I.

Definition of Agency
CASES:
Caram v. Laureta, GR No L-28740, 24 February 1981

DOCTRINE: Same; Same;  Same; Same;  Agency; Principal should be deemed a

purchaser in bad faith if agents purchased the property in bad faith.— There is no doubt
then that Irespe and Aportadera, acting as agents of Caram, purchased the property of
Mata in bad faith. Applying the princple of agency, Caram, as principal, should also be
deemed to have acted in bad faith.

Laureta filed an action for nullity, recovery of ownership and/or

reconveyance with damages against Mata

FACTS:
In 1945, a certain Marcos Mata is the owner of the a parcel of land. He then sold the
same to Claro Laureta, but such sale was not registered because during that time the
civil government of Tagum, Davao was not yet as organized. However, Mata delivered
the papers and the actual possession of the property to Laureta. Since then, Laureta
had been in possession of the land and was in fact paying for the realty taxes due.

2 years later, or in 1947, the same land was allegedly sold by Mata to Fermin Caram.
This 2nd sale was facilitated by Atty Aportadera and Gumercindo Arcilla, who filed for a
petition for the issuance of a new ODCT alleging the loss of the said title. Eventually, a
new ODCT was issued in favor of Fermin Caram.

The trial court rendered a decision in favor of Laureta. It was found during the trial
that the 2nd sale to Caram was made through his representatives, Pedro Irespe and Atty
Abelardo Aportadera because Marcos Mata and Caram had never met. In fact, Caram
admitted that Atty Aportadera acted as his notary public and attorney-in-fact at the
same time in the purchase of the property. However, Caram contends that he cannot
be considered to have acted in bad faith because there is no direct proof that Irespe
and Aportadera, his alleged agents, had knowledge of the first sale to Laureta.

ISSUE:
W/N the Caram should be bound by the bad faith of his agents.

RULING:
Yes. There is no doubt then that Irespe and Aportadera, acting as agents of Caram,
purchased the property of Mata in bad faith. Applying the principle of agency, Caram as
principal, should also be deemed to have acted in bad faith.

There is no doubt then that Irespe and Aportadera, acting as agents of Caram,
purchased the property of Mata in bad faith. Applying the principle of agency, Caram as
principal, should also be deemed to have acted in bad faith.
The Court cannot help being convinced that Irespe, attorney-in-fact of Caram, Jr. had
knowledge of the prior existing transaction, Exhibit A, between Mata and Laureta over
the land, subject matter of this litigation, when the deed, Exhibit F, was executed by
Mata in favor of Caram, Jr. And this knowledge has the effect of registration as to
Caram, Jr.

Even if Irespe and Aportadera did not have actual knowledge of the first sale, still their
actions have not satisfied the requirement of good faith. Bad faith is not based solely on
the fact that a vendee had knowledge of the defect or lack of title of his vendor. In the
case of Leung Yee vs. F. L. Strong Machinery Co. and Williamson, this Court held:

One who purchases real estate with knowledge of a defect or lack of title in his vendor
can not claim that he has acquired title thereto in good faith, as against the true owner
of the land or of an interest therein, and the same rule must be applied to one who has
knowledge of facts which should have put him upon such inquiry and investigation as
might be necessary to acquaint him with the defects in the title of his vendor.
In the instant case, Irespe and Aportadera had knowledge of circumstances which
ought to have put them an inquiry. Both of them knew that Mata’s certificate of title
together with other papers pertaining to the land was taken by soldiers under the
command of Col. Claro L. Laureta. Added to this is the fact that at the time of the
second sale Laureta was already in possession of the land. Irespe and Aportadera
should have investigated the nature of Laureta’s possession.

2. The first sale in favor of Laureta prevails over the sale in favor of Caram.

Caram was a registrant in bad faith, then it is as if there was no registration at all.
The question to be determined now is, who was first in possession in good faith? A
possessor in good faith is one who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it. Laureta was first in possession of the property.
He is also a possessor in good faith. It is true that Mata had alleged that the deed of
sale in favor of Laureta was procured by force.

Such defect, however, was cured when, after the lapse of four years from the time the
intimidation ceased, Marcos Mata lost both his rights to file an action for annulment or
to set up nullity of the contract as a defense in an action to enforce the same.

Air France v. Court of Appeals, L-21438, 28 September 1966

Bordador v. Luz, GR No. 130148, 15 December 1997

DOCTRINES: Contracts; Agency;  The basis for agency is representation. —The

basis for agency is representation. Here, there is no showing that Brigida consented to
the acts of Deganos or authorized him to act on her behalf, much less with respect to
the particular transactions involved. Petitioners’ attempt to foist liability on respondent
spouses through the supposed agency relation with Deganos is groundless and ill-
advised.
Same; Same; A person dealing with an agent is put upon inquiry and must
discover upon his peril the authority of the agent. — Besides, it was grossly and
inexcusably negligent of petitioners to entrust to Deganos, not once or twice but on at
least six occasions as evidenced by six receipts, several pieces of jewelry of substantial
value without requiring a written authorization from his alleged principal. A person
dealing with an agent is put upon inquiry and must discover upon his peril the authority
of the agent.

FACTS: (apparent authority)

Jose and Lydia Bordador are engaged in the business of selling purchase and sale of
jewelry and Brigida Luz was their regular customer. On several occasions, Narciso
Deganos, Brigida’s brother, received some pieces of gold and jewelry from the
Bordadors amounting to almost 400k. These items were indicated in 17 receipts and 11
of which stated that they were received for by a certain Evelyn Aquino, a niece of
Narciso Deganos, and the other 6 indicated that they were received for Brigida Luz.

Deganos was supposed to sell the items at a profit and thereafter remit the proceeds
and return the unsold items to the Bordadors.. Deganos, however, remitted only the
sum of P53,207.00. He neither paid the balance of the sales proceeds, nor did he return
any unsold item to petitioners.

This prompted the Borrdadors to file a complaint before the barangay against Deganos
for the recovery of said amount. Brigida D. Luz, who was not impleaded in the case,
appeared as a witness for Deganos and ultimately, the parties entered into a
compromise agreement, wherein Deganos obligated himself to pay the Bordadors, on
installment basis, the balance plus interest. However, he failed to comply with this
undertaking prompting the Bordadors to institute a civil case against both Deganos and
Luz.

Bordadors claimed that Deganos acted as the agent of Luz when he received the
subject items of jewelry, and because he failed to pay the same, Luz, as principal,
together with her husband, are solidarily liable. On the other hand, Luz denied that she
had anything to do with the said transactions. She claimed that she never authorized
Deganos to receive any item of jewelry in her behalf and, for that matter, neither did
she actually receive any of the articles in question.

ISSUE: Whether or not spouses Luz are liable to the Bordadors despite the fact that the
evidence does not show that they signed any of the subject receipts or authorized
Deganos to receive the items of jewelry on their behalf.

RULING:
While the Bordadors insist that Deganos was the agent of Brigida D. Luz as the latter
clothed him with apparent authority as her agent and held him out to the public as
such, hence Brigida can not be permitted to deny said authority to innocent third
parties who dealt with Deganos under such belief, the court ruled that the evidence
does not support this theory that Deganos was an agent of Brigida D. Luz and that the
latter should consequently be held solidarily liable with Deganos in his obligation to
petitioners. While the quoted statement in the findings of fact of the assailed appellate
decision mentioned that Deganos ostensibly acted as an agent of Brigida, the actual
conclusion and ruling of the Court of Appeals categorically stated that, (Brigida Luz)
never authorized her brother (Deganos) to act for and in her behalf in any transaction
with Petitioners x x x It is clear, therefore, that even assuming arguendo  that Deganos
acted as an agent of Brigida, the latter never authorized him to act on her behalf with
regard to the transactions subject of this case.

The basis for agency is representation. Here, there is no showing that Brigida
consented to the acts of Deganos or authorized him to act on her behalf, much less
with respect to the particular transactions involved. Petitioners attempt to foist liability
on respondent spouses through the supposed agency relation with Deganos is
groundless and ill-advised.

Besides, it was grossly and inexcusably negligent of he Bordadors to entrust to

Deganos, not once or twice but on at least six occasions as evidenced by six receipts,
several pieces of jewelry of substantial value without requiring a written authorization
from his alleged principal. A person dealing with an agent is put upon inquiry and must
discover upon his peril the authority of the agent.

The records show that neither an express nor an implied agency was proven to have
existed between Deganos and Brigida D. Luz. Evidently the Bordadors who were
negligent in their transactions with Deganos, cannot seek relief from the effects of their
negligence by conjuring a supposed agency relation between the two respondents
where no evidence supports such claim.

Victorias Milling v. Court of Appeals, GR No. 117356, 19 June 2000

DOCTRINES: Agency; The basis of agency is representation—on the part of the

principal, there must be an actual intention to appoint or an intention naturally inferable
from his words or actions, while on the part of the agent, there must be an intention to
accept the appointment and act on it;  One factor which most clearly distinguishes
agency from other legal concepts is control—one person (the agent) agreeing to act
under the control or direction of another (the principal). —It is clear from Article 1868
that the basis of agency is representation. On the part of the principal, there must be
an actual intention to appoint or an intention naturally inferable from his words or
actions; and on the part of the agent, there must be an intention to accept the
appointment and act on it, and in the absence of such intent, there is generally no
agency. One factor which most clearly distinguishes agency from other legal concepts is
control; one person—the agent—agrees to act under the control or direction of another
—the principal. Indeed, the very word “agency” has come to connote control by the
principal. The control factor, more than any other, has caused the courts to put
contracts between principal and agent in a separate category.
Same; An authorization given to another containing the phrase “for and in our behalf”
does not necessarily establish an agency, as ultimately, what is decisive is the intention
of the parties, and the use of the words “sold and endorsed” means that the parties
intended a contract of sale, and not an agency. —It appears plain to us that private
respondent CSC was a buyer of the SLDFR form, and not an agent of STM. Private
respondent CSC was not subject to STM’s control. The question of whether a contract is
one of sale or agency depends on the intention of the parties as gathered from the
whole scope and effect of the language employed. That the authorization given to CSC
contained the phrase “for and in our (STM’s) behalf” did not establish an agency.
Ultimately, what is decisive is the intention of the parties. That no agency was meant to
be established by the CSC and STM is clearly shown by CSC’s communication to
petitioner that SLDR No. 1214M had been “sold and endorsed” to it. The use of the
words “sold and endorsed” means that STM and CSC intended a contract of sale, and
not an agency. Hence, on this score, no error was committed by the respondent
appellate court when it held that CSC was not STM’s agent and could independently sue
petitioner.

FACTS:
St. Therese Merchandising (STM) regularly bought sugar from Victorias Milling Co. Inc.
(VMC). In the course of their dealings, VMC issued several Shipping List/Delivery
Receios (SLDRs) to STM as proof of purchases. Among these was SLDR No. 1214M,
which is the subject of this case. STM sold to Consolidated Sugar Corp (CSC) its rights
under the subject SLDR for 14M. On the same day, CSC wrote VMC that it had been
authorized by STM to withdraw the sugar covered by the subject SLDR. CSC then
surrendered the subject SLDR to VMC’s warehouse and was allowed to withdraw sugar.
However, after 2,000 bags of sugar had been released, VMC refused to allow further
withdrawals of sugar against the subject SLDR. VMC reasoned that it cannot allow any
further withdrawals because STM had already withdrawn all the sugar covered by the
said SLDR.

Dominion insurance v. CA, 376 SCRA 239

DOCTRINES: Civil Law;  Contracts; Agency;  The basis for agency is

representation; There must be an actual intention by the principal to appoint and on
the part of the agent an intention to accept the appointment and act on it, otherwise
there is generally no agency.—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. The basis for agency is representation. On the
part of the principal, there must be an actual intention to appoint or an intention
naturally inferrable from his words or actions; and on the part of the agent, there must
be an intention to accept the appointment and act on it, and in the absence of such
intent, there is generally no agency.

FACTS: Dominion Insurance has Rodolfo Guevarra as its agency manager. Guevarra
was given the authority to settle and pay the claims of the insured. However, Guevarra
paid certain claims using his personal money. Thus, he instituted this complaint for
seeking to recover certain sum representing such payment of insurance claims.

ISSUE: WON Guevarra acted within his authority as agent of Dominion Insurance; WON
Gueverra is entitled to reimbursement of amounts paid out of his personal money in
settling the claims of several insured

RULING: Firstly, 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.10 The basis for agency is representation.11 On the part of the
principal, there must be an actual intention to appoint 12 or an intention naturally
inferrable from his words or actions;13 and on the part of the agent, there must be an
intention to accept the appointment and act on it, 14 and in the absence of such intent,
there is generally no agency.

A perusal of the records would show that the SPA entered into by Dominion Insurance
and Gueverra, despite the word special in the tile, the contents reveal that what was
constituted was actually a general agency.

"1. To conduct, sign, manager (sic), carry on and transact Bonding and Insurance
business  as usually pertain to a Agency Office, or FIRE, MARINE, MOTOR CAR,
PERSONAL ACCIDENT, and BONDING with the right, upon our prior written consent, to
appoint agents and sub-agents.

"2. To accept, underwrite and subscribed (sic) cover notes or Policies  of Insurance and
Bonds for and on our behalf.

"3. To demand, sue, for (sic) collect, deposit, enforce payment, deliver and transfer for
and receive and give effectual receipts and discharge  for all money to which the FIRST
CONTINENTAL ASSURANCE COMPANY, INC.,18 may hereafter become due, owing
payable or transferable to said Corporation by reason of or in connection with the
above-mentioned appointment.

"4. To receive notices, summons, and legal processes  for and in behalf of the FIRST
CONTINENTAL ASSURANCE COMPANY, INC., in connection with actions and all legal
proceedings against the said Corporation." 19 [Emphasis supplied]

Moreover, Gueverra’s authority to settle claims is further limited by the written standard
authority to pay which states that the payment shall come from Gueverra’s revolving
fund or collection.

II. Classification

A. Express or Implied
Art. 1870, 1871, 1872, 1873
CASES:
Dela Pena v. Hidalgo, GR No. L-5486, 17 August 1910

DOCTRINES: AGENCY; ADMINISTRATION OF PROPERTY; IMPLIED AGENCY.—

When the agent and administrator of property informs his principal by letter
that for reasons of health and medical treatment he is about to depart from the
place where he is executing his trust and wherein the said property is situated,
and abandons the property, turns it over to a third party, renders accounts of
its revenues up to the date on which he ceases to hold his position and
transmits to his principal a general statement which summarizes and embraces
all the balances of his accounts since he began the administration to the date of
the termination of his trust, and, without stating when he may return to take
charge of the administration of the said property, asks his principal to execute a
power of attorney in due form in favor of and transmit the same to another
person who took charge of the administration of the said property, it is but
reasonable and just to conclude that the said agent had expressly and definitely
renounced his agency and that such agency was duly terminated, in accordance
with the provisions of article 1732 of the Civil Code, and, although the agent in
his aforementioned letter did not use the words "renouncing the agency," yet
such words were undoubtedly so understood and accepted by the principal,
because of the lapse of nearly nine years up to the time of the latter's death,
without his having interrogated either the renouncing agent, disapproving what
he had done, or the person who substituted the latter.

1. 2.ID. ; ID. ; ID.—The person who took charge of the administration of property

without express authorization and without a power of attorney executed by the
owner thereof, and performed the duties of his office without opposition or
absolute prohibition on the owner's part, expressly communicated to the said
 person, is concluded to have administered the said property by virtue of an
'implied agency, in acordance with the provisions of article 1710 of the Civil
Code, since the said owner of the property, knowing perfectly well that the said
person took charge of the administration of the same, through designation by
such owner's former agent who had to absent himself from the place for well-
founded reasons, remained silent for nearly nine years. Although he did not
send a new power of attorney to the said person who took charge of his
property, the fact remains that, during the .period stated, he neither opposed
nor prohibited the new agent with respect to the administration, nor did he
appoint another person in his confidence; wherefore it must be concluded that
this new agent acted by virtue of an implied agency, equivalent to a legitimate
agency, tacitly conferred by the owner of the property administered.

1. 3.ID. ; ID. ; ID.—It is improper to compare the case where the owner of the

property is unaware of the officious management of a third party in the former's
interests, with the case where, having perfect knowledge that his interests and
property were so being managed and administered, he did not object, but in
fact consented to such management and administration for many years; for the
reason that an administration by virtue of an implied agency derives its origin
from a contract, and the management of another's business without the
knowledge of the owner thereof, is based solely on a quasi-contract—a
distinction sanctioned by the jurisprudence established by the supreme court of
Spain in its decision of July 7, 1881.

1. 4.ID. ; ID. ; ID.—The agent and administrator who was obliged to leave his

charge for a legitimate cause and who duly informed his principal, is
thenceforward released and freed from the results and consequences of the
management of the person who substituted him with the consent, even tacit
though it be, of his principal. For this reason, the latter has no right to claim
damages against his former agent whose conduct was in accordance with the
provisions of article 1736 of the Civil Code, for the care of the property and
interests of another can not require that the agent make the sacrifice of his
health, of his life, and of his own interests, it having been shown that it was
impossible for the latter to continue in the discharge of his duties.

1. 5. ID.; ID.; ID.; LIABILITY OF ADMINISTRATOR.—The administrator is only

responsible for the result and consequences of his administration during the
period when he had charge of his principal's property. His responsibility can not
be held to extend beyond the period of his administration, especially as the
representative of the testate succession of the deceased owner of the property
adissued in his favor an instrument whereby he acknowledges that the said
administration was satisfactorily terminated.
 1. 6.ID.; ID.; ID.; ACCOUNTING; PAYMENT.—It is not sufficient that the agent shall
have rendered a satisfactory accounting; in addition thereto it is indispensable
that he pay to his principal, or to the owner of the property administered, any
balance shown by such accounts.

1. 7.DEBTS AND DEBTORS; INTEREST.—According to the provisions of article 1755

of the Civil Code, interest shall be owed only when it has been expressly
stipulated, and article 1108 of the same code provides that should the debtor,
who is obliged to pay a certain sum of money, be in default and fail to fulfill the
agreement made with his creditor, he must pay, as indemnity for losses and
damages, should there be no stipulation to the contrary, the interest agreed
upon, and should there be no express stipulation, the legal interest; but, in
order that the debtor may be considered to be in default and obliged to pay
such indemnity it is necessary, as a general rule, that his creditor demand of
him the fulfillment of his obligation, judicially or extrajudicially, except in such
cases as are limitedly specified in article 1100 of the aforesaid code.

FACTS:

Keeler Electric Co. v. Rodriguez, 44 Phil. 19

DOCTRINES: DUTIES OF PERSONS DEALING WITH AN ASSUMED AGENT.—Persons

dealing with an assumed agent, whether the assumed agency be a general or
special one, are bound at their peril, if they would hold the principal, to ascertain not
only the fact of the agency but the nature and extent of the authority, and in case
either is controverted, the burden of proof is upon them to establish it.

1. 5.AGENT ALONE CANNOT ENLARGE HIS AUTHORITY.—The agent alone cannot

enlarge or extend his authority by his own acts or statements, nor can he alone
remove limitations or waive conditions imposed by his principal. To charge the
principal in such a case, the principal's consent or concurrence must be shown.

1. 6.PAYMENT AT OWN RISK.—Where a person in making payment solely relied

upon the representation of an agent as to his authority to receive and receipt
for the money, such payment is made at his own risk, and where the agent was
not so authorized, such payment is not a valid defense against the principal.

FACTS: (assumed authority)

Harry Keeler Electric Co is engaged in the electrical business and is known for selling
the “Matthews” electric plant. Montelibano, who was a resident of Iloilo, approached
the company and signified his intention to find a purchaser for the electric plant. In
turn, Harry Keeler told Montelibano that for any plant that he could sell or any customer
that he could find, he would be paid a commission of 10%, if the sale was
consummated. Montelibano was able to convince Domingo Rodriguez to buy and the
shipment was thereafter scheduled. However, when the plant was installed on
Rodriguez’ premises, Rodriguez paid the purchase price to Montelibano without the
knowledge of the company. Also, no part of the money was ever paid to the company.
According to the company, during the shipment, one of its employees, Juan Cenar was
sent together with the electric plant for the purpose of installing the plant to Rodriguez’
premises. In addition, the company alleged that Montelibano had no authority from the
company to receive the purchase price; That in truth and in fact his services were
limited and confined to the finding of purchasers for the "Matthews" plant to whom the
company would later make and consummate the sale. That Montelibano was not an
electrician, could not install the plant and did not know anything about its mechanism.
This was corroborated by Cenar. On the part of Rodriguez, he said that he paid the
money to Montelibano because he was the one who sold, delivered, and installed the
electrical plant, and he presented to him the account, and Montelibano assured him
that he was duly authorized to collect the value of the electrical plant.

ISSUE: WON Harry Keeler authorized Montelibano to receive payment in its behalf;
WON Rodriguez had a right to assume by any or deed that Montelibano was authorized
to receive money.

RULING: 1. No. Montelibano was not authorized. There is nothing on the face of the
receipt to show that Montelibano was the agent of, or that he was acting for, the
plaintiff. It is his own personal receipt and his own personal signature. Outside of the
fact that Montelibano received the money and signed this receipt, there is no evidence
that he had any authority, real or apparent, to receive or receipt for the money. Neither
is there any evidence that the plaintiff ever delivered the statement to Montelibano, or
authorized anyone to deliver it to him, and it is very apparent that the statement in
question is the one which was delivered by the plaintiff to Cenar, and is the one which
Cenar delivered to the defendant at the request of the defendant.

The person dealing with the agent must also act with ordinary prudence and reasonable
diligence. Obviously, if he knows or has good reason to believe that the agent is
exceeding his authority, he cannot claim protection. So if the suggestions of probable
limitations be of such a clear and reasonable quality, or if the character assumed by the
agent is of such a suspicious or unreasonable nature, or if the authority which he seeks
to exercise is of such an unusual or improbable character, as would suffice to put an
ordinarily prudent man upon his guard, the party dealing with him may not shut his
eyes to the real state of the case, but should either refuse to deal with the agent at all,
or should ascertain from the principal the true condition of affairs. (Mechem on Agency,
vol. I, sec 752.)

And not only must the person dealing with the agent ascertain the existence of the
conditions, but he must also, as in other cases, be able to trace the source of his
reliance to some word or act of the principal himself if the latter is to be held
responsible. As has often been pointed out, the agent alone cannot enlarge or extend
his authority by his own acts or statements, nor can he alone remove limitations or
waive conditions imposed by his principal. To charge the principal in such a case, the
principal's consent or concurrence must be shown. (Mechem on Agency, vol. I, section
757.)

Pittsburgh Plate Glass v. Director, GR No. L-22773, 29 March 1974

DOCTRINES: Patents;  Attorneys;  Administrative tribunal should accept client’s

confirmation of counsel’s authority to represent it.—

Facts: On November 5, 1962 the law firm of Lichauco, Picazo and Agcaoili filed with the
Philippines Patent Office a petition for extension of time to file on behalf of Pittsburg
Plate Glass Co. a notice of opposition to respondent Chua Tua Hian and Company’s
application for registration of a trademark. The plea was made pursuant to a cablegram
from the petitioner’s patent agents in the United States of America. On December 7,
1962 petitioner’s counsel filed a duly authenticated power of attorney executed by the
petitioner dated November 12, 1962 in favor of the power for the prosecution of its
case. On October 14, 1963 the Director of Patents dismissed the petitioner’s opposition
on the ground that on November 5, 1962 when its counsel filed a petition for extension
of time to file a notice of opposition, said counsel was not yet authorized by the
petitioner to file the said pleading as its power of attorney was executed only on
November 12, 1962. On November 14, 1963 the petitioner’s counsel asked for a
reconsideration of the order of dismissal attaching to its motion an affidavit of the
petitioner which states that the cablegram from its American patent agent was duly
authorized, as the latter has been entrusted the task of handling foreign trademark
matters involving the petitioner.

ISSUE: The main issue before this Court is whether the law firm of Lichauco, Picazo and
Agcaoili was authorized to represent the petitioner before the Philippine Patent Office
on November 5, 1962 when the former pleaded for an extension of time to register the
petitioner's opposition to the respondent's application.

Held: It is our considered view that the said law firm was so properly authorized by the
petitioner. It should be noted that the petitioner does not deny, as in fact it asserted in
writing, that the said law firm was authorized to represent it by virtue of the powers it
had vest upon Langner, et al., a correspondent of Lichauco, Picazo and Agcaoili, to
hand all foreign trademark matters affecting the petitioner. It bears emphasis that the
relationship between counsel and client is strictly a personal one. It is a relationship the
creation of which courts and administrative tribunals cannot but recognize on the faith
of the client’s word, especially when no substantial prejudice is thereby caused to any
third party. In the case at bar, the petitioner, which claims to be adversely affected by
the respondent’s trademark application, seasonably informed the Director of Patents
that its counsel had the authority to represent it before the latter’s office. We see no
valid reasons to interpose chevaux-de-frise (obstruct) upon that claim and deny the
petitioner its basic right to be heard.

Conde v. Court of Appeals, GR No. L-40242, 15 December 1982

DOCTRINES: Civil Law; Agency;  Implied agency created from silence or lack of

action or failure to repudiate the agency.— If, as opined by both the Court a quo and
the Appellate Court, petitioner had done nothing to formalize her repurchase, by the
same token, neither have the vendees-a-retro done anything to clear their title of the
encumbrance therein regarding petitioner’s right to repurchase. No new agreement was
entered into by the parties as stipulated in the deed of pac to de retro, if the vendors
a retro failed to exercise their right of redemption after ten years. If, as alleged,
petitioner exerted no effort to procure the signature of Pio Altera after he had
recovered from his illness, neither did the Alteras repudiate the deed that their son-in-
law had signed. Thus, an implied agency must be held to have been created from their
silence or lack of action, or their failure to repudiate the agency.

FACTS: Margarita, Bernardo and Dominga, all surnamed Conde, sold with right of
repurchase within 10years, a parcel of agricultural land to Casimira and Pio Altera. Said
contract was recorded in the Registry of Deeds. Thereafter, Paciente Cordero, son-in-
law of the Alteras, signed a document purporting to be a memorandum of repurchase
over a parcel of land sold with repurchase which document got lost.

WE, PIO ALTERA and PACIENTE CORDERO, both of legal age, and residents of Burauen
Leyte, Philippines, after having been duly sworn to in accordance with law free from
threats and intimidation, do hereby depose and say:

1. That I, PIO ALTERA bought with the right of repurchase two parcels of
land from DOMINGA CONDE, BERNARDO CONDE AND MARGARITA
CONDE, all brother and sisters.

2. That these two parcels of land were all inherited by the three.
 3. That the document of SALE WITH THE RIGHT OF REPURCHASE got lost
in spite of the diligent efforts to locate the same which was lost during the
war.

4. That these two parcels of land which was the subject matter of a Deed
of Sale with the Right of Repurchase consists only of one document which
was lost.

5. Because it is about time to repurchase the land, I have allowed

the representative of Dominga Conde, Bernardo Conde and
Margarita Conde in the name of EUSEBIO AMARILLE to
repurchase the same.

6. Now, this very day November 28, 1945, 1 or We have received together
with Paciente Cordero who is my son-in-law the amount of ONE
HUNDRED SIXTY-FIVE PESOS (P165. 00) Philippine Currency of legal
tender which was the consideration in that sale with the right of
repurchase with respect to the two parcels of land.

The document is in the form of a deed of resale executed by Paciente on behalf if is

father-in-law. It is to be noted that neither of the vendees-a-retro, Pio Altera nor
Casimira Pasagui, was a signatory to the deed. 

Alleging that she had validly repurchased the subject lot, Dominga Conde filed a
complaint for quieting of title against the Alteras, Cordero and other Condes.

ISSUE: WON there was a valid exercise of repurchase considering that the
Memorandum of Repurchase was signed by Paciente Cordero and not by Pio Altera, the
vendee-a-retro, and that there is nothing in said document to show that Cordero was
specifically authorized to act for and on behalf of the vendee a retro, Pio Altera.

RULING:

Naguiat v. Court of Appeals, GR No. 118375, 3 October 2003

DOCTRINES: Civil Law; Estoppel;  Court of Appeals is correct in invoking the said rule
on agency by estoppel.—The Court of Appeals recognized the existence of an “agency
by estoppel” citing Article 1873 of the Civil Code. Apparently, it considered that at the
very least, as a consequence of the interaction between Naguiat and Ruebenfeldt,
Queaño got the impression that Ruebenfeldt was the agent of Naguiat, but Naguiat did
nothing to correct Queaño’s impression. In that situation, the rule is clear. 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. The Court of Appeals is correct in
invoking the said rule on agency by estoppel.

FACTS: Queaño contracted a loan with Naguiat in the amount of (₱200,000.00).

Naguiat then indorsed a check in the amount of 95k, which was earlier issued to
Naguiat by the Corporate Resources Financing Corporation. She also issued her own
check in the amount of 95k. the proceeds of the checks were to constitute the loan
granted by Naguiat to Queaño. In turn, to secure the loan, a REM was executed in
favor of Naguiat and the duplicate title to the mortgage property was surrendered
Naguiat. Queano then issued a promissory note and Security Bank post dated check to
Naguiat. Upon presentment of the said security bank check, it was dishonored for
insufficiency of funds. Queaño then requested secbank to stop payment of her PDC but
the bank rejected the request pursuant to its policy not to honor such requests if the
check is drawn against insufficient funds. Queaño then received a demand letter from
Naguiat to settle the loan. Thereafter, Queano together with one Ruby Ruebenfedlt met
with Naguiat. There, Queano informed Naguiat that she did not receive the proceeds of
the loan, adding that the checks were retained by Ruebenfeldt, who purportedly was
Naguiat’s agent.It was found out that Naguiat instructed Ruebenfeldt to withhold from
Queaño the checks she issued or indorsed to Queaño, pending delivery by the latter of
additional collateral. Ruebenfeldt served as agent of Naguiat on the loan application of
Queaño’s friend, Marilou Farralese, and it was in connection with that transaction that
Queaño came to know Naguiat.

ISSUE: WON Rubenfeldt was an agent of Naguiat.

RULING: The Court of Appeals recognized the existence of an "agency by

estoppel25 citing Article 1873 of the Civil Code.26 Apparently, it considered that at the
very least, as a consequence of the interaction between Naguiat and Ruebenfeldt,
Queaño got the impression that Ruebenfeldt was the agent of Naguiat, but Naguiat did
nothing to correct Queaño’s impression. In that situation, the rule is clear. 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.27 The Court of Appeals is correct in
invoking the said rule on agency by estoppel. 1awphi1.nét

More fundamentally, whatever was the true relationship between Naguiat and
Ruebenfeldt is irrelevant in the face of the fact that the checks issued or indorsed to
Queaño were never encashed or deposited to her account of Naguiat.

All told, we find no compelling reason to disturb the finding of the courts a quo that the
lender did not remit and the borrower did not receive the proceeds of the loan. That
being the case, it follows that the mortgage which is supposed to secure the loan is null
and void. The consideration of the mortgage contract is the same as that of the
principal contract from which it receives life, and without which it cannot exist as an
independent contract.28 A mortgage contract being a mere accessory contract, its
validity would depend on the validity of the loan secured by it.

Professional Services v. Agana, GR No. 126297, 31 January 2007

DOCTRINES: Same;Same; Same; PSI’s liability is also anchored upon the agency

principle of apparent authority or agency by estoppel and the doctrine of corporate
negligence.—But the Ramos pronouncement is not our only basis in sustaining PSI’s
liability. Its liability is also anchored upon the agency principle of apparent authority or
agency by estoppel and the doctrine of corporate negligence which have gained
acceptance in the determination of a hospital’s liability for negligent acts of health
professionals. The present case serves as a perfect platform to test the applicability of
these doctrines, thus, enriching our jurisprudence. Apparent authority, or what is
sometimes referred to as the “holding out” theory, or doctrine of ostensible agency or
agency by estoppel, has its origin from the law of agency. It imposes liability, not as the
result of the reality of a contractual relationship, but rather because of the actions of a
principal or an employer in somehow misleading the public into believing that the
relationship or the authority exists. The concept is essentially one of estoppel and has
been explained in this manner: “The principal is bound by the acts of his agent with the
apparent authority which he knowingly permits the agent to assume, or which he holds
the agent out to the public as possessing. The question in every case is whether the
principal has by his voluntary act placed the agent in such a situation that a person of
ordinary prudence, conversant with business usages and the nature of the particular
business, is justified in presuming that such agent has authority to perform the
particular act in question.
Same; Same; Same; In cases where it can be shown that a hospital, by its
actions, has held out a particular physician as its agent and /or employee and that a
patient has accepted treatment from that physician in the reasonable belief that it is
being rendered in behalf of the hospital, then the hospital will be liable for the
physician’s negligence.—The applicability of apparent authority in the field of hospital
liability was upheld long time ago in Irving v. Doctor Hospital of Lake Worth, Inc. , 415
So. 2d 55 (1982). There, it was explicitly stated that “ there does not appear to be any
rational basis for excluding the concept of apparent authority from the field of hospital
liability.” Thus, in cases where it can be shown that a hospital, by its actions, has held
out a particular physician as its agent and/or employee and that a patient has accepted
treatment from that physician in the reasonable belief that it is being rendered in behalf
of the hospital, then the hospital will be liable for the physician’s negligence.
Same; Same; Same; By accrediting Dr. Ampil and Dr. Fuentes and publicly
advertising their qualifications, the hospital created the impression that they were its
agents, authorized to perform medical or surgical services for its patients .—In this case,
PSI publicly displays in the lobby of the Medical City Hospital the names and
specializations of the physicians associated or accredited by it, including those of Dr.
Ampil and Dr. Fuentes. We concur with the Court of Appeals’ conclusion that it “ is now
estopped from passing all the blame to the physicians whose names it proudly paraded
in the public directory leading the public to believe that it vouched for their skill and
competence.” Indeed, PSI’s act is tantamount to holding out to the public that Medical
City Hospital, through its accredited physicians, offers quality health care services. By
accrediting Dr. Ampil and Dr. Fuentes and publicly advertising their qualifications, the
hospital created the impression that they were its agents, authorized to perform
medical or surgical services for its patients. As expected, these patients, Natividad being
one of them, accepted the services on the reasonable belief that such were being
rendered by the hospital or its employees, agents, or servants.

FACTS:

In 1984, Natividad Agana was rushed to the Medical City General Hospital because of
difficulty of bowel movement and bloody anal discharge. After a series of medical
examinations, Dr. Miguel Ampil diagnosed her to be suffering from Cancer of the
sigmoid. On April 11, 1984, Dr. Ampil assisted by the medical staff of the Medical City
Hospital performed an Anterior resection surgery on Natividad. He found that the
malignancy on her sigmoid area had spread on her left ovary, necessitating the removal
of certain portions of it. Thus, Dr. Ampil obtained the consent of Natividad’s husband,
Enrique Agana, to permit Dr. Juan Fuentes to perform hysterectomy on her. After Dr.
Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the operation
and closed the incision after searching for the missing 2 gauzes as indicated by the
assisting nurses but failed to locate it. After a couple of days, Natividad complained of
excruciating pains in her anal region but Dr. Ampil said it is a natural consequence of
the operation/surgery and recommended that she consult an oncologist to examine the
cancerous nodes which were not removed during the operation. Natividad and her
husband went to the US to seek further treatment and she was declared free from
cancer. A piece of gauze portruding from Natividad’s vagina was found by her daughter
which was then removed by hand by Dr. Ampil and assured that the pains will
vanished. However, it didn’t. The pains intensified prompting Natividad to seek
treatment at the Polymedic General Hospital. While confined there, Dr. Ramon Guttierez
detected the presence of another foreign object in her vagina – a foul smelling gauze
measuring 1.5 inches in width which badly infected her vagina. A recto-vaginal fistula
had forced stool to excrete through her vagina. Another surgical operation was needed
to remedy the damage.

Issues: Whether or not PSI may be held solidarily liable for the negligence of Dr. Ampil.

Held: Yes, PSI is solidarily liable for the negligence of Dr. Ampil. In Ramos v. Court of
Appeals, the court held that private hospitals, hire, fire and exercise real control over
their attending and visiting ‘consultant’ staff. While ‘consultants’ are not, technically
employees, the control exercised, the hiring, and the right to terminate consultants all
fulfill the important hallmarks of an employer-employee relationship, with the exception
of the payment of wages. The court held that for the purpose of allocating responsibility
in medical negligence cases, an employer-employee relationship in effect exists
between hospitals and their attending and visiting physicians.

In addition to the pronouncement in Ramos vs CA, Its liability is also anchored upon the
agency principle of apparent authority or agency by estoppel and the doctrine of
corporate negligence.

Apparent authority, or what is sometimes referred to as the “holding out” theory, or

doctrine of ostensible agency or agency by estoppel, imposes liability, not as the result
of the reality of a contractual relationship, but rather because of the actions of a
principal or an employer in somehow misleading the public into believing that the
relationship or the authority exists.

In this case, PSI publicly displays in the lobby of Hospital the names and specializations
of the physicians associated or accredited by it, including those of Dr. Ampil and Dr.
Fuentes. It is now estopped from passing all the blame to the physicians whose names
it proudly paraded in the public directory leading the public to believe that it vouched
for their skill and competence. PSI’s act is tantamount to holding out to the public that
Medical City Hospital, through its accredited physicians, offers quality health care
services. By accrediting Dr. Ampil and Dr. Fuentes and publicly advertising their
qualifications, the hospital created the impression that they were its agents, authorized
to perform medical or surgical services for its patients. As expected, these patients,
Natividad being one of them, accepted the services on the reasonable belief that such
were being rendered by the hospital or its employees, agents, or servants.

Under the doctrine of corporate negligence or corporate responsibility, PSI as owner,

operator and manager of Medical City Hospital, did not perform the necessary
supervision nor exercise diligent efforts in the supervision of Drs. Ampil and Fuentes
and its nursing staff, resident doctors, and medical interns who assisted Drs. Ampil and
Fuentes in the performance of their duties as surgeons. Premised on the doctrine of
corporate negligence, the trial court held that PSI is directly liable for such breach of
duty.

In the present case, it was duly established that PSI operates the Medical City Hospital
for the purpose and under the concept of providing comprehensive medical services to
the public. Accordingly, it has the duty to exercise reasonable care to protect from harm
all patients admitted into its facility for medical treatment. Unfortunately, PSI failed to
perform such duty.

It is worthy to note that Dr. Ampil and Dr. Fuentes operated on Natividad with the
assistance of the Medical City Hospital’s staff, composed of resident doctors, nurses,
and interns. As such, it is reasonable to conclude that PSI, as the operator of the
hospital, has actual or constructive knowledge of the procedures carried out,
particularly the report of the attending nurses that the two pieces of gauze were
missing. In Fridena v. Evans, it was held that a corporation is bound by the knowledge
acquired by or notice given to its agents or officers within the scope of their authority
and in reference to a matter to which their authority extends. This means that the
knowledge of any of the staff of Medical City Hospital constitutes knowledge of PSI.
Now, the failure of PSI, despite the attending nurses’ report, to investigate and inform
Natividad regarding the missing gauzes amounts to callous negligence. Not only did PSI
breach its duties to oversee or supervise all persons who practice medicine within its
walls, it also failed to take an active step in fixing the negligence committed. This
renders PSI, not only vicariously liable for the negligence of Dr. Ampil under Article
2180 of the Civil Code, but also directly liable for its own negligence under Article 2176.

PSI, apart from a general denial of its responsibility, failed to adduce evidence showing
that it exercised the diligence of a good father of a family in the accreditation and
supervision of Dr. Ampil. In neglecting to offer such proof, PSI failed to discharge its
burden under the last paragraph of Article 2180 and, therefore, must be adjudged
solidarily liable with Dr. Ampil.

B. Oral or Written
Art. 1869, Art. 1874
CASES:

Angeles v. Phil. National Railways, 500 SCRA 444

Civil Law;  Contracts; Agency;  Normally, the agent has neither rights nor liabilities
as against the third party; he cannot thus sue or be sued on the contract .—Where
agency exists, the third party’s (in this case, PNR’s) liability on a contract is to the
principal and not to the agent and the relationship of the third party to the principal is
the same as that in a contract in which there is no agent. Normally, the agent has
neither rights nor liabilities as against the third party. He cannot thus sue or be sued on
the contract. Since a contract may be violated only by the parties thereto as against
each other, the real party-in-interest, either as plaintiff or defendant in an action upon
that contract must, generally, be a contracting party.
Agency;  Assignee;  The legal situation is different where an agent is constituted as
an assignee.—The legal situation is, however, different where an agent is constituted as
an assignee. In such a case, the agent may, in his own behalf, sue on a contract made
for his principal, as an assignee of such contract. The rule requiring every action to be
prosecuted in the name of the real party-in-interest recognizes the assignment of rights
of action and also recognizes that when one has a right assigned to him, he is then the
real party-in-interest and may maintain an action upon such claim or right.
Civil Law;  Contracts; Article 1374 of the Civil Code provides that the various
stipulations of a contract shall be read and interpreted together, attributing to the
doubtful ones that sense which may result from all of them taken jointly .—Article 1374
of the Civil Code provides that the various stipulations of a contract shall be read and
interpreted together, attributing to the doubtful ones that sense which may result from
all of them taken jointly. In fine, the real intention of the parties is primarily to be
determined from the language used and gathered from the whole instrument. When
put into the context of the letter as a whole, it is abundantly clear that the rights which
Romualdez waived or ceded in favor of Lizette were those in furtherance of the agency
relation that he had established for the withdrawal of the rails. At any rate, any doubt
as to the intent of Romualdez generated by the way his letter was couched could be
clarified by the acts of the main players themselves. Article 1371 of the Civil Code
provides that to judge the intention of the contracting parties, their contemporaneous
and subsequent acts shall be principally considered. In other words, in case of doubt,
resort may be made to the situation, surroundings, and relations of the parties.
Powers of Attorney;  A power of attorney is only but an instrument in writing by which a
person, as principal, appoints another as his agent and confers upon him the authority
to perform certain specified acts on behalf of the principal.—A power of attorney is only
but an instrument in writing by which a person, as principal, appoints another as his
agent and confers upon him the authority to perform certain specified acts on behalf of
the principal. The written authorization itself is the power of attorney, and this is clearly
indicated by the fact that it has also been called a “letter of attorney.” Its primary
purpose is not to define the authority of the agent as between himself and his principal
but to evidence the authority of the agent to third parties with whom the agent
deals.The letter under consideration is sufficient to constitute a power of attorney.
Except as may be required by statute, a power of attorney is valid although no notary
public intervened in its execution. A power of attorney must be strictly construed and
pursued. The instrument will be held to grant only those powers which are specified
therein, and the agent may neither go beyond nor deviate from the power of attorney.

Jimenez v. Rabot, 38 Phil. 378

City-Lite v. CA, 325 SCRA 385

Cosmic Lumber v. CA, 265 SCRA 168
San Juan Structural Steel v. CA, 296 SCRA 631
De los Reyes v. CA, 313 SCRA 632
AF Realty v. Dieselman Freight, 373 SCRA 385

C. Onerous or Gratitious
Art. 1875

D. General or Special
Art. 1876

CASES:

Siasat v. IAC, 139 SCRA 238

Civil Law;  Agency; General Agency; Where general words were employed in an

agreement that no restrictions were intended as to the manner the agency was to be
carried out or in the place where it was to be executed, a general agency is constituted.
—One does not have to undertake a close scrutiny of the document embodying the
agreement between the petitioners and the respondent to deduce that the latter was
instituted as a general agent. Indeed, it can easily be seen by the way general words
were employed in the agreement that no restrictions were intended as to the manner
the agency was to be carried out or in the place where it was to be executed. The
power granted to the respondent was so broad that it practically covers the
negotiations leading to, and the execution of, a contract of sale of petitioners'
merchandise with any entity or organization.
Same;  Same; Same;  Contract of agency, not entered through fraudulent
representations where no efforts were exerted to limit the scope of the agency; Case at
bar.—lf the circumstances were as claimed by the petitioners, they would have exerted
efforts to protect their interests by limiting the respondent's authority. There was
nothing to prevent the petitioners from stating in the contract of agency that the
respondent could represent them only in the Visayas. Or to state that the Department
of Education and Culture and the Department of National Defense, which alone would
need a million pesos worth of flags, are outside the scope of the agency. As the trial
court opined, it is incredible that they could be so careless after being in the business
for fifteen years.

Dominion insurance v. CA, 376 SCRA 239

Civil Law;  Contracts; Agency;  The basis for agency is representation;  There must be an
actual intention by the principal to appoint and on the part of the agent an intention to
accept the appointment and act on it, otherwise there is generally no agency. —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. The
basis for agency is representation. On the part of the principal, there must be an actual
intention to appoint or an intention naturally inferrable from his words or actions; and
on the part of the agent, there must be an intention to accept the appointment and act
on it, and in the absence of such intent, there is generally no agency.

E. Couched in General Terms or Special Power of Attorney

Art. 1877, Art. 1878, Art. 1879, Art. 1880
CASES:

Germann v. Donaldson, GR No. 439, 11 November 1901

1. CONTRACT; CONFLICT OF LAWS.—The validity of a power of attorney executed

in Germany between German subjects should be considered according to the
laws of that country.

1. 2.AGENCY; POWER OF ATTORNEY.—The right to commence action for collection

of debts owing to principal is not an incident of strict ownership, which must be
conferred in express terms.

1. 3.POWER OF ATTORNEY; RIGHT TO SUE.—The power to "legally compel" the

payment of debts owing to the principal is an express grant of the right to bring
suit for the collection of such debts.

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

Macke v. Camps, 7 Phil. 553

Bank of PI v. De Coster, 47 Phil. 594

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

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

Hodges v. Salas, 63 Phil. 567

Dungo v. Lopena, 6 SCRA 1007

PNB v. Sta. Maria, 29 SCRA 303

Vicente v. Geraldez, 52 SCRA 210

Veloso v. Court of Appeals, GR No. 102737, 21 August 1996

Bravo-Guerrero v. Bravo, GR No. 152658, 29 July 2005