Saturday, 23 October 2021

AGENCY

Article 1877. An agency couched in general terms comprises only acts of administration, even
if the principal should state that he withholds no power or that the agent may execute such
acts as he may consider appropriate, or even though the agency should authorize a general
and unlimited management.

An agency couched in general terms comprises only acts of administration, even if the principal
should state that he withholds no power or that the agent may execute such acts as he may
consider appropriate, or even though the agency should authorize a general and unlimited
management.

According to the power or authority conferred, the agency may be:

1. Couched in general terms; or,

2. Couched in specific terms.

The power of authority includes only acts of administration and an express power is necessary to
perform any act of strict ownership, even if the principal states that:

1. He withholds no power;
2. The agent may execute such acts as he may consider appropriate; or,
3. He authorizes a general or unlimited management.

What are acts of administration?

Acts of administration are those which do not imply the authority to alienate for the exercise of
which an express power is necessary, such as entering into a compromise, accepting or
repudiating an inheritance, or selling or mortgaging properties.

Article 1878. Special powers of attorney are necessary in the following cases:

1. To make such payments as are not usually considered as acts of administration;

2. To effect novations which put an end to obligations already in existence at the time the
agency was constituted;
3. To compromise, to submit questions to arbitration, to renounce the right to appeal from a
judgment, to waive objections to the venue of an action or to abandon a prescription
already acquired;
4. To waive any obligation gratuitously;
5. To enter into any contract by which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration
6. To make gifts, except customary ones for charity or those made to employees in the
business managed by the agent;
7. To loan or borrow money, unless the latter act be urgent and indispensable for the
preservation of the things which are under administration;
8. To lease any real property to another person for more than one year;

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9. To bind the principal to render some service without compensation;
10. To bind the principal in a contract of partnership;
11. To obligate the principal as a guarantor or surety;
12. To create or convey real rights over immovable property;
13. To accept or repudiate an inheritance;
14. To ratify or recognize obligations contracted before the agency
15. Any other act of strict dominion.

The 15 cases enumerated are general acts of strict dominion or ownership. Hence, a special
power of attorney is necessary for their execution through an agent.

The acts referred to in this article can be reduced to 3:

1. Acts of strict dominion or ownership;

2. Gratuitous contracts;
3. Contracts where personal trust or confidence is of the essence of the agreement.

What is a special power of attorney?

It refers to a clear mandate, express or implied, specifically authorizing the performance of the
act, and must therefore be distinguished from an agency couched in general terms.

Powers of attorney are generally construed strictly and courts will not infer or presume broad
powers from deeds which do not sufficiently include property or subject under which the agent is
to deal. Hence, authority in the cases enumerated in this Article must be couched in clear and
unmistakable language.

Should the SPA be notarized in order to be valid?

A power of attorney is valid although no notary public intervened in its execution. However, a
notarized power of attorney carries the weight conferred upon with respect to its due execution.

Scope of authority to purchase:

Where an agent’s power to purchase is general and unrestricted, he has implied authority to do
whatever is usual and necessary in the exercise of such power. He may determine the usual and
necessary details of the contract, agree upon the prices, modify or rescind the contract of
purchase, accept delivery for his principal, give directions for the delivery of the property
purchased, and may borrow money to pay for the care and preservation of the property
purchased; but he has no special power to settle a contest between the principal and a third
person as to the ownership of the goods purchased, or to agree to an account stated, or to do
anything not usual and necessary to the exercise of such authority.

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However, where the agency is a special one, or is restricted to purchases upon certain terms and
conditions, the agent has no authority to purchase upon different terms and conditions from those
authorized or to modify or rescind a contract of purchase made by the principal.

Germann and Co. v. Donaldson, Sim and Co. 1 Phil. 63 G.R. No. L-22595 November 1,
1927

FACTS: A power of attorney was executed in Germany giving the recipient authority to bring an
action in the Philippines. Said power of attorney was not authenticated by a notary public. In
Germany, no such authentication was needed, contrary to Philippine rules. Max Leonard Tornow,
a German citizen who reside in Berlin and the sole owner of Germann & Co., it is a German
company which has as office in Berlin which has a business operations in Germany and Manila.
On 5 February 5. 1900, Tornow executed an instrument conferring several powers of attorney in
favor of Fernando Kammarzell, a German citizen who resides in Manila. On October, 27 1900,
Tornow executed a general power for suits to substitute for the first instrument conferring power
to Kammarzell. Under this instrument, Kammarzell sued Donaldson, Sim & Co. for recovery of
a sum of money. Donaldson, Sim & Co claimed that the original power cannot be construed as
conferring to Kammarzell the authority to institute a suit since under Art 1713 of the Civil Code
an agency stated in general terms only includes acts of administration and that in order to
alienate, mortgage or execute any other act of strict ownership an express commission is
required. Issue: Whether or not the Kammarzell has the power/authority to institute an acton on
behalf ofGermann & Co.

ISSUE: Whether or not the power of attorney properly made insofar as form was
concerned?

HELD:

Yes, because it was executed in Germany. There is no reason why the lex loci celebrationis
should not apply.

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Strong v. Gutierrez Rupide, 6 Phil. 680 (main opinion only)

FACTS:

Among the lands comprising the friar lands are the Dominican lands, the only valuable asset
owned by the corporation Philippine Sugar Estates Development Company Limited (Philippine
Sugar Estates). Francisco Gutierrez Repide (Repide), defendant, was the majority stockholder
and one of the five directors of Philippine Sugar Estates. He was likewise elected by the board as
the agent and administrator general of such company. The factual backdrop being during US
occupation, the US Government wanted to secure title over the friar lands. To accomplish this
objective, Governor for the Philippines entered into negotiations for the purchase of the
Dominican lands, during which Repide represented Philippine Sugar Estates. The first offer of
the Governor was to purchase the subject lands in the amount of $6, 043,219.47. As the majority
stockholder of Philippine Sugar Estates and without prior consultation with the other
stockholders, Repide rejected the offer. For the second offer, the purchase price was increased to
$7,535,000.

While negotiations for the second offer were ongoing and while still holding out for a higher
price of the Dominican lands, Repide took steps to purchase the 800 shares of stock of Philippine
Sugar Estates. These shares were owned by Mrs. Eleanor Strong (Strong) which were then in the
possession of her agent, F. Stuart Jones (Jones). Repide, instead of seeing Jones, employed
Kauffman who later on employed Sloan, a broker, to purchase the shares of Strong. Jones sold
the 800 shares of Strong for 16,000 Mexican currency. For this sale transaction a check of one
Rueda Ramos was issued. Later on, the negotiations for the purchase of the Dominican lands
were concluded and a contract of sale was subsequently executed. This sale transaction increased
the value of the shares of stocks originally owned by Strong from 16,000 Mexican currency to
76,256 US currency. During the negotiations regarding the purchase of the shares of stock of
Strong, not one word of the facts affecting the value of this stock was made known to her nor her
agent, Jones. After the sale of Dominican lands and after the purchase of the 800 shares of
Strong, Repide became the owner of 30,400 out of the 42,030hares of Philippine Sugar Estates.
Strong filed a complaint for the recovery of her 800 shares. She argued that her agent Jones had
no authority to sell her shares and that Repide fraudulently concealed the facts affecting their
value.

ISSUE: Was there fraud in effecting the purchase of Strong’s shares?

RULING: Yes. With the factual circumstances of this case, it became the duty of Repide, acting
in good faith, to state the facts before making the purchase of Strong’s shares. That Repide was
one of the directors of Philippine Sugar Estates was but one of the facts upon which liability is
asserted. He was not only a director, but he owned three-fourths of the shares of its stock, and
was, at the time of the purchase of the stock, administrator general of the company with large
powers and engaged in the negotiations which finally led to the sale of the company’s lands at a
price which greatly enhanced the value of the stock. He was the negotiator for the sale of the
Dominican lands and was acting substantially as the agent of the shareholders of Philippine
Sugar Estates by reason of his ownership of the shares in the company. Because of such

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ownership and agency, no one knew as well as he does about the exact condition of the
negotiations. He was the only one who knew of the probability of the sale of the Dominican
lands to the government and of the probable purchase price. Under these circumstances, Repide
employed an agent to purchase the stock of Strong, concealed his own identity and his
knowledge of the state of negotiations and their probable result.

The concealment of his identity while procuring the purchase of the stock, by his agent, was in
itself strong evidence of fraud on the part of Repide. By such means, the more easily was he able
to avoid questions relative to the negotiations for the sale of Dominican lands and actual
misrepresentations regarding that subject. He kept up the concealment as long as he could by
giving the check of a third person Rueda Ramos, for the purchase money. This move of Repide
was a studied and intentional omission to be characterized as part of the deceitful machinations
to obtain the purchase without giving any information whatever as to the state and probable
result of the negotiations and to obtain a lower price for the shares of Strong. After the purchase
of stock, he continued negotiations for the sale of the Dominican lands as the administrator
general and eventually entered into a contract of sale. The whole transaction gives conclusive
evidence of the overwhelming influence Repide had in the negotiations and it is clear that the
final consummation was in his hands at all times.

B. H. MACKE ET AL V JOSE CAMPS

FACTS:

B. H. Macke and W.H. Chandler, partners doing business under thee firm name of Macke,
Chandler And Company, allege that during the months of February and March 1905, they sold to
Jose Camps and delivered at his place of business, known as the :Washington Café,” various bills
of goods amounting to P351.50; that Camps has only paid on account of said goods the sum of
P174; that there is still due them on account of said goods the sum of P177.50

Plaintiffs made demand for the payment from defendant and that the latter failed and refused to
pay the said balance or any part of it

Macke, one of the plaintiffs, testified that on the order of one Ricardo Flores, who represented
himself to be the agent of Jose Camps, he shipped the said goods to the defendant at the
Washington Café; that Flores (agent) later acknowledged the receipt of the said goods and made
various payments thereon amounting in all to P174; that believes that Flores is still the agent of
Camps; and that when he went to the Washington Café for the purpose of collecting his bill he
found Flores, in the absence of Camps, apparently in charge of the business and claiming to be
the business manager of Camps, said business being that of a hotel with a bar and restaurant
annexed.

A written contract was introduced as evidence, from which it appears that one Galmes, the
former of “Washington Café” subrented the building wherein the business was conducted, to
Camps for 1 year for the purpose of carrying on that business, Camps obligating himself not to
sublet or subrent the building or the business without the consent of the said Galmes.

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This contract was signed by Camps and the name of Ricardo Flores as a witness and attached
thereon is an inventory of the furniture and fittings which also is signed by Camps with the word
“sublessee” below the name, and at the foot of this inventory the word “received” followed by
the name “Ricardo Flores” with the words “managing agent” immediately following his name.

ISSUE: W/N Ricardol Flores was the agent of Camps

Ruling: Yes

Evidence is sufficient to sustain a finding that Flores is the agent of Camps in the management of
the bar of the Washington Café with authority to bind Camps, his principal, for the payment of
the goods

The contract sufficiently establishes the fact that Camps was the owner of the business and of the
bar, and the title of “managing agent” attached to the signature of Flores which appears on that
contract, together with the fact that at the time the purchases were made, Flores was apparently
in charge of the business performing the duties usually intrusted to a managing agent leave little
room for doubt that he was there as the authorized agent of Camps.

Agency by Estoppel --- One who clothes another with apparent authority as his agent, and holds
him out to the public as such, can not be permitted to deny the authority of such person to act as
his agent, to the prejudice of innocent third persons dealing with such person in good faith and in
the honest belief that he is what he appears to be.

Estoppel---- “Whenever a party has, by his own declaration, act or omission, intentionally and
deliberately led another to believe a particular thing true, and to act upon such belief, he can not,
in any litigation arising out of such declaration, act, or omission be permitted to falsify; and
unless the contrary appears, the authority of the agent must be presumed to include all the
necessary and usual means of carrying his agency into effect.

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THE BANK OF THE PHILIPPINE ISLANDS vs. GABRIELA ANDRES DE COSTER Y
ROXAS

FACTS:

 Jean M. Poizat and wife Gabriela (with Jean acting as her agent) borrowed P292,000
from BPI, payable one year after 

date of borrowing (Dec 29, 1921) with 9 percent interest per annum.

 A promissory note1 was made for this loan, indicating that the defendants are liable
jointly and severally and that in 

the event of a suit or action, defendants shall pay an additional P10,000 as attorney’s fees.

 To secure payment thereof:

1. A chattel mortgage was executed by defendants Jean M. Poizat & J.M. Poizat &
Co. (a partnership) on the steamers Roger Poizat and Gabrielle Poizat (these
belong to Poizat Vegetable Oil Mills)

2. Gabriela (w/ consent & permission of husband and her husband acting as her
agent – IMPT!) delivered to BPI a mortgage on certain real property in the City of
Manila (same property was subject to a prior mortgage in favor of La Orden de
Dominicos hence it is made a party defendant)

 CFI: The note being long past due and owing, plaintiff brought an action against
defendants and CFI ruled against Gabriela, her husband Jean Poizat, and J.M. Poizat &
Co., who are jointly and severally liable to BPI for P292,000 w/ interest, P10,000
attorney’s fees, and P2,500 for insurance of steamer Gabrielle Poizat w/ interest on that
amount from Feb 9, 1924. 


o Defendants have not paid the judgment or any part thereof.


o BPI prayed for the sheriff to possess and sell the steamers and asked the court for the real
property to be sold

according to law; the proceeds of both be applied to the sum owed to BPI.

o The religious corporation La Orden de Dominicos then appeared in the suit and filed a plea for
the credit

(P125,000 principal + P27,954.34 interest) to them against the spouses De Coster & Poizat be
taken into

account when the second mortgage is closed.

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 May 3, 1924 - Upon plaintiff’s motion, Gabriela, Jean Poizat, and J.M. Poizat & Co.
were declared in default for 

failure to appear or answer. 


 June 4, 1924 – W/o giving notice to defendants, the lower court ruled in favor of BPI
and La Orden de Dominicos and 

ordered the sale of the properties. 

1 The promissory note was said to be made by Gabriela with the consent of her husband
(and said husband acting as Gabriela’s agent). No mention of the partnership J.M. Poizat
& Co. at this part of the case yet.

August 26, 1924 – Gabriela filed a motion stating that she has been residing in Paris from
1908 to April 30, 1924 (#ItsAWow); that she was absent from the Philippines when the summons
was served to her husband and through her husband’s malicious negligence, default was taken
against her. She had no idea about the facts until the judgment against her was published in the
local newspapers in July 1924. She was unable to obtain rendition of the facts because her
husband had gone to Hongkong and had left Hongkong for Singapore under a false name and she
is now clueless about her husband’s whereabouts.

o She came into possession of documents showing the illegality of the notes and the mortgage.

o Mortgage with Dominican Fathers – Mortgage for debt of third person made without the
marital consent of

the wife; husband did not have the authority to make her liable for a surety on the debt of a third
person. o Notes to BPI:

1. It does not represent any money paid to the defendant by the bank.

2. It is exclusively the personal debt of Jean Poizat and J.M. Poizat & Co.

3. It was executed by her husband because the bank asked for more security on the debt.

4. It was executed by her husband in excess of the powers given to him under his power of
attorney.

5. It was the result of a collusion between BPI and Jean Poizat for the purpose of making
her liable for the 

obligation of a third person.

o Mortgage with BPI:

1. It was executed to secure a void obligation.

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2. Does not guarantee any loan made to Gabriela.

3. Executed without the express marital consent which the law requires.

4. Executed through collusion.

 Gabriela prayed for the annulment of the judgment and for the case to be reopened so
she can file her answer. She prayed for the case to be tried on its merit and that a final
judgment absolving her from all liability be rendered.

 Motion by Gabriela was DENIED. MR was DENIED as well. Hence, this petition. 

ISSUES (HOLDING):

1. WON the summons for Gabriela served to her husband was valid? (NO)

2. WON the husband was authorized (by virtue of his POA) and empowered to sign the
bank note for and on behalf of 

his wife? (NO – because wife was not a party to the preexisting debt of husband to BPI)

3. WON the husband was authorized to sign the mortgage with BPI for and on behalf of his
wife? (NO – because the 

note upon which the mortgage was supposed to secure is VOID as to the wife; making
the mortgage void as well.)

RATIO DECIDENDI:

1. Paragraph 6 of Section 396 of the Code of Civil Procedure provides:


“In all other cases, to the defendant personally, or by leaving a copy at his usual place of
residence, in the hands of some person resident therein of sufficient discretion to receive
the same. xxx” 

The sheriff admitted that the summons for Gabriela was given to her husband, Mr. J. M.
Poizat, at her usual place of residence in the City of Manila on March 13, 1924. If this
were the case of the wife being in Paris on a pleasure or a business trip, then her
residence would have continued to be that of her husband. This is not the case here. 

Upon the admitted facts, the Court is clearly of the opinion that the residence of the
husband was not the usual place of residence of the wife. Giving full force and effect to
the legal presumption that the usual place of residence of the wife is that of her husband,
that presumption is overcome by the admitted fact that the wife was "residing in the City
of Paris, France, since the year 1908 up to April 30, 1924." Without placing a limitation
upon the length of time sufficient to overcome the legal presumption, suffice it to say that
sixteen years is amply sufficient. 

It follows that the substituted service (of summons) attempted to be made is NULL and

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VOID and by such service, the court never acquired jurisdiction of the person of the
defendant wife. 

(AGENCY-RELATED) The plaintiff contends that under his power of attorney, the
husband was the general agent of the wife with authority to accept service of process for
her and in her name, and that by reason of the fact that the husband was duly served and
he neglected to appear or reply, his actions and conduct were binding on the defendant
wife. But there is nothing in the record tending to show that the husband accepted service
of any process for or on account of his wife or as her agent, or that he was acting on her
behalf in his failure and neglect to appear or answer.

2. On August 25, 1903, Gabriela gave her husband a power of attorney, which gives him the
following powers:

“5. Loan or borrow any sums of money or fungible things xxxx and making all these
transactions with or without mortgages, pledges or personal guaranty.”

Jean Poizat did sign a promissory note on behalf of his wife in Dec 1921 and a real mortgage
afterward, also as his wife’s attorney in fact. But facts show that Jean owed BPI P290,050.02
prior to July 1921 and thereafter his debt to BPI was converted into 6 promissory notes
aggregating to P308,458.58 of which P16,180 were paid; thus the balance of P292,278.58. What
happened in Dec 1921 is that these 6 promissory notes were cancelled and substituted by a joint
and several note signed by Jean in his personal capacity, as an agent of his wife, and as a member
of the firm J.M. Poizat & Co.

Under the power of attorney, the husband had no authority for and on behalf of the wife to
execute a joint and several note or to make her liable as an accommodation maker. The debt in
question was a preexisting debt of her husband and of the firm of which she was not a party and
she was not obliged to pay. No new or additional money was lent when the note (of which wife is
already a party) was signed in Dec 1921. (It would be a different story had it been an actual loan
and not a preexisting debt at the time that the note was executed in Dec 1921.) There is nothing
in the power of attorney which gives the husband the authority to make his wife liable as a surety
for the payment of the preexisting debt of a third person.

3. The real mortgage to the bank was given to secure the note in question and was not given for
any other purpose. The note being void as to the wife, it follows that as to her the real mortgage
to the bank is also void for want of power to execute it.

Before the motion was filed, there were certain negotiations done between the wife’s camp (and
her lawyer) and BPI. BPI now claims that the wife is estopped to deny her liability due to some
evidence and admissions on the part of her attorney during such negotiations. It was found by the
court that the wife and her lawyer did not have the complete information at the time of the

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negotiations and such negotiations were in the nature of a compromise which was rejected by the
bank already.

It was also found by the Court that there is no claim that the debt in question was on account of
the “usual daily expenses of the family” as provided for Art. 1362 of the CC. Neither is there any
evidence to show that the wife was legally liable to pay for the original debt evidenced by the
note in question.

This decision as to the bank on this motion is based on the assumption that the facts are true as
set forth and alleged in the petition to set aside and vacate the judgment as to the wife, but the
Court is not making any finding as to the actual truth of such facts. That remains for the
defendant wife to prove such alleged facts when the case is tried on its merits.

DISPOSITIVE:

1. Lower court’s opinion in refusing to set aside and vacate the judgment for BPI against
Gabriela is REVERSED; such judgment is set aside and REMANDED to the lower court
for further proceedings.

2. Judgment of lower court in favor of La Orden de Dominicos is REVERSED, without

prejudice to its right to file an original suit to foreclose its mortgage or to file a good and
sufficient plea as intervenor in the instant suit.

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Katigbak v. Tai Hung Co., 52 Phil. 622

Po Sun Suy and Po Ching are owners of the commercial firm Tai Hing Co.)

FACTS: Po Ejap was the owner of a titled land w/c was mortgaged to PNB in 1919-1921, Po
Tecsi executed a general power of attorney in favor of his brother Po Ejap to perform on his
behalf the ff: "to buy, sell, or barter, assign, admit in acquittance or in any other manner to
acquire or convey all sorts of property, real and personal, businesses and industries, credits,
rights, and actions belonging to me, for whatever prices and under the conditions which he may
stipulate, paying and receiving payment in cash or in installments, and to execute the proper
instruments with the formalities provided by the law."

Po Ejap then sold the said land with its improvements to his brother Po Tecsi for the sum of
P10,000. In 1923, making use of the power conferred by his brother, Po Ejap sold absolutely said
land to Katigbak. After said sale, Po Tecsi leased the property sold, from Gabino Barreto Po
Ejap, who administered it in the name of Jose M. Katigbak, at a rental of P1,500 per month,
payable in advance, leaving unpaid the rents accrued from that date until his death which
occurred on November 26, 1926, having paid the accrued rents up to October 22, 1925; from
November 26, 1926, the defendants Po Sun Suy and Po Ching leased said land for the sum of
P1,500 per month; on February 11, 1927, Po Sun Suy was appointed administrator of the estate
of his father Po Tecsi, and filed with the court an inventory of said estate including the land
inquestion; and on May 23, 1927, Jose M. Katigbak sold the same property to Po Sun Boo,
Katigbak filed this action for the recovery of the rent. Po Sun Suy contends that Katigbak is not
the owner of the property (so not entitled to rents) because Po Ejap was not authorized under the
power executed by Po Tecsi to sell said land, because said power had been executed before Po
Ejap sold said land to Tecsi.

ISSUES: WON Po Ejap cannot have sold the property (on behalf of Tecsi) because the
power was executed by Tecsi before Tecsi owned the property.

RULING: The power is general and authorizes Gabino Po Ejap to sell any kind of realty
"belonging" (pertenezcan) to the principal. The use of the subjunctive "pertenezcan" (might
belong) and not the indicative "pertenecen" (belong), means that Po Tecsi meant not only the
property he had at the time of the execution of the power, but also such as he might afterwards
have during the time it was in force. Under Act 496, every document which in any manner
affects the registered land is ineffective unless it is recorded in the registry of deeds. But such
inefficacy only refers to third persons who, in good faith, may have acquired some right to the
registered land. While it is true that a power of attorney not recorded in the registry of deeds is
ineffective in order that an agent or attorney-in-fact may validly perform acts in the name of his
principal, and that any act performed by the agent by virtue of said' power with respect to the
land is ineffective against a third person who, in good faith, may have acquired a right thereto, it

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does, however, bind the principal to acknowledge the acts performed by his attorney-in- fact
regarding said property.

In the present case, while it is true that the non-registration of the power of attorney executed by
Po Tecsi in favor of his brother Gabino Barreto Po Ejap prevents the sale made by the latter of
the litigated land in favor of Jose M. Katigbak from being recorded in the registry of deeds, it is
not ineffective to compel Tecsi to acknowledge said sale.

Insular Drug Co. v. National Bank, 58 Phil. 684

Facts: 132 checks made out in the name of the Insular Drug Co., Inc., were brought to the
branch office ofthe Philippine National Bank in Iloilo by Foerster, a salesman of the drug
company, Foerster's wife, and Foerster's clerk. And said bank credited those checks to the
personal account of Foerster and permittedhim amd his wife to make withdrawals. Eventually the
Manila office of the drug company investigated the transactions of Foerster. Upon the discovery
of anomalies, Foerster committed suicide. But there is no evidence showing that the bank
knewthat Foerster was misappropriating the funds of his principal. The Insular Drug Company
claims that itnever received the face value of 132 checks.

Issue: WON PNB shall be held liable for permitting Foerster to indorse and withdraw the
checks of hisprincipa, Insular Druga Co. Inc.

Held:Yes. The bank could tell by the checks themselves that the money belonged to the Insular
Drug Co., Inc., and not to Foerster or his wife or his clerk. Moreover, the bank did not only
permit Foerster to indorse checks and then place them to his personal account, but it went farther
and permitted Foerster's wife and clerk to indorse the checks. The right of an agent to indorse
commercial paper is a very responsible power and will not be lightly inferred. A sales man with
authority to collect money belonging to his principal does not have the implied authority to
indorse checks received in payment. And it suffices to state in conclusion that bank will have to
stand the loss occasioned by the negligence of its agents.

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C.N. HODGES vs. CARLOTA SALAS and PAZ SALAS (GR No. G.R. No. L-42958.
October 21, 1936)

Facts: The defendants, Salas and Salas, executed a Power of Attorney in favor of their brother-in
law Felix S. Yulo to enable him to obtain a loan and secure it with a mortgage on the real
property described in transfer certificate of title No. 3335. Under the said Power of Attorney,
Yulo obtained a loan, hence binding his principals jointly and severally to pay it within 10 years
subject to interest. In effect he signed a promissory note for the amount borrowed and executed a
deed of mortgage of the real property. However, the amount loaned was not delivered to Yulo but
rather the plaintiff and the agent, Yulo had an agreement that the amount be used to pay the
personal debts of the agent. The defendants failed to pay at maturity the interest stipulated which
should have been paid one year in advance. Thus, plaintiff, Hodges therefore brought an action
for foreclosure of the mortgage. The defendants then counters such action that Yulo acted in
excess of his authority.

Issue: Whether or not, Felix Yulo, being the agent, was authorized to borrow money and
use it as he wished for his personal gain by virtue of the authority conferred by the
defendants.

Ruling: In the case of Manila Trading & Supply Co. vs. Uy Tiepo, the court held that an agent
who used the borrowed money for his personal gain or benefit is deemed to have exceeded the
authority conferred upon him under the power of attorney in which case should have been
specific and limited to a certain extent. As substantially provided under Article 1881 of the Civil
Code that an agent must act within the scope of his authority and may do such acts as may be
conducive to the accomplishment of the purpose of the agency. In the case at bar, Yulo exceeded
the authority provided under the Power of Attorney by using the loaned money for his personal
benefit.

Dungo v. Lopena, 6 SCRA 1007

FACTS: (Sept 10, 1959) Petitioner Dungo and one Rodrigo Gonzales purchased 3 parcels of
land from respondents. Out of the total price, downpayment was made with the agreement that
the balance would be paid in 6 monthly installments. To secure the payment of the balance,
Dungo and Gonzales executed over the same 3 parcels of land Deed of Real Estate Mortgage in
favor of Lopena and Ramos.

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→ Duly registered with the Office of the Register of Deeds with the condition that failure of the
vendees to pay any of the installments on their maturity dates shall automatically cause the entire
unpaid balance to become due and demandable. Vendees defaulted on the first installment which
prompted respondents to file a complaint for the foreclosure of the mortgage. Before trial, a
compromise agreement was submitted to the lower court for approval.

→ Signed by respondent Lopena and Rosa Ramos and Gonzales.

→ It was not signed by herein petitioner but Gonzales represented that his signature was both for
himself and for Dungo.

→ Dungo’s counsel of record was present at the preparation of the compromise agreement and
affixed his own signature. Compromise agreement states should the defendants fail to pay the
mortgage indebtedness on the specified date, judgments of foreclosure shall be entered. Period of
redemption is waived. Subsequently, a Tri-Party Agreement was drawn. Signatories were Dungo
and Gonzales as debtors, Lopena and Ramos as creditors and one Emma Santos as payor. When
Dungo and Gonzales failed to pay the balance of their indebtedness, Lopena and Ramos filed a
Motion for the Sale of Mortgaged Property. Lower court granted the motion and ordered the sale.
The 3 parcels of land were sold at a public auction. The sheriff’s sale was later confirmed by the
lower court (Aug 30, 1960). Petitioner did not file any opposition.

(Aug 31) Dungo filed a motion to set aside all the proceedings on the ground that the
compromise agreement was void since he did not sign it. TC denied. Dungo filed a notice of
appeal from the approval of the foreclosure sale. Respondents opposed, saying that the judgment
was not appealable because It was rendered by virtue of the compromise agreement.

ISSUE: W/N the compromise agreement and all the proceedings subsequent thereto void
insofar as the petitioner is concerned – NO

RATIO: A compromise in itself is a contract.1 Under Art 1878, a third person cannot bind
another to a compromise agreement unless the third person has obtained a special power of
attorney for that purpose from the party intended to be bound. However, although the Civil Code
expressly requires a special power of attorney so that one may compromise an interest of
another, it is incorrect to conclude that its absence renders the compromise agreement void. It is
merely unenforceable. Resulting from its nature as a contract.

Dungo had already ratified the compromise agreement as established by the Tri-Party Agreement
where it was stipulated that the PAYOR submits and binds himself to the force and effect of the
order of CFI. When it appears that the client, on becoming aware of the compromise and
judgment thereon, fails to repudiate promptly the action of his attorney, he will not be heard to
contest its validity.

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Although Dungo was not a signatory, the compromise agreement benefited him in that the
agreement extended the date of maturity. Petitioner argues that the compromise agreement could
not be enforced because it had been novated by the Tri-Party Agreement. Petitioner was
mistaken. Novation by presumption has never been favored. It needs to be established that the
old and new contracts are incompatible in all points or that the will to novate is expressly stated.
The Tri-Party Agreement was an instrument intended to render effective the compromise
agreement. It merely complemented and ratified the same. Compromise agreement was valid and
enforceable.

Petition for certiorari and mandamus filed by petitioner is dismissed

PNB v. Sta. Maria, 29 SCRA 303

Facts:

· Special power of the attorney to mortgage real estate is limited to such authority and does not
bind the grantor personally to other obligations contracted by the grantee

· The sugar crop loans were obtained by Maximo from the plaintiff bank under the power of the
attorney, executed in his favor by his brothers and sisters to mortgage a 16-odd hectare parcel of
land, jointly owned by all of them

· Valeriana the sister of Maximo, alone also executed in favor of her brother Maximo a special
power of attorney to borrow money and mortgage any real estate owned by her.

· Maximo applied for two separate crop loans with the PNB, one in the amount of P15,000 but
only P13,216.11 was extended by the PNB and the other for P23,000 but only P12,427.57 was
extended by the PNB

· As security for the two loans, Maximo executed it in his own name in favor of PNB two chattel
mortgages, guaranteed by the surety bonds for the full authorized amounts of loans executed by
the Associated Insurance & Surety Co., Inc.

· Plaintiff Bank filed the case on February 10,1961 against Defendant Maximo Sta. Maria and his
six brothers and sisters and the Associated Insurancs & Suret Co., Inc. for the collection of
unpaid balances of two sugar crop loans

·  The Trial Court rendered judgement in favor of the PNB 


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·  Maximo did not appeal but his siblings appealed and contended that they had given
their brother Maximo the authority to borrow money but only to mortgage the real estate
jointly owned by them and that if they are liable, the liability should not go beyond the
value of the property which they had authorized to be given as security of the loans
obtained by Maximo. They further contended that they did not benefit whatsoever from
the loans. 

Issue: W/N the siblings are only liable for the value of the land?

Held: Yes, except for Valeriana who issued a separate Special Power of Attorney 

authorizing Maximo to borrow money. 


· In Bank of P. I. v. De Coster, "where in an instrumentpowers and duties are specified and

defined, that all of such powers and duties are limited andconfined to thosewhich are specified
and defined, and all other powers andduties are excluded.”

· In De Villa vs. Fabricante, where the power of attorneygiven to the husband by the wife was
limited to a grant of authority to mortgage a parcel of land titled in the wife'sname, the wife may
not be held liable for the payment of the mortgage debt contracted by the husband, as
theauthority to mortgage does not carry with it the authorityto contract obligation.

· Maximo and Valeriana are the only ones liable for the loans and that the other siblings’ liability
only correspond to real estate mortgage and the foreclosure and sale of mortgage.

· Maximo’s argument that "a mortgage is simply anaccessory contract, and that to effect the
mortgage, aloan has to be secured" falls, far short of the mark.Maximo had indeed, secured the
loan on his own accountand the defendants-appellants had authorized him tomortgage their
respective undivided shares of the realproperty jointly owned by them as security for the
loan.But that was the extent of their authority land consequentliability, to have the real property
answer for the loan incase of non-payment.

The outcome might be different if there had been anexpress ratification of the loans by
defendants-appellantsor if it had been shown that they had been benefited bythe crop loans so as
to put them in estoppel.

· Under the Art. 1207, Valeriana is only jointly liable with Maximo

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Vicente v. Geraldez, 52 SCRA 210

Facts

• Private respondent Hi Cement Corporation filed with CFI Bulacan a complaint for injunction
and damages against petitioners.

o In said complaint the plaintiff alleged that: Under a deed of sale and transfer, it had acquired
the Placer Lease Contract No. V-90, from Banahaw Shale Mining Association. The deed was
duly registered and duly approved by DENR.

o The said Placer Lease Contract was 25 years from August 1, 1960 and covered two mining
claims (Red Star 8 and 9) with a combined area of about fifty-one hectares

• However, within the boundaries of the Red Star 8 are 3 parcels of land which are being claimed
by Juan Bernabe (about two hectares), Ignacio Vicente (about two hectares) and Moises Angeles
(about one-fourth hectare)

• The plaintiff requested defendants to allow its workers to enter the area in question for
exploration and development purposes as well as for the extraction of minerals, promising to pay
the defendants reasonable amounts as damages, but the defendants refused to allow entry of the
plaintiff's representatives

o The defendants were threatening the plaintiff's workers with bodily harm if they entered the
premises, for which reason the plaintiff had suffered irreparable damages due to its failure to
work on and develop its claims and to extract minerals therefrom, resulting in its inability to
comply with its contractual commitments

• Defendants’ claims:

o They are rightful owners of certain portions of the land covered by the supposed mining claims
of the plaintiff

o It was the plaintiff and its workers who had committed acts of force and violence when they

• The court then suggested the relocation of the boundaries of the plaintiff's claims in relation to
the properties of the defendants

o Had a surveyor survey the location and relocate borders

o The report found that Angeles’ and Vicente’s properties were totally covered by Corporation’s
claim while Bernabe’s property was only partially covered – report was approved "with the
conformity of all the parties in this case.”

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• The counsels of the parties executed and submitted to the court a Compromise Agreement –
approved

• On October 21, 1969, Atty. Francisco Ventura (for Hi Cement ), filed with the trial court a
manifestation stating that on September 1,1969 he sent a copy of the Compromise Agreement to
Mr. Antonio Diokno, President of the corporation, requesting the latter to intercede with the
Board of Directors for the confirmation or approval of the commitment made by the plaintiff's
lawyers to abide by the decision of the Court based on the reports of the Commissioners

o However, the corporation’s president answered through a letter stating that they do not agree
with the valuation set by the court. o RTC rendered judgment that plaintiff is ordered to pay
defendants per square meter for the subject properties

• Plaintiff filed a motion for new trial on the ground that the decision of above decision is null
and void because it was based on the Compromise Agreement which was itself null and void for
want of a special authority by the plaintiff's lawyers to enter into the said agreement.

Issue

Is the compromise agreement entered into by the corporation’s lawyer valid? NO.

Ratio

• SPAs are necessary, among other cases, in a compromise and to renounce the right to appeal
from a judgment.

o Attorneys have authority to bind their clients in any case by any agreement in relation thereto
made in writing, and in taking appeals, and in all matters of ordinary judicial procedure, but they
cannot, without special authority, compromise their clients' litigation, or receive anything in
discharge of their clients' claims but the full amount in cash.

The Compromise Agreement was signed only by the lawyers of the parties.

O It is not disputed that the lawyers of respondent had not submitted to the Court any written
authority from their client to enter into a compromise.

• This Court has said that the Rules "require, for attorneys to compromise the litigation of their
clients, a special authority. And while the same does not state that the special authority be in
writing the court has every reason to expect that, if not in writing, the same be duly established
by evidence other than the self- serving assertion of counsel himself that such authority was
verbally given him."

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o The law specifically requires that "juridical persons may compromise only in the form and with
the requisites which may be necessary to alienate their property.”

• Under corporation law, the power to compromise or settle claims in favor of or against the
corporation is ordinarily and primarily committed to the Board of Directors.

o This power may however be delegated either expressly or impliedly to other corporate officials
or agents.

o Thus it has been stated, that as a general rule an officer or agent of the corporation has no
power to compromise or settle a claim by or against the corporation, except to the extent that
such power is given to him either expressly or by reasonable implication from the circumstances.

• A corporation officer's power as an agent of the corporation must therefore be sought from the
statute, the charter, the by-laws, or in a delegation of authority to such officer, from the acts of
board of directors, formally expressed or implied from a habit or custom of doing business –
none in the case at bar.

Equally misplaced is petitioners' invocation of the principle of estoppel.

O In the case at bar, except those made by plaintiff’s counsel, petitioners have not demonstrated
any act or declaration of the corporation amounting to false representation or concealment of
material facts calculated to mislead said petitioners.

o The acts or conduct for which the corporation may be liable under the doctrine of estoppel
must be those of the corporation, its governing body or authorized

officers, and not those of the purported agent who is himself responsible for the
misrepresentation

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G.R. No. 102737. August 21, 1996 FRANCISCO A. VELOSO, Petitioner, v. CA,
AGLALOMA B. ESCARIO, assisted by her husband GREGORIO L. ESCARIO, the
REGISTER OF DEEDS -MANILA, Respondent.

DOCTRINE: The special power of attorney can be included in the general power when it is
specified therein the act or transaction for which the special power is required. "Whether the
instrument be denominated as "general power of attorney" or "special power of attorney," what
matters is the extent of the power or powers contemplated upon the agent or attorney in fact. If
the power is couched in general terms, then such power cannot go beyond acts of administration.
However, where the power to sell is specific, it not being merely implied, much less couched in
general terms, there can not be any doubt that the attorney in fact may execute a valid sale. An
instrument may be captioned as "special power of attorney" but if the powers granted are
couched in general terms without mentioning any specific power to sell or mortgage or to do
other specific acts of strict dominion, then in that case only acts of administration may be
deemed conferred.”

FACTS:
Petitioner Francisco Veloso owns a parcel of land in Tondo, Manila covered by a TCT issued by
the Registry of Deeds-Manila. He acquired the subject property before he got married from
Philippine Building Corporation. Hence, the property did not belong to the conjugal partnership.

The said title was subsequently canceled and a new one was issued in the name of Aglaloma B.
Escario.

Subsequently, petitioner filed an action for annulment of documents, reconveyance of property

with damages and preliminary injunction alleging that he was the absolute owner of the subject
property and he never authorized anybody to sell it. He alleged that when his wife left for
abroad, he found out that his copy was missing.

The transfer of property was supported by a General Power of Attorney and Deed of Absolute
Sale, executed by Irma Veloso, wife of the petitioner.

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Petitioner denied executing the power of attorney and alleged that his signature was falsified. He
also denied having known the supposed witnesses in the execution of the power of attorney.
Thus, he contended that the sale of the property, and the subsequent transfer were null and void.

Defendant Aglaloma Escario alleged that she was a buyer in good faith and denied any
knowledge of the alleged irregularity. She allegedly relied on the general power of attorney
which was sufficient in form and substance and was duly notarized.

Witness for the plaintiff Atty. Julian G. Tubig denied any participation in the execution of the
general power of attorney, and attested that he did not sign.

RTC ruled in favor of Escaro as the lawful owner of the property as she was deemed an innocent
purchaser for value. The trial court ruled that there was no need for a special power of attorney
when the special power was already mentioned in the general one.

CA affirmed in toto the findings of the trial court.

ISSUE: Was the General Power of Attorney valid?

HELD: The assailed power of attorney was valid and regular on its face. It was notarized and as
such, it carries the evidentiary weight conferred upon it with respect to its due execution. While
it is true that it was denominated as a general power of attorney, a perusal thereof revealed that it
stated an authority to sell. "2. To buy or sell, hire or lease, mortgage or otherwise hypothecate
lands, tenements and hereditaments …." Thus, there was no need to execute a separate and
special power of attorney since the general power of attorney had expressly authorized the agent
or attorney in fact the power to sell the subject property. The general power of attorney was
accepted by the Register of Deeds when the title to the subject property was canceled and
transferred in the name of private Respondent. RE FALSIFIED SIGNATURE: SC found that the
basis presented by the petitioner was inadequate to sustain his allegation of forgery. Mere
variance of the signatures cannot be considered as conclusive proof that the same were forged.
Forgery cannot be presumed. RE INNOCENT PURCHASER FOR VALUE:

SC agrees with the conclusion of the lower court that private respondent was an innocent
purchaser for value. Respondent Aglaloma relied on the power of attorney presented by
petitioners wife, Irma. Being the wife of the owner and having with her the title of the property,

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there was no reason for the private respondent not to believe in her authority. Moreover, the
power of attorney was notarized and as such, carried with it the presumption of its due execution.
A purchaser in good faith is one who buys property of another, without notice that some other
person has a right to, or interest in such property and pays a full and fair price for the same, at the
time of such purchase, or before he has notice of the claim or interest of some other person in the
property.

The questioned power of attorney and deed of sale, were notarized and therefore, presumed to be
valid and duly executed. Atty. Tubig denied having notarized the said documents and alleged that
his signature had also been falsified. Just like the petitioner, witness Atty. Tubig merely pointed
out that his signature was different from that in the power of attorney and deed of sale. Even
granting for the sake of argument, that the petitioners signature was falsified and consequently,
the power of attorney and the deed of sale were null and void, such fact would not revoke the
title subsequently issued in favor of private respondent. The right of an innocent purchaser for
value must be respected and protected, even if the seller obtained his title through fraud.

The REMEDY of the person prejudiced is to bring an action for damages against those who
caused or employed the fraud, and if the latter are insolvent, an action against the Treasurer of
the Philippines may be filed for recovery of damages against the Assurance Fund. RE
ESTOPPEL: The trial court did not err in applying equitable estoppel in this case. The principle
of equitable estoppel states that where one or two innocent persons must suffer a loss, he who by
his conduct made the loss possible must bear it. From the evidence adduced, it should be the
petitioner who should bear the loss. The fact remains that the Certificate of Title, as well as other
documents necessary for the transfer of title were in the possession of Irma, consequently leaving
no doubt or any suspicion on the part of the defendant as to her authority. Under Section 55 of
Act 496, Irma’s possession and production of the TCT to defendant operated as conclusive
authority from the plaintiff to the Register of Deeds to enter a new certificate. ACCORDINGLY,
the petition for review is hereby DENIED for lack of merit.

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BRAVO-GUERRERO vs. BRAVO, G.R. No. 152658 July 29, 2005

FACTS: Spouses Mauricio Bravo ("Mauricio") and Simona5 Andaya Bravo ("Simona") owned
two parcels of land ("Properties") located along Evangelista Street, Makati City, Metro Manila.
They have three children - Roland, Cesar and Lily, all surnamed Bravo. Cesar died without issue.
Lily Bravo married David Diaz, and had a son, David B. Diaz, Jr. ("David Jr."). Roland had six
children, namely, Lily Elizabeth Bravo-Guerrero ("Elizabeth"), Edward Bravo ("Edward"),
Roland Bravo, Jr. ("Roland Jr."), Senia Bravo, Benjamin Mauricio Bravo, and their half-sister,
Ofelia Bravo ("Ofelia"). Simona executed a General Power of Attorney ("GPA") on 17 June
1966 appointing Mauricio as her attorney-in-fact.

In the GPA, Simona authorized Mauricio to "mortgage or otherwise hypothecate, sell, assign and
dispose of any and all of my property, real, personal or mixed, of any kind whatsoever and
wheresoever situated, or any interest therein xxx." Mauricio subsequently mortgaged the
Properties to the Philippine National Bank (PNB) and Development Bank of the Philippines
(DBP) for P10,000 and P5,000, respectively. On 25 October 1970, Mauricio executed a Deed of
Sale with Assumption of Real Estate Mortgage ("Deed of Sale") conveying the Properties to
"Roland A. Bravo, Ofelia A. Bravo and Elizabeth Bravo"8 ("vendees"). However, the Deed of
Sale was not annotated on TCT Nos. 58999 and 59000. Neither was it presented to PNB and
DBP. The mortage loans and the receipts for loan payments issued by PNB and DBP continued
to be in Mauricio’s name even after his death on 20 November 1973. Simona died in 1977. On
23 June 1997, Edward, represented by his wife, Fatima Bravo, filed an action for the judicial
partition of the Properties. Edward claimed that he and the other grandchildren of Mauricio and
Simona are co-owners of the Properties by succession. Despite this, petitioners refused to share
with him the possession and rental income of the Properties.

ISSUE: Whether Simona validly appointed Mauricio as her attorney-in-fact to dispose the
properties in question.

DECISION: The SC also agree with the trial court that Simona authorized Mauricio to dispose
of the Properties when she executed the GPA. True, Article 1878 requires a special power of
attorney for an agent to execute a contract that transfers the ownership of an immovable.
However, the Court has clarified that Article 1878 refers to the nature of the authorization, not to
its form. Even if a document is titled as a general power of attorney, the requirement of a special
power of attorney is met if there is a clear mandate from the principal specifically authorizing the

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performance of the act. In Veloso v. Court of Appeals, the Court explained that a general power
of attorney could contain a special power to sell that satisfies the requirement of Article 1878,
thus: While it is true that it was denominated as a general power of attorney, a perusal thereof
revealed that it stated an authority to sell, to wit: "2. To buy or sell, hire or lease, mortgage or
otherwise hypothecate lands, tenements and hereditaments or other forms of real property, more
specifically TCT No. 49138, upon such terms and conditions and under such covenants as my
said attorney shall deem fit and proper."

Thus, there was no need to execute a separate and special power of attorney since the general
power of attorney had expressly authorized the agent or attorney in fact the power to sell the
subject property. The special power of attorney can be included in the general power when it is
specified therein the act or transaction for which the special power is required. In this case,
Simona expressly authorized Mauricio in the GPA to "sell, assign and dispose of any and all of
my property, real, personal or mixed, of any kind whatsoever and wheresoever situated, or any
interest therein xxx" as well as to "act as my general representative and agent, with full authority
to buy, sell, negotiate and contract for me and in my behalf." Taken together, these provisions
constitute a clear and specific mandate to Mauricio to sell the Properties. Even if it is called a
"general power of attorney," the specific provisions in the GPA are sufficient for the purposes of
Article 1878. These provisions in the GPA likewise indicate that Simona consented to the sale of
the Properties.

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