ATP Case Digest Output (31-50)

AGENCY, TRUST AND PARTNERSHIP - CASE DIGESTS - M6 - SY 2019-2020
31) Litonjua v. Fernandez, 427 SCRA 478

Facts:
- Mrs. Lourdes Alimario and Agapito Fisico who worked as brokers, offered to sell to the petitioners, Antonio K.
Litonjua and Aurelio K. Litonjua, Jr., the parcels of land.
- the owners of the properties were represented by Mary Mediatrix Fernandez and Gregorio T. Eleosida,
respectively. The brokers told the petitioners that they were authorized by respondent Fernandez to offer the
property for sale.
- The petitioners and respondent Fernandez agreed that the petitioners would buy the property consisting of
36,742 square meters, for the price of P150 per square meter, or the total sum of P5,098,500. They also
agreed that the owners would shoulder the capital gains tax, transfer tax and the expenses for the
documentation of the sale.
- The petitioners and respondent Fernandez also agreed to meet on December 8, 1995 to finalize the sale. It
was also agreed upon that on the said date, respondent Fernandez would present a special power of attorney
executed by the owners of the property, authorizing her to sell the property for and in their behalf, and to
execute a deed of absolute sale thereon. The petitioners would also remit the purchase price to the owners,
through respondent Fernandez. However, only Agapito Fisico attended the meeting. He informed the
petitioners that respondent Fernandez was encountering some problems with the tenants and was trying to
work out a settlement with them.[7] After a few weeks of waiting, the petitioners wrote respondent Fernandez
on January 5, 1995, demanding that their transaction be finalized by January 30, 1996.
- When the petitioners received no response from respondent Fernandez, the petitioners sent her another
Letter[9] dated February 1, 1996, asking that the Deed of Absolute Sale covering the property be executed in
accordance with their verbal agreement dated November 27, 1995. The petitioners also demanded the
turnover of the subject properties to them within fifteen days from receipt of the said letter; otherwise, they
would have no option but to protect their interest through legal means.
- Fernandez, however rejected the claims of the petitioner.
- On April 12, 1996, the petitioners filed the instant Complaint for specific performance with damages[13]
against respondent Fernandez and the registered owners of the property.
- After trial on the merits, the trial court rendered judgment in favor of the petitioners .
- the appellate court promulgated its decision reversing and setting aside the judgment of the trial court and
dismissing the petitioners’ complaint, as well as the respondents’ counterclaim.
Issue/s:
- WHETHER OR NOT THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN THE PARTIES.
- WHETHER OR NOT THE CONTRACT FALLS UNDER THE COVERAGE OF THE STATUTE OF FRAUDS.
Held:
- the petitioners assert that there was a perfected contract of sale between the petitioners as buyers and the
respondents-owners, through respondent Fernandez, as sellers. The petitioners contend that the perfection of
the said contract is evidenced by the January 16, 1996 Letter of respondent Fernandez.
- The petitioners argue that the letter is a sufficient note or memorandum of the perfected contract, thus,
removing it from the coverage of the statute of frauds. The letter specifically makes reference to a sale which
respondent Fernandez agreed to initially, but which the latter withdrew because of the emergence of some
people who claimed to be tenants on both parcels of land.
- The petitioners’ contention is bereft of merit. In its decision, the appellate court ruled that the Letter of
respondent Fernandez dated January 16, 1996 is hardly the note or memorandum contemplated under Article
1403(2)(e) of the New Civil Code.
- In this case, we agree with the findings of the appellate court that there was no perfected contract of sale
between the respondents-owners, as sellers, and the petitioners, as buyers.
- There is no documentary evidence on record that the respondents-owners specifically authorized respondent
Fernandez to sell their properties to another, including the petitioners. Article 1878 of the New Civil Code
provides that a special power of attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable consideration,[37] or to create or
convey real rights over immovable property,[38] or for any other act of strict dominion.[39] Any sale of real
property by one purporting to be the agent of the registered owner without any authority therefor in writing from
the said owner is null and void.[40] The declarations of the agent alone are generally insufficient to establish
the fact or extent of her authority.[41] In this case, the only evidence adduced by the petitioners to prove that
respondent Fernandez was authorized by the respondents-owners is the testimony of petitioner Antonio
Litonjua that respondent Fernandez openly represented herself to be the representative of the respondents-
owner.
32) Gozun v. Mercado, 511 SCRA 205 (2006)
Facts:
In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga. Upon respondent’s request,
petitioner, owner of JMG Publishing House, a printing shop located in San Fernando, Pampanga, submitted to
respondent draft samples and price quotation of campaign materials.
By petitioner’s claim, respondent’s wife had told him that respondent already approved his price quotation and that he
could start printing the campaign materials, hence, he did print campaign materials.
Given the urgency and limited time to do the job order, petitioner availed of the services and facilities of Metro Angeles
Printing and of St. Joseph Printing Press, owned by his daughter Jennifer Gozun and mother Epifania Macalino
Gozun, respectively.
Petitioner delivered the campaign materials to respondent’s headquarters along Gapan-Olongapo Road in San
Fernando, Pampanga.
Meanwhile, on March 31, 1995, respondent’s sister-in-law, Lilian Soriano (Lilian) obtained from petitioner "cash
advance" of P253,000 allegedly for the allowances of poll watchers who were attending a seminar and for other
related expenses. Lilian acknowledged on petitioner’s 1995 diary receipt of the amount.
Petitioner later sent respondent a Statement of Account in the total amount of P2,177,906 itemized as follows:
P640,310 for JMG Publishing House; P837,696 for Metro Angeles Printing; P446,900 for St. Joseph Printing Press;
and P253,000, the "cash advance" obtained by Lilian.
On August 11, 1995, respondent’s wife partially paid P1,000,000 to petitioner who issued a receipt therefor.
Despite repeated demands and respondent’s promise to pay, respondent failed to settle the balance of his account to
petitioner.
Petitioner and respondent being compadres, they having been principal sponsors at the weddings of their respective
daughters, waited for more than three (3) years for respondent to honor his promise but to no avail, compelling
petitioner to endorse the matter to his counsel who sent respondent a demand letter. Respondent, however, failed to
heed the demand.
Petitioner thus filed with the Regional Trial Court a complaint against respondent to collect the remaining amount of
P1,177,906 plus "inflationary adjustment" and attorney’s fees.
In his Answer with Compulsory Counterclaim, respondent denied having transacted with petitioner or entering into any
contract for the printing of campaign materials. He alleged that the various campaign materials delivered to him were
represented as donations from his family, friends and political supporters. He added that all contracts involving his
personal expenses were coursed through and signed by him to ensure compliance with pertinent election laws.
On petitioner’s claim that Lilian, on his (respondent’s) behalf, had obtained from him a cash advance of P253,000,
respondent denied having given her authority to do so and having received the same.
Issue:
Whether Lillian was authorized to receive cash advance from the petitioner, thus, a valid agent of the respondent.
Ruling:
Regional Trial Court
The trial court rendered judgment in favor of petitioner, the dispositive portion of which reads:
WHEREFORE, the plaintiff having proven its (sic) cause of action by preponderance of evidence, the Court hereby
renders a decision in favor of the plaintiff ordering the defendant as follows:
1. To pay the plaintiff the sum of P1,177,906.00 plus 12% interest per annum from the filing of this complaint until
fully paid;
2. To pay the sum of P50,000.00 as attorney's fees and the costs of suit.
SO ORDERED
Court of Appeals
The Court of Appeals held that other than petitioner’s testimony, there was no evidence to support his claim that Lilian
was authorized by respondent to borrow money on his behalf. It noted that the acknowledgment receipt23 signed by
Lilian did not specify in what capacity she received the money. Thus, applying Article 131724 of the Civil Code, it held
that petitioner’s claim for P253,000 is unenforceable.
On the accounts claimed to be due JMG Publishing House – P640,310, Metro Angeles Printing – P837,696, and St.
Joseph Printing Press – P446,900, the appellate court, noting that since the owners of the last two printing presses
were not impleaded as parties to the case and it was not shown that petitioner was authorized to prosecute the same
in their behalf, held that petitioner could not collect the amounts due them.
Finally, the appellate court, noting that respondent’s wife had paid P1,000,000 to petitioner, the latter’s claim of
P640,310 (after excluding the P253,000) had already been settled.
Hence, the present petition, faulting the appellate court to have erred:
1. When it dismissed the complaint on the ground that there is no evidence, other than petitioner’s own
testimony, to prove that Lilian R. Soriano was authorized by the respondent to receive the cash advance from
the petitioner in the amount of P253,000.00.
2. When it dismissed the complaint, with respect to the amounts due to the Metro Angeles Press and St. Joseph
Printing Press on the ground that the complaint was not brought by the real party in interest.
Supreme Court
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. Contracts 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 are classified as
unauthorized contracts and are declared unenforceable, unless they are ratified.
Generally, the agency may be oral, unless the law requires a specific form. However, a special power of attorney is
necessary for an agent to, as in this case, borrow money, unless it be urgent and indispensable for the preservation of
the things which are under administration. Since nothing in this case involves the preservation of things under
administration, a determination of whether Soriano had the special authority to borrow money on behalf of respondent
is in order.
Petitioner’s testimony failed to categorically state, however, whether the loan was made on behalf of respondent or of
his wife. While petitioner claims that Lilian was authorized by respondent, the statement of account marked as Exhibit
"A" states that the amount was received by Lilian "in behalf of Mrs. Annie Mercado."
Invoking Article 187333 of the Civil Code, petitioner submits that respondent informed him that he had authorized
Lilian to obtain the loan, hence, following Macke v. Camps which holds that one who clothes another with apparent
authority as his agent, and holds him out to the public as such, respondent cannot be permitted to deny the authority.
Nowhere in the note can it be inferred that defendant-appellant was connected with the said transaction. Under Article
1317 of the New Civil Code, a person cannot be bound by contracts he did not authorize to be entered into his behalf.
It bears noting that Lilian signed in the receipt in her name alone, without indicating therein that she was acting for and
in behalf of respondent. She thus bound herself in her personal capacity and not as an agent of respondent or anyone
for that matter.
It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by
an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will
bind the agent only. It is not enough merely that the agent was in fact authorized to make the mortgage, if he has not
acted in the name of the principal.
In light thereof, petitioner is the real party in interest in this case. The trial court’s findings on the matter were affirmed
by the appellate court.39 It erred, however, in not declaring petitioner as a real party in interest insofar as recovery of
the cost of campaign materials made by petitioner’s mother and sister are concerned, upon the wrong notion that they
should have been, but were not, impleaded as plaintiffs.
In sum, respondent has the obligation to pay the total cost of printing his campaign materials delivered by petitioner in
the total of P1,924,906, less the partial payment of P1,000,000, or P924,906.
WHEREFORE, the petition is GRANTED. The Decision dated December 8, 2004 and the Resolution dated April 14,
2005 of the Court of Appeals are hereby REVERSED and SET ASIDE.
The April 10, 2002 Decision of the Regional Trial Court of Angeles City, Branch 57, is REINSTATED mutatis mutandis,
in light of the foregoing discussions. The trial court’s decision is modified in that the amount payable by respondent to
petitioner is reduced to P924,906.
33) Severino v. Severino, 44 Phil. 343
FABIOLA SEVERINO (plaintiff-appellee) vs. GUILLERMO SEVERINO (defendant-appellant) FELICITAS

VILLANUEVA (intervenor-appellee)
Ostrand, J.| 16 January 1923 | G.R. No. L-18058
Putative Principal: Melecio Severino

Putative Agent: Guillermo Severino
FACTS: Melecio Severino owned 428 hectares of the land, which was administered by his brother, Guillermo
Severino. After Melecio's death, Guillermo continued to occupy the land.
Cadastral proceedings were then instituted for the registration of the lands titles within the surveyed area. In the said
proceedings, Guillermo’s lawyer Hofileña filed answers in behalf of Guillermo claiming that Melecio’s lots were the
property of his client. Since no opposition was made in the said proceedings, the titles were eventually decreed in
Guillermo’s favor.
Fabiola Severino (the alleged natural daughter of Melecio) filed an action to compel Guillermo to convey to her four
parcels land, or in default to pay damages for wrongfully causing said land to be registered in his own name.
Felicitas Villanueva, in her capacity as administratrix of the estate of Melecio, filed a complaint in intervention
claiming in the same relief as the original plaintiff, except in so far as she prays that the conveyance be made, or
damages paid, to the estate instead of to the plaintiff Fabiola Severino.
The lower court rendered a judgment:

1. Recognizing the plaintiff Fabiola Severino as the acknowledged natural child Melecio Severino and
2. Ordering the Guillermo to convey to Felicitas (as administratix of Melecio’s estate):
a. 428 hectares of the land in question
b. Proceeds in his possession of a certain mortgage placed thereon by him and to pay the costs.
From this judgment, only Guillermo appeals.
MAIN ISSUE: Whether or not Guillermo ought to reconvey the property to the administratix Felicitas Villanueva?
RULING: YES. Guillermo came into possession of the property as the agent of Melecio.
RATIO:
1. The relations of an agent to his principal are fiduciary and it is an elementary and very old rule that in regard to
property forming the subject-matter of the agency, he 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.
2. That Guillermo came into the possession of the property in question as the agent of Melecio Severino in
the administration of the property, is clear and cannot be disputed.
a. In the case Montelibano vs. Severino, Guillermo’s testimony is conclusive in this respect. He stated under
oath that from 1902-1913, he had been in charge and occupation of the land as the encargado or
administrator of Melecio Severino and that he had always known the land as the property of Melecio
Severino.
b. In his answer filed in the same case, Guillermo, through his attorney, disclaimed all personal interest in the
land and averred that it was wholly the property of his brother Melecio.
3. Guillermo argues that his title has become res judicata through the decree of registration and cannot now be
disturbed; however, the Court disagrees.
a. According to the Land Registration Act, this decree becomes conclusive after 1 year from the date of the
entry if it is not disputed and no one attempts to disturb the decree or the proceedings upon which it is
based.
b. Felicita, as administratix, raises the principle of “equity” and contends that the legal title so acquired inured
to the benefit of the estate of Melecio Severino (Guillermo’s principal and cestui que trust). She thus asks
that this superior equitable right be made effective by compelling the defendant, as the holder of the legal
title, to transfer it to the estate.
4. Here, the Court acknowledges that torrens titles carry a strong presumption in favor of their regularity or validity.
However, once it is cleary proven that a fiduciary relation existed and a consequent breach of trust occurred,
there is no reason why the Court should not make such needed reparation.
a. As long as the land stands registered in the name of the party guilty of the breach of trust and no rights of
innocent third parties are adversely affected, reparation can take place (in the form of a conveyance or
transfer of the title to the cestui que trust).
Judgment appealed from is AFFIRMED (with some additional directions to its dipositive clauses) with the costs against
the appellant. The right of Fabiola Severino to establish in the probate proceedings her status as Melecio’s recognized
natural child is reserved.
34) Green Valley Poultry v. IAC, 133 SCRA 697
Green Valley Poultry & Allied Products, Inc. vs. Intermediate Appellate Court
GR No. L-49395. 26 December 1984
Facts:
Squibb and Green Valley entered into a letter agreement where it is stipulated that:
a. Green Valley is the non-exclusive distributor of the products of Squibb Veterinary Products.
b. Green Valley as distributor, is entitled to 10% discount on Squibb’s whole sale price and
catalogue price.
c. Green Valley is limited to selling Squibb’s products to central and northern Luzon.
d. Payment for purchases from Squibb will be due 60 days from the date of invoice.
e. No payment will be accepted in the form of post-dated checks. Payment by check must be on
current dating.
It is mutually agreed that this non-exclusive distribution agreement can be terminated by either Green Valley Poultry &
Allied Products, Inc. or Squibb Philippines on 30 day notice.
For goods delivered to Green Valley but unpaid, Squibb filed suit to collect.
Green Valley claimed that their relationship is that of an agency to sell, thus there’s no obligation to turn over the
proceeds or goods if not sold, and since it had sold the goods but not been able to collect from the purchases, the
action was premature.
Squibb argues that their relationship with GV is a mere contract of sale evidenced by the stipulation that GV was
obligated to pay for the goods after the 60-day period.
RTC Ruling:
The judgement is in favor of the plaintiff (Squibb) ordering the defendant to pay the sum of P48,374.74 plus P96.00
with interest at 6% per annum from the filing of this action; plus attorney's fees in the amount of P5,000.00 and to pay
the costs.
CA Ruling:
The Court of Appeals upheld the decision of the RTC saying that the agreement between the parties was a contract of
sale.
Issue:
Whether or not the agreement was an agency to sell and if so, was it relieves Green Valley of its liability?
Ruling:
The Court did not have to categorize the contract. Whether viewed as an agency to sell or as a contract of sale, the
liability of Green Valley is indubitable. Adopting Green Valley's theory that the contract is an agency to sell, it is liable
because it sold on credit without authority from its principal. The Civil Code has a provision exactly in point. It reads:
Art. 1905. The commission agent cannot, without the express or implied consent of the principal,
sell on credit. Should he do so, the principal may demand from him payment in cash, but the
commission agent shall be entitled to any interest or benefit, which may result from such sale.
WHEREFORE, the petition is hereby dismissed; the judgment of the defunct Court of Appeals is affirmed with costs
against the petitioner.
SO ORDERED.
35) INTERNATIONAL FILMS(CHINA), LTD., plaintiff-appellant,

vs.
THE LYRIC FILM EXCHANGE, INC., defendant-appellee.
G.R. No. 42465. November 19, 1936
FACTS
This is an appeal by International Films (China), Ltd. from the judgment of the Court of First Instance of Manila
dismissing the complaint filed by it against the Lyric Film Exchange, Inc.
Sometime in June 1933, the International Films (China), Ltd., through Bernard Gabelman, the Philippine agent of the
company by virtue of a power of attorney, leased the film entitled "Monte Carlo Madness" to the Lyric Film Exchange,
Inc. for exhibition in different theaters. One of the conditions of the contract was that Lyric Film Exchange would
answer for the loss of the film whatever the cause.
After the last showing of the film, Vicente Albo, then chief of the film department of the Lyric Film Exchange, Inc.,
telephoned Gabelman informing him that the showing of said film had already been finished and asked where he
wished to have the film returned to him.
The next morning, Gabelman went to Albo's office and asked whether he could deposit the film in question in the vault
of the Lyric FilmExchange, Inc., as the International Films(China) Ltd. did not yet have a safety vault, as required by
the regulations of the fire department. O'Malley, Albo's chief, answered that the deposit could not be made inasmuch
as the film in question would not be covered by the insurance carried by the Lyric FilmExchange, Inc. Gabelman
requested to permit him to deposit said film in the vault of the LyricFilm Exchange, Inc., under Gabelman's own
responsibility. O'Malley agreed and the filmwas deposited in the vault of the defendant company under Bernard
Gabelman's responsibility.
Sometime in July 1933, Gabelman severed his connection with International Films (China), Ltd., and was then
succeeded by Lazarus Joseph. Gabelman, upon
turning over the agency to the new agent, informed the latter of the deposit of
the film"Monte Carlo Madness" in the vault of the defendant company as well as of the verbal contract entered into
between him and the Lyric Film Exchange, Inc.
As soon as Joseph had taken possession of the Philippine agency of theInternational Films (China) Ltd., he went to
the office of
the Lyric Film Exchange, Inc., to ask for the return not only of the film "Monte Carlo Madness" but also of the
films"White Devils" and "Congress Dances". The Lyric Film Exchange, Inc., returned the films except the film "Monte
Carlo Madness" because it will be shown in Cebu. However, the bodega of the Lyric Film Exchange, In., was burned
together with the film "Monte Carlo Madness" which was not insured.
RULING OF THE TRIAL COURT
Dimissed the complaint filed against the Lyric Film Exchange, Inc. (No details provided in the full text).
RULING OF THE SC
One of the questions is whether or not the Lyric Film Exchange, Inc., is repsonsible to the International Films (China)
Ltd., for the destruction by fire of the film entitled "Monte Carlo Madness" (other questions were with regard to court
procedure and insurance policy).
The International Films claims that the Lyric Film Exchange's failure to return
the film "Monte Carlo Madness" was due to the fact that the period for the delivery had been extended in order that it
might be shown in Cebu. The Lyric Film Exchange, on the other hand, claims that when it wanted to return the
film"Monte Carlo Madness" to Gabelman, said agent, not having a
safety vault, requested Albo to keep said film in the latter's vault under Gabelman's own responsibility, verbally
stipulating at the same time that the Lyric Film Exchange, as subagent of theInternational Films (China) Ltd., might
show the film in question in its theaters.
If the verbal contract had between Gabelman and Albo was a

Subagency, the Lyric Film Exchange is not civilly liable for the
destruction by fire of the film because, as a mere subagent, it was not obliged to fulfill more than the contents of the
mandate and to answer for the damages caused to the principal by his failure to do so (art. 1718, Civil Code). The fact
that the film was not insured against fire does not constitute fraud or negligence on the part of theLyric Film Exchange,
Inc., because as a subagent, it received no instruction to that effect from its principal and the insurance of the film does
not form a part of the obligation imposed upon it by law.
36) HSBC vs. National Steel Corporation and CityTrust Banking Corporation, G.R. No. 183486, 24 February 2016
National Steel Corporation entered into a Sales Export Contract with Klockner for the sale of 1,200 metric
tons of prime rolled coils. Klockner applied for an irrevocable letter of credit with HSBC in favor of NSC for
$468,000 to which HSBC granted. Specified therein is the agreement that collection will be governed by UCP
400. Thereafter, NSC shipped the goods to Klockner via M/V Sea Dragon and arrived in Hongkong. NSC
authorized City Trust Banking Corporation as its collecting agent. When City Trust sent the collection order to
HSBC, it stated that collection will be based under URC 322 to which HSBC conformed and consistently
reiterate during their correspondence. It was also agreed that proceeds will be remitted to Standard Charter
Bank-Manila before it will be turned over to CityTrust. When Klockner refused payment, HSBC informed City
Trust and wished to return to NSC all its papers and press for banking charges. City Trust informed NSC of
the non-payment of Klockner and advised NSC that it enforced its tasked to HSBC on collection basis. NSC
argued that such was not on collection basis and that the letter of credit was negotiated to City Trust. Unable
to collect from HSBC, NSC filed collection suit against HSBC.
RTC’S RULING:
HSBC is not liable since the agreement is governed by URC 322 which provides: a bank merely
facilitates collection. Its duty is to forward the Letter of Credit and the required documents from the entity
seeking payment, herein NSC to another entity which has the duty to pay, KLOCKNER. The bank incurs no
obligation other than as a collecting agent, as agreed by and between City Trust, the agent of NSC and HSBC.
NSC appealed RTC’s decision to CA.
CA’S RULING:
HSBC is liable. it is UCP 400 and not URC 322 which governs the transaction. It is the obligation of the
issuing bank to pay the seller (NSC) of the credit once the draft and the required documents are properly
presented. Under the independence principle, the issuing bank’s obligation to pay under the Letter of Credit is
separate from the compliance of the parties in the underlying or main contract. It is also clearly stated in the
terms of the Letter of Credit that UCP 400 is governing. Furthermore, even if it was not clearly stated, it’s still
be applied as this Court consistently recognized UCP 400 under Philippine jurisdiction. HSBC filed the instant
petition for review on certiorari.
ISSUES: WHETHER HSBC IS LIABLE TO PAY
WHETHER CITY TRUST BANK HAS LIABILITY TO NSC
SC’S RULING:
UNDER UCP 400, HSBC IS LIABLE TO PAY SINCE IT IS CLEARLY AGREED UPON IN THE TERMS OF
THE LETTER OF CREDIT, HENCE, IT IS BOUND BY THE RULES SET THEREIN. AND ASSUMING THERE WAS
NO EXPRESS STIPULATION, UCP 400 IS STILL APPLICABLE DUE TO ITS UNIVERSAL USAGE AND CUSTOM
AS CONSISTENTLY APPLIED BY THIS COURT.
EVENTHOUGH CITY TRUST BANK IS NOT IMPLEADED IN THIS SUIT FOR COLLECTION OF MONEY,
NSC RESERVING ITS RIGHT TO FILE SEPARATE CASE AGAINST CITY TRUST BANK’S BREACH OF ITS
OBLIGATION TO ITS PRINCIPAL, NSC, IT STILL IS LIABLE TO NSC FOR NOT UPHOLDING THE INTEREST OF
ITS PRINCIPAL. WHEN IT ACCEPTED THE AUTHORITY GIVEN BY NSC, IT OBLIGES ITSELF TO FOLLOW THE
INSTRUCTIONS GIVEN AND SEE TO IT THAT IT IS DILIGENTLY COMPLIED WITH FOR THE INTEREST AND
ADVANTAGE OF ITS PRINCIPAL.
SC AFFIRMED THE DECISION OF THE CA.
37) People vs. Chowdury, 325 SCRA 572

G.R. No. 129577-80 February 15, 2000
Ponente: Puno, J.
Facts:
In 1995, Bulu Chowdury and Josephine Ong were charged before the Regional Trial Court of Manila with the crime of
illegal recruitment in large scale by recruiting Estrella B. Calleja, Melvin C. Miranda and Aser S. Sasis.
Complainants testified that Chowdury interviewed them in 1994 at Craftrade Overseas Developers (Craftrade) for
employment as factory workers in South Korea. Chowdury required them to submit requirements such as their
passports, NBI clearances, passport size pictures, and medical certificates. They were also required to pay placement
fees. At the time, Chowdury was a consultant and interviewer of Craftrade which was operating under a temporary
license to recruit workers for abroad pending the renewal of their license. Such temporary license was granted to
process the expiring visas of overseas workers who have already been deployed. Chowdury was convicted based on
the fact that he was not registered with the POEA as employee of Craftrade. Neither was he, in his personal capacity,
licensed to recruit overseas workers.
Chowdury testified that he worked as interviewer at Craftrade and his primary duty was to interview job applicants for
abroad. As a mere employee, he only followed the instructions given by his superiors. He argues that the officers
having control, management and direction of the agency are the ones to be held liable.
Chowdury was convicted in the trial court and appealed the decision.
Issue:
Whether Chowdury knowingly and intentionally participated in the commission of the crime charged.
Ruling:
Trial Court: The trial court found Chowdury guilty of the crime of illegal recruitment in large scale and sentenced him to
life imprisonment and pay a fine of PhP100,000.
Supreme Court: No. Upon examination of the records, the SC found that the prosecution failed to prove that Chowdury
was aware of Craftrade’s failure to register his name with POEA and that he actively engged in recruitment despite this
knowledge. The obligation to register its personnel with the POEA belongs to the officers of the agency. A mere
employee of the agency cannot be expected to know the legal requirements for its operation.
The evidence shows that Chowdury carried out his duties as interviewer of Craftrade believing that the agency was
duly licensed by the POEA and he, in turn, was duly authorized by his agency to deal with the applicants in its behalf.
Accused-appellant in fact confined his actions to his job description. He merely interviewed the applicants and
informed them of the requirements for deployment but he never received money from them. Their payments were
received by the agency's cashier, Josephine Ong. Furthermore, he performed his tasks under the supervision of its
president and managing director.
IN VIEW WHEREOF , the assailed decision of the Regional Trial Court is REVERSED and SET ASIDE. Accused-
appellant is hereby ACQUITTED. The Director of the Bureau of Corrections is ordered to RELEASE accused-appellant
unless he is being held for some other cause, and to REPORT to this Court compliance with this order within ten (10)
days from receipt of this decision.
38) Olaguer vs. Purugganan, 515 SCRA 460
Facts:
1.This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the Decision,dated 30 June
2003, promulgated by the Court of Appeals, affirming the Decision of the Regional Trial Court, dated 26 July 1995,
dismissing the petitioner’s suit.
2.Petitioners were active in the political opposition against the Marcos dictatorship.
3.Anticipating the possibility that petitioner would be arrested and detained by the Marcos military, Locsin, Joaquin,
and Hector Holifeña 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.
4.Petitioner also executed a Special Power of Attorney (SPA), on 26 May 1979, appointing as his attorneys-in-fact
Locsin, Joaquin and Hofileña for the purpose of selling or transferring petitioner’s shares of stock with Businessday.
5.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.
6.The petitioner, respondent Locsin sent Rebecca Fernando, an employee of Businessday, to Camp Crame where the
petitioner was detained, to pretend to borrow Certificate of Stock No. 100 for the purpose of using it as additional
collateral for Businessday’s then outstanding loan with the National Investment and Development Corporation. When
Fernando returned the borrowed stock certificate, the word "cancelled" was already written therein.
7.Petitioner alleged that these funds consisted of his monthly salary, which Businessday agreed to continue paying
after his arrest for the financial support of his family. After receiving a total of ₱600,000.00, the payments stopped.
Thereafter, respondent Locsin and Fernando went to ask petitioner to endorse and deliver the rest of his stock
certificates to respondent Locsin, but petitioner refused.
8.On 16 January 1986, petitioner was finally released from detention. He then discovered that he was no longer
registered as stockholder of Businessday in its corporate books. He also learned that Purugganan, as the Corporate
Secretary of Businessday, had already recorded the transfer of shares in favor of respondent Locsin, while petitioner
was detained. When petitioner demanded that respondents restore to him full ownership of his shares of stock, they
refused to do so. On 29 July 1986, petitioner filed a Complaint before the trial court against respondents Purugganan
and Locsin to declare as illegal the sale of the shares of stock, to restore to the petitioner full ownership of the shares,
and payment of damages.
Issues:
1.WON the CA erred in ruling that there was a perfected contract of sale between petitioner and Mr. Locsin over the
shares.
2.WON the CA erred in ruling that the petitioner consented to the alleged sale of shares to Mr. Locsin.
3.WON the CA erred in ruling that the amounts received by petitioner’s in laws were not petitioner’s salary from the
corporation but installment payments for the shares.
4.WON the CA erred in ruling that Mr. Locsin was the party to the alleged sale of shares and not the corporation.
5.WON the CA erred in ruling that the alleged sale of the shares was valid although the cancellation of the shares was
irregular.
Ruling:
RTC Ruling:
The trial court in its Decision, dated 26 July 1995, dismissed the Complaint filed by the petitioner. It ruled that the sale
of shares between petitioner and respondent Locsin was valid. The trial court concluded that petitioner had intended to
sell the shares of stock to anyone, including respondent Locsin, in order to provide for the needs of his family should
he be jailed or forced to go underground; and that 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. It further found that petitioner consented to have respondent Locsin buy the shares himself. It also ruled that
petitioner, through his wife, received from respondent Locsin the amount of ₱600,000.00 as payment for the shares of
stock. The dispositive part of the trial court’s Decision reads:
WHEREFORE, for failure of the [herein petitioner] to prove by preponderance of evidence, his causes of action and of
the facts alleged in his complaint, the instant suit is hereby ordered DISMISSED, without pronouncement as to costs.
Court of Appeals Ruling:
On appeal, the Court of Appeals affirmed the Decision of the trial court that there was a perfected contract of sale. It
further ruled that granting that there was no perfected contract of sale, petitioner, nevertheless, ratified the sale to
respondent Locsin by his receipt of the purchase price, and his failure to raise any protest over the said sale. The
Court of Appeals refused to credit the petitioner’s allegation that the money his wife received constituted his salary
from Businessday since the amount he received as his salary, ₱24,000.00 per month, did not correspond to the
amount he received during his detention, ₱20,000.00 per month (deposits of ₱10,000.00 on every 15th and 30th of
each month in the accounts of the petitioner’s in-laws). On the other hand, the total amount received, ₱600,000.00,
corresponds to the aggregate par value of petitioner’s shares in Businessday. Moreover, 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.
The Court of Appeals also ruled that although the manner of the cancellation of the petitioner’s certificates of stock and
the subsequent issuance of the new certificate of stock in favor of respondent Locsin was irregular, this irregularity will
not relieve petitioner of the consequences of a consummated sale.
Finally, the Court of Appeals affirmed the Decision of the trial court disallowing respondent Locsin’s claims for moral
and exemplary damages due to lack of supporting evidence.
Supreme Court Ruling:
Issue 1: No. Petitioner, thus, claims that his arrest and subsequent detention are not among the instances covered by
the terms "absence or incapacity," as provided under the SPA he executed in favor of respondent Locsin.
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. However, the
rule is not absolute and should not be applied to the extent of destroying the very purpose of the power. If the
language will permit, the construction that should be adopted is that which will carry out instead of defeat the purpose
of the appointment. 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.
Petitioner had not submitted evidence that he was in debt with Businessday at the time he had executed the SPA. Nor
could he have considered incurring any debts since he admitted that, at the time of its execution, he was concerned
about his possible arrest, death and disappearance. 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.
Issue 2: No, petitioner received from respondent Locsin, through his wife and in-laws, the installment payments for a
total of ₱600,000.00 from 1980 to 1982, without any protest or complaint. It was only four years after 1982 when
petitioner demanded the return of the shares. Under the SPA, Locsin was given authority, to negotiate the terms and
conditions of the sale including the manner of payment. Moreover, had respondent Locsin given the proceeds directly
to the petitioner, as the latter suggested in this petition, the proceeds were likely to have been included among
petitioner’s properties which were confiscated by the military. Instead, respondent Locsin deposited the money in the
bank accounts of petitioner’s in-laws, and consequently, assured that the petitioner’s wife received these amounts.
Article 1882 of the Civil Code provides that the limits of an 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.
Issue 3: No, petitioner received ₱20,000.00 per month through his in-laws; this amount does not correspond to his
monthly salary at ₱24,000.00.
Granting that petitioner was able to prove his allegations, such an act of gratuity, on the part of Businessday in favor of
petitioner, would be void. An arrangement whereby petitioner will receive "salaries" for work he will not perform, which
is not a demandable debt since petitioner was on an extended leave of absence, constitutes a donation under Article
726 of the Civil Code. Under Article 748 of the Civil Code, if the value of the personal property donated exceeds
₱5,000.00, the donation and the acceptance shall have to be made in writing. Otherwise, the donation will be void. In
the present case, petitioner admitted in his testimony that such arrangement was not made in writing and, hence, is
void.
Issue 4: No, Respondent Locsin had obtained cash advances from the company, paid to him on the 15th and 30th of
the month, so that he can pay petitioner for the shares. To support his claim, he presented Businessday’s financial
records and the testimony of Leo Atienza, the Company’s Accounting Manager. When asked why the term "shares of
stock" was used for the entries, instead of "cash advances," Atienza explained that the term "shares of stock" was
more specific rather than the broader phrase "cash advances."
Petitioner alleges that the purported sale between himself and respondent Locsin of the disputed shares of stock is
void since it contravenes Article 1491 of the Civil Code, which provides that:
ART. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or
through the mediation of another:
xxxx
(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the
principal has been given; x x x.
It is, indeed, a familiar and universally recognized doctrine that a person who undertakes to act as agent for another
cannot be permitted to deal in the agency matter on his own account and for his own benefit without the consent of his
principal, freely given, with full knowledge of every detail known to the agent which might affect the transaction. The
prohibition against agents purchasing property in their hands for sale or management is, however, clearly, not
absolute. It does not apply where the principal consents to the sale of the property in the hands of the agent or
administrator.
In the present case, the parties have conflicting allegations. While respondent Locsin averred that petitioner had
permitted him to purchase petitioner’s shares, petitioner vehemently denies having known of the transaction. However,
records show that petitioner’s position is less credible than that taken by respondent Locsin given petitioner’s
contemporaneous and subsequent acts.
Issue 5: No, petitioner claims that the cancellation of the shares and the subsequent transfer thereof were fraudulent,
and, therefore, illegal. In the present case, the shares were transferred in the name of the buyer, respondent Locsin,
without the petitioner delivering to the buyer his certificates of stock. Section 63 of the Corporation Code provides that:
Sec.63. Certificate of stock and transfer of shares.— xxx Shares of stock so issued are personal property and may be
transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person
legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the
transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the
transfer, the number of the certificate or certificates and the number of shares transferred.
The aforequoted provision furnishes the procedure for the transfer of shares – the delivery of the endorsed certificates,
in order to prevent the fraudulent transfer of shares of stock. However, this rule cannot be applied in the present case
without causing the injustice sought to be avoided. As had been amply demonstrated, there was a valid sale of stocks.
Petitioner’s failure to deliver the shares to their rightful buyer is a breach of his duty as a seller, which he cannot use to
unjustly profit himself by denying the validity of such sale. Thus, while the manner of the cancellation of petitioner’s
certificates of stock and the issuance of the new certificates in favor of respondent Locsin was highly irregular, we
must, nonetheless, declare the validity of the sale between the parties.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed Decision of the
Court of Appeals, promulgated on 30 June 2003, affirming the validity of the sale of the shares of stock in favor of
respondent Locsin. No costs.
39) MBTC vs. CA, 194 SCRA 169
METROPOLITAN BANK & TRUST COMPANY, petitioner, vs. COURT OF APPEALS, GOLDEN SAVINGS & LOAN
ASSOCIATION, INC., LUCIA CASTILLO, MAGNO CASTILLO and GLORIA CASTILLO, respondents.
FACTS:
1. The Metropolitan Bank and Trust Co. (MBTC) is a commercial bank with branches throughout the Philippines
and even abroad.
2. Golden Savings and Loan Association was, at the time these events happened, operating in Calapan, Mindoro,
with the other private respondents as its principal officers.
3. In January 1979, a certain Eduardo Gomez opened an account with Golden Savings and deposited over a period
of two months 38 treasury warrants with a total value of P1,755,228.37.
4. They were all drawn by the Philippine Fish Marketing Authority (PFMA) and purportedly signed by its General
Manager and countersigned by its Auditor.
5. Six of them were directly payable to Gomez while the others appeared to have been indorsed by their respective
payees, followed by Gomez as second indorser.
6. All these warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to
its Savings Account No. 2498 in the Metrobank branch in Calapan, Mindoro.
7. They were then sent for clearing by the branch office to the principal office of Metrobank, which forwarded them
to the Bureau of Treasury for special clearing.
8. More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times to ask whether
the warrants had been cleared. She was told to wait.
9. Accordingly, Gomez was meanwhile not allowed to withdraw from his account. Later, however, "exasperated"
over Gloria's repeated inquiries and also as an accommodation for a "valued client," the petitioner says it finally
decided to allow Golden Savings to withdraw from the proceeds of the warrants.
10. There were three withdrawals. The total withdrawal was P968.000.00.
11. In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account, eventually
collecting the total amount of P1,167,500.00 from the proceeds of the apparently cleared warrants.
12. On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the
Bureau of Treasury on July 19, 1979, and demanded the refund by Golden Savings of the amount it had previously
withdrawn, to make up the deficit in its account.
13. The demand was rejected.
14. Metrobank then sued Golden Savings in the RTC of Mindoro.
15. The lower court ruled in favor of Golden Savings, which, however, filed a motion for reconsideration even as
Metrobank filed its notice of appeal.
16. The RTC dismissed the complaint .
17. An appeal was filed, the decision was affirmed.
18. The MBTC filed this petition for review.
ISSUE: W/N MBTC was acting only as a collecting agent for Golden Savings,
RULING:
No, it was not acting as an agent.
Art. 1909 of Civil Code clearly provides that 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.
In the case at bar, the negligence of Metrobank has been sufficiently established. It was the clearance given by it that
assured Golden Savings it was already safe to allow Gomez to withdraw the proceeds of the treasury warrants he had
deposited Metrobank misled Golden Savings. There may have been no express clearance, as Metrobank insists
(although this is refuted by Golden Savings) but in any case that clearance could be implied from its allowing
Golden Savings to withdraw from its account not only once or even twice but three times. The total withdrawal
was in excess of its original balance before the treasury warrants were deposited, which only added to its belief that
the treasury warrants had indeed been cleared.
The challenged decision is AFFIRMED, with modification.
40) Bacaling represented by her attorney-in-fact Jose Juan Tong and Jose Juan Tong, in his personal capacity, vs
Felomino Muya, et al., G.R. Nos. 148404-05 April 11, 2002
Facts:
- Petitioner Nelita M. Bacaling and her spouse Ramon Bacaling were the owners of three (3) parcels of
land, with a total area of 9.9631 hectares, located in Barangay Cubay, Jaro, Iloilo City.
- Respondents, on the other hand, claim that in 1964 they were legally instituted by Bacaling's
administrator/overseer as tenant-tillers of the subject parcels of land on sharing basis with two and a half (2½)
hectares each for respondents Muya, Amor, Tonocante and Lazarte, and one and a half (1½) hectares for
respondent Jereza. In 1974, their relationship with the landowner was changed to one of leasehold. They
religiously delivered their rental payments to Bacaling as agricultural lessor. In 1980, they secured certificates
of land transfer in their names for the one hundred ten (110) sub-lots. They have made various payments to
the Land Bank of the Philippines as amortizing owners-cultivators of their respective tillage.
- In August 21, 1990, petitioner Jose Juan Tong, together with Vicente Juan and Victoria Siady, bought
from Nelita Bacaling the subject one hundred ten (110) sub-lots for One Million Seven Hundred Thousand
Pesos (P1,700,000.00). The said sale was effected after Bacaling has repurchased the subject property from
the Government Service Insurance System. To secure performance of the contract of absolute sale and
facilitate the transfer of title of the lots to Jose Juan Tong, Bacaling appointed him in 1992 as her
attorney-in-fact, under an irrevocable special power of attorney.
DAR Ruling
- Following the sale of the one hundred ten (110) sub-lots and using the irrevocable special power of
attorney executed in his favor, petitioner Tong (together with Bacaling) filed a petition for cancellation of the
certificates of land transfer against respondents and a certain Jaime Ruel with the Department of
Agrarian Reform (DAR) Region VI Office in Iloilo City. The DAR, however, dismissed the petition on the
ground that there had been no legitimate conversion of the classification of the 110 sub-lots from
agricultural to residential prior to October 21, 1972 when Operation Land Transfer under P.D. No. 72
took effect. Bacaling and Tong appealed to the DAR Central Office but their appeal was similarly rejected.
The motion for reconsideration failed to overturn the ruling of the Central Office Order.
Office of the President Ruling
- On September 19, 1997, Bacaling and Tong appealed the adverse DAR Orders to the Office of the
President which reversed them in toto in a Decision. The OP Decision found that the one hundred ten (110)
parcels of land had been completely converted from agricultural to residential lots as a result of the
declarations of the NUPC and the Bureau of Lands and the factual circumstances, i.e., the GSIS loan with real
estate mortgage, the division of the original three (3) parcels of land into one hundred ten (110) sub-lots under
individual certificates of title, and the establishment of residential communities adjacent to the subject property,
which indubitably proved the intention of Nelita and Ramon Bacaling to develop a residential subdivision
thereon.
Court of Appeals Ruling
- Respondents elevated the OP Decision to the Court of Appeals on a petition for review under Rule 43 of
the Rules of Civil Procedure. Before the petition was resolved, Nelita Bacaling manifested to the appellate
court that she was revoking the irrevocable power of attorney in favor of Jose Juan Tong and that she was
admitting the status of respondents as her tenants of the one hundred ten (110) sub-lots which allegedly were
agricultural in character.
- On January 31, 2001 the Court of Appeals reversed the OP Decision and validated the certificates of
land transfers in favor of respondents without however promulgating a ruling on petitioner Tong's supposedly
ensuing lack of material interest in the controversy as a result of the manifestation.
- Petitioner Nelita Bacaling resurrected her manifestation with the Court of Appeals and moved to
withdraw/dismiss the present petition on the ground that the irrevocable power of attorney in favor of petitioner
Jose Juan Tong had been nullified by her and that Tong consequently lacked the authority to appear before
this Court. She also manifested that, contrary to the arguments of petitioner Tong, respondents were bona fide
tenants of the one hundred ten (110) sub-lots which were allegedly agricultural and not residential pieces of
realty. Accordingly, petitioner Tong was left all alone to pursue the instant case.
Issue: Whether or not the petitioner may revoke the SPA in favor of Jose Juan Tong?
Ruling:
Substantively, we rule that Bacaling cannot revoke at her whim and pleasure the irrevocable special power of
attorney which she had duly executed in favor of petitioner Jose Juan Tong and duly acknowledged before a
notary public.
The agency, to stress, is one coupled with interest which is explicitly irrevocable since the deed of agency was
prepared and signed and/or accepted by petitioner Tong and Bacaling with a view to completing the performance of
the contract of sale of the one hundred ten (110) sub-lots. It is for this reason that the mandate of the agency
constituted Tong as the real party in interest to remove all clouds on the title of Bacaling and that, after all these cases
are resolved, to use the irrevocable special power of attorney to ultimately "cause and effect the transfer of the
aforesaid lots in the name of the vendees [Tong with two (2) other buyers] and execute and deliver document/s or
instrument of whatever nature necessary to accomplish the foregoing acts and deeds."
The fiduciary relationship inherent in ordinary contracts of agency is replaced by material consideration which in the
type of agency herein established bars the removal or dismissal of petitioner Tong as Bacaling's attorney-in-fact on the
ground of alleged loss of trust and confidence.
We hold that petitioner Jose Juan Tong possesses adequate and legitimate interest to file the instant petition. Under
our rules of procedure, interest means material interest, that is, an interest in issue and to be affected by the judgment,
while a real party in interest is the party who would be benefited or injured by the judgment or the party entitled to the
avails of the suit. There should be no doubt that as transferee of the one hundred ten (110) sub-lots through a contract
of sale and as the attorney-in-fact of Nelita Bacaling, former owner of the subject lots, under an irrevocable special
power of attorney, petitioner Tong stands to be benefited or injured by the judgment in the instant case as well as the
orders and decisions in the proceedings a quo. The deed of sale categorically states that petitioner Tong and his co-
sellers have fully paid for the subject parcels of land. The said payment has been duly received by Bacaling. Hence, it
stands to reason that he has adequate and material interest to pursue the present petition to finality.
41) Philippine Products v. Primateria, 15 SCRA 301
FACTS:
 Defendant Primateria Societe Anonyme Pour Le Commerce Exterieur [PZ]is a foreign juridical entity from
Zurich, Switzerland.
 It was then engaged in "Transactions in international trade with agricultural products, particularly in oils, fats
and oil-seeds and related products."
 1951-PZ, through defendant Alexander B. Baylin, entered into an agreement with plaintiff Philippine
Products Company [PPC], whereby the latter undertook to buy copra in the Philippines for the account of PZ,
during "a tentative experimental period of one month from date." The contract was renewed by mutual
agreement up to 1953.
 PPC caused the shipment of copra to foreign countries, pursuant to instructions from PZ, thru Primateria
(Phil.) Inc [PP] acting by defendant Alexander G. Baylin and Jose M. Crame, (officers of PP)
 Alexander G. Baylin and Primateria Philippines acted as the duly authorized agents of Primateria Zurich in the
Philippines
o Baylin acted indiscriminately in these transactions in the dual capacities of agent of the Zurich firm
and executive vice-president of PP, which also acted as agent of PZ. It
 Primateria Zurich had no license to transact business in the Philippines
 the total amount due to PPC, was P33,009.71. PPC filed action to recover the sum
 Lower court held PZ liable to the plaintiff for the sums of P31,009.71, but absolved PP, Alexander G. Baylin,
and Jose M. Crame from any and all liability.
 PPC: Primateria Zurich is a foreign corporation within the meaning of Sections 68 1 and 692 of the Corporation
Law, and since it has transacted business in the Philippines without the necessary license, as required by said
provisions, its agents here are personally liable for contracts made in its behalf.
Issues + Ruling
Whether defendant Primateria Zurich may be considered a foreign corporation within the meaning of Sections
68 and 69 of the Corporation Law
 the Primateria Zurich was not duly proven to be a foreign corporation; nor that a societe anonyme ("sociedad
anomima") is a corporation; and that failing such proof, the societe cannot be deemed to fall within the
prescription of Section 68 of the Corporation Law. We agree with the said court's conclusion. In fact, our
corporation law recognized the difference between sociedades anonimas and corporations.
1
Section 68 of the Corporation Law states: "No foreign corporation or corporation formed, organized, or existing under any laws other than
those of the Philippines shall be permitted to transact business in the Philippines, until after it shall have obtained a license for that purpose
from the Securities and Exchange Commission ..
2
Section 69, "any officer or agent of the corporation or any person transacting business for any foreign corporation not having the license
prescribed shall be punished by imprisonment for etc
Whether its agents may be held personally liable on contracts made in the name of the entity with third
persons in the Philippines.
 SC cannot see how PPC could recover from both the principal (Primateria Zurich) and its agents. It has been
given judgment against the principal for the whole amount
 . It asked for such judgment, and did not appeal from it. It clearly stated that its appeal concerned the other
three defendants.
 PPC: appellees as agents of Primateria Zurich are liable to it under Art. 1897 of the NCC
Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his
powers.
 SC: no proof that, as agents, they exceeded the limits of their authority.
o It should be PZ, the principal, who should be the one to raise the point, but they never did
o At any rate, the article does not hold that in cases of excess of authority, both the agent and
the principal are liable to the other contracting party.
whether the agent of a foreign corporation doing business, but not licensed here is personally liable for
contracts made by him in the name of such corporation.
 No necessity to dispense issue but SC still said that such foreign corporation may be sued here And obviously,
liability of the agent is necessarily premised on the inability to sue the principal or non-liability of such principal.
In the absence of express legislation, of course.
Disposition: the appealed judgment is affirmed
42) NPC v. National Merchandising, 117 SCRA 789
This case is about the recovery of liquidated damages from a seller’s agent that allegedly exceeded its authority in
negotiating the sale.
Facts:
On October 17,1956 , Plaintiff-appellant National Power Corporation (NPC) and defendant- appellant National
Merchandising Corporation (NAMERCO), the Philippine representative of New York-based International Commodities
Corporation, executed a contract of sale of four thousand long tons of crude sulfur for its Maria Cristina Fertilizer Plant
in Iligan City for a total price of Php 450,716 with a stipulation for liquidated damages in case of breach. Domestic
Insurance Company executed a performance bond in favor of NPC to guarantee the seller’s obligation.
Prior to the execution of the contract, New York corporation in its cable to Namerco dated August 9, 1956 stated that
the sale was subject to availability of a steamer. However, Namerco did not disclose that cable to the NPC and,
contrary to its principal’s instruction, it agreed that nonavailability of a steamer was not a justification for nonpayment of
the liquidated damages.
In a cable dated October 16, 1956, or one day before the contract of sale was signed, the New York supplier advised
Namerco that the latter should not sign the contract unless it (Namerco) wished to assume sole responsibility for the
shipment. Item 4 of the contract provides:
"4. Responsibility for availability of vessel. — The availability of vessel to transport the quantity of sulfur within the
time specified in item 14 of this specification shall be the responsibility of the bidder. In case of award of contract,
failure to ship on time allegedly due to non-availability of vessels shall not exempt the Contractor from payment of
liquidated damages provided in item 15 of this specification."
In a letter dated November 12, 1956, the NPC advised John Z. Sycip, the president of Namerco, of the opening on
November 8 of a letter of credit for $212,120 in favor of International Commodities Corporation which would expire on
January 31, 1957. Notice of that letter of credit was, received by cable by the New York firm on November 15, 1956.
Thus, the deadline for the delivery of the sulfur was January 15, 1957.
The New York supplier was not able to deliver the sulfur due to its inability to secure shipping space. During the period
from January 20 to 26, 1957 there was a shutdown of the NPC’s fertilizer plant because there was no sulfur. No
fertilizer was produced.
In a letter dated February 27, 1957, the general manager of the NPC advised Namerco and the Domestic Insurance
Company that under Article 9 of the contract of sale "non-availability of bottom or vessel" was not a fortuitous event
that would excuse non-performance and that the NPC would resort to legal remedies to enforce its rights.
The Government Corporate Counsel in his letter to Sycip dated May 8, 1957 rescinded the contract of sale due to the
New York supplier’s non-performance of its obligations. The same counsel in his letter of June 8, 1957 demanded from
Namerco the payment of P360,572.80 as liquidated damages. He explained that time was of the essence of the
contract. A similar demand was made upon the surety.
On November 5, 1957, the NPC sued the New York firm, Namerco and the Domestic Insurance Company for the
recovery of the stipulated liquidated damages.
Decision of the Trial Court:
The trial court concluded that Namerco acted beyond the bounds of its authority because it violated its principal’s
cabled instructions (1) that the delivery of the sulfur should be "C & F Manila", not "C & F Iligan City" ; (2) that the sale
be subject to the availability of a steamer and (3) that the seller should be allowed to withdraw right away the full
amount of the letter of credit and not merely eighty percent thereof.
Issue:
WON, Namerco being the Philippine representative of New York-based International Commodities Corporation, be
held liable for the damages sought by NPC?
Ruling:
Yes.
The Court agreed with the trial court that Namerco is liable for damages because under article 1897 of the Civil Code
the agent who exceeds the limits of his authority without giving the party with whom he contracts sufficient notice of his
powers is personally liable to such party.
The truth is that even before the contract of sale was signed Namerco was already aware that its principal was having
difficulties in booking shipping space. In a cable dated October 16, 1956, or one day before the contract of sale was
signed, the New York supplier advised Namerco that the latter should not sign the contract unless it (Namerco) wished
to assume sole responsibility for the shipment. Sycip, Namerco’s president, replied in his letter to the seller dated also
October 16, 1956, that he had no choice but to finalize the contract of sale because the NPC would forfeit Namerco’s
bidder’s bond in the sum of P45,100 posted by the Domestic Insurance Company if the contract was not formalized.
Three days later, or on October 19, the New York firm cabled Namerco that the firm did not consider itself bound by
the contract of sale and that Namerco signed the contract on its own responsibility. In its letters dated November 8 and
19, 1956, the New York corporation informed Namerco that since the latter acted contrary to the former’s cabled
instructions, the former disclaimed responsibility for the contract and that the responsibility for the sale rested on
Namerco.
The rule relied upon by the defendants-appellants that every person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent would apply in this case if the principal is sought to be held
liable on the contract entered into by the agent. That is not so in this case. Here, it is the agent that it sought to be held
liable on a contract of sale which was expressly repudiated by the principal because the agent took chances, it
exceeded its authority, and, in effect, it acted in its own name.
In support of that contention, the defendants cite article 1403 of the Civil Code which provides that a contract entered
into in the name of another person by one who has acted beyond his powers is unenforceable. The Court hold that
defendants’ contention is untenable because article 1403 refers to the unenforceability of the contract against the
principal. In the instant case, the contract containing the stipulation for liquidated damages is not being enforced
against it principal but against the agent and its surety. It is being enforced against the agent because article 1807
implies that the agent who acts in excess of his authority is personally liable to the party with whom he contracted. And
that rule is complemented by article 1898 of the Civil Code which provides that "if the agent contracts in the name of
the principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if the
party with whom the agent contracted is aware of the limits of the powers granted by the principal."
As priorly discussed, namerco, as agent, exceeded the limits of its authority in contracting with the NPC in the name of
its principal. The NPC was unaware of the limitations on the powers granted by the New York firm to Namerco.
WHEREFORE, the lower court’s judgment is modified and defendants National Merchandising Corporation
(NAMERCO) and Domestic Insurance Company of the Philippines are ordered to pay solidarily to the National
Power Corporation the sum of P45,100.00 as liquidated damages.
43) National Bank & Welch Fairchild, 44 Phil. 780
PNB- Creditor
Fairchild- Agent
La Compania Naviera Inc.- Principal
PRINCIPAL AND AGENT; LIABILITY OF AGENT; APPROPRIATION OFPROPERTY WHICH PRINCIPAL IS

OBLIGATED TO DELIVER TO THIRD PARTY.— An agent who obligates his principal to deliver specific property to a
third party may not thereafter, to the prejudice of such third party, appropriate and apply the same property, or its
proceeds, to the payment of debts owing by the principal to the agent; and the circumstances that the principal assents
to such application of the property does not alter the case.
FACTS:
>La compania being new to the shipping world needed to acquire a proper complement of vessels and adequate
equipment, and as shipping values in those days were high, the company did not have sufficient ready capital to meet
all the requirements.
>So the company’s officials applied for a loan to the PNB to purchase a boat called the Benito Juarez being sold in th
U.S.
>The loan was for $125,000 to run for 1 year from May 17, 1918
>Nevertheless, owing to delay in the delivery of the vessel, the money was not then delivered and was not actually
advanced by the bank until several months later
> it was through the efforts of Geo Fairchild(president of Fairchild & Co.) and of Judge James Ross, as attorney, that
the consent of the proper authorities in Washington, D. C., was obtained for the transfer of the Benito Juarez to
Philippine registry.
>after the approval of its transfer to Philippine registry had been obtained, steps were taken for the delivery of the
vessel to the agents of the purchaser in San Francisco at the price of $125,000, as agreed.
>it was understood that the delivery of the purchase money would be made by the Anglo-London and Paris National
Bank, in San Francisco, as agent of the Philippine National Bank contemporaneously with the delivery to it of the bill of
sale and the policy of insurance of the vessel.
>however,he vessel needed repairs before it could be dispatched on its voyage to the Orient; and it became
impracticable to deliver the bill of sale and insurance policy to the bank in San Francisco at the time the money was
needed to effect the transfer.
>fearing that a hitch might thus occur in the negotiations, Welch, Fairchild & Co., in Manila, addressed a letter on
August 8, 1918, to the Philippine National Bank,requesting it to cable its correspondent in San Francisco to release the
money and make payment for the vessel upon application by Welch & Co., without requiring the delivery of the bill of
sale or policy of insurance, "in which event," the letter continued, "the Compañía Naviera will deliver to you here the
bill of sale also the insurance policy covering the voyage to Manila."
>La Compañía Naviera, Inc. confirmed this request and authorized the bank to send the cablegram necessary to give
it effect.
>In response the PNB authorized its correspondent in San Francisco to release the payment for the purchase of the
Benito Juarez, without the production of either bill of sale or insurance policy.
>After the repair of the Benito Juarez had been accomplished it was insured by Welch & Co. to the value of $150,000
and was dispatched, in November, 1918, on its voyage to the Philippine Islands.
>The Vessel encountered a storm and became a complete loss.
>When the insurance was taken out to cover the voyage to Manila, no policy was issued by any insurer; but the
insurance was placed by Welch & Co. of San Francisco, upon the instructions of Welch, Fairchild & Co., as agents of
the Compañía Naviera, and it was taken out in the ordinary course of business to protect the interests of all parties
concerned.
>As would naturally happen in an insurance of this amount, the risk was distributed among several companies, it was
remitted by draft or telegraphic transfer to Welch, Fairchild & Co. in Manila; and in this manner practically the full
amount for which the Benito Juarez had been insured was transmitted to Manila by the last days of June, 1919.
>The bank officials already knew that the insurance had been collected many months previously by Welch, Fairchild &
Co., it is evident that the making of demand for delivery of a policy for $125,000 was a mere formula by which the bank
intended to plant a contention that the proceeds of the insurance, to the extent of $125,000, belonged to it. To this
demand Welch, Fairchild & Co. responded with a negative.
>Meanwhile, what had become of the proceeds of the insurance upon the Benito Juarez? That money, as we have
already seen, came to the hands of Welch, Fairchild & Co. in Manila and has there rested, having been applied by
Welch, Fairchild & Co. in part satisfaction of indebtedness incurred by La Compañía Naviera to it. This disposition of
the insurance money was made by Welch, Fairchild & Co. with the tacit approval of La Compañía Naviera
>The assistance the WFC in the transfer to the Philippine registry of the Benito Juarez, the repairs made and the
services with respect to other vessels which were purchased for La Compañía Naviera, made La Compañía Naviera
indebted to Welch, Fairchild & Co.
>The contention of the defense is Welch, Fairchild & Co. acted exclusively in the character of agent for La Compañía
Naviera in the purchase of the Benito Juarez, no obligation enforcible against it was created by the letter of August 8,
1918, and as a consequence the bank should look exclusively to La Compañía Naviera, as principal, for
indemnification for any loss resulting from the failure of said company to deliver the insurance policy, or policies, on the
Benito Juarez, or the proceeds thereof, to the bank.
>Upon hearing the cause the trial judge absolved the defendant from the complaint and the plaintiff appealed.
ISSUE:
WON the PNB can collect from Welch, Fairchild & Co.
RULING:
YES,
the plaintiff bank has a clear right of action against the defendant. While it is true that an agent who acts for a revealed
principal in the making of a contract does not become personally bound to the other party in the sense that an action
can ordinarily be maintained upon such contract directly against the agent, yet that rule clearly does not control this
case. it is manifest upon the simplest principles of jurisprudence that one who has intervened in the making of a
contract in the character of agent cannot be permitted to intercept and appropriate the thing which the principal is
bound to deliver, and thereby make performance by the principal impossible. The agent in any event must be
precluded from doing any positive act that could prevent performance on the part of his principal. This much, ordinary
good faith towards the other contracting party requires. The situation before us in effect is one where, notwithstanding
the promise held out jointly by principal and agent in the letters of August 8 and 10, 1918, the two have conspired to
make an application of the proceeds of the insurance entirely contrary to the tenor of said letters. This cannot be
permitted.
44) Cervantes v. CA, 304 SCRA 25

Facts:
On March 27, 1989, private respondent PAL issued to herein petitioner Nicholas Cervantes a round trip ticket for
Manila-Honolulu-Los Angeles-Honolulu-Manila, which is valid until March 27, 1990. On March 23, 1990, petitioner
used it. Upon his arrival in Los Angeles, he immediately booked a flight to Manila, which was confirmed on April 2.
Upon learning that the plane would make a stop-over in San Francisco, and because he would be there on April 2,
petitioner made arrangements to board in San Francisco. On April 2, he was not allowed to board due to the expiration
of his ticket. He filed a complaint for damages. It was not given due course by both the trial court and the Court of
Appeals.
Issues:
(1) Whether or not the act of the PAL agents in confirming subject ticket extended the period of validity of petitioner's
ticket
(2) Whether or not the denial of the award for damages was proper
Held:
(1) From the facts, it can be gleaned that the petitioner was fully aware that there was a need to send a letter to the
legal counsel of PAL for the extension of the period of validity of his ticket. Under Article 1898 11 of the New Civil
Code, the acts of an agent beyond the scope of his authority do not bind the principal, unless the latter ratifies the
same expressly or impliedly. Furthermore, when the third person (herein petitioner) knows that the agent was acting
beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person is
aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the
latter undertook to secure the principal's ratification.
(2) An award of damages is improper because petitioner failed to show that PAL acted in bad faith in refusing to allow
him to board its plane in San Francisco. In awarding moral damages for breach of contract of carriage, the breach
must be wanton and deliberately injurious or the one responsible acted fraudulently or with malice or bad faith.
Petitioner knew there was a strong possibility that he could not use the subject ticket, so much so that he bought a
back-up ticket to ensure his departure. Should there be a finding of bad faith, we are of the opinion that it should be on
the petitioner. What the employees of PAL did was one of simple negligence. No injury resulted on the part of
petitioner because he had a back-up ticket should PAL refuse to accommodate him with the use of subject ticket.
Neither can the claim for exemplary damages be upheld. Such kind of damages is imposed by way of example or
correction for the public good, and the existence of bad faith is established. The wrongful act must be accompanied by
bad faith, and an award of damages would be allowed only if the guilty party acted in a wanton, fraudulent, reckless or
malevolent manner. Here, there is no showing that PAL acted in such a manner. An award for attorney's fees is also
improper.
45) National Food Authority v. IAC, 184 SCRA 166

Facts:
Medalla, as a commission agent of plaintiff Superior Shipping Corporation,entered into a contract for hire of ship (MV
Sea Runner) with defendant NFA.The contract obligated Medalla to transport on the MV Sea Runner 8,550 sacksof
rice belonging to NFA from Occidental Mindoro to Malabon, Metro Manila.Upon completion of the delivery, plaintiff
wrote a letter around October 1979,requesting NFA that it be allowed to collect the amount for freightage andother
charges. Plaintiff wrote again around November 1979, this timespecifically requesting that payment be made to it and
not to Medalla becauseplaintiff was the owner of the vessel.On November 16, 1979, NFA informed plaintiff that it could
not grant itsrequest because the contract to transport the rice was entered into by NFAand defendant Medalla who did
not disclose that he was acting as a mereagent of plaintiff. Thereupon on November 19, 1979, defendant NGA
paiddefendant Medalla the sum of P25,974.90, for freight services.On December 4, 1979, plaintiff wrote defendant
Medalla demanding that heturn over to plaintiff the amount of P27,000.00 paid to him by defendant NFA.Defendant
Medalla, however, "ignored the demand."
Issue:
Whether NFA is jointly and severally liable with defendant Medalla.
Held:
Yes, NFA is solidarily liable with defendant Medalla.
Ratio:
It is an undisputed fact that Gil Medalla was a commission agent ofrespondent Superior Shipping Corporation which
owned the vessel "MV SeaRunner" that transported the sacks of rice belonging to petitioner NFA. Thecontext of the
law is clear. Art. 1883, which is the applicable law in the case atbar provides:
Art. 1883.
If an agent acts in his own name, the principal has noright of action against the persons with whom the agent
hascontracted; neither have such persons against the principal.
In such case the agent is the one directly bound in favor of theperson with whom he has contracted, as if the
transaction werehis own,
except when the contract involves things belongingto the principal.
The provision of this article shall be understood to be withoutprejudice to the actions between the principal and agent.
Consequently, when things belonging to the principal (in this case, Superior Shipping Corporation) are dealt
with, the agent is bound to the principal
although he does not assume the character of such agent and appears acting inhis own name
. In other words, the agent's apparent representation yields to theprincipal's true representation and that, in
reality and in effect, the contractmust be considered as entered into between the principal and the third
person
Corollarily, if the principal can be obliged to perform his duties under the
contract, then it can also demand the enforcement of its rights arising from
the contract
46) Far East Bank and Trust Company (now Bank of the Philippine Islands) and Rolando Borja, Deputy Sherrif v. Sps.
Ernesto and Leonor C. Cayetano, G.R. No. 179909, January 25,2010
Execution by agent of mortgage agreement on behalf of principal
Posted on February 17, 2010 by Hector M. de Leon Jr. • Posted in Civil Law • Tagged agency, mortgage
Several cases decided by the Supreme Court indicate that the agent should be very careful in the manner he or she
signs a mortgage contract on behalf of the principal; otherwise, the mortgage may be binding upon the agent only.
In Far East Bank and Trust Company (Now Bank of the Philippine Islands) and Rolando Borja,
Deputy Sherrif vs. Sps. Ernesto and Leonor C. Cayetano, G.R. No. 179909, January 25, 2010, the principal executed
a special power of attorney in favor of her daughter authorizing her to contract a loan from a bank and to mortgage the
principal’s two lots. The principal also executed an affidavit of non-tenancy for the approval of the loan. The bank
granted a loan secured by two promissory notes and a real estate mortgage over the principal’s two lots. The
mortgage document was signed by the agent and her husband as mortgagors in their individual capacities, without
stating that the agent was executing the mortgage contract for and in behalf of the principal.
The bank foreclosed the mortgage due to non-payment of the loan. A notice of public auction sale was sent to
principal. The latter’s lawyer responded with a letter to the bank requesting that the public auction be postponed. The
letter went unheeded and the public auction was held as scheduled wherein the mortgaged properties were sold to the
bank. Subsequently, the bank consolidated its title and obtained new titles in its name after the redemption period
lapsed without the principal taking any action.
Around five years later, the principal filed a complaint for annulment of mortgage and extrajudicial foreclosure of the
properties with damages with the regional trial court (RTC) of Naga City. The principal sought nullification of the real
estate mortgage and extrajudicial foreclosure sale, as well as the cancellation of the bank’s title over the properties.
The RTC rendered judgment in favor of the principal, holding that the principal cannot be bound by the real estate
mortgage executed by the agent unless it is shown that the same was made and signed in the name of the principal;
hence, the mortgage will bind the agent only.
The Court of Appeals (CA) affirmed the RTC’s ruling. It held that it must be shown that the real estate mortgage was
executed by the agent on behalf of the principal, otherwise the agent may be deemed to have acted on his own and
the mortgage is void. However, the CA further declared that the principal loan agreement was not affected, which had
become an unsecured credit.
The Supreme Court held that the principal is not bound by the real estate mortgage executed by the authorized agent
in her own name without indicating the principal. It is not sufficient for the principal to have authorized the agent
through a special power of attorney to execute the mortgage on behalf of the principal; the mortgage contract itself
must clealy state that the agent was executing the mortgage contract for and on behalf of the principal.
The Supreme Court cited three earlier rulings in support of its finding:
(1) The Philippine Sugar Estates Development Co., Ltd., Inc. vs. Poizat, et al, 48 Phil. 536 (1925), where Gabriela
Andrea de Coster (Coster) executed a general power of attorney authorizing her husband, Juan Poizat (Poizat), to
obtain a loan and to secure the same with mortgage, pledge or personal securities. Although the real estate mortgage
mentioned that it was entered also in Poizat’s capacity as attorney-in-fact of Coster, Poizat signed the contract in his
own name without any indication that he also signed it as the attorney-in-fact of his wife. The Supreme Court ruled that
while Poizat may have had the authority to borrow money and mortgage the real property of his wife, the law specifies
how and in what manner it must be done, and the stubborn fact remains that, as to the transaction in question, that
power was never exercised;
(2) Rural Bank of Bombon (Camarines Sur), Inc. vs. Court of Appeals, 212 SCRA 25 (1992), where the Supreme
Court held that “Aquino’s act of signing the Deed of Real Estate Mortgage in his name alone as mortgagor, without any
indication that he was signing for and in behalf of the property owner, Ederlinda M. Gallardo, bound himself alone in
his personal capacity as a debtor of the petitioner Bank and not as the agent or attorney-in-fact of Gallardo”;
(3) Gozun vs. Mercado, 511 SCRA 305 (2006), where the Supreme Court held that the principal was not liable for the
“cash advance” given to the agent who signed the receipt in her name alone, without indicating therein that she was
acting for and in behalf of respondent. Thus, the Supreme Court ruled that the agent bound herself in her personal
capacity and not as an agent of the principal or anyone for that matter.
From the foregoing, it is not sufficient that the principal executed a power of attorney authorizing the agent to execute
the mortgage contract or that the mortgage contract mention that it was entered into by the agent as attorney-in-fact of
the principal. It is essential that the agent must sign the contract on behalf of the principal.
While the Supreme Court held in Cayetano that the principal is not bound by the real estate mortgage executed by the
agent, the Supreme Court ruled that laches prevent the principal from questioning the validity of the mortgage:
Notwithstanding the nullity of the real estate mortgage executed by Tabing and her husband, we find that the equity
principle of laches is applicable in the instant case. Laches is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to
assert it. Its essential elements are: (1) conduct on the part of the defendant, or of one under whom he claims, giving
rise to the situation complained of; (2) delay in asserting complainant’s right after he had knowledge of the defendant’s
conduct and after he has an opportunity to sue; (3) lack of knowledge or notice on the part of the defendant that the
complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event
relief is accorded to the complainant.
There is no absolute rule on what constitutes laches. It is a creation of equity and applied not really to penalize neglect
or sleeping upon one’s rights but rather to avoid recognizing a right when to do so would result in a clearly inequitable
situation. The question of laches, we said, is addressed to the sound discretion of the court and each case must be
decided according to its particular circumstances. Verily, in a number of cases, it had been held that laches, the
essence of which is the neglect to assert a right over a long period of time, may prevent recovery of a titled property.
In the present case, records clearly show that respondents could have filed an action to annul the mortgage on their
properties, but for unexplained reasons, they failed to do so. They only questioned the loan and mortgage transactions
in December 1996, or after the lapse of more than five (5) years from the date of the foreclosure sale. It bears noting
that the real estate mortgage was registered and annotated on the titles of respondents, and the latter were even
informed of the extrajudicial foreclosure and the scheduled auction. Instead of impugning the real estate mortgage and
opposing the scheduled public auction, respondents’ lawyer wrote a letter to petitioner and merely asked that the
scheduled auction be postponed to a later date. Even after five (5) years, respondents still failed to oppose the
foreclosure and the subsequent transfer of titles to petitioner when their agent, Tabing, acting in behalf of Cayetano,
sent a letter proposing to buy back the properties. It was only when the negotiations failed that respondents filed the
instant case. Clearly, respondents slept on their rights.
47) Ace Navigation Co., Inc. vs. FGU Insurance Corporat ion, 674 SCRA 348
Facts:
Cardia Limited shipped on board the vessel M/V Pakarti Tiga at Shanghai Port, China, 8260 metric tons (or
165,200 bags) of Grey Portland Cement to be discharged at the Port of Manila and delivered to its consignee,
Heindrich Trading Corp. The subject shipment was insured with respondents FGU Insurance Corp. and Pioneer
Insurance and Surety Corp. against all risks for the amount of Php 18,048,421.00. Regency Express Lines S.A.,
chartered by Sky International, Inc. having entered into a contract with Shinwa Kaiun Kaisha Ltd. to which the subject
vessel was chartered by the owner Pakarti Tata, was the one which directly dealt with Heindrich and accordingly
issued Clean Bill of Lading No. SM-1.
The vessel arrived at the Port of Manila and the shipment was discharged. Upon inspection by Heindrich and Ace
Navigation Co. Inc, agent of Cardia Limited, it was found that out of the 165,200 bags of cement, 43,905 bags were in
bad order and condition. The respondents, unable to collect the sustained damages from Cardia Limited and Regency
Express Lines S.A., each paid Heindrich separately totaling to Php 711,727.34 and became sub rated to all the rights
and causes of action accruing to Heindrich. Respondents filed a complaint for damages. Ace Navigation Co. Inc.
claimed it was not a real party-in-interest from whom the respondents can demand compensation. The respondents
maintain that Ace Navigation Co. Inc is a ship agent and not a mere agent of Cardia, as found by both the CA and the
RTC.
Issue:
Whether or not Ace Navigation Co. Inc. be held liable for damages sought by FGU Insurance Corporation and Pioneer
Insurance and Surety Corporation.
Decision:
Article 586 of the Code of Commerce provides that “the ship owner and the ship agent shall be civilly liable for the acts
of the captain and for the obligations contracted by the latter to repair, equip and provision the vessel, provided the
creditor proves the amount claimed was invested therein. By ship agent is understood the person entrusted with the
provisioning of a vessel, or who represents her in the port in which she may be found.” Due to the above provision, the
Court disagreed with respondents’ contention. Thus, Ace Navigation Co. Inc. cannot be held liable for damages
sought by the respondents.
48) DBP vs. CA, 231SCRA 370 G.R. No. L-109937 March 21, 1994
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented by CANDIDA G. DANS, and
the DBP MORTGAGE REDEMPTION INSURANCE POOL, respondents.
FACTS: Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for a loan of P500,000.00
with the Development Bank of the Philippines (DBP), Basilan Branch. As the principal mortgagor, Dans, then 76 years
of age, was advised by DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption
Insurance Pool (DBP MRI Pool)
A loan, in the reduced amount of P300,000.00, was approved by DBP on August 4, 1987 and released on
August 11, 1987. From the proceeds of the loan, DBP deducted the amount of P1,476.00 as payment for the MRI
premium. On August 15, 1987, Dans accomplished and submitted the "MRI Application for Insurance" and the "Health
Statement for DBP MRI Pool."
On August 20, 1987, the MRI premium of Dans, less the DBP service fee of 10 percent, was credited by DBP to the
savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was advised of the credit.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this information
to the DBP MRI Pool. On September 23, 1987, the DBP MRI Pool notified DBP that Dans was not eligible for MRI
coverage, being over the acceptance age limit of 60 years at the time of application.
On October 21, 1987, DBP apprised Candida Dans of the disapproval of her late husband's MRI application. The DBP
offered to refund the premium of P1,476.00 which the deceased had paid, but Candida Dans refused to accept the
same, demanding payment of the face value of the MRI or an amount equivalent to the loan. She, likewise, refused to
accept an ex gratia settlement of P30,000.00, which the DBP later offered.
On February 10, 1989, respondent Estate, through Candida Dans as administratrix, filed a complaint with the
Regional Trial Court, Branch I, Basilan, against DBP and the insurance pool for "Collection of Sum of Money with
Damages." Respondent Estate alleged that Dans became insured by the DBP MRI Pool when DBP, with full
knowledge of Dans' age at the time of application, required him to apply for MRI, and later collected the insurance
premium thereon. Respondent Estate therefore prayed: (1) that the sum of P139,500.00, which it paid under protest
for the loan, be reimbursed; (2) that the mortgage debt of the deceased be declared fully paid; and (3) that damages
be awarded.
The DBP and the DBP MRI Pool separately filed their answers, with the former asserting a cross-claim against the
latter
RTC: rendered a decision in favor of respondent Estate and against DBP. The DBP MRI Pool, however, was
absolved from liability, after the trial court found no privity of contract between it and the deceased. The trial court
declared DBP in estoppel for having led Dans into applying for MRI and actually collecting the premium and the
service fee, despite knowledge of his age ineligibility
CA Affirmed
ISSUE:
(1) WON there is a contract made between DBP MRI Pool and the late Juan Dans
(2) WON there is a contract made between DBP and the late Jun Dans
RULING:
(1) When Dans applied for MRI, he filled up and personally signed a "Health Statement for DBP MRI Pool" (Exh.
"5-Bank") with the following declaration:
I hereby declare and agree that all the statements and answers contained herein are true, complete
and correct to the best of my knowledge and belief and form part of my application for insurance. It is
understood and agreed that no insurance coverage shall be effected unless and until this application
is approved and the full premium is paid during my continued good health (Records, p. 40).
Under the aforementioned provisions, the MRI coverage shall take effect: (1) when the application shall be
approved by the insurance pool; and (2) when the full premium is paid during the continued good health of the
applicant. These two conditions, being joined conjunctively, must concur.
Undisputably, the power to approve MRI applications is lodged with the DBP MRI Pool. The pool, however, did not
approve the application of Dans. There is also no showing that it accepted the sum of P1,476.00, which DBP credited
to its account with full knowledge that it was payment for Dan's premium. There was, as a result, no perfected
contract of insurance; hence, the DBP MRI Pool cannot be held liable on a contract that does not exist.
(2) The liability of DBP is another matter.

It was DBP, as a matter of policy and practice, that required Dans, the borrower, to secure MRI coverage.
Instead of allowing Dans to look for his own insurance carrier or some other form of insurance policy, DBP compelled
him to apply with the DBP MRI Pool for MRI coverage. When Dan's loan was released on August 11, 1987, DBP
already deducted from the proceeds thereof the MRI premium. Four days latter, DBP made Dans fill up and sign his
application for MRI, as well as his health statement. The DBP later submitted both the application form and health
statement to the DBP MRI Pool at the DBP Main Building, Makati Metro Manila. As service fee, DBP deducted 10
percent of the premium collected by it from Dans.
In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second as an insurance agent.
As an insurance agent, DBP made Dans go through the motion of applying for said insurance, thereby leading
him and his family to believe that they had already fulfilled all the requirements for the MRI and that the issuance of
their policy was forthcoming. Apparently, DBP had full knowledge that Dan's application was never going to be
approved. The maximum age for MRI acceptance is 60 years as clearly and specifically provided in Article 1 of the
Group Mortgage Redemption Insurance Policy signed in 1984 by all the insurance companies concerned (Exh. "1-
Pool").
Under Article 1987 of the Civil Code of the Philippines, "the agent who acts as such is not personally
liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his
authority without giving such party sufficient notice of his powers." The DBP is not authorized to accept
applications for MRI when its clients are more than 60 years of age (Exh. "1-Pool"). Knowing all the while that Dans
was ineligible for MRI coverage because of his advanced age, DBP exceeded the scope of its authority when it
accepted Dan's application for MRI by collecting the insurance premium, and deducting its agent's
commission and service fee.
The liability of an agent who exceeds the scope of his authority depends upon whether the third person
is aware of the limits of the agent's powers. There is no showing that Dans knew of the limitation on DBP's
authority to solicit applications for MRI.
If the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on the
agent and he (third person) has been deceived by the non-disclosure thereof by the agent, then the latter is liable for
damages to him. The rule that the agent is liable when he acts without authority is founded upon the supposition that
there has been some wrong or omission on his part either in misrepresenting, or in affirming, or concealing the
authority under which he assumes to act.
49) Country Bankers Insurance Corporatisn vs. Keppel Cebu Shipyard, 673 SCRA 427
FACTS:
Unimarine Shipping Lines, Inc. (Unimarine) is a corporation engaged in the shipping industry. Unimarine contracted
the services of Keppel Cebu Shipyard for dry-docking and ship repair works on its vessel, the MV Pacific Fortune.
Cebu Shipyard issued a bill to Unimarine in consideration for its services. They negotiated to a reduction to P3.85M
and terms of this agreement were embodied in Cebu Shipyard’s letter to the President/GM of Unimarine. In
compliance with the agreement, Unimarine secured from Country Bankers Insurance Corp. (CBIC), through it’s agent,
Bethoven Quinain (Quinain), a Surety Bond of P3M. The expiration of the Surety Bond was extended through an
Endorsement attached to the Surety Bond.
Cebu Shipyard sent Unimarine letters, demanding it to settle its account. Due to Unimarine’s nonpayment, Cebu
Shipyard asked the surety CBIC to fulfill their obligations as sureties. However, CBIC alleged that the Surety Bond was
issued by its agent, Quinain, in excess of his authority.
ISSUE:
W/N the provisions of Article 1911 of the Civil Code is applicable in the present case to hold petitioner liable for the
acts done by its agent in excess of authority. YES
HELD:
CBIC is liable for the surety bond. CBIC could not be allowed to disclaim liability because Quinain’s actions were within
the terms of the special power of attorney given to him. Our law mandates an agent to act within the scope of his
authority. The scope of an agent’s authority is what appears in the written terms of the power of attorney granted upon
him.
Under Articles 1898 and 1910, an agent’s act, even if done beyond the scope of his authority, may bind the principal if
he ratifies them, whether expressly or tacitly. It must be stressed though that only the principal, and not the agent, can
ratify the unauthorized acts, which the principal must have knowledge of.
Neither Unimarine nor Cebu Shipyard was able to repudiate CBIC’s testimony that it was unaware of the existence of
Surety Bond and Endorsement. There were no allegations either that CBIC should have been put on alert with regard
to Quinain’s business transactions done on its behalf. It is clear, and undisputed therefore, that there can be no
ratification in this case, whether express or implied.
Article 1911, on the other hand, is based on the principle of estoppel, which is necessary for the protection of third
persons. It states that the principal is solidarily liable with the agent even when the latter has exceeded his authority, if
the principal allowed him to act as though he had full powers. However, for an agency by estoppel to exist, the
following must be established:
1. The principal manifested a representation of the agent’s authority or knowingly 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.
This Court cannot agree with the Court of Appeals’ pronouncement of negligence on CBIC’s part. CBIC not only
clearly stated the limits of its agents’ powers in their contracts, it even stamped its surety bonds with the restrictions, in
order to alert the concerned parties. Moreover, its company procedures, such as reporting requirements, show that it
has designed a system to monitor the insurance contracts issued by its agents. CBIC cannot be faulted for Quinain’s
deliberate failure to notify it of his transactions with Unimarine. In fact, CBIC did not even receive the premiums paid by
Unimarine to Quinain.
DISPOSITION:
WHEREFORE, this petition is hereby GRANTED and the complaint against CBIC is DISMISSED for lack of merit.
50) Cuison vs. CA, G.R. No. 88531, Oct. 26, 1993
G.R. No. 88539 October 26, 1993
KUE CUISON, doing business under the firm name and style"KUE CUISON PAPER SUPPLY," petitioner,
vs.
THE COURT OF APPEALS, VALIANT INVESTMENT ASSOCIATES, respondents.
BIDIN, J.:
This petition for review assails the decision of the respondent Court of Appeals ordering petitioner to pay private
respondent, among others, the sum of P297,482.30 with interest. Said decision reversed the appealed decision of the
trial court rendered in favor of petitioner.
The case involves an action for a sum of money filed by respondent against petitioner anchored on the following
antecedent facts:
Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and sale of newsprint, bond paper and scrap,
with places of business at Baesa, Quezon City, and Sto. Cristo, Binondo, Manila. Private respondent Valiant
Investment Associates, on the other hand, is a partnership duly organized and existing under the laws of the
Philippines with business address at Kalookan City.
From December 4, 1979 to February 15, 1980, private respondent delivered various kinds of paper products
amounting to P297,487.30 to a certain Lilian Tan of LT Trading. The deliveries were made by respondent pursuant to
orders allegedly placed by Tiu Huy Tiac who was then employed in the Binondo office of petitioner. It was likewise
pursuant to Tiac's instructions that the merchandise was delivered to Lilian Tan. Upon delivery, Lilian Tan paid for the
merchandise by issuing several checks payable to cash at the specific request of Tiu Huy Tiac. In turn, Tiac issued
nine (9) postdated checks to private respondent as payment for the paper products. Unfortunately, sad checks were
later dishonored by the drawee bank.
Thereafter, private respondent made several demands upon petitioner to pay for the merchandise in question, claiming
that Tiu Huy Tiac was duly authorized by petitioner as the manager of his Binondo office, to enter into the questioned
transactions with private respondent and Lilian Tan. Petitioner denied any involvement in the transaction entered into
by Tiu Huy Tiac and refused to pay private respondent the amount corresponding to the selling price of the subject
merchandise.
Left with no recourse, private respondent filed an action against petitioner for the collection of P297,487.30
representing the price of the merchandise. After due hearing, the trial court dismissed the complaint against petitioner
for lack of merit. On appeal, however, the decision of the trial court was modified, but was in effect reversed by the
Court of Appeals, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is MODIFIED in that defendant-appellant Kue Cuison is
hereby ordered to pay plaintiff-appellant Valiant Investment Associates the sum of P297,487.30 with
12% interest from the filing of the complaint until the amount is fully paid, plus the sum of 7% of the
total amount due as attorney's fees, and to pay the costs. In all other respects, the decision appealed
from is affirmed. (Rollo, p. 55)
In this petition, petitioner contends that:
THE HONORABLE COURT ERRED IN FINDING TIU HUY TIAC AGENT OF DEFENDANT-
APPELLANT CONTRARY TO THE UNDISPUTED/ESTABLISHED FACTS AND CIRCUMSTANCES.
THE HONORABLE COURT ERRED IN FINDING DEFENDANT-APPELLANT LIABLE FOR AN

OBLIGATION UNDISPUTEDLY BELONGING TO TIU HUY TIAC.
THE HONORABLE COURT ERRED IN REVERSING THE WELL-FOUNDED DECISION OF THE TRIAL COURT,
(Rollo, p, 19)
The issue here is really quite simple — whether or not Tiu Huy Tiac possessed the required authority from petitioner
sufficient to hold the latter liable for the disputed transaction.
This petition ought to have been denied outright, forin the final analysis, it raises a factual issue. It is elementary that in
petitions for review under Rule 45, this Court only passes upon questions of law. An exception thereto occurs where
the findings of fact of the Court of Appeals are at variance with the trial court, in which case the Court reviews the
evidence in order to arrive at the correct findings based on the records.
As to the merits of the case, it is a well-established rule that one who clothes another with apparent authority as his
agent and holds him out to the public as such cannot be permitted to deny the authority of such person to act as his
agent, to the prejudice of innocent third parties dealing with such person in good faith and in the honest belief that he
is what he appears to be (Macke, et al, v. Camps, 7 Phil. 553 (1907]; Philippine National Bank. v Court of Appeals, 94
SCRA 357 [1979]). From the facts and the evidence on record, there is no doubt that this rule obtains. The petition
must therefore fail.
It is evident from the records that by his own acts and admission, petitioner held out Tiu Huy Tiac to the public as the
manager of his store in Sto. Cristo, Binondo, Manila. More particularly, petitioner explicitly introduced Tiu Huy Tiac to
Bernardino Villanueva, respondent's manager, as his (petitioner's) branch manager as testified to by Bernardino
Villanueva. Secondly, Lilian Tan, who has been doing business with petitioner for quite a while, also testified that she
knew Tiu Huy Tiac to be the manager of petitioner's Sto. Cristo, Binondo branch. This general perception of Tiu Huy
Tiac as the manager of petitioner's Sto. Cristo store is even made manifest by the fact that Tiu Huy Tiac is known in
the community to be the "kinakapatid" (godbrother) of petitioner. In fact, even petitioner admitted his close relationship
with Tiu Huy Tiac when he said that they are "like brothers" (Rollo, p. 54). There was thus no reason for anybody
especially those transacting business with petitioner to even doubt the authority of Tiu Huy Tiac as his manager in the
Sto. Cristo Binondo branch.
In a futile attempt to discredit Villanueva, petitioner alleges that the former's testimony is clearly self-serving inasmuch
as Villanueva worked for private respondent as its manager.
We disagree, The argument that Villanueva's testimony is self-serving and therefore inadmissible on the lame excuse
of his employment with private respondent utterly misconstrues the nature of "'self-serving evidence" and the specific
ground for its exclusion. As pointed out by this Court in Co v. Court of Appeals et, al., (99 SCRA 321 [1980]):
Self-serving evidence is evidence made by a party out of court at one time; it does not include a
party's testimony as a witness in court. It is excluded on the same ground as any hearsay evidence,
that is the lack of opportunity for cross-examination by the adverse party, and on the consideration
that its admission would open the door to fraud and to fabrication of testimony. On theother hand, a
party's testimony in court is sworn and affords the other party the opportunity for cross-examination
(emphasis supplied)
Petitioner cites Villanueva's failure, despite his commitment to do so on cross-examination, to produce the very first
invoice of the transaction between petitioner and private respondent as another ground to discredit Villanueva's
testimony. Such failure, proves that Villanueva was not only bluffing when he pretended that he can produce the
invoice, but that Villanueva was likewise prevaricating when he insisted that such prior transactions actually took
place. Petitioner is mistaken. In fact, it was petitioner's counsel himself who withdrew the reservation to have
Villanueva produce the document in court. As aptly observed by the Court of Appeals in its decision:
. . . However, during the hearing on March 3, 1981, Villanueva failed to present the document
adverted to because defendant-appellant's counsel withdrew his reservation to have the former
(Villanueva) produce the document or invoice, thus prompting plaintiff-appellant to rest its case that
same day (t.s.n., pp. 39-40, Sess. of March 3, 1981). Now, defendant-appellant assails the credibility
of Villanueva for having allegedly failed to produce even one single document to show that plaintiff-
appellant have had transactions before, when in fact said failure of Villanueva to produce said
document is a direct off-shoot of the action of defendant-appellant's counsel who withdrew his
reservation for the production of the document or invoice and which led plaintiff-appellant to rest its
case that very day. (Rollo, p.52)
In the same manner, petitioner assails the credibility of Lilian Tan by alleging that Tan was part of an intricate plot to
defraud him. However, petitioner failed to substantiate or prove that the subject transaction was designed to defraud
him. Ironically, it was even the testimony of petitioner's daughter and assistant manager Imelda Kue Cuison which
confirmed the credibility of Tan as a witness. On the witness stand, Imelda testified that she knew for a fact that prior
to the transaction in question, Tan regularly transacted business with her father (petitioner herein), thereby
corroborating Tan's testimony to the same effect. As correctly found by the respondent court, there was no logical
explanation for Tan to impute liability upon petitioner. Rather, the testimony of Imelda Kue Cuison only served to add
credence to Tan's testimony as regards the transaction, the liability for which petitioner wishes to be absolved.
But of even greater weight than any of these testimonies, is petitioner's categorical admission on the witness stand
that Tiu Huy Tiac was the manager of his store in Sto. Cristo, Binondo, to wit:
Court:
x x x x x x x x x
Q And who was managing the store in Sto. Cristo?
A At first it was Mr. Ang, then later Mr. Tiu Huy Tiac but I cannot remember the exact
year.
Q So, Mr. Tiu Huy Tiac took over the management,.
A Not that was because every afternoon, I was there, sir.
Q But in the morning, who takes charge?
A Tiu Huy Tiac takes charge of management and if there (sic) orders for newsprint or
bond papers they are always referred to the compound in Baesa, sir. (t.s.n., p. 16,
Session of January 20, 1981, CA decision, Rollo, p. 50, emphasis supplied).
Such admission, spontaneous no doubt, and standing alone, is sufficient to negate all the denials made by petitioner
regarding the capacity of Tiu Huy Tiac to enter into the transaction in question. Furthermore, consistent with and as an
obvious indication of the fact that Tiu Huy Tiac was the manager of the Sto. Cristo branch, three (3) months after Tiu
Huy Tiac left petitioner's employ, petitioner even sent, communications to its customers notifying them that Tiu Huy
Tiac is no longer connected with petitioner's business. Such undertaking spoke unmistakenly of Tiu Huy Tiac's
valuable position as petitioner's manager than any uttered disclaimer. More than anything else, this act taken together
with the declaration of petitioner in open court amount to admissions under Rule 130 Section 22 of the Rules of Court,
to wit : "The act, declaration or omission of a party as to a relevant fact may be given in evidence against him." For
well-settled is the rule that "a man's acts, conduct, and declaration, wherever made, if voluntary, are admissible
against him, for the reason that it is fair to presume that they correspond with the truth, and it is his fault if they do not.
If a man's extrajudicial admissions are admissible against him, there seems to be no reason why his admissions made
in open court, under oath, should not be accepted against him." (U.S. vs. Ching Po, 23 Phil. 578, 583 [1912];).
Moreover, petitioner's unexplained delay in disowning the transactions entered into by Tiu Huy Tiac despite several
attempts made by respondent to collect the amount from him, proved all the more that petitioner was aware of the
questioned commission was tantamount to an admission by silence under Rule 130 Section 23 of the Rules of Court,
thus: "Any act or declaration made in the presence of and within the observation of a party who does or says nothing
when the act or declaration is such as naturally to call for action or comment if not true, may be given in evidence
against him."
All of these point to the fact that at the time of the transaction Tiu Huy Tiac was admittedly the manager of petitioner's
store in Sto. Cristo, Binondo. Consequently, the transaction in question as well as the concomitant obligation is valid
and binding upon petitioner.
By his representations, petitioner is now estopped from disclaiming liability for the transaction entered by Tiu Huy Tiac
on his behalf. It matters not whether the representations are intentional or merely negligent so long as innocent, third
persons relied upon such representations in good faith and for value As held in the case of Manila Remnant
Co. Inc. v. Court of Appeals, (191 SCRA 622 [1990]):
More in point, we find that by the principle of estoppel, Manila Remnant is deemed to have allowed its
agent to act as though it had plenary powers. Article 1911 of the Civil Code provides:
"Even when the agent has exceeded his authority, the principal issolidarily liable with
the agent if the former allowed the latter to act as though he had full powers."
(Emphasis supplied).
The above-quoted article is new. It is intended to protect the rights of innocent persons. In such a
situation, both the principal and the agent may be considered as joint tortfeasors whose liability is joint
and solidary.
Authority by estoppel has arisen in the instant case because by its negligence, the principal, Manila
Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it. That
the principal might not have had actual knowledge of theagent's misdeed is of no moment.
Tiu Huy Tiac, therefore, by petitioner's own representations and manifestations, became an agent of petitioner by
estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or
disproved as against the person relying thereon (Article 1431, Civil Code of the Philippines). A party cannot be allowed
to go back on his own acts and representations to the prejudice of the other party who, in good faith, relied upon them
(Philippine National Bank v. Intermediate Appellate Court, et al., 189 SCRA 680 [1990]).
Taken in this light,. petitioner is liable for the transaction entered into by Tiu Huy Tiac on his behalf. Thus, even when
the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to
fact as though he had full powers (Article 1911 Civil Code), as in the case at bar.
Finally, although it may appear that Tiu Huy Tiac defrauded his principal (petitioner) in not turning over the proceeds of
the transaction to the latter, such fact cannot in any way relieve nor exonerate petitioner of his liability to private
respondent. For it is an equitable maxim that as between two innocent parties, the one who made it possible for the
wrong to be done should be the one to bear the resulting loss (Francisco vs. Government Service Insurance System, 7
SCRA 577 [1963]).
Inasmuch as the fundamental issue of the capacity or incapacity of the purported agent Tiu Huy Tiac, has already
been resolved, the Court deems it unnecessary to resolve the other peripheral issues raised by petitioner.
WHEREFORE, the instant petition in hereby DENIED for lack of merit. Costs against petitioner.
SO ORDERED.
Feliciano, Romero, Melo and Vitug, JJ., concur.

ATP Case Digest Output (31-50)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

ATP Case Digest Output (31-50)

Uploaded by

Copyright:

Available Formats

AGENCY, TRUST AND PARTNERSHIP - CASE DIGESTS - M6 - SY 2019-2020

31) Litonjua v. Fernandez, 427 SCRA 478

32) Gozun v. Mercado, 511 SCRA 205 (2006)

Regional Trial Court

33) Severino v. Severino, 44 Phil. 343

FABIOLA SEVERINO (plaintiff-appellee) vs. GUILLERMO SEVERINO (defendant-appellant) FELICITAS

Putative Principal: Melecio Severino

The lower court rendered a judgment:

34) Green Valley Poultry v. IAC, 133 SCRA 697

GR No. L-49395. 26 December 1984

action was premature.

35) INTERNATIONAL FILMS(CHINA), LTD., plaintiff-appellant,

G.R. No. 42465. November 19, 1936

RULING OF THE TRIAL COURT

If the verbal contract had between Gabelman and Albo was a

ISSUES: WHETHER HSBC IS LIABLE TO PAY

WHETHER CITY TRUST BANK HAS LIABILITY TO NSC

SC AFFIRMED THE DECISION OF THE CA.

37) People vs. Chowdury, 325 SCRA 572

38) Olaguer vs. Purugganan, 515 SCRA 460

Court of Appeals Ruling:

Supreme Court Ruling:

No, it was not acting as an agent.

The challenged decision is AFFIRMED, with modification.

Office of the President Ruling

Court of Appeals Ruling

41) Philippine Products v. Primateria, 15 SCRA 301

 Primateria Zurich had no license to transact business in the Philippines

 SC: no proof that, as agents, they exceeded the limits of their authority.

Disposition: the appealed judgment is affirmed

42) NPC v. National Merchandising, 117 SCRA 789

liquidated damages provided in item 15 of this specification."

Decision of the Trial Court:

exceeded its authority, and, in effect, it acted in its own name.

43) National Bank & Welch Fairchild, 44 Phil. 780

La Compania Naviera Inc.- Principal

PRINCIPAL AND AGENT; LIABILITY OF AGENT; APPROPRIATION OFPROPERTY WHICH PRINCIPAL IS

sale and the policy of insurance of the vessel.

>The Vessel encountered a storm and became a complete loss.

44) Cervantes v. CA, 304 SCRA 25

Whether NFA is jointly and severally liable with defendant Medalla.

Yes, NFA is solidarily liable with defendant Medalla.

except when the contract involves things belongingto the principal.

Execution by agent of mortgage agreement on behalf of principal

Posted on February 17, 2010 by Hector M. de Leon Jr. • Posted in Civil Law • Tagged agency, mortgage

(2) The liability of DBP is another matter.

G.R. No. 88539 October 26, 1993

In this petition, petitioner contends that:

THE HONORABLE COURT ERRED IN FINDING DEFENDANT-APPELLANT LIABLE FOR AN

must therefore fail.

Q And who was managing the store in Sto. Cristo?

Q So, Mr. Tiu Huy Tiac took over the management,.

A Not that was because every afternoon, I was there, sir.

Q But in the morning, who takes charge?

Feliciano, Romero, Melo and Vitug, JJ., concur.

You might also like