G.R. No. L-38816 November 3, 1933 the bank has not done so.
the bank has not done so. Much more could be said about this case, but it suffices to
INSULAR DRUG CO., INC., plaintiff-appellee, vs.THE PHILIPPINE NATIONAL BANK, ET AL.,
defendants. THE PHILIPPINE NATIONAL BANK, appellant.
MALCOLM, J.:
FACTS
 The Insular Drug Co., Inc., is a Philippine corporation with offices in the City of Manila.
 U.E. Foerster was formerly a salesman of drug company for the Islands of Panay and
Negros. Foerster also acted as a collector for the company. He was instructed to take the
checks which came to his hands for the drug company to the Iloilo branch of the
Chartered Bank of India, Australia and China and deposit the amounts to the credit of the
drug company.
 Instead, Foerster deposited checks, including those of Juan Llorente, Dolores Salcedo,
Estanislao Salcedo, and a fourth party, with the Iloilo branch of the Philippine National
Bank. The checks were in that bank placed in the personal account of Foerster. Some of
the checks were drawn against the Bank of PNB. After the indorsement on the checks
was written "Received payment prior indorsement guaranteed by Philippine National
bank, Iloilo Branch, Angel Padilla, Manager." The indorsement on the checks took various
forms, some being "Insular Drug Company, Inc., By: (Sgd.) U. Foerster, Agent. (Sgd.) U.
Foerster" other being "Insular Drug Co., Inc., By: (Sgd.) Carmen E. de Foerster, Agent
(Sgd.) Carmen E. de Foerster"; others "Insular Drug Co., Inc., By: (Sgd.) Carmen E. de
Foerster, Carmen E. de Froster"; others "(Sgd.) Carmen E. de Foerster, (Sgd.) Carmen E.
de Foerster"; one (Sgd.) U. Foerster. (Sgd.) U. Foerster"; others; "Insular Drug Co., Inc.,
Carmen E. de Foerster, By: (Sgd.) V. Bacaldo," etc. In this connection it should be
explained that Carmen E. de Foerster was his stenographer. As a consequence of the
indorsements on checks the amounts therein stated were subsequently withdrawn by U.
E., Foerster and Carmen E. de Foerster.
 Eventually the Manila office of the drug company investigated the transactions of
Foerster. Upon the discovery of anomalies, Foerster committed suicide. But there is no
evidence showing that the bank knew that Foerster was misappropriating the funds of his
principal. The Insular Drug Company claims that it never received the face value of 132
checks here in the question covering a total of P18,285.92.
ISSUE: WON the bank can be held liable
HELD: YES
 This is a case where 132 checks made out in the name of the Insular Drug Co., Inc., were
brought to the branch office of the Philippine National Bank in Iloilo by Foerster, a
salesman of the drug company, Foerster's wife, and Foerster's clerk. The bank could tell
by the checks themselves that the money belonged to the Insular Drug Co., Inc., and not
to Foerster or his wife or his clerk. When the bank credited those checks to the personal
account of Foerster and permitted Foerster and his wife to make withdrawals without
there being made authority from the drug company to do so, the bank made itself
responsible to the drug company for the amounts represented by the checks. The bank
could relieve itself from responsibility by pleading and proving that after the money was
withdrawn from the bank it passed to the drug company which thus suffered no loss, but
state in conclusion that bank will have to stand the loss occasioned by the negligence of
its agents.
 The bank argues that the drug company was never defrauded at all. While the evidence
on the extent of the loss suffered by the drug company is not nearly as clear as it should
be, it is a sufficient answer to state that no such special defense was relied upon by the
bank in the trial court. The drug company saw fit to stand on the proposition that checks
drawn in its favor were improperly and illegally cashed by the bank for Foerster and
placed in his personal account, thus making it possible for Foerster to defraud the drug
company, and the bank did not try to go back of this proposition.
 The next point relied upon by the bank, to the effect that Foerster had implied authority
to indorse all checks made out in the name of the Insular Drug Co., Inc., has even less
force. Not only did the bank permit Foerster to indorse checks and then place them to his
personal account, but it went farther and permitted Foerster's wife and clerk to indorse
the checks.
 The right of an agent to indorse commercial paper is a very responsible power and will
not be lightly inferred. A salesman with authority to collect money belonging to his
principal does not have the implied authority to indorse checks received in payment.
Any person taking checks made payable to a corporation, which can act only by agent
does so at his peril, and must same by the consequences if the agent who indorses the
same is without authority.
 It is sufficient to state that no trust fund was involved; that the fact that bank acted in
good faith does not relieve it from responsibility; that no proof was adduced, admitting
that Foerster had right to indorse the checks, indicative of right of his wife and clerk to do
the same , and that the checks drawn on the Bank of the Philippine Islands can not be
differentiated from those drawn on the Philippine National Bank because of the
indorsement by the latter.
THE MUNICIPAL COUNCIL OF ILOILO, plaintiff and appellee, VS. JOSE EVANGELISTA ET AL.,
defendants and appellees. TAN ONG SZE VDA. DE TAN TOCO, appellant.
November 17, 1930
PRINCIPAL: TAN TOCO (wife of Jose Arroyo)
ATTY-IN-FACT: TAN BOON TIONG
SCOPE OF AUTHORITY: to employ and contract for the services of lawyers
1. Tan Ong Sze Vda. de Tan Toco sought to recover from the Municipality of Iloilo the
value of a strip of land which was taken by the Municipality to widen a public street;
2. CFI entitled Tan Toco to recover P42,966.40, representing the value of said strip of
land, from the Municipality. This was affirmed by SC. Case was remanded to the
court of origin, and the judgment became final and executory.
3. Attorney Jose Evangelista, in his own behalf and as counsel for the administratrix of
Jose Ma. Arroyo's intestate estate, filed a claim in the same case for professional
services rendered by him, which the court, acting with the consent of the Tan
Toco, fixed at 15 per cent of the amount of the judgment .
 4. At the hearing on said claim, the claimants appeared: Antero Soriano appeared
claiming the amount of the judgment had been assigned to him (by atty-in-fact Tan
Boon Tiong), which he in turn assigned to Mauricio Cruz & Co., Inc.
5. After hearing all the adverse claims on the amount of the judgment, the court
ordered :
a. that the attorney's lien in the amount of 15 per cent of the judgment, be
recorded in favor of Attorney Jose Evangelista, in his own behalf and as counsel
for the administratrix of the deceased Jose Ma. Arroyo, and
b. directed the municipality of Iloilo to file an action of interpleading against the
adverse claimants, the Philippine National Bank, Antero Soriano, Mauricio Cruz
& Co., Jose Evangelista, and Jose Arroyo, as was done, the case being filed in
the Court of First Instance of Iloilo as civil case No. 7702.
6. CFI:
a. declaring valid and binding the deed of assignment of the credit executed by
Tan Toco's widow, through her attorney-in-fact Tan Buntiong, in favor of the
late Antero Soriano; likewise the assignment executed by the latter during his
lifetime in favor of the defendant Mauricio Cruz & Co., Inc., and
b. the Municipality was also ordered to pay the said Mauricio, Cruz & Co., Inc., the
balance of P30,966.40 and ordered to deposit said sum in a local bank, at the
disposal of the aforesaid Mauricio Cruz & Co., Inc.,
7. the municipal treasurer of Iloilo, paid the late Antero Soriano the amount of P6,000
in part payment of the judgment mentioned above, assigned to him by Tan Boon
Tiong, acting as attorney-in-fact of the appellant herein, Tan Ong Sze Vda. de Tan
Toco.
8. In pursuance of the resolution of the court below ordering that the attorney's lien in
the amount of 15 per cent of the judgment be recorded in favor of Attorney Jose
Evangelista, in his own behalf and as counsel for the late Jose Ma. Arroyo, the said
clerk of court delivered on the same date to said Attorney Jose Evangelista the said
amount of P6,000.
9. With these two payments ( for Atty. Soriano and Atty. Evangelista) of P6,000 each
making a total of P12,000, the judgment for P42,966.44 against the municipality of
Iloilo was reduced to P30,966.40, which was adjudicated by said court to Mauricio
Cruz & Co.
ISSUE: WON Tan Boon Tiong, as attorney-in-fact of the appellant, was empowered by his
principal to make an assignment of credits, rights, and interests, in payment of debts for
professional services rendered by lawyers. (WON assignment made to Atty. Soriano is VALID)
HELD: YES. in paragraph VI of the power of attorney, 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. In the present case, the assignment made by Tan Boon
Tiong, as attorney-in-fact for the appellant, in favor of Attorney Antero Soriano for
professional services rendered in other cases in the interests of the appellant and her coheirs,
was that credit which she had against the municipality of Iloilo, and such assignment was
equivalent to the payment of the amount of said credit to Antero Soriano for professional
services.
RATIO:
(1) That an agent or attorney-in-fact empowered to pay the debts of the principal, and to
employ lawyers to defend the latter's interests, is impliedly empowered to pay the lawyer's
fees for services rendered in the interests of said principal, and may satisfy, them by an
assignment of a judgment rendered in favor of said principal;
(2) that when a person appoints two attorneysin-fact independently, the consent of the one
will not be required to validate the acts of the other unless that appears positively to have
been the principal's intention; and
(3). that the assignment of the amount of a judgment made by a person to his attorney, who
has not taken any part in the case wherein said judgment was rendered, made in payment of
professional services, in other cases, does not contravene the prohibition of article 1459, case
5, of the Civil Code.
NOTE: aside from Tan Boon Tiong, there is another atty-in-fact: Tan Montano. The court said
that: the failure of the other attorney-in-fact to consent to the deed of assignment, the latter
being also authorized to pay, in the name and behalf of the principal, all her debts and the
liens and encumbrances on her property, the very fact that different letters of attorney were
given to each of these two representatives shows that it was not the principal's intention that
they should act jointly in order to make their acts valid. Furthermore, the Principal Tan Toco
was aware of that assignment and she not only did not repudiate it, but she continued
employing Attorney Antero Soriano to represent her in court.
DOMINGO v. DOMINGO
42 SCRA 131
Quick Summary:
Vicente (Seller) contracts Gregorio to be his broker and agrees to share 5% commission
when Gregorio is able to sell the lot. The suggested price is PhP2.00/sqm for the lot.
Gregorio subhires Purisma, promising half the commission if he is able to secure a buyer.
Purisma presents Oscar de Leon who proceeds to agree to buy the lot at the price of
PhP1.20/sqm as Gregorio negotiated with Vicente for a lower price. This he did and was able
to secure a secret profit or propina of PhP1,000.00 allegedly for reducing the price.
Later, Oscar de Leon proceeds to buy the lot but in the name of his wife, Amparo Diaz.
Vicente excludes Gregorio from the transaction and refuses to pay commission (he tore their
original contract of agency) even if it was stipulated in their agreement that he is still
accountable to Gregorio for the commission if sale commenced with 3 months after
termination of agency contract.
Article 1891 applies. It is the duty of the agent to account for and to deliver to the principal
all money and property which may have come into his hands or his subagent. This he did not
do. He withheld the PhP1,000.00 gift from Vicente, who did not even know about this. SC
held that Gregorio has forfeited his share in the commission for breach of loyalty. His
acceptance of said substantial monetary gift (the propina) corrupted his duty to serve the
interests only of his principal and undermined his loyalty to his principal, who gave him
partial advance of Three Hundred Pesos (P300.00) on his commission. Instead of securing
the highest price for the lot for his principal, he ended up bargaining with him at the
expense of the seller.
FACTS:
In a document, Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the
exclusive agency to sell his lot No. 883 of Piedad Estate with an area of about 88,477 square
meters at the rate of P2.00 per square meter (or for P176,954.00) with a commission of 5% on
the total price, if the property is sold by Vicente or by anyone else during the 30-day duration
of the agency or if the property is sold by Vicente within three months from the termination of
the agency to apurchaser to whom it was submitted by Gregorio during the continuance of the
agency with notice to Vicente. The said agency contract was in triplicate, one copy was given
to Vicente, while the original and another copy were retained by Gregorio.
On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer,
promising him one-half of the 5% commission.
Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer.
After several conferences between Gregorio and Oscar de Leon, the latter raised his offer to
P109,000.00 on June 20, 1956 , to which Vicente agreed by signing. Upon demand of Vicente,
Oscar de Leon issued to him a check in the amount of P1,000.00 as earnest money, after which
Vicente advanced to Gregorio the sum of P300.00. Oscar de Leon confirmed his former offer
to pay for the property at P1.20 per square meter in another letter. Subsequently, Vicente
asked for an additional amount of P1,000.00 as earnest money, which Oscar de Leon promised
to deliver to him. Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the
sum of One Thousand Pesos (P1,000.00) for succeeding in persuading Vicente to sell his lot at
P1.20 per square meter or a total in round figure of One Hundred Nine Thousand Pesos
(P109,000.00). This gift of One Thousand Pesos (P1,000.00) was not disclosed by Gregorio to
Vicente. Neither did Oscar pay Vicente the additional amount of One Thousand Pesos
(P1,000.00) by way of earnest money. In the deed of sale was not executed on August 1, 1956
as stipulated in Exhibit "C" nor on August 15, 1956 as extended by Vicente, Oscar told Gregorio
that he did not receive his money from his brother in the United States, for which reason he
was giving up the negotiation including the amount of One Thousand Pesos (P1,000.00) given
as earnest money to Vicente and the One Thousand Pesos (P1,000.00) given to Gregorio as
propina or gift.
When Oscar did not see him after several weeks, Gregorio sensed something fishy. So, he
went to Vicente and read a portion of Exhibit "A" marked habit "A-1" to the effect that Vicente
was still committed to pay him 5% commission, if the sale is consummated within three
months after the expiration of the 30-day period of the exclusive agency in his favor from the
execution of the agency contract on June 2, 1956 to a purchaser brought by Gregorio to
Vicente during the said 30-day period. Vicente grabbed the original of Exhibit "A" and tore it to
pieces. Gregorio held his peace, not wanting to antagonize Vicente further, because he had
still duplicate of Exhibit "A". From his meeting with Vicente, Gregorio proceeded to the office
of the Register of Deeds of Quezon City, where he discovered Exhibit "G' deed of sale
executed on September 17, 1956 by Amparo Diaz, wife of Oscar de Leon, over their house and
lot No. 40 Denver Street, Cubao, Quezon City, in favor Vicente as down payment by Oscar de
Leon on the purchase price of Vicente's lot No. 883 of Piedad Estate. Upon thus learning that
Vicente sold his property to the same buyer, Oscar de Leon and his wife, he demanded in
writting payment of his commission on the sale price of One Hundred Nine Thousand Pesos
(P109,000.00), Exhibit "H". He also conferred with Oscar de Leon, who told him that Vicente
went to him and asked him to eliminate Gregorio in the transaction and that he would sell his
property to him for One Hundred Four Thousand Pesos (P104,000.0 In Vicente's reply to
Gregorio's letter, Exhibit "H", Vicente stated that Gregorio is not entitled to the 5%
commission because he sold the property not to Gregorio's buyer, Oscar de Leon, but to
another buyer, Amparo Diaz, wife of Oscar de Leon.
The Court of Appeals found from the evidence that Exhibit "A", the exclusive agency contract,
is genuine; that Amparo Diaz, the vendee, being the wife of Oscar de Leon the sale by Vicente
of his property is practically a sale to Oscar de Leon since husband and wife have common or
identical interests; that Gregorio and intervenor Teofilo Purisima were the efficient cause in
the consummation of the sale in favor of the spouses Oscar de Leon and Amparo Diaz; that
Oscar de Leon paid Gregorio the sum of One Thousand Pesos (P1,000.00) as "propina" or gift
and not as additional earnest money to be given to the plaintiff, because Exhibit "66",
Vicente's letter addressed to Oscar de Leon with respect to the additional earnest money,
does not appear to have been answered by Oscar de Leon and therefore there is no writing or
document supporting Oscar de Leon's testimony that he paid an additional earnest money of
One Thousand Pesos (P1,000.00) to Gregorio for delivery to Vicente, unlike the first amount of
One Thousand Pesos (P1,000.00) paid by Oscar de Leon to Vicente as earnest money,
evidenced by the letter Exhibit "4"; and that Vicente did not even mention such additional
earnest money in his two replies Exhibits "I" and "J" to Gregorio's letter of demand of the 5%
commission.
ISSUE:
(1) whether the failure on the part of Gregorio to disclose to Vicente the payment to him by
Oscar de Leon of the amount of One Thousand Pesos (P1,000.00) as gift or "propina" for
having persuaded Vicente to reduce the purchase price from P2.00 to P1.20 per square meter,
so constitutes fraud as to cause a forfeiture of his commission on the sale price.
HELD:
In the case at bar, defendant-appellee Gregorio Domingo as the broker, received a gift or
propina in the amount of One Thousand Pesos (P1,000.00) from the prospective buyer Oscar
de Leon, without the knowledge and consent of his principal, herein petitioner-appellant
Vicente Domingo. His acceptance of said substantial monetary gift corrupted his duty to serve
the interests only of his principal and undermined his loyalty to his principal, who gave him
partial advance of Three Hundred Pesos (P300.00) on his commission. As a consequence,
instead of exerting his best to persuade his prospective buyer to purchase the property on the
most advantageous terms desired by his principal, the broker, herein defendant-appellee
Gregorio Domingo, succeeded in persuading his principal to accept the counter-offer of the
prospective buyer to purchase the property at P1.20 per square meter or One Hundred Nine
Thousand Pesos (P109,000.00) in round figure for the lot of 88,477 square meters, which is
very much lower the the price of P2.00 per square meter or One Hundred Seventy-Six
Thousand Nine Hundred Fifty-Four Pesos (P176,954.00) for said lot originally offered by his
principal.
The duty embodied in Article 1891 of the New Civil Code will 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.
Neither would the rule apply if the agent or broker had informed the principal of the gift or
bonus or profit he received from the purchaser and his principal did not object therto.
11
Herein defendant-appellee Gregorio Domingo was not merely a middleman of the petitioner-
appellant Vicente Domingo and the buyer Oscar de Leon. He was the broker and agent of said
petitioner-appellant only. And therein petitioner-appellant was not aware of the gift of One
Thousand Pesos (P1,000.00) received by Gregorio Domingo from the prospective buyer; much
less did he consent to his agent's accepting such a gift.
The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of Oscar de
Leon, does not materially alter the situation; because the transaction, to be valid, must
necessarily be with the consent of the husband Oscar de Leon, who is the administrator of
their conjugal assets including their house and lot at No. 40 Denver Street, Cubao, Quezon
City, which were given as part of and constituted the down payment on, the purchase price of
herein petitioner-appellant's lot No. 883 of Piedad Estate. Hence, both in law and in fact, it
was still Oscar de Leon who was the buyer.
As a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo
must forfeit his right to the commission and must return the part of the commission he
received from his principal.
Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from Gregorio
Domingo his one-half share of whatever amounts Gregorio Domingo received by virtue of the
transaction as his sub-agency contract was with Gregorio Domingo alone and not with Vicente
Domingo, who was not even aware of such sub-agency. Since Gregorio Domingo received
from Vicente Domingo and Oscar de Leon respectively the amounts of Three Hundred Pesos
(P300.00) and One Thousand Pesos (P1,000.00) or a total of One Thousand Three Hundred
Pesos (P1,300.00), one-half of the same, which is Six Hundred Fifty Pesos (P650.00), should be
paid by Gregorio Domingo to Teofilo Purisima.
Because Gregorio Domingo's clearly unfounded complaint caused Vicente Domingo mental
anguish and serious anxiety as well as wounded feelings, petitioner-appellant Vicente
Domingo should be awarded moral damages in the reasonable amount of One Thousand
Pesos (P1,000.00) attorney's fees in the reasonable amount of One Thousand Pesos
(P1,000.00), considering that this case has been pending for the last fifteen (15) years from its
filing on October 3, 1956.
WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of Appeals
and directing defendant-appellee Gregorio Domingo: (1) to pay to the heirs of Vicente
Domingo the sum of One Thousand Pesos (P1,000.00) as moral damages and One Thousand
Pesos (P1,000.00) as attorney's fees; (2) to pay Teofilo Purisima the sum of Six Hundred Fifty
Pesos (P650.00); and (3) to pay the costs.
Severino v. Severino
44 Phil. 343 (1923)
Plaintiff & Appellee: Fabiola Severino (natural child)
Defendant & Appellant: Guillermo Severino (brother and administrator)
Intervenor & Appellee: Felicitas Villanueva (administratrix of the estate)
Ostrand, J.
Summary: The natural child and sole heir filed suit to recover property of the deceased father
consisting of 4 parcels of land which was registered in the name of the brother/administrator.
The court ruled for the daughter as the agent or any person occupying fiduciary relations is
utterly disabled from acquiring for his own benefit the property committed to his custody for
management.
Facts:
Melecio Severino died on May 25, 1915. Some 428 hectares of land were recorded
in the Mortgage Law Register in his name in 1901 by virtue of possessory information
proceedings instituted by his brother Agapito Severino in his behalf. During his lifetime, the
land was worked by defendant Guillermo Severino as administrator. Guillermo continued to
occupy the land and in 1916, a survey was conducted and Guillermo’s lawyer, Roque Hofilena
claimed the lots for his client and succeeded in having the title decreed in favor of Guillermo.
The alleged natural daughter and sole heir of one Melecio Severino, Fabiola Severino filed an
action to compel Guillermo Severino to convey to her 4 parcels of land or to pay her in default,
Php800,000 in damages for wrongfully causing said land to be registered in his own name.
Felicitas Villanueva, in her capacity as administratrix of the estate also filed a complaint in
intervention claiming same relief except that for the conveyance to be made to the estate of
Melecio instead of to Fabiola Severino. Guillermo Severino denied the charge and averred that
since he was already awarded the title, it has become res judicata and cannot be disturbed.
The lower court recognized Fabiola as the acknowledged natural daughter of
Melecio and ordered the defendant to convey 428 hectares of land to the intervenor as
administratrix of the estate.
Issue:
1. Whether or not the registration of land under the name of the administrator
was valid – was there fraud involved?
2. Side Issue: Did the defendant’s title has become res judicata to the case?
Did the trial court err in acknowledging Fabiola as the natural child of Melecio
in same proceeding?
Held:
1. NO. That Guillermo came into possession of the property as the agent of the
deceased Melecio in the administration of the property cannot be successfully
disputed. He stated under oath in the case of Montelibano vs. Severino that from
 1902 up to 1913, he had been continuously in charge as encargado or administrator,
and that the Melecio’s possession was peaceful, continuous and exclusive.
The relations of an agent to his principal are fiduciary and it is an old rule
that in regard to property forming the subject matter of the agency, he is stopped
from acquiring or asserting a title adverse to that of the principal. His position is
analogous to that of a trustee and he cannot be allowed to create in himself an
interest in opposition to that of his principal or cestui que trust. This is substantially
in harmony with the principles of the Civil Law and American cases:
In Gilbert vs. Hewetson , a receiver, trustee, attorney, agent or any other person
occupying fiduciary relations respecting property or persons, is utterly disabled from
acquiring for his own benefit the property committed to his custody for
management. No fraud is needed to be shown.
In Massie vs. Watts, the agent cannot hold the land under an entry for himself
otherwise than as trustee for his principal.
As will be seen, an agent is not only stopped from denying his principal’s
title to the property, but he is also disabled from acquiring interests therein adverse
to those of his principal during the term of the agency.
2. On res judicata: NO. Turning to the Land Registration Act, there is no indication of an
intention to cut off, through the issuance of a decree of registration, equitable rights
or remedies. Section 70 and 102 of the Act provides otherwise.
On the acknowledgement of Fabiola as natural child: YES. The trial court err in
making a declaration in the present case as to the recognition of Fabiola Severino as
the natural child of Melecio Severino. The question of the status of Fabiola and her
right to share in the inheritance may, upon notice to all interested parties, be
determined in the probate proceedings for the settlement of the estate of the
deceased.
Judgment of the trial court is in accordance with the facts and the law. The right of
Fabiola Severino to establish in the probate proceedings her status as a recognized
natural child is reserved. Judgment affirmed with instructions.
------------------------------------------------------------------------------------------------------
PNB vs. MANILA SURETY and FIDELITY CO., INC., CA
REYES, J.B.L., J.:
Facts:
PNB had opened a letter of credit and advanced thereon $120,000 to Edgington Oil Refinery
for 8,000 tons of hot asphalt, where 2,000 tons of this (worth P279,000) were released and
delivered to Adams & Taguba Corp. (ATACO) under a trust receipt guaranteed by Manila
Surety & Fidelity Co. up to the amount of P75,000. To pay for the asphalt, ATACO constituted
the Bank its assignee and attorney-in-fact to receive and collect from the Bureau of Public
Works the amount aforesaid out of funds payable to the assignor under Purchase Order No.
71947. This assignment stipulated the conditions that:
1. The same shall remain irrevocable until the said credit accomodation is fully liquidated.
2. The PNB is hereby appointed as our Attorney-in-Fact for us and in our name, place and
stead, to collect and to receive the payments to be made by virtue of the aforesaid
Purchase Order, with full power and authority to execute and deliver on our behalf,
receipt for all payments made to it; to endorse for deposit or encashment checks, money
order and treasury warrants which said Bank may receive, and to apply said payments to
the settlement of said credit accommodation.
This power of attorney shall also remain irrevocable until our total indebtedness to the
said Bank have been fully liquidated.
ATACO delivered to the Bureau of Public Works, and the latter accepted, asphalt to the total
value of P431,466.52. Of this amount the Bank regularly collected, from April 21, 1948 to
November 18, 1948, P106,382.01. Thereafter, for unexplained reasons, the Bank ceased to
collect, until in 1952 its investigators found that more moneys were payable to ATACO from
the Public Works office, because the latter had allowed mother creditor to collect funds due to
ATACO under the same purchase order to a total of P311,230.41.
Its demands on ATACO and Manila Surety having been refused, PNB sued both in the CFI of
Manila to recover the balance of P158,563.18 as of February 15, 1950.
CFI: in favor of PNB and ordered ATACO and Manila Surety to pay the bank P174,462.34 as of
Feb. 1956 minus P8K which Manila Surety paid, provided that the latter shall not pay more
than P75K; that ATACO and Pedro Taguba, jointly and severally, to pay Manila Surety what it
would have to pay.
Only PNB appealed.
CA: reversed CFI as to Manila Surety’s liability, holding that:
PNB had been negligent in having stopped collecting from the Bureau of Public
Works the moneys falling due in favor of ATACO, from and after November 18, 1948,
before the debt was fully collected, thereby allowing such funds to be taken and
exhausted by other creditors to the prejudice of the surety, and PNB’s negligence
resulted in exoneration of respondent Manila Surety.
PNB: The power of attorney obtained from ATACO was merely in additional security in its
favor, and that it was the duty of the surety, and not that of the creditor, to see to it that the
obligor fulfills his obligation, and that the creditor owed the surety no duty of active diligence
to collect any, sum from the principal debtor.
ISSUE: WON PNB was diligent in collecting from the Bureau of Public Works.
HELD: NO.
CA 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 (Civ. Code, Art. 1887) and becomes liable for the damages which the principal may
suffer through his non-performance (Civ. Code, Art. 1884). Certainly, Manila Surety 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.
Even if the assignment with power of attorney from the principal debtor were considered as
mere additional security, by allowing the assigned funds to be exhausted without notifying the
surety, the Bank deprived the former of any possibility of recoursing against that security. The
Bank thereby exonerated the surety, pursuant to:
ART. 2080. — The guarantors, even though they be solidary, are released from their
obligation whenever by some act of the creditor they cannot be subrogated to the
rights, mortgages and preferences of the latter.
The appellant points out to its letter of demand addressed to the Bureau of Public Works, on
May 5, 1949, and its letter to ATACO, informing the debtor that as of its date, October 1949,
its outstanding balance was P156,374.83. But it has no bearing on the issue whether the Bank
has exercised due diligence in collecting from the Bureau of Public Works, since the letter was
addressed to ATACO, and the funds were to come from elsewhere. As to the letter of demand
on the Public Works office, it does not appear that any reply thereto was made; nor that the
demand was pressed, nor that the debtor or the surety were ever apprised that payment was
not being made. Because of the Bank's inactivity the other creditors were enabled to collect
P173,870.31, when the balance due to PNB was only P158,563.18.
Even if the Court of Appeals erred on the second reason it advanced in support of the decision
now under appeal, because the rules on application of payments, giving preference to secured
obligations are only operative in cases where there are several distinct debts, and not where
there is only one that is partially secured, the error is of no importance, since the principal
reason based on the Bank's negligence furnishes adequate support to the decision of the
Court of Appeals that the surety was thereby released.
Affirmed.
GREEN VALLEY POULTRY & ALLIED PRODUCTS, INC., petitioner vs.
THE INTERMEDIATE APPELLATE COURT and E.R. SQUIBB & SONS PHILIPPINE CORPORATION,
respondents.
ABAD SANTOS, J.:
 On November 3, 1969, Squibb and Green Valley entered into a letter agreement the text
of which reads as follows:
E.R. Squibb & Sons Philippine Corporation is pleased to appoint Green
Valley Poultry & Allied Products, Inc. as a non-exclusive distributor for
Squibb Veterinary Products, as recommended by Dr. Leoncio D. Rebong, Jr.
and Dr. J.G. Cruz, Animal Health Division Sales Supervisor.
As a distributor, Green Valley Poultry & Allied Products, Inc. wig be
entitled to a discount as follows:
Feed Store Price (Catalogue)
Less 10%
Wholesale Price
Less 10%
Distributor Price
There are exceptions to the above price structure. At present, these are:
1. Afsillin Improved — 40 lbs. bag
The distributor commission for this product size is 8% off P120.00
2. Narrow — Spectrum Injectible Antibiotics
These products are subject to price fluctuations. Therefore, they are
invoiced at net price per vial.
3. Deals and Special Offers are not subject to the above distributor price
structure. A 5% distributor commission is allowed when the distributor
furnishes copies for each sale of a complete deal or special offer to a
feedstore, drugstore or other type of account.
Deals and Special Offers purchased for resale at regular price invoiced at
net deal or special offer price.
Prices are subject to change without notice. Squibb will endeavor to advise
you promptly of any price changes. However, prices in effect at the tune
orders are received by Squibb Order Department will apply in all instances.
Green Valley Poultry & Allied Products, Inc. win distribute only for the
Central Luzon and Northern Luzon including Cagayan Valley areas. We will
not allow any transfer or stocks from Central Luzon and Northern Luzon
including Cagayan Valley to other parts of Luzon, Visayas or Mindanao
which are covered by our other appointed Distributors. In line with this,
you will follow strictly our stipulations that the maximum discount you can
give to your direct and turnover accounts will not go beyond 10%.
It is understood that Green Valley Poultry and Allied Products, Inc. will
accept turn-over orders from Squibb representatives for delivery to
customers in your area. If for credit or other valid reasons a turn-over
 order is not served, the Squibb representative will be notified within 48
hours and hold why the order will not be served.
It is understood that Green Valley Poultry & Allied Products, Inc. will put
up a bond of P20,000.00 from a mutually acceptable bonding company.
Payment for Purchases of Squibb Products will be due 60 days from date
of invoice or the nearest business day thereto. No payment win be
accepted in the form of post-dated checks. Payment by check must be on
current dating.
It is mutually agreed that this non-exclusive distribution agreement can be
terminated by either Green Valley Poultry & Allied Products, Inc. or Squibb
Philippines on 30 days notice.
I trust that the above terms and conditions will be met with your approval
and that the distributor arrangement will be one of mutual satisfaction.
If you are agreeable, please sign the enclosed three (3) extra copies of this
letter and return them to this Office at your earliest convenience.
Thank you for your interest and support of the products of E.R. Squibb &
Sons Philippines Corporation.
 Since goods delivered to Green Valley were unpaid, Squibb filed suit to collect. The trial
court gave judgment in favor of Squibb which was affirmed by the Court of Appeals.
 Green Valley claimed that the contract with Squibb was a mere agency to sell; that it
never purchased goods from Squibb; that the goods received were on consignment only
with the obligation to turn over the proceeds, less its commission, or to return the
goods if not sold, and since it had sold the goods but had not been able to collect from
the purchasers thereof, the action was premature.
 Squibb claimed that the contract was one of sale so that Green Valley was obligated to
pay for the goods received upon the expiration of the 60-day credit period.
 Both TC and CA upheld the claim of Squibb that the agreement between the parties was
a sales contract.
 We do not have to categorize the contract. 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.
WHEREFORE, the petition is hereby dismissed; the judgment of the defunct Court of Appeals is
affirmed with costs against the petitioner.
SMITH, BELL & CO. V SOTELO MATTI
ROMUALDEZ; 1922
NATURE
APPEAL from a judgement of the CFI of Manila
PRINCIPAL: intervenor Maanila Oil Refining and By-products
Agent: SOTELO
FACTS
- August, 1918: Plaintiff Corporation Smith, Bell & Co., and defendant Sotelo entered into
contract:
- Plaintiff obligated itself to sell (and the defendant to purchase) 1) 2 steel tanks, to be shipped
from New York and delivered at Manila “within 3 or 4 months”; 2) 2 expellers to be shipped
from San Francisco in the month of September, 1918, or as soon as possible; 3) 2 electric
motors to be delivered “Approximate delivery within ninety days. – This is not guaranteed.”
- tanks arrived at Manila April 27, 1919
- expellers arrived October 26, 1918
- motors arrived Feb. 27, 1919.
-The plaintiff corporation notified Sotelo of the arrival of these goods, but Sotelo refused to
receive them and to pay the prices stipulated.
- The court below absolved the defendants from the complaint insofar as the tanks and
electric motors were concerned, but rendered judgment against them for the expellers,
ordering them to “receive the aforesaid expellers and pay the plaintiff the price of the said
goods”
- both parties appeal
Petitioners' Claim
- petitioner immediately notified the defendant Sotelo of the arrival of the goods
- defendant refused to receive and pay the price
- expellers and motors in good conditions
Defendant Sotelo and Intervenor Manila Oil:
- denied the allegations as to:
a. the shipment and arrival of the goods,
b. the notification to Mr. Sotelo,
c. the latter's refusal to receive them and pay their price,
d. and the good condition of the expellers and the motors
- alleged as special defense:
a. Sotelo made the contracts in question as manager of the intervenor, the Manila Oil
Refining and ByProducts Co. which fact was known to the plaintiff, and
b. that "it was only in May, 1919, that it notified the intervenor that said tanks had arrived,
the motors and the expellers having arrived incomplete and long after the date
stipulated."
- As a counterclaim or set-off, they also allege that, as a consequence of the plaintiff's delay in
making delivery of the goods, which the intervenor intended to use in the manufacture of
cocoanut oil, the intervenor suffered damages
ISSUE#1: WON, under the contracts entered into and the circumstances established in the
record, the plaintiff has fulfilled, in due time, its obligation to bring the goods in question to
Manila
HELD
1. Yes. The plaintiff has not been guilty of any delay in the fulfillment of its obligation, and it
could not have incurred any of the liabilities mentioned by the intervenor in its counterclaim.
Ratio When no definite date has been fixed for the delivery of goods, the obligor shall not be
held guilty of delay in the fulfillment of its obligation if it delivers the goods within a
reasonable time.
Reasoning
- The obligation is regarded as conditional: the term which the parties attempted to fix is so
uncertain that one cannot tell just whether those articles could be brought to Manila or not.
*They were executed at the time of the world war when there existed rigid restrictions on the
export from the US of articles like the machinery in question, and transportation was difficult.
- When the delivery is subject to the fulfillment of a condition dependent on the will of third
persons who could in no way be compelled to fulfill the condition (like in this case), the obligor
will be deemed to have sufficiently performed his part of the obligation, if he has done all that
was in his power, even if the condition has not been fulfilled in reality- and he has the right to
demand performance of the contract by the other party.
- In such cases, delivery must be made within reasonable time.
- What is reasonable time? – to be determined by the circumstances attending the particular
transaction, such as the character of the goods, the purpose for which they are intended, the
ability of the seller to produce the goods if they are to be manufactured, the facilities available
for transportation, and the distance the goods must be carried, and the usual course of
business in the particular trade.
ISSUE#2 2. WON the intervenor Manila Oil has right of action
Held: No.
Ratio When an agent acts in his own name, the principal shall have no right of action against
the persons with whom the agent has contracted.
Reasoning When the agent transacts business in his own name, it shall not be necessary to
state who is the principal and he shall be directly liable, as if the business were for his own
account. (Code of Com., art 246)
- Agent signed the contracts in his individual capacity and his own name, therefore, he
is bound by them
-
rd
Undisclosed principal has no right of action against the 3 party
Disposition the judgment appealed from is modified, and the defendant sentenced to accept
and receive from the plaintiff the tanks, expellers, motors, and to pay the plaintiff the sum of
P96,000, with legal interest, and the costs of both instances.
Rural Bank of Bombon v CA
G.R. No. 95703 | August 3, 1992
Quick Summary:
Ederlinda Gallardo transacted with Rufino Aquino, contracting him to be her agent and
providing him with a Special Power of Attorney authorizing him to mortgage her property in
her behalf for the purpose of securing loans from banks. She provided him with the TCT to the
property as well.
Rufino Aquino secured a loan from Rural Bank of Bombon for the amount of PhP350,000.00 as
principal and chargeable with a 14% interest per annum. In the contract of mortgage, he
represented himself to be the attorney-in-fact of Gallardo, but proceeded to sign his name as
mortgagor. He even got his wife to sign the documents as wife of mortgagor.
Gallardo, upon knowing of the transaction, went to court to secure the annulment of such
contract since she was allegedly surprised to find out that her property was already
mortgaged and correspondence regarding the contract of mortgage were not being sent to
her, and instead sent to the address of Aquino, who has since disappeared from Bulacan and
now resides in Camarines Sur. Further, the mortgage was secured to pay off personal loans of
Aquino and to establish his personal fishpond business.
RTC issued a TRO restraining Rural Bank of Bombon to foreclose the mortgage. In his Answer,
Aquino alleged that Gallardo owed him money and it was already the responsibility of Aquino
to take care of payments due. RTC ruled in favor of Aquino and Bank of Bombon.
CA reversed the ruling of the RTC and held that the Deal of Real Estate Mortgage was not
valid. It not binding on the principal Gallardo since it was executed not in her name as Avancena, J.
principal but in the personal capacity of the Aquino spouses.

Issue:
WON the Deed of Real Estate Mortgage executed by Rufino S. Aquino as attorney-in-fact of Facts:
Ederlinda Gallardo in favor of the Rural Bank of Bombon is valid.
In 1902, the defendant was appointed by the plaintiffs administrator of their
Held: property and acted as such until June 30, 1916, when his authority was cancelled. It is alleged
No. Aquino signed the Deed of Real Estate Mortgage in his name alone as mortgagor, without
by the plaintiffs, who are defendant’s parents that the defendant acquired the property
any indication that he was signing for and in behalf of the property owner, Ederlinda Gallardo.
He bound himself alone in his personal capacity as a debtor of the petitioner Bank and not as claimed in his capacity as administrator with their money and for their benefit. The properties
the agent or attorney-in-fact of Gallardo. include the launch Malabon, casco Nos. 2584 and 2545, automobile No. 2060, typewriting
machine, house and piano. The trial court ordered the defendant to return the properties and
Ratio: the rendition of accounts of his administration.
It is a general rule in the law of agency that, in order to bind the principal by a mortgage on
real property executed by an agent, it must upon its face purport to be made, signed and
sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough
merely that the agent was in fact authorized to make the mortgage, if he has not acted in the Issue:
name of the principal. Neither is it ordinarily sufficient that in the mortgage the agent
describes himself as acting by virtue of a power of attorney, if in fact the agent has acted in his Whether or not the purchase of the properties under the administrator’s name was
own name and has set his own hand and seal to the mortgage. This is especially true where
valid?
the agent himself is a party to the instrument. However clearly the body of the mortgage may
show and intend that it shall be the act of the principal, yet, unless in fact it is executed by the
agent for and on behalf of his principal and as the act and deed of the principal, it is not valid
as to the principal. (Philippine Sugar Estates Development Co. vs. Poizat)
Held:
Bank cannot rely on Article 1883 to bind the principal Gallardo. It is not applicable to the case
at bar. Article 1883 states “in such case the agent is the one directly bound in favor of the NO. From the rule established in Article 1717 of the Civil Code, when an agent acts in
person with whom he has transacted, as if the transaction was his own, except when the his own name, the principal shall have no right of action against the person with whom the
contract involves things belonging to the principal.” agent has contracted, cases belonging to principal are excepted. According to this exception,
(when things belonging to the principal are dealt with), the agent is bound to the principal
There is no principle of law by which a person can become liable on a real mortgage which she although he does not assume the character of such agent and appears acting in his own name.
never executed either in person or by attorney in fact. Here, Aquino acted purportedly as an The money with which the launch and the other properties were brought having come from the
agent of Gallardo, but actually acted in his personal capacity. Involved herein are properties plaintiff, the exception established in this article is applicable. The case of Martinez vs.
titled in the name of respondent Gallardo against which the Bank proposes to foreclose the
Martinez is not applicable as in that case, the relation of principal and agent, which exists
mortgage constituted by an agent (Aquino) acting in his personal capacity.
between the plaintiffs and the defendant, did not exist.

Sy-Juco and Viardo vs. Sy-Juco Regarding the launch Malabon, it appears that the defendant bought it in his own
name from the Pacific Commercial Co., and registered it to the Custom House, not with his
40 Phil. 1920 (1920)
money, but within the agency which he had received from the plaintiffs. It was bought using
the plaintiffs’ money and immediately after the purchase, the launch had to be repaired at
their expense. If the defendant contracted the obligation to buy the launch for the plaintiffs
Plaintiffs and Appellants: Vicente Sy-Juco & Cipriana Viardo and in their representation, by virtue of the agency, notwithstanding the fact that it was
bought in his own name, he is obliged to transfer to the plaintiffs the rights he received from
Defendant and Appellant: Santiago V. Sy-Juco the vendor, and the plaintiffs are entitled to be subrogated in these rights.
 Regarding the casco 2584, the defendant’s claim that it was constructed at his SSG wrote Medalla demanding that he turn over to the former the P27,000 paid to him by
instance in the plaintiff’s shipyard is rebutted by the fact that on the date this casco was NFA. Medalla, however, "ignored the demand."
constructed, he did not have sufficient money with which to pay the exoense of its
construction. Plaintiff filed the instant complaint.

As to the automobile 2060, there is sufficient evidence to show that the price was Defendant-appellant NFA admitted that it entered into a contract with Medalla whereby SSG’s
paid using plaintiffs’ money. In order to pay and issue the checks, the defendant had to vessel transported NFA’s 8,550 sacks of rice from San Jose, Mindoro to Manila and paid
deposit for them on those same days as he didn’t have sufficient money in the bank. Medalla P27,000 for freightage.

Regarding casco No. 2545, the fact that it was leased and was sunk still makes it TC: in favor of SSG. Medalla and NFA are solidarily liable for freightage in the amount of
necessary to make a pronouncement of ownership to enforce liability of the lessee. The court P25,974.90 plus attorney’s fees.
finds that it belonged to the plaintiff and that the latter sold it afterwards to the defendants by
way of public instrument. IAC: TC affirmed.

Regarding the wood, windows and doors for the construction of the house, it it was ISSUE: WON the instant case falls within the exception of the general rule provided for in Art.
found that they were given to the defendant as his property. 1883 of the NCC.

Concerning the rendition of accounts, the defendant is absolved for it appears that NFA: not liable under the exception to the rule (Art. 1883) since it had no knowledge of the
he used to render accounts of his agency after each transaction. fact of agency between SSG and Medalla when the contract was entered into between them.
An undisclosed principal cannot maintain an action upon a contract made by his agent unless
Judgment affirmed. such principal was disclosed in such contract. One who deals with an agent acquires no right
against the undisclosed principal.
G.R. No. 75640 April 5, 1990
HELD: NO.
NATIONAL FOOD AUTHORITY vs. IAC, SUPERIOR SHIPPING CORPORATION
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
PARAS, J.:
against the principal.

On September 6, 1979 Gil Medalla, as commission agent of the plaintiff Superior Shipping
In such case the agent is the one directly bound in favor of the person with whom he
Corporation (SSC), entered into a contract for hire of ship known as "MV Sea Runner" with
has contracted, as if the transaction were his own, except when the contract
defendant National Grains Authority (now NFA), where Medalla obligated to transport on the
involves things belonging to the principal.
said ship 8,550 sacks of rice belonging to NFA from the port of San Jose, Occidental Mindoro,
to Malabon, Metro Manila.
The provision of this article shall be understood to be without prejudice to the
actions between the principal and agent.
Upon completion of the delivery of rice at its destination, SSC wrote a letter requesting NFA
that it be allowed to collect the P93,538.70 indicated in its statement of account which
included a claim for freightage, demurrage and stevedoring charges. Consequently, when things belonging to the principal (in this case, Superior Shipping
Corporation) are dealt with, the agent is bound to the principal although he does not assume
the character of such agent and appears acting in his own name. In other words, the agent's
SSC wrote again NFA, this time specifically requesting that the payment for freightage and
apparent representation yields to the principal's true representation and that, in reality and in
other charges be made to it and not to defendant Medalla because SSG was the owner of the
effect, the contract must be considered as entered into between the principal and the third
vessel "MV Sea Runner". NFA informed SSG that it could not grant its request because the
person. Corollarily, if the principal can be obliged to perform his duties under the contract,
contract to transport the rice was entered into by NFA and Medalla who did not disclose that
then it can also demand the enforcement of its rights arising from the contract.
he was acting as a mere agent of SSG. Thereupon on November 19, 1979, NFA paid Medalla
P25,974.90 for freight services in connection with the shipment.
AFFIRMED.
GOLD STAR MINING CO., INC., petitioner, vs. MARTA LIM-JIMENA, CARLOS JIMENA, GLORIA
JIMENA, AURORA JIMENA, JAIME JIMENA, DANTE JIMENA, JORGE JIMENA, JOYCE JIMENA,
as legal heirs of the deceased VICTOR JIMENA, and JOSE HIDALGO, respondents.
REYES, J.B.L., J.:
FACTS
 In 1937, Ananias Isaac Lincallo bound himself in writing to turn to Victor Jimena one-half
(1/2) of the proceeds from all mining claims that he would purchase with the money to
be advanced by the latter. This agreement was later on modified (in a 1939 notarial
instrument duly registered with the Register of Deeds of Marinduque in his capacity as
mining recorder) so as to include in the equal sharing arrangement not only of the
proceeds from several mining claims, which by that time had already been purchased by
Lincallo with various sums totalling P5,800.00 supplied by Jimena, but also the lands
constituting the same, and so as to bind thereby their "heirs, assigns, or legal
representatives."
 Apparently, the mining rights over part of the claims were assigned by Lincallo to Gold
Star Mining Co., Inc., sometime before World War Il because in 1950 the corporation paid
him P5,000 in consideration of, and as a quitclaim for, pre-war royalties.
 On several occasions thereafter, the mining claims in question were made subject-matter
of contracts entered into by Lincallo in his own name and for his benefit alone without
the slightest intimation of Jimena's interests over the same.
 On 19 September 1951, Lincallo and one Alejandro Marquez, as separate owners of
particular mining claims, entered into an agreement with Gold Star Mining Co., Inc., the
assignee thereof, regarding allotment to Lincallo of 45% of the royalties due from the
corporation.
 Four months later, Lincallo, Marquez and Congressman Panfilo Manguerra, again as
owners, leased certain mining claims to Jacob Cabarrus, who, in turn, transferred to
Marinduque Iron Mines Agents, Inc., his rights under the lease contract. By virtue of still
another contract executed by these lessors on 29 February 1952, 43% of the royalties due
from Marinduque Iron Mines Agents, Inc., were agreed upon to be paid to Lincallo.
 As early as August, 1939 and down to September, 1952, Jimena repeatedly apprised Gold
Star Mining Co., Inc., and Marinduque Iron Mines Agents, Inc., of his interests over the
mining claims so assigned and/or leased by Lincallo and, accordingly, demanded
recognition and payment of his one-half share in all the royalties, allocated and paid and,
thereafter, to be paid to the latter. Both corporations, however, ignored Jimena's
demands.
 Payment of the P5,800 advanced for the purchase of the mining claims, as well as the
one-half share in the royalties paid by the two corporations, were also repeatedly
demanded by Jimena from Lincallo. Acknowledging Jimena's contractual claim, Lincallo
off and on promised to settle his obligations. And on 14 July 1952, Lincallo promised for
the last time, to settle everything on or before the 30th day of the same month.
 Lincallo, however, did not only fail to settle his accounts with Jimena but transferred on
16 August 1952, a month after he promised to pay Jimena, 35 of his 45% share in the
royalties due from Gold Star Mining Co., Inc., to one Gregorio Tolentino, a salaried
employee, for an alleged consideration of P10,000.00.
 Jimena commenced a suit against Lincallo for recovery of his advances and his one-half
share in the royalties. Gold Star Mining Co., Inc., and Marinduque Iron Mines, Inc.,
together with Tolentino, were later joined as defendants.
 The TC issued, upon petition of Jimena, a writ of preliminary injunction restraining Gold
Star Mining Co., Inc., and Marinduque Iron Mines Agents, Inc., from paying royalties
during the pendency of the case to Lincallo, his assigns or legal representatives. Despite
the injunction, Gold Star Mining Co., Inc., was found out to have paid P30, 691.92 to
Lincallo and Tolentino. Said corporation claimed later on (on appeal) that the injunction
had been superseded and/or dissolved on 25 May 1955 by the trial court's grant of
Jimena's petition for a writ of preliminary attachment "to supersede the writ of
preliminary injunction previously issued." But as the grant was conditioned upon filing of
a bond to be approved by the trial court, no writ of attachment was issued because the
bond offered by Jimena was disapproved.
 Jimena and Tolentino died successively during the pendency of the case in the trial court
and were, accordingly, substituted by their respective widows and children.
 TC: rendered decision in favor of Jimena
 From this judgment, all four defendants, namely, Lincallo, the widow and children of
Tolentino, and the two corporations, appealed to the CA.
 CA: the Court of Appeals handed down a decision sustaining in its entirety that of the
trial court.
 Petitioner Gold Star Mining Co., Inc., argues that the CA’s decision finding that
respondents Jimenas have a cause of action against it, and condemning it to pay the sum
of P30,691.92 for violation of an allegedly non-existent injunction, are reversible errors.
Reasons: As to respondents Jimena's cause of action, the same does not allegedly appear
in the complaint filed against petitioner corporation. And as to the P30,691.92 penalty for
violation of the injunction, the same can not allegedly be imposed because (1) the sum of
P30,691.92 was not prayed for, (2) the injunction in question had already been
superseded and/or dissolved by the trial court's grant of Jimena's petition for writ of
preliminary attachment; and (3) the corporation was never charged, heard, nor found
guilty in accordance with, and pursuant to, the provisions, of Rule 64 of the (Old) Rules of
Court.
ISSUE: won Jimenas have a cause of action against Gold Star
SC: YES
 We are of the same opinion with the Court of Appeals that respondents Jimenas have a
cause of action against petitioner corporation and that the latter's joinder as one of the
defendants before the trial court is fitting and proper. CA:
There first assigned error is the Trial Court erred in not dismissing this instant action
as "there is no privity of contract between Gold Star and Jimena." This contention is
without merit. The situation at bar is similar to the status of the first and second
mortgagees of a duly registered real estate mortgage. While there exists no privity
of contract between them, yet the common subject-matter supplies the juridical
link.
Borrowing the Spanish maxim cited by Jimena's counsel, "el deudor de mi deudor es
deudor mio," this legal maxim finds sanction in Article 1177, new Civil Code which
provides that "creditors, after having pursued the property in possession of the
debtor to satisfy their claims, may exercise all the rights and bring all the actions of
the latter (debtor) for the same purpose, save those which are inherent in his
person; they may also impugn the acts which the debtor may have done to defraud
them (1111)."
 . . . it can be said that Lincallo, in transferring the mining claims to Gold Star
(without disclosing that Jimena was a co-owner although Gold Star had knowledge
of the fact as shown by the proofs heretofore mentioned) acted as Jimena's agent
with respect to Jimena's share of the claims.
Under such conditions, Jimena has an action against Gold Star, pursuant to Article
1883, New Civil Code, which provides that the principal may sue the person with
whom the agent dealt with in his (agent's) own name, when the transaction
"involves things belonging to the principal."
As counsel for Jimena has correctly contended, "the remedy of garnishment
suggested by Gold Star is utterly inadequate for the enforcement of Jimena's right
against Lincallo because Jimena wanted an accounting and wanted to receive
directly his share of the royalties from Gold Star. That recourse is not open to Jimena
unless Gold Star is made a party in this action."
 Considering that no writ of preliminary attachment was issued by the trial court, the
condition for its issuance not having been met by Jimena, nothing can be said to have
superseded the writ of preliminary injunction in question. The preliminary injunction was,
therefore, subsisting and evidently violated by petitioner corporation when it paid the
sum of P30,691.92 to Lincallo and Tolentino.
 By sentencing Gold Star Mining Co., Inc., to pay, for the account of Lincallo, the sum
aforesaid, the court merely endeavoured to prevent its award from being rendered pro
tanto nugatory and ineffective, and thus make it conformable to law and justice.
 That the questioned award was not intended to be a penalty against appellant Gold Star
Mining Co., Inc., is shown by the provision in the judgment that the P30,691.92 to be paid
by it to Jimena is "to be imputed to Lincallo's liability under this judgment." The court thus
left the way open for Gold Star Mining Co., Inc., to recover later the whole amount from
Lincallo, whether by direct action against him or by deducting it from the royalties that
may fall due under his 1951 contract with appellant.
CA decision affirmed.
Concepcion, C.J., Dizon, Makalintal, Sanchez, Castro, Angeles, Fernando and Capistrano, JJ.,
concur.
Zaldivar, J., is on leave.
GONZALO TUASON, plaintiff and appellee, vs. DOLORES OROZCO, defendant and appellant.
February 10, 1906
Mapa,J;
PRINCIPAL: Juan Vargas
AGENT: Enrique Grupe
1. SCOPE OF AUTHORITY: Juan de Vargas executed a power of attorney to Enrique
Grupe, authorizing him, among other things:
a. to dispose of all his property, and particularly of a certain house and lot known
as No. 24 Calle Nueva, Malate, in the city of Manila, for the price at which it was
actually sold.
b. He was also authorized to mortgage the house fór the purpose of securing the
payment of any amount advanced to his wife, Dolores Orozco, who, inasmuch
as the property had been acquired with funds belonging to the conjugal
partnership, was a necessary party to its sale or encumbrance.
2. On the 21st of January, 1890, Enrique Grupe and Dolores Orozco obtained a loan
from the Gonzalo Tuason secured by a mortgage on the property referred to in the
power of attorney.
3. In the caption of the instrument evidencing the debt it is stated that Grupe and
Dolores Orozco appeared as the parties of the first part and Gonzalo Tuason, the
plaintiff, as the party of the second part; that Grupe acted for himself and also in
behalf of Juan Vargas by virtue of the power granted him by the latter, and that
Dolores Orozco appeared merely for the purpose of complying with the
requirement contained in the power of attorney.
4. This instrument was duly recorded in the Registry of Property, and it appears
therefrom that Enrique Grupe (as attorney in fact for Vargas) received from the
Gonzalo a loan of 2,200 pesos and delivered the same to the Orozco;
5. That to secure its payment of the loan, Grupe mortgaged the property of his
principal with Orozco's consent as required in the power of attorney.
6. Grupe also received 1,300 pesos. This amount he borrowed for his own use. (The
recoverv of this sum not being involved in this action, it will not be necessary to
refer to it in this decision. The complaint refers only to the 2,200 pesos delivered to
the defendant under the terms of the agreement.)
7. Tuazon instituted this action against Orozco for recovery of the P2200 loan.
8. Orozco: denies having received this sum. She claims that the instrument is evidence
of a debt personally incurred by Enrique Grupe for his own benefit, and not incurred
for the benefit of his principal, Vargas, as alleged in the complaint. As a matter of
fact, Grupe, by the terms of the agreement, bound himself personally to pay the
debt.
ISSUE#1: WON mortgage was valid given the fact that the proceeds of the loan was delivered
not by the creditor (Tuazon).
HELD: YES. The fact that the defendant received the money from her husband's agent and not
from the creditor does not affect the validity of the mortgage in view of the conditions
contained in the power of attorney under which the mortgage was created. Nowhere does it
appear in this power that the money was to be delivered to her by the creditor himself and
not through the agent or any other person. The important thing was that she should have
received the money. This we think is fully established by the record.
ISSUE#2: WON Orozco, wife of the principal and who took part in the execution of the
mortgage be held liable given the fact that the agent Gruspe bound himself personally to
pay the debt.
HELD: YES. A debt incurred by the agent is binding directly upon the principal, provided the
former acted, as in the present case, within the scope of his authority. (Art. 1727 of the Civil
Code.) 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. The individual liability of the
agent constitutes in the present case a further security in favor of the creditor and does not
affect or preclude the liability of the principal. In the present case the latter's liability was
further guaranteed by a mortgage upon his property. The law does not provide that the agent
can not bind himself personally to the fulfillment of an obligation incurred by him in the name
and on behalf of his principal. On the contrary, it provides that such act on the part of an
agent would be valid. (Art. 1725 of the Civil Code.)
-The above mortgage being valid and having been duly recorded in the Register of Property,
directly subjects the property thus encumbered, whoever its possessor may be, to the
fulfillment of the obligation for the security of which it was created. (Art. 1876 of the Civil
Code and art. 105 of the Mortgage Law.).
-it is practically of no importance whether or not Enrique Grupe bound himself personally to
pay the debt in question. Be this as it may and assuming that Vargas, though principal-in the
agency, was not the principal debtor, the right in rem arising from the mortgage would have
justified the creditor in bringing his action directly against the property encumbered had he
chosen to foreclose the mortgage rather than to sue Grupe, the alleged principal debtor.
This would be true irrespective of the personal liability incurred by Grupe. The result would be
practically the same even though it were admitted that appellant's contention is correct.
- principal. The contract of sale was even expressly repudiated by the principal since Namerco
National Power Corp. v National Merchandising Corporation
October 23, 1982 | G.R. No. L-33819 and L-33897
Facts:
NPC and Namerco, as representatives of International Commodities Corporations (New York),
executed a contract for the purchase by the NPC of 4,000 long tons of crude sulfur for its
Maria Cristina fertilizer plant for the price of 450,716.00. The agreement was that upon
receipt of the letter of credit by the seller, it would deliver the sulfur at Iligan City within 60
days. Else, the seller and its surety would be liable to pay liquidated damages at the rate of
two-fifth of the one percent of the full contract price for the first thirty days of default and
four-fifth of one percent for everyday thereafter until complete delivery is made.
The New York supplier was not able to deliver the sulfur before January 15, 1957, which was
the deadline for the delivery as it was not able to secure shipping space. NPC’s fertilizer had to
shut down from January 20 to January 26 because of this and no fertilizer was produced.
According to NPC’s counsel, “non-availability of bottom or vessel” is not a fortuitious event
and demanded for liquidated damages from date of deadline (January 15, 1957) up to May 9,
1957, which was the date NPC rescinded the contract of sale stating that time was of the
essence. Similar demand was made on Domestic Insurance Company as its surety. The total of
liquidated damages amounted to PhP360,572.80.
The Contract of Sale explicitly excludes non-availability of bottom or vessel as reason to
exempt seller from payment of liquidated damages. Namerco’s offer is even more explicit as it
guarantees the availability of bottom or vessel.
RTC concluded that Namerco acted beyond the bounds of its authority because it violated its
principal’s cabled instructions which among others includes that the sale is subject to
availability of steamer.
Issue:
Is Namerco liable to pay liquidated damages to NPC?
Held:
Yes. Under Article 1397, the agent who exceeds the limits of his authority without giving the
party with whom he contracts sufficient notices of his powers is personally liable to such
party.
Ratio:
Even before the contract of sale was signed, Namerco was already aware that its principal was
having difficulties in booking shipping space and yet it proceeded to do so despite warnings
because the company did not want to forfeit Namerco’s bidder’s bond in the sum of
PhP45,100.00. Namerco never disclosed to the NPC the cabled or written instructions of its
took chances and acted in its own name.
Namerco cannot hide behind Article 1403 which provides that a contract entered into in the
name of another person by one who has acted beyond his powers is unenforceable. This is
because the unenforceability of contract being referred to is against the principal, and not the
agent. For agents such as Namerco, it is Article 1897 that applies. Thus, it should be held liable
for liquidated damages.
Other details:
Damages reduced to only PHP45,100.00 instead of the original amount since the liquidated
damages as computed per contract would have amounted to 80% of the purchase price and as
an equitable consideration since Namerco employed persistent efforts to charter steam and
failure to secure shipping space is not attributable to its fault or negligence.
Dominion Insurance Corp. vs. CA
376 SCRA 239 (2002) 1. Whether Guevarra acted within his authority as agent for Dominion; and
2. Whether Guevarra is entitled to reimbursement of amounts he paid out of his
personal money in settling the claims of several insured.

Pardo, J.
Held:

1. No. A perusal of the Special Power of Attorney would show show that petitioner
Petitioner: Dominion Insurance Corporation (represented by third-party defendant Austria) and respondent Guevarra intended
to enter into a principal-agent relationship. Despite the word “special” in the title of
Respondent: Rodolfo S. Guevarra and Fernando Austria, CA the document, the contents reveal that what was constituted was actually a general
agency. The terms of the agreement read:

“That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC.,17 a

Summary: corporation duly organized and existing under and by virtue of
the laws of the Republic of the Philippines, xxx represented by
The Insurance agent advanced payment for the claims of the company’s insured. He the undersigned as Regional Manager, xxx do hereby appoint
sought to recover from the corporation. The court held that since the agent acted beyond the RSG Guevarra Insurance Services represented by Mr. Rodolfo
instructions of his principal to make payment only from the revolving fund or collection, he is Guevarra xxx to be our Agency Manager in San Fdo., for our
not entitled to reimbursement. But to prevent unjust enrichment, Article 1236 was applied, place and stead, to do and perform the following acts and things:
the agent may demand for reimbursement so far as the principal was benefited. “1. To conduct, sign, manager (sic), carry on and transact
Bonding and Insurance business as usually pertain to a Agency
Office, or FIRE, MARINE, MOTOR CAR, PERSONAL ACCIDENT, and
BONDING with the right, upon our prior written consent, to
Facts:
appoint agents and sub-agents.
Rodolfo S. Guevarra filed a case for a sum of money against Dominion Insurance “2. To accept, underwrite and subscribed (sic) cover notes
Corporation to recover Php156,473.90 which he claimed to have advanced in his capacity as or Policies of Insurance and Bonds for and on our behalf.
manager of defendant to satisfy certain claims filed by defendant’s clients. The defendant “3. To demand, sue, for (sic) collect, deposit, enforce payment,
denied any liability to plaintiff and asserted a counterclaim for P249,672.53, representing deliver and transfer for and receive and give effectual receipts
premiums that plaintiff allegedly failed to remit. and discharge for all money to which the FIRST CONTINENTAL
ASSURANCE COMPANY, INC.,18 may hereafter become due,
Dominion also filed a third-party complaint against Fernando Austria, who, at the time owing payable or transferable to said Corporation by reason of
relevant to the case, was its Regional Manager for Central Luzon area. Pre-trial conferences or in connection with the above-mentioned appointment.
were set for 9 times from Oct. 18, 1991 to April 6, 1992 but were postponed. On May 22, “4. To receive notices, summons, and legal processes for
1992, another pre-trial was held but counsel of Dominion failed to appear, and sent a and in behalf of the FIRST CONTINENTAL ASSURANCE COMPANY,
handwritten note asking for postponement. The court declared Dominion in default. It also INC., in connection with actions and all legal proceedings against
denied the Motion to Lift Order of Default. The trial court rendered judgment in favor of the said Corporation.”
Guevarra and ordered Dominion to pay him Php156,473.90. The Court of Appeals affirmed the
decision of the trial court.

The agency comprises all the business of the principal,20 but,

couched in general terms, it is limited only to acts of administration. A
Issues: general power permits the agent to do all acts for which the law does not
require a special power. Thus, the acts enumerated in or similar to those
 enumerated in the Special Power of Attorney do not require a special
power of attorney.
Article 1878, Civil Code, enumerates the instances when a
special power of attorney is required. The pertinent portion that applies to
this case provides that:
“Article 1878. Special powers of attorney are necessary in the following
cases:
(1) To make such payments as are not usually considered as acts
of administration;
(15) Any other act of strict dominion.
Guevarra’s authority to settle claims is embodied in the Memorandum of
Management Agreement which enumerates Guevarra’s duties and
responsibilities as agency manager”
1. You are hereby given authority to settle and dispose of all motor car
claims in the amount of Php5,000 with prior approval of the Regional
Office.
2. Full authority is given you on TPPI claims settlement.
The authority to pay also limits Guevarra’s authority to pay which states
that the payment shall come from the revolving fund collection.
2. No reimbursement but to prevent unjust enrichment, general
rule on Oblicon is used. Having deviated from the instructions of the
principal, the expenses that respondent Guevarra incurred in the
settlement of the claims of the insured may not be reimbursed from
petitioner Dominion. This conclusion is in accord with Article 1918, Civil
Code. 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.
Article 1236, second paragraph, Civil Code, provides:
“Whoever pays for another may demand from the debtor what he has
paid, except that if he paid without the knowledge or against the will of
the debtor, he can recover only insofar as the payment has been beneficial
to the debtor.”
Thus, to the extent that the obligation of the petitioner has been extinguished,
respondent Guevarra may demand for reimbursement from his principal. To
rule otherwise would result in unjust enrichment of petitioner.
The decision of the Court of Appeals is modified. Dominion Insurance is ordered
to pay Guevarra the amount of P112, 672.11 representing the total amount
advanced by the latter in the payment of the claims of the petitioner’s clients.
Petition denied, Judgment modified.
NICHOLAS Y. CERVANTES, Petitioner, vs. COURT OF APPEALS AND THE PHILIPPINE AIR LINES,
INC., respondent.
PURISIMA, J.:
FACTS
 On March 27, 1989,PAL issued to the herein petitioner, Nicholas Cervantes (Cervantes), a
round trip plane ticket for Manila-Honolulu-Los Angeles-Honolulu-Manila, which ticket
expressly provided an expiry of date of one year from issuance, i.e., until March 27, 1990.
The issuance of the said plane ticket was in compliance with a Compromise Agreement
entered into between the contending parties in two previous suits before the RTC in
Surigao City.
 Four days before the expiry date of subject ticket, the petitioner used it. Upon his arrival
in Los Angeles on the same day, he immediately booked his Los Angeles-Manila return
ticket with the PAL office, and it was confirmed for the April 2, 1990 flight. c
 Upon learning that the same PAL plane would make a stop-over in San Francisco, and
considering that he would be there on April 2, 1990, petitioner made arrangements with
PAL for him to board the flight in San Francisco instead of boarding in Los Angeles.
 On April 2, 1990, when the petitioner checked in at the PAL counter in San Francisco, he
was not allowed to board. The PAL personnel concerned marked the following notation
on his ticket: TICKET NOT ACCEPTED DUE EXPIRATION OF VALIDITY. C
 Aggrieved, petitioner Cervantes filed a Complaint for Damages, for breach of contract of
carriage the RTC of Surigao del Norte in Surigao City. But the said complaint was
dismissed for lack of merit.
 Petitioner appealed to the Court of Appeals, which upheld the dismissal of the caseary
ISSUES
Whether or not the act of the PAL agents in confirming subject ticket extended the period of
validity of petitioners ticket; (2)
HELD:
  The plane ticket itself provides that it is not valid after March 27, 1990. It is also WHEREFORE, the Petition is DENIED and the decision of the Court of Appeals dated July 25,
stipulated in paragraph 8 of the Conditions of Contract as follows: 1995 AFFIRMED in toto. No pronouncement as to costs. c
"8. This ticket is good for carriage for one year from date of issue, except as otherwise
provided in this ticket, in carriers tariffs, conditions of carriage, or related regulations. The fare
for carriage hereunder is subject to change prior to commencement of carriage. Carrier may
refuse transportation if the applicable fare has not been paid.
 In his effort to evade this inevitable conclusion, petitioner theorized that the
confirmation by the PALs agents in Los Angeles and San Francisco changed the
compromise agreement between the parties.
 The 2 employees did not extend the validity of the ticket. Both had no authority to do so.
Appellant knew this from the very start when he called up the Legal Department of
appellee in the Philippines before he left for the United States of America. He had first
hand knowledge that the ticket in question would expire on March 27,1990 and that to
secure an extension, he would have to file a written request for extension at the PALs
office in the Philippines. Despite this knowledge, appellant persisted to use the ticket in
question.ry
 It can be gleaned that the petitioner was fully aware that there was a need to send a
letter to the legal counsel of PAL for the extension of the period of validity of his ticket.
Since the PAL agents are not privy to the said Agreement and petitioner knew that a
written request to the legal counsel of PAL was necessary, he cannot use what the PAL
agents did to his advantage. The said agents, according to the Court of Appeals, acted
without authority when they confirmed the flights of the petitioner.
 Under Article 1898 of the New Civil Code, the acts of an agent beyond the scope of his
authority do not bind the principal, unless the latter ratifies the same expressly or
impliedly. Furthermore, when the third person (herein petitioner) knows that the agent
was acting beyond his power or authority, the principal cannot be held liable for the
acts of the agent. If the said third person is aware of such limits of authority, he is to
blame, and is not entitled to recover damages from the agent, unless the latter
undertook to secure the principals ratification
 Petitioner stresses that the alleged lack of authority of the PAL employees was neither
raised in the answer nor in the motion to dismiss. But records show that the question of
whether there was authority on the part of the PAL employees was acted upon by the
trial court when Nicholas Cervantes was presented as a witness and the depositions of
the PAL employees, Georgina M. Reyes and Ruth Villanueva, were presented.
 The admission by Cervantes that he was told by PALs legal counsel that he had to submit
a letter requesting for an extension of the validity of subject tickets was tantamount to
knowledge on his part that the PAL employees had no authority to extend the validity of
subject tickets and only PALs legal counsel was authorized to do so.
 However, notwithstanding PALs failure to raise the defense of lack of authority of the
said PAL agents in its answer or in a motion to dismiss, the omission was cured since the
said issue was litigated upon, as shown by the testimony of the petitioner in the course of
trial. Rule 10, Section 5 of the 1997 Rules of Civil Procedure provides that when evidence
is presented by one party, with the express or implied consent of the adverse party, as to
issues not alleged in the pleadings, judgment may be rendered validly as regards the said
issue, which shall be treated as if they have been raised in the pleadings. There is implied
consent to the evidence thus presented when the adverse party fails to object thereto.