AGENCY transport the cargoes to Columbia’s
2019 BAR REVIEW warehouses/plants in Bulacan and Valenzuela
Atty. Jose Cochingyan, III
• What is a contract of agency?
• Representation
• Elements of a contract of agency
 consent of the parties
 express or implied
 object
 execution of juridical act in
relation to third parties
 agent acts as a representative agent
acts within the scope of his
authority
Art. 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. (1709a)
Eurotech Industrial Technologies, Inc.
v. Cuizon, 521 SCRA 584 (2007)
Edwin Cuizon signed a deed of assignment,
assigning receivables to Eurotech for and on
behalf of Impact Systems Sales, a sole
proprietorship owned by Erwin Cuizon.
Eurotech then delivered but later found out
that Impact collected on the receivables.
Suit was filed where Eurotech claimed that
Edwin signed without authority and was
therefore liable. Can Edwin be held liable?
No.
It is said that the basis of agency is
representation, that is, the agent acts for and
on behalf of the principal on matters within the
scope of his authority and said acts have the
same legal effect as if they were personally
executed by the principal.
By this legal fiction, the actual or real absence
of the principal is converted into his legal or
juridical presence – qui facit per alium facit per
se.
Loadmasters Customs Services, Inc. v.
Glodel Brokerage Corp., 639 SCRA 69 (2011).
Columbia engaged the services of Glodel for the
release and withdrawal of the cargoes from the
pier and the subsequent delivery to its
warehouses/plants.
Glodel, in turn, engaged the services of
Loadmasters for the use of its delivery trucks to
City. The goods were insured by R&B Insurance.
The goods were loaded on board trucks owned
by Loadmasters, driven by its employed drivers
and accompanied by its employed truck
helpers. One of the truckloads of copper
cathodes, was lost en route.
Later on, this truck was recovered but without
the copper cathodes.
Columbia filed with R&B Insurance a claim for
insurance indemnity which R&B Insurance paid.
R&B Insurance, in turn, filed a complaint for
damages against both Loadmasters and Glodel.
Can Loadmasters be excused on the ground
that it is merely an agent of Glodel?
There can be no contract of agency between
the parties.
Loadmasters never represented Glodel.
Neither was it ever authorized to make such
representation.
It is a settled rule that the bases 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. Such mutual intent is not obtaining in this
case.
What then is the extent of the respective
liabilities of Loadmasters and Glodel?
Each wrongdoer is liable for the total damage
suffered by R&B Insurance.
Article 1875. Agency is presumed to be for a
compensation, unless there is proof to the
contrary. (n)
We must apply the presumption on
compensation with caution. The source of this
provision is the Code of Commerce rule on the
compensation for commercial agents/
commission agents. This rule if applied literally
in civil law may lead to an incorrect conclusion.
Instead, we should look into jurisprudence
where this provision is used and when applied
one will notice that the court is guided by the
principle of quantum meruit in relation to
unjust enrichment, among others.
Urban Bank, Inc. v. Peña, G.R. No.
145817, 19 October 2011. 659 SCRA 418
(2011).
A certain Atty. Peña was allegedly constituted
as its agent to recover the Pasay property of the
bank.
There was a highly-controverted conversation
with Peña where the bank president allegedly
agreed to a compensation of 10% on condition
that possession would be turned over to the
bank, free of tenants, not later than four
months.
Four months later Peña was able to hand over
the property to Urban Bank but the bank would
not pay the compensation nor even admit the
fact of the agency.
Was there an agency and if so is compensation
due Peña has demanded?
The Court concluded 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.
The evidence does not support Peña's claim
that Urban Bank agreed to "attorney's fees and
compensation" of 10% of the market value of
the property.
Peña has never shown any written confirmation
of his 10% agency fee, whether in a note, letter,
memorandum or board resolution of Urban
Bank.
The Supreme Court stated: “Agency is
presumed to be for compensation. But
because in this we find no evidence that
Urban Bank agreed to pay Peña a
specific amount or percentage of
amount for his services, we turn to the
principle against unjust enrichment and
on the basis of quantum meruit.”
Peña is entitled to payment for compensation
for services rendered as agent of Urban Bank,
but on the basis of the principles of unjust
enrichment and quantum meruit, and not on
the purported oral contract.
Applying these principles the Court found the
amount of 10% or PhP24,161,200 to be
“staggering” —
“an unconscionable amount” and the Court
found reason to reduce this to PhP3,000,000 to
Peña, for expenses incurred corresponding to
the performance of his services and an
additional award of PhP1,500,000 for the
services he performed as a lawyer in securing
the rights of Urban Bank as owner of the Pasay
property.
Essential Characteristics of Agency
• Nominate and Principal
• Unilateral and primarily onerous
• Consensual
• Personal, Representative and
Derivative
What do you mean by agency being unilateral?
A unilateral contract has been defined as “A
contract in which one party makes a promise or
undertakes a performance.” Thus, it was
observed that “[M]any unilateral contacts are in
reality gratuitous promises enforced for good
reason with no element of bargain.” *Black’s
Law Dictionary 326 (1990)]
It is perhaps in this sense that agency is
unilateral because it is the agent who
undertakes the performance of the agency.
However, one must not forget that agency is
still a contract with a bilateral character.
Consensual
Article 1869. Agency may be express, or
implied from the acts of the principal, from
his silence or lack of action, or his failure to
repudiate the agency, knowing that another
person is acting on his behalf without
authority.
Agency may be oral, unless the law requires a
specific form. (1710a)
ARTICLE 1870. Acceptance by the agent may
also be express, or implied from his acts
which carry out the agency, or from his
silence or inaction according to the
circumstances. (n)
Distinguishing agency from other similar
contracts:
 From Employment Contract
 From Broker
 From Sale
 From Tenancy
EMPLOYEE vs. AGENT
The general law on agency, on the other hand,
expressly allows the principal an element of
control over the agent in a manner consistent
with an agency relationship.
In this sense, these control measures cannot be
read as indicative of labor law control.
Foremost among these are the directives that
the principal may impose on the agent to
achieve the assigned tasks, to the extent that
they do not involve the means and manner of
undertaking these tasks.
The law likewise obligates the agent to render
an account; in this sense, the principal may
impose on the agent specific instructions on
how an account shall be made, particularly on
the matter of expenses and reimbursements.
To these extents, control can be imposed
through rules and regulations without intruding
into the labor law concept of control for
purposes of employment.
Tongko v. The Manufacturers Life Insurance Co.
(Phils.), Inc. 622 SCRA 58, 85-86, 93 (2010)
Tongko v. The Manufacturers Life Insurance Co.
(Phils.), Inc. G.R. No. 167622. January 25, 2011.;
640 SCRA 395 (2011)
BROKER vs. AGENT
Is the broker entitled to their commission?
Tan v. Gullas, 393 SCRA 334 (2002)
Tan & his colleagues (licensed real estate
brokers) were given an SPA by Gullas
authorizing Tan to sell the latter’s land.
Tan introduced Gullas to nuns who wanted to
buy the property for P530/sqm instead of the
P550/sqm.
The Gullas eventually sold the land through
another broker for recorded price of P200/sqm.
Tan sued for his commissions and claim
undervaluation.
Question:
Is the broker entitled to his commission?
Answer
Yes.
The vendors are trying to evade payment of the
commission which rightfully belong to Tan and
his colleagues as brokers with respect to the
sale.
There was no dispute as to the role that the
brokers played in the transaction.
At the very least, brokers set the sale in motion.
They were not able to participate in its
consummation only because they were
prevented from doing so by the acts of the
vendors.
"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.“
(citing the case of Hahn v. Court of Appeals, 266
SCRA 537 (1997))
Medrano v. Court of Appeals, 452 SCRA
77 (2005)
Mr. Dominador Lee, a businessman from Makati
City, was a client of Mrs. Pacita G. Borbon, a
licensed real estate broker. Lee expressed that
he wanted land planted with mango trees
instead.
Borbon was able to find a property according to
Lee’s specifications and secured an authority to
sell from Medrano, the owner.
But the ocular inspection of the property
arranged by Borbon together with Lee never
materialized — the first time was due to
inclement weather; the next time, no car was
available for the tripping to Batangas.
One day, Lee then called up Borbon and told
her that he was on his way to Lipa City to
inspect another property, and might as well
also take a look at the property Borbon was
offering.
Since Lee was in a hurry, the brokers could no
longer accompany him at the time.
Thus, he asked and was given the address
directions on how to reach the lot.
Thereupon, Lee was instructed to get in touch
with Medrano's daughter.
Borbon found out from Lee that he bought the
property.
Question:
Is Borbon entitled to a commission?
Answer:
Yes.
 A broker is generally defined as one
who is engaged, for others, on a
commission,
 negotiating contracts relative to
property with the custody of which he
has no concern;
  the negotiator between other parties,
never acting in his own name but in
the name of those who employed him;
 he is strictly a middleman and for some
purposes the agent of both parties.
 A broker is one whose occupation is to
bring parties together, in matters of
trade, commerce or navigation.
"Procuring cause" is meant to be the proximate
cause.
The term "procuring cause," in describing a
broker's activity,
 refers to a cause originating a series of
events which, without break in their
continuity,
 result in accomplishment of prime
objective of the employment of the
broker —
 producing a purchaser ready, willing
and able to buy real estate on the
owner's terms.
A broker will be regarded as the "procuring
cause" of a sale, so as to be entitled to
commission, if his efforts are the foundation
on which the negotiations resulting in a sale
are begun.
The broker must be the efficient agent or the
procuring cause of the sale.
The means employed by him and his efforts
must result in the sale.
He must find the purchaser, and the sale must
proceed from his efforts acting as broker.
In this case, the court found that the evidence
on record shows that Borbon and her
colleagues were instrumental in the sale of the
property to Lee.
Domingo v. Domingo, 42 SCRA 131
(1971).
Vicente Domingo appointed Gregorio Domingo
as the former’s real estate broker with exclusive
agency to sell his lot for P2/sqm w/ a
commission of 5%.
Oscar then made an offer to buy the property at
P1.20/sqm.
A propina (gift/tip) of P1000 was then given by
Oscar to Gregorio for persuading Vicente to sell
the property for P120/sqm.
Vicente eventually sold the property to Oscar
and Gregorio learned from Oscar that Vicente
asked that Gregorio be eliminated from the
transaction.
Is Gregorio entitled to his commission?
Answer: NO.
The duties of a broker to his employer are
essentially those which an agent owes to his
principal.
An agent who takes a secret profit in the
nature of a bonus, gratuity or personal benefit
from the vendee, without revealing the same
to his principal, the vendor, is guilty of breach
of his loyalty to the principal, and forfeits his
right to collect the commission from his
principal 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
customs allows it, because the rule is to
prevent the possibility of any wrong, not to
remedy or repair an actual damage.
By taking such a profit or propina from the
vendee, the agent assumes a position
inconsistent with that of being an agent for his
principal, who has a right to treat him, insofar
as this commission is concerned, as if no
agency had existed.
The fact that the principal may have benefited
by the valuable services rendered by the agent
does not exculpate the agent who only has
himself to blame for such treachery and
perfidy.
SALES vs. AGENCY
Spouses Viloria v. Continental Airlines, Inc., G.R.
No. 188288. 16 January 2012. 663 SCRA 57
(2012).
The distinctions between a sale and an agency
are not difficult to discern and this Court, as
early as 1970, had already formulated the
guidelines that would aid in differentiating the
two (2) contracts. … that the primordial
differentiating consideration between the two
(2) contracts is the transfer of ownership or title
over the property subject of the contract.
In an agency, the principal retains ownership
and control over the property and the agent
merely acts on the principal's behalf and under
his instructions in furtherance of the objectives
for which the agency was established. On the
other hand, the contract is clearly a sale if the
parties intended that the delivery of the
property will effect a relinquishment of title,
control and ownership in such a way that the
recipient may do with the property as he
pleases.
SALES vs. AGENCY …. Some classic test criteria
… the agreement, Wilson sold the four parcels of
Quiroga v. Parsons, 38 Phil 502 (1918).
When the terms of the agreement compels the
purported agent to pay for the products
received from the purported principal within
the stipulated period, even when there has
been no sale thereof to the public, the
underlying relationship is not one of contract of
agency to sell, but one of actual sale.
A real agent does not assume personal
responsibility for the payment of the price of
the object of the agency; his obligation is
merely to turn-over to the principal the
proceeds of the sale once he receives them
from the buyer.
Consequently, since the underlying agreement
is not an agency agreement, it cannot be
revoked except for cause.
Question: Let us say a buying agent is
instructed to buy at a fixed price and if the
agent is able to buy at a lower price the agent
keeps the difference. And if at a higher price
the agent bears the lost. Is this an agency?
When under the agreement the purported
agent becomes responsible for any changes in
the acquisition cost of the object he has been
authorized to purchase from a supplier in the
United States, the underlying agreement is not
an contract of agency to buy, since a true agent
does not bear any risk relating to the subject
matter or the price.
Being a contract of sale and not agency, any
profits realized by the purported agent from
discounts received from the American supplier
pertained to it with no obligation to account
for it, much less to turn it over, to the
purported principal.
Gonzalo Puyat v. Arco, 72 Phil. 402 (1941).
TENANCY vs. AGENCY
Jusayan v. Sombilla, G.R. No. 163928.
January 21, 2015.
Wilson Jesena (Wilson) owned four parcels of
land situated in New Lucena, Iloilo.
On June 20, 1970, Wilson entered into an
agreement with respondent Jorge Sombilla
(Jorge), wherein Wilson designated Jorge as his
agent to supervise the tilling and farming of his
riceland in crop year 1970-1971.
On August 20, 1971, before the expiration of
land to Timoteo Jusayan (Timoteo).
Jorge and Timoteo verbally agreed that Jorge
would retain possession of the parcels of land
and would deliver 110 cavans of palay annually
to Timoteo without need for accounting of the
cultivation expenses provided that Jorge would
pay the irrigation fees.
Question:
Is Jorge the agent of Timoteo?
The claim of Timoteo that Jorge was his agent
contradicted the verbal agreement he had
fashioned with Jorge.
By assenting to Jorge's possession of the land
sans accounting of the cultivation expenses and
actual produce of the land provided that Jorge
annually delivered to him 110 cavans of palay
and paid the irrigation fees belied the very
nature of agency, which was representation.
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.
While in possession of the land, therefore, Jorge
was acting for himself instead of for Timoteo.
Unlike Jorge, Timoteo did not benefit whenever
the production increased, and did not suffer
whenever the production decreased.
Timoteo's interest was limited to the delivery of
the 110 cavans of palay annually without any
concern about how the cultivation could be
improved in order to yield more produce.
What is the form required of an agency?
Article 1869. Agency may be express, or
implied from the acts of the principal, from
his silence or lack of action, or his failure to
repudiate the agency, knowing that another
person is acting on his behalf without
authority.
Agency may be oral, unless the law requires
a specific form. (1710a)
Yulo v. BPI; G.R. No. 217044. January
16, 2019
The Bank of the Philippine Islands sent Spouses
Rainier Jose M. Yulo and Juliet L. Yulo a credit
card packet which contained petitioner's pre-
approved credit card and a copy of its Terms
and Conditions.
This was received through Ranier Yulos’
authorized representative, one Jessica Baitan,
as shown in the check mark in the box beside
"Authorized Representative" in the Delivery
Receipt.
The Yulo Spouses regularly settled their
accounts with the Bank of the Philippine Islands
at first, but started to be delinquent with their
payments by July 2008.
Their outstanding balance ballooned to a large
sum which included finance charges, penalties,
and interests.
Unable to pay, BPI sued.
Question
While it is clear that the Yulo’s are liable for
the principal amount, are the Yulos also liable
for the finance charges, penalties, and
interests which is provided for in the terms
and conditions of the credit card packet that
they received?
Answer
As a pre-screened client, petitioner Rainier did
not submit or sign any application form as a
condition for the issuance of a credit card in his
account.
Unlike a credit card issued through an
application form, with the applicant explicitly
consenting to the Terms and Conditions on
credit accommodation use, a pre-screened
credit card holder's consent is not immediately
apparent.
Thus, respondent, as the credit card provider,
had the burden of proving its allegation that
petitioner Rainier consented to the Terms and
Conditions surrounding the use of the credit
card issued to him.
While the Delivery Receipt showed that Baitan
received the credit card packet for petitioner
Rainier, it failed to indicate Baitan's relationship
with him.
Respondent also failed to substantiate its claim
that petitioner Rainier authorized Baitan to act
on his behalf and receive his pre-approved
credit card.
The only evidence presented was the check
mark in the box beside "Authorized
Representative" in the Delivery Receipt.
This self-serving evidence is obviously
insufficient to sustain respondent's claim.
A contract of agency is created when a person
acts for or on behalf of a principal, with the
latter's consent or authority.
Unless required by law, an agency does not
require a particular form, and may be express
or implied from the acts or silence of the
principal.
Respondent fell short in establishing an agency
relationship between petitioner Rainier and
Baitan, as the evidence presented did not
support its claim that petitioner Rainier
authorized Baitan to act on his behalf.
Without proof that petitioner Rainier read and
agreed to the Terms and Conditions of his pre-
approved credit card, petitioners cannot be
bound by it.
Court orders only payment of principal amount
plus legal interest which is 12% legal interest
from November 11, 2008, the date of BPI's first
extrajudicial demand, until June 30, 2013, and
six percent (6%) legal interest from July 1, 2013
until fully paid.
LEGAL INTEREST
By the way, do you remember why legal
interest here is 12% from date of demand to
June 30, 2013 and 6% from July 1, 2013 until
fully paid?
The basis is the case of Nacar v. Gallery Frames
(G.R. No. 189871. August 13, 2013)
This decision in turn made reference to the
ruling in Eastern Shipping Lines, Inc. v. Court of
Appeals (G.R. No. 97412, July 12, 1994, 234
SCRA 78), which lays down three rules:
1. When the obligation is breached, and it
consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the
interest due should be that which may have
been stipulated in writing.
Furthermore, the interest due shall itself earn
legal interest from the time it is judicially
demanded.
In the absence of stipulation, the rate of
interest shall be 12% per annum to be
computed from default, i.e., from judicial or
extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan
or forbearance of money, is breached, an
interest on the amount of damages awarded
may be imposed at the discretion of the court
at the rate of 6% per annum.
No interest, however, shall be adjudged on
unliquidated claims or damages except when
or until the demand can be established with
reasonable certainty.
Accordingly, where the demand is established
with reasonable certainty, the interest shall
begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so
reasonably established at the time the demand
is made, the interest shall begin to run only
from the date the judgment of the court is
made (at which time the quantification of
damages may be deemed to have been
reasonably ascertained).
The actual base for the computation of legal
interest shall, in any case, be on the amount
finally adjudged.
3. When the judgment of the court awarding a
sum of money becomes final and executory,
the rate of legal interest, whether the case
falls under paragraph 1 or paragraph 2, above,
shall be 12% per annum from such finality until
its satisfaction, this interim period being
deemed to be by then an equivalent to a
forbearance of credit.
But the court in the Nacar case also pointed out
that this is no longer true.
Bangko Sentral ng Pilipinas Monetary Board
Resolution No. 796 of May 16, 2013 provides
that:
The rate of interest for the loan or forbearance
of any money, goods or credits and the rate
allowed in judgments, in the absence of an
express contract as to such rate of interest,
shall be six percent (6%) per annum.
This Circular took effect on 1 July 2013.
Thus, in absence of express contract we follow
the Eastern Shipping ruling up to June 30, 2013
and beginning July 1, 2013 it will be 6% until
full satisfaction.
-ON THE CONSENT OF THE PARTIES TO THE
AGENCY … when consented to & its effects to
others …
THE PRINCIPAL:
Article 1869. Agency may be express, or
implied from the acts of the principal, from
his silence or lack of action, or his failure to
repudiate the agency, knowing that another
person is acting on his behalf without
authority.
Agency may be oral, unless the law requires
a specific form. (1710a)
THE AGENT
Is an agent bound for the incidents of agency?
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. (1725)
Remember that this provision has two instances
where the agent is personally liable
 he expressly binds himself
 exceeds the limits of his authority
without giving such party sufficient
notice of his powers.
Question: How may an agent accept an
agency?
ARTICLE 1870. Acceptance by the agent may
also be express, or implied from his acts
which carry out the agency, or from his
silence or inaction according to the
circumstances. (n)
Acceptance of Agency Between Persons
Present—
ARTICLE 1871. Between persons who are
present, the acceptance of the agency may
also be implied if the principal delivers his
power of attorney to the agent and the latter
receives it without any objection. (n)
Acceptance of Agency Between Persons Who
are Absent
ARTICLE 1872. Between persons who are
absent, the acceptance of the agency cannot
be implied from the silence of the agent,
except:
(1) When the principal transmits his power of
attorney to the agent, who receives it without
any objection;
(2) When the principal entrusts to him by
letter or telegram a power of attorney with
respect to the business in which he is
habitually engaged as an agent, and he did
not reply to the letter or telegram. (n)
Third Parties/Public
Article 1873. If a person specially informs
another or states by public advertisement
that he has given a power of attorney to a
third person, the latter thereby becomes a
duly authorized agent, in the former case with
respect to the person who received the
special information, and in the latter case
with regard to any person.
The power shall continue to be in full force
until the notice is rescinded in the same
manner in which it was given. (n)

Article 1408. Unenforceable contracts cannot
be assailed by third persons.
Article 1921. If the agency has been
entrusted for the purpose of contracting with
specified persons, its revocation shall not
prejudice the latter if they were not given
notice thereof. (1734)
Article 1922. If the agent had general powers,
revocation of the agency does not prejudice
third persons who acted in good faith and
without knowledge of the revocation. Notice
of the revocation in a newspaper of general
circulation is a sufficient warning to third
persons. (n)
Classification of Agencies
Creating a Problem of Semantics
ARTICLE 1876. An agency is either general or
special.
The former comprises all the business of the
principal. The latter, one or more specific
transactions. (1712)
ARTICLE 1876. An agency is either general or
special.
The former comprises all the business of the
principal. The latter, one or more specific
transactions. (1712)
ARTICLE 1877. An agency couched in general
terms comprises only acts of administration,
even if the principal should state that he
withholds no power or that the agent may
execute such acts as he may consider
appropriate, or even though the agency
should authorize a general and unlimited
management. (n)
An agent may be:
According to a Supreme Decision an agent may
be the following. But note these are US terms
and are inconsistent with our Civil Code
terminology. Take note of this decision to
answer objective question on what is a
universal agent. But do use this to answer an
essay question.
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.
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.
A special agent:
Is one authorized to do some particular act or
to act upon some particular occasion. He acts
usually in accordance with specific instructions
or under limitations necessarily implied from
the nature of the act to be done. Siasat v. IAC,
139 SCRA 238 (1985).
Contracts of agency and general powers of
attorney, must be interpreted in accordance
with the language used by the parties—the
real intention of the parties is
 primarily to be determined from the
language used, and to be gathered
from the whole instrument.
 In case of doubt, resort must be had to
the situation, surroundings, and
relations of the parties.
 Whenever it is possible, effect is to be
given to every word or clause used by
the parties, for it is to be presumed that
the parties said what they intended to
say and that they used each word or
clause with sole purpose, and that
purpose is, if possible, to be ascertained
and enforced.
 If the contract be open to two
constructions, one of which would
while the other would overthrow it, the
former is to be chosen; if by one
construction the contract would be
illegal, and by another equally
permissible construction would be
lawful, the latter must be adopted.
 The acts of the parties will be presumed
to be done in conformity with and not
contrary to the intent of the contract.
 The meaning of general words must be
construed with reference to the specific
object to be accomplished and limited
by the recitals made in reference to
such object.
 Linan v. Puno, 31 Phil. 259 (1915).

Dominion Insurance Corp. v. Court of
Appeals, 376 SCRA 239 (2002).
Guevarra is the agent of Dominion Insurance
and per their Memorandum of Management
Agreement with authority is to settle claims.
In settling the claims, Guevarra's authority is
further limited by the written standard
authority to pay, which states that the payment
shall come from Guevarra's revolving fund or
collection.
Guevarra paid the claims and obtained Release
of Claim Loss and Subrogation Receipts from
the insured who were paid, but not from
Guevarra’s revolving fund or collection but from
his personal funds.
Guevarra now sought to be reimbursed. Did he
act within the scope of his powers and is
entitled to reimbursement?
The instruction of the principal could not be any
clearer. Guevarra was authorized to pay the
claim of the insured, but the payment shall
come from the revolving fund or collection in
his possession.
The agency comprises all the business of the
principal, but, couched in general terms, it is
limited only to acts of administration. A general
power permits the agent to do all acts for which
the law does not require a special power. Thus,
the acts enumerated in or similar to those
enumerated in the Special Power of Attorney
do not require a special power of attorney.
The payment of claims is not an act of
administration. The settlement of claims is not
included among the acts enumerated in the
Special Power of Attorney, neither is it of a
character similar to the acts enumerated
therein. A special power of attorney is required
before Guevarra could settle the insurance
claims of the insured.
Nevertheless, to the extent that the obligation
of the petitioner has been extinguished,
Guevarra may demand for reimbursement from
his principal. To rule otherwise would result in
unjust enrichment of Dominion Insurance.
Veloso v. Court of Appeals, 260 SCRA
593 (1996).
Francisco Veloso issued a General Power of
Attorney to his wife, Irma. It provided among
others the following powers:
“To buy or sell, hire or lease, mortgage or
otherwise hypothecate lands, tenements and
hereditaments or other forms of real property,
more specifically TCT No. 49138, upon such
terms and conditions and under such
covenants as my said attorney shall deem fit
and proper."
When he returned home from a trip abroad, he
found that his property has been sold and his
title cancelled.
Has the sale been executed with the scope of
the General Power of Attorney granted? Or is
there a necessity for a special power of attorney
Ruling:
While it is true that it was denominated as a
general power of attorney, a perusal thereof
revealed that it stated an authority to sell.
Thus, there was no need to execute a separate
and special power of attorney since the general
power of attorney had expressly authorized the
agent or attorney in fact the power to sell the
subject property.
The special power of attorney can be included
in the general power when it is specified therein
the act or transaction for which the special
power is required.
CASES WHERE SPECIAL POWERS
ARE NECESSARY - SORRY BUT YOU HAVE NO
CHOICE BUT TO MEMORIZE BY HEART EACH
AND EVERYONE OF THESE…
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;
(2) To effect novations which put an end to
obligations already in existence at the time
the agency was constituted;
(3) To compromise, to submit questions to
arbitration, to renounce the right to appeal
from a judgment, to waive objections to the
venue of an action or to abandon a
prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the
ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable
consideration;
(6) To make gifts, except customary ones for
charity or those made to employees in the
business managed by the agent;
(7) To loan or borrow money, unless the
latter act be urgent and indispensable for the
preservation of the things which are under
administration;

(8) To lease any real property to another
person for more than one year;
(9) To bind the principal to render some
service without compensation;
(10) To bind the principal in a contract of
partnership;
(11) To obligate the principal as a guarantor
or surety;
(12) To create or convey real rights over
immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations
contracted before the agency;
(15) Any other act of strict dominion. (n)
Philippine International Trading
Corporation v. Threshold Pacific Corporation,
G.R. No. 209119, October 3, 2018.
The petitioner, Philippine International Trading
Corporation (PITC) is a government-owned and
controlled corporation created by law to engage
in or handle foreign procurement, marketing,
and distribution for Philippine and third country
enterprises.
Respondent Threshold Pacific Corporation (TPC)
is a domestic corporation, and respondent
Cuales is its Managing Director.
PITC and Threshold Pacific Corporation (TPC)
entered into an Import Financing Agreement
(IFA) whereby PITC agreed to assist TPC
financially in the amount of P50,000,000.00 for
the latter's importation of urea fertilizers.
As a result of Allied Sugarcane Planters
Association, Inc. (ASPAI) members' urgent
fertilizer requirements vis-à-vis the delay in the
importation of fertilizers, PITC and TPC
amended the IFA where PITC agreed to
disburse the first tranche of the loan of 5.8 m to
enable TPC to purchase the fertilizers from the
domestic market for resale to ASPAI members.
As a result of further delay in the shipment of
the imported fertilizers, the parties further
amended the IFA in order to meet ASPAI's
urgent request for additional fertilizer.
This subsequent amendment to the IFA was
denominated as the 2nd Addendum, which for
a 2nd partial release of the loan in the amount
of P5,000,000.00 but PITC indicated that this
will be the last time for BORROWER to source
said fertilizers from domestic suppliers utilizing
the Loan herein granted by PITC.
Due to non-payment of the loan PITC sued and
the RTC ordered TPC to pay 5.8 m for 1st
tranche and 4.9 m for second tranche plus
interest and penalty charges.
The CA reversed.
The Court of Appeals held that TPC and Cuales
sufficiently proved that the IFA and its
addendums were simulated and did not reflect
the true intention of the parties.
The CA considered PITC and ASPAI's acts
contemporaneous and subsequent to the
aforementioned loan documents as testified by
Cuales, to wit:
(i) PITC required ASPAI, not TPC, to issue the
required post-dated checks and execute real
estate mortgages to secure the loan;
(ii) PITC reimbursed TPC for storage and
delivery expenses incurred in relation to the
fertilizers' handling, warehousing, arrastre,
trucking and supervision;
(iii) pursuant to the 1st Addendum, PITC opened
a LandBank Letter of Credit amounting to
P5,723,325.00 directly in favor of La Filipina Uy
Gongco Corp., with ASPAI as its consignee. TPC
was not a party to this transaction;
(iv) as to the 2nd Addendum's partial
disbursement amounting to P5,000,000.00,
ASPAI acknowledged the receipt of
P4,900,000.00 of the loan proceeds, while TPC
returned the balance of P100,000.00 to PITC;
(v) ASPAI liquidated costs in relation fertilizer
purchases and submitted receipts thereon to
PITC;
(vi) upon dishonor of its post-dated checks, PITC
sent demand letters to ASPAI, not to TPC;
(vii) due to the checks' dishonor, PITC filed
criminal complaints for estafa and violation of
Batas Pambansa Blg. 22 against ASPAI's officers;
(viii) the IFA conditioned the release of loan
proceeds upon, among others, TPC's submission
of Noah's Ark Sugar Holdings (Noah's Ark)'s
written conforme endorsing the assignment of
ASPAI's quedans to PITC.
However, PITC proceeded to make partial
disbursements of the loan despite TPC's failure
to submit Noah's Ark's endorsement; and
(ix) the parties executed the IFA to facilitate the
importation of urea fertilizer.
However, pursuant to the two addendums,
instead of importing fertilizers, ASPAI purchased
them directly from local suppliers.
In ruling that the loan was simulated and not
reflective of the parties' actual intention, the
appellate court considered respondent Cuales'
testimony as sufficient evidence of
contemporaneous and subsequent acts
showing that TPC was merely ASPAI's agent
Question
Was TPC merely an agent of ASPAI?
Answer
No.
In general, an agency may be express or
implied.
However, an agent must possess a special
power of attorney if he intends to borrow
money in his principal's behalf, to bind him as a
guarantor or surety, or to create or convey real
rights over immovable property, including real
estate mortgages.
While the special power of attorney may be
either oral or written, the authority given must
be express.
In other words, there must be "a clear mandate
from the principal specifically authorizing the
performance of the act," not merely overt acts
from which an agency may be inferred.
Consequently, the agent's "authority must be
duly established by competent and convincing
evidence other than the self serving assertion of
the party claiming that such authority was
verbally given."
These supposed acts contemporaneous and
subsequent to the loan do not outweigh the
loan instruments' express language: that
respondent Cuales, as its representative,
executed the loan and bound respondent TPC
as the debtor-borrower.
Thus, respondent TPC shall be liable to pay
petitioner PITC, the creditor, the principal loan
plus interests and other charges when these
become due.
Yoshizaki v. Joy Training Center of
Aurora, Inc., 702 SCRA 631 (2013)
Joy Training Center of Aurora, Inc. (Joy Training)
is a non-stock, non-profit religious educational
institution.
On behalf of the Joy Training, Richard and Linda
Johnson sold the real properties, a Wrangler
jeep, and other personal properties in favor of
the spouses Sally and Yoshio Yoshizaki on the
strength of a certification which states:
Further, Richard A. and Linda J[.] Johnson were
given FULL AUTHORITY for ALL SIGNATORY
purposes for the corporation on ANY and all
matters and decisions regarding the property
and ministry here. They will follow guidelines
set forth according to their appointment and
ministerial and missionary training and in that,
they will formulate and come up with by-laws
which will address and serve as governing
papers over the center and corporation. They
are to issue monthly and quarterly statements
to all members of the corporation.
And a resolution which states:
We, the undersigned Board of Trustees (in
majority) have authorized the sale of land and
building owned by spouses Richard A. and
Linda J[.] Johnson (as described in the title SN
No. 5102156 filed with the Province of Aurora
last 5th day of March 1998. These proceeds are
going to pay outstanding loans against the
project and the dissolution of the corporation
shall follow the sale. This is a religious, non-
profit corporation and no profits or stocks are
issued.
Joy Training questioned the sale in court.
Were the spouses sufficiently authorized?
The resolution which purportedly grants the
spouses Johnson a special power of attorney is
negated by the phrase "land and building
owned by spouses Richard A. and Linda J[.]
Johnson.”
Moreover, the certification is a mere general
power of attorney which comprises all of Joy
Training's business.
Article 1877 of the Civil Code clearly states that
"[a]n agency couched in general terms
comprises only acts of administration, even if
the principal should state that he withholds no
power or that the agent may execute such acts
as he may consider appropriate, or even though
the agency should authorize a general and
unlimited management."
Necessarily, the absence of a contract of agency
renders the contract of sale unenforceable;
At this point, we reiterate the established
principle that persons dealing with an agent
must ascertain not only the fact of agency, but
also the nature and extent of the agent's
authority.
A third person with whom the agent wishes to
contract on behalf of the principal may require
the presentation of the power of attorney, or
the instructions as regards the agency.
The basis for agency is representation and a
person dealing with an agent is put upon
inquiry and must discover on his own peril the
authority of the agent.
Patrimonio v. Gutierrez, 724 SCRA 636
(2014)
The petitioner and the respondent Napoleon
Gutierrez (Gutierrez) entered into a business
venture under the name of Slam Dunk
Corporation to produce mini-concerts and
shows related to basketball.
The petitioner pre-signed several checks to
answer for the expenses of Slam Dunk.
Although signed, these checks had no payee's
name, date or amount.
The blank checks were entrusted to Gutierrez
with the specific instruction not to fill them out
without previous notification to and approval
by the petitioner. The arrangement was made
so that he could verify the validity of the
payment and make the proper arrangements to
fund the account.
In the middle of 1993, without the petitioner's
knowledge and consent, Gutierrez went to
Marasigan (the petitioner's former teammate),
to secure a loan in the amount of P200,000.00
on the excuse that the petitioner needed the
money for the construction of his house. In
addition to the payment of the principal,
Gutierrez assured Marasigan that he would be
paid an interest of 5% per month from March to
May 1994.
Marasigan agreed and gave Gutierrez the
P200,000. On May 24, 1994, Marasigan
deposited the check but it was dishonored for
the reason "ACCOUNT CLOSED."
It was later revealed that petitioner's account
with the bank had been closed since May 28,
1993
Did the issuance of blank checks by a principal
authorize his agent to borrow money?
Article 1878 does not state that the authority
be in writing. As long as the mandate is express,
such authority may be either oral or written.
We unequivocably declared in Lim Pin v. Liao
Tian, et al., that the requirement under Article
1878 of the Civil Code refers to the nature of
the authorization and not to its form.
Be that as it may, the authority must be duly
established by competent and convincing
evidence other than the self serving assertion of
the party claiming that such authority was
verbally given. . . .
. . . that the petitioner entrusted the blank pre-
signed checks to Gutierrez is not legally
sufficient because the authority to enter into a
loan can never be presumed.
The contract of agency and the special
fiduciary relationship inherent in this contract
must exist as a matter of fact.
The person alleging it has the burden of proof
to show, not only the fact of agency, but also its
nature and extent.
On blank checks and applying section 14 of the
Negotiable Instruments Law, the Court stated
that:
In order however that one who is not a holder
in due course can enforce the instrument
against a party prior to the instrument's
completion, two requisites must exist:
1. that the blank must be filled strictly in
accordance with the authority given;
and
2. it must be filled up within a reasonable
time.
If it was proven that the instrument had not
been filled up strictly in accordance with the
authority given and within a reasonable time,
the maker can set this up as a personal defense
and avoid liability. However, if the holder is a
holder in due course, there is a conclusive
presumption that authority to fill it up had been
given and that the same was not in excess of
authority.
Marasigan is Not a Holder in Due Course
Acquisition in good faith means taking without
knowledge or notice of equities of any sort
which could be set up against a prior holder of
the instrument. It means that he does not have
any knowledge of fact which would render it
dishonest for him to take a negotiable paper. ,,,
Our own examination of the records tells us
that Gutierrez has exceeded the authority to
fill up the blanks and use the check.
To repeat, petitioner gave Gutierrez pre-signed
checks to be used in their business provided
that he could only use them upon his approval.
His instruction could not be any clearer as
Gutierrez' authority was limited to the use of
the checks for the operation of their business,
and on the condition that the petitioner's prior
approval be first secured.

Some Special Limitations
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. (n) (ACT 190
Statute of Frauds)
Article 1491. The following persons cannot
acquire by purchase, even at a public or
judicial auction, either in person or through
the mediation of another: ….
(2) Agents, the property whose
administration or sale may have been
intrusted to them, unless the consent of the
principal has been given; ….
Article 1879. A special power to sell
excludes the power to mortgage; and a
special power to mortgage does not include
the power to sell. (n)
OBLIGATIONS OF AN AGENT UPON
ACCEPTANCE
Upon Acceptance
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.
He must also finish the business already
Effect
begunof Acceptance
on the death of the principal, should
delay entail any danger. (1718)
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.
He must also finish the business already
begun on the death of the principal, should
delay entail any danger. (1718)
Article 1909. The agent is responsible not
only for fraud, but also for negligence, which
shall be judged with more or less rigor by the
courts, according to whether the agency was
or was not for a compensation. (1726)
OBLIGATIONS OF WHEN
DECLINING/WITHDRAWAL
Upon Refusal
Article 1885. In case a person declines an
agency, he is bound to observe the diligence
of a good father of a family in the custody and
preservation of the goods forwarded to him
by the owner until the latter should appoint
an agent or take charge of the goods. (n)
Question: is the one declining the agency an
agent at this point in time?
No precisely, the agency was declined and the
law only charged the person so declining with
the diligence of a good father of a family in the
custody and preservation of the owner’s goods.
Withdrawal from Agency
Article 1929. The agent, even if he should
withdraw from the agency for a valid reason,
must continue to act until the principal has
had reasonable opportunity to take the
necessary steps to meet the situation. (1737a)
SCOPE OF AUTHORITY
Article 1881. The agent must act within the
scope of his authority. He may do such acts as
may be conducive to the accomplishment of
the purpose of the agency. (1714a)
Effect of Exceeding the Authority; Main Rules
Article 1317. No one may contract in the
name of another without being authorized by
the latter, or unless he has by law a right to
represent him.
A contract entered into in the name of
another by one who has no authority or legal
representation, or who has acted beyond his
powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person
on whose behalf it has been executed, before
it is revoked by the other contracting party.
(1259a)
Article 1403. The following contracts are
unenforceable, unless they are ratified:
(1) Those entered into in the name of
another person by one who has been given
no authority or legal representation, or who
has acted beyond his powers; …

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. (n)
Gonzales-Saldana v. Spouses Niamatali
G.R. No. 226587. November 21, 2018
In January 2002, respondent-spouses Gordon
and Amy Niamatali (respondent-spouses), then
residing in the United States of America, made
known to petitioner Donabelle Gonzales-
Saldana (petitioner) their intention to acquire
real properties in Metro Manila.
Petitioner, who was then working in the
Department of Labor and Employment (DOLE),
informed them that a certain parcel of land
located in Las Piñas City would be sold in a
public auction conducted by the DOLE Sheriff's
Office.
Thereafter, respondent-spouses asked
petitioner to participate in the public auction on
their behalf.
Consequently, on January 30, 2002, they
remitted US$60,000.00 or P3,000,000.00 to
petitioner's bank account for the purchase of
the Las Piñas property.
In March 2002, however, respondent-spouses
received from petitioner photocopies of
Transfer Certificates of Title (TCT) Nos. 105904
and 223102 covering properties located in
Manila and Parañaque contrary to their
agreement that petitioner would purchase the
Las Piñas property.
Petitioner explained to them that the auction
sale of the Las Piñas property did not push
through because of a third-party claim, but the
judgment creditor agreed to sell to her the
Parañaque and Manila properties which were
also levied on execution.
Upon their return to the Philippines in July
2002, petitioner brought respondent-spouses to
the Las Piñas property but it was locked up and
a signboard was posted, on which the words
"Future Home of Lutheran School and
Community Center" were written.
Thus, respondent-spouses informed petitioner
that they were no longer interested in acquiring
the Las Piñas property and asked for the return
of the P3,000,000.00, to which petitioner
acceded.
In the suit that was subsequently filed,
petitioner averred that petitioner asked
respondent-spouses whether they were
interested in buying the properties located in
Manila and Parañaque, but the latter did not
respond.
In good faith, and thinking that it would be
beneficial for respondent-spouses, petitioner
requested her friend, Alninia L. Austria
(Austria), to participate in the bidding of the
Manila and Parañaque properties.
In both auctions, Austria was declared the
winning bidder.
When the respondent-spouses told petitioner
that they were no longer interested in buying
the Las Piñas property, petitioner told them
that she would return their money but she had
to sell first the Manila and Parañaque
properties.
Question
Would you say that petitioner acted in good
faith and what was in the best interest of the
respondent spouses?
Answer
A contract of agency may be inferred from all
the dealings between petitioner and
respondent-spouses.
The question of whether an agency has been
created is ordinarily a question which may be
established in the same way as any other fact,
either by direct or circumstantial evidence. The
question is ultimately one of intention.
In this case, respondent-spouses communicated
with petitioner as regards the purchase of the
Las Piñas property and they remitted
P3,000,000.00 to petitioner's account for such
purpose.
For her part, petitioner made inquiries with the
DOLE Sheriff's Office and even talked to the
judgment creditor for the purchase of the said
property.
Also, she received P3,000,000.00 from
respondent-spouses to finalize the transaction.
Thus, it is beyond dispute that an implied
agency existed between petitioner and
respondent-spouses for the purpose of
purchasing the Las Piñas property.
Petitioner, however, acted beyond the scope of
her authority.
It is worthy to note that it was petitioner who
introduced to respondent-spouses the idea of
participating in the auction sale of the Las Piñas
property.
When the parties came to an agreement as to
the purchase of the said property, petitioner
was then unaware of other properties which
were going to be sold on auction.
As a result, the parties never agreed on a
substitute property to be purchased in case the
bidding of the Las Piñas property failed to
materialize.
As it happened, the Las Piñas property could
not be auctioned on account of a third-party
claim.
Thus, when petitioner was informed that
certain properties in Manila and Parañaque
were to be auctioned for the same judgment
creditor, she proceeded to participate in the
bidding and decided not to wait for respondent-
spouses' approval.
It was only after the sale that petitioner
informed respondent-spouses that she already
settled for the Manila and Parañaque
properties, worth more than P3,000,000.00 in
valuation.
Thus, even though petitioner may have been
motivated by good intentions and by a sincere
belief that the purchase of the Manila and
Parañaque properties would benefit
respondent-spouses, it cannot be gainsaid that
she acted outside the scope of the authority
given to her, i.e., to purchase the Las Piñas
property.
Hence, petitioner's failure to fulfill her
obligation entitles respondent-spouses to the
return of the P3,000,000.00 which they
remitted to her account.
SCOPE OF AUTHORITY
The Power of the Written Word:
Article 1900. So far 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, even if the
agent has in fact exceeded the limits of his
authority according to an understanding
between the principal and the agent. (n)
Effect of Exceeding the Authority, Exceeded
with Profit
Article 1882. The limits of the agent's
authority shall not be considered exceeded
should it have been performed in a manner
more advantageous to the principal than that
specified by him. (1715)
Agent acting in his own name
Article 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.
(1717)
Bucton v. Rural Bank of El Salvador,
Inc., 717 SCRA 278 (2014)
Where authorized agent failed to indicate in the
mortgage that she was acting for and on behalf
of her principal; and the Real Estate Mortgage
explicitly shows on its face that it was signed by
agent in her own name and in her own personal
capacity.
Thus, consistent with the law on agency, the
principal cannot be bound by the acts of the
agent.
The third-party bank has no one to blame but
itself:
Not only did it act with undue haste when it
granted and released the loan in less than three
days, it also acted negligently in preparing the
Real Estate Mortgage as it failed to indicate that
agent was signing it for and on behalf of
principal.
THE DO’S & DON’TS OF AN AGENT
When there are Instructions & when there are
none:

Article 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. (1719)
Should not do what is manifestly harmful to
principal
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 1173. The fault or negligence of the
obligor consists in the omission of that
diligence which is required by the nature of
the obligation and corresponds with the
circumstances of the persons, of the time and
of the place.
When negligence shows bad faith, the
provisions of articles 1171 and 2201,
paragraph 2, shall apply.
If the law or contract does not state the
diligence which is to be observed in the
performance, that which is expected of a
good father of a family shall be required.
(1104a)
In case of conflict of interest, whose interest
should the agent choose?
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. (n)
Borrowing Money, can agent borrow/lend the
principal?
Article 1890. If the agent has been
empowered to borrow money, he may
himself be the lender at the current rate of
interest. If he has been authorized to lend
money at interest, he cannot borrow it
without the consent of the principal. (n)
Render an accounting and deliver whatever he
received during the agency
Article 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. (1720a)
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. (1724a)
Spouses Salvador v. Spouses Rabaja,
G.R. No. 199990, February 4, 2015
Spouses Rabaja learned that Spouses Salvador
were looking for a buyer of the subject
property.
Petitioner Herminia Salvador (Herminia)
personally introduced Gonzales to them as the
administrator of the said property.
Spouses Salvador even handed to Gonzales the
owner's duplicate certificate of title over the
subject property.
On July, 3, 1998, Spouses Rabaja made an initial
payment of P48,000.00 to Gonzales in the
presence of Herminia. Gonzales then presented
the Special Power of Attorney (SPA), executed
by Rolando Salvador (Rolando) and dated July
24, 1998.
On the same day, the parties executed the
Contract to Sell which stipulated that for a
consideration of P5,000,000.00, Spouses
Salvador sold, transferred and conveyed in
favor of Spouses Rabaja the subject property.
Spouses Rabaja made several payments
totalling P950,000.00, which were received by
Gonzales pursuant to the SPA provided earlier
as evidenced by the check vouchers signed by
Gonzales and the improvised receipts signed by
Herminia.
In June 1999, the Spouses Salvador complained
to Spouses Rabaja that they did not receive any
payment from Gonzales.
This prompted Spouses Rabaja to suspend
further payment; and as a consequence, they
received a notice to vacate the subject property
from Spouses Salvador for non-payment of
rentals.
According to Article 1900 of the New Civil Code,
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, Spouses Rabaja did not recklessly
enter into a contract to sell with Gonzales.
They required her presentation of the power of
attorney before they transacted with her
principal. And when Gonzales presented the
SPA to Spouses Rabaja, the latter had no reason
not to rely on it.
The law mandates an agent to act within the
scope of his authority which what appears in
the written terms of the power of attorney
granted upon him.
The Court holds that, indeed, Gonzales 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.
As the agent acted within the scope of his
authority, the principal must comply with all the
obligations.
As correctly held by the CA, considering that it
was not shown that Gonzales exceeded her
authority or that she expressly bound herself to
be liable, then she could not be considered
personally and solidarily liable with the
principal, Spouses Salvador.
BPI v. Laingo, G.R. No. 205206, March
16, 2016
Rheozel Laingo (Rheozel), the son of respondent
Yolanda Laingo (Laingo), opened a "Platinum 2-
in-1 Savings and Insurance" account with
petitioner Bank of the Philippine Islands (BPI).
The account is a savings account where
depositors are automatically covered by an
insurance policy against disability or death.
Rheozel died in an car accident. BPI was very
accommodating in helping the family close the
account and withdraw Rhoezel's money.
Two years later the sister of Rheozel found the
insurance policy, but it was too late to claim on
the policy since the policy provides that the
claim the should have filed within three
calendar months from the death of Rheozel.
The respondent sued the bank and the
insurance company.
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.
REMINDER!
Case Problem on Rendering an Accounting
Sazon v. Vasquez-Menancio [G.R. No.
192085. February 22, 2012.] 666 SCRA 707
Respondent is a resident of the United States of
America.
Sometime in 1979, she entrusted the
management, administration, care and
preservation of her properties, consisting of 9
lots in Libon, Albay to petitioner.
Respondent avers that the 9 lots are productive,
and that petitioner as the administrator has
collected and received all the fruits and income
accruing therefrom.
Petitioner, on the other hand, claims that
several of the properties do not produce any
fruit or generate any income at all, and that any
supposed income derived from them is not
sufficient to answer for all the expenses
incurred to maintain them.
According to respondent, petitioner never
rendered a full accounting of the fruits and
income derived from the properties
Petitioner however wrote the respondent four
times to report on the conditions of her
property.
Question:
Is petitioner loyally performing the duties of an
agent in rendering an accounting?
Answer
Petitioner was the administrator of
respondent's properties for 18 years or from
1979 to 1997, and four letters within 18 years
can hardly be considered as sufficient to keep
the principal informed and updated of the
condition and status of the latter's properties.
Case was remanded for reception of evidence.
Case on Agent’s Duty of Loyalty
Hernandez v. Hernandez, 645 SCRA 24
(2011)
Department of Public Works and Highways
(DPWH), offered to purchase a portion of a
parcel of land owned by the Hernandez family
for use in the expansion of the South Luzon
Expressway. The initial offer was 35 pesos and
the parties haggled until it reached 70 pesos
and there was still no agreement.
The Hernandezes appointed one of their kin ,
Cecilio, as their true and lawful attorney to deal
with the government.
On 11 November 1993, they executed a letter
to Cecilio which states that they would give
Cecilio 20% of any amount in excess of 70.00
pesos per square meter and whatever excess
beyond P300.00 Pesos per square meter of the
area shall likewise be given to Cecilio as
additional incentive.
When the expropriation proceedings were
concluded the court set the just compensation
at 1,500 pesos per square meter. Which means
the Hernandez family is entitled to
21,964,500.00 pesos as just compensation.
Cecilio received this amount for himself and
paid his aunt 1,123,000.00 pesos and one of the
Hernandezes, namely Cornelia to sign a
quitclaim.
Is Cecilio entitled to the amount he has taken
from the just compensation awarded by the
court?
Cecilio's position would give him 83.07% of the
just compensation due Cornelia as a co-owner
of the land.
No evidence on record would show that
Cornelia agreed, by way of the 11 November
1993 letter, to give Cecilio 83.07% of the
proceeds of the sale of her land.
What is on record is that Cornelia asked for an
accounting of the just compensation from
Cecilio several times, but the request remained
unheeded.
Right at that point, it can be already said that
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
or cestui que trust.
Instead of an accounting, what Cornelia
received was a receipt and quitclaim document
that was ready for signing. …
However, Cecilio did not disclose the truth and
instead of coming up with the request of his
aunt, he made a contract intended to bar
Cornelia from recovering any further sum of
money from the sale of her property.
EXPENSES OF THE AGENCY
Article 1912. The principal must advance to
the agent, should the latter so request, the
sums necessary for the execution of the
agency.
Should the agent have advanced them, the
principal must reimburse him therefor, even if
the business or undertaking was not
successful, provided the agent is free from all
fault.
The reimbursement shall include interest on
the sums advanced, from the day on which
the advance was made. (1728)
Article 1886. Should there be a stipulation
that the agent shall advance the necessary
funds, he shall be bound to do so except
when the principal is insolvent. (n)
POWER TO RETAIN THINGS IN PLEDGE
Article 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. (1730)
 Article 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
Note remedy of principal
notoriously is against
incompetent both the
or
agent andinsolvent.
the substitute:
(3) All acts of the substitute appointed
against the prohibition of the
principal shall be void. (1721)
Article 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. (1722a)
1. Substitution made without authority
to the agent from the principal.
2. Substitution authorized by the
principal, but without designating the
person, and the person so named is
notoriously incompetent or insolvent.
3. Authorized substitution with the
statement of the person selected, and
4. Substitution done against the
expressed prohibition of the principal.
Villaluz v. Land Bank of the Philippines,
814 SCRA 466 (2016)
Sometime in 1996, Paula Agbisit (Agbisit),
mother of petitioner May S. Villaluz (May),
requested the latter to provide her with
collateral for a loan.
At the time, Agbisit was the chairperson of
Milflores Cooperative and she needed ₱600,000
to ₱650,000 for the expansion of her backyard
cut flowers business.
May convinced her husband, Johnny Villaluz
(collectively, the Spouses Villaluz), to allow
Agbisit to use their land, located in Calinan,
Davao City and covered by Transfer Certificate
of Title (TCT) No. T-202276, as collateral.
On March 25, 1996, the Spouses Villaluz
executed a Special Power of Attorney in favor of
Agbisit authorizing her to, among others,
"negotiate for the sale mortgage, or other
forms of disposition a parcel of land covered by
Transfer Certificate of Title No. T-202276" and
"sign in our behalf all documents relating to the
sale, loan or mortgage, or other disposition of
the aforementioned property."
The one-page power of attorney neither
specified the conditions under which the special
powers may be exercised nor stated the
amounts for which the subject land may be sold
or mortgaged.
On June 19, 1996, Agbisit executed her own
Special Power of Attorney, appointing Milflores
Cooperative as attorney-in-fact in obtaining a
loan from and executing a real mortgage in
favor of Land Bank of the Philippines (Land
Bank).
On June 21, 1996, Milflores Cooperative, in a
representative capacity, executed a Real Estate
Mortgage in favor of Land Bank in consideration
of the ₱3,000,000 loan to be extended by the
latter.
Land Bank partially released one-third of the
total loan amount, or ₱995,500, to Milflores
Cooperative on June 25, 1996.
On the same day, Agbisit borrowed the amount
of ₱604,750 from Milflores Cooperative.
Land Bank released the remaining loan amount
of ₱2,000,500 to Milflores Cooperative on
October 4, 1996.
Unfortunately, Milflores Cooperative was
unable to pay its obligations to Land Bank.
Thus, Land Bank filed a petition for extra-
judicial foreclosure sale.
May now contests the foreclosure.
Question:
Is the execution of the mortgage by Milflores
Cooperative valid and authorized?
The law creates 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, i.e., the substitute becomes the
agent of the principal.
As a result, the principal is bound by the acts of
the substitute as if these acts had been
performed by the principal's appointed agent.
Concomitantly, the substitute assumes an
agent's obligations to act within the scope of
authority, to act in accordance with the
principal's instructions, and to carry out the
agency, among others.
In order to make the presumption inoperative
and relieve himself from its effects, it is
incumbent upon the principal to prohibit the
agent from appointing a substitute.
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, Article 1892 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 incompetent 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.
In the present case, the Special Power of
Attorney executed by the Spouses Villaluz
contains no restrictive language indicative of an
intention to prohibit Agbisit from appointing a
substitute or sub-agent.
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. (1725)
Article 1901. A third person cannot set up the
fact that the agent has exceeded his powers,
if the principal has ratified, or has signified his
willingness to ratify the agent's acts. (n)
Article 1902. A third person with whom the
agent wishes to contract on behalf of the
principal may require the presentation of the
power of attorney, or the instructions as
regards the agency. Private or secret orders
and instructions of the principal do not
prejudice third persons who have relied upon
the power of attorney or instructions shown
them. (n)
LIABILITY OF THE PRINCIPAL DESPITE AGENT
EXCEEDING HIS AUTHORITY

Thus, Agbisit's appointment of Milflores

Cooperative was valid. When agent exceeds authority

Article 1911. Even when the agent has

TWO OR MORE AGENTS WITH ONE PRINCIPAL exceeded his authority, the principal is
v. solidarily liable with the agent if the former
TWO PRINCIPALS WITH A COMMON AGENT allowed the latter to act as though he had full
powers. (n)
Article 1894. The responsibility of two or
more agents, even though they have been
Doctrine of Apparent Authority
appointed simultaneously, is not solidary, if
solidarity has not been expressly stipulated.
The doctrine of apparent authority focuses on
(1723)
two factors,

Article 1915. If two or more persons have

first the principal’s manifestations of the
appointed an agent for a common transaction
existence of agency which need not be
or undertaking, they shall be solidarily liable
expressed, but may be general and implied,
to the agent for all the consequences of the
and
agency. (1731)

second is the reliance of third persons upon

Article 1895. If solidarity has been agreed
the conduct of the principal or agent.
upon, each of the agents is responsible for
the non-fulfillment of agency, and for the
Under the doctrine of apparent authority, the
fault or negligence of his fellows agents,
question in every case is whether the principal
except in the latter case when the fellow
has by his voluntary act placed the agent in such
agents acted beyond the scope of their
a situation that a person of ordinary prudence,
authority. (n)
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.
Professional Services, Inc. v. Court of Appeals,
544 SCRA 170 (2008); 611 SCRA 282 (2010).
Citystate Savings Bank v. Tobias. G.R.
No. 227990. March 7, 2018
Rolando Robles (Robles), a certified public
accountant, has been employed with Citystate
Savings Bank (petitioner) since July 1998 then as
Accountant-trainee for its Chino Roces Branch.
On September 6, 2000, Robies was promoted as
acting manager for petitioner's Baliuag, Bulacan
branch, and eventually as manager.
Tobias enticed Teresita Tobias (Tobias), a meat
vendor at the Baliuag Public Market, to open an
account at his branch and to put her funds in
some high interest mechanism.
Thereafter, Robies would frequent Tobias' stall
at the public market to deliver the interest
earned by her deposit accounts in the amount
of Php 2,000.00.
In turn, Tobias would hand over her passbook
to Robies for updating.
The passbook would be returned the following
day with typewritten entries but without the
corresponding counter signatures.
Tobias was later offered by Robies to sign-up in
petitioner's back-to-back scheme which is
supposedly offered only to petitioner's most
valued clients.
Under the scheme, the depositors authorize the
bank to use their bank deposits and invest the
same in different business ventures that yield
high interest.
Robies allegedly promised that the interest
previously earned by Tobias would be doubled
and assured her that he will do all the paper
work.
Lured by the attractive offer, Tobias signed the
pertinent documents without reading its
contents and invested a total of Php
1,800,000.00 to petitioner through Robies.
Later, Tobias became sickly, thus she included
her daughter and another respondent Shellidie
Valdez (Valdez), as co-depositor in her accounts
with the petitioner.
In 2005, Robies failed to remit to respondents
the interest as scheduled.
Demands were made and ignored, litigation
ensued.
Question
Can the bank be held solidarily liable for the
fraud committed by Tobias acted without its
authority?
Answer
Yes.
The business of banking is one imbued with
public interest.
As such, banking institutions are obliged to
exercise the highest degree of diligence as well
as high standards of integrity and performance
in all its transactions.
The bank, in its capacity as principal, may also
be adjudged liable under the doctrine of
apparent authority.
The principal's liability in this case however, is
solidary with that of his employee.
The doctrine of apparent authority or what is
sometimes referred to as the "holding out"
theory, or the doctrine of ostensible agency,
imposes liability, not "as the result of the reality
of a contractual relationship, but rather
because of the actions of a principal or an
employer in somehow misleading the public
into believing that the relationship or the
authority exists."
Records show that respondents entered into
two types of transactions with the petitioner,
the first involving savings accounts, and the
other loan agreements.
Both of these transactions were entered into
outside the petitioner bank's premises, through
Robles.
. . . , the liability of a bank to third persons for
acts done by its agents or employees is limited
to the consequences of the latter's acts which it
has ratified, or those that resulted in
performance of acts within the scope of actual
or apparent authority it has vested.
Moreover, that the respondents have been
lured by Robles into signing the said documents
without knowing the implications thereof
does not prove complicity or knowledge on the
part of the petitioner of Robles' inappropriate
acts.
Nonetheless, while it is clear that the proximate
cause of respondents' loss is the
misappropriation of Robles, petitioner is still
liable under Article 1911 of the Civil Code, to
wit:
Art. 1911. Even when the agent has exceeded
his authority, the principal is solidarity liable
with the agent if the former allowed the latter
to act as though he had full powers.
The existence of apparent or implied authority
is measured by previous acts that have been
ratified or approved or where the accruing
benefits have been accepted by the principal.
It may also be established by proof of the
course of business, usages and practices of the
bank; or knowledge that the bank or its officials
have, or is presumed to have of its responsible
officers' acts regarding bank branch affairs.
As aptly pointed by the CA, petitioner's
evidence bolsters the case against it, as they
support the finding that Robles as branch
manager, has been vested with the apparent or
implied authority to act for the petitioner in
offering and facilitating banking transactions.
The testimonies of the witnesses presented by
petitioner establish that there was nothing
irregular in the manner in which Robles
transacted with the respondents.
In fact, petitioner's witnesses admitted that
while the bank's general policy requires that
transactions be completed inside the bank
premises, exceptions are made in favor of
valued clients, such as the respondents.
In which case, banking transactions are allowed
to be done in the residence or place of business
of the depositor, since the same are verified
subsequently by the bank cashier.
Moreover, petitioner admitted that for valued
clients, the branch manager has the authority to
transact outside of the bank premises.
In fact, Robles previously transacted business
on behalf of the petitioner as when it sought
and facilitated the opening of respondents'
accounts.
Petitioner acknowledged Robles' authority and
it honored the accounts so opened outside the
bank premises.
In this light, respondents cannot be blamed for
believing that Robles has the authority to
transact for and on behalf of the petitioner and
for relying upon the representations made by
him.
After all, Robles as branch manager is
recognized "within his field and as to third
persons as the general agent and is in general
charge of the corporation, with apparent
authority commensurate with the ordinary
business entrusted him and the usual course
and conduct thereof."
Consequently, petitioner is estopped from
denying Robles' authority.
As the employer of Robles, petitioner is
solidarity liable to the respondents for damages
caused by the acts of the former, pursuant to
Article 1911 of the Civil Code.
OBLIGATIONS OF THE PRINCIPAL
In general:
Article 1910. The principal must comply with
all the obligations which the agent may have
contracted within the scope of his authority.
As for any obligation wherein the agent has
exceeded his power, the principal is not
bound except when he ratifies it expressly or
tacitly. (1727)
Funding/Expenses/Damages in the execution
of the agency
Article 1912. The principal must advance to
the agent, should the latter so request, the
sums necessary for the execution of the
agency.
Should the agent have advanced them, the
principal must reimburse him therefor, even if
the business or undertaking was not
successful, provided the agent is free from all
fault.
The reimbursement shall include interest on
the sums advanced, from the day on which
the advance was made. (1728)
Article 1913. The principal must also
indemnify the agent for all the damages
which the execution of the agency may have
caused the latter, without fault or negligence
on his part. (1729)
IMPORTANT RULES TO REMEMBER ABOUT
EXPENSES
Article 1918. The principal is not liable for
the expenses incurred by the agent in the
following cases:
1. If the agent acted in contravention of the
principal's instructions, unless the latter
should wish to avail himself of the
benefits derived from the contract;
2. When the expenses were due to the fault
of the agent;
 3. When the agent incurred them with
knowledge that an unfavorable result
would ensue, if the principal was not
aware thereof;
4. When it was stipulated that the expenses
would be borne by the agent, or that the
latter would be allowed only a certain
sum. (n)
Commission Agents – PLEASE MEMORIZE ALL
PROVISIONS
Article 1906. Should the commission agent,
with authority of the principal, sell on credit,
he shall so inform the principal, with a
statement of the names of the buyers. Should
he fail to do so, the sale shall be deemed to
have been made for cash insofar as the
principal is concerned. (n)
Article 1907. Should the commission agent
receive on a sale, in addition to the ordinary
commission, another called a guarantee
commission, he shall bear the risk of
collection and shall pay the principal the
proceeds of the sale on the same terms
agreed upon with the purchaser. (n)
Article 1908. The commission agent who
does not collect the credits of his principal at
the time when they become due and
demandable shall be liable for damages,
unless he proves that he exercised due
diligence for that purpose. (n)
Article 1903. The commission agent shall be
responsible for the goods received by him in
the terms and conditions and as described in
the consignment, unless upon receiving them
he should make a written statement of the
damage and deterioration suffered by the
same. (n)
Article 1904. The commission agent who
handles goods of the same kind and mark,
which belong to different owners, shall
distinguish them by countermarks, and
designate the merchandise respectively
belonging to each principal. (n)
Article 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. (n)
THIRD PERSONS DEALING WITH BOTH
PRINCIPAL AND AGENT
Article 1916. When two persons contract
with regard to the same thing, one of them
with the agent and the other with the
principal, and the two contracts are
incompatible with each other, that of prior
date shall be preferred, without prejudice to
the provisions of article 1544. (n)
Article 1917. In the case referred to in the
preceding article, if the agent has acted in
good faith, the principal shall be liable in
damages to the third person whose contract
must be rejected. If the agent acted in bad
faith, he alone shall be responsible. (n)
PRINCIPAL’S LIABIITY FOR THE ACT OF THE
AGENT’S EMPLOYEES
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.
There is no vinculum juris between the airline
company and its agent's employees and the
contractual relationship between the airline
company and its agent does not operate to
create a juridical tie between the airline
company and its agent's employees.
Article 2180 of the Civil Code does not make the
principal vicariously liable for the tort
committed by its agent's employees and the
principal-agency relationship per se does not
make the principal a party to such tort; hence,
the need to prove the principal's own fault or
negligence.
Spouses Viloria v. Continental Airlines, Inc., G.R.
No. 188288, 16 January 2012]
Petron Corp. v. Spouses Cesar Jovero &
Erma F. Cudilla, G.R. No. 151038, 18 January
2012, 663 SCRA 172 (2012).
Thus, with regard to the delivery of the
petroleum, Villaruz was acting as the agent of
petitioner Petron.
For a fee, he delivered the petroleum products
on its behalf. Notably, petitioner even imposed
a penalty clause in instances when there was a
violation of the hauling contract, wherein it may
impose a penalty ranging from a written
warning to the termination of the contract.
Therefore, as far as the dealer was concerned
with regard to the terms of the dealership
contract, acts of Villaruz and his employees are
also acts of petitioner.
ARTICLE 1919. Agency is extinguished:
(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction,
insanity or insolvency of the principal or of
the agent;
(4) By the dissolution of the firm or
corporation which entrusted or accepted the
agency;
(5) By the accomplishment of the object
or purpose of the agency;
(6) By the expiration of the period for
which the agency was constituted. (1732a)
ARTICLE 1920. The principal may revoke the
agency at will, and compel the agent to return
the document evidencing the agency. Such
revocation may be express or implied.
(1733a)
Revised Penal Code
ARTICLE 34. Civil Interdiction. — Civil
interdiction shall deprive the offender during
the time of his sentence of the rights of
parental authority, or guardianship, either as
to the person or property of any ward, of
marital authority, of the right to manage his
property and of the right to dispose of such
property by any act or any conveyance inter
vivos.
TWO PRINCIPALS – ONE AGENT – EFFECT OF
THE
REVOCATION BY ONE
Article 1915. If two or more persons have
appointed an agent for a common transaction
or undertaking, they shall be solidarily liable
to the agent for all the consequences of the
agency. (1731)
Article 1925. When two or more principals
have granted a power of attorney for a
common transaction, any one of them may
revoke the same without the consent of the
others. (n)
ACTS OF INCOMPATIBILITY
Article 1923. The appointment of a new
agent for the same business or transaction
revokes the previous agency from the day on
which notice thereof was given to the former
agent, without prejudice to the provisions of
the two preceding articles. (1735a)
Article 1921. If the agency has been
entrusted for the purpose of contracting with
specified persons, its revocation shall not
prejudice the latter if they were not given
notice thereof. (1734)
Article 1922. If the agent had general
powers, revocation of the agency does not
prejudice third persons who acted in good
faith and without knowledge of the
revocation. Notice of the revocation in a
newspaper of general circulation is a
sufficient warning to third persons. (n)
Article 1924. The agency is revoked if the
principal directly manages the business
entrusted to the agent, dealing directly with
third persons. (n)
Article 1926. A general power of attorney is
revoked by a special one granted to another
agent, as regards the special matter involved
in the latter. (n)
Article 1928. The agent may withdraw from
the agency by giving due notice to the
principal. If the latter should suffer any
damage by reason of the withdrawal, the
agent must indemnify him therefor, unless
the agent should base his withdrawal upon
the impossibility of continuing the
performance
of the agency without grave
COMPLEX MANDATE
detriment to himself. (1736a)
Article 1927. An agency cannot be revoked if
a bilateral contract depends upon it, or if it is
the means of fulfilling an obligation already
contracted, or if a partner is appointed
manager of a partnership in the contract of
partnership and his removal from the
management is unjustifiable. (n)
Article 1930. The agency shall remain in full
force and effect even after the death of the
principal, if it has been constituted in the
common interest of the latter and of the
agent, or in the interest of a third person who
has accepted the stipulation in his favor. (n)
KNOWLEDGE – ALWAYS IMPORTANT
Article 1931. Anything done by the agent,
without knowledge of the death of the
principal or of any other cause which
extinguishes the agency, is valid and shall be
fully effective with respect to third persons
who may have contracted with him in good
faith. (1738)
Article 1921. If the agency has been
entrusted for the purpose of contracting with
specified persons, its revocation shall not
prejudice the latter if they were not given
notice thereof. (1734)
Article 1922. If the agent had general powers,
revocation of the agency does not prejudice
third persons who acted in good faith and
without knowledge of the revocation. Notice
of the revocation in a newspaper of general
circulation is a sufficient warning to third
persons. (n)
Article 1932. If the agent dies, his heirs must
notify the principal thereof, and in the
meantime adopt such measures as the
circumstances may demand in the interest of
the latter. (1739)
Oliver v. Philippine Savings Bank, 788
SCRA 189 (2016)
Mercedes Oliver (Oliver) was a depositor at
PSBank where she was assisted by Lilia Castro
(Castro)who was the Assistant Vice President of
PSBank and the Acting Branch Manager of
PSBank San Pedro, Laguna.
Sometime in 1997, she made an initial deposit
of P12 million into her PSBank account.
Castro convinced her to loan out her deposit as
interim or bridge financing for the approved
loans of bank borrowers who were waiting for
the actual release of their loan proceeds.
Under this arrangement, Castro would first
show the approved loan documents to Oliver.
Thereafter, Castro would withdraw the amount
needed from Oliver's account.
Upon the actual release of the loan by PSBank
to the borrower, Castro would then charge the
rate of 4% a month from the loan proceeds as
interim or bridge financing interest.
Together with the interest income, the principal
amount previously withdrawn from Oliver's
bank account would be deposited back to her
account.
Meanwhile, Castro would earn a commission of
10% from the interest.
Their arrangement went on smoothly for
months. Due to the frequency of bank
transactions, Oliver even entrusted her
passbook to Castro.
Because Oliver earned substantial profit, she
was further convinced by Castro to avail of an
additional credit line in the amount of P10
million. The said credit line was secured by a
real estate mortgage on her house and lot in
Ayala Alabang.
Oliver instructed Castro to pay P2 million
monthly to PSBank starting on September 3,
1998 so that her credit line for P10 million
would be fully paid by January 3, 1999.
Beginning September 1998, Castro stopped
rendering an accounting for Oliver.
The latter then demanded the return of her
passbook.
When Castro showed her the passbook
sometime in late January or early February
1999, she noticed several erasures and
superimpositions therein.
Suspicious, Oliver investigated her transaction
history register and discovered several
unauthorized transactions including an
additional loans of P4,491,250.00 and
P1,396,310.45 and a withdrawal of P7 million.
The loans were secured by the earlier real
estate mortgage on her house in Ayala Alabang.
Oliver then received two collection letter from
PSBank for the additional loans and then a final
demand letter with a notice informed her of the
impending extra-judicial foreclosure and sale of
her house and lot to be held on October 21,
1999.
Question:
Is Castro an agent of Oliver such that Oliver
can be held liable for the loans and suffer the
lost of the unauthorized withdrawal of P7
million?
Answer
A contract of agency may be inferred from all
the dealings between Oliver and Castro.
Agency can be express or implied from the acts
of the principal, from his silence or lack of
action, or his failure to repudiate the agency
knowing that another person is acting on his
behalf without authority.
The question of whether an agency has been
created is ordinarily a question which may be
established in the same way as any other fact,
either by direct or circumstantial evidence. The
question is ultimately one of intention.
Clearly, an agency was formed because Castro
bound herself to render some service in
representation or on behalf of Oliver, in the
furtherance of their business pursuit.
For months, the agency between Oliver and
Castro benefited both parties. Oliver, through
Castro's representations, was able to obtain
loans, relend them to borrowers, and earn
interests; while Castro acquired commissions
from the transactions.
Oliver even gave Castro her passbook to
facilitate the transactions.
Accordingly, the laws on agency apply to their
relationship. 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.
The Court finds that the said loans were
acquired with Oliver's authority.
Although it was proven that Oliver authorized
the loans, in the aggregate amount of
P5,888,149.33, there was nothing in the records
which proved that she also allowed the
withdrawal of P7 million from her bank account.
Castro, as agent of Oliver and as branch
manager of PS Bank, utterly failed to secure the
authorization of Oliver to withdraw such
substantial amount.
As a standard banking practice intended
precisely to prevent unauthorized and
fraudulent withdrawals, a bank manager must
verify with the client-depositor to authenticate
and confirm that he or she has validly
authorized such withdrawal.
Castro's lack of authority to withdraw the P7
million on behalf of Oliver became more
apparent when she altered the passbook to
hide such transaction.
Castro went beyond the scope of her authority
in withdrawing the P7 million from Oliver's bank
account.
Siquion Reyna Monecillo and Ongsiako
Law officers v. Chinlo-Sia, 783 SCRA 56 (2016).
Petitioner Siguion Reyna Montecillo & Ongsiako
Law Offices (SRMO) acted as counsel for
Remedios N. Rodriguez (Remedios) when she
commenced an action for the intestate
settlement of the estate of her deceased
husband Susano J. Rodriguez before the
Regional Trial Court of Lucena City.
During the pendency of the intestate
proceedings, Remedios asked for the payment
of widow's allowance. This was denied by the
RTC but was reversed by the CA with the grant
of a monthly widow's allowance of P3,000.00
effective August 1982.
Five years after, Remedios executed a Deed of
Sale of Inheritance wherein she soldl her rights,
interests and participation in the estate to
Remigio M. Gerardo (Gerardo) in consideration
of P200,000.00.
Remedios also executed a special power of
attorney (SPA) authorizing Gerardo to, among
others, "receive from any person, entity,
government agency or instrumentality, or from
any court, any property, real or personal, cash,
checks or other commercial documents which
may be due to me or payable to me by virtue of
any contract, inheritance or any other legal
means," and to "receive said property ... in his
own name and for his own account and to
deposit the same at his sole discretion for his
own account, and dispose of [the] same without
any limitation.
Gerardo later on executed a document titled as
"Substitution of Attorney-in-Fact," where he
designated SRMO as substitute attorney
pursuant to the power of substitution granted
to him in the earlier SPA. Gerardo subsequently
executed an SPA authorizing SRMO to appear
and represent him in any and all proceedings
and incidents in the aforementioned case.
After the CA's decision regarding the widow's
allowance became final and executory, SRMO,
filed a motion with the RTC for the payment of
the allowance amounting to P315,000.00. Few
months after, the estate paid the amount in 3
checks.
A Partial Project of Partition of the Estate was
approved by the RTC on January 20, 1997.
Remedios then filed an motion to terminate the
services of SRMO.
Remedios questioned the RTC's Order
approving the partition and denied the
execution of the Deed of Sale of Inheritance in
favor of Gerardo. She also demanded that
SRMO return the amount it received from the
partition. Before the motion could be resolved,
Remedios withdrew the motion.
Notwithstanding the withdrawal of the motion,
the RTC motu proprio directed SRMO to
reimburse the Estate the amount of P3l5,000.00
representing the widow's allowance it received
in 1991.
SRMO filed a “Motion to Excuse
Reimbursement, according to SRMO, when it
sought the payment of the widow's allowance,
it was merely seeking the enforcement of a
judgment credit in favor of its clients,
Remedios, who had, in turn, sold her interests
to Gerardo.
On December 22, 2003, RTC denied SRMO's
motion. A petition for certiorari to the CA by
SRMO was likewise denied.
A law firm acting as counsel for one of the
parties in the intestate proceedings cannot file
a petition for certiorari before the Court of
Appeals to protect its own he parties in the
intestate proceedings interest.
Under the law of agency, an agent is not
personally liable for the obligations of the
principal unless he performs acts outside the
scope of his authority or he expressly binds
himself to be personally liable.
Otherwise, the principal is solely liable.
Here, there was no showing that SRMO bound
itself personally for Gerardo’s obligations.
SRMO also acted with the bounds of the
authority issued by Gerardo, as the transferee
pendent lite of the widow’s interest, to receive
the payment.
Virata v. Ng Wee G.R. No. 220926. July
5, 2017
Ng Wee was a valued client of Westmont Bank.
Sometime in 1998, he was enticed by the bank
manager to make money placements with
Westmont Investment Corporation
(Wincorp),an investment house, and one of the
bank's affiliates. Offered to him were "sans
recourse" transactions with the following
mechanics:
After screening, a corporate borrower who
needs financial assistance or funding enters into
a Credit Line Agreement with Wincorp.
The agreement stipulates that Wincorp shall
extend a credit facility on "best effort" basis and
that every drawdown by the accredited
borrower shall be evidenced by a promissory
note executed in favor of Wincorp and/or the
investor/s who has/have agreed to extend the
credit facility.
Wincorp then scouts for investors willing to
provide the funds needed by the accredited
borrower.
The investor is matched with the accredited
borrower.
An investor who provides the fund is issued a
Confirmation Advice which indicates the
amount of his investment, the due date, the
term, the yield, the maturity and the name of
the borrower.
The contents of a Confirmation Advice are
typically as follows:
This is to confirm that pursuant to your
authority, we have acted in your behalf and/or
for your benefit, risk or account without
recourse or liability, real or contingent,
to Westmont Investment Corporation in respect
of the loan granted to the Borrower named and
under the terms specified hereunder(details of
the amount rate of interest term and relevant
dates follows)
Special Power of Attorneys (SPAs) are also
prepared for the signature of the lender
investor. The SPAs uniformly provide:
To agree, deliver, sign, execute loan documents
relative to the borrowing of:
______________________________ ("The
Borrower") to whom the undersigned, thru
Wincorp, agreed to lend the principal sum of
PESOS
_____________________________________
HEREBY GIVING AND GRANTING unto said
Attorney-in-Fact power and authority to do and
perform all and every act and thing whatsoever
requisite or necessary to be done in and about
the premises, HEREBY RATIFYING AND
CONFIRMING all that said Attorney-in-Fact shall
lawfully do or cause to be done by virtue of
these presents.
Ng Wee's initial investments were matched
with Hottick Holdings Corporation (Hottick), one
of Wincorp's accredited borrowers, the majority
shares of which was owned by a Malaysian
national by the name of Tan Sri Halim Saad
(Halim Saad).
Halim Saad was then the controlling
shareowner of UEM-MARA, which has
substantial interests in the Manila Cavite
Express Tollway Project (Cavitex).
Hottick was extended a credit facility with a
maximum drawdown of P1,500,908,026.87.
Hottick fully availed of the loan facility, but it
defaulted when the Asian financial crisis struck.
As a result, Wincorp filed a collection suit
against Hottick, Halim Saad, and NSC for the
repayment of the loan and related costs.
Alarmed by the news of Hottick's default and
financial distress, Ng Wee confronted Wincorp
and inquired about the status of his
investments.
Wincorp assured him that the losses from the
Hottick account will be absorbed by the
company and that his investments would be
transferred instead to a new borrower account.
In view of these representations, Ng Wee
continued making money placements, rolling
over his previous investments in Hottick and
even increased his stakes in the new borrower
account — Power Merge Corporation (Power
Merge).
Wincorp's board of directors held on February
9, 1999, the investment house resolved to file
the collection case against Halim Saad and
Hottick, and, on even date, approved Power
Merge's application for a credit line, extending
a credit facility to the latter in the maximum
amount of P1,300,000,000.00.
Barely a month later, Wincorp, through another
board meeting increased Power Merge's
maximum credit limit to P2,500,000,000.00.
A total of P2,183,755,253.11 was drawn by
Power Merge from the facility. Following
protocol, Power Merge issued Promissory Notes
in favor of Wincorp, either for itself or as agent
for or on behalf of certain investors, for each
drawdown.
Unknown to Ng Wee, however, was that on the
very same dates the Credit Line Agreement and
its subsequent Amendment were entered into
by Wincorp and Power Merge, Side Agreements
were likewise executed by the two corporations
absolving Power Merge of liability as regards
the Promissory Notes it issued.
The side agreement provides that:
Ng Wee was not able to collect Power Merge's
outstanding obligation under the Confirmation
Advices in the amount of P213,290,410.36.
Ng Wee now files a suit claiming that he fell
prey to the intricate scheme of fraud and deceit
that was hatched by Wincorp and Power
Merge.
Is Wincorp as a mere agent liable to the
obligations of Power Merge?
Agency, in Wincorp's case, is not a veritable
defense.
There is no dearth of statutory provisions in the
New Civil Code that aim to preserve the
fiduciary character of the relationship between
principal and agent.
Of the established rules under the code, one
cannot be more basic than the obligation of the
agent to carry out the purpose of the agency
within the bounds of his authority.
Though he may perform acts in a manner more
advantageous to the principal than that
specified by him, in no case shall the agent carry
out the agency if its execution would manifestly
result or damage to the principal.
In the instant case, the SPAs executed by Ng
Wee constituted Wincorp as agent relative to
the borrowings of Power Merge, allegedly
without risk of liability on the part of Wincorp.
However, the SPAs, as couched, do not
specifically include a provision empowering
Wincorp to excuse Power Merge from repaying
the amounts it had drawn from its credit line via
the Side Agreements.
They merely authorize Wincorp "to agree,
deliver, sign, execute loan documents" relative
to the borrowing of a corporate borrower.
Otherwise stated, Wincorp had no authority to
absolve Power Merge from the latter's
indebtedness to its lenders.
Doing so therefore violated the express terms
of the SPAs that limited Wincorp's authority to
contracting the loan.
In no way can the execution of the Side
Agreements be considered as part and parcel of
Wincorp's authority since it was not mentioned
with specificity in the SPAs. As far as the
investors are concerned, the Side Agreements
amounted to a gratuitous waiver of Power
Merge's obligation, which authority is required
under the law to be contained in an SPA for its
accomplishment.

Finally, the benefit from the Side Agreements, if
any, redounded instead to the agent itself,
Wincorp, which was able to hold Power Merge
papers that are more valuable than the
outstanding Hottick obligations that it
exchanged.
In discharging its duties as an alleged agent,
Wincorp then elected to put primacy over its
own interest than that of its principal, in clear
contravention of the law. And when Wincorp
thereafter concealed from the investors the
existence of the Side Agreements, the company
became liable for fraud even as an agent.
Ticong v. Malim, 819 SCRA 116 (2017).
Malim was a realty broker/dealer while
Abangan and Macal were his associates; that
the Ticongs were the registered owners of
several parcels of land in Digos.’
Malim, presenting himself as the authorized
representative of the Ticongs, sent a letter of
"formal intent to sell" to Jainus C. Perez (Perez),
the real estate field supervisor of the Church of
Jesus Christ of Latter-Day Saints (Buyer),
offering to sell the subject properties.
On February 11, 2000, the Ticongs and Malim
and his associates signed the MOA authorizing
them to "look, negotiate, and sell to any
prospective buyer" for their properties on a
commission basis; that they were also
authorized by the Ticongs to charge an
"overprice" on top of the P900.00 per square
meter price.
The subject properties were eventually sold at
P1,460.00 per square meter or for the total
amount of P7,300,000.00; and Malim et al
demanded their overprice commission of
P2,800,000.00 based on the P560.00 per square
meter overprice commission.
The Ticongs denied that Malim et al are entitled
to their commissions and that the MOA was
crafted and solely prepared by Malim, et al. and
that they signed the same without
comprehending the salient aspects thereof due
to their limited education;
Ticongs also claim that the sale of their
properties prospered through their own active,
direct and personal efforts.
Question:
Are Maling et al instrumental to the sale and
are they entitled to the overprice commission?
The term “procuring cause,” in describing a
broker's activity, refers to a cause originating a
series of events which, without break in their
continuity, results in the accomplishment of the
prime objective of employing the broker — to
produce a purchaser ready, willing and able to
buy real estate on the owner’s terms.
To be regarded as the procuring cause of a sale,
a broker's efforts must have been the
foundation of the negotiations which
subsequently resulted in a sale.
“The broker must be the efficient agent or the
procuring cause of the sale.
The means employed by him and his efforts
must result in the sale. He must find the
purchaser, and the sale must proceed from his
efforts acting as broker.
When there is a close, proximate and causal
connection between the agent's efforts and the
sale of the property, the agents are entitled to
their commission.
In this case, the role of the respondents in the
successful consummation of the sale
transaction is undisputed.
Indeed, the evidence on record shows that the
respondents were instrumental in the sale of
the properties of the Ticongs.
Without their intervention, no sale would have
been consummated.
They were the ones who set the sale of the said
lots in motion.
If not for the respondents, the Buyer would not
have known about the lots being sold by the
Ticongs.
As correctly observed by the CA, the
respondents were the procuring cause of the
sale as shown by the following:
a) on February 5, 2000, Malim, with the
conformity of Lorenzo Ticong, sent a formal
letter of intent informing the representative of
the Buyer regarding the availability for sale of
the Ticongs' properties;
b) in a letter, dated April 15, 2000, the Ticongs
expressly recognized the respondents as their
sole agents and middlemen with respect to the
sale transaction and that the latter were in
constant communication with the Buyer and
the Ticongs;
c) Javier Alvero, an employee of the Ticongs,
testified that the respondents were the agents
who negotiated the sale of the subject lots with
the Buyer;
d) the Ticongs gave the respondents P50,000.00
as partial payment of their commission as
stated in the acknowledgment receipt, dated
March 30, 2001, which implied that they
recognized the respondents as the procuring
cause of the sale; and
e) the testimony of Malim clearly proved the
efforts exerted by the respondents to bring
about the consummation of the sale through
constant follow-ups with the Buyer by letters
and telephone calls.
When there is a close, proximate and causal
connection between the agent's efforts and the
sale of the property, the agents are entitled to
their commission.
Basic is the principle that a contract (the MOA
in this case) is the law between the parties, and
its stipulations are binding on them, unless the
contract is contrary to law, morals, good
customs, public order or public policy.
The Ticongs, having freely and willingly entered
into a contract by executing the MOA, cannot
renege on their obligation to pay the overprice
commission on the flimsy excuse that the
respondents were not licensed brokers who did
not spend much money in partially negotiating
with the Buyer.
Accordingly, the Ticongs are liable to pay the
overprice commission
Siy v. Tomlin, G.R. No. 205998, April
24, 2017.
Petitioner is the owner of a 2007 model Range
Rover which he purchased from Alberto Lopez
III (Lopez) on July 22, 2009.
Lopez executed and signed in blank a deed of
sale and surrendered all documents of title to
him; that he did not register the sale in his
favor, such that the vehicle remained in the
name of Lopez.
In September, 2010, he delivered the subject
vehicle, together with all its documents of title
and the blank deed of sale, to Ong, with the
express intention of selling the vehicle through
the latter as broker/second hand car dealer;
Ong failed to remit the proceeds of the
purported sale nor return the vehicle; that
petitioner later found out that the vehicle had
been transferred to Chua.
Quezon City Police District's Anti-Carnapping
Section.
Ong, upon learning of the complaint, met with
petitioner to arrange the return of the vehicle;
but Ong still failed to surrender the vehicle.
The vehicle was later impounded and taken into
custody by the PNP-Highway Patrol Group
(HPG) at Camp Crame, Quezon City after
respondent, Chua, attempted to process a PNP
clearance of the vehicle with a view to
transferring ownership thereof.
Petitioner filed for a writ of replevin for the
return of the vehicle to him.
Question:
Did Ong have the power to transfer the
ownership of the vehicle such that the replevin
is not properly granted?
Answer
This Court is not unaware of the practice by
many vehicle buyers and second-hand car
traders of not transferring registration and
ownership over vehicles purchased from their
original owners, and rather instructing the latter
to execute and sign in blank deeds of sale
covering these vehicles, so that these buyers
and dealers may freely and readily trade or re-
sell the vehicles in the second-hand car market
without difficulty.
In many cases as well, busy vehicle owners
selling their vehicles actually leave them,
together with all the documents of title, spare
keys, and deeds of sale signed in blank, with
second-hand car traders they know and trust, in
order for the latter to display these vehicles for
actual viewing and inspection by prospective
buyers at their lots, warehouses, garages, or
showrooms, and to enable the traders to
facilitate sales on-the-spot, as-is-where-is,
without having to inconvenience the owners
with random viewings and inspections of their
vehicles.
For this kind of arrangement, an agency
relationship is created between the vehicle
owners, as principals, and the car traders, as
agents.
The situation is akin to an owner of jewelry who
sells the same through an agent, who receives
the jewelry in trust and offers it for sale to
his/her regular clients; if a sale is made, the
agent takes payment under the obligation to
remit the same to the jewelry owner, minus the
agreed commission or other compensation.
From petitioner's own account, he constituted
and appointed Ong as his agent to sell the
vehicle, surrendering to the latter the vehicle,
all documents of title pertaining thereto, and a
deed of sale signed in blank, with full
understanding that Ong would offer and sell the
same to his clients or to the public.
In return, Ong accepted the agency by his
receipt of the vehicle, the blank deed of sale,
and documents of title, and when he gave bond
in the form of two guarantee checks worth
P4.95 million.
All these gave Ong the authority to act for and
in behalf of petitioner.
Under the Civil Code on agency,
Art. 1869. Agency may be express, or implied
from the acts of the principal, from his silence
or lack of action, or his failure to repudiate the
agency, knowing that another person is acting
on his behalf without authority.
Agency may be oral, unless the law requires a
specific form.
Art. 1870. Acceptance by the agent may also be
express, or implied from his acts which carry
out the agency, or from his silence or inaction
according to the circumstances. (Emphasis and
underscoring supplied)
The basis of agency is representation and the
same may be constituted expressly or impliedly.
In an implied agency, the principal can be
bound by the acts of the implied agent." The
same is true with an oral agency.
Acting for and in petitioner's behalf by virtue of
the implied or oral agency, Ong was thus able to
sell the vehicle to Chua, but he failed to remit
the proceeds thereof to petitioner; his
guarantee checks bounced as well.
This entitled petitioner to sue for estafa
through abuse of confidence.
But since Ong was able to sell the subject
vehicle to Chua, petitioner thus ceased to be
the owner thereof.
Nor is he entitled to the possession of the
vehicle; together with his ownership, petitioner
lost his right of possession over the vehicle.
Pacific Rehouse Corporation v. EIB
Securities, Inc. 633 SCRA 214 (2010)
Pacific Rehouse Corporation is a client of EIB
Securities, a stock broker. This corporation likes
to trade in the stock market.
Pacific Rehouse Corporation signed a standard
Securities Dealing Accounts Agreement which
states:
The client agrees that all monies and/or
securities and/or all other property of the Client
in the Company's custody or control held from
time to time shall be subject to a general lien in
favour of Company for the discharge of all or
any indebtedness of the Client to the Company.
Pacific Rehouse Corporation, on various dates,
bought 60,790,000 KKP and 16,180,000 DMCI
shares of stock through EIB likewise at the PSE.
Pacific Rehouse Corporation also transferred
16,000,000 DMCI shares it already had to EIB.
Thus, a total of 32,180,000 DMCI shares of stock
owned by Pacific Rehouse were placed in the
custody or control of EIB.
Subsequently, Pacific Rehouse Corporation
ordered the sale of 60,790,000 KPP shares to
any buyer at the price of PhP0.14 per share. The
KPP shares were eventually sold at PhP0.14 per
share to interested buyers.
Pacific Rehouse Corporation was to reacquire or
buy back the KPP shares at PhP0.18 per share
after 30 days from date of transaction.
EIB, without knowledge and consent of Pacific
Rehouse Corporation, sold the latter'
32,180,000 DMCI shares at the controlling
market price.
EIB later sent sales confirmation receipts to
Pacific Rehouse Corporation.
Question:
Was EIB authorized to sell the DMCI shares?
Answer:
As couched, the lien in favor of EIB attaches to
any money, securities, or properties of
petitioners (Pacific Rehouse Corporation) which
are in EIB's possession is for the discharge of all
or any indebtedness and obligations of
petitioners to EIB.
The above proviso also gives EIB the authority
to sell or dispose of petitioners' securities or
properties in its possession to pay for
petitioners' indebtedness to EIB.
It is, thus, evident from the above SDAA
provision that said lien and authority granted to
EIB to dispose of petitioners' securities or
properties in the former's possession apply only
to discharge and pay off petitioners'
indebtedness to EIB and nothing more.
Sec. 7 of the SDAA does not apply to
petitioners' obligations to third-party
purchasers of their KKP shares under the "full
cross to seller" obligation, and certainly EIB
could not use said provision for the repurchase
of the KKP shares.
Indubitably, the sale of the DMCI shares made
by EIB is null and void for lack of authority to do
so, for petitioners never gave their consent or
permission to the sale.
Thus, when EIB sold the DMCI shares to buy
back the KKP shares, it paid the proceeds to the
vendees of said shares, the act of which is
clearly an obligation to a third party and, hence,
is beyond the ambit of its authority as agent.
Such act is surely illegal and does not bind
petitioners as principals of EIB.
Republic v. Bañez, 772 SCRA 297 (2015)
Pursuant to the offer to sell on 7 December
1981,, Antonio V. Bañez, Luisita Bañez Valera,
and Nena Bañez Hojilla (collectively,
respondents) executed a Letter Agreement
irrevocably giving CRC the option to purchase
parcel of land (subject property), with an area
of 20,000 sq m in Barangay Calaba, Bangued,
Abra to Cellophil Resources Corporation (CRC).
The pertinent portion of the Letter Agreement
(hereinafter referred to as Contract), to wit:
The purchase price shall be Twenty Pesos . . .
per square meter or a total amount of Four
Hundred Thousand Pesos (P400,000.00).
2. The co-owners shall take all necessary steps
to cause the CRC Portion to be brought under
the operation of Republic Act No. 496, as
amended, and to cause the issuance in their
name of the corresponding original certificate
of title, all of the foregoing to be accomplished
within a reasonable time from date hereof. . . .
xxx xxx xxx
7. The co-owners hereby confirm their
agreement and permission to CRC's entry into,
construction of building[s] and improvements,
and occupancy of, any portion of the Property,
and . . . waive any right of action they may have
against CRC respecting such entry, construction,
or occupancy by the latter of any Portion of the
Property.
8. An absolute deed of sale containing the
above provisions and standard warranties on
conveyances of real property shall be executed
by the co-owners in favor of CRC or its
assignee/s and the same delivered to the latter
together with the original certificate of title
upon payment of the purchase price less the
advances made by CRC in accordance with
Paragraphs 2 and 3 above; provided, that
payment shall be made by CRC only upon
presentation by the co-owners to CRC of
certificate/s and/or clearances, with
corresponding receipts, issued by the
appropriate government office/s or agency/ies
to the effect that capital gains tax, real estate
taxes on the Property and local transfer tax
and other taxes, fees or charges due on the
transaction and/or on the Property have been
paid.
9. This option shall be effective from [the] date
of your acceptance as indicated by your
conformity below and for a period of one (1)
month from and after CRC shall have been
notified in writing by the co-owners that an
original certificate of title has been issued in
their names and that they are ready to execute
the . . . deed of sale.
Respondents were paid sums as advances by
CRC and CRC thereafter constructed staff
houses on the property.
As respondents would be staying abroad for a
time, they executed a Special Power of Attorney
(SPA) in favor of Edgardo B. Hojilla (Hojilla).
The SPA authorized Hojilla to perform the
following:
1. To take all steps necessary to cause a portion
of the lot covered by Tax Declaration No. 40185
in the name of Urbano Bañez which is the
subject of our "Offer to Sell" to Cellophil
Resources Corporation containing an area . . . to
be brought under the operation of Republic Act
No. 496, as amended, and to cause the issuance
in our name of the corresponding original
certificate of title.
CRC stopped its operation. The Development
Bank of the Philippines and National
Development Company took over CRC's
operation and turned over CRC's equity to Asset
Privatization Trust .
Respondents then took over the property and
prevented APT to enter the property.
The APT sent demand letters on 29 May 1991,
24 October 1991, and 6 July 1999.
Meantime, the ATP was eventually replaced by
the government, the Republic of the
Philippines.
The question is with respect the 10 year
prescription period. When the suit was filed by
the Republic in 2000, Hojilla put up the defense
of prescription as the letter agreement was
executed in 1981.
However, it was noted that Hojilla sent a letter
to petitioner’s predecessors dated 15 August
1984, Hojilla updated petitioner of the status of
the subject property's title.
If the letter is attributed to the respondents it
would be an acknowledgment of respondents'
commitment under the Contract.
By updating the other party of the status of the
application for title on the subject property, the
letter dated 15 August 1984 served as a written
acknowledgment of debt or obligation of
respondents.
And the prescriptive period would run anew in
1984 and then again when the demand letters
were sent on 29 May 1991, 24 October 1991,
and 6 July 1999
Is Hojilla authorized to send that letter as to
bind the respondents?
The present case is a case of an express
agency, where, Hojilla, the agent, binds himself
to represent another, the principal, who are
herein respondents, with the latter's express
consent or authority.
In a contract of agency, the agent acts for and in
behalf of the principal on matters within the
scope of the authority conferred upon him,
such that, the acts of the agent have the same
legal effect as if they were personally done by
the principal.
Because there is an express authority granted
upon Hojilla to represent the respondents as
evidenced by the SPA, Hojilla's actions bind the
respondents.
As agent, the representations and
guarantees of Hojilla are considered
representations and guarantees of the
principal. This is the principle of agency
by promissory estoppel.
We refer to the evidence on record.
It was Hojilla who administered and/or
managed the subject property.
Based on Hojilla's letter dated 15
August 1984 to petitioner, Hojilla made
the representation that besides being
the attorney-in-fact of the respondents
with limited authority to register the
property, he was also their agent with
regard to respondents' other
obligations related to the Contract.
The pertinent portion of the 15 August
1984 letter of Hojilla to petitioner
reads:
Regarding our loan with the National
Electrification Administration (NEA), Hon. Mel
Mathay who is helping the Bañez heirs has
initiated negotiations with NEA for Abreco to
purchase our lot in front of the Provincial Jail to
offset our loan with NEA.
Also, one glaring fact that cannot escape us is
Hojilla's representation and guarantee that
petitioner's obligation will only arise upon
presentation of a clean title and execution of a
Deed of Sale signed by the respondents' heirs,
which reads,
"[t]he Bañez heirs will only claim for the full
payment of the property upon presentation of a
clean title and execution of a Deed of Sale
signed by the heirs."
If Hojilla knew that he had no authority to
execute the Contract and receive the letters on
behalf of respondents, he should have
opposed petitioner's demand letters.
However, having received the several demand
letters from petitioner, Hojilla continuously
represented himself as the duly authorized
agent of respondents, authorized not only to
administer and/or manage the subject
property, but also authorized to register the
subject property and represent the
respondents with regard to the latter's
obligations in the Contract.
Hojilla also assured petitioner that petitioner's
obligation to pay will arise only upon
presentation of the title.
Clearly, the respondents are estopped by the
acts and representations of their agent.
Assuming further that Hojilla exceeded his
authority, the respondents are still solidarily
liable because they allowed Hojilla to act as
though he had full powers by impliedly ratifying
Hojilla's actions — through action by omission.
This is the import of the principle of agency by
estoppel or the doctrine of apparent authority.
In an agency by estoppel or apparent
authority, "[t]he principal is bound by the acts
of his agent with the apparent authority which
he knowingly permits the agent to assume, or
which he holds the agent out to the public as
possessing."
The respondents' acquiescence of Hojilla's acts
was made when they failed to repudiate the
latter's acts.
They knowingly permitted Hojilla to represent
them and petitioners were clearly misled into
believing Hojilla's authority.
Thus, the respondents are now estopped from
repudiating Hojilla's authority, and Hojilla's
actions are binding upon the respondents.
International Exchange Bank Now
Union Bank of the Philippines v. Spouses
Briones, G.R. No. 205657, March 29, 2017 ,
822 SCRA 103 (2017)
The Spouses Briones executed a promissory
note with chattel mortgage that required them
to take out an insurance policy on the
vehicle. The promissory note also gave iBank, as
the Spouses Briones' attomey-in-fact,
irrevocable authority to file an insurance claim
in case of loss or damage to the vehicle. The
insurance proceeds were to be made payable to
iBank.
On November 5, 2003, at about 10:50 p.m., the
mortgaged BMW Z4 Roadster was camapped by
three (3) armed men in front of Metrobank
Banlat Branch in Tandang Sora, Quezon
City.Jerome Briones (Jerome) immediately
reported the incident to the Philippine National
Police Traffic Management Group.
The Spouses Briones declared the loss to iBank,
which instructed them to continue paying the
next three (3) monthly installments "as a sign of
good faith," a directive they complied with.
On March 26, 2004, or after the Spouses
Briones finished paying the three (3)-month
installment, iBank sent them a letter demanding
full payment of the lost vehicle.
On April 30, 2004, the Spouses Briones
submitted a notice of claim with their insurance
company, which denied the claim on June 29,
2004 due to the delayed reporting of the lost
vehicle.
and his removal from the management is
unjustifiable.
A bilateral contract that depends upon the
agency is considered an agency coupled with an
interest, making it an exception to the general
rule of revocability at will. . . . when an agency
is established for both the principal and the
agent, an agency coupled with an interest is
created and the principal cannot revoke the
agency at will. . . .
In the promissory note with chattel mortgage,
the Spouses Briones authorized petitioner to
claim, collect, and apply the insurance proceeds
towards the full satisfaction of their loan if the
mortgaged vehicle were lost or damaged.
Clearly, a bilateral contract existed between the
parties, making the agency irrevocable.
Petitioner was also aware of the bilateral
contract; thus, it included the designation of an
irrevocable agency in the promissory note with
chattel mortgage that it prepared for the
Spouses Briones to sign.
END

Petitioner posits that respondent Jerome's GOOD LUCK AT THE BAR EXAMS
direct dealing with the insurance company was
a revocation of the agency relationship
between petitioner and respondents.

Question:
Was the agency relationship was revoked and
thus terminated?

Answer
The Spouses Briones' claim for loss cannot be
seen as an implied revocation of the agency or
their way of excluding petitioner.

They did not disregard or bypass petitioner

when they made an insurance claim; rather,
they had no choice but to personally do it
because of their agent's negligence.

This is not the implied termination or

revocation of an agency provided for under
Article 1924 of the Civil Code.

While a contract of agency is generally

revocable at will as it is primarily based on trust
and confidence, Article 1927 of the Civil Code
provides the instances when an agency
becomes irrevocable:

Article 1927. An agency cannot be revoked if a

bilateral contract depends upon it, or if it is the
means of fulfilling an obligation already
contracted, or if a partner is appointed manager
of a partnership in the contract of partnership