Article 1868.

 By the contract of agency a person binds himself to render some service or to
do something in representation or on behalf of another, with the consent or authority of the
latter. (1709a)

Article 1869. Agency may be express, or implied from the acts of the principal, from his
silence or lack of action, or his failure to repudiate the agency, knowing that another
person is acting on his behalf without authority.

Article 1898. If the agent contracts in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party with
whom the agent contracted is aware of the limits of the powers granted by the principal. In
this case, however, the agent is liable if he undertook to secure the principal's ratification.
(n)

Article 1901. A third person cannot set up the fact that the agent has exceeded his
powers, if the principal has ratified, or has signified his willingness to ratify the agent's
acts. (n)

Article 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is not bound
except when he ratifies it expressly or tacitly. (1727)

Article 1317. No one may contract in the name of another without being authorized by the
latter, or unless he has by law a right to represent him.

A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose behalf it has been executed, before
it is revoked by the other contracting party. (1259a)

CHAPTER 8
Unenforceable Contracts (n)

Article 1403. The following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers;

Article 1874. When a sale of a piece of land or any interest therein is through an agent,
the authority of the latter shall be in writing; otherwise, the sale shall be void. (n)
Article 1930. The agency shall remain in full force and effect even after the death of the
principal, if it has been constituted in the common interest of the latter and of the agent, or
in the interest of a third person who has accepted the stipulation in his favor. (n)

Article 1931. Anything done by the agent, without knowledge of the death of the principal
or of any other cause which extinguishes the agency, is valid and shall be fully effective
with respect to third persons who may have contracted with him in good faith. (1738)

Article 1932. If the agent dies, his heirs must notify the principal thereof, and in the
meantime adopt such measures as the circumstances may demand in the interest of the
latter. (1739)

Rallos v Felix
Plaintiff: Ramon Rallos

Defendant: Felix Go Chan & Sons Realty Corporation

Facts: Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of
land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer Certificate
of Title No. 11116 of the Registry of Cebu.They executed a special power of attorney in favor
of their brother, Simeon Rallos, authorizing him to sell such land for and in their behalf.  
After Concepcion died, Simeon Rallos sold the undivided shares of his sisters Concepcion
and Gerundia to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. New
TCTs were issued to the latter. Petitioner Ramon Rallos, administrator of the Intestate
Estate of Concepcion filed a complaint praying (1) that the sale of the undivided share of
the deceased Concepcion Rallos in lot 5983 be unenforceable, and said share be reconveyed
to her estate; (2) that the Certificate of ‘title issued in the name of Felix Go Chan & Sons
Realty Corporation be cancelled and another title be issued in the names of the corporation
and the “Intestate estate of Concepcion Rallos” in equal undivided and (3) that plaintiff be
indemnified by way of attorney’s fees and payment of costs of suit.

1) WON sale was valid although it was executed after the death of the principal,
Concepcion.

2) WON sale fell within the exception to the general rule that death extinguishes the
authority of the agent

Ruling:
Article 1930 is not involved because admittedly the special power of attorney executed in
favor of Simeon Rallos was not coupled with an interest.
Article 1931 is the applicable law. Under this provision, an act done by the agent after the
death of his principal is valid and effective only under two conditions, viz: (1) that the agent
acted without knowledge of the death of the principal, and (2) that... the third person who
contracted with the agent himself acted in good faith. Good faith here means that the third
person was not aware of the death of the principal at the time he contracted with said
agent. These two requisites must concur: the absence... of one will render the act of the
agent invalid and unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the
death of his principal at the time he sold the latter's share in Lot No. 5983 to respondent
corporation. The knowledge of the death is clearly to be inferred from the pleadings filed by
Simeon Rallos before the trial court.[12] That Simeon Rallos knew of the death of his sister
Concepcion is also a finding of fact of the court a quo[13]  and of respondent appellate
court when the latter stated that
Simeon Rallos "must have known of the death of his sister, and yet he proceeded with the
sale of the lot in the name of both his sisters Concepcion and Gerundia Rallos without
informing appellant (the realty corporation) of the death of the former."
On the basis of the established knowledge of Simeon Rallos concerning the death of his
principal, Concepcion Rallos, Article 1931 of the Civil Code is inapplicable.
The law expressly requires for its application lack of knowledge on the part of the agent of
the death... of his principal; it is not enough that the third person acted in good faith.
Principles:
no one may contract in the name of another without being authorized by the latter, or
unless he has by law a right to represent him.[3]... no one may contract in the name of
another without being authorized by the latter, or unless he has by law a right to represent
him.[3]  A contract entered into in the name of... another by one who has no authority or
legal representation, or who has acted beyond his powers, shall be unenforceable, unless it
is ratified, expressly or impliedly, by the person on whose behalf it has been executed,
before it is revoked by the other contracting... party.[... the creation and acceptance of the
relationship of agency whereby one party, called the principal (mandante), authorizes
another, called the agent (mandatario), to act for and in his behalf in transactions... with
third persons. The essential elements of agency are: (1) there is consent, express or
implied, of the parties to establish the relationship; (2) the object is the execution of
a juridical act in relation to a third person; (3) the agent acts as a representative and
not for... himself; and (4) the agent acts within the scope of his authority. (4) Specific
form?
Agency is basically personal, representative, and derivative  in nature. The authority of the
agent to act emanates from the powers granted to him by his principal; his act is the act of
the principal if done within the scope of the authority. Qui... facit per alium facit per se. "He
who acts through another acts himself."
By reason of the very nature of the relationship between principal and agent, agency is
extinguished by the death of the principal or of the agent. This is the law in this
jurisdiction.
the death of the principal effects instantaneous and absolute revocation of the authority of
the agent unless the power be coupled with an interest
Orient Air Services v CA

Facts:
American Airlines, Inc. and Orient Air Services and Hotel Representatives... entered into a
General Sales Agency Agreement... whereby the former authorized the latter to act as its
exclusive general sales agent within the Philippines for the sale of air passenger
transportation.
On 11 May 1981, alleging that Orient Air had reneged on its obligations under the
Agreement by failing to promptly remit the net proceeds of sales for the months of January
to March 1981 in the amount of US $254,400.40, American Air by itself undertook the
collection of the... proceeds of tickets sold originally by Orient Air and terminated forthwith
the Agreement in accordance with Paragraph 13
Four (4) days later American Air instituted suit against Orient Air with the Court of First
Instance of Manila... for Accounting with Preliminary Attachment or Garnishment,
Mandatory Injunction and Restraining Order... defendant Orient Air denied the material
allegations of the complaint with respect to plaintiff's entitlement to alleged unremitted
amounts, contending that after application thereof to the commissions... due it under the
Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overriding
commissions.
Finding that the record and the evidence substantiated the allegations of the American
Airlines, the trial court ruled in its favor
On appeal, the Court of Appeals... affirmed the findings of the court
Issues:
W/N the lower court's decision ordering American Air to "reinstate defendant as its general
sales agent for passenger... transportation in the Philippines in accordance with said GSA
Agreement."

Ruling:
After a careful examination of the records, the Court finds merit in the contention of Orient
Air that the Agreement, when interpreted in accordance with the foregoing principles,
entitles it to the 3% overriding commission based on total... revenue, or as referred to by
the parties, "total flown revenue."
As the designated exclusive General Sales Agent of American Air, Orient Air was
responsible for the promotion and marketing of American Air's services for air passenger
transportation, and the solicitation of sales therefor.  In return for such efforts and
services, Orient
Air was to be paid commissions of two (2) kinds:  first, a sales agency commission, ranging
from 7-8% of tariff fares and charges from sales by Orient Air when made on American Air
ticket stock; and second, an overriding commission of 3% of tariff fares and charges... for
all sales of passenger transportation over American Air services.
To rule otherwise, i.e., to limit the basis of such overriding commissions to sales... from
American Air ticket stock would erase any distinction between the two (2) types of
commissions and would lead to the absurd conclusion that the parties had entered into a
contract with meaningless provisions.
******
It is believed, however, that respondent appellate court erred in affirming the rest of the
decision of the trial court.  We refer particularly to the lower court's decision ordering
American Air to "reinstate defendant as its general sales agent for passenger...
transportation in the Philippines in accordance with said GSA Agreement."
By affirming this ruling of the trial court, respondent appellate court, in effect, compels
American Air to extend its personality to Orient Air.  Such would be violative of the
principles and essence of agency, defined by law as a contract whereby "a person binds
himself... to render some service or to do something in representation or on behalf of
another, WITH THE CONSENT OR AUTHORITY OF THE LATTER."
Such a relationship can only be effected with the consent of the principal, which must not,
in any way, be compelled by... law or by any court.  In fact, the Agreement itself between
the parties states that "either party may terminate the Agreement without cause by giving
the other 30 days' notice by letter, telegram or cable." (emphasis supplied) We, therefore,
set aside the portion of the... ruling of the respondent appellate court reinstating Orient Air
as general sales agent of American Air.

Uy v CA

FACTS:  Petitioners William Uy and Rodel Roxas are agents authorized to sell 8 parcels of
land.  Petitioners offered to sell the land to NHA for a housing project. On February 14,
1989, NHA passed a resolution approving the acquisition of said lands, and pursuant to
this the parties executed Deeds of Absolute Sale. However, only 5 out of 8 lands were paid
for by NHA because of a report from DENR that the remaining area is located at an active
landslide area and are therefore not conducive for housing.  On November 22, 1991, NHA
issued a resolution canceling the sale of the remaining lands and offered P1.225 million to
the landowners as daños perjuicios.  On March 9, 1992, petitioners filed a complaint for
damages against NHA and its general manager Robert Balao.  RTC ruling: declared the
cancellation to be justified, but awarded the amount offered by NHA.  Court of Appeals
ruling: affirmed the decision, but deleted the award. The appellate court noted that
petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the
action before the trial court.

ISSUE:  Whether or not the petitioners are real parties in interest.

HELD:  Petitioners claim that they lodged the complaint not in behalf of their principals
but in their own name as agents directly damaged by the termination of the contract.
Petitioners in this case purportedly brought the action for damages in their own name and
in their own behalf. An action shall be prosecuted in the name of the party who, by the
substantive law, has the right sought to be enforced.  Petitioners are not parties to the
contract of sale between their principals and NHA. They are mere agents of the owners of
the land subject of the sale. As agents, they only render some service or do something in
representation or on behalf of their principals. The rendering of such service did not make
them parties to the contracts of sale executed in behalf of the latter. Since a contract may
be violated only by the parties thereto as against each other, the real parties-in-interest,
either as plaintiff or defendant, in an action upon that contract must, generally, either be
parties to said contract. Petitioners have not shown that they are assignees of their
principals to the subject contracts. While they alleged that they made advances and that
they suffered loss of commissions, they have not established any agreement granting them
"the right to receive payment and out of the proceeds to reimburse [themselves] for
advances and commissions before turning the balance over to the principal[s]." 
WHEREFORE, the instant petition is hereby DENIED.

Macke v Camps
  
Facts:
The plaintiffs in this action, B. H. Macke and W. H. Chandler, partners doing business
under the firm name of Macke, Chandler & Company. They sold to the defendant and
delivered at his place of business, known as the "Washington Cafe," various bills of goods;
that the defendant has only paid on account of said accounts the sum of P174; that there
is still due them on account of said goods the sum of P177.50; that before instituting this
action they made demand for the payment thereof; and that defendant had failed and
refused to pay the said balance or any part of it up to the time of the filing of the complaint.
B. H. Macke, one of the plaintiffs, testified that on the order of Ricardo Flores, who
represented himself to be agent of the defendant, he shipped the said goods to the
defendants at the Washington Cafe; that Flores later acknowledged the receipt of
said goods and made various payments thereon amounting in all to P174; that on
demand for payment of balance of the account Flores informed him that he did not have
the necessary funds on hand, and that he would have to wait the return of his principal,
the defendant, who was at that time visiting in the provinces.
A written contract was introduced from which it appears that one Galmes, the former
owner of the business now know as the "Washington Cafe," subrented the
building wherein the business was conducted, to the defendant for a period of one year,
for the purpose of carrying on that business, the defendant obligating himself not to
sublet or subrent the building or the business without the consent of the said
Galmes. This contract was signed by the defendant and the name of Ricardo
Flores appears thereon as a witness, and attached thereto is an inventory of
the furniture and fittings which also is signed by the defendant with the word
"sublessee" (subarrendatario) below the name, and at the foot of this inventory the word
"received" (recibo) followed by the name "Ricardo Flores," with the words
"managing agent" (el manejante encargado) immediately following his name.

Issue:
WON Flores is considered an agent of the defendant Camps

Held: 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 agent in good faith
and in the honest belief that he is what he appears to be. Unless the contrary appears, the
authority of an agent must be presumed to include all the necessary and usual means of
carrying his agency into effect. Flores, as managing agent of the Washington Café, had
authority to buy such reasonable quantities. of supplies as might from time to time
be necessary in carrying on the business of a hotel bar may fairly be presumed from the
nature of the business, especially in view of the fact that his principal appears to have left
him in charge during more or less prolonged periods of absence; from an examination of
the items of the account attached to the complaint, we are of opinion that he was acting
within the scope of his authority in ordering these goods, and that his admissions as to the
receipt of these goods are binding on his principal, and in the absence of evidence to the
contrary, furnish satisfactory proof of their delivery as alleged in the complaint
The judgment of the trial court is affirmed with the costs of this instance against the
appellant.

Prudential Bank v CA
FACTS:
 
Aurora Cruz invested P200,000 with Prudential bank at its Quezon Avenue Branch. The
placement was for 63 days at 13.75% annual interest. The amount of P196,122.88 was
withdrawn on June 23,1986 from the savings account and applied to the investment, the
difference of P3,877.07 representing the pre-paid investment.

The transaction was evidence by a Confirmation Sale and Debit Memo delivered to Cruz
after two days. Bank employee Susan Quimbo issued the documents.

Upon maturity of the placement on Aug 25, 1986, Cruz returned to the bank to renew her
investment. Quimbo again issued the same documents but now asked Cruz to sign a
Withdrawal Slip for P196,122.98, representing the amount to be re-invested. Quimbo
explained that this was a new requirement of the bank.

On Oct 27, 1986, Cruz returned to the Bank to withdraw P200,000 but was informed that
according to their records, she had already withdrawn the money of Aug 25, 1986. The
bank had no copy of the Confirmation Sale or Debit Memo issued by Quimbo, Quimbo also
stopped reporting to the bank.

Cruz made several demands for the return of the money but was told by bank officials to
defer court action. Subsequently, the Bank denied the request of Cruz because she
allegedly had withdrawn the money already.

Cruz filed an action for breach of contract. The bank denied liability and instituted a third-
party suit against Quimbo. Trial court and CA decided in favor of Cruz.

Petitioner claims that the documents presented by Cruz were fake and she did not deny
signing the Withdrawal Slip. On the other hand, Cruz states that she merely signed as part
of the new procedure for re-investment but has not received the amount.

ISSUES + RULING:
 WoN the bank, as principal, should be held liable for the acts of Quimbo, its agent.

the bank should not have been found liable for a quasi-delict when it was sued for breach of
contract.

 YES.
The amount in the Withdrawal Slip relied on by petitioner is an irregular figure which
corresponded to the very same amount Cruz was re-investing after the deduction of the
pre-paid interest. If the intention of Cruz were to withdraw her money, she would have done
so in round figures.
The bank failed to impugn the authenticity of the documents presented by Cruz. Even if
authorized officials did notsign the documents, Cruz had no obligation to verify the
authority of Quimbo who handed the same to her. She had the right to presume the
authenticity of the documents. Cruz had no reason to not accept Quimbo’s authority to act
in behalf of her employer. The Court also took note of the fact that although the bank filed
a third-party claim against Quimbo, it did not pursue the case. The bank also did not
present Quimbo to testify.

The bases of the petitioner’s liability are Arts. 1910 and 1911 of the Civil Code. The
agent’s apparent representation yields to the principal’s true representation and the
contract is considered as entered into between the principal and the third person.
The Court also had previously held that banks are liable to innocent 3rd persons where the
representation is made in the course of its business by an agent acting within the general
scope of his authority, notwithstanding the fact that the latter may already be abusing his
authority in order to commit fraud.
The bank’s relationship with the public is fiduciary. The bank should have immediately
repaired the injury caused to Cruz. The misdeeds of employees must be readily
acknowledged and rectified.

Litonjua Jr. v Eternit

FACTS:

The Eternit Corporation (EC) is a corporation duly organized and registered under
Philippine laws. Since 1950, it had been engaged in the manufacture of roofing materials
and pipe products. Ninety (90%) percent of the shares of stocks of EC were owned by
Eteroutremer S.A. Corporation (ESAC), a corporation organized and registered under the
laws of Belgium. In 1986, the management of ESAC grew concerned about the political
situation in the Philippines and wanted to stop its operations in the country. The
Committee for Asia of ESAC instructed Michael Adams, a member of EC’s Board of
Directors, to dispose of the eight parcels of land. Adams engaged the services of
realtor/broker Lauro G. Marquez so that the properties could be offered for sale to
prospective buyers. Glanville later showed the properties to Marquez.

Marquez thereafter offered the parcels of land and the improvements thereon to Eduardo B.
Litonjua, Jr. of the Litonjua & Company, Inc. The Litonjua siblings offered to buy the
property for P20,000,000.00 cash. Marquez apprised Glanville of the Litonjua siblings’ offer
and relayed the same to Delsaux in Belgium, but the latter did not respond. It was only on
February 12, 1987 that Delsaux sent a telex to Glanville stating that, based on the
“Belgian/Swiss decision,” the final offer was “US$1,000,000.00 and P2,500,000.00 to cover
all existing obligations prior to final liquidation.”

Marquez conferred with Glanvilleconfirmed that the Litonjua siblings had accepted the
counter-proposal of Delsaux. He also stated that the Litonjua siblings would confirm full
payment within 90 days after execution and preparation of all documents of sale, together
with the necessary governmental clearances.The Litonjua brothers deposited the amount of
US$1,000,000.00 with the Security Bank & Trust Company, Ermita Branch, and drafted
an Escrow Agreement to expedite the sale.

Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the sale
would be implemented. In a telex dated April 22, 1987, Glanville informed Delsaux that he
had met with the buyer, which had given him the impression that “he is prepared to press
for a satisfactory conclusion to the sale. Meanwhile, with the assumption of Corazon C.
Aquino as President of the Republic of the Philippines, the political situation in the
Philippines had improved. Marquez received a telephone call from Glanville, advising that
the sale would no longer proceed. The Litonjuas then filed a complaint for specific
performance and damages against EC (now the Eterton Multi-Resources Corporation) and
the Far East Bank & Trust Company, and ESAC in the RTC of Pasig City.

In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was not
doing business in the Philippines, it cannot be subject to the jurisdiction of Philippine
courts; the Board and stockholders of EC never approved any resolution to sell subject
properties nor authorized Marquez to sell the same; and the telex dated October 28, 1986
of Jack Glanville was his own personal making which did not bind EC.

ISSUE:

Won Glanville and Delsaux have the necessary authority to sell the subject properties.

RULING:

NO. Section 23 of Batas Pambansa Bilang 68, otherwise known as the Corporation Code of
the Philippines, provides:

SEC. 23. The Board of Directors or Trustees. – Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and held by the board of
directors or trustees to be elected from among the holders of stocks, or where there is no
stock, from among the members of the corporation, who shall hold office for one (1) year
and until their successors are elected and qualified.

Indeed, a corporation is a juridical person separate and distinct from its members or
stockholders and is not affected by the personal rights,obligations and transactions of the
latter.It may act only through its board of directors or, when authorized either by its by-
laws or by its board resolution, through its officers or agents in the normal course of
business. The general principles of agency govern the relation between the corporation and
its officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions
of law.

Under Section 36 of the Corporation Code, a corporation may sell or convey its real
properties, subject to the limitations prescribed by law and the Constitution, as follows:

SEC. 36. Corporate powers and capacity. – Every corporation incorporated under this Code
has the power and capacity:

xxxx
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and
otherwise deal with such real and personal property, including securities and bonds of
other corporations, as the transaction of a lawful business of the corporation may
reasonably and necessarily require, subject to the limitations prescribed by the law and the
Constitution.

The property of a corporation, however, is not the property of the stockholders or members,
and as such, may not be sold without express authority from the board of directors.
Physical acts, like the offering of the properties of the corporation for sale, or the
acceptance of a counter-offer of prospective buyers of such properties and the execution of
the deed of sale covering such property, can be performed by the corporation only by
officers or agents duly authorized for the purpose by corporate by-laws or by specific acts of
the board of directors.[28] Absent such valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs of the corporation, but not in
the course of, or connected with, the performance of authorized duties of such director, are
not binding on the corporation.

In this case, the petitioners as plaintiffs below, failed to adduce in evidence any resolution
of the Board of Directors of respondent EC empowering Marquez, Glanville or Delsaux as
its agents, to sell, let alone offer for sale, for and in its behalf, the eight parcels of land
owned by respondent EC including the improvements thereon. While Glanville was the
President and General Manager of respondent EC, and Adams and Delsaux were members
of its Board of Directors, the three acted for and in behalf of respondent ESAC, and not as
duly authorized agents of respondent EC; a board resolution evincing the grant of such
authority is needed to bind EC to any agreement regarding the sale of the subject
properties. Such board resolution is not a mere formality but is a condition sine qua non to
bind respondent EC. Admittedly, respondent ESAC owned 90% of the shares of stocks of
respondent EC; however, the mere fact that a corporation owns a majority of the shares of
stocks of another, or even all of such shares of stocks, taken alone, will not justify their
being treated as one corporation.[43]

Spouses Viloria v Continental Airlines

Angeles v PNR

Jimenez v Rabot

City-Lite v CA

FACTS
F.P. Holdings and Realty Corporation (F.P. Holdings), formerly the Sparta Holdings Inc, was
the registered owner of a parcel of land situated along E. Rodriguez Avenue, Quezon City
also known as the “Violago Property” or the “San Lorenzo Ruiz Commercial Center,” with an
area of 71,754 sqm. The property was offered for sale to the general public through the
circulation of a sales brochure containing the description of the property and the asking
price of P6,250/sqm with terms of payment negotiable. In addition, broker’s commission
was 2% of selling price, net of withholding taxes and other charges. Contact person was
Meldin Al G. Roy, Metro Drug Inc. The front portion consisting of 9,192 sqm is the subject
of this litigation. Al G. Roy sent a sales brochure, together with the location plan and copy
of the TCT to Atty. Gelacio Mamaril, a practicing lawyer and a licensed real estate broker.
Mamaril passed in turn passed on these documents to Antonio Teng, Executive Vice
President, and Atty Victor Villanueva, Legal Counsel of City-Lite. City-Lite conveyed its
interest to purchase a portion or one-half (1/2) of the front lot of the “Violago Property”
Apparently, Roy subsequently informed City-Lite’s representative that it would take time to
subdivide the lot and F.P. HOLDINGS was not receptive to the purchase of only half of the
front lot. Atty. Mamaril wrote Metro Drug (Al G. Roy) expressing City-Lite’s desire to buy the
entire front lot of the subject property instead of only half thereof provided the asking price
of P6,250/sqm was reduced and that payment be in installment for a certain period. The
parties reached an agreement and Roy agreed to sell the property to City-Lite provided only
the latter submit its acceptance in writing to the terms and conditions of the sale. For some
reason or another and despite demand, F.P. HOLDINGS refused to execute the
corresponding deed of sale in favor of City-Lite of the front lot of the property. Trial court
ruled in favor of City-Lite ordering F.P. HOLDINGS to execute a deed of sale of the property
in favor of the former for the total consideration of P55,056,250 payable as follows: P15 M
as downpayment to be payable immediately upon execution of the deed of sale and the
balance within 6 months from downpayment without interest. CA reversed TC’s decision

ISSUE: W/N there was a perfected contract of sale between City-Lite and respondent
F.P. HOLDINGS because of a lack of definite agreement on the manner of paying the
purchase price and that Metro Drug and Meldin Al G. Roy were not authorized to sell the
property to City-Lite, and that the authority of Roy was only limited to that of mere liaison
or contact person

RULING: No, Roy mere contact person

Art. 1874 of NCC: “When the sale of a piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing, otherwise, the sale shall be void.” The
absence of authority to sell can be determined from the written memorandum issued by
respondent F.P. HOLDINGS President requesting Metro Drug’s assistance in finding buyers
for the property Memorandum indicates that Meldin G. Roy and/or Metro Drug was only to
assist F.P. Holdings in looking for buyers and referring to them possible prospects whom
they were supposed to endorse to F.P. Holdings. But the final evaluation, appraisal and
acceptance of the transaction could be made only by F.P. Holdings. In other words, Roy
and/or Metro Drug was only a contact person with no authority to conclude a sale of the
property Roy and/or Metro Drug was a mere broker and Roy/s only job was to bring parties
the parties together for a possible transaction

SC: for lack of a written authority to sell the “Violago Property” on the part of Roy and/or
Metro Drug, the sale should be as it is declared null and void

Cosmic Lumber v CA

Facts:
COSMIC LUMBER CORPORATION through its General Manager executed on 28 January
1985 a Special Power of Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact... to
initiate, institute and file any court action for the ejectment of third persons and/or
squatters of the entire lot 9127 and 443 and covered by TCT Nos. 37648 and 37649, for the
said squatters to remove their houses and vacate the premises in order that the...
corporation may take material possession of the entire lot, and for this purpose, to appear
at the pre-trial conference and enter into any stipulation of facts and/or compromise
agreement so far as it shall protect the rights and interest of the corporation in the
aforementioned... lots
Paz G. Villamil-Estrada, by virtue of her power of attorney, instituted an action for the
ejectment of private respondent Isidro Perez and recover the possession of a portion of Lot
No. 443 before the Regional Trial Court of Dagupan
Villamil-Estrada entered into a Compromise Agreement with respondent Perez,... That to
buy peace said defendant pays unto the plaintiff through herein attorney-in-fact the sum of
P26,640.00 computed at P80.00/square meter;
That plaintiff hereby recognizes ownership and possession of the defendant by virtue of this
compromise agreement over said portion of 333 square m. of lot 443 which portion will be
located on the easternmost part as indicated in the sketch as annex A;
Whatever expenses of subdivision, registration, and other incidental expenses shall be
shouldered by the defendant.[3]... the "Compromise Agreement" was approved by the trial
court and judgment was rendered in accordance therewith.
Although the decision became final and executory it was not executed within the 5-year
period from date of its finality allegedly due to the failure of petitioner to produce the
owner's duplicate copy of Title... needed to segregate from Lot No. 443 the portion sold by...
the attorney-in-fact, Paz G. Villamil-Estrada, to private respondent under the compromise
agreement.
respondent filed a complaint to revive the judgment
Petitioner asserts that it was only when the summons in Civil Case No. D-10459 for the
revival of judgment was served upon it that it came to know of the compromise agreement
entered into between Paz G. Villamil-Estrada and respondent Isidro Perez... upon learning
of the fraudulent transaction, petitioner sought annulment of the decision of the trial court
before respondent Court of Appeals on the ground that the compromise agreement was
void... because:  (a) the attorney-in-fact did not have the authority to dispose of, sell,
encumber or divest the plaintiff of its ownership over its real property or any portion
thereof; (b) the authority of the attorney-in-fact was confined to the institution and filing of
an... ejectment case against third persons/squatters on the property of the plaintiff, and to
cause their eviction therefrom; (c) while the special power of attorney made mention of an
authority to enter into a compromise agreement, such authority was in connection with,
and limited... to, the eviction of third persons/squatters thereat, in order that "the
corporation may take material possession of the entire lot;" (d) the amount of P26,640.00
alluded to as alleged consideration of said agreement was never received by the plaintiff; (e)
the private... defendant acted in bad faith in the execution of said agreement... the disposal
of a corporate property indispensably requires a Board Resolution of its Directors, a fact
which is wanting... respondent court dismissed the complaint on the basis of its finding
that not one of the grounds for annulment, namely, lack of jurisdiction, fraud or illegality
was shown to exist. denied the motion for reconsideration filed... by petitioner, discoursing
that the alleged nullity of the compromise judgment on the ground that petitioner's
attorney in fact Villamit-Estrada was not authorized to sell the subject property may be
raised as a defense in the execution of the compromise judgment as it does not... bind
petitioner, but not as a ground for annulment of judgment because it does not affect the
jurisdiction of the trial court over the action nor does it amount to extrinsic fraud
Issues:
the decision of the trial court is void because the compromise agreement upon which it was
based is void.  Attorney-in-fact Villamil-Estrada did not possess the authority to sell or was
she armed with a Board
Resolution authorizing the sale of its property.  She was merely empowered to enter into a
compromise agreement in the recovery suit she was authorized to file against persons
squatting on Lot No. 443, such authority being expressly confined to the "ejectment of
third... persons or squatters of x x x lot x x x (No.) 443 x x x for the said squatters to
remove their houses and vacate the premises in order that the corporation may take
material possession of the entire lot
Ruling:
We agree with petitioner.  The authority granted Villamil-Estrada under the special power
of attorney was explicit and exclusionary:  for her to institute any action in court to eject all
persons found on Lots Nos. 9127 and 443 so that petitioner could take material...
possession thereof, and for this purpose, to appear at the pre-trial and enter into any
stipulation of facts and/or compromise agreement but only insofar as this was protective of
the rights and interests of petitioner in the property.
Nowhere in this... authorization was Villamil-Estrada granted expressly or impliedly any
power to sell the subject property nor a portion thereof.  Neither can a conferment of the
power to sell be validly inferred from the specific authority "to enter into a compromise
agreement"... because of the explicit limitation fixed by the grantor that the compromise
entered into shall only be "so far as it shall protect the rights and interest of the corporation
in the aforementioned lots.
In the context of the specific investiture of  powers to Villamil-Estrada, alienation by sale of
an immovable certainly cannot be deemed protective of the right of petitioner to physically
possess the same, more so when the land was being sold for a price of P80.00 per square
meter, very much less than its assessed value of P250.00... per square meter, and
considering further that petitioner never received the proceeds of the sale.
When the sale of a piece of land or any interest thereon is through an agent, the authority
of the latter shall be in writing; otherwise, the sale shall be void.[9] Thus the authority of an
agent to execute a contract for the sale of real estate must be... conferred in writing and
must give him specific authority, either to conduct the general business of the principal or
to execute a binding contract containing terms and conditions which are in the contract he
did execute.[10] A special power of attorney is... necessary to enter into any contract by
which the ownership of an immovable is transmitted or acquired either gratuitously or for a
valuable consideration.[11] The express mandate required by law to enable an appointee of
an agency (couched) in general... terms to sell must be one that expressly mentions a sale
or that includes a sale as a necessary ingredient of the act mentioned.[12] For the principal
to confer the right upon an agent to sell real estate, a power of attorney must so express the
powers of... the agent in clear and unmistakable language.  When there is any reasonable
doubt that the language so used conveys such power, no such construction shall be given
the document.[
It is therefore clear that by selling to respondent Perez a portion of petitioner's land through
a compromise agreement, Villamil-Estrada acted without or in obvious authority.
The sale ipso jure is consequently void.  So is the compromise agreement.  This... being the
case, the judgment based thereon is necessarily void.
a judgment based on a compromise entered into by an attorney without specific authority
from the... client is void.
The Court also observed that a defendant against whom a judgment based on a
compromise is sought to be enforced may... file a petition for certiorari to quash the
execution.  He could not move to have the compromise set aside and then appeal from the
order of denial since he was not a party to the compromise.
Not all the legal semantics in the world can becloud the unassailable fact that petitioner
was deceived and betrayed by its attorney-in-fact.  Villamil-Estrada deliberately concealed
from petitioner, her principal, that a compromise agreement... had been forged with the
end-result that a portion of petitioner's property was sold to the deforciant, literally for a
song.  Thus completely kept unaware of its agent's artifice, petitioner was not accorded
even a fighting chance to repudiate the settlement so much so... that the judgment based
thereon became final and executory.
It may be argued that petitioner knew of the compromise agreement since the principal is
chargeable with and bound by the knowledge of or notice to his agent received while the
agent was acting as such.  But the general rule is intended to protect those who exercise
good... faith and not as a shield for unfair dealing.  Hence there is a well-established
exception to the general rule as where the conduct and dealings of the agent are such as to
raise a clear presumption that he will not communicate to the principal the facts in...
controversy.[21] The logical reason for this exception is that where the agent is committing
a fraud, it would be contrary to common sense to presume or to expect that he would
communicate the facts to the principal.  Verily, when an agent is engaged... in the
perpetration of a fraud upon his principal for his own exclusive benefit, he is not really
acting for the principal but is really acting for himself, entirely outside the scope of his
agency.
petition is GRANTED

San Juan Structural v CA

Facts: Plaintiff-appellant San Juan structural and steel fabricators Inc.’s amended

complaint alleged that on February 14, 1989, plaintiff-appellant entered into an agreement
with defendant-appellee Motorich Sales Corporation for the transfer to it of a parcel of land
identified as lot 30, Block 1 of the Acropolis Greens Subdivision located in the district of
Murphy, Quezon City, Metro Manila containing an area of 414 sqm, covered by TCT no.
362909; that as stipulated in the agreement of February 14, 1i989, plaintiff-appellant paid
the down payment in the sum of P100,000, the balance to be paid on or before March 2,
19889; that on March 1, 1989,Mr. Andres T. Co, president of Plaintiff-appellant
corporation, wrote a letter to defendant-appellee Motorich Sales Corporation requesting a
computation for the balance to be paid; that said letter was coursed through the defendant-
appellee’s broker. Linda Aduca who wrote the computation of the balance; that on March 2,
1989, plaintiff-appellant was ready with the amount corresponding to the balance, covered
by Metrobank cashier’s check no. 004223 payable to defendant-appellee Motorich Sales
Corporation; that plaintiff-appellant and defendant-appellee were supposed to meet in the
plaintiff-appellant’s office but defendant-appellee’s treasurer, Nenita Lee Gruenbeg did not
appear; that defendant-appelle despite repeated demands and in utter disregard of its
commitments had refused to execute the transfer of rights/deed of assignment which is
necessary to transfer the certificate of title; that defendant ACL development corporation is
impleaded as a necessary party since TCT no. 362909 is still in the name of said defendant;
while defendant VNM Realty and Development Corporation is likewise impleaded as a
necessary party in view of the fact that it is the transferor of the right in favor of defendant-
appellee Motorich Sales Corporation; that on April 6, 1989 defendant ACL Development
Corporation and Motorich Sales Corporation entered into a deed of absolute sale whereby
the former transferred to the latter the subject property; that by reason of said transfer; the
registry of deeds of Quezon City issued a new title in the name of Motorich Sales
Corporation, represented by defendant-appellee Nenita Lee Gruenbeg and Reynaldo L.
Gruenbeg, under TCT no. 3751; that as a result of defendants-appellees Nenita and
Motorich’s bad faith in refusing to execute a formal transfer of rights/deed of assignment,
plaintiff-appellant suffered moral and nominal damages which may be assessed against
defendant-appellees in the sum of P500,000; that as a result of an unjustified and
unwarranted failure to execute the required transfer or formal deed of sale in favor of
plaintiff-appellant, defendant-appellees should be assessed exemplary damages in the sum
of P100,000; that by reason of the said bad faith in refusing to execute a transfer in favor of
plaintiff-appellant the latter lost opportunity to construct a residential building in the sum
of P100,000 and that as a consequence of such bad faith, it has been constrained to obtain
the services of counsel at an agreed fee of P100,000 plus appearance fee of for every
appearance in court hearings.

Issues: Whether or not the corporation’s treasurer act can bind the corporation.

Whether or not the doctrine of piercing the veil of corporate entity is applicable.

Held: No. Such contract cannot bind Motorich, because it never authorized or ratified such
sale.

A corporation is a juridical person separate and distinct from its stockholders or members.
Accordingly, the property of the corporation is not the property of the corporation is not the
property of its stockholders or members and may not be sold by the stockholders or
members without express authorization from the corporation’s board of directors.

Section 23 of BP 68 provides the Board of Directors or Trustees – Unless otherwise provided

in this code, the corporate powers of all corporations formed under this code shall be
exercised, all business conducted, and all property of such corporations controlled and held
by the board of directors or trustees to be elected from among the stockholders of stocks, or
where there is no stock, from among the members of the corporations, who shall hold office
for 1 year and until their successors are elected and qualified.

As a general rule, the acts of corporate officers within the scope of their authority are
binding on the corporation. But when these officers exceed their authority, their actions,
cannot bind the corporation, unless it has ratified such acts as is estopped from
disclaiming them.

Because Motorich had never given a written authorization to respondent Gruenbeg to sell
its parcel of land, we hold that the February 14, 1989 agreement entered into by the latter
with petitioner is void under Article 1874 of the Civil Code. Being inexistent and void from
the beginning, said contract cannot be ratified.

The statutorily granted privilege of a corporate veil may be used only for legitimate
purposes. On equitable consideration,the veil can be disregarded when it is utilized as a
shield to commit fraud, illegality or inequity, defeat public convenience; confuse legitimate
issues; or serve as a mere alter ego or business conduit of a person or an instrumentality,
agency or adjunct of another corporation.

We stress that the corporate fiction should be set aside when it becomes a shield against
liability for fraud, or an illegal act on inequity committed on third person. The question of
piercing the veil of corporate fiction is essentially, then a matter of proof. In the present
case, however, the court finds no reason to pierce the corporate veil of respondent
Motorich. Petitioner utterly failed to establish the said corporation was formed, or that it is
operated for the purpose of shielding any alleged fraudulent or illegal activities of its officers
or stockholders; or that the said veil was used to conceal fraud, illegality or inequity at the
expense of third persons like petitioner.

Delos Reyes v CA

AF Realty v Dieselman
FACTS:

Dieselman Freight Service Co. is an owner of commercial lot consisting of 2,094 sqm.,
located at Pasig City. On May 10, 1988, Manuel C. Cruz, Jr. a member of the board of
directors of Dieselman, issued a letter authorizing Cristeta N. Polintan "to look for a buyer
and negotiate the sale" of the lot at ₱3,000.00 per sqm.. Cruz Jr. has no written authority
from Dieselman to sell the lot. In turn Polintan authorized Felicisima Noble to sell the same
lot. Noble offered the property to AF Realty & Development, Inc. at ₱2,500.00 per sqm.
Zenaida Ranullo, board member and vice-president of AF Realty, accepted the offer and
issued a check in the amount of ₱300,000.00. Ranullo asked Polintan for the board
resolution of Dieselman  authorizing the sale. However, Polintan could only give Ranullo
the original copy of TCT No. 39849, the tax declaration and tax receipt for the lot, and a
photocopy of the Articles of Incorporation of Dieselman. Cruz, Sr. president of Dieselman,
acknowledged receipt of the said ₱300,000.00 as "earnest money" but required AF Realty to
finalize the sale at ₱4,000.00 per sqm. AF Realty replied that it is willing to pay the balance.
However, Cruz, Sr. terminated the offer and demanded from AF Realty the return of the title
of the lot claiming that there was a perfected contract of sale, AF Realty filed a complaint
for specific performance against Dieselman and Cruz, Jr.. The complain prays that
Dieselman be ordered to execute and deliver a final deed of sale in favor of AF Realty. In its
answer Dieselman alleged that it did not authorize any person to enter into such
transaction on its behalf. Meanwhile, on July 30, 1988, Dieselman and Midas Development
Corporation (Midas) executed a Deed of Absolute Sale of the same property.

The CA held that Cruz, Jr. was not authorized in writing by Dieselman to sell the property
to AF Realty, the sale was not perfected, and that the Deed of Absolute Sale between
Dieselman and Midas is valid, there being no bad faith on the part of the latter.
ISSUE:

Whether or not the sale made through an agent was ratified.

RULING:
No. There was no valid agency. The BOD never authorize Cruz to see the land. The
agreement between Cruz, Jr. and Polintan, as well as the subsequent agreement between
Polintan and Noble, never bound the corporation. It presumed that the sale transacted by
Noble purportedly on behalf of Polintan and ultimately purportedly on behalf of DFS is void.
Article 1874 provides that when a sale of piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.
Considering that respondent Cruz, Jr., Cristeta Polintan and Felicisima Ranullo were not
authorized by respondent Dieselman to sell its lot, the supposed contract is void.