extinguished.
It does not appear sufficiently proven that the understanding between Joseph (the
second agent) and Albo was that the defendant company would continue showing said
film under the same contract. The preponderance of evidence shows that the verbal
agreement had between Gabelman (the former agent) and Albo was that said film
would remain deposited in the safety vault of the defendant company under the
responsibility of Gabelman and that the defendant company, as his subagent, could
show it in its theaters, with petitioner receiving 5% of the receipts up to a certain
amount, and 15% in excess of said amount.
If, as it has been sufficiently proven that the verbal contract had between Gabelman
and Albo was a sub-agency or a submandate, the defendant company 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
(Art. 1718, Civil Code).
43
Serona v. Court of Appeals
TOPIC: Appointment by an agent of a substitute or sub-agent
An agent does not ipso facto commit the crime of estafa through conversion or
misappropriation by delivering jewelry she received to be sold on commission basis to
a sub-agent—the law on agency in our jurisdiction allows the appointment by an
agent of a substitute or sub-agent in the absence of an express agreement to the
contrary between the agent and the principal.
44
Baltazar v. Ombudsman
Art. 1892. The agent may appoint a substitute if the principal has not prohibited him
from doing so; but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the
person appointed was notoriously incompetent or insolvent.
All acts of the substitute appointed against the prohibition of the principal shall be
void.
1. Agency cannot be further delegated. Potestas delegata non delegare potest; a
power once delegated cannot be re-delegated.
2. 1892: What is allowed is a substitute and not a delegation of the agency.
45
Villaluz v. Land Bank of the Phils.
TOPIC: An agent may appoint a substitute if the principal has not prohibited him from
doing so.
DOCTRINE: The law requires a presumption that an agent has the power to appoint a
substitute. The consequence of the presumption is that, upon valid appointment of a
substitute by the agent, there ipso jure arises an agency relationship between the
principal and the substitute. As a result, the principal is bound by the acts of the
substitute as if these acts had been performed by the principals appointed agent.
Concomitantly, the substitute assumes an agent’s obligation to act within the scope or
authority, to act in accordance with the principal’s instructions, and to carry out the
agency, among others.
To protect the principal, Art.1829 allocates responsibility to the agent for the acts of
the substitute when the agent was not expressly authorized by the principal to appoint
a substitute
46
Escueta v. Lim
TOPIC: Authority from Special Power of Attorney
The agent may appoint a substitute if the principal has not prohibited him from doing
so.—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 x x x. Applying the above-quoted provision to the special power of
attorney executed by Ignacio Rubio in favor of his daughter Patricia Llamas, it is clear
that she is not prohibited from appointing a substitute. By authorizing Virginia Lim to
sell the subject properties, Patricia merely acted within the limits of the authority given
by her father, but she will have to be “responsible for the acts of the sub-agent,”
among which is precisely the sale of the subject properties in favor of respondent.
47
Baltazar v. Mariano
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:
void.
An agent cannot delegate to another the same agency..
While art. 1892 allows the agent to appoint a substitute, such is not the situation in
the instant case. The SPA clearly delegates the agency to petitioner to pursue the case
and not merely as a substitute. Besides, it is clear in the aforecited article that what is
allowed is a substitute and not a delegation of the agency.
48
Del Rosario v. La Badenia
Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the
principal may furthermore bring an action against the substitute with respect to the
obligations which the latter has contracted under the substitution.
The principal is liable upon sub agency contracts entered into by a general agent in
the name of the principal, when it appears that the general agent was clothed with
such broad powers as to justify the inference that he was authorized to execute
contracts of this kind, and it not appearing from the record what limitations, if any,
were placed upon his powers to act for his principal.
49
Municipal Council of Iloilo v. Evangelista
TOPIC: Appointment of two agents
DOCTRINE: When a person appoints two agents independently, the consent of one
will not be required to validate the acts of the other, unless that appears positively to
have been the principal's intention.
50
Mendezona v. Vda. De Goitia
Art. 1896. The agent owes interest on the sums he has applied to his own use from
the day on which he did so, and on those which he still owes after the extinguishment
of the agency.
It is sufficient to say that an agent shall be liable for interest upon any sums he may
have applied to his own use, from the day on which he did so, and upon those which
he still owes, after the expiration of the agency, from the time of his default.
51
DeBorja v. De Borja
Art. 1724. The contractor who undertakes to build a structure or any other work for
a stipulated price, in conformity with plans and specifications agreed upon with the
land-owner, can neither withdraw from the contract nor demand an increase in the
price on account of the higher cost of labor or materials, save when there has been a
change in the plans and specifications, provided:
(1) Such change has been authorized by the proprietor in writing; and
(2) The additional price to be paid to the contractor has been determined in writing by
both parties.
There being no evidence showing that he converted the money entrusted to him to his
own use, he is not liable for interest thereon in accordance with the provisions of
article 1724 of the Civil Code.
52
ART. 1883
Lim Tiu v. Ruiz y Rementeria (1883)
ART. 1883. If an agent acts in his own name, the principal has no right of action
The provisions of this article shall be understood to be without prejudice to the

actions between the principal and agent.
RULING: It was established that Domingo acted in his own name in selling the
merchandise and that the defendants fully believed that they were dealing with
Domingo without any knowledge of the fact that he was an agent of the plaintiffs.
DOCTRINE: SALE OF MERCHANDISE BY AGENT WITHOUT DISCLOSING THE

PRINCIPAL.—When an agent transacts business in his own name it shall not be
necessary for him to state who is the principal and he shall be directly liable as if the
business were for his own account, to the persons with whom he transacts the same,
said persons not having any right of action against the principal nor the latter against
the former.
53
Phil. National Bank v. Agudelo y Gonzaga (1883)
If an agent acts in his own name, the principal has no right of action against the
persons with whom the agent has contracted; neither have such persons against the
principal.

actions between the principal and agent
RULING: Inasmuch as the properties mortgaged by Mauro belong to Paz Agudelo y
Gonzaga, Paz is responsible for the acts of Mauro although he acted in his own name
HOWEVER iIt would be an EXCEPTION with the properties of his own name in
connection with the properties of his principal, does so within the scope of his
authority. It is noted that Mauro was not authorized to execute promissory notes
even in the name of his principal Paz Agudelo y Gonzaga, nor to constitute a
mortgage on her real properties to secure such promissory notes.
DOCTRINE: When an agent negotiates a loan in his own name and executes a
promissory note under his personal signature without express authority from his
principal, giving as security therefore real estate belonging to the latter, also in his
own name and not in the name and in representation of said principal, the obligation
so contracted by him is personal and is not binding upon the aforesaid principal
54
Olaguer v. Purugganan, Jr. (SPA)
RULING: Art 1919(3) of the Civil Code, provides that the death, civil interdiction,
insanity or insolvency of the principal or of the agent extinguishes the agency; it
would be impossible, for Olaguer to require himself to qualify as a minor, an imbecile,
a deaf-mute, or a prodigal before the SPA becomes operative. Since if he did, then he
himself would not be able to administer his own property.
DOCTRINE: When a person disappears from his domicile, his whereabouts being
unknown, and without leaving an agent to administer his property, the judge, at the
instance of an interested party, a relative, or a friend, may appoint a person to
represent him in all that may be necessary. This same rule shall be observed when
under similar circumstances the power conferred by the absentee has expired.
55
Syjuco and Viardo v. Syjuco
principal.

actions between the principal and agent
RULING: The fact that Santiago has acted in his own name may only be a violation
of the agency on his part. – Plaintiff believe that it was bought with their money. To
cure such defect, when he purchased the thing in his own name, he is obliged to
transfer to the plaintiffs the rights he received from the vendor and the plaintiffs are
entitled to be subrogated in this rights.
DOCTRINE: Art 1717 of CC states that, when an agent acts in his own name, the
principal shall have no right of action against the person with whom the agent has
contracted, cases involving things belonging to the principal are excepted. Such
exception pertains to the agent’s apparent representation yields to the principal’s true
representation and that, in reality and in effect, the contract must be considered as
entered into between the principal and the third person. And consequently, if the
obligations belong to the former, to him alone must also belong the rights arising
from the contract.
56
V-Gent Inc. v. Morning Star Travel and Tours, Inc.
principal.

actions between the principal and agen
RULING: The plane tickets bore the names of the individual passengers, and that it
was only V-Gent that transacted business concerning the purchase of these plane
tickets. Thus, V-Gent only purchased the plane tickets on behalf of the passengers as
the latter’s agent. The tickets were issued in the name of the passengers and paid for
with the passengers’ money
DOCTRINE: The Rules of Court provides that “An agent acting in his own name and
for the benefit of an undisclosed principal may sue or be sued without joining the
principal except when the contract involves things belonging to the principal.” (This
rule is consistent with Art. 1863)
An agent may sue or be sued solely in its own name and without joining the principal
when the following elements concur:
(1) the agent acted in his own name during the transaction;
(2) the agent acted for the benefit of an undisclosed principal; and
(3) the transaction did not involve the property of the principal
ART. 1884-1896
57
Bank of P.I. v. Laingo
Article 1884. 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.
RULING:
 Art. 1884 provides that 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.
 1887 provides in the execution of the agency, the agent shall act in
accordance with the instructions of the principal. In default, thereof, he shall
do all that a good father of a family would do, as required by the nature of the
business.
 The provision is clear that an agent is bound to carry out the agency. The
relationship existing between principal and agent is a fiduciary one, demanding
conditions of trust and confidence. It is the duty of the agent to act in good
faith for the advancement of the interests of the principal. In this case, BPI
had the obligation to carry out the agency by informing the beneficiary, who
appeared before BPI to withdraw funds of the insured who was BPI's
depositor, not only of the existence of the insurance contract but also the
accompanying terms and conditions of the insurance policy in order for the
beneficiary to be able to properly and timely claim the benefit. BPI’s notice is
the notice of FGU insurance.
DOCTRINE: The provision is clear that an agent is bound to carry out the agency.
The relationship existing between principal and agent is a fiduciary one, demanding
conditions of trust and confidence. It is the duty of the agent to act in good faith for
the advancement of the interests of the principal
58
British Airways v. CA
RULING: 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.
DOCTRINE: 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.
59
Phil. National Bank v. Welch Fairchild
RULING: One who has intervened in the making of a contract in the character of
agent cannot be permitted to intercept and appropriate the thing which the principal
is bound to deliver, and thereby make performance by the principal impossible. The
agent in any event must be precluded from doing any positive act that could prevent
performance on the part of his principal. This much, ordinary good faith towards the
other contracting party requires.
DOCTRINE:
 An agent who acts for principal in the making of a contract does not become
personally bound to the other party in the sense that an action can ordinarily
be maintained upon such contract directly against the agent
 The agent in any event must be precluded from doing any positive act that
could prevent performance on the part of his principal. This much, ordinary
good faith towards the other contracting party requires
60
BA Finance v. CA
RULING:
DOCTRINE: In granting B.A. Finance Corporation the aforementioned powers and
prerogatives, the Cuady spouses created in the former’s favor an agency. Thus, under
Article 1884 of the Civil Code of the Philippines, B.A. Finance Corporation is bound by
its acceptance to carry out the agency, and is liable for damages which, through its
nonperformance, the Cuadys, the principal in the case at bar, may suffer.
61
PNB v. Manila Surety
RULING: Even if the assignment with power of attorney from the ATACO were
considered as mere additional security still, 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 thereby exonerated the
surety, pursuant to Article 2080 of the Civil Code
DOCTRINE: The Court of Appeals did not hold the Bank answerable for negligence
in failing to collect from the principal debtor but for its neglect in collecting the sums
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 the care of a good father of a family and becomes liable
for the damages which the principal may suffer through his non-performance.
Certainly, the Bank could not expect that the Bank would diligently perform its duty
under its power of attorney, but because they could not have collected from the
Bureau even if they had attempted to do so. It must not be forgotten that 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.
62
Cadwallader v. Smith Bell
Article 1888. An agent shall not carry out an agency if its execution would
manifestly result in loss or damage to the principal.
Article 1889. The agent shall be liable for damages if, there being a conflict
between his interests and those of the principal, he should prefer his own.
RULING: The contract of sale to themselves (sale from principal to agent) thereby
induced was founded on their fraud and was subject to annulment by the aggrieved
party. Upon annulment the parties should be restored to their original position by
mutual restitution.
DOCTRINE:
1. Such conduct on the part of the agent constitutes fraud, entitling the principal
to annul the contract of sale.
2. Upon annulment the parties should be restored to their original position by
mutual restitution.
63
Strong v. Guiterrez Repide
Article 1888. An agent shall not carry out an agency if its execution would
manifestly result in loss or damage to the principal. (n)
Article 1889. The agent shall be liable for damages if, there being a conflict
between his interests and those of the principal, he should prefer his own.
RULING: The shares of Mrs. Strong were sold to the Ripede was not an express
power and therefore the sale was without authority. The article is not satisfied by an
admission of the principal that the power exists, without disclosing that it was
expressed.
Repide employing an agent to buy, concealing his identity as the buyer and his
knowledge of the state of the negotiations for the sale of the lands to the
government and the probable result. Repide violated his duty as an agent of the
company. He employed deceit in the purchase of stocks had Sloan known the actual
state of negotiation, he would not have sold such.
DOCTRINE:
1. To compromise, alienate, mortgage, or to execute any other act of strict
ownership, must have an express commission so to do. "The express
mandate" required by article 1713 of the Civil Code to enable an appointee of
an "agency stated in general terms only" to sell must be one that expressly
mentions a sale or that includes a sale as a necessary ingredient of the act
mentioned.
2. Being a director, owner of some of the company’s stocks, administrator
general of the company engaged in negotiations with the sale of the lands to
the government which greatly enhances the value of the stock, one must act in
good faith and to disclose facts which might affect the value of the stock.
64
Cosmic Lumber v. Court of Appeals
Article 1874. When a sale of a piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.
RULING: Nowhere in this authorization was Villamil-Estrada granted expressly or
impliedly any power to sell the subject property nor a portion thereof. Neither can a
conferment of the power to sell be validly inferred from the specific authority "to
enter into a compromise agreement" because of the explicit limitation fixed by the
grantor that the compromise entered into shall only be "so far as it shall protect the
rights and interest of the corporation in the aforementioned lots.”
DOCTRINE: When the sale of a piece of land or any interest thereon is through an
agent, the authority of the latter shall be in writing; otherwise, the sale shall be
void. Thus the authority of an agent to execute a contract for the sale of real estate
must be conferred in writing and must give him specific authority, either to conduct
the general business of the principal or to execute a binding contract containing
terms and conditions which are in the contract he did execute.
For the principal to confer the right upon an agent to sell real estate, a power of
attorney must so express the powers of the agent in clear and unmistakable
language.
65
Barton v. Leyte Asphalt
rticle 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:

void.
RULING: A sale made by a broker to himself without the consent of the principal is
ineffectual whether the broker has been guilty of fraudulent conduct or not. The
position of the defendant company is indubitably sound in so far as it rests upon the
contention that the plaintiff has not in fact found any bona fide purchasers ready and
able to take the commodity contracted for upon terms compatible with the contract.
DOCTRINE: An agent who is clothed with authority to sell a given commodity cannot
bind the principal by selling to himself, either directly or indirectly. It results that the
principal is not obligated to fill orders taken by the agent from his own subagent,
unless the principal ratifies such sale with full knowledge of the facts.
66
Hernandez v. Hernandez
RULING: Cecilio’s position is analogous to that of a trustee and he cannot,
consistently with the principles of good faith, be allowed to create in himself an
interest in opposition to that of his principal.
DOCTRINE: The relation of an agent to his principal is fiduciary and it is elementary

that in regard to property subject matter of the agency, an agent is estopped from
acquiring or asserting a title adverse to that of the principal. His position is analogous
to that of a trustee and he cannot, consistently with the principles of good faith, be
allowed to create in himself an interest in opposition to that of his principal.
67
Domingo v. Domingo
Article 1891. Every agent is bound to render an account of his transactions and to
be void
RULING: An agent who takes a secret profit in the nature of a bonus, gratuity or
personal benefit from the vendee, without revealing the same to bis principal is guilty
of a breach of his loyalty to the latter and forfeits his right to collect the commission
that may be due him, even if the principal does not suffer any injury by reason of
such breach of fidelity, or that he obtained better results or that the agency is a
gratuitous one, or that usage or custom allows it; because the rule is to prevent the
possibility of any wrong, not to remedy or repair an actual damage.
The duty embodied in Article 1891 of the Civil Code does not apply if the agent or
broker acted only as a middleman with the task of merely bringing together the
vendor and vendee, who themselves thereafter will negotiate on the terms and
conditions of the transaction.
DOCTRINE: Articles 1891 and 1909 of the Civil Code demand the utmost good faith,
fidelity, honesty, candor and fairness on the part of the agent to his principal. The
agent has an 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.
68
Ojinaga v. Estate of Perez
be void
RULING: [Dissenting] The mere fact that the agent, by some means or other, by
stating facts or refusing to state all of the facts, induces the principal to accept a
certain amount as the profits made in the course of the agency, this fact can not be
used for the purpose of preventing the principal from recovering the true amount
when the true amount is actually discovered.
DOCTRINE: [Dissenting] The mere fact that the agent, by some means or other, by
stating facts or refusing to state all of the facts, induces the principal to accept a
certain amount as the profits made in the course of the agency, this fact can not be
used for the purpose of preventing the principal from recovering the true amount
when the true amount is actually discovered.
69
Sazon v. Vasquez-Menancio
be void
RULING: Petitioner claims that in the course of her administration of the properties,
the letters she sent to respondent should be considered as a fulfillment of her
obligation, as respondent's agent, to render an accounting of her administration. Both
the RTC and the CA found these letters insufficient, the Court agrees.
DOCTRINE: It is evident that the reason behind the failure of petitioner to render an
accounting to respondent is immaterial. What is important is that the former fulfill her
duty to render an account of the relevant transactions she entered into as
respondent's agent.
70
Guzman v. Court of Appeals
be void
RULING: While it is true that appellant received the proceeds of his wine sales as
travelling salesman for the complainant, for and in behalf of the latter as his principal,
and that possession of the agent is possession of the principal, an agent, unlike a
servant or messenger, has both the physical and juridical possession of the goods
received in agency, or the proceeds thereof, which takes the place of the goods after
their sale by the agent. His duty to turn over the proceeds of the agency depends
upon his discharge, as well as the result of the accounting between him and the
principal; and he may set up his right of possession
DOCTRINE: An agent, unlike a servant or messenger, has both the physical and
judicial possession of the goods received in agency, or the proceeds thereof, which
takes the place of the goods after their sale by the agent. His duty to turn over the
proceeds of the agency depends upon his discharge, as well as the resul'* of the
accounting between him and the principal; and he may set up his right of possession
as against that of the principal unt
il the agency is terminated.
71 Int’l Films (China) v. Lyric Film

Article 1892. The agent may appoint a substitute if the principal has not prohibited
void.
RULING: Defendant company, as subagent of the plaintiff in the exhibition of the

film "Monte Carlo Madness", was not obliged to insure it against fire, not having
received any express mandate to that effect, and it is not liable for the accidental
destruction thereof by fire..
DOCTRINE: It does not appear sufficiently proven that the understanding between
Joseph (the second agent) and Albo was that the defendant company would continue
showing said film under the same contract. The preponderance of evidence shows
that the verbal agreement had between Gabelman (the former agent) and Albo was
that said film would remain deposited in the safety vault of the defendant company
under the responsibility of Gabelman and that the defendant company, as his
subagent, could show it in its theaters, with petitioner receiving 5% of the receipts up
to a certain amount, and 15% in excess of said amount.
If, as it has been sufficiently proven that the verbal contract had between Gabelman
and Albo was a sub-agency or a submandate, the defendant company 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 (Art. 1718, Civil Code).
71
Serona v. Court of Appeals
void.
RULING: The law on agency in our jurisdiction allows the appointment by an agent
of a substitute or sub-agent in the absence of an express agreement to the contrary
between the agent and the principal.

It cannot be said that Serona’s act of entrusting the jewelry to Labrador is
characterized by abuse of confidence because such an act was not proscribed and
is, in fact, legally sanctioned.
DOCTRINE: An agent does not ipso facto commit the crime of estafa through
conversion or misappropriation by delivering jewelry she received to be sold on
commission basis to a sub-agent—the law on agency in our jurisdiction allows the
appointment by an agent of a substitute or sub-agent in the absence of an express
agreement to the contrary between the agent and the principal.
72
Baltazar v. Ombudsman
void.
RULING: Article 1892 allows the agent to appoint a substitute, such is not the
situation in the instant case. The SPA clearly delegates the agency to the petitioner to
pursue the case and not merely as a substitute. Is clear in the aforecited Article that
what is allowed is a substitute and not a delegation of the agency. Baltazar is neither
a real party in interest, he is not a party who will be benefited or injured by the
results of both cases.
DOCTRINE:
1. Agency cannot be further delegated. Potestas delegata non delegare potest; a
power once delegated cannot be re-delegated.
2. 1892: What is allowed is a substitute and not a delegation of the agency.
73
Villaluz v. Land Bank of the Phils.
void.
RULING:
-Although the law presumes that the agent is authorized to appoint a substitute, it
also imposes an obligation upon the agent to exercise this power conscientiously. To
protect the principal, Art.1829 allocates responsibility to the agent for the acts of the
substitute when the agent was not expressly authorized by the principal to appoint a
substitute and if so authorized but a specific person is not designated, the agent
appoints a substitute who is notoriously imcompetent or insolvent.
-In these instances, the principal has a right of action against both the agent and the
substitute if the latter commits acts prejudicial to the principal.
DOCTRINE: The law requires a presumption that an agent has the power to appoint
a substitute. The consequence of the presumption is that, upon valid appointment of
a substitute by the agent, there ipso jure arises an agency relationship between the
principal and the substitute. As a result, the principal is bound by the acts of the
substitute as if these acts had been performed by the principals appointed agent.
Concomitantly, the substitute assumes an agent’s obligation to act within the scope
or authority, to act in accordance with the principal’s instructions, and to carry out the
agency, among others.
To protect the principal, Art.1829 allocates responsibility to the agent for the acts of
the substitute when the agent was not expressly authorized by the principal to
appoint a substitute
74
Escueta v. Lim
void.
RULING:
DOCTRINE: The agent may appoint a substitute if the principal has not prohibited
him from doing so.—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 x x x. Applying the above-quoted provision to the special power
of attorney executed by Ignacio Rubio in favor of his daughter Patricia Llamas, it is
clear that she is not prohibited from appointing a substitute. By authorizing Virginia
Lim to sell the subject properties, Patricia merely acted within the limits of the
authority given by her father, but she will have to be “responsible for the acts of the
sub-agent,” among which is precisely the sale of the subject properties in favor of
respondent.
75
Baltazar v. Mariano
void.
RULING: A re-delegation of the agency would be detrimental to the principal as the

second agent has no privity of contract with the former. In the instant case, petitioner
has no privity of contract with Paciencia Regala, owner of the fishpond and principal
of Faustino Mercado.
DOCTRINE: An agent cannot delegate to another the same agency..
While art. 1892 allows the agent to appoint a substitute, such is not the situation in
the instant case. The SPA clearly delegates the agency to petitioner to pursue the
case and not merely as a substitute. Besides, it is clear in the aforecited article that
what is allowed is a substitute and not a delegation of the agency.
76
Del Rosario v. La Badenia
void.
RULING:
DOCTRINE: The principal is liable upon sub agency contracts entered into by a
general agent in the name of the principal, when it appears that the general agent
was clothed with such broad powers as to justify the inference that he was
authorized to execute contracts of this kind, and it not appearing from the record
what limitations, if any, were placed upon his powers to act for his principal.
77
Municipal Council of Iloilo v. Evangelista
Article 1894. The responsibility of two or more agents, even though they have been
appointed simultaneously, is not solidary, if solidarity has not been expressly
stipulated.
RULING: Tan Boon Tiong is authorized to employ and contract for the services of
lawyers upon such conditions as he may deem convenient, to take charge of any
actions necessary or expedient for the interests of his principal, and to defend suits
brought against her. This power necessarily implies the authority to pay for the
professional services thus engaged.
DOCTRINE: When a person appoints two agents independently, the consent of one
will not be required to validate the acts of the other, unless that appears positively to
have been the principal's intention.
78
Mendezona v. Vda. De Goitia
Article 1894. The responsibility of two or more agents, even though they have been
appointed simultaneously, is not solidary, if solidarity has not been expressly
stipulated.
RULING:
DOCTRINE: It is sufficient to say that an agent shall be liable for interest upon any
sums he may have applied to his own use, from the day on which he did so, and
upon those which he still owes, after the expiration of the agency, from the time of
his default.
79
DeBorja v. De Borja
Article 1896. The agent owes interest on the sums he has applied to his own use
from the day on which he did so, and on those which he still owes after the
extinguishment of the agency
RULING:
DOCTRINE: There being no evidence showing that he converted the money
entrusted to him to his own use, he is not liable for interest thereon in accordance
with the provisions of article 1724 of the Civil Code.
80
Smith Bell v. Court of Appeals

Article 1897. 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
DOCTRINE: The Settling agent acting within the scope of its authority cannot be
held personally liable and/or solidarily liable for the obligations of its disclosed
principal.
Ruling: The Settling agent acting within the scope of its authority cannot be held
personally liable and/or solidarily liable for the obligations of its disclosed principal.
Smith Bell undisputedly a settling agent acted within the scope of its authority.
In Salonga vs. Warner the Court ruled that the scope and extent of the functions of
an adjustment and settlement agent do not include personal liability. His functions
are merely to settle and adjusts claims in behalf of his principal if those claims are
proven and undisputed, and if the claim is disputed or is disapproved by the principal,
like in the instant case, the agent does not assume any personal liability. The
recourse of the insured is to press his claim against the principal.
The plaintiffs contend that the doctrine in Salonga does not apply simply because
only the agent was sued there while here both agent and principal were impleaded
and found solidarity liable is WITHOUT merit. Such distinction is immaterial. The
agent cannot be sued nor held liable whether singly or solidarily with its principal. The
only “involvement” of Smith Bell in the contract of insurance was having its name
stamped at the bottom left portion of the policy as “Claim Agent” which cannot be
interpreted that Smith Bell participated in the contract.
The well entrenched rule is that solidary obligation cannot lightly be inferred. It must
be positively and clearly expressed. The Insurance Code is quite clear as to the
purpose and role of a resident agent. Such agent, as a representative of the foreign
insurance company, is tasked only to receive legal processes on behalf of its principal
and not to answer personally for any insurance claims.
81
Cremphil Export v Court of Appeals
DOCTRINE: Where the money used to discharge a person’s debt rightfully belonged
to the debtor, the party paying cannot be considered a third-party payor under Art.
1302(2) of the Civil Code but a mere agent.
Ruling: Since the money used to discharge Garcia’s debt rightfully belonged to him,
FCI cannot be considered a third party payor under Art. 1302 (2). It was but a
conduit, or as aptly categorized by respondents, merely an agent as defined in Art.
1868 of the Civil Code.
82
Angles v PNR
DOCTRINE: Where agency exists, the third party’s liability on a contract is to the
principal and not to the agent and the relationship of the third party to the principal is
the same as that in a contract in which there is no agent. Normally, the agent has
neither rights nor liabilities as against the third party. He cannot thus sue or be sued
on the contract.
RULING: Where agency exists, the third party’s (in this case, PNR’s)
liability on a contract is to the principal and not to the agent and the
relationship of the third party to the principal is the same as that in a
contract in which there is no agent. Normally, the agent has neither rights
nor liabilities as against the third party. He cannot thus sue or be sued on
the contract. Since a contract may be violated only by the parties thereto as against
each other, the real party-in-interest, either as plaintiff or defendant in an action
upon that contract must, generally, be a contracting party.
83
EuroTech Industrial v Cuizon
DOCTRINE: “The agent who acts as such is not personally liable to the party with
authority without giving such party sufficient notice of his power.”
-An agent who acts as such, is not personally liable to the party with whim he
contracts.
-There are two instances when an agent becomes personally liable to a third person:
- when he expressly binds himself to the obligation
- when he exceeds his authority.
RULING: Edwin does not fall within any of the exceptio\ns contained in Art.1897.
Edwin acted well within his authority when he signed the Deed of Assignment.
Eurotech refused to deliver th 1unit of sludge pump unless it received, in full, the
payment for the Impact Systems’ indebtedness, Impact Systems desperately needed
the sludge pump for its business since after it paid the amount of 50k as DP ir still
persisted in negotiating with Eurotech which culminated in the execution of the Deed
of Assignment of its receivables from Toledo Power Company. The significant amount
of time sprint on the negotiation for the sale of the sludge pump underscores Impact
Systems’ perseverance to get hold of the said equipment. Edwin’s participation in the
DOA was reasonably necessary or was required in order for him to protect the
business of his principal.
84
Tuason v Orozco
DOCTRINE: The principal is directly liable to the creditor for the payment of a debt
incurred by his agent acting within the scope of his authority.
The agent may bind himself personally to the payment of the debt incurred for the
benefit and in behalf of his principal. In such a case the liability expressly incurred by
the agent does not preclude the personal liability of the principal but constitutes a
further security in favor of the creditor.
RULING: A debt thus incurred by the agent is binding directly upon the principal,
provided that the agent acted within the scope of his authority. The fact that the
agent has also bound himself to pay the debt does not relieve from liability the
principal for whose benefit the debt was incurred.
85
Phil. Products Co. v PSA
DOCTRINE: Article 1987 of the Civil Code does not hold that in case of excess of
authority, both the agent and the principal are liable to the other contracting party.
- Basis of liability of agent; In the absence of express legislation, the liability of
the agent of a foreign corporation doing business, but not licensed in the Philippines,
is premised on the inability to sue the principal or non-liability thereof.
RULING: Court held that there is no proof that as agents, they exceeded the limits
of their authority. In fact, the principal, P. Zurich, who should be the one to raise
such point, never raised it, denied its liability on the ground of excess of authority. At
any rate, Art 1897 does not hold that in cases of excess authority, BOTH the agent
and the principal are liable to the other contracting party. Liability of the agent is
necessarily premised on the inability to sue the principal or non-liability of such
principal, in the absence of express legislation
86
Pineda v CA
DOCTRINE: In its position as administrator of the policy, the employer should be

considered as the agent of the insurer, and any omission of duty to the employee in
its administration should be attributable to the insurer.
An agency relationship is based upon consent by one person that another shall act in
his behalf and be subject to his control.
The insurer directs the performance of the employer’s administrative acts, and if
these duties are not undertaken properly the insurer is in a position to exercise more
constricted control over the employer’s conduct.
RULING: he questioned powers of attorney do not contain in clear and unequivocal

terms authority to Captain Nuval to obtain, receive, receipt from respondent company
insurance proceed arising from the death of the seaman-insured. On the contrary, the
said powers of attorney are couched in terms which could easily arouse suspicion of
an ordinary man.
87
DBP v Court of Appeals
authority without giving such party sufficient notice of his powers.
DOCTRINE: Under Art. 1897, the agent who acts as such is not personally liable to
the party with whom he contracts, unless he expressly binds himself or exceeds the
limits of his authority without giving such party sufficient notice of his powers.
The liability of the agent who exceeds the scope of his authority depends on whether
the third person is aware of the limits of the agent’s powers.
If the third person dealing with an agent is unaware of the limits of the authority
conferred by the principal in the agent and the third person has been deceived by the
non-disclosure by the agent, then the latter is liable for damages to him
RULING: as an insurance agent, DBP made Dans go through the motion of applying
for said insurance, thereby 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. Apparently, DBP had full knowledge that Dans’s application was never
going to be approved.
88
Cason v Rickards
Article 1898. If the agent contracts in the name of the principal, exceeding the
scope of his authority, and the principal does not ratify the contract, it shall be 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 undertook to
secure the principal's ratification
DOCTRINE: 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 deposits.
RULING: Rickards testified that he received express directions in regard to this
particular transaction. Rickards being an agent and someone who explicitly turned
over the money to Smith Bell as he left cannot be made liable to Cason.
Smith, Bell & Co. did not present as witnesses any of these employees or agents, and
did not present any of their books which the witness Rickards declared would
corroborate his statement.
The witness could not testify to whom this cash was paid. Although he testified that
he had some independent recollection of this transaction, yet it is apparent that his
testimony is substantially, if not entirely, based upon the entries made in the books of
the bank, which were in his handwriting.
89
Zayco v Serra
DOCTRINE: Where an agent or representative in entering into a contract on behalf
of the principal exceeds his authority, the contract is not an absolute, nullity, but only
voidable at the instance of the party who has been improperly represented.
RULING: Albayda who represented the Gemora estate was its judicial administrator
and Gregorio Cordova who signed the contract on behalf of the Cordova estate was
the de facto administrator of that estate. Assuming that these persons exceeded their
authority, the contract would nevertheless not be an absolute nullity, but simply
voidable at the instance of the parties who had been improperly Represented.
90
Cervantes v Court of Appeals
DOCTRINE: 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.
RULING: Cervantes theorized that the confirmation by the PAL’s agents in Los
Angeles and San Francisco changed the compromise agreement between the parties.
As ruled by the appellate court, he was aware of the risk that his ticket could expire,
as it did, before he returned to the Philippines. Did the (2) two agents have the
authority? Both had no authority to do so. Cervantes knew this from the very start
when he called up the Legal Department of PAL before he left for the US. 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.
Despite this knowledge he persisted to use the ticket. Since the PAL agents are not
privy to the said Agreement and Cervantes knew that a written request was
necessary, he cannot use what the PAL agents did to his advantage.
91
Borja Sr. v Sulyap
DOCTRINE: Even if a partyÊs counsel exceeded his authority in inserting a
penalty clause in a compromise agreement, the status of said clause is not
void but merely voidable, i.e., capable of being ratified.
RULING: Evidently, petitioner cannot feign ignorance of the existence of the penalty
clause in the compromise agreement approved by the court. Even assuming that Atty.
Leonardo Cruz exceeded his authority in inserting the penalty clause, the status of
the said clause is not void but merely voidable, i.e., capable of being ratified. Indeed,
petitioner’s failure to question the inclusion of the 2% monthly interest and 25%
attorney’s fees in the judicial compromise despite several opportunities to do so was
tantamount to ratification. Hence, he is estopped from assailing the validity thereof.
92
Albert v. University Publishing Co., Inc.
TOPIC: Liability of person acting for corporation with no valid existence
DOCTRINE: A person acting or purporting to act on behalf of a corporation which has no
valid existence assumes such privileges and obligations and becomes personally liable for
contracts entered into or for other acts performed as such agent.
RULING: The evidence is patently clear that Jose M. Aruego, acting as representative of a
non-existent principal, was the real party to the contract sued upon; that he was the one who
reaped the benefits resulting from it, so much so that partial payments of the consideration
were made by him; that he violated its terms, thereby precipitating the suit in question; and
that in the litigation he was the real defendant. Perforce, in line with the ends of justice,
responsibility under the judgment falls on him.
93
Eugenio v. CA
TOPIC: Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor-in-interest or any person authorized to receive it
DOCTRINE: As far as third persons are concerned, 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 an
understanding between the principal and his agent. In fact, Atty. Rosario, private respondent’s
own witness, admitted that “it is the responsibility of the collector to turn over the collection.
RULING: Even assuming arguendo that herein private respondent’s cashier never received the
amounts reflected in the TPRs, still private respondent failed to prove that Estrada, who is its duly
authorized agent with respect to petitioners, did not receive those amounts from the latter. As
correctly explained by petitioners, “in so far as the private respondent’s customers are concerned,
for as long as they pay their obligations to the sales representative of the private respondent using
the latter’s official receipt, said payment extinguishes their obligations.” Otherwise, it would
unreasonably cast the burden of supervision over its employees from respondent corporation to its
customers.
94
Salvador v. Rabaja
TOPIC: Art. 1900 - Reliance on SPA; Sub topic - 1902, 1910
DOCTRINE: Gonzales, as agent of Sps. Salvador, could validly receive the payments of
Sps. Rabaja.
Article 1990 provides: insofar as third persons are concerned, an act is deemed to have
been performed within the scope of the agent's authority, if such act is within the terms of the
power of attorney, as written. In this case, Sps. Rabaja did not recklessly enter into a contract
with Gonzales. They required her presentation of the power of attorney before they
transacted with her principal. And when Gonzales presented the SPA to Sps. Rabaja, they
had no reason not to rely on it.
Since there was a valid SPA, Sps. Rabaja properly made payments to Gonzales as agent
of Sps. Salvador; and it was as if they paid to Sps. Salvador.
RULING: Gonzales (Agent-Defendant) acted within the scope of her authority. The SPA
precisely stated that she could administer the property, negotiate the sale and collect any
document and all payments related to the subject property.
Since there was a valid SPA, Sps. Rabaja properly made payments to Gonzales as agent of
Sps. Salvador; and it was as if they paid to Sps. Salvador.
A matter on the arrangement, grievance or strife between the principal and the agent is theirs
alone and should not affect third persons. If Spouses Salvador did not receive the payments
or they wish to specifically revoke the SPA, then their recourse is to institute a separate action
against Gonzales.
95
Manila Memorial Park Cemetery v. Linsangan
TOPIC: The acts of an agent beyond the scope of his authority do not bind the
principal.
DOCTRINE: The acts of an agent beyond the scope of his authority do not bind the
principal, unless he ratifies them, expressly or impliedly. Only the principal can ratify; the
agent cannot ratify his own unauthorized acts. Moreover, the principal must have knowledge
of the acts he is to ratify.
RULING: it has not been established that Atty. Linsangan even bothered to inquire
whether Baluyot was authorized to agree to terms contrary to those indicated in the
written contract, much less bind MMPCI by her commitment with respect to such
agreements.
96
Commissioner of Public Highways v. San Diego
TOPIC: Principal/Client, and not a third person, can only question the lack of authority of
agent.
DOCTRINE: Third person cannot question lack of authority of agent—In an expropriation
proceeding, the State cannot raise the alleged lack of authority of the counsel of the owner of
the property to bind his client in a compromise agreement because such lack of authority may
be questioned only by the principal or client.
RULING: The Court held that in an expropriation proceeding, the State cannot raise the
alleged lack of authority of the counsel of the owner of the property to bind his client in a
compromise agreement because such lack of authority may be questioned only by the
principal or client.
the state cannot impugn the validity of the compromise agreement executed by the Solicitor
General on behalf of the State with the approval of the proper government officials, on the
ground that it was executed only by the lawyer of respondent estate, without any showing of
having been specially authorized to bind the estate
97
NAPOCOR v. NAMARCO
TOPIC: Art. 1897 and 1898; Art. 1902
DOCTRINE: The rule that a person dealing with an agent must inquire into the limits of the
agent’s authority does not apply where the agent is being held directly responsible for taking
chances in exceeding its authority.
The rule in Art. 1403 of the Civil Code that a contract entered into by an agent beyond his
authority is unenforceable does not apply where the contract is being enforced as to damages
against the agent itself for doing what it did without authority.
Art. 1897 implies that the agent who acts in excess of his authority is personally liable to the
party with whom he contracted. This rule is complemented by Art. 1898 which provides that
“if the agent contracts in the name of the principal, exceeding the scope of his authority, and
the principal does not ratify the contract, it shall be void if the party with whom the agent
contracted is aware of the limits of the powers granted by the principal.
An agent must disclose the limits of its authority to avoid personal liability for ultra vires
contracts.
RULING: Namerco acted beyond the bounds of its authority because it violated its
principal’s cabled instructions.
Namerco never disclosed to the NPC the cabled or written instructions of its principal also, it
exceeded the limits of its authority, it acted in its own name and not as agent and therefore,
bound by the contract of sale, which is unenforceable against its principal.
98
Austria v. Court of Appeals
TOPIC: Receipt of thing for sale on commission basis
DOCTRINE: Robbery as defense against civil action for loss of thing.—Where MA received
from GA a pendant with diamonds to be sold on commission basis, which MA later on failed
to return because of a robbery committed upon her, it is not necessary that there be a
conviction for robbery for MA to be relieved from civil liability of returning the pendant under
Art, 1174, New Civil Code, as it would only be sufficient to establish that the unforseeable
event, the robbery in this case, did take place without any concurrent fault on the debtor's
part, and this can be done by preponderant evidence.
To require, moreover. prior conviction in order to establish robbery as a fact, would demand
proof beyond reasonable doubt to prove a fact in a civil case.
RULING: "ART. 1174. Except in cases expressly specified by law, or when it is otherwise
declared by stipulation, or when the nature of the obligation requires the assumption of risk,
no person shall be responsible for those events which could not be foreseen, or which,
though foreseen, were inevitable."
It must be realized that a court finding that a robbery has happened would not necessarily
mean that those accused in- the criminal action should be found guilty of the crime; nor would
a ruling that those actually accused did not commit the robbery be inconsistent with a finding
that a robbery did take place. The evidence to establish these facts would not necessarily be
the same.
99
Green Valley Poultry v. IAC
TOPIC: Art. 1905. The commission agent cannot, without the express or implied
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 entitled to any interest
or benefit, which may result from such sale.
DOCTRINE: Contracts; Damages; Agency; In an agency to sell, the agent is liable to
pay the principal for goods sold by the agent without the principal’s consent.
RULING: Whether viewed as an agency to sell or as a contract of sale, the liability of
Green Valley is indubitable. Adopting Green Valley’s theory that the contract is an
agency to sell, it is liable because it sold on credit without authority from its principal.
The Civil Code has a provision exactly in point. It Reads:
“Art. 1905. The commission agent cannot, without the express or implied
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 entitled
to any interest or benefit, which may result from such sale.”
100
MBTC v. CA
TOPIC: Art. 1909
DOCTRINE: 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.
RULING: Metrobank contends that it was acting only as a collecting agent for Golden
Savings, Metrobank seems to be suggesting that as a mere agent it cannot be liable to the
principal (untenable bc of Art 1909). The negligence of Metrobank has been sufficiently
established.
The negligence of Metrobank has been sufficiently established. To repeat for emphasis, it
was the clearance 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
but in any case that clearance could be implied from its allowing Golden Savings to withdraw
from its account not only once or even twice but three times.
101
Lim Chai Seng v. Trinidad
TOPIC:
DOCTRINE: The principal is bound by the act of his agent, and the effects of the
dishonesty of the agent must be borne by the principal.
RULING: it is undeniable that Cu Chiat had full authority to make returns to the Collector
of Internal Revenue of the business done each quarter by Lim Chai Seng and to make
payment of the proper amount of the taxes due by those returns. This being undeniable, it
follows that when Cu Chiat made returns, as he did, showing a certain amount of business
transacted and the taxes due were computed according to those returns, the Collector of
Internal Revenue could not legitimately collect a greater amount.
102
Pleasantville Dev. v. Court of Appeals
TOPIC: Art. 1896; Art. 1897; Liability of principal for agent’s acts
DOCTRINE: The rule is that the principal is responsible for the acts of the agent, done
within the scope of his authority, and should bear the damage caused to third persons. On the
other hand, the agent who exceeds his authority is personally liable for the damage.
RULING: CTTEI was acting within its authority as the sole real estate representative of
petitioner when it made the delivery to Kee. In acting within its scope of authority, it was,
however, negligent. It is this negligence that is the basis of petitionerÊs liability, as principal of
CTTEI, per Articles 1909 and 1910 of Civil Code). Petitioner and CTTEI are solidarily liable.
103
Country Bankers Insurance v. Keppel Cebu Shipyard
TOPIC: Applicability of Article 1910 - 1911
DOCTRINE: Article 1910 - Ordinarily, the principal must have full knowledge at the time of
ratification of all the material facts and circumstances relating to the unauthorized act of the
person who assumed to act as agent. Thus, if material facts were suppressed or unknown,
there can be no valid ratification. Nevertheless, this principle does not apply if the principal's
ignorance of the material facts and circumstances was willful, or that the principal chooses to
act in ignorance of the facts.
Article 1911 - On the other hand, states that the principal is solidarily liable with the agent
even when the latter has exceeded his authority, if the principal allowed him to act as though
he had full powers.
an agency by estoppel to exist, the following must be established: (a) The principal
manifested a representation of the agent’s authority or knowingly allowed the agent to
assume such authority; (b) The third person, in good faith, relied upon such representation;
and (c) Relying upon such representation, such third person has changed his position to his
detriment.
RULING: The Special Power of Attorney accorded to Quinain clearly states the limits of his
authority and particularly provides that in case of surety bonds, it can only be issued in favor
of government agencies; furthermore, the amount of the surety bond is limited to P500k (The
surety bond in this case is 3M.)
CBIC not only clearly stated the limits of its agents’ powers in their contracts, it even stamped
its surety bonds with the restrictions, in order to alert the concerned parties.
CBIC cannot be faulted for Quinain’s deliberate failure to notify it of his transactions with
Unimarine. In fact, CBIC did not even receive the premiums paid by Unimarine to Quinain.
104
Bacaltos Coal Mines v. CA
TOPIC: Duty of a Person Dealing with an Agent
DOCTRINE: Every person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent; 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. Persons dealing with an assumed agent, whether the
assumed agency be a general or special one, are bound at their 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 proof is upon them to establish it.
-Rule that between two innocent parties, the one who made it possible for the wrong to be
done should be the one to bear the resulting loss; For such rule to apply, the condition
precent is that both parties must be innocent.
RULING: 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 unrelated either to the power to use the coal operating contract or
to those already enumerated.
- no evidence at all that Bacaltos Coal Mines as a coal mining company owns and
operates vessels, and even if it owned any such vessels, that it was allowed to
charter or lease them. Also, the Authorization is not a general power of attorney. It is
a special power of attorney for it refers to a clear mandate specially authorizing the
performance of a specific power and of express acts subsumed therein.
105
Filipinas Life Assurance Co. v. Pedroso
TOPIC: Principal’s responsibility for the acts of its agent; third persons should not be
prejudiced.
DOCTRINE: The general rule is that the principal is responsible for the acts of its agent
done within the scope of its authority and should bear the damage caused to third persons;
The acts of an agent beyond the scope of his authority do not bind the principal, unless the
principal ratifies them, expressly or impliedly.
Innocent third persons should not be prejudiced if the principal failed to adopt the needed
measures to prevent misrepresentation, much more so if the principal ratified his agent’s acts
beyond the latter’s authority.
RULING: a person dealing with an agent is put upon inquiry and must discover at his own
peril the agent’s authority, in this case, respondents did exercise due diligence in removing all
doubts and in confirming the validity of the representations made by Valle.
Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. Filipinas
Life cannot profess ignorance of Valle’s acts. Even if Valle’s representations were beyond his
authority as a debit/insurance agent, Filipinas Life thru Alcantara and Apetrior expressly and
knowingly ratified Valle’s acts. It cannot even be denied that Filipinas Life benefited from the
investments deposited by Valle in the account of Filipinas Life. In our considered view,
Filipinas Life had clothed Valle with apparent authority; hence, it is now estopped to deny said
authority.
106
Professional Services, Inc. v. CA
TOPIC: Art. 1911; Doctrine of Apparent Authority; Agency by Estoppel
DOCTRINE:
2008 Res.
The doctrine of apparent authority essentially involves two factors to determine the liability of
an independent contractor-physician. The first factor focuses on the hospital’s manifestations
and is sometimes described as an inquiry whether the hospital acted in a manner which
would lead a reasonable person to conclude that the individual who alleged to be negligent
was an employee or agent of the hospital. In this regard, the hospital need not make express
representations to the patient that the treating physician is an employee of the hospital; rather
a representation may be general and implied. The second factor focuses on the patient’s
reliance. It is sometimes characterized as an inquiry on whether the plaintiff acted in reliance
upon the conduct of the hospital or its agent, consistent with ordinary care and prudence.
Under the doctrine of apparent authority, the question in every case is whether the principal
has by his voluntary act placed the agent in such a situation that a person of ordinary
prudence, conversant with business usages and the nature of the particular business, is
justified in presuming that such agent has authority to perform the particular act in question.
RULING:
In general, a hospital is not liable for the negligence of an independent contractor-physician.
There is, however, an exception to this principle. The hospital may be liable if the physician is
the ostensible agent of the hospital. This exception is also known as the doctrine of apparent
authority.
It must be stressed that under the doctrine of apparent authority, the question in every case is
whether the principal has by his voluntary act placed the agent in such a situation that a
person of ordinary prudence, conversant with business usages and the nature of the
particular business, is justified in presuming that such agent has authority to perform the
particular act in question.
2010 res:
DOCTRINE: Factors that determine Apparent Authority: First, the hospital’s implied
manifestation to the patient which led the latter to conclude that the doctor was the hospitals
agent; and second, the patient’s reliance upon the contract of the hospital and the doctor,
consistent with ordinary care and prudence.
RULING: There is ample evidence that the hospital (PSI) held out to Natividad that the Dr.
Ampil was its agent.
107
Banate v. Philippine Countryside Rural Bank
TOPIC: The doctrine of apparent authority with special reference to banks, had long been
recognized in this jurisdiction; The authority to act for and to bind a corporation may be
presumed from acts of recognition in other instances when the power was exercised without
any objection from its board or shareholders
DOCTRINE: The authority of a corporate officer or agent in dealing with third persons may
be actual or apparent. Actual authority is either express or implied.
existence of apparent authority may be ascertained through:

1. the general manner in which the corporation holds out an officer or agent as having the
power to act, or in other words, the apparent authority to act in general, with which it clothes
him; or
2. the acquiescence in his acts of a particular nature, with actual or constructive knowledge
thereof, within or beyond the scope of his ordinary powers. Accordingly, the authority to act
for and to bind a corporation may be presumed from acts of recognition in other instances
when the power was exercised without any objection from its board or shareholders.
**acts and contracts of the agent, as are within the apparent scope of the authority conferred
on him, although no actual authority to do such acts or to make such contracts has been
conferred, bind the principal. The principal’s liability, however, is limited only to third persons
who have been led reasonably to believe by the conduct of the principal that such actual
authority exists, although none was given.
RULING: The authority of a corporate officer or agent in dealing with third persons may be
actual or apparent. Actual authority is either express or implied. The extent of an agent’s
express authority is to be measured by the power delegated to him by the corporation, while
the extent of his implied authority is measured by his prior acts which have been ratified or
approved, or their benefits accepted by his principal.
. It is a settled rule that persons dealing with an agent are bound at their peril, if they would
hold the principal liable, to ascertain not only the fact of agency but also the nature and extent
of the agent’s authority, and in case either is controverted, the burden of proof is upon them
to establish it. As parties to the mortgage contract, the petitioners are expected to abide by its
terms. The subsequent purported agreement is of no moment, and cannot prejudice PCRB,
as it is beyond MondigoÊs actual or apparent authority, as above discussed.
108
Manila Remnants v. Court of Appeals
TOPIC: ART. 1911. Even when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to act as though he had full
powers.
DOCTRINE: Authority by estoppel has arisen in the instant case because by its
negligence, the principal, Manila Remnant, has permitted its agent, A.N. Valencia and Co. to
exercise powers not granted to it.
RULING: the Valencia realty firm had clearly overstepped the bounds of its authority as
agent—and for that matter, even the law—when it undertook the double sale of the disputed
lots. Such being the case, the principal, Manila Remnant, would have been in the clear
pursuant to Article 1897 of the Civil Code which states that:
“the agent who acts as such is not personally liable to that 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.”
109
Litonjua, Jr. v. Eternit Corp.
TOPIC: Art. 1911
DOCTRINE: Unauthorized act of an officer of the corporation is not binding on it unless the
latter ratifies the same expressly or impliedly by its board of directors. Any sale of real
property of a corporation by a person purporting to be an agent thereof but without written
authority from the corporation is null and void.
RULING: The property of a corporation, is not the property of the stockholders or members,
and as such may not be sold without EXPRESS AUTHORITY.
Absent such valid delegation/authorization, the rule is that the declarations of an individual
director relating to the affairs of the corporation, but not in the course of, or connected with,
the performance of authorized duties of such director, are not the sale of its real properties,
the final say will have to be with the board of directors through its officers and agents binding
on the corporation.

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Agency, Trust and Partnership- Doctrines

 Based on representation  Based on

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Guzman v. Court of Appeals

The provisions of this article shall be understood to be without prejudice to the

DOCTRINE: SALE OF MERCHANDISE BY AGENT WITHOUT DISCLOSING THE

The provisions of this article shall be understood to be without prejudice to the

The provisions of this article shall be understood to be without prejudice to the

The provisions of this article shall be understood to be without prejudice to the

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

DOCTRINE: The relation of an agent to his principal is fiduciary and it is elementary

71 Int’l Films (China) v. Lyric Film

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

RULING: Defendant company, as subagent of the plaintiff in the exhibition of the

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

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

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

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

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

RULING: A re-delegation of the agency would be detrimental to the principal as the

DOCTRINE: An agent cannot delegate to another the same agency..

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

Smith Bell v. Court of Appeals

DOCTRINE: In its position as administrator of the policy, the employer should be

RULING: he questioned powers of attorney do not contain in clear and unequivocal

existence of apparent authority may be ascertained through:

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