AGENCY, TRUST, AND PARTNERSHIP DIGESTS
1. MANILA MEMORIAL PARK CEMETERY V. LINSANGAN MMPCI further alleged that it cannot be held jointly and solidarily
[TOPIC FROM THE SYLLABUS]
The acts of an agent beyond the scope of his authority do not
bind the principal, unless he ratifies them, expressly or
impliedly. Only the principal can ratify; the agent cannot ratify
his own unauthorized acts. Moreover, the principal must have
knowledge of the acts he is to ratify. Ratification in agency is
the adoption or confirmation by one person of an act performed
on his behalf by another without authority.
[FACTS]
In 1984, Florencia Baluyot offered Atty. Linsangan a lot called
Garden State at the Holy Cross Memorial Park owned by petitioner.
According to Baluyot, a former owner of a memorial lot under
Contract No. 25012 was no longer interested in acquiring the lot and
had opted to sell his rights subject to reimbursement of the amounts
he already paid. Contract No. 25012 was for P95,000.00. Atty.
Linsangan agreed and gave Baluyot P35,295.00 representing the
amount to be reimbursed to the original buyer and to complete the
down payment to MMPCI.
In March 1985, Baluyot informed Atty. Linsangan that he would be
issued Contract No. 28660, a new contract covering the subject lot in
the name of the latter instead of old Contract No. 25012. Atty.
Linsangan protested, but Baluyot assured him that he would still be
paying the old price of P95,000.00 with P19,838.00 credited as full
down payment leaving a balance of about P75,000.00.
Subsequently, Contract No. 28660 has a listed price of P132,250.00.
Linsangan objected to the new contract price. Baluyot then executed
a document confirming that while the contract price is P132,250.00,
Linsangan would pay only the original price of P95,000.00.
Linsangan signed Contract No. 28660. Then he issued 12 postdated
checks of P1,800.00 each in favor of MMPCI. The next year,
Linsangan again issued 12 postdated checks in favor of MMPCI.
On May 1987, Baluyot verbally advised Linsangan that Contract No.
28660 was cancelled for reasons the latter could not explain, and
presented to him another proposal for the purchase of an equivalent
property. He refused the new proposal and insisted that Baluyot and
MMPCI honor their undertaking.
Because of this, Linsangan filed a complaint for breach of contract
and damages against MMPCI.
MMPCI alleged that Contract No. 28660 was cancelled conformably
with the terms of the contract because of non- payment of
arrearages. MMPCI stated that Baluyot was not an agent but an
independent contractor, and as such was not authorized to represent
MMPCI or to use its name except as to the extent expressly stated in
the Agency Manager Agreement. Moreover, MMPCI was not aware
of the arrangements entered into by Atty. Linsangan and Baluyot, as
it in fact received a down payment and monthly installments as
indicated in the contract.
[LOWER COURT’S RULING]
RTC: decided in favor of Linsangan and against MMPCI. The trial
court held MMPCI and Baluyot jointly and severally liable.It found
that Baluyot was an agent of MMPCI and that the latter was
estopped from denying this agency, having received and encashed
the checks issued by Atty. Linsangan and given to it by Baluyot.
While MMPCI insisted that Baluyot was authorized to receive only
the down payment, it allowed her to continue to receive postdated
checks from Atty. Linsangan, which it in turn consistently encashed.
MMPCI appealed to the CA. It claimed that Atty. Linsangan is bound
by the written contract with MMPCI, the terms of which were clearly
set forth therein and read, understood, and signed by the former. It
also alleged that Atty. Linsangan, a practicing lawyer for over
thirteen (13) years at the time he entered into the contract, is
presumed to know his contractual obligations and is fully aware that
he cannot belatedly and unilaterally change the terms of the contract
without the consent, much less the knowledge of the other
contracting party, which was MMPCI. And in this case, MMPCI did
not agree to a change in the contract and in fact implemented the
same pursuant to its clear terms. In view thereof, because of Atty.
Linsangan's delinquency, MMPCI validly cancelled the contract.
DURBAN | GUILLERMO | JANAYON | SEMPRON
liable with Baluyot as the latter exceeded the terms of her agency,
neither did MMPCI ratify Baluyot's acts. It added that it cannot be
charged with making any misrepresentation, nor of having allowed
Baluyot to act as though she had full powers as the written contract
expressly stated the terms and conditions which Atty. Linsangan
accepted and understood. In canceling the contract, MMPCI merely
enforced the terms and conditions imposed therein.
CA: affirmed the decision of the trial court. It held that MMPCI is
considered estopped when it allowed Baluyot to act and represent
MMPCI even beyond her authority.
MMPCI filed its MR but was denied. Hence, this petition.
MMPCI claims that the Court of Appeals seriously erred in
disregarding the plain terms of the written contract and Atty.
Linsangan's failure to abide by the terms thereof, which justied its
cancellation. In addition, even assuming that Baluyot was an agent
of MMPCI, she clearly exceeded her authority and Atty. Linsangan
knew or should have known about this considering his status as a
long-practicing lawyer.
Atty. Linsangan argues that he did not violate the terms and
conditions of the contract, and in fact faithfully performed his
contractual obligations and complied with them in good faith for at
least two years.
[ISSUE/S]
WON MMPCI can be held jointly and soliadrily liable with
Baluyot. NO.
We can answer na DILI jointly and solidarily liable and MMPCI if ma
prove nila na either na (1) dili agent si Baluyot or (2) if agent man
lang ni exceed siya sa iya authority without ratification from MMPCI.
So here, agent si baluyot pero ni exceed man siya without
ratification so mao ni decision sa SC.
[HELD]
NO. 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. Thus, the
elements of agency are (i) consent, express or implied, of the parties
to establish the relationship; (ii) the object is the execution of a
juridical act in relation to a third person; (iii) the agent acts as a
representative and not for himself; and (iv) the agent acts within the
scope of his authority.
It is a settled rule that persons dealing with an agent are bound at
their peril, if they would hold the principal liable, to ascertain not only
the fact of agency but also the nature and extent of authority, and in
case either is controverted, the burden of proof is upon them to
establish it. The basis for agency is representation and a person
dealing with an agent is put upon inquiry and must discover upon his
peril the authority of the agent. If he does not make such an inquiry,
he is chargeable with knowledge of the agent's authority and his
ignorance of that authority will not be any excuse.
Atty. Linsangan should have been alerted by the fact that Baluyot
failed to effect the transfer of rights earlier promised, and was unable
to make good her written commitment, nor convince MMPCI to
assent thereto, as evidenced by several attempts to induce him to
enter into other contracts for a higher consideration.
Baluyot was authorized to solicit and remit to MMPCI offers to
purchase interment spaces obtained on forms provided by MMPCI.
So yes agent siya however.
The acts of an agent beyond the scope of his authority do not bind
the principal, unless he ratifies them, expressly or impliedly. Only the
principal can ratify; the agent cannot ratify his own unauthorized
acts. Moreover, the principal must have knowledge of the acts he is
to ratify. Ratification in agency is the adoption or confirmation by one
person of an act performed on his behalf by another without
authority.
No ratification can be implied in the instant case. If MMPCI was
aware of the arrangement, it would have refused the latter's check
payments for being insufficient. One who claims the benefit of an
estoppel on the ground that he has been misled by the
representations of another must not have been misled through his
own want of reasonable care and circumspection.52 Even assuming
that Atty. Linsangan was misled by MMPCI's actuations, he still
cannot invoke the principle of estoppel, as he was clearly negligent
in his dealings with Baluyot, and could have easily determined, had
NAUGHTY GIRLS & CARLY
AGENCY, TRUST, AND PARTNERSHIP DIGESTS
he only been cautious and prudent, whether said agent was clothed
with the authority to change the terms of the principal's written
contract.
[DISPOSITION]
WHEREFORE, petition is GRANTED.
2. GREGORIO ARANETA, INC. V. PAZ TUASON DE PATERNO
FACTS:
Respondent is the owner of the subject property located in Sta.
Mesa Manila, which was subdivided into lots. In 1940 and 1941,
Paz Tuazon obtained from Jose Vidal loans totaling P90,098, and
constituted a first mortgage on the aforesaid property to secure the
debt; and then on 1943, she obtained additional loans of P30k and
P20k upon the same security.
In 1943 Paz Tuason decided to sell the entire property for the net
amount of P400,000 and entered into negotiations with Gregorio
Araneta, Inc. for this purpose. The negotiations resulted to a
contract, called Promesa de Compra y Venta. This contract provided
that subject to the preferred right of the lessees and that of Jose
Vidal as mortgagee, Paz Tuason would sell to Gregorio Araneta, Inc.
and the latter would buy for the said amount of P400,000 the entire
estate. Paz Tuason and Gregorio Araneta, Inc. executed with
regard to the lots an absolute deed of sale.
Before the execution of the deed of sale, Paz Tuason had offered to
Vidal the check for P143,150 in full settlement of her mortgage
obligation, but Vidal refused to received that check or to cancel the
mortgage contending that by the separate agreement before
mentioned payment of the mortgage was not to be effected totally or
partially before the end of four years from April, 1943.
Thus, Paz Tuason commenced an action against the mortgagee.
However, the action against Vidal never came on for trial and the
record and the checks were destroyed during the war. This failure of
the suit for the cancellation of Vidal's mortgage, coupled with the
destruction of the checks tendered to the mortgagee, the nullification
of the bank deposit on which those checks had been drawn, and the
tremendous rise of real estate value following the termination of the
war, gave occasion to the breaking off of the schemes outlined. Paz
Tuazon, after the war, repudiated them for reasons to be set forth.
Thus, this instant action by Gregorio Araneta Inc., to compel
Paz Tuason to deliver to the plaintiff a clear title to the lots
described in Exhibit A free from all liens and encumbrances,
and a deed of cancellation of the mortgage to Vidal.
The principal bone of contention between Gregorio Araneta, Inc. and
Paz Tuason was the validity of the deed of sale Exhibit A on which
the suit was predicated.
ISSUE 1: W/N THE CONTRACT WAS VALID
HELD: YES.
The lower court held that the contract was invalid, that there was to
be no absolute sale to Gregorio Araneta, Inc., unless Vidal's
mortgage was cancelled. However, SC did not agree on lower
court’s ruling. The contemplated execution of an absolute deed of
sale was not contingent on the cancellation of Vidal's mortgage.
Vidal's mortgage was not an obstacle to the sale.
 The contract of sale Exhibit A was valid and enforceable,
but the loss of the checks for P143,150 and P12,932.61
and invalidation of the corresponding deposit is to be
borne by the buyer, Gregorio Araneta, Inc.
 Paz Tuason shall pay Jose Vidal the amount of the
mortgage and the stipulated interest…;
 Vidal's mortgage is superior to the purchaser's right under
Exhibit A, which is hereby declared subject to said
mortgage.
 Should Gregorio Araneta, Inc. be forced to pay the
mortgage, it will be subrogated to the right of the
mortgagee.
The case was remanded to the court of origin with instruction to hold
a rehearing for the purpose of liquidation.
ISSUE 2: W/N Jose Araneta acted as agent of Paz Tuason de
Paterno.
HELD: No. Jose Araneta did not act as agent of Paz Tuason.
DURBAN | GUILLERMO | JANAYON | SEMPRON
Jose Araneta was referred to as defendant's agent or broker "who
acts in this transaction" and who as such was to receive a
commission of 5 %, although the commission was to be charged to
the purchasers, while in paragraph 13 the defendant promised, in
consideration of Jose Araneta's services rendered to her, to assign
to him all her right, title and interest to and in certain lots not
embraced in the sales to Gregorio Araneta, Inc. or the tenants.
The corporate theory aside, and granting for the nonce that Jose
Araneta and Gregorio Araneta, Inc. were identical and that the acts
of one were the acts of the other, the relation between the defendant
and Jose Araneta did not fall within the purview of article 1459 of the
Spanish Civil Code.
Tested by this standard, Jose Araneta was not an agent within
the meaning of article 1459.
 By Exhibits 7 and 8 he was to be nothing more than a go-
between or middleman between the defendant and the
purchaser, bringing them together to make the contract
themselves. There was no confidence to be betrayed.
 Jose Araneta was not authorized to make a binding
contract for the defendant.
 He was not to sell and he did not sell the defendant's
property.
 He was to look for a buyer and the owner herself was to
make, and did make, the sale.
 He was not to fix the price of the sale because the price
had been already fixed in his commission.
 He was not to make the terms of payment because these,
too, were clearly specified in his commission.
 In fine, Jose Araneta was left no power or discretion
whatsoever, which he could abuse to his advantage and to
the owner's prejudice.
DOCTRINE:
ART. 1459. The following persons can not acquire by purchase,
even at public or judicial auction, neither in person nor by an
agent:
(2) Agents, the property whose administration or sale may have
been entrusted to them, unless the consent of the principal
have been given.
Manresa: [says that the] agent- in the sense there used, is one who
accepts another's representation to perform in his name certain acts
of more or less transcendency;
Scaveola: the agent's incapacity to buy his principal's property rests
in the fact that the agent and the principal form one juridical person.
Scaveola further observes that the fear that greed might get the
better of the sentiments of loyalty and disinterestedness which
should animate an administrator or agent, is the reason underlying
various classes of incapacity enumerated in article 1459. And as
American courts commenting on similar prohibition at common law
put it, the law does not trust human nature to resist the temptations
likely to arise of antagonism between the interest of the seller and
the buyer.
Therefore, the ban of paragraph 2 of article 1459 connotes the idea
of trust and confidence; the relationship does not involve
considerations of good faith and integrity the prohibition should not
and does not apply. To come under the prohibition, the agent must
be in a fiduciary with his principal.
Two motions for reconsiderations were subsequently denied.
3. ORIENT AIR SERVICE & HOTEL REPRESENTATIVES V. CA
Facts:
American Air, an air carrier offering passenger and air cargo
transportation, entered into a General Sales Agency Agreement with
Orient Air, authorizing the latter to act as its exclusive general sales
agent for the sale of air passenger transportation. Alleging that
Orient Air had reneged on its obligations under the Agreement by
failing to promptly remit the net proceeds of sales, American Air by
itself undertook the collection of the proceeds of tickets sold
originally by Orient Air and terminated forthwith the Agreement.
NAUGHTY GIRLS & CARLY
AGENCY, TRUST, AND PARTNERSHIP DIGESTS
American Air instituted suit against Orient Air with the Court of First
Instance of Manila, Branch 24, for Accounting with Preliminary
Attachment or Garnishment, Mandatory Injunction and Restraining
Order.
Defendant Orient Air denied the material allegations of the complaint
with respect to plaintiff's entitlement to alleged unremitted amounts,
contending that after application thereof to the commissions due it
under the Agreement, plaintiff in fact still owed Orient Air a balance
in unpaid overriding commissions. Further, the defendant contended
that the actions taken by American Air in the course of terminating
the Agreement as well as the termination itself were untenable,
Orient Air claiming that American Air's precipitous conduct had
occasioned prejudice to its business interests.
Lower Court’s Rulings:
Trial Court: ruled in favor of Orient Air; holding the termination
made by the latter as affecting the GSA agreement illegal and
improper and order the plaintiff to reinstate defendant as its general
sales agent for passenger transportation in the Philippines in
accordance with said GSA agreement.
CA: affirmed the findings of the court a quo on their material points
but with some modifications with respect to the monetary awards
granted.
Issue: Whether or not the CA was erred in affirming the lower
court’s ruling ordering American Air to reinstate Orient Air as its
general sales agent.
Held:
YES. By affirming this ruling of the trial court, respondent appellate
court, in effect, compels American Air to extend its personality to
Orient Air. Such would be violative of the principles and essence of
agency, defined by law as a contract whereby "a person binds
himself to render some service or to do something in representation
or on behalf of another, WITH THE CONSENT OR AUTHORITY OF
THE LATTER." (Article 1868)
In an agent-principal relationship, the personality of the principal is
extended through the facility of the agent. In so doing, the agent, by
legal fiction, becomes the principal, authorized to perform all acts
which the latter would have him do. Such a relationship can only be
effected with the consent of the principal, which must not, in any
way, be compelled by law or by any court. The Agreement itself
between the parties states that "either party may terminate the
Agreement without cause by giving the other 30 days' notice by
letter, telegram or cable."
4. EDUARDO LITONJUA JR. V. ETERNIT CORP.
FACTS:
Eternit Corporation (EC) is a corporation duly organized
and registered under Philippine laws. It have 8 parcels of land
located in Mandaluyong, Manila where they conduct manufacturing
operations under the name of far East Bank & Trust Company
(FEBTC) as trustee. 90% of the shares of stocks of EC were owned
by Eteroutremer S.A Corporation (ESAC), a duly organized
corporation in Belgium. Glanville, was the General Manager and
President of EC while Delsaux was the Regional Director for Asia of
ESAC.
When ESAC knew about the political situation in the
Philippines, it wanted to stop its operations in the country. Adams, a
member of EC’s Board of Directors was instructed to dispose of the
eight parcels of land where he engaged the services of Marquez so
the properties could then be offered for sale to prospective buyers.
Thereafter, Marquez offered the parcels of land and its
improvements to Eduardo Litonjua, Jr. where Eduardo and his
brother Antonio offered to buy the property for P20M. Marquez
informed Glanville of the offer made by the Litonjua’s and relayed
the same to Delsaux in Belgium. Glanville telexed Delsaux inquiring
for his counterproposal to the offer of the Litonjua’s. Delsaux in a
response sent in a telex to Glanville, stated that final offer was
US$1M and P2.5M to cover existing obligations prior to final
liquidation. Said copy of the telex from Delsaux was furnished by
Marquez to Eduardo where the latter accepted the counterproposal.
The Litonjua’s deposited with the Security Bank & Trust
Company the amount of US$1M and drafted an Escrow Agreement
to expedite the sale. However, Marquez got a cal l from Glanville
and followed it up with a letter that the sale would no longer proceed
because the Board agreed not to because the political situation in
the Philippines had improved. Hence, the reason why the Litonjua’s
DURBAN | GUILLERMO | JANAYON | SEMPRON
filed a complaint for specific performance and damages against EC
(now the Eterton Multi-resources Corporation), FEBTC and ESAC.
Petitioner’s Argument:
Petitioners assert that there was a perfected contract of
sale, that acceptance was made known to them through real estate
broker Marquez who does not need a written authority from the
Board of Directors of EC.They averred that Marquez acted merely as
a broker or go-between and not as agent of the corporation; hence, it
was not necessary for him to be empowered as such by any written
authority. They further claimed that an agency by estoppel was
created when the corporation clothed Marquez with apparent
authority to negotiate for the sale of the properties.
Respondent’s Argument:
It alleged that Marquez had no written authority from the
Board of Directors to bind it; neither were Glanville and Delsaux
authorized by its board of directors to offer the property for sale.
Since the sale involved substantially all of the corporation’s assets, it
would necessarily need the authority from the stockholders.
ISSUES:
1. WON Marquez needed a written authority from respondent
Eternit before sale can be perfected.
2. WON Glanville and Delsaux have the necessary authority
to sell the subject properties or at the very least , were
knowingly permitted by respondent Eternit to do acts
within the scope of an apparent authority and thus held
them out to the public as possessing power to sell.
RTC’s Ruling:
It dismissed the complaint against EC and ESAC on the
ground that there is no valid and binding sale between the plaintiffs
and said defendants. The complaint against FEBTC is likewise
dismissed for lack of cause of action. The trial court declared that
since the authority of the agents/realtors was not in writing, the sale
is void and not merely unenforceable, and as such, could not have
been ratified by the principal. Plaintiffs could not assume that
defendants had agreed to sell the property without a clear
authorization from the corporation concerned, that is, through
resolutions of the Board of Directors and stockholders.
CA’s Ruling:
It affirmed the decision of the RTC. It ruled that Marquez,
who was a real estate broker, was a special agent within the purview
of Article 1874 of the New Civil Code. Under Section 23 of the
Corporation Code, he needed a special authority from EC’s board of
directors to bind such corporation to the sale of its properties.
Delsaux, who was merely the representative of ESAC (the majority
stockholder of EC) had no authority to bind the latter. Moreover, the
Litonjuas failed to prove that an agency by estoppel had been
created between the parties.
SC’s RULING:
[The court before dealing with matters in connection with
contract of agency discussed that issues raised by the petitioners
such as whether Marquez, Glanville and Delsaux were authorized
by respondent EC to act as their agents relative to the sale of
properties of respondent EC and the boundaries of their authority as
agents are factual in nature and cannot be raised in the Court under
Rule 45 of the ROC because elementary is the rule that SC is not a
trier of facts but this rule is subject to certain exceptions to which the
petitioners failed to establish.]
It must be stressed that when specific performance is
sought of a contract made with an agent, the agency must be
established by clear, certain and specific proof.
Sec. 23 of BP 68(Corporation Code), clearly states that
corporation may only act through its Board of Directors (BOD), or
when authorized either by is by-laws or by its board resolution,
through its officers and agents in the normal course of business.
While under Sec.36 of the same code provides that physical acts,
like the offering of the properties of the corporation for sale, or the
acceptance of a counter-offer of prospective buyers of such
properties and the execution of the deed of sale covering such
property, can be performed by the corporation only by officers or
agents duly authorized for the purpose by corporate by-laws or by
specific acts of the board of directors. Absent such valid
delegation/authorization, the rule is that the declarations of an
individual director relating to the affairs of the corporation, but not in
the course of, or connected with, the performance of authorized
duties of such director, are not binding on the corporation.
NAUGHTY GIRLS & CARLY
AGENCY, TRUST, AND PARTNERSHIP DIGESTS
In this case, petitioners failed to adduce in evidence any
resolution of the BOD of EC empowering Marquez, Glanville or
Delsaux as its agents, to sell, let alone offer for sale, for and in its
behalf, the 8 parcels of land owned by EC including the
improvements thereon. It must be noted that while Glanville was the
President and General Manager of respondent EC, and Adams and
Delsaux were members of its Board of Directors, the three acted for
and in behalf of respondent ESAC, and not as duly authorized
agents of respondent EC; a board resolution evincing the grant of
such authority is needed to bind EC to any agreement regarding the
sale of the subject properties. Such board resolution is not a mere
formality but is a condition sine qua non to bind respondent EC.
Admittedly, respondent ESAC owned 90% of the shares of stocks of
respondent EC; however, the mere fact that a corporation owns a
majority of the shares of stocks of another, or even all of such
shares of stocks, taken alone, will not justify their being treated as
one corporation.
The court also agreed with the ruling of the appellate
court that Marquez had no authority to bind respondent EC to sell
the subject properties. A real estate broker is one who negotiates the
sale of real properties. His business, generally speaking, is only to
find a purchaser who is willing to buy the land upon terms fixed by
the owner. He has no authority to bind the principal by signing a
contract of sale. Indeed, an authority to find a purchaser of real
property does not include an authority to sell.
Equally barren of merit is petitioners’ contention that
respondent EC is estopped to deny the existence of a principal-
agency relationship between it and Glanville or Delsaux. For an
agency by estoppel to exist, the following must be established: (1)
the principal manifested a representation of the agent’s authority or
knowlingly allowed the agent to assume such authority; (2) the third
person, in good faith, relied upon such representation; (3) relying
upon such representation, such third person has changed his
position to his detriment. An agency by estoppel, which is similar to
the doctrine of apparent authority, requires proof of reliance upon the
representations, and that, in turn, needs proof that the
representations predated the action taken in reliance. Such proof is
lacking in this case. Neither may respondent EC be deemed to have
ratified the transactions between the petitioners and respondent
ESAC, through Glanville, Delsaux and Marquez. The transactions
and the various communications inter se were never submitted to
the Board of Directors of respondent EC for ratification.
5. JOCELYN DOLES V. MA. AURA TINA ANGELES
[TOPIC FROM THE SYLLABUS]
The basis of agency is representation. 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.
Agency may even be implied from the words and conduct of the
parties and the circumstances of the particular case. Though the fact
or extent of authority of the agents may not, as a general rule, be
established from the declarations of the agents alone, if one
professes to act as agent for another, she may be estopped to deny
her agency both as against the asserted principal and the third
persons interested in the transaction in which he or she is engaged.
[FACTS]
Respondent filed with the RTC a complaint for Specific Performance
with Damages against petitioner. Respondent alleged that petitioner
was indebted to the former in the concept of a personal loan
amounting to P405,430.00.
Petitioner then ceded to respondent a parcel of land with an area of
42 square meters in order to satisfy her personal loan with
respondent; that this property was mortgaged to National Home
Mortgage Finance Corporation (NHMFC) to secure petitioner's loan
in the sum of P337,050.00 with that entity.
Petitioner, while admitting some allegations in the complaint, denied
that she borrowed money from respondent, and averred that from
June to September 1995, she referred her friends to respondent
whom she knew to be engaged in the business of lending money in
exchange for personal checks through her capitalist Arsenio Pua.
She alleged that her friends, Romulo, Moratin, Inocencio, Jacob and
Tomelden, borrowed money from respondent and issued personal
checks in payment of the loan; that the checks bounced for
insufficiency of funds; that despite her efforts to assist respondent to
collect from the borrowers, she could no longer locate them; that,
DURBAN | GUILLERMO | JANAYON | SEMPRON
because of this, respondent became furious and threatened
petitioner that if the accounts were not settled, a criminal case will be
filed against her; that she was forced to issue eight checks
amounting to P350,000 to answer for the bounced checks of the
borrowers she referred; that prior to the issuance of the checks she
informed respondent that they were not sufficiently funded but the
latter nonetheless deposited the checks and for which reason they
were subsequently dishonored; that respondent then threatened to
initiate a criminal case against her for violation of Batas Pambansa
Blg. 22; that she was forced by respondent to execute an "Absolute
Deed of Sale" over her property in Bacoor, Cavite, to avoid criminal
prosecution.
[LOWER COURT’S RULING]
RTC: dismissed the complaint by the respondent. It held that the
sale was void for lack of cause or consideration.
Respondent appealed to the CA.
CA: granted the appeal and reversed the decision of the lower court.
The CA concluded that petitioner was the borrower and, in turn,
would "re-lend" the amount borrowed from the respondent to her
friends. Hence, the Deed of Absolute Sale was supported by a valid
consideration, which is the sum of money petitioner owed
respondent amounting to P405,430.00, representing both principal
and interest.
Petitioner filed her MR which was denied by the CA.
Hence, this petition.
[ISSUE/S]
WON the petitioner can be considered as a debtor of the
respondent.
[HELD]
NO. Petitioner is merely an agent or representative of the
debtors. The basis of agency is representation. 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. Agency may even be implied from the words and conduct
of the parties and the circumstances of the particular case. Though
the fact or extent of authority of the agents may not, as a general
rule, be established from the declarations of the agents alone, if one
professes to act as agent for another, she may be estopped to deny
her agency both as against the asserted principal and the third
persons interested in the transaction in which he or she is engaged.
In the case at bar, both petitioner and respondent have undeniably
disclosed to each other that they are representing someone else,
and so both of them are estopped to deny the same.
With respect to the admission of petitioner that she is "re-lending"
the money loaned from respondent to other individuals for pro􏰀t, it
must be stressed that the manner in which the parties designate the
relationship is not controlling. If an act done by one person in behalf
of another is in its essential nature one of agency, the former is the
agent of the latter notwithstanding he or she is not so called. 30 The
question is to be determined by the fact that one represents and is
acting for another, and if relations exist which will constitute an
agency, it will be an agency whether the parties understood the
exact nature of the relation or not.
[DISPOSITION]
WHEREFORE, the instant petition is GRANTED.
6. WOODCHILD HOLDINGS, INC. V. ROXAS ELECTRIC AND
CONSTRUCTION CO.
FACTS: Respondent Roxas Electric and Construction Co (RECCI)
was the owner of two parcels of land in Antipolo, Rizal. The RECCI’s
Board of Directors approved a resolution authorizing the
corporation’s president, Roberto Roxas (Roxas)…
1. To sell to petitioner Woodchild Holdings Inc., (Woodchild)
Lot No. 491-A-3-B-2 covered by TCT No. 78086, with an
area of 7,213 square meters;
NAUGHTY GIRLS & CARLY
AGENCY, TRUST, AND PARTNERSHIP DIGESTS
2. To execute, sign and deliver the pertinent sales
documents; and
3. To receive the proceeds of the sale for and on behalf of
the company.
In a Letter to Roxas dated June 21, 1991, Woodchild President
Jonathan Dy offered to buy the lot for P1,000/sqm or at the price of
P7,213,000. Roxas accepted Dy’s offer and less than a month later
Roxas, as President of RECCI, as vendor, and Dy, as President of
Woodchild, as vendee, executed a contract to sell in which RECCI
bound and obliged itself to sell to Dy the lot covered by TCT No.
78086 for P7,213,000. A deed of absolute sale was then issued in
favor of Woodchild.
On March 31, 1992, Wimbeco and Woodchild executed a contract
for the construction of the warehouse building for P11,804,160. After
the warehouse was finished, Woodcchild issued on March 21, 1993
a certificate of occupancy by the building official.
Now, Woodchild complained to Roxas (RECCI president) that the
latter company’s vehicles of were parked on a portion of the property
over which Woodchild had been granted a right of way. Thus, Dy
and Roxas discussed the need of the WHI to buy a 500-square-
meter portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 as
provided for in the deed of absolute sale. However, Roxas died soon
thereafter.
Woodchild wrote to RECCI requesting to purchase the lots as
provided in the deed of absolute sale. However, RECCI rejected the
demand of Woodchild. And so, Woodchild filed a complaint against
the RECCI with the RTC for specific performance and damages for
RECCI’s unjustifiable refusal to deliver to Woodchild Holdings the
stipulated beneficial use and right of way. RECCI likewise failed to
eject the squatters of the premises within the stipulated time frame.
Because of these, Woodchild suffered unrealized income of
P300,000.00 a month or P2,100,000.00 supposed income from
rentals of the subject property for seven (7) months.
In its Answer, RECCI alleged that it never authorized its former
president, Roberto Roxas, to grant the beneficial use of any portion
of the lot, nor agreed to sell any portion thereof or create a lien or
burden thereon. It merely authorized Roxas to sell Lot No. 491-A-3-
B-2 covered by TCT No. 78086. As such, the grant of a right of way
and the agreement to sell a portion of Lot No. 491-A-3-B-1 covered
by TCT No. 78085 in the said deed are ultra vires. RECCI also
alleged that the delay in the construction of its warehouse building
was due to the failure of the WHI’s contractor to secure a building
permit thereon.
RTC
 Rendered judgment in favor of Woodchild.
 RECCI was estopped from disowning the apparent
authority of Roxas under the May 17, 1991 Resolution of
its Board of Directors.
CA
 Judgment reversed.
 Under the resolution of the Board of Directors of the
RECCI, Roxas was merely authorized to sell the lot
covered by TCT No. 78086, but not to grant right of way in
favor of the Woodchild over a portion of the ot, or to grant
an option to the petitioner to buy a portion thereof.
 The grant of a right of way and an option to the
respondent were so lopsided in favor of the respondent
because the latter was authorized to fix the location as
well as the price of the portion of its property to be sold to
the respondent. Hence, such provisions contained in the
deed of absolute sale were not binding on the RECCI.
Before the SC, Woodchild avers that RECCI authorized Roxas to
grant a right of way over a portion of the lot in its (Woodchild) favor,
and an option for the respondent to buy a portion of the said
property. When the respondent sold the property, it (respondent)
was well aware of its obligation to provide Woodchild with a means
of ingress to or egress from the property to the Sumulong Highway,
since the latter had no adequate outlet to the public highway. The
petitioner notes that the respondent’s Board of Directors never
approved any resolution rejecting the deed of absolute sale
DURBAN | GUILLERMO | JANAYON | SEMPRON
executed by Roxas for and in its behalf. As such, the respondent is
obliged to sell a portion of the lot covered by TCT No. 78085 with an
area of 500 square meters at the price of P1,000 per square meter,
based on its evidence and Articles 649 and 651 of the New Civil
Code.
For its part, respondent posits that Roxas was not so authorized
under the Resolution to impose a burden or to grant a right of way in
favor of the petitioner on Lot No. 491-A-3-B-1, much less convey a
portion thereof to the petitioner. Hence, the respondent was not
bound by such provisions contained in the deed of absolute sale.
ISSUE 1: W/N RESPONDENT RECCI IS BOUND BY THE
PROVISIONS IN THE DEED OF ABSOLUTE SALE GRANTING
TO PETITIONER BENEFICIAL USE AND A RIGHT OF WAY
HELD: NO. Respondent is not so bound.
SC agrees with respondent’s postulate.
Generally, the acts of the corporate officers within the scope of their
authority are binding on the corporation. However, under Article
1910 of the New Civil Code, acts done by such officers beyond the
scope of their authority cannot bind the corporation unless it has
ratified such acts expressly or tacitly, or is estopped from denying
them:
Art. 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.
Thus, contracts entered into by corporate officers beyond the scope
of authority are unenforceable against the corporation unless ratified
by the corporation.
In this case, the respondent denied authorizing its then president
Roberto B. Roxas to sell a portion of Lot No. 491-A-3-B-1 covered by
TCT No. 78085, and to create a lien or burden thereon. The
petitioner was thus burdened to prove that the respondent so
authorized Roxas to sell the same and to create a lien thereon.
Examining the resolution at issue, Roxas was not specifically
authorized by RECCI under the said resolution to grant a right of
way in favor of the petitioner on a portion of Lot No. 491-A-3-B-1 or
to agree to sell to the petitioner a portion thereof. The authority of
Roxas, under the resolution, to sell Lot No. 491-A-3-B-2 covered by
TCT No. 78086 did not include the authority to sell a portion of
the adjacent lot, Lot No. 491-A-3-B-1, or to create or convey real
rights thereon. Neither may such authority be implied from the
authority granted to Roxas to sell Lot No. 491-A-3- B-2 to the
petitioner “on such terms and conditions which he deems most
reasonable and advantageous.”
Under paragraph 12, Article 1878 of the New Civil Code, a special
power of attorney is required to convey real rights over immovable
property. In addition, Article 1358 of the New Civil Code requires that
contracts which have for their object the creation of real rights over
immovable property must appear in a public document. The
petitioner cannot feign ignorance of the need for Roxas to have
been specifically authorized in writing by the Board of Directors
to be able to validly grant a right of way and agree to sell a
portion of Lot No. 491-A-3-B-1. The rule is that if the act of the agent
is one which requires authority in writing, those dealing with him are
charged with notice of that fact.
ISSUE 2: W/N RESPONDENT GAVE APPARENT AUTHORITY TO
ROXAS TO GRANT RIGHT OF WAY AND TO GRANT AN
OPTION TO SELL TO PETITIONER
HELD: NO.
Woodchild submitted that in allowing Roxas to execute the contract
to sell and the deed of absolute sale and failing to reject or
disapprove the same, RECCI thereby gave Roxas apparent authority
NAUGHTY GIRLS & CARLY
AGENCY, TRUST, AND PARTNERSHIP DIGESTS
to grant a right of way for the lot and to grant an option for RECCI to
sell a portion thereof to Woodchild. But this postulate was rejected
by the SC. Absent estoppel or ratification, apparent authority
cannot remedy the lack of the written power required under the
statement of frauds.
Apparent authority can rise on these two instances:
1. The principal may knowingly permit the agent to so hold
himself out as having such authority, and in this way, the
principal becomes estopped to claim that the agent does
not have such authority;
2. The principal may so clothe the agent with the indicia of
authority as to lead a reasonably prudent person to
believe that he actually has such authority.
There can be no apparent authority of an agent without acts or
conduct on the part of the principal and such acts or conduct of the
principal must have been known and relied upon in good faith and as
a result of the exercise of reasonable prudence by a third person as
claimant and such must have produced a change of position to its
detriment. The apparent power of an agent is to be determined by
the acts of the principal and not by the acts of the agent.
For the principle of apparent authority to apply, the Woodchild was
burdened to prove the following:
(a) the acts of the respondent justifying belief in the agency by the
petitioner;
(b) knowledge thereof by the respondent which is sought to be held;
and,
(c) reliance thereon by the petitioner consistent with ordinary care
and prudence.
In the case at bar, there is no evidence on record of specific acts
made by the RECCI showing or indicating that it had full knowledge
of any representations made by Roxas to Woodchild that the RECCI
had authorized him to grant to the respondent an option to buy a
portion of the Lot.
ISSUE 3: W/N THERE WAS RATIFICATION ON THE PART OF
RECCI WHEN IT RETAINED THE 5M PESO PURCHASE PRICE
OF THE LOT
HELD: NO.
It bears stressing that RECCI sold the Lot to Woodchild, and the
latter had taken possession of the property. As such, the respondent
had the right to retain the P5,000,000, the purchase price. For an
act of the principal to be considered as an implied ratification of an
unauthorized act of an agent, such act must be inconsistent with any
other hypothesis than that he approved and intended to adopt what
had been done in his name.
Ratification is the intentional relinquishment of a known right.
Ratification cannot be inferred from acts that a principal has a
right to do independently of the unauthorized act of the agent.
Moreover, if a writing is required to grant an authority to do a
particular act, ratification of that act must also be in writing. Since
RECCI had not ratified the unauthorized acts of Roxas, the
same are unenforceable. Hence, by the respondent’s retention of
the amount, it cannot thereby be implied that it had ratified the
unauthorized acts of its agent, Roberto Roxas.
DISPOSITION:
Decision of the CA is affirmed.
7. EDUARDO OLAGUER V. EMILIO PURUGGANAN
Facts:
Petitioner Olaguer alleges that he was the owner of 60,000 shares of
stock of Businessday Corporation (Businessday). At the time he was
employed with the corporation, petitioner, together with respondent
Locsin and Joaquin, was active in the political opposition against the
Marcos dictatorship. Anticipating the possibility that petitioner would
be arrested and detained by the Marcos military, Locsin, Joaquin,
and Hector Hofileña had an unwritten agreement that, in the event
that petitioner was arrested, they would support the petitioner's
family by the continued payment of his salary. Petitioner also
executed a Special Power of Attorney (SPA), appointing as his
attorneys-in-fact Locsin, Joaquin and Hofileña for the purpose of
selling or transferring petitioner's shares of stock with Businessday.
DURBAN | GUILLERMO | JANAYON | SEMPRON
The parties acknowledged the SPA before respondent Emilio
Purugganan, Jr., who was then the Corporate Secretary of
Businessday, and at the same time, a notary public for Quezon City.
On 24 December 1979, petitioner was arrested by the Marcos
military by virtue of an Arrest, Search and Seizure Order and
detained for allegedly committing arson. During the petitioner's
detention, respondent Locsin ordered fellow respondent Purugganan
to cancel the petitioner's shares in the books of the corporation and
to transfer them to respondent Locsin's name.
Respondent Locsin contended that petitioner approached him and
requested him to sell, and, if necessary, buy petitioner's shares of
stock in Businessday, to assure support for petitioner's family in the
event that something should happen to him, particularly if he was
jailed, exiled or forced to go underground. At the time petitioner was
employed with Businessday, respondent Locsin was unaware that
petitioner was part of a group, Light-a-Fire Movement, which actively
sought the overthrow of the Marcos government through an armed
struggle. He denied that he made any arrangements to continue
paying the petitioner's salary in the event of the latter's
imprisonment. In view of petitioner's previous instructions,
respondent Locsin decided to buy the shares himself. However, he
had to borrow from Businessday the funds he used in purchasing the
shares from petitioner, and had to pay the petitioner in installments
of P10,000.00 every 15th and 30th of each month.
Lower Court’s Rulings:
Trial Court: dismissed the Complaint filed by the petitioner. It ruled
that the sale of shares between petitioner and respondent Locsin
was valid. The SPA drafted by the petitioner empowered respondent
Locsin, and two other agents, to sell the shares for such price and
under such terms and conditions that the agents may deem proper.
CA: affirmed the Decision of the trial court that there was a perfected
contract of sale. The financial condition of Businessday prevented it
from granting any form of financial assistance in favor of the
petitioner, who was placed in an indefinite leave of absence, and,
therefore, not entitled to any salary.
Issue: Whether or not there was no valid sale since respondent
Locsin exceeded his authority under the SPA.
Held:
Petitioner sought to impose a strict construction of the SPA by
limiting the definition of the word "absence" to a condition wherein "a
person disappears from his domicile, his whereabouts being
unknown, without leaving an agent to administer his property," citing
Article 381 of the Civil Code. Petitioner also puts forward that the
word "incapacity" would be limited to mean "minority, insanity,
imbecility, the state of being deaf-mute, prodigality and civil
interdiction" as defined in Article 38 of the Civil Code.
Petitioner's arguments are unpersuasive. It is a general rule that a
power of attorney must be strictly construed; the instrument will be
held to grant only those powers that are specified, and the agent
may neither go beyond nor deviate from the power of attorney.
Clauses in a power of attorney that are repugnant to each other
should be reconciled so as to give effect to the instrument in
accordance with its general intent or predominant purpose.
Furthermore, the instrument should always be deemed to give such
powers as essential or usual in effectuating the express powers.
Among the standards the said article enumerates is that no agent
has been appointed to administer the property. In the present case,
petitioner himself had already authorized agents to do specific acts
of administration and thus, no longer necessitated the appointment
of one by the court. The language of the SPA clearly enumerates, as
among those acts that the agents were authorized to do, the act of
applying the proceeds of the sale of the shares to any obligations
petitioner might have against the Businessday group of companies.
This interpretation is supported by the use of the word "and" in
enumerating the authorized acts, instead of phrases such as "only
for," "for the purpose of," "in order to" or any similar terms to indicate
that the petitioner intended that the SPA be used only for a limited
purpose, that of paying any liabilities with the Businessday group of
companies.
8. BRITISH AIRWAYS V. CA
FACTS:
Mahtani decided to visit his relatives in Bombay, India so
he obtained the services of a certain Mr. Gumar to prepare for his
travel plans. The latter purchased a ticket from BA. Since Ba had no
NAUGHTY GIRLS & CARLY
AGENCY, TRUST, AND PARTNERSHIP DIGESTS
direct flights from Manila to Bombay, Mahtani had to take a flight to
HK via PAL and upon arrival in HK he had to take a connecting flight
to Bombay on board BA.
Mahtani checked in at the PAL counter in MNL his 2
pieces of luggage containing his clothings and personal effects but
when he arrived in Bombay he discovered that his luggage was
missing. He was told by the BA representatives that the same might
have been diverted to London. He waited for a week then finally Ba
advised him to file a claim by accomplishing the “Property Irregularity
Report”.
Mahtani filed his complaint for damages and attorney’s fee
against BA and Mr. Gumar. BA denied it stating that Mahtani did not
have a cause of action against it. Then BA, filed a third party
complaint against PAL alleging the non-transfer of the luggage was
due to latter’s late arrival in HK, thus leaving hardly any time for the
proper transfer of Mahtani’s luggage to the BA aircraft bound for
Bombay. PAL filed an answer to the third party complaint disclaiming
any liability.
Petitioner’s Argument:
It argued that award for compensatory damages in the
form of the sum of P7k was without basis and the respondent failed
to declare a higher valuation with respect to his luggage, a condition
provided in the ticket that liability for loss, delay, or damage to
baggage is limited unless a higher value is declared in advance,
ISSUES:
WON the CA erred in dismissing the third party complaint against
PAL
RTC’s Ruling:
Rendered decision in favor of Mahtani ordering BA to pay
the former P7k for the value of 2 suit cases, $400 for the value of the
contents of the luggage, P50k for moral and actual damages and
20% for patty’s fees. It also dismissed the third party complaint
against PAL for lack of cause of action.
CA’s Ruling:
Affirmed the decision of the trial court.
SC’s RULING:
[Before discussing matters regarding the contract of
agency between BA and PAL, the Court here denied BA’s claim that
there should have been no separate award for the luggage and the
contents since the petitioner failed to declare a separate higher
valuation for the luggage , therefore its liability is limited, at most ,
only to the amount stated. Notwithstanding with the American
jurisprudence recognize in this jurisdiction that an air carrier is not
liable for the loss of the bag in an amount in excess of the limits
specified in the tariff , such tariff is binding on the passenger
regardless of the passenger’s lack of knowledge or assent, the court
ruled against blind reliance on adhesion contracts where the facts
and circumstances justify that they should be disregarded and also
BA had waived the defense of limited liability when it failed to raise
timely objections regarding the actual claims and damages when the
passenger was asked.]
The Court did not agree with the said dismissal.
Settled is the issue that the rule that carriage by plane
although performed by successive carriers is regarded as a single
operation and that the carrier issuing the passenger’s ticket is
considered the principal party and the other carrier is merely
subcontractors or agent. In this case, it is worth observing that the
contract of air transportation was exclusively between Mahtani and
BA, the later merely endorsing the MNL to HK leg of the former’s
journey to PAL as it subcontractor or agent, This was evident on the
“Conditions of Contracts” of the ticket issued by BA. Thus, it is
undisputed that PAL in transporting Mahtani from MNL to HK acted
as agent of BA. Additionally, BA and PAL are both members of the
International Air Transport Association(IATA) wherein member
airlines are regarded as agents of each other in the issuance of the
tickets and other matters pertaining to their relationship. Therefore,
in the instant case, the contractual relationship between BA and PAL
is one of agency, the former being the principal, since it was the one
which issued the confirmed ticket, and the latter, the agent.
Hence, the CA should have been cognizant of the well-
settled rule that an agent is also responsible for any negligence in
the performance of its function and is liable for damages which the
principal may suffer by reason of its negligent act. The Court of
Appeals erred when it opined that BA, being the principal, had no
cause of action against PAL, its agent or sub-contractor.
DURBAN | GUILLERMO | JANAYON | SEMPRON
Since the instant petition was based on breach of contract
of carriage, Mahtani can only sue BA alone, and not PAL, since the
latter was not a party to the contract. However, this is not to say that
PAL is relieved from any liability due to any of its negligent acts. The
Court recognized that a carrier (PAL), acting as an agent of another
carrier, is also liable for its own negligent acts or omission in the
performance of its duties.
It is but logical, fair and equitable to allow BA to sue PAL
for indemnification, if it is proven that the latter's negligence was the
proximate cause of Mahtani's unfortunate experience, instead of
totally absolving PAL from any liability.
9. RURAL BANK OF MILAOR V. FRANCISCA OCFEMIA
[TOPIC FROM THE SYLLABUS]
A bank is liable to innocent third persons where representation is
made in the course of its normal business by an agent like Manager
Tena, even though such agent is abusing her authority. Clearly,
persons dealing with her could not be blamed for believing that she
was authorized to transact business for and on behalf of the bank. If
a corporation knowingly permits one of its officers or any other agent
to act within the scope of an apparent authority, it holds the agent
out to the public as possessing the power to do those acts; thus, the
corporation will, as against anyone who has in good faith dealt with it
through such agent, be estopped from denying the agent's authority.
[FACTS]
Respondents mortgaged 5 parcels of land located in Camarines Sur
and 2 others to the petitioner as shown by the Deed of REM and
Promissory note. The Sps.Ocfemia were not able to redeem the
mortgaged properties consisting of 7 parcels of land and so the
mortgage was foreclosed and thereafter ownership thereof was
transferred to the petitioner. Out of the 7 parcels that were
foreclosed, 5 of them are in the possession of the respondents
because these were sold by petitioner to the parents of Marife Niño
as evidenced by a Deed of Sale.
However, these 5 parcels of land have not been transferred in the
name of the parents of Marife Niño after they were sold to her
parents by the petitioner because according to the Assessor’s Office,
they cannot be transferred as there is a need to have the document
of sale registered with the ROD of Camarines Sur. However, the
ROD informed her that the document cannot be registered without a
board resolution of the petitioner bank. Niño then went to the bank
and requested for a board resolution so that the property can be
transferred.
Petitioner bank refused her request for a board resolution and made
many alibis. She was told that the petitioner bank had a new
manager and it had no record of the sale. She was asked for
additional requirements which she complied and was told to wait for
2 weeks because the petitioner would still study the matter. After 2
weeks, petitioner bank told her that the resolution of the board would
not be released because the bank had no records of the old
manager.
Hence, respondents executed an action for mandamus with
damages. On April 10, 1996, petition was declared in default on
motion of the respondents for failure to file and answer within the
reglementary period after it was duly served with summons.
[LOWER COURT’S RULING]
RTC: granted the petition.
CA: affirmed the decision of the trial court.
[ISSUE/S]
WON the board of directors of a rural banking corporation be
compelled to confirm a deed of absolute sale of real property
owned by the corporation which deed of sale was executed by
the bank manager without prior authority of the board of
directors of the rural banking corporation
[HELD]
NO. The bank acknowledged, by its own acts or failure to act, the
authority of Fe S. Tena to enter into binding contracts. After the
execution of the Deed of Sale, respondents occupied the properties
in dispute and paid the real estate taxes due thereon. If the bank
management believed that it had title to the property, it should have
NAUGHTY GIRLS & CARLY
AGENCY, TRUST, AND PARTNERSHIP DIGESTS
taken some measures to prevent the infringement or invasion of its
title thereto and possession thereof.
A bank is liable to innocent third persons where representation is
made in the course of its normal business by an agent like Manager
Tena, even though such agent is abusing her authority. Clearly,
persons dealing with her could not be blamed for believing that she
was authorized to transact business for and on behalf of the bank.
The bank is estopped from questioning the authority of the bank
manager to enter into the contract of sale. If a corporation knowingly
permits one of its officers or any other agent to act within the scope
of an apparent authority, it holds the agent out to the public as
possessing the power to do those acts; thus, the corporation will, as
against anyone who has in good faith dealt with it through such
agent, be estopped from denying the agent's authority.
Petitioner has authorized Tena to enter into the Deed of Sale.
Accordingly, it has a clear legal duty to issue the board resolution
sought by respondents. Having authorized her to sell the property, it
behooves the bank to confirm the Deed of Sale so that the buyers
may enjoy its full use.
[DISPOSITION]
WHEREFORE, the instant petition is DENIED.
10. ZENAIDA MENDOZA V. EDUARDO PAULE
PARTIES
Engr. Eduardo Paule: Defendant
Zenaida G. Mendoza and Manuel De la Cruz: Petitioners
FACTS
Herein defendant Engr. Eduardo Paule (Paule) is the proprietor of
E.M. Paule Construction and Trading (EMPCT). On May 24, 1999,
he executed a SPA authorizing herein petitioner Zenaida Mendoza
(Mendoza), to participate in the bidding of a National Irrigation
Administration (NIA) project and to represent him in all transactions
related thereto, to wit:
1. To represent EMPCT of which I (PAULE) am the General
Manager…
2. To participate in the bidding, to secure bid bonds and other
documents pre-requisite in the bidding...
3. To receive and collect payment in check in behalf of EMPCT.
4. To do and perform such acts and things that may be necessary
and/or required to make the herein authority effective.
Mendoza participated in the bidding and was subsequently awarded
packages A-10 and B-11. When one Manuel de la Cruz (Cruz)
learned that Mendoza is in need of heavy equipment for use in the
NIA project, he met up with Mendoza and Paule where they
conducted meetings and agreed for a Job Order where Cruz would
lease his dump trucks to EMPCT for hauling purposes.
But then, on Apr 27, 2000, Paule revoked the SPA he previously
issued in favor of Mendoza. Because of this, NIA refused to make
payment to Mendoza on her billings. In turn, Cruz, could not be paid
for the rent of the dump trucks. Thus, Cruz demanded from Mendoza
and/or EMPCT the payment of the outstanding rentals amounting to
P726,000. Cruz then filed before the RTC of Nuvea Ecija a collection
suit with damages.
Despite that previous revocation and the suit by Cruz, on August 23,
2000, PAULE again constituted MENDOZA as his attorney-in-fact:
1. To represent me (PAULE), in my capacity as General Manager of
the EMPCT, in all meetings, conferences and transactions
exclusively for the construction of the projects known as Package
A10 of Schedule A and Package No. B-11. .;
2. To implement, execute, administer and supervise the said projects
in whatever stage they are in as of to date, to collect checks and
other payments due on said projects and act as the Project Manager
for EMPCT;
3. To do and perform such acts and things that may be necessary
and required to make the herein power and authority effective.
RTC’s Ruling:
DURBAN | GUILLERMO | JANAYON | SEMPRON
Judgment is granted in favor of Cruz. RTC ordered defendant Paule
to pay the plaintiff the sum of P726,000.00 by way of actual
damages or compensation for the services rendered by him and
damages.
 RTC found that Mendoza was duly constituted as
EMPCT's agent for purposes of the NIA project and that
Mendoza validly contracted with CRUZ for the rental of
heavy equipment that was to be used therefor.
 Through the SPAs he executed, PAULE clothed
MENDOZA with apparent authority and held her out to the
public as his agent; as principal, PAULE must comply with
the obligations which MENDOZA contracted within the
scope of her authority and for his benefit.
 PAULE knew of the transactions which MENDOZA
entered into since at various times when she and CRUZ
met at the EMPCT office, PAULE was present and offered
no objections.
CA’s Ruling:
Reversed RTC’s ruling and dismissed Cruz’s complaint.
 The SPAs issued in Mendoza's favor did not grant the
latter the authority to enter into contract with Cruz for
hauling services; the SPAs limit Mendoza's authority to
only represent EMPCT in its business transactions with
NIA, to participate in the bidding of the project, to receive
and collect payment in behalf of EMPCT, and to perform
such acts as may be necessary and/or required to make
the said authority effective. Thus, the engagement of
CRUZ's hauling services was done beyond the scope
of MENDOZA's authority.
 As for CRUZ, the CA held that he knew the limits of
Mendoza's authority under the SPAs yet he still transacted
with her. Citing Manila Memorial Park Cemetery, Inc. v.
Linsangan, the appellate court declared that the principal
(PAULE) may not be bound by the acts of the agent
(MENDOZA) where the third person (CRUZ) transacting
with the agent knew that the latter was acting beyond the
scope of her power or authority under the agency.
ARGUMENTS AND DEFENSES OF THE PARTIES BEFORE THE
SC:
CRUZ argues that MENDOZA was acting within the scope of her
authority when she hired his services as hauler of debris because
the NIA project (both Packages A-10 and B-11 of the NIA-CMIPP)
consisted of construction of canal structures, which involved the
clearing and disposal of waste, acts that are necessary and
incidental to Paule's obligation under the NIA project.
MENDOZA, for her part claims, among others, that Paule may not
revoke her appointment as attorney-in-fact for and in behalf of
EMPCT because, as manager of their partnership in the NIA project,
she was obligated to collect from NIA the funds to be used for the
payment of suppliers and contractors with whom she had earlier
contracted for labor, materials and equipment.
 In his Comment, Paule argues that Mendoza's authority
under the SPAs was for the limited purpose of securing
the NIA project; that Mendoza was not authorized to
contract with other parties with regard to the works and
services required for the project, such as Cruz's hauling
services; that MENDOZA acted beyond her authority in
contracting with Cruz, and Paule, as principal, should not
be made civilly liable to Cruz under the SPAs.
ISSUE: W/N MENDOZA WAS AN AGENT OF PAULE
HELD: NO.
Records show that Paule and Mendoza entered into a
PARTNERSHIP in regard to the NIA project. PAULE's contribution
thereto is his contractor's license and expertise, while MENDOZA
would provide and secure the needed funds for labor, materials and
services; deal with the suppliers and subcontractors; and in general
and together with Paule, oversee the effective implementation of the
project. For this, Paule would receive as his share three per cent
NAUGHTY GIRLS & CARLY
AGENCY, TRUST, AND PARTNERSHIP DIGESTS

(3%) of the project cost while the rest of the profits shall go to If the alleged owner or partner
Mendoza. takes his agreed share of If, when earned, the profits
profits, not as owner but as an belong to all the parties as
Although the SPAs did limit Mendoza’s authority to such acts as agreed measure of common proprietors in agreed
representing EMPCT in its business transactions, the evidence compensation for his services proportions, the relation is one
shows that when Mendoza and Cruz met and discussed the lease of or the like, the relation is one of of partnership
the latter's heavy equipment for use in the project, Paule was agency.
present and interposed no objection to Mendoza's actuations. Similarities
Mendoza's actions were in accord with what she and Paule originally Both conceptions import the idea of a fiduciary relationship.
agreed upon, as to division of labor and delineation of functions
within their partnership.

Under the Civil Code, every partner is an agent of the partnership for
the purpose of its business; each one may separately execute all
acts of administration, unless a specification of their respective
duties has been agreed upon, or else it is stipulated that any one of
them shall not act without the consent of all the others.

At any rate, Paule does not have any valid cause for opposition
because his only role in the partnership is to provide his contractor's
license and expertise, while the sourcing of funds, materials, labor
and equipment has been relegated to Mendoza.

In addition, Paule reinstated Mendoza as his attorney-in-fact, this

time with broader authority, even after CRUZ has already filed his
complaint. If he truly believed that Mendoza exceeded her
authority with respect to the initial SPA, then he would not have
issued another SPA. Therefore, Cruz really had a cause of action
against Paule and Mendoza. The CA erred in dismissing Cruz's
complaint on a finding of exceeded agency. Because G.R. No.
173275 already attained finality, Paule was already adjudged to be
liable to Cruz for the transactions entered by Mendoza for the
laborers, suppliers of materials and services for use in the NIA
project.

W/N PAULE VALIDLY REVOKED MENDOZA’S SPAs

HELD: NO.
Since Mendoza took care of the funding and sourcing of labor,
materials and equipment for the project, it is only logical that she
controls the finances, which means that the SPAs issued to her were
necessary for the proper performance of her role in the partnership.
Without the SPAs, she could not collect from NIA, because as far as
it is concerned, EMPCT — and not the PAULE-MENDOZA
partnership — is the entity it had contracted with. Without these
payments from NIA, there would be no source of funds to complete
the project and to pay off obligations incurred.

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.

Disposition: Petitions granted.

Notes:
Agency distinguished from partnership
The most certain test of partnership as distinguished from ordinary
agency is that, an agent acts only for his principal, while a partner
acts not only for his co-partners and the partnership but also as
principal of himself.

AGENCY
Control by the principal
An agent must submit to the
principal’s right to control the
agent’s conduct in regard to the
subject of the agency
Liability of the agent
The ordinary agent assumes
no personal liability where he
acts within the scope of his
authority
Sharing of Profits
PARTNERSHIP
This not applicable to the
partnership concept.
A partner acting as agent for
the partnership binds not only
the firm members but himself
as well (the partner is both an
agent and a principal at the
same time when engaged in
carrying on the partnership
business).

DURBAN | GUILLERMO | JANAYON | SEMPRON NAUGHTY GIRLS & CARLY

AGENCY, TRUST, AND PARTNERSHIP DIGESTS

DURBAN | GUILLERMO | JANAYON | SEMPRON NAUGHTY GIRLS & CARLY