BusOrg - Case Digest Set 4

General Provisions
DEADLINE: OCTOBER 24, SUNDAY BEFORE 12AM.
CASES ASSIGNEE STATUS
1. Rallos v. Felix Go Chan & Sons CATAPANG, JORAINE ●

Realty Corp., 81 SCRA 251 VINCENT CORTADO
2. Orient Air Services & Hotel CHING, GEORGE JURIS INTING ●

Representatives vs. Court of
Appeals, 197 SCRA 645
3. Air France vs. Court of Appeals, CUIZON, ANALIE SERICON ●

126 SCRA 448
4. Santos vs. Buenconsejo, 14 DAPITAN, JAIRUS MIRAL ●

SCRA 407
5. Albaladejo y Cia vs. Phil. DAUD, BEGUM NAZWA M ●

Refining Co., 45 Phil. 556
6. Cui vs. Cui, 100 Phil. 913 DELA CRUZ, MELODY ●

IRLANDEZ
7. Allied Free Worker’s Union DEMAFILES, EMMELIE ●

[PLUM] vs. Compania Maritima, UNTALAN
19 SCRA 258
8. Far Eastern Export & Import Co. DIANA, SALVADOR JR PAMAT ●

vs. Lim Teck Suan, 97 Phil. 171
9. Nielson & Co., Inc. vs. Lepanto DIRECTO, RONAH FAE ●

Consolidated Mining Co., 26 SCRA VILORIA
540
10. Shell Co., of the Phil. Ltd. vs. ECHEGORIN, NIKKO ●

Firemen’s Ins. of Newark, N.J., 100
Phil. 755
11. Sevilla vs. Court of Appeals, ELORDE, CARLIN DON ASIS ●

160 SCRA 171
12. Lourdes Valerio Lim vs. People, FERNANDEZ, THESSALOE ●

GR No. L-34338, November 21, MAY BONGCAYAO
1984
13. San Diego, Sr. vs. Nombre, 11 GALVEZ, LENIE ANNE ●

SCRA 165 PATRON
14. Rallos v. Yangco, 20 Phil 269 GONZALES, CYRIL ARELLANO ●
15. Macke v. Camps, 7 Phil 357 GONZALES, JASHERA ●

LABAWAN
16. Conde vs. Court of Appeals, GUELOS, KRISTEN JOAN ●
119 SCRA 245 PALEC
17. Manotok Brothers, Inc. vs. GUINTO, EUAN ESPARAGOZA ●

Court of Appeals, 221 SCRA 224
18. Domingo v. Domingo, 42 HAO, KATRINA BEATRICE ●

SCRA 131 NOEL
19. Siasat vs. Intermediate JAYME, REINA ANNE CEJAS ●

Appellate Court, 139 SCRA 238
20. Municipal Council of Iloilo vs. JOSOL, NEIL RANIEL ●

Evangelista, 55 Phil. 290
21. Caballero vs. Deiparine, 60 LAGARTO, BLESSY JOYCE ●

SCRA 136 GUINTIBANO
22. Phil. National Bank vs. Sta. LIBARIOS, SARAH JHYNE ●

Maria, 29 SCRA 303 CONCEPCION
23. BA Finance Corp. vs. Court of MACADINE, JOJI SERENATAS ●

Appeals, 211 SCRA 112
24. Director of Public Works vs. MALABUTE, ALASTAIR MARK ●

Sing Juco, 53 Phil. 205 BARBOZA
25. Philippine Sugar Estates MAÑALAC, GLANERY ANNE ●

Development Co., vs. Poizat, 48 PAREJA
Phil. 536
26. Rural Bank of Bombon, Inc. vs. MARZAN, SON RODRIGO III ●
Court of Appeals, 212 SCRA 25 BARCEBAL
27. Commercial Bank & Trust Co. MUAÑA, LOWELL LENDIO ●

of the Phil. vs. Republic Armored
Car Service Corp., 9 SCRA 142
28. Phil. National Bank vs. Agudelo RAPISURA, COLEEN M ●

y Gonzaga, 58 Phil. 635
29. Syjuco and Viardo vs. Syjuco, SAGULO, RHONALEN ●

40 Phil. 634 DUNGOG
30. National Food Authority vs. SAID, SITTIE A'SHIA ●

Intermediate Appellate Court, 184 PANGCOGA
SCRA 166
31. Awad vs. Filma Mercantile Co., SERRANO, MARIA CRISTINA ●

49 Phil. 816 ANGELA J
32. Alfred Hahn vs. CA and BMW, TORREVILLAS, JOVANEY ●

GR No. 113074, January 22, 1997 YAON
33. Tan vs. Gullas, GR No. 143978, VALLES, MARCELLANNE ERFE ●
December 3, 2002
34. Quiroga vs. Parsons Hardware YU, FAYE ASTORETH ●

Co., 38 Phil 501
35. Dominion Insurance Corp. vs. ZAMBRANO, ERWIN SEROMA ●

CA, GR No. 129919, February 6,
2002
1. Rallos v. Felix Go Chan & Sons Realty Corp., 81 SCRA

251
PRELIMINARIES
Who is the plaintiff:
Who is the defendant:
Nature of the Action filed in the SC? What is the case all about in Summary?
What is the Case filed in the original court?
What is the cause of action? If Based on law, cite the legal basis of the claim.
From which court Originated?

Court a quos ruling and brief reason why?
Who won? Who is liable? Dispositive Portion.
Principle:
1. AGENCY DEFINED: ITS ELEMENTS:
By the relationship of agency, one party called the principal authorizes another called the agent to act for
and in his behalf in transactions with third persons. The essential elements of agency are:
(l) 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.
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. “He who acts through another acts himself.”
2. Art. 1930 and Art. 1931 of the Civil Code providing that death of principal or agent extinguishing
agency is only a general rule;
Rationale for the provision.—
Reason of the very nature of the relationship between principal and agent, agency is extinguished by the
death of the principal.
Manresa explains that the rationale for the law is found in the juridical basis of agency which is
representation.
Laurent says that the juridical tie between the principal and the agent is severed ipso jure upon the death
of either without necessity for the heirs of the principal to notify the agent of the fact of death of the former.
The same rule prevails at common law—the death of the principal effects instantaneous and absolute
revocation of the authority of the agent unless the power be coupled with an interest.
This is the prevalent rule in American jurisprudence where it is well-settled that a power without an
interest conferred upon an agent is dissolved by the principal’s death, and any attempted execution of the
power afterwards is not binding on the heirs or representatives of the deceased.
3. Art. 1930 and Art. 1931 of the Civil Code exceptions to general rule provided in Art. 1919 of the Civil
Code, that death of principal revokes ipso jure the agency.—Is the general rule provided for in Art. 1919
that the death of the principal or of the agent extinguishes the agency, subject to any exception, and if so, is
the instant case within that exception? That is the determinative point in issue in this litigation x x x
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule aforementioned.
4. Contention that despite death of principal the act of attorney-in-fact in selling his principal’s share of
the disputed property is valid and enforceable since the buyer acted in good faith is untenable because of
the established knowledge of the attorney-in-fact of the death of his principal;
Requisites of Art. 1931 that despite death of principal and of agent is valid not complied with. —Under
Art. 1931 of the Civil Code, 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) (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.
x x x 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.
Facts:
This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal,
Concepcion Rallos, sold the latter's undivided share in a parcel of land pursuant to a power of
attorney which the principal had executed in Simeon’s favor. The administrator of the estate went to
court to have the sale declared uneanforceable and to recover the disposed share.
The trial court granted the relief prayed for, but upon appeal the Court of Appeals uphold the validity
of the sale and the complaint.
Hence, this Petition for Review on certiorari.
Concepcion and Gerundia Rallos,were both sisters and a registered co-owners of a parcel of land covered by a
Transfer Certificate of Title (TCT 11116) in the Registry of Cebu.
On April 1954, the sisters executed a special power of attorney in favor of their brother, Simeon Rallos,
authorizing him to sell the said parcel of land for and in their behalf.
On March 1955, Concepcion Rallos died.
On September 1955, In spite of Concepcion’s death, Simeon Rallos sold the undivided shares of his sisters
Concepcion and Gerundia to Felix Go Chan & Sons Realty Corporation.
The deed of sale was registered in the Registry of Deeds of Cebu, the old TCT was cancelled, and a new transfer
certificate of Title No. 12989 was issued in the name of the vendee.
On May 18, 1956 Ramon Rallos, as administrator of the Intestate Estate of Concepcion Rallos, filed a
complaint to the Court of First Instance of Cebu, praying (1) that the sale of the undivided share of the deceased
Concepcion Rallos in lot 5983 be declared 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 shares and
(3) that plaintiff be indemnified by way of attorney's fees and payment of costs of suit.
Named party defendants were Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the Register of
Deeds of Cebu, but subsequently, the latter was dropped from the complaint.
The complaint was amended twice; defendant Corporation's Answer contained a crossclaim against its co-defendant,
Simon Rallos while the latter filed third-party complaint against his sister, Gerundia Rallos.
While the case was pending in the trial court, both Simeon and his sister Gerundia died and they were substituted by
the respective administrators of their estates.
After trial the court a quo rendered judgment:
(1) Declaring the deed of sale, Exh. "C", null and void insofar as the one-half pro-indiviso share of
Concepcion Rallos in the property in question, — Lot 5983 of the Cadastral Survey of Cebu — is
concerned;
sentencing the co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay to defendant
Felix Co Chan & Sons Realty Corporation the sum representing the price of one-half (1/2) share of lot 5983;and
dismissing the third-party complaint without prejudice to filing either a complaint against the regular administrator
of the Estate of Gerundia Rallos or a claim in the Intestate-Estate of Cerundia Rallos, covering the same subject-
matter of the third-party complaint, at bar.
Felix Go Chan & Sons Realty Corporation appealed to the Court of Appeals from the foregoing judgment insofar as
it set aside the sale of the one-half (1/2) share of Concepcion Rallos.
And the appellate tribunal resolved the appeal in favor of the appellant corporation sustaining the sale in question.
The appellee administrator, Ramon Rallos, administrator of the Intestate Estate of Concepcion Rallos moved for a
reconsideration of the decision but the same was denied.
Hence, this Petition for Review on certiorari
Issue/s:
1.WON the sale of the undivided share of Concepcion Rallos in lot 5983 valid although it was
executed by the agent after the death of his principal? No.
2.Is the fact of knowledge of the death of the principal a material factor in determining the legal
effect of an act performed after such death? Yes.
Ruling:
Before proceedings to the issues, We shall briefly restate certain principles of law relevant to the
matter tinder consideration.
1. It is a basic axiom in civil law embodied in our Civil Code that 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 3
contract entered into in the name of another by one who has no authority or the 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. Article 1403 (1) of the same Code also provides:
4
ART. 1403. The following contracts are unenforceable, unless they are justified:
(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; ...
Out of the above given principles, sprung the creation and acceptance of the relationship of
agency whereby one party, caged 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 agents acts as a
representative and not for himself, and (4) the agent acts within the scope of his authority. 5
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 se. "He who acts through another acts
himself". 6
2. There are various ways of extinguishing agency, but her We are concerned only with one cause
7
— death of the principal Paragraph 3 of Art. 1919 of the Civil Code which was taken from Art. 1709
of the Spanish Civil Code provides:
ART. 1919. Agency is extinguished.
xxx xxx xxx
3. By the death, civil interdiction, insanity or insolvency of the principal or of the
agent; ... (Emphasis supplied)
By reason of the very nature of the relationship between Principal and agent, agency is extinguished
by the death of the principal or the agent. This is the law in this jurisdiction.
8
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is
found in the juridical basis of agency which is representation Them being an in. integration of the
personality of the principal integration that of the agent it is not possible for the representation to
continue to exist once the death of either is establish. Pothier agrees with Manresa that by reason of
the nature of agency, death is a necessary cause for its extinction. Laurent says that the juridical tie
between the principal and the agent is severed ipso jure upon the death of either without necessity
for the heirs of the fact to notify the agent of the fact of death of the former. 9
The same rule prevails at common law — the death of the principal effects instantaneous and
absolute revocation of the authority of the agent unless the Power be coupled with an interest. This
10
is the prevalent rule in American Jurisprudence where it is well-settled that a power without an
interest confer. red upon an agent is dissolved by the principal's death, and any attempted execution
of the power afterward is not binding on the heirs or representatives of the deceased. 11
3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent
extinguishes the agency, but this is subject to exceptions, and if so, is the instant case within that
exception? That is the determinative point in issue in this litigation. It is the contention of respondent
corporation which was sustained by respondent court that notwithstanding the death of the principal
Concepcion Rallos the act of the attorney-in-fact, Simeon Rallos in selling the former's sham in the
property is valid and enforceable inasmuch as the corporation acted in good faith in buying the
property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned.
ART. 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.
ART. 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.
Obviously, Article 1930 is not involved because admittedly the special power of attorney executed in
favor of Simeon Rallos was not coupled with an interest.
Here the Article 1931 is the applicable law.
But 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.
While 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 Lot No. 5983 to respondent corporation. The knowledge of the
death is clearly to be inferred from the pleadings filed by Simon 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 and of respondent appellate court when the latter stated that Simeon Rallos 'must have
13
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. 14
On the basis of the established knowledge of Simon Rallos concerning the death of his principal
Concepcion Rallos, Article 1931 of the Civil Code, being also an exception, becomes also
inapplicable in this case.
Because 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.
Thus in Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old Civil rode now Art.
1931 of the new Civil Code sustained the validity , of a sale made after the death of the
principal because it was not shown that the agent knew of his principal's demise. To the same
15
effect is the case of Herrera, et al., v. Luy Kim Guan, et al., 1961, where in the words of Justice
Jesus Barrera the Court stated:
... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented
no proof and there is no indication in the record, that the agent Luy Kim Guan was
aware of the death of his principal at the time he sold the property. The death 6f the
principal does not render the act of an agent unenforceable, where the latter had no
knowledge of such extinguishment of the agency. (1 SCRA 406, 412)
4. In sustaining the validity of the sale to respondent consideration the Court of Appeals reasoned
out that there is no provision in the Code which provides that whatever is done by an agent having
knowledge of the death of his principal is void even with respect to third persons who may have
contracted with him in good faith and without knowledge of the death of the principal. 16
We cannot see the merits of the foregoing argument as it ignores the existence of the general rule
enunciated in Article 1919 that the death of the principal extinguishes the agency. That being the
general rule it follows a fortiorithat any act of an agent after the death of his principal is void ab
initio unless the same fags under the exception provided for in the aforementioned Articles 1930 and
1931. Article 1931, being an exception to the general rule, is to be strictly construed, it is not to be
given an interpretation or application beyond the clear import of its terms for otherwise the courts will
be involved in a process of legislation outside of their judicial function.
5. On the argument advanced by respondent court is that the vendee acting in good faith relied on
the power of attorney which was duly registered on the original certificate of title recorded in the
Register of Deeds of the province of Cebu, that no notice of the death was annotated on said
certificate of title by the heirs of the principal and accordingly they must suffer the consequences of
such omission. 17
To support such argument reference is made to a portion in Manresa's Commentaries which We

quote:
If the agency has been granted for the purpose of contracting with certain persons,
the revocation must be made known to them. But if the agency is general iii nature,
without reference to particular person with whom the agent is to contract, it is
sufficient that the principal exercise due diligence to make the revocation of the
agency publicity known.
In case of a general power which does not specify the persons to whom represents'
on should be made, it is the general opinion that all acts, executed with third persons
who contracted in good faith, Without knowledge of the revocation, are valid. In such
case, the principal may exercise his right against the agent, who, knowing of the
revocation, continued to assume a personality which he no longer had. (Manresa
Vol. 11, pp. 561 and 575; pp. 15-16, rollo)
The above discourse however, treats of revocation by an act of the principal as a mode of
terminating an agency which is to be distinguished from revocation by operation of law such as
death of the principal which obtains in this case. On page six of this Opinion We stressed that by
reason of the very nature of the relationship between principal and agent, agency is
extinguished ipso jure upon the death of either principal or agent. Although a revocation of a power
of attorney to be effective must be communicated to the parties concerned, yet a revocation by
18
operation of law, such as by death of the principal is, as a rule, instantaneously effective inasmuch
as "by legal fiction the agent's exercise of authority is regarded as an execution of the
principal's continuing will. With death, the principal's will ceases or is the of authority is
19
extinguished.
The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal
What the Code provides in Article 1932 is that, if the agent die 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.
Hence, the fact that no notice of the death of the principal was registered on the certificate of title of
the property in the Office of the Register of Deeds, is not fatal to the cause of the estate of the
principal
According to the Court, We stress the indispensable requirement that the agent acted without
knowledge or notice of the death of the principal, In the case the agent Ramon Rallos
executed the sale notwithstanding notice of the death of his principal.
Accordingly, the agent's act is unenforceable against the estate of his principal.
6. Holding that the good faith of a third person in said with an agent affords the former sufficient
protection, respondent court drew a "parallel" between the instant case and that of an innocent
purchaser for value of a land, stating that if a person purchases a registered land from one who
acquired it in bad faith — even to the extent of foregoing or falsifying the deed of sale in his favor —
the registered owner has no recourse against such innocent purchaser for value but only against the
forger.
20
To support the correctness of this respondent corporation, in its brief, cites the case of Blondeau, et
al., v. Nano and Vallejo, 61 Phil. 625. We quote from the brief:
In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo
was a co-owner of lands with Agustin Nano. The latter had a power of attorney
supposedly executed by Vallejo Nano in his favor. Vallejo delivered to Nano his land
titles. The power was registered in the Office of the Register of Deeds. When the
lawyer-husband of Angela Blondeau went to that Office, he found all in order
including the power of attorney. But Vallejo denied having executed the power The
lower court sustained Vallejo and the plaintiff Blondeau appealed. Reversing the
decision of the court a quo, the Supreme Court, quoting the ruling in the case
of Eliason v. Wilborn, 261 U.S. 457, held:
But there is a narrower ground on which the defenses of the

defendant- appellee must be overruled. Agustin Nano had
possession of Jose Vallejo's title papers. Without those title papers
handed over to Nano with the acquiescence of Vallejo, a fraud could
not have been perpetuated. When Fernando de la Canters, a
member of the Philippine Bar and the husband of Angela Blondeau,
the principal plaintiff, searched the registration record, he found them
in due form including the power of attorney of Vallajo in favor of
Nano. If this had not been so and if thereafter the proper notation of
the encumbrance could not have been made, Angela Blondeau
would not have sent P12,000.00 to the defendant Vallejo.' An
executed transfer of registered lands placed by the registered owner
thereof in the hands of another operates as a representation to a third
party that the holder of the transfer is authorized to deal with the
land.
As between two innocent persons, one of whom must suffer the

consequence of a breach of trust, the one who made it possible by
his act of coincidence bear the loss. (pp. 19-21)
The Blondeau decision, however, is not on all fours with the case before Us because here We are
confronted with one who admittedly was an agent of his sister and who sold the property of the latter
after her death with full knowledge of such death. The situation is expressly covered by a provision
of law on agency the terms of which are clear and unmistakable leaving no room for an interpretation
contrary to its tenor, in the same manner that the ruling in Blondeau and the cases cited therein
found a basis in Section 55 of the Land Registration Law which in part provides:
xxx xxx xxx
The production of the owner's duplicate certificate whenever any voluntary

instrument is presented for registration shall be conclusive authority from the
registered owner to the register of deeds to enter a new certificate or to make a
memorandum of registration in accordance with such instruments, and the new
certificate or memorandum Shall be binding upon the registered owner and upon all
persons claiming under him in favor of every purchaser for value and in good
faith: Provided however, That in all cases of registration provided by fraud, the owner
may pursue all his legal and equitable remedies against the parties to such fraud
without prejudice, however, to the right, of any innocent holder for value of a
certificate of title. ... (Act No. 496 as amended)
7. One last point raised by respondent corporation in support of the appealed decision is an 1842
ruling of the Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein payments made to an
agent after the death of the principal were held to be "good", "the parties being ignorant of the
death". Let us take note that the Opinion of Justice Rogers was premised on the statement that
the parties were ignorant of the death of the principal. We quote from that decision the following:
... Here the precise point is, whether a payment to an agent when the Parties are
ignorant of the death is a good payment. in addition to the case in Campbell before
cited, the same judge Lord Ellenboruogh, has decided in 5 Esp. 117, the general
question that a payment after the death of principal is not good. Thus, a payment of
sailor's wages to a person having a power of attorney to receive them, has been held
void when the principal was dead at the time of the payment. If, by this case, it is
meant merely to decide the general proposition that by operation of law the death of
the principal is a revocation of the powers of the attorney, no objection can be taken
to it. But if it intended to say that his principle applies where there was 110 notice of
death, or opportunity of twice I must be permitted to dissent from it.
... That a payment may be good today, or bad tomorrow, from the accident
circumstance of the death of the principal, which he did not know, and which by no
possibility could he know? It would be unjust to the agent and unjust to the debtor. In
the civil law, the acts of the agent, done bona fide in ignorance of the death of his
principal are held valid and binding upon the heirs of the latter. The same rule holds
in the Scottish law, and I cannot believe the common law is so unreasonable... (39
Am. Dec. 76, 80, 81; emphasis supplied)
To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke, mention
may be made that the above represents the minority view in American jurisprudence. Thus
in Clayton v. Merrett, the Court said.—
There are several cases which seem to hold that although, as a general principle,
death revokes an agency and renders null every act of the agent thereafter
performed, yet that where a payment has been made in ignorance of the death, such
payment will be good. The leading case so holding is that of Cassiday v. McKenzie, 4
Watts & S. (Pa) 282, 39 Am. 76, where, in an elaborate opinion, this view ii broadly
announced. It is referred to, and seems to have been followed, in the case of Dick v.
Page, 17 Mo. 234, 57 AmD 267; but in this latter case it appeared that the estate of
the deceased principal had received the benefit of the money paid, and therefore the
representative of the estate might well have been held to be estopped from suing for
it again. . . . These cases, in so far, at least, as they announce the doctrine under
discussion, are exceptional. The Pennsylvania Case, supra (Cassiday v. McKenzie 4
Watts & S. 282, 39 AmD 76), is believed to stand almost, if not quite, alone in
announcing the principle in its broadest scope. (52, Misc. 353, 357, cited in 2 C.J.
549)
So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the opinion,
except so far as it related to the particular facts, was a mere dictum, Baldwin J. said:
The opinion, therefore, of the learned Judge may be regarded more as an
extrajudicial indication of his views on the general subject, than as the adjudication of
the Court upon the point in question. But accordingly all power weight to this opinion,
as the judgment of a of great respectability, it stands alone among common law
authorities and is opposed by an array too formidable to permit us to following it. (15
Cal. 12,17, cited in 2 C.J. 549)
Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American

jurisprudence, no such conflict exists in our own for the simple reason that our statute, the Civil
Code, expressly provides for two exceptions to the general rule that death of the principal revokes
ipso jure the agency, to wit: (1) that the agency is coupled with an interest (Art 1930), and (2) that
the act of the agent was executed without knowledge of the death of the principal and the third
person who contracted with the agent acted also in good faith (Art. 1931). Exception No. 2 is the
doctrine followed in Cassiday, and again We stress the indispensable requirement that the agent
acted without knowledge or notice of the death of the principal In the case before Us the agent
Ramon Rallos executed the sale notwithstanding notice of the death of his principal Accordingly, the
agent's act is unenforceable against the estate of his principal.
IN VIEW OF ALL THE FOREGOING, We set aside the decision of respondent appellate court, and
We affirm en toto the judgment rendered by then Hon. Amador E. Gomez of the Court of First
Instance of Cebu, quoted in pages 2 and 3 of this Opinion, with costs against respondent realty
corporation at all instances.
So Ordered.
2. Orient Air Services & Hotel Representatives vs. Court of Appeals, 197
SCRA 645
PRELIMINARIES
Who is the plaintiff: American Airlines, Inc.
Who is the defendant: Orient Air Service and Hotel Representatives, Inc.
What is the Case filed in the original court? American Air instituted suit against Orient Air with the Court
of First Instance of Manila, Branch 24, for Accounting with Preliminary Attachment or Garnishment, Mandatory
Injunction and Restraining Order4 averring the aforesaid basis for the termination of the Agreement as well as
therein defendant's previous record of failures "to promptly settle past outstanding refunds of which there were
available funds in the possession of the defendant, . . . to the damage and prejudice of plaintiff."
From which court Originated? Court of First Instance of Manila, Branch 24
Court a quos ruling and brief reason why? In favor of defendant and against plaintiff dismissing the
complaint and holding the termination made by the latter as affecting the GSA agreement illegal and improper and
order the plaintiff to reinstate defendant as its general sales agent for passenger transportation in the Philippines in
accordance with said GSA agreement.
Who won? Who is liable? Dispositive Portion. WHEREFORE, with the foregoing modification, the Court
AFFIRMS the decision and resolution of the respondent Court of Appeals, dated 27 January 1986 and 17 December
1986, respectively. Costs against petitioner American Air.
Principle: 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 .17 (emphasis
supplied) In an agent-principal relationship, the personality of the principal is extended through the facility of the
agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter
would have him do. Such a relationship can only be effected with the consent of the principal, which must not, in
any way, be compelled by law or by any court.
Facts:
American Airlines (American Air) and Orient Air Services and Hotel Representatives (Orient Air) 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.
The agreement contained provisions such as the following:
1. Representation of American by Orient Air Services

Orient Air Services will act on American's behalf as its exclusive General Sales Agent within the
Philippines;
13. Termination
American may terminate the Agreement on two days' notice in the event Orient Air Services is unable to
transfer to the United States the funds payable by Orient Air Services to American under this Agreement.
Either party may terminate the Agreement without cause by giving the other 30 days' notice by letter,
telegram or cable.
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 thereof (Termination).
Four (4) days later, or on 15 May 1981, American Air instituted suit against Orient Air with the Court of First
Instance of Manila, Branch 24, for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction
and Restraining Order averring the aforesaid basis for the termination of the Agreement as well as therein
defendant's previous record of failures "to promptly settle past outstanding refunds of which there were available
funds in the possession of the defendant, . . . to the damage and prejudice of plaintiff."
Orient Air denied the complaint, contending that after application thereof to the commissions due it under
the Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions. Further, the
defendant contended that the actions taken by American Air in the course of terminating the Agreement as well as
the termination itself were untenable, Orient Air claiming that American Air's precipitous conduct had occasioned
prejudice to its business interests.
Orient Air denied the material allegations of the complaint with respect to plaintiff's entitlement to alleged
unremitted amounts and contended that the actions taken by American Air in the course of terminating the
Agreement as well as the termination itself were untenable, Orient Air claiming that American Air's precipitous
conduct had occasioned prejudice to its business interests.
The trial court rendered in favor of defendant and against plaintiff dismissing the complaint and holding
the termination made by the latter as affecting the GSA agreement illegal and improper and order the plaintiff to
reinstate defendant as its general sales agent for passenger transportation in the Philippines in accordance with
said GSA agreement.
On appeal, the Intermediate Appellate Court (now Court of Appeals) affirmed the findings of the court a
quo on their material points but with some modifications with respect to the monetary awards granted.
1) American is ordered to pay Orient the sum of US$53,491.11 representing the balance of the
latter's overriding commission covering the period March 16, 1977 to December 31, 1980, or its Philippine
peso equivalent in accordance with the official rate of exchange legally prevailing on July 10, 1981, the
date the counterclaim was filed;
Issue/s: WON the court may reinstate defendant as its general sales agent for passenger transportation in the
Philippines in accordance with the GSA Agreement.
Ruling: No, it cannot.
When the appellate court affirmed the ruling of the trial court, it in effect compelled 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.
In an agent-principal relationship, the personality of the principal is extended through the facility of the
agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter
would have him do. Such a relationship can only be effected with the consent of the principal, which must not, in
any way, be compelled by law or by any court. The Agreement itself between the parties states that "either party
may terminate the Agreement without cause by giving the other 30 days' notice by letter, telegram or cable."
(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.
3. Air France vs. Court of Appeals, 126 SCRA 448
G.R. No. L-57339 December 29, 1983
AIR FRANCE, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE G. GANA (Deceased), CLARA A. GANA, RAMON
GANA, MANUEL GANA, MARIA TERESA GANA, ROBERTO GANA, JAIME JAVIER GANA,
CLOTILDE VDA. DE AREVALO, and EMILY SAN JUAN, responden
PRELIMINARIES
Air France

CA, Jose Gana (deceased), Clara A. Gana, Ramon A. Gana, Manuel Gana, Maria Teresa Gana, Roberto
Gana, Jaime Javier Gana, Clotilde vda de Arevalo and Emily San Juan,
Petition for Review on Certiorari, assailing the Decision of the CA which reversed the Decision of the CFI
and awarded damages in favor of respondents GANAS.
This case is an action for damages against Air France commenced by the GANAS for alleged breach of
contract of carriage.

The Ganas filed a complaint for damages arising from breach of contract of carriage.
Breach of contract of carriage

Court of First Instance of Manila, Branch III

The CFI ruled against the GANAS.
The Trial Court dismissed the Complaint based on Partial and Additional Stipulations of Fact as on
the documentary and testimonial evidence.

Air France won.
WHEREFORE, the judgment under review is hereby reversed and set aside, and the Amended
Complaint filed by private respondents hereby dismissed. NO COSTS.
Principle:
Notice to travel agent of rejection of request for extension of validity of plane tickets, also notice to the
principals.
Facts:
Sometime in February, 1970, the late Jose G. Gana and his family, purchased from AIR FRANCE nine (9)
"open-dated" air passage tickets for the Manila/Osaka/Tokyo/Manila route.
On 24 April 1970, AIR FRANCE exchanged or substituted the aforementioned tickets with other tickets for
the same route.
At this time, the GANAS were booked for the Manila/Osaka segment on AIR FRANCE Flight 184 for 8
May 1970, and for the Tokyo/Manila return trip on AIR FRANCE Flight 187 on 22 May 1970.
The tickets were valid until May 8, 1971.
The Ganas did not depart on May 8, 1970.
To extend the validity of their tickets, Jose Gana sought the assistance of Teresita Manucdoc, a
Secretary of the Sta. Clara Lumber Company where Jose Gana was the Director and Treasurer.
Teresita enlisted the help of Lee Ella Manager of the Philippine Travel Bureau, who used to handle
travel arrangements for the personnel of the Sta. Clara Lumber Company.
Ella sent the tickets to Cesar Rillo, Office Manager of AIR FRANCE. The tickets were returned to Ella
who was informed that extension was not possible. Ella then returned the tickets to Teresita and informed
her of the impossibility of extension.
In the meantime, the GANAS had scheduled their departure on May 7, 1971 or one day before the
expiry date.
In the morning of the very day of their scheduled departure on the first leg of their trip, Teresita requested
travel agent Ella to arrange the revalidation of the tickets.
Ella gave the same negative answer and warned her that although the tickets could be used by the GANAS
if they left onMay 7, 1971, the tickets would no longer be valid for the rest of their trip because the
tickets would then have expired on May 8,1971.
Teresita replied that it will be up to the GANAS to make the arrangements. Notwithstanding the warnings,
the GANAS departed from Manila in the afternoon of May 7, 1971 on board AIR FRANCE Flight 184 for
Osaka, Japan.
However, for the Osaka/Tokyo flight on May 17, 1971, Japan Airlines refused to honor the tickets
because of their expiration, and the GANAS had to purchase new tickets.
They encountered the same difficulty with respect to their return trip to Manila as AIR FRANCE also
refused to honor their tickets.
They were able to return only after pre-payment in Manila, through their relatives, of the readjusted rates.
They finally flew back to Manila on separate Air France Frights.
On 25 August 1971, the GANAS commenced before the then Court of First Instance of Manila,
Branch III, Civil Case No. 84111 for damages arising from breach of contract of carriage.
AIR FRANCE traversed the material allegations of the Complaint and alleged that the GANAS
brought upon themselves the predicament they found themselves in and assumed the consequential
risks; that travel agent Ella's affixing of validating stickers on the tickets without the knowledge and
consent of AIR FRANCE, violated airline tariff rules and regulations and was beyond the scope of his
authority as a travel agent; and that AIR FRANCE was not guilty of any fraudulent conduct or bad
faith.
On 29 May 1975, the Trial Court dismissed the Complaint based on Partial and Additional
Stipulations of Fact as wen as on the documentary and testimonial evidence.
The GANAS appealed to respondent Appellate Court. During the pendency of the appeal, Jose
Gana, the principal plaintiff, died.
On 15 December 1980, respondent Appellate Court set aside and reversed the Trial Court's
judgment in a Decision, which decreed:
WHEREFORE, the decision appealed from is set aside. Air France is hereby ordered
to pay appellants moral damages in the total sum of NINETY THOUSAND PESOS
(P90,000.00) plus costs.
SO ORDERED. 2
Reconsideration sought by AIR FRANCE was denied.

Hence, this petition. Petitioner's recourse before this instance, to which we gave due course.
Issue/s:
WON he notice to Teresita of the rejection of the request for extension of the validity of the tickets
constituted as notice to the GANAS.
Ruling:
Yes, Teresita was an agent of the Ganas.
Hence, notice to her of the rejection of the request for extension of the validity of the tickets was
deemed as notice to her principal, the GANAS.
The GANAS cannot defend by contending lack of knowledge of those rules since the evidence bears out
that Teresita, who handled travel arrangements for the GANAS, was duly informed by travel agent Ella of
the advice of Rillo, the Office Manager of Air France, that the tickets in question could not be extended
beyond the period of their validity without paying the fare differentials and additional travel taxes brought
about by the increased fare rate and travel taxes.
The ruling relied on by respondent Appellate Court, therefore, in KLM vs. Court of Appeals, 65 SCRA 237
(1975), holding that it would be unfair to charge respondents therein with automatic knowledge or notice
of conditions in contracts of adhesion, is inapplicable.
To all legal intents and purposes, Teresita was the agent of the GANAS and notice to her of the rejection of
the request for extension of the validity of the tickets was notice to the GANAS, her principals . Air France
vs. Court of Appeals, 126 SCRA 448, No. L- 57339 December 29, 1983.
4. Santos vs. Buenconsejo, 14 SCRA 407
PRELIMINARIES
Who is the plaintiff: Jose Santos
Who is the defendant: Anatolio Buenconesjo

Principle:
Agency; Power of attorney cannot vest property right in attorney’s own name.—A special power of attorney
authorizing a person to act on behalf of the children of another cannot vest in the said attorney any property right
in his own name.
Same; Children without authority to execute power of attorney for parent.—The children have no authority to
execute a power of attorney for their father who is still alive.
Facts:
Petitioner Jose A. Santos y Diaz seeks the reversal of an order of the Court of First Instance of Albay,
denying his petition, filed in Cadastral Case No. M-2197, LRC Cad. Rec. No. 1035, for the cancellation of
original certificate of title No. RO-3848 (25322), issued in the name of Anatolio Buenconsejo, Lorenzo Bon
and Santiago Bon, and covering Lot No. 1917 of the Cadastral Survey of Tabaco, Albay, and the issuance in
lieu thereof, of a separate transfer certificate of title in his name, covering part of said Lot No. 1917, namely
Lot No. 1917-A of Subdivision Plan PSD-63379.
It appears that the aforementioned Lot No. 1917 covered by Original Certificate of Title No.
RO-3848 (25322) was originally owned in common by Anatolio Buenconsejo to the extent of
½ undivided portion and Lorenzo Bon and Santiago Bon to the extent of the other ½ (Exh.
B);
the Anatolio Buenconsejo's rights, interests and participation over the portion
abovementioned lot were on January 3, 1961 and by a Certificate of Sale executed by the
Provincial Sheriff of Albay, transferred and conveyed to Atty. Tecla San Andres Ziga,
awardee in the auction sale conducted by the Sheriff in connection with the execution of the
decision of the Juvenile Delinquency and Domestic Relations Court in Civil Case No. 25267,
entitled "Yolanda Buenconsejo, et al. vs. Anatolio Buenconsejo"; that on December 26, 1961
and by a certificate of redemption issued by the Provincial Sheriff of Albay, the rights,
interest, claim and/or or participation which Atty. Tecla San Andres Ziga may have acquired
over the property in question by reason of the aforementioned auction sale award, were
transferred and conveyed to the herein petitioner in his capacity as Attorney-in-fact of the
children of Anatolio Buenconsejo, namely, Anastacio Buenconsejo, Elena Buenconsejo and
Azucena Buenconsejo (Exh. C).
It would appear, also, that petitioner Santos had redeemed the aforementioned share of Anatolio
Buenconsejo, upon the authority of a special power of attorney executed in his favor by the
children of Anatolio Buenconsejo;
that relying upon the power of attorney and redemption made by him, Santos now claims to have
acquired the share of Anatolio Buenconsejo in the aforementioned Lot No. 1917; that as the alleged
present owner of said share, Santos caused a subdivision plan of said Lot No. 1917 to be made, in
which the portion he claims as his share thereof has been marked as Lot No. 1917-A; and that he
wants said subdivision at No. 1917-A to be segregated from Lot No. 1917 and a certificate of title
issued in his name exclusively for said subdivision Lot No. 1917-A.
On such claim, petitioner now wants the portion to be segregated from the lot.
Issue/s:
Whether or not petitioner Jose Santos is the owner of the share of Anatolio on Lot No. 1917.
Ruling:
No.
The Supreme Court declared that the petitioner’s claim is untenable on the following basis:
1. The SPA authorized him to act on behalf of the children of Anatolion Buenconsejo, and, hence, it
could not have possibly vested in him any property right in his own name.
2. The children of Anatolio Buenconsejo had no authority to execute said SPA, because their father is still
alive and, in fact, he and his wife opposed the petition of Santos.
(Don’t read further. Read only if asked.)
Assuming in arguendo that the SPA and redemption is valid:
3. In consequence of said power of attorney and redemption, Santos could have acquired no more than the
share pro indiviso of Anatolio Buenconsejo in Lot No. 1917, so that petitioner cannot, without the conformity of
the other co-owners, or a judicial decree of partition issued pursuant to Rule 69 which have not been followed
by Santos, adjudicate to himself in fee simple a determinate portion of said Lot No. 1917, as his share therein, to
the exclusion of the other co-owners.
Inasmuch as the appeal is patently devoid of merit, the order appealed from is hereby affirmed, with
treble cost against petitioner-appellant Jose A. Santos y Diaz. It is so ordered.
5. Albaladejo y Cia vs. Phil. Refining Co., 45 Phil. 556
PRELIMINARIES
Who is the plaintiff: Albaladejo Y Cia
Who is the defendant: The Philippine Refining Co., as successor to the Visayan Refining Co.
Nature of the Action filed in the SC? What is the case all about in Summary? This action was instituted in the
Court of First Instance of the Province of Albay by Albaladejo y Cia., S. en C., to recover a sum of money from the
Philippine Refining Co., as successor to the Visayan Refining Co., two causes of action being stated in the
complaint.
What is the Case filed in the original court? A case to recover a sum of money
From which court Originated? Court of First Instance of the Province of Albay
Court a quos ruling and brief reason why? The trial judge absolved the defendant from the first cause of action
but gave judgment for the plaintiff to recover the sum of P49,626.68, with costs, upon the second cause of action.
Who won? Who is liable? Dispositive Portion. VRC won. For the reasons stated we are of the opinion that no
liability on the part of the defendant is shown upon the plaintiff's second cause of action, and the judgment of the
trial court on this part of the case is erroneous.
Principle:
Not having a contract of agency, a party is NOT entitled to reimbursement, as contemplated under Art. 1729, now
Art. 1913, for the damages/expenses it incurred in maintaining and extending its organization.
Facts:
This action was instituted in the Court of First Instance of the Province of Albay by Albaladejo y Cia.,
S. en C., to recover a sum of money from the Philippine Refining Co., as successor to the Visayan
Refining Co., two causes of action being stated in the complaint. Upon hearing the cause the trial
judge absolved the defendant from the first cause of action but gave judgment for the plaintiff to
recover the sum of P49,626.68, with costs, upon the second cause of action. From this judgment the
plaintiff appealed with respect to the action taken upon the first cause of action, and the defendant
appealed with respect to the action taken upon the second cause of action. It results that, by the
appeal of the two parties, the decision of the lower court is here under review as regards the action
taken upon both grounds of action set forth in the complaint.
IPlaintiff Albaladejo y Cia., is a limited partnership engaged in the buying and selling of the products of the country,
especially copra, and the conduct of a general mercantile business in Legaspi and in other places where it maintained
agencies, or sub-agencies, for the prosecution of its commercial enterprises.
Defendant Visayan Refining Co., is a corporation engaged in operating its extensive plant at Opon, Cebu, for the
manufacture of coconut oil.
On August 28, 1918, both parties entered into a contract and agreed for a period of one (1) year to buy and sell
exclusively from each other; and that during the continuance of the contract, the plaintiff will not appoint any other
agent for the purchase of copra in Legaspi nor buy copra from any vendor in Legaspi.
Pursuant to the agreement, Albaladejo, as VRC's agent, bought copra extensively for VRC for a period of 1 year.
Memorandum of Agreement Re Purchase of Copra. — This memorandum of agreement,

made and entered into by and between Albaladejo y Compania, S. en C., of Legaspi,
Province of Albay, Philippine Islands, party of the first part, and the Visayan Refining
Company, Inc., of Opon, Province of Cebu, Philippine Islands, party of the second part,
Witnesseth That. — Whereas, the party of the first part is engaged in the purchase of copra
in the Province of Albay; and Whereas, the party of the second part is engaged in the
business of the manufacture of coconut oil, or which purpose it must continually purchase
large quantities of copra; Now, Therefore, in consideration of the premises and covenants
hereinafter set forth, the said parties have agreed and do hereby contract and agree as
follows, to wit:
1. The party of the first part agrees and binds itself to sell to the party of the second part, and
the party of the second part agrees and binds itself to buy from the party of the first part, for a
period of one (1) year from the date of these presents, all the copra purchased by the party
of the first part in Province of Albay.
2. The party of the second part agrees to pay the party of the first part for the said copra the
market price thereof in Cebu at date (of) purchase, deducting, however, from such price the
cost of transportation by sea to the factory of the party of second part at Opon, Cebu, the
amount deducted to be ascertained from the rates established, from time to time, by the
public utility commission, or such entity as shall succeed to its functions, and also a further
deduction for the shrinkage of the copra from the time of its delivery to the party of the
second part to its arrival at Opon, Cebu, plus one-half of a real per picul in the event the
copra is delivered to boats which will unload it on the pier of the party of the second part at
Opon, Cebu, plus one real per picul in the event that the party of the first part shall employ its
own capital exclusively in its purchase.
3. During the continuance of this contract the party of the second part will not appoint any
other agent for the purchase of copra in Legaspi, nor buy copra from any vendor in Legaspi.
4. The party of the second part will, so far as practicable, keep the party of the first part
advised of the prevailing prices paid for copra in the Cebu market.
5. The party of the second part will provide transportation by sea to Opon, Cebu, for the
copra delivered to it by the party of the first part, but the party of the first part must deliver
such copra to the party of the second part free on board the boats of the latter's ships or on
the pier alongside the latter's ships, as the case may be.
At the end of said year, both parties found themselves satisfied with the existing arrangement and they therefore
continued by tacit consent to govern their future relations by the same agreement.
When the contract above referred to was originally made, Albaladejo y Cia. apparently had only one
commercial establishment, i.e., that at Legaspi; but the large requirements of the Visayan Refining Co. for
copra appeared so far to justify the extension of the plaintiff's business that during the course of the next two
or three years it established some twenty agencies, or subagencies, in various ports and places of the Province
of Albay and neighboring provinces.
In this situation, affairs remained until July 9, 1920, when the Visayan Refining Co. closed down its factory at Opon
and withdrew from the copra market.
After the Visayan Refining Co. had ceased to buy copra, as above stated, of which fact the plaintiff was duly
notified, the supplies of copra already purchased by the plaintiff were gradually shipped out and accepted by
the Visayan Refining Co., and in the course of the next eight or ten months the accounts between the two
parties were liquidated. This time, Philippine Refining Co (PRC) succeeded to the rights and liabilities of VRC.
The last account rendered by the Visayan Refining Co. to the plaintiff was for the month of April, 1921, and it
showed a balance of P288 in favor of the defendant.
Under date of June 25, 1921, the plaintiff company addressed a letter from Legaspi to the Philippine Refining
Co. (which had now succeeded to the rights and liabilities of the Visayan Refining Co.), expressing its
approval of said account. In this letter no dissatisfaction was expressed by the plaintiff as to the state of affairs
between the parties; but about six weeks thereafter the present action was begun.
Upon reference to paragraph five of the contract reproduced above it will be seen that the Visayan Refining
Co. obligated itself to provide transportation by sea to Opon, Cebu, for the copra which should be delivered to
it by the plaintiff;
and the first cause of action set forth in the complaint is planted upon the alleged negligent failure of the
Visayan Refining Co. to provide opportune transportation for the copra collected by the plaintiff and deposited
for shipment at various places. In this connection we reproduce the following allegations from the complaint:
6. That, from the month of September, 1918, until the month of June, 1920, the plaintiff opportunely
advised the Visayan of the stocks that the former had for shipment, and, from time to time, requested
the Visayan to send vessels to take up said stocks; but that the Visayan culpably and negligently
allowed a great number of days to elapse before sending the boats for the transportation of the copra to
Opon, Cebu, and that due to the fault and negligence of the Visayan, the stocks of copra prepared for
shipment by the plaintiff had to remain an unnecessary length of time in warehouses and could not be
delivered to the Visayan, nor could they be transmitted to this latter because of the lack of boats, and
that for this reason the copra gathered by the plaintiff and prepared for delivery to the Visayan
suffered the diminishment of weight herein below specified, through shrinkage or excessive drying,
and, in consequence thereof, an important diminishment in its value.
x x x x x x x x x
8. That the diminishment in weight suffered as shrinkage through excessive drying by all the lots of
copra sold by the plaintiff to the Visayan, due to the fault and negligence of the Visayan in the sending
of boats to take up said copra, represents a total of 9,695 piculs and 56 cates, the just and reasonable
value of which, at the rates fixed by the purchaser as the price in its liquidation, is a total of two
hundred and one thousand, five hundred and ninety-nine pesos and fifty-three centavos (P201,599.53),
Philippine currency, in which amount the plaintiff has been damaged and injured by the negligent and
culpable acts and omissions of the Visayan, as herein above stated and alleged.
But about six weeks after their accounts were liquidated, the present action was begun.
Albaladejo alleged that VRC negligently failed to provide opportune transportation for the copra it collected and
deposited for shipment at various places in pursuant to their agreement, where wasVRC obligated itself to provide
transportation by sea to Opon, Cebu.
Due to VRC's failure, the copra diminished in weight and value due to its shrinkage through the excessive drying.
That the diminishment in weight suffered as shrinkage through excessive drying by all the
lots of copra sold by the plaintiff to the Visayan, due to the fault and negligence of the
Visayan in the sending of boats to take up said copra, represents a total of 9,695 piculs and
56 cates, the just and reasonable value of which, at the rates fixed by the purchaser as the
price in its liquidation, is a total of two hundred and one thousand, five hundred and ninety-
nine pesos and fifty-three centavos (P201,599.53), Philippine currency, in which amount the
plaintiff has been damaged and injured by the negligent and culpable acts and omissions of
the Visayan, as herein above stated and alleged.
IHence, Albaladejo was damaged and injured.
However, the lower court ruled that VRC was not negligent in the delay of the transportation but the occasional
irregularities were due at time to the condition of the weather as to the transportation by sea. Albaladejo also sought
to recover P110,000, the amount it expended in maintaining and extending its activity as a purchaser or copra.
Issue/s: Whether or not Albaladejo, as agent of VRC, is entitled to reimbursement for the expenses in maintaining
and extending its organization for the purchase of copra in the period when VRC was closed which it incurred at the
instance and request of VRC or upon any promise of the defendant to make that expenditure good.
Ruling:
NO.
Albaladejo presented several trade letters of VRC and PRC as evidence that PRC hoped that it would soon re-enter
the copra market. But nothing in these letters held the PRC liable for the expenses incurred by Albaldejo in keeping
its organization intact during the period now under consideration.
Further, the contract between VRC/PRC and Albaladejo is actually one of purchase and not of agency. Although
VRC/PRC used "agents'' in its trade letter to refer to Albaladjo and other suppliers, this designation was evidently
only used for convenience and it is very clear that in its activities as a buyer, Albaladejo was acting upon its own
account and not as an agent of VRC.
The use of this term “agent” in one clause of the contract cannot dominate the real nature of the agreement as
revealed in other clauses, no less than in the caption of the agreement itself.
Also, when it turned over the copra to VRC, a second sale was effected. Not having a contract of agency with VRC,
Albaladejo is NOT entitled to reimbursement, as contemplated under Art. 1729, now Art. 1913, for the
damages/expenses it incurred in maintaining and extending VRC's organization.
[Art, 1913. The principal must also indemnify the agent for all the damages which the execution of agency may
have caused the latter, without fault or negligence on his part.]
In the appellant's brief the contention is advanced that the contract between the plaintiff and the Visayan
Refining Co. created the relation of principal and agent between the parties, and the reliance is placed upon
article 1729 of the Civil Code which requires the principal to indemnify the agent for damages incurred in
carrying out the agency. Attentive perusal of the contract is, however, convincing to the effect that the relation
between the parties was not that of principal and agent in so far as relates to the purchase of copra by the
plaintiff. It is true that the Visayan Refining Co. made the plaintiff one of its instruments for the collection of
copra; but it is clear that in making its purchases from the producers the plaintiff was buying upon its own
account and that when it turned over the copra to the Visayan Refining Co., pursuant to that agreement, a
second sale was effected.
In paragraph three of the contract it is declared that during the continuance of this contract the Visayan
Refining Co. would not appoint any other agent for the purchase of copra in Legaspi; and this gives rise
indirectly to the inference that the plaintiff was considered its buying agent. But the use of this term in one
clause of the contract cannot dominate the real nature of the agreement as revealed in other clauses, no less
than in the caption of the agreement itself. In some of the trade letters also the various instrumentalities used
by the Visayan Refining Co. for the collection of copra are spoken of as agents. But this designation was
evidently used for convenience; and it is very clear that in its activities as a buyer the plaintiff was acting upon
its own account and not as agents, in the legal sense, of the Visayan Refining Co.
The title to all of the copra purchased by the plaintiff undoubtedly remained in it until it was delivered by way
of subsequent sale to said company.
For the reasons stated we are of the opinion that no liability on the part of the defendant is shown upon the
plaintiff's second cause of action, and the judgment of the trial court on this part of the case is erroneous.
The appealed judgment will therefore be affirmed in so far as it absolves the defendant from the first cause of
action and will be reversed in so far as it gives judgment against the defendant upon the second cause of
action; and the defendant will be completely absolved from the complaint. So ordered, without express
findings as to costs of either instance.
6. Cui vs. Cui, 100 Phil. 913
PRELIMINARIES
JESUS MA. CUI

ANTONIO MA. CUI
Court of First Instance of Cebu

CFI- Judgment was rendered in favor of the plaintiff, Jesus Ma. Cui
Who won? Who is liable? Dispositive Portion

Won- Defendant-appellant Antonio Ma. Cui
IN VIEW OF THE FOREGOING CONSIDERATIONS, the judgment appealed from is reversed and set aside,
and the complaint as well as the complaint in intervention are dismissed, with costs equally against plaintiff-
appellee and intervenor-appellant.
Principle:
PROHIBITION AGAINST AGENT OR ADMINISTRATOR TO BUY PROPERTY OF PRINCIPAL.—The
prohibition of the law against an agent or administrator from purchasing property in his hands for sale or
management contained in Article 1459 of the old Civil Code has already been removed.
Under the provisions of article 1491, section 2, of the new Civil Code, an agent may now buy property placed in his
hands for sale or administration, provided that the principal gives his consent thereto.
While, the new Code came into effect only on August 30, 1950, however, since this is a right that is declared for the
first time, the same may be given retroactive effect if no vested or acquired right is impaired (Article 2253, new
Civil Code).
In the present case, during the lifetime of the vendor, particularly on the date of the execution of the sale in
question, the appellants could not claim any vested or acquired right in the properties sold, as heirs, the most they
had was a mere expectancy.
Therefore, the practical and liberal provision of the new Civil Code even if the sale had taken place before its
effectivity may be invoked.
Facts:
On May 25, 1948, Jesus Ma. Cui and Jorge Ma. Cui brought an action in the Court of First Instance
of Cebu against Antonio Ma. Cui and Mercedes Cui de Ramas seeking the annulment of the sale
of three parcels of land against the latter.
The Rehabilitation Finance Corporation was included as party defendant because the lands above-
mentioned were mortgaged to it to secure a loan of P130,000, the object being to have the mortgage
declared null and void. Also on March 19, 1949, Rosario Cui, daughter of Don Mariano Cui, filed in
the same court a petition for the appointment of a guardian of the person and properties of
her father on the ground of incompetency and, accordingly, he was declared incompetent on March
31, 1949 and one Victorino Reynes was appointed as his guardian.
Jesus alleged that during the marriage of Don Mariano and Dona Antonia, their parents acquired certain properties
(some by donation) in Cebu, namely, Lots Nos. 2312, 2313 and 2319.
Upon the death of their mother, the properties were placed under the administration of their father.
Main allegation was:
That while the Don Mariano was 84 years of age, Antonio by means of deceit, secured the transfer to
themselves the said lot without any pecuniary consideration; that in the deed of sale executed on March 8,
1946, Rosario Cui appeared as one of the vendees, but on learning of this fact she subsequently renounced
her rights under the sale and returned her portion to Don Mariano Cui by executing a deed of resale in his
favor on October 11, 1946;
that Antonio & other defendant, fraudulently and with the desire of enriching themselves unjustly at the
expense of their father, Don Mariano Cui, and of their brothers and co-heirs, secured a loan of P130,000
from the Rehabilitation properties, and with the loan thus obtained, defendants constructed an apartment on
the questioned lot building of strong materials consisting of 14 doors, valued at approximately P130,000
and another building on the same parcels of land, which buildings were leased to some Chinese commercial
firms a monthly rental of P7,600, which defendants have collected and will continue to collect to the
prejudice of the plaintiffs;
Jesus alleged that the sale should be invalidated so far as the portion of the property sold to Antonio Cui is
concerned, for the reason that when that sale was effected, Antonio was then acting as the agent or administrator
of the properties of Don Mariano Cui.
Jesus lays stress on the power of attorney Exhibit L which was executed by Don Mariano in favor of Antonio Cui on
March 2,1946, wherein the former has constituted the latter as his "true and lawful attorney" to perform in his name
and that of the intestate heirs of Doña Antonia Perales.
But Defendants in their answer set up the defense that the sale mentioned in the complaint is valid
because it was executed when Don Mariano Cui was still in possession of his mental faculties and that,
while the sale was at first executed in favor of the defendants and their sister Rosario Cui, the latter
however resold her share to Don Mariano for reason stated in the deed of resale executed to that
effect. They prayed that the complaint be dismissed.
On May 22, 1951, after due hearing and the presentation of voluminous evidence on the part of both
parties, the court rendered its decision dismissing the complaint and sentencing the plaintiffs to pay
the costs of action, from which plaintiffs appealed in due time, and because the value of the property
involved exceeds the amount of P50,000, the case was certified to us for decision by the Court of
Appeals under section 1 of Republic Act No. 296.
In this appeal, appellants now contended that the lower court erred: (1) "in not declaring the deed of
sale, Exhibit A, void or inexistent for lack of valid consent and consideration" ; (2) "in not declaring
illegal the sale, evidenced by Exhibit A, on the ground that it was a transaction between principal and
agent, which is prohibited by paragraph (2), Article 1459 of the old Civil Code" ; (3) "in not finding
that the three lots conveyed by means of the deed of sale, Exhibit A, belong to the unliquidated
conjugal partnership of Don Mariano Cui and his deceased wife Doña Antonia Perales, and that
consequently Don Mariano Cui could not validly sell the entire property" ; and (4) "in not finding that
the plaintiffs are entitled to seven-eights (7/8) of the property in question and of the rentals thereof
beginning November 1, 1947." We will discuss these issues separately.
In support of their contention that Don Mariano Cui did not and could not have validly consented to
the deed of sale in question, appellants submitted the following propositions: (a) Don Mariano was
incapacitated to give his consent by reason of his age and ailment; (b) Don Mariano acted under a
mistake, and his signature was secured by means of deceit; and (c) the sale Exhibit A is vitiated by
undue influence.
The deed of sale Exhibit A was executed by Don Mariano Cui, Antonio Cui and Mercedes Cui de
Ramas on March 8, 1946 in the city of Cebu, and by Rosario Cui and her husband Dr. Ireneo
Encarnacion in the City of Manila on March 20, 1946. The consideration of the sale was
P64,000 plus the reservation of the right in favor of Don Mariano "to enjoy the fruits and rents
of the same" as long as he lives. It appears however that, while in said deed of sale it is stated
that Don Mariano has acknowledged receipt of said consideration of P64,000, the same is not
true with regard to the share of Rosario Cui. So Don Mariano went to Calapan, Mindoro in July,
1946 to collect from Rosario her share of the purchase price amounting to P20,000. Rosario
then excused herself from going ahead with the sale alleging as reason that she needed what
money she had to rehabilitate her electric plant in Calapan and also because Cebu was very
far from Mindoro where they had already their permanent residence. Not being able to pay her
share in the consideration of the sale, Don Mariano demanded from her the resale of her
interest. This was done when she went to Manila on October 11, 1946 to execute the deed of
resale in favor of Don Mariano. This attitude of Don Mariano is very significant in so far as his
state of mind is concerned. It shows that he was fully conscious of what was transpiring and of
the transaction he was executing so much so that he went to the extent of demanding from
Rosario the resale of her interest when she failed to pay her share in the consideration of the
sale.
There are other letters and documents which Don Mariano had prepared and executed in the
neighborhood of the time the deed of sale in question was executed which also depict the
mental condition that he possessed at the time, and to show this we can do no better than to
quote what the lower court said on this point: jgc:chanrobles.com.ph
It is obvious from the foregoing discussion that Don Mariano signed and executed the
deed of sale Exhibit A not only at a time when he was still in the full enjoyment of his
mental faculties, but also under conditions which indicate that he knew what he was
doing and, as a consequence, it cannot be said that he has entered into the
transaction without his consent or under a misapprehension that the document he was
signing was not the sale of the properties in question but one merely pertaining to
their administration.
Issue/s:
WON the sale of the property to Antonio was valid when made during the existence of principal-agent
relationship?
Ruling: YES.
While under article 1459 of the old Civil Code an agent or administrator is disqualified from purchasing property in
his hand for sale or management, and, in this case, the property in question was sold to Antonio Cui while he was
already the agent or administrator of the properties of Don Mariano Cui, we however believe that this question
cannot now be raised or invoked.
The prohibition of the law is contained in article 1459 of the old Civil Code, but this prohibition has already
been removed. Under the provisions of article 1491, section 2, of the new Civil Code, an agent may now buy
property placed in his hands for sale or administration, provided that the principal gives his consent thereto.
While the new Code came into effect only on August 30, 1950, however, since this is a right that is declared for the
first time, the same may be given retroactive effect if no vested or acquired right is impaired (Article 2253, new
Civil Code).
During the lifetime of Don Mariano,and particularly on March 8, 1946, the herein appellants could not claim any
vested or acquired right in these properties, for,as heirs, the most they had was a mere expectancy.
We may, therefore, invoke now this practical and liberal provision of our new Civil Code even if the sale had taken
place before its effectivity.
As an additional argument to nullify the deed of sale Exhibit A, even partially, in the
supposition that all their previous arguments would prove of no avail, Appellants raise the
question that said sale should be invalidated at least in so far as the portion of the property
sold to Antonio Cui is concerned, for the reason that when that sale was effected, he was then
acting as the agent or administrator of the properties of Don Mariano Cui.
In advancing this argument, appellants lay stress on the power of attorney Exhibit L which
was executed by Don Mariano in favor of Antonio Cui on March 2, 1946, wherein the former
has constituted the latter as his "true and lawful attorney" to perform in his name and that of
the intestate heirs of Doña Antonia Perales the following acts: jgc:chanrobles.com.ph
". . . to administer, sell, mortgage, lease, demand, claim, represent me and

the intestate heirs, in all meetings of corporations, associations, of which my
or their presence is required, sue for, collect, cash, indorse checks drawn in
my favor or of the intestate heirs against any person or entity or bank, and
sign all documents, that I and or the intestate heirs to which I am the
administrator are entitled to; giving and granting unto my said attorney full
power to perform and to make everything necessary to be done or which he
believes to be necessary or beneficial for me and the said heirs as fully and to
all intents and purposes as I might or could do if personally present, with full
power of substitution, and revocation, hereby granting ratifying all that he or
his substitutes shall lawfully do or cause to be done by virtue of these
presents." cralaw virtua1aw library
While under article 1459 of the old Civil Code an agent or administrator is disqualified
from purchasing property in his hands for sale or management, and, in this case, the
property in question was sold to Antonio Cui while he was already the agent or
administrator of the properties of Don Mariano Cui, we however believe that this
question cannot now be raised or invoked for the following reasons.
(1) This contention is being raised in this appeal for the first time. It was never raised
in the trial court. An examination of the complaints, both original as well as amended,
will show that nowhere therein do they raise the invalidity of the sale on that ground
nor ask as an alternative relief the partial revocation of the sale in so far as Antonio’s
share is concerned because of the alleged relation of principal and agent between
vendor and vendee. It is undoubtedly for this reason that the trial court has not
passed upon this question in its decision. And considering that under Section 19, Rule
48, of our Rules of Court, an appellant may only include "In his assignment of error
any question of law or of fact that has been raised in the court below and which is
within the issues made by the parties in their pleadings", it follows that appellants are
now prevented from raising this question for the first time in this instance.
(2) The power of attorney in question is couched in so general a language that one
cannot tell whether it refers to the properties of Don Mariano or only to the conjugal
properties of the spouses. However, considering that the appointment was extended to
Antonio Cui by Don Mariano so that he may act as agent "for me and for the intestate
heirs of the deceased Antonia Perales", one is led to believe that the power refers to
the conjugal properties wherein he had one-half interest and the heirs of Doña
Antonia,the remaining half. Moreover,the power of attorney was executed on March 2,
1946 while the deed of sale was executed on March 8, 1946. They were therefore
executed practically at the same time, which makes it doubtful as to whether such sale
can be deemed to be within the prohibition of the law.
(3) Because The prohibition of the law contained in article 1459 of the old Civil Code
has already been removed.
Under the provisions of article 1491, section 2, of the new Civil Code, an agent may
now buy property placed in his hands for sale or administration, provided that the
principal gives his consent thereto.
The Court found that:
Don Mariano signed and executed the deed of sale Exhibit A not only at a time when
he was still in the full enjoyment of his mental faculties, but also under conditions
which indicate that he knew what he was doing and, as a consequence, it cannot be
said that he has entered into the transaction without his consent or under a
misapprehension that the document he was signing was not the sale of the properties
in question but one merely pertaining to their administration.
While the new Code came into effect only on August 30, 1950, however, since this is a
right that is declared for the first time, the same may be given retroactive effect if no
vested or acquired right is impaired (Article 2253, new Civil Code). During the lifetime
of Don Mariano, and particularly on March 8, 1946, the herein appellants could not
claim any vested or acquired right in these properties, for, as heirs, the most they had
was a mere expectancy. We may, therefore, invoke now this practical and liberal
provision of our new Civil Code even if the sale had taken place before its effectivity.
7. Allied Free Worker’s Union [PLUM] vs. Compania Maritima, 19 SCRA

258
PRELIMINARIES
Who is the plaintiff: Allied Free Worker’s union
Who is the defendant: Compania Maritima
Nature of the Action filed in the SC? What is the case all about in Summary? MARITIMA filed an action to
rescind the CONTRACT , enjoin AFWU members from doing arrastre and stevedoring work in connection with
its, vessels, and for recovery of damages against AFWU and its officers
AFWU sued Maritima for unfair labor practice saying that maritima refused to bargain collectively
Maritima complained to the AFWU of unsatisfactory and inefficient service by the laborers doing the arrastre
and stevedoring work. This deteriorating situation was admitted as a fact by AFWU's president. To remedy the
situation since MARITIMA's business was being adversely affected — Teves was forced to hire extra laborers
from among "stand-by" workers not affiliated to any union to help in the stevedoring and arrastre work. The
wages of these extra laborers were paid by MARITIMA through separate vouchers and not by AFWU.
Moreover, said wages were not charged to the consignees or owners of the cargoes. AFWU presented to
MARITIMA a written proposal for a collective bargaining agreement.
This demand embodied certain terms and conditions of employment different from the provisions of the
CONTRACT . No reply was made by MARITIMA. MARITIMA informed AFWU of the termination of the
CONTRACT because of the inefficient service rendered by the latter which had adversely affected its business.
From which court Originated? Industrial Court

the CFI decision in the civil case was promulgated. It ordered the rescission of the CONTRACT and
permanently enjoined AFWU members from performing work in connection with MARITIMA's vessels.
AFWU then filed its notice of appeal, appeal bond and record on appeal.
Industrial Court IN VIEW OF ALL THE FOREGOING CIRCUMSTANCES, the complaint of the union
for unfair labor practices against the Compañia MARITIMA and/or its agent Jose C. Teves and the Iligan
Stevedoring Union and/or Sergio Obach is hereby dismissed for lack of substantial evidence and merit.
In pursuance of the provisions of Section 12 of Republic Act 875 and the Rules of this court on certification
election, the Honorable, the Secretary of Labor or any of his authorized representative is hereby requested to
conduct certification election among all the workers and/or stevedores working in the wharf of Iligan City who
are performing stevedoring and arrastre service aboard Compañia MARITIMA vessels docking at Iligan City
port in order to determine their representative for collective bargaining with the employer, whether their desire
to be represented by the petitioner Allied Free Workers Union or neither [sic]; and upon termination of the said
election, the result thereof shall forthwith be submitted to this court for further consideration. The union
present payroll may be utilized in determining the qualified voters, with the exclusion of all supervisors.
MARITIMA WON. Wherefore, the appealed decision of the Court of Industrial Relations is hereby affirmed
insofar as it dismissed the charge of unfair labor practice in CIR Case 426-ULP
Principle:
Under the law the duty to bargain collectively arises only between the "employer" and its "employees". Where
neither party is an ''employer" nor an "employee" of the other, no such duty would exist. Needless to add, where
there is no duty to bargain collectively the refusal to bargain violates no right. The facts as found by the court a quo
strongly indicate that it is AFWU itself who is the "employer" of those laborers. The facts very succinctly show that
it was AFWU, through its officers, which selected and hired the laborers, (2) paid their wages, (3) exercised control
and supervision over them, and (4) had the power to discipline and dismiss them.
Facts:
The three cases before this Court are the respective appeals separately taken by the parties hereto from an
order1 of the Court of Industrial Relations en banc affirming its trial judge's decision, rendered on November 4,
1963, in CIR Case 175-MC and CIR Case 426-ULP. Thus L-22971 is the appeal of MARITIMA2 in CIR Case
175-MC; L-22952 is AFWU's appeal in the same case; and L-22951 refers to AFWU's3 appeal in CIR Case
426-ULP. Since these cases were jointly tried and decided in the court a quo and they involve the same
fundamental issue — the presence or absence of employer-employee relationship — they are jointly
considered herein.
MARITIMA is a local corporation engaged in the shipping business. Teves is its branch manager in the port
of Iligan City.
And AFWU (Allied Free Worker’s Union) is duly registered legitimate labor organization with 225 members.
On August 11, 1952, MARITIMA, through Teves, entered into a CONTRACT 4 with AFWU the terms of which
We reproduce:
— ARRASTRE AND STEVEDORING CONTRACT —
KNOW ALL MEN BY THESE PRESENTS:
This CONTRACT made and executed this 11th day of August, 1952, in the City of Iligan,
Philippines, by and between the COMPAÑIA MARITIMA Iligan Branch, represented by its
Branch Manager in Iligan City, and the ALLIED FREE WORKERS' UNION, a duly
authorized labor union, represented by its President:
WITNESSETH.
1. That the Compañia MARITIMA hereby engage the services of the Allied Free Workers'
Union to do and perform all the work of stevedoring and arrastre services of all its vessels or
boats calling in the port of Iligan City, beginning August 12, 1952.
2. That the Compañia MARITIMA shall not be liable for the payment of the services rendered
by the Allied Free Workers' Union, for the loading, unloading and deliveries of cargoes as
same is payable by the owners and consignees of cargoes, as it has been the practice in the
port of Iligan City.
3. That the Allied Free Workers' Union shall be responsible for the damages that may be
caused to the cargoes in the course of their handling.
4. That this CONTRACT is good and valid for a period of one (1) month from August 12,
1952, but same may be renewed by agreement of the parties; however
Compañia MARITIMA reserves the right to revoke this CONTRACT even before the
expiration of the term, if and when the Allied Free Workers' Unionfails to render good
service.
During the first month of the existence of the CONTRACT , AFWU rendered satisfactory service.
So, MARITIMA, through Teves, verbally renewed the same.
This harmonious relations between MARITIMA and AFWU lasted up to the latter part of 1953 until the former
complained to the latter of unsatisfactory and inefficient service by the laborers doing the arrastre and
stevedoring work. This deteriorating situation was admitted as a fact by AFWU's president.
To remedy the situation since MARITIMA's business was being adversely affected — Teves was forced to hire
extra laborers from among "stand-by" workers not affiliated to any union to help in the stevedoring and
arrastre work. The wages of these extra laborers were paid by MARITIMA through separate vouchers and not
by AFWU. Moreover, said wages were not charged to the consignees or owners of the cargoes.
On July 23, 1954, AFWU presented to MARITIMA a written proposal5 for a collective bargaining agreement.
This demand embodied certain terms and conditions of employment different from the provisions of
the CONTRACT . No reply was made by MARITIMA.
On August 6, 1954, AFWU instituted proceedings in the Industrial Court6 praying that it be certified as

the sole and exclusive bargaining agent in the bargaining unit composed of all the laborers doing the
arrastre and stevedoring work in connection with MARITIMA's vessels in Iligan City.
MARITIMA answered, alleging lack of employer-employee relationship between the parties.
On August 24, 1954, MARITIMA informed AFWU of the termination of the CONTRACT because of the

inefficient service rendered by the latter which had adversely affected its business. The termination was to take
effect as of September 1, 1954.
MARITIMA then contracted with the Iligan Stevedoring Union for the arrastre and stevedoring work. The latter
agreed to perform the work subject to the same terms and conditions of the CONTRACT . The new agreement
was to be carried out on September 1, 1954.
On August 26, 1954, upon the instance of AFWU, MARITIMA found itself charged before the Industrial
Court7 of unfair labor practices under Sec. 4(a), (1), (3), (4) and (6) of Rep. Act No.
875. MARITIMA answered, again denying the employer-employee relationship between the parties.
On September 1, 1954, members of AFWU, together with those of the Mindanao Workers Alliance — a sister
union — formed a picket line at the wharf of Iligan City, thus preventing the Iligan Stevedoring Union from
carrying out the arrastre and stevedoring work it contracted for.8 This picket lasted for nine days.
On September 9, 1954, MARITIMA filed an action9 to rescind the CONTRACT , enjoin AFWU members from

doing arrastre and stevedoring work in connection with its, vessels, and for recovery of damages
against AFWU and its officers. Incidentally, this civil case has been the subject of three proceedings already
which have reached this Court. The first 10 involved a preliminary injunction issued therein on September 9,
1954, by the trial court prohibiting AFWU from interfering in any manner with the loading and unloading of
cargoes from MARITIMA's vessels. This injunction was lifted that very evening upon the filing of a counter
bond by AFWU. Subsequently, a motion to dissolve said counterbond was filed by MARITIMA but the hearing
on this incident was enjoined by Us on March 15, 1955, upon the institution of the petition for prohibition and
injunction in said L-8876. 11 Meanwhile, AFWU members-laborers were able to continue the arrastre and
stevedoring work in connection with MARITIMA's vessels.
On December 5, 1960, the CFI decision in the civil case was promulgated. It ordered the rescission of
the CONTRACT and permanently enjoined AFWU members from performing work in connection
with MARITIMA's vessels.
AFWU then filed its notice of appeal, appeal bond and record on appeal. 12 The subsequent incidents thereto
gave rise to the two other proceedings which have previously reached Us here.
On January 6, 1961, upon motion of MARITIMA ,an order of execution pending appeal and a writ of injunction
against AFWU was issued by the trial court in the civil case. This enabled MARITIMA to engage the services
of the Mindanao Arrastre Service to do the arrastre and stevedoring work on January 8, 1961.
However, AFWU filed a petition for certiorari, injunction and prohibition 13 here and on January 18, 1961, was
able to secure a writ of preliminary injunction ordering the maintenance of the status quo prior to January 6,
1961. Thus, after January 18, 1961, AFWU laborers were again back doing the same work as before.
The third incident that reached US 14 involved an order of the same trial court in the same civil case, dated
January 11, 1961, which amended some clerical errors in the original decision of December 5, 1960. Upon
motion of MARITIMA, the trial court, on March 24, 1962, issued an order for the execution of the decision of
January 11, 1961, since AFWU did not appeal therefrom, and on March 31, 1962, a writ of execution ousting
the 225 AFWU members-laborers from their work in connection with the loading and unloading of cargoes
was issued and a levy on execution upon the properties of AFWU was effected. Accordingly, on April 1,
1962, MARITIMA was again able to engage the services of the Mindanao Arrastre Service.
On April 16, 1962, upon the institution of the petition for certiorari, injunction, prohibition and mandamus, a
preliminary injunction was issued by Us against the orders of March 24 and 31, 1962. But then, on May 16,
1962, upon motion of MARITIMA this preliminary injunction was lifted by Us insofar as it related to the
execution of the order ousting the AFWU laborers from the stevedoring and arrastre work in connection with
the MARITIMA vessels. 15 Such then was the status of things.
On November 4, 1963, after almost 10 years of hearing the two cases jointly, the Industrial Court finally
rendered its decision. The dispositive part provided:
IN VIEW OF ALL THE FOREGOING CIRCUMSTANCES, the complaint of the union for unfair
labor practices against the Compañia MARITIMA and/or its agent Jose C. Teves and the Iligan
Stevedoring Union and/or Sergio Obach is hereby dismissed for lack of substantial evidence and
merit.
The court a quo held that under the CONTRACT , AFWU was an independent contractor

of MARITIMA.
In pursuance of the provisions of Section 12 of Republic Act 875 and the Rules of this court on
certification election, the Honorable, the Secretary of Labor or any of his authorized representative is
hereby requested to conduct certification election among all the workers and/or stevedores working in
the wharf of Iligan City who are performing stevedoring and arrastre service aboard
Compañia MARITIMA vessels docking at Iligan City port in order to determine their representative for
collective bargaining with the employer, whether their desire to be represented by the petitioner Allied
Free Workers Union or neither [sic]; and upon termination of the said election, the result thereof shall
forthwith be submitted to this court for further consideration.
The union present payroll may be utilized in determining the qualified voters, with the exclusion of all
supervisors.
SO ORDERED.
Issue/s:
WON AFWU is an agent of the laborers being a bargaining representative against Maritima?
Ruling: No.
The conclusion thus reached by the court a quo is in full accord with the facts and the applicable
jurisprudence. We totally agree with the court a quo that AFWU was an independent contractor. And
an independent contractor is not an "employee".17
Neither is there any direct employment relationship between MARITIMA and the laborers. The latter
have no separate individual contracts with MARITIMA. In fact, the court a quo found that it
was AFWU that hired them.
In its all-out endeavor to make an "employer" out of MARITIMA, AFWU citing an impressive array of

jurisprudence, even goes to the extent of insisting that it be considered a mere "agent" of MARITIMA.
According to the Court, suffice it to say on this point that an agent can not represent two conflicting interests
that are diametrically opposed.
And that the cases sought to be relied upon did not involve representatives of opposing interests.
The findings of the Court that AFWU is the employer of the laborers is diametrically opposed on its claim that
it is an agent of same laborers for purposes of collective bargaining agreement with Maritima.
In other way of saying, AFWU cannot claim simply as an agent acting in behalf of Maritima to avoid being
considered as the true employer of the laborers, and at same time claiming that it be declared as Sole and
Exclusive Bargaining Agent of the laborers for purposes of concluding a collective bargaining agreement with
Maritima because these two positions are diametrically opposed to each other.
No. There is no any direct employment relationship between MARITIMA and the laborers. The latter have no
separate individual contracts with MARITIMA. In fact, the court a quo found that it was AFWU that hired them.
Their only possible connection with MARITIMA is through AFWU which contracted with the latter. Hence, they
could not possibly be in a better class than AFWU which dealt with MARITIMA.
Under the CONTRACT, AFWU was an independent contractor of MARITIMA. The petitioner union operated as a
labor contractor under the so-called "cabo" system has a complete set of officers and office personnel and its
organizational structure. The payrolls where laborers are listed and paid were prepared by the union itself without
the intervention or control of the respondent company and/or its agent at. The respondent never had any knowledge
of the individual names of laborers and/or workers listed in the union payroll or in their roster of membership. The
union engaged the services of their members in undertaking the work of arrastre and stevedoring either to haul
shippers' goods from their warehouses to the MARITIMA boat or from the boat to the different consignees. The
charges for such service were known by the union and collected by them through their bill collector, who are
employees of the union and not of the respondent. The respondent had no intervention whatsoever in the collection
of those charges.
The union members who were hired by the union to perform arrastre and stevedoring work on respondents' vessels
at Iligan port were being supervised and controlled by the general foreman of the petitioner union or by any union
assistant when performing arrastre and/or stevedoring work aboard vessels of the Compañia MARITIMA. There
were no instances where offices and employees of the respondent Compañia MARITIMA and/or its agent had
interfered in the giving of instructions to the laborers performing the arrastre and/or stevedoring work.
It is true that MARITIMA admits that it did not answer AFWU's proposal for a collective bargaining agreement.
From this it does not necessarily follow that it is guilty of unfair labor practice. Under the law the duty to bargain
collectively arises only between the "employer" and its "employees". Where neither party is an ''employer" nor an
"employee" of the other, no such duty would exist. Needless to add, where there is no duty to bargain collectively
the refusal to bargain violates no right. The facts as found by the court a quo strongly indicate that it is AFWU itself
who is the "employer" of those laborers. The facts very succinctly show that it was AFWU, through its officers,
which selected and hired the laborers, (2) paid their wages, (3) exercised control and supervision over them, and (4)
had the power to discipline and dismiss them.
These are the very elements constituting an employer-employee relationship. An agent can not represent two
conflicting interests that are diametrically opposed. And that the cases sought to be relied upon did not involve
representatives of opposing interests.
8. Far Eastern Export & Import Co. vs. Lim Teck Suan, 97 Phil. 171
PRELIMINARIES
FAR EASTERN EXPORT & IMPORT CO., Petitioner
LIM TECK SUAN, Respondent.
petition for certiorari to review a decision of the Court of Appeals
Collection of a sum the sum of P11,4476.60, with legal interest from the date of the
filing of the complaint and to pay the costs.chanrbl esvirualawlibrary chanrobles virtual law library
Breach of Contract / warranty - SUAN received inferior quality of products
Case only mentioned LOWER COURT since it is a 1955 case
RTC - Ruled in favor of FAR Eastern
CA - Reversed
Finding no reversible error in the decision appealed from, the same is hereby
affirmed, with costs. chanrob
Principle:
Facts:
This is a petition for certiorari to review a decision of the Court of Appeals

dated September 25, 1953, reversing the decision of the Court of First
Instance of Manila, and sentencing the defendant-petitioner Far Eastern
Export & Import Co. later referred to as export company, to pay the
plaintiff-respondent Lim Teck Suan later to be referred to as Suan, the
sum of P11,476.60, with legal interest from the date of the filing of the
complaint and to pay the costs.
(meaning at CA there was finding of brokerage or agency)
1. Sometime in November, 1948, Ignacio Delizalde, an agent of the Far
Eastern Export & Import Company, went to the store of Lim Teck Suan
situated at 267 San Vicente Street, Manila, and offered to sell textile,
showing samples thereof, and after having arrived at an agreement with
Bernardo Lim, the General Manager of Lim Teck Suan, Delizalde returned
on November 17 with the buyer's order.
Some parts of the Buyer’s order stated:
a. “I (Suan) hereby commission you to procure for me

the following merchandise, subject to the terms” robles virtual law library
b. Product - “10,000 yds Ashtone Acetate & Rayon-No.

1347”
c. “Payment will be by "Confirmed Irrevocable Letter of
Credit" to be opened in favor of Frenkel
International Corporation, 52 Broadway, New York,
4, N. Y. for the full amount of the above cost of
merchandise plus (approximately) for export packing:
insurance, freight, documentation, forwarding, etc.
which are for the buyers accounts, IMMEDIATELY upon
written Accepted (Sgd.) Illegible Date Nov. 1948 to be
signed by our representative upon confirmation. “
library
chanroblesvirtualawlibrary chanrobles virtual law
In accordance with said Exhibit A, plaintiff established a letter of credit

No. 6390 (Exhibit B) in favor of Frenkel International Corporation
through the Hongkong and Shanghai Banking Corporation, attached to the
agreed statement of facts.
On February 11, 1949, the textile arrived at Manila on board the vessel M.S.
Arnold Maersk, covered by bill of lading No. 125 (Exhibit C), Invoice No.
1684-M (Exhibit D) issued by Frenkel International Corporation direct to
the plaintiff.
2. Upon receipt of the items delivered, SUAN complained to the FAR

EASTERN of the inferior quality of the textile received by him and had them
examined by Marine Surveyor Del Pan & Company and to pay him an
amount of P11,476.66 i, representing the net direct loss. ( the fifteen cases
c (
of Ashtone Acetate and Rayon Suiting for the purpose of offering them for
sale which netted P11,907.30. Deducting this amount from the sum of
P23,686.96 which included the amount paid by plaintiff for said textile and
the warehouse expenses) irtual law librar
3. Far Eastern Export and Import Company’s defense;
3.1 It only acted as a broker in this transaction;
3.2that after placing the order, the defendants took no further action and
the cargo was taken directly by the buyer Lim Teck Suan, the shipment
having been made to him and all the documents were also handled by him
directly without any intervention on the part of the defendants;
3.3 that upon receipt of Lim Teck Suan's complaint the defendants passed
it to its principal, Frenkel International Corporation, for comment, and
the latter maintained that the merchandise was up to standard called
for.
chanroblesvirtualawlibrary chanrobles virtual law library
4. The lower court acquitted the FAR EASTERN from the complaint.
The lower court acquitted the defendants from the complaint asking for
damages in the sum of f 19,500.00 representing the difference in price
between the textile ordered and those received, plus profits unrealized and
the cost of this suit, and dismissed the counterclaim filed by the defendants
without pronouncement as to costs."
5. The Court of Appeals reversed the judgment entered by the Court of First
Instance of Manila, basing its decision of reversal on the case of Jose
Velasco, vs. Universal Trading Co., Inc., 45 Off. Gaz. 4504.
Issue/s:
Whether or not Far eastern is a broker or agent of SUAN?
Ruling:
No.
The contract entered into was not that of brokerage nor an agency but a contract of
sale and purchase.
The Court carefully examined the Velasco case and agree with the Court of
Appeals that the facts in that case are very similar to those in the present
case.
In the present case, the export company acted as agent for Frenkel
International Corporation, presumably the supplier of the textile sold.
In the Velasco case, the Universal Trading Co., was acting as agent for A. J.
Wilson Company, also the supplier of the whisky sold.
In the present case, Suan according to the first part of the agreement is said
merely to be commissioning the Export Company to procure for him the
merchandise in question, just as in the other case, Velasco was supposed to
be ordering the whisky thru the Universal Trading Co.
In the present case, the price of the merchandise bought was paid for by
Suan by means of an irrevocable letter of credit opened in favor of the
supplier, Frenkel International Corporation. In the Velasco case, Velasco
was given the choice of either opening a similar irrevocable letter of credit
in favor of the supplier A. J. Wilson Company or making a cash deposit.
It is true that in the Velasco case, upon the arrival of the whisky and
because it did not conform to specifications, Velasco infused to receive it;
but in the present case although Suan received the merchandise he
immediately protested its poor quality and it was deposited in the
warehouse and later withdrawn and sold for the best price possible, all at
the suggestion of the Export company.
The present case is in our opinion a stronger one than that of Velasco for
holding the transaction as one of purchase and sale because as may be
noticed from the agreement (Exhibit "A"), the same speaks of the items
(merchandise) therein involved as sold, and the sale was even confirmed by
the Export company.
In both cases, the agents Universal Trading Co. and the export company
dealt directly with the local merchants Velasco and Suan without expressly
indicating or revealing their principals.
In both cases there was no privity of contract between the buyers Suan and
Velasco and the suppliers Frenkel International Corporation and A. J.
Wilson Company, respectively.
In both cases no commission or monetary consideration was paid or agreed

to be paid by the buyers to the Export company and the Universal Trading
Co., proof that there was no agency or brokerage, and that the profit of the
latter was undoubtedly the difference between the price listed to the buyers
and the net or special price quoted to the sellers, by the suppliers. (go
directly at the lowest part)
As already stated, it was held in the Velasco case that the transaction
therein entered into was one of purchase and sale, and for the same reasons
given there, we agree with the Court of Appeals that the transaction entered
into here is one of purchase and sale.
Similar facts mentioned by the SC in deciding the present case
Present Case Jose Velasco, vs. Universal Trading Co.,

Inc.,
the export company acted as agent for the Universal Trading Co., was acting as
Frenkel International Corporation, agent for A. J. Wilson Company, also the
presumably the supplier of the textile supplier of the whisky sold.
sold.
Suan according to the first part of the Velasco was supposed to be ordering the
agreement is said merely to be whisky thru the Universal Trading Co
commissioning the Export Company to
procure for him the merchandise in
question
the price of the merchandise bought was Velasco was given the choice of either
paid for by Suan by means of an opening a similar irrevocable letter of
irrevocable letter of credit opened in favor credit in favor of the supplier A. J. Wilson
of the supplier, Frenkel International Company or making a cash deposit
Corporation
Although Suan received the merchandise

he immediately protested its poor quality upon the arrival of the whisky and
and it was deposited in the warehouse because it did not conform to
and later withdrawn and sold for the best specifications, Velasco refused to received
price possible, all at the suggestion of the it
Export company.
In both cases, the agents Universal Trading Co. and the export company dealt directly
with the local merchants Velasco and Suan without expressly indicating or revealing
their principals.
In both cases there was no privity of contract between the buyers - Suan and Velasco
and the suppliers Frenkel International Corporation and A. J. Wilson Company,
respectively.
In both cases no commission or monetary consideration was paid or agreed to be paid

by the buyers to the Export company and the Universal Trading Co., proof that there
was no agency or brokerage, and that the profit of the latter was undoubtedly the
difference between the price listed to the buyers and the net or special price quoted
to the sellers, by the suppliers.
The present case is in our opinion a stronger one than that of Velasco for holding
the transaction as one of purchase and sale.
Additional:
As was held also by this Tribunal in the case of Gonzalo Puyat & Sons
Incorporated vs. Arco Amusement, 72 Phil., 402, where a foreign company has an
agent here selling its goods and merchandise, that same agent could not very well
act as agent for local buyers, because the interests of his foreign principal and
those of the buyer would be in direct conflict. He could not serve two masters at the
same time.
Like In the present case, the Export Company being an agent of the Frenkel
International Corporation could not, as it claims, have acted as an agent or broker
for Suan.
9. Nielson & Co., Inc. vs. Lepanto Consolidated Mining Co., 26 SCRA 540
[G.R. No. L-21601. December 28, 1968.]
NIELSON & COMPANY, INC., Plaintiff-Appellant, v. LEPANTO CONSOLIDATED

MINING COMPANY, Defendant-Appellee.
PRELIMINARIES
Who is the plaintiff: Nielson Co.
Who is the defendant: Lepanto Consolidated Mining Co.
Motion for reconsideration of a supreme court decision

DAMAGES for the refusal of Lepanto to comply with the terms of a management contract entered into between
them (nielson and lepanto)
Article 1709 of the Old Civil Code, defining contract of agency, provides:
"By the contract of agency, one person binds himself to render some service or do something for
the account or at the request of another."
Article 1544, defining contract of lease of service, provides:

"In a lease of work or services, one of the parties binds himself to make or construct something or
to render a service to the other for a price certain."
From which court Originated? CFI manila

The lower court, in the decision appealed from, considered the management contract as a contract of Iease of
services.
Article 1709 of the Old Civil Code, defining contract of agency, provides:
"By the contract of agency, one person binds himself to render some service or do something for
the account or at the request of another."
Article 1544, defining contract of lease of service, provides:
"In a lease of work or services, one of the parties binds himself to make or construct something or
to render a service to the other for a price certain."
In both agency and lease of services one of the parties binds himself to render some service to the
other party. Agency, however, is distinguished from lease of work or services in that the basis of agency is
representation, while in the lease of work or services the basis is employment. The lessor of services does
not represent his employer, while the agent represents his principal.
Nielsen won and the SC ordered Lepanto to pay the former.
IN VIEW OF THE FOREGOING CONSIDERATIONS, We hereby reverse the decision of the court a quo
and enter in lieu thereof another, ordering the appellee Lepanto to pay the appellant Nielson the different amounts as
specified...
Principle: "Agency" and "lease of service" compared and distinguished.—
In both agency and lease of services one of the parties binds himself to render some service to the other party.
Agency, however, is distinguished from lease of work or services in that the basis of agency is representation, while
in the lease of work or services the basis is employment.
The lessor of services does not represent his employer, while the agent represents his principal.
Agency is a preparatory contract, as agency "does not stop with the agency because the purpose is to enter into
other contracts." The most characteristic feature of an agency relationship is the agent's power to bring about
business relations between his principal and third persons.
"The agent is destined to execute juridical acts (creation, modification or extinction of relations with .third parties).
Lease of services contemplate only material (non-juridical) acts." (Reyes & Puno, An Outline of Philippine Civil
Law, Vol. V, p. 277). Nielson & Company, Inc. vs. Lepanto Consolidated Mining Company, 26 SCRA 540, No. L-
21601 December 28, 1968
Facts:
It appears that the suit involves an operating agreement executed before World War II between the plaintiff
(Nielson) and the defendant (Lepanto) whereby the former operated and managed the mining properties owned
by the latter for a management fee of P2,500.00 a month and a 10% participation in the net profits resulting
from the operation of the mining properties. For brevity and convenience, hereafter the plaintiff shall be
referred to as NIELSON and the defendant, LEPANTO.
On January 30, 1937, Nielson & Co. executed an agreement with Lepanto Consolidated Mining Co.
Lepanto owned the mining properties. Nielson operated and maintained the said properties for Php 2,500.00 /
month as management fee plus 10% participation in the net profits for 5 years.
In 1940, the 10% share was disputed. Lepanto’s Board of Directors authorized C.A. De Witt, president to enter
with an agreement with Nielson modifying same provisions effective January 1, 1940 such that Nielson shall receive
:
1. 10% of the dividends paid during the contract period and every end of the year;
2. 10% of any depletion reserve that may be set up;
3. 10% of any amount expended during the year out of surplus earnings for capital account.
In 1941, the parties renewed their contract for another 5 years but the Pacific War broke out in December 1941.
In January 1942, the operation was disrupted. The U.S. Army ordered that the mill, power plant, supplies,
equipment, concentrates on hand and mines be destroyed to prevent the Japanese from using. Thereafter, the
Japanese army occupied the mining properties and was ousted only in August 1945.
Lepanto then rebuilt the mines and mills including setting up new organizations, repairs, clearings, salvages, etc.
The reconstruction was completed until 1948. On June 26, 1948 the mines resumed the operation under the
exclusive management of Lepanto.
Shortly after the mines were liberated from the Japanese invaders in 1945, a disagreement arose
between NIELSON and LEPANTO over the status of the operating contract in question which as
renewed expired in 1947.
Under the terms thereof, the management contract shall remain in suspense in case fortuitous event
or force majeure, such as war or civil commotion, adversely affects the work of mining and milling.
"In the event of inundations, floodings of mine, typhoon, earthquake or any other force
majeure, war, insurrection, civil commotion, organized strike, riot, injury to the machinery or
other event or cause reasonably beyond the control of NIELSON and which adversely affects
the work of mining and milling; NIELSON shall report such fact to LEPANTO and without
liability or breach of the terms of this Agreement, the same shall remain in suspense, wholly
or partially during the terms of such inability." (Clause II of Exhibit "C").
NIELSON held the view that, on account of the war, the contract was suspended during the war;
hence the life of the contract should be considered extended for such time of the period of suspension.
On the other hand, LEPANTO contended that the contract should expire in 1947 as originally agreed
upon because the period of suspension accorded by virtue of the war did not operate to extend further
the life of the contract.
No understanding appeared from the record to have been bad by the parties to resolve the
disagreement. In the meantime, LEPANTO rebuilt and reconstructed the mines and was able to bring
the property into operation only in June of 1948, . . . .
On February 6, 1958, Nielson brought an action against Lepanto before the Court of First Instance (CFI) of
Manila to recover damages suffered in view of the refusal of Lepanto to comply with the terms of a management
contract entered into between them on January 30, 1937.
In its answer, Lepanto denied the allegations and set up certain defenses, prescription and laches as bars against the
institution of the action.
After trial, the court a quo rendered a decision dismissing the complaint with costs. The court stated that it did not
find sufficient evidence to establish the counterclaim of Lepanto therefore, dismissed the same.
Nielson appealed. The Court reversed the decision of the trial court and ordered Lepanto to pay:
1. 10% Share of cash dividends of December 1941 in the amount of Php 17,500.00 with legal interest thereon from the
date of the filling of the complaint;
2. Management fee for January 1942 in the amount of Php 2,500.00 with legal interest thereon from the date of the
filing of the complaint;
3. Management fees for the 60-month period of extension amounting to Php 150,000.00 with legal interest;
4. 10% Share in the cash dividends during the period of extension;
5. 10% of the depletion reserve amounting to Php 53,928.88 with legal interest;
6. 10% of the expenses of the capital account amounting to Php 694,364.76 with legal interest;
7. To issue and deliver to Nielson shares of stock at a par value equivalent to the total of Nielson’s 10% share in the
stock dividends declared on November 28, 1948 and August 22, 1950; and
8. The sum of Php 50,000.00 as attorney’s fee and the cost that Lepanto seeks for reconsideration .
In the Original Supreme Court ruling:
Let us now come to the management fees claimed by Nielson for the period of extension. In this respect, it has
been shown that the management contract was extended from June 27, 1948 to June 26, 1953, or for a period
of sixty (60) months. During this period Nielson had a right to continue in the management of the mining
properties of Lepanto and Lepanto was under obligation to let Nielson do it and to pay the corresponding
management fees. Appellant Nielson insisted in performing its part of the contract but Lepanto prevented it
from doing so. Hence, by virtue of Article 1186 of the Civil Code, there was a constructive fulfillment an the
part of Nielson of its obligation to manage said mining properties in accordance with the contract and Lepanto
had the reciprocal obligation to pay the corresponding management fees and other benefits that would have
accrued to Nielson if Lepanto allowed it (Nielson) to continue in the management of the mines during the
extended period of five (5) years.
Lepanto admits, in its own brief, that Nielson had really insisted in taking over the management and operation
of the mines but that it (Lepanto) unequivocally refuse to allow it. The following is what appears in the brief of
the appellee:
It was while defendant was in the midst of the rehabilitation work which was fully described earlier,
still reeling under the terrible devastation and destruction wrought by war on its mine that Nielson
insisted in taking over the management and operation of the mine. Nielson thus put Lepanto in a
position where defendant, under the circumstances, had to refuse, as in fact it did, Nielson's insistence
in taking over the management and operation because, as was obvious, it was impossible, as a result of
the destruction of the mine, for the plaintiff to manage and operate the same and because, as provided
in the agreement, the contract was suspended by reason of the war. The stand of Lepanto in
disallowing Nielson to assume again the management of the mine in 1945 was unequivocal and cannot
be misinterpreted, infra.37
Based on the foregoing facts and circumstances, and Our conclusion that the management contract was
extended, We believe that Nielson is entitled to the management fees for the period of extension. Nielson
should be awarded on this claim sixty times its monthly pay of P2,500.00, or a total of P150,000.00.
Lepanto seeks the reconsideration of the decision rendered on December 17, 1966. The
motion for reconsideration is based on two sets of grounds — the first set consisting of
four principal grounds, and the second set consisting of five alternative grounds, as
follows: chanrob1es virtual 1aw library
Principal Ground: chanrob1es virtual 1aw library

1. The court erred in overlooking and failing to apply the proper law applicable to the
agency or management contract in question, namely, Article 1733 of the Old Civil Code
(Article 1920 of the new), by virtue of which said agency was effectively revoked and
terminated in 1945 when, as stated in paragraph 20 of the complaint, "defendant
voluntarily . . . prevented plaintiff from resuming management and operation of said
mining properties." cralaw virtua1aw library
Issue/s:
WON the management contract in question is a contract of agency such that

Lepanto has the right to revoke and terminate the said contract, as it did
terminate the same, under the law of agency?
Ruling:
NO.
The Supreme Court ruled that the management contract is not a contract of agency as defined in Article 1709 of
the Old Civil Code, but as a contract of lease of services as defined in Article 1544 of the same Code.
Article 1709 defines the contract of agency as “one person binds himself to render some service or to do something
for the account or at the request of another.”
While Article 1544 defines contract of lease of service as “in a lease of work or services, one of the parties binds
himself to make or construct something or to render a service to the other for a price certain.”
(go to directly to the yellow below all the way to the bottom)
The court determined the nature of the management contract in question wherein there was agreement for Nielson
for 5 years had the right to renew, to explore, to develop, and to operate the mining claims of Lepanto.
In the performance of this principal undertaking Nielson was not acting as an agent but one as performing material
acts for an employer, for a compensation.
---------------------------
We are going to dwell on these grounds in the order they are presented.
1. In its first principal ground Lepanto claims that its own counsel and this Court
had overlooked the real nature of the management contract entered into by and
between Lepanto and Nielson, and the law that is applicable on said contract.
Lepanto now asserts for the first time - and this is done in a motion for
reconsideration — that the management contract in question is a contract of
agency such that it has the right to revoke and terminate the said contract, as it
did terminate the same, under the law of agency, and particularly pursuant to
Article 1733 of the Old Civil Code (Article 1920 of the New Civil Code)
We have taken note that Lepanto is advancing a new theory. We have carefully
examined the pleadings filed by Lepanto in the lower court, its memorandum and
its brief on appeal, and never did it assert the theory that it has the right to
terminate the management contract because that contract is one of agency
which it could terminate at will. While it is true that in its ninth and tenth special
affirmative defenses, in its answer in the court below, Lepanto pleaded that it
had the right to terminate the management contract in question, that plea of its
right to terminate was not based upon the ground that the relation between
Lepanto and Nielson was that of principal and agent but upon the ground that
Nielson had allegedly not complied with certain terms of the management
contract. If Lepanto had thought of considering the management contract as one
of agency it could have amended its answer by stating exactly its position. It
could have asserted its theory of agency in its memorandum for the lower court
and in its brief on appeal. This, Lepanto did not do. It is the rule, and the settled
doctrine of this Court, that a party cannot change his theory on appeal — that is,
that a party cannot raise in the appellate court any question of law or of fact that
was not raised in the court below or which was not within the issue made by the
parties in their pleadings (Section 19, Rule 49 of the old Rules of Court, and also
Section 18 of the new Rules of Court; Hautea v. Magallon, L-20345, November
28, 1964; Northern Motors, Inc. v. Prince Line, L-13884, February 29, 1960;
American Express Co. v. Natividad, 46 Phil. 207; Agoncillo v. Javier, 38 Phil. 424
and Molina v. Somes, 24 Phil. 49)
At any rate, even if we allow Lepanto to assert its new theory at this very late
stage of the proceedings, this Court cannot sustain the same.
Lepanto contends that the management contract in question (Exhibit C) is one

of agency because: (1) Nielson was to manage and operate the mining
properties and mill on behalf, and for the account, of Lepanto; and (2) Nielson
was authorized to represent Lepanto in entering, on Lepanto’s behalf, into
contracts for the hiring of laborers, purchase of supplies, and the sale and
marketing of the ores mined.
All these, Lepanto claims, show that Nielson was, by the terms of the contract,
destined to execute juridical acts not on its own behalf but on behalf of Lepanto
under the control of the Board of Directors of Lepanto "at all times."
Hence Lepanto claims that the contract is one of agency. Lepanto then
maintains that an agency is revocable at the will of the principal (Article
1733 of the Old Civil Code) regardless of any term or period stipulated in
the contract, and it was in pursuance of that right that Lepanto
terminated the contract in 1945 when it took over and assumed exclusive
management of the work previously entrusted to Nielson under the
contract. Lepanto finally maintains that Nielson as an agent is not entitled
to damages since the law gives to the principal the right to terminate the
agency at will.
Because of Lepanto’s new theory We consider it necessary to determine

the nature of the management contract — whether it is a contract of
agency or a contract of lease of services. Incidentally, we have noted that
the lower court, in the decision appealed from, considered the
management contract as a contract of lease of services.
Article 1709 of the Old Civil Code, defining contract of agency, provides: jgc:chanrobles.com.ph
"By the contract of agency, one person binds himself to render some
service or do something for the account or at the request of another." cralaw virtua1aw library
Article 1544, defining contract of lease of service, provides: jgc:chanrobles.com.ph
"In a lease of work or services, one of the parties binds himself to make
or construct something or to render a service to the other for a price
certain."cralaw virtua1aw library
In both agency and lease of services one of the parties binds himself to render some
service to the other party.
Agency, however, is distinguished from lease of work or services in that the basis of
agency is representation, while in the lease of work or services the basis is
employment.
The lessor of services does not represent his employer, while the agent represents his
principal.
On the basis of the interpretation of Article 1709 of the old Civil Code, Article
1868 of the new Civil Code has defined the contract of agency in more explicit
terms, as follows: jgc:chanrobles.com.ph
"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." cralaw virtua1aw library
There is another obvious distinction between agency and lease of

services.
Agency is a preparatory contract, as agency "does not stop with the agency
because the purpose is to enter into other contracts." The most characteristic
feature of an agency relationship is the agent’s power to bring about business
relations between his principal and third persons. "The agent is destined to
execute juridical acts (creation, modification or extinction of relations with third
parties).
Lease of services contemplate only material (non-juridical) acts." (Reyes and

Puno, "An Outline of Philippine Civil Law," Vol. V, p. 277)
In the light of the interpretations we have mentioned in the foregoing

paragraphs, let us now determine the nature of the management contract in
question.
Under the contract, Nielson had agreed, for a period of five years, with the right to
renew for a like period, to explore, develop and operate the mining claims of Lepanto,
and to mine, or mine and mill, such pay ore as may be found therein and to market the
metallic products recovered therefrom which may prove to be marketable, as well as to
render for Lepanto other services specified in the contract.
We gather from the contract that the work undertaken by Nielson was to take complete
charge, subject at all times to the general control of the Board of Directors of Lepanto,
of the exploration and development of the mining claims, of the hiring of a sufficient
and competent staff and of sufficient and capable laborers, of the prospecting and
development of the mine, of the erection and operation of the mill, and of the
beneficiation and marketing of the minerals found on the mining properties; and in
carrying out said obligation Nielson should proceed diligently and in accordance with the
best mining practice.
In connection with its work Nielson was to submit reports, maps, plans and
recommendations with respect to the operation and development of the mining
properties, make recommendations and plans on the erection or enlargement of any
existing mill, dispatch mining engineers and technicians to the mining properties as
from time to time may reasonably be required to investigate and make
recommendations without cost or expense to Lepanto.
Nielson was also to "act as purchasing agent of supplies, equipment and other
necessary purchases by Lepanto, provided, however, that no purchase shall be made
without the prior approval of Lepanto; and provided further, that no commission shall
be claimed or retained by Nielson on such purchase" ; and "to submit all requisition for
supplies, all contracts and arrangement with engineers, and staff and all matters
requiring the expenditures of money, present or future, for prior approval by Lepanto;
and also to make contracts subject to the prior approval of Lepanto for the sale and
marketing of the minerals mined from said properties, when said products are in a
suitable condition for marketing." 1
It thus appears that the principal and paramount undertaking of Nielson under the
management contract was the operation and development of the mine and the
operation of the mill. All the other undertakings mentioned in the contract are
necessary or incidental to the principal undertaking — these other undertakings being
dependent upon the work on the development of the mine and the operation of the mill.
In the performance of this principal undertaking Nielson was not in any way executing
juridical acts for Lepanto, destined to create, modify or extinguish business relations
between Lepanto and third persons.
In other words, in performing its principal undertaking Nielson was not acting as an
agent of Lepanto, in the sense that the term agent is interpreted under the law of
agency, but as one who was performing material acts for an employer, for a
compensation.
It is true that the management contract provides that Nielson would also act as
purchasing agent of supplies and enter into contracts regarding the sale of mineral, but
the contract also provides that Nielson could not make any purchase, or sell the
minerals, without the prior approval of Lepanto. It is clear, therefore, that even in these
cases Nielson could not execute juridical acts which would bind Lepanto without first
securing the approval of Lepanto. Nielson, then, was to act only as an intermediary, not
as an agent.
Lepanto contends that the management contract in question being one of agency it had
the right to terminate the contract at will pursuant to the provision of Article 1733 of
the old Civil Code. We find, however, a provision in the management contract which
militates against this stand of Lepanto. Paragraph XI of the contract provides: jgc:chanrobles.com.ph
"Both parties to this agreement fully recognize that the terms of this Agreement are
made possible only because of the faith or confidence that the Officials of each
company have in the other; therefore, in order to assure that such confidence and faith
shall abide and continue, NIELSON agrees that LEPANTO may cancel this Agreement at
any time upon ninety (90) days written notice, in the event that NIELSON for any
reason whatsoever, except acts of God, strike and other causes beyond its control, shall
cease to prosecute the operation and development of the properties herein described,
in good faith and in accordance with approved mining practice." cralaw virtua1aw library
It is thus seen, from the above-quoted provision of paragraph XI of the management

contract, that Lepanto could not terminate the agreement at will. Lepanto could
terminate or cancel the agreement by giving notice of termination ninety days in
advance only in the event that Nielson should prosecute in bad faith and not in
accordance with approved mining practice the operation and development of the mining
properties of Lepanto. Lepanto could not terminate the agreement if Nielson should
cease to prosecute the operation and development of the mining properties by reason
of acts of God, strike and other causes beyond the control of Nielson.
The phrase "Both parties to this agreement fully recognize that the terms of this
agreement are made possible only because of the faith and confidence of the officials of
each company have in the other" in paragraph XI of the management contract does not
qualify the relation between Lepanto and Nielson as that of principal and agent based
on trust and confidence, such that the contractual relation may be terminated by the
principal at any time that the principal loses trust and confidence in the agent. Rather,
that phrase simply implies the circumstance that brought about the execution of the
management contract. Thus, in the annual report for 1936 2 , submitted by Mr. C. A.
Dewit, President of Lepanto, to its’ stockholders, under date of March 15, 1937, we
read the following:jgc:chanrobles.com.ph
"To the Stockholders: chanrob1es virtual 1aw library
x x x
"The incorporation of our Company was effected as a result of negotiations with Messrs.
Nielson & Co., Inc., and an offer by these gentlemen to Messrs. C. I. Cookes and V. L.
Lednicky, dated August 11, 1936, reading as follows: chanrob1es virtual 1aw library
In the construction of an instrument where there are several provisions or particulars,

such a construction is, if possible, to be adopted as will give effect to all, 3 and if some
stipulation of any contract should admit of several meanings, it shall be understood as
bearing that import which is most adequate to render it effectual. 4
It is Our considered view that by express stipulation of the parties, the management
contract in question is not revocable at the will of Lepanto.
We rule that this management contract is not a contract of agency as defined in Article
1709 of the old Civil Code, but a contract of lease of services as defined in Article 1544
of the same Code.
This contract cannot be unilaterally revoked by Lepanto.
The first ground of the motion for reconsideration should, therefore, be brushed aside.
10. Shell Co., of the Phil. Ltd. vs. Firemen’s Ins. of Newark, N.J., 100 Phil.
755
PRELIMINARIES
Petitioner: Shell (Principal)

Respondents: CA; FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY COMMERCIAL
CASUALTY INSURANCE CO.; SALVADOR SISON (Car Owner), PORFIRIO DE LA FUENTE (Company
Agent)
What is the Case filed in the original court? An action for recovery of sum of money
What is the cause of action? If Based on law, cite the legal basis of the claim. An action for recovery of sum of
money, based on the alleged negligence of the defendants.
From which court Originated? Court of First Instance of Manila

RESPONDENT WON. Petitioner was held liable.
As the act of the agent or his employees acting within the scope of his authority is the act of the principal, the
breach of the undertaking by the agent is one for which the principal is answerable. Moreover, the company
undertook to "answer and see to it that the equipments are in good running order and usable condition;" and the
Court of Appeals found that the Company's mechanic failed to make a thorough check up of the hydraulic lifter and
the check up made by its mechanic was "merely routine" by raising "the lifter once or twice and after observing that
the operator was satisfactory, he (the mechanic) left the place." The latter was negligent and the company must
answer for the negligent act of its mechanic which was the cause of the fall of the car from the hydraulic lifter.
The judgment under review is affirmed, with costs against the petitioner.
Principle:
As the act of the agent or his employees acting within the scope of his authority is the act of the principal, the
breach of the undertaking by the agent is one for which the principal is answerable.
Facts:
Respondent Salvador Sison owned a Plymouth car, which was brought to petitioner Shell company's gasoline and
service station for washing, greasing and spraying, in which such services were undertaken by Profirio De La
Fuente (agent of petitioner) through his two employees.
Nearly finishing the services, the crew positioned carefully the car for a final greasing.
As some parts of the car couldn’t be reached by the greaseman, the lifter was lowered.
Unfortunately, for unknown reasons (probably due to mechanical failure or human error), while the lifter was being
lowered, the car swung and fell from the platform.
In short, it accidentally fell off, damaging the said car.
Said car of respondent Sison was thereafter repaired and after the investigation made by the car's insurance
companies, as said car was insured against loss or damage by Firemen's Insurance Company of Newark, New
Jersey, and Commercial Casualty Insurance Company jointly for the sum of P10,000.
The insurance companies after paying the sum of P1,651.38 for the damage and charging the balance of P100.00 to
Salvador Sison, in accordance with the terms of the insurance contract, filed this action together with said
Salvador Sison for the recovery of the total amount of the damage from the defendants on the ground of
negligence.
Both the insurance companies and the owner of the car brought an action in the CFI Manila against petitioner Shell
and De la fuente
The CFI-MANILA dismissed complaint, but CA reversed and sentenced petitioner to pay respondents
Issue/s: WON Dela Fuente is merely an agent of Shell Co. hence, its PRINCIPAL, Shell company is bound to the
acts of his agent de la Fuente?
Ruling: YES.
De la Fuente was the operator of the station "by grace" of the Defendant Company which could and did remove him
as it pleased;
that all the equipments needed to operate the station was owned by the Defendant Company which took charge of
their proper care and maintenance, despite the fact that they were loaned to him; t
that the Defendant company did not leave the fixing of price for gasoline to De la Fuente;
That the service station belonged to the company and bore its trade name and the operator sold only the products of
the company;
that the equipment used by the operator belonged to the company and were just loaned to the operator and the
company took charge of their repair and maintenance.
Consequently, the findings of the Court of Appeals that the operator De la fuente was an agent of the company and
not an independent contractor should not be disturbed, in which,the servicing job on Appellant Sison's automobile
was accepted by De la Fuente in the normal and ordinary conduct of his business as operator of his co-appellee's
service station, and that the jerking and swaying of the hydraulic lift which caused the fall of the subject car were
due to its defective condition, resulting in its faulty operation.
As the Court of Appeals found, Company's mechanic failed to make a thorough check up of the hydraulic lifter,
check up was "merely routine" by raising "the lifter once or twice, after observing that the operator was satisfactory,
he (the mechanic) left the place. The latter was negligent and the company must answer for the negligent act of its
mechanic which was the cause of the fall of the car from the hydraulic lifter.
To sum, as the act of the agent or his employees acting within the scope of his authority is the act of the principal,
the breach of the undertaking by the agent is one for which the principal is answerable.
In this case, since the latter (agent Dela Fuente) was negligent, it necessarily follows that the Shell company must
answer for the negligent act of its mechanic which was the cause of the fall of the car from the hydraulic lifter.
11. Sevilla vs. Court of Appeals, 160 SCRA 171
PRELIMINARIES
DR. CARLOS L. SEVILLA and LINA O. SEVILLA

THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and
SEGUNDINA NOGUERA
Appeal by Certiorari
When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises, a complaint wall
filed by the herein appellants against the appellees with a prayer for the issuance of mandatory preliminary
injunction.
Breach of Trust or Contract (???)
Regional Trial Court (Court of First Instance)
For apparent lack of interest of the parties therein, the trial court ordered the dismissal of the case
without prejudice
WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975, by
the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist World
Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the
sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and for exemplary damages, and the sum of
P5,000.00, as and for nominal and/or temperate damages.
Costs against said private respondents.
Principle:
Civil Law; Partnership; Lina Sevilla’s own argument that the parties had embarked on a joint venture or otherwise
a partnership rejected.—In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a
consequence, accepting Lina Seviila’s own, that is, that the parties had embarked on a joint venture or otherwise, a
partnership. And apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of
November 28, 1961, she expressly “concedes your [Tourist World Service, Inc.'s] right to stop the operation of your
branch office,” in effect, accepting Tourist World Service, Inc.'s control over the manner in which the business was
run. A joint venture, including a partnership, presupposes generally a parity of standing between the joint co-
venturers or partners, in which each party has an equal proprietary interest in the capital or property contributed and
where each party exercises equal rights in the conduct of the business. Furthermore, the parties did not hold
themselves out as partners, and the building itself was embellished with the electric sign “Touristt World Service,
Inc.," in lieu of a distinct partnership name.
Same;Agency; The parties had contemplated a principal-agent relationship rather than a joint management or a
partnership.—It is the Court’s considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the
private respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of
agency. It is the essence of this contract that the agent renders services “in representation or on behalf of another.” In
the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World
Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said,
Sevilla herself, based on her letter of November 28,1961, presumed her printipaTs authority as owner of the
business undertaking. We are convinced, considering the circumstances and from the respondent Court’s recital of
facts, that the parties had contemplated a principal-agent relationship, rather than a joint management or a
partnership.
Same; Same; Same; The agency being one coupled with an interest cannot be revoked at wilL —But unlike simple
grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the parties,
cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been created for
the mutual interest of the agent and the principal. It appears that Lina Sevilla is a bona fide travel agent herself, and
as such, she had acquired an interest in the business entrusted to her. Moreover, she had assumed a personal
obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the
business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is not
limited to the commissions she earned as a result of her business transactions. but one that extendB to the very
subject matter of the power of management delegated to her. It is an agency that, as we said, cannot be revoked at
the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to
damages.
Facts:
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on Oct. 19, 1960
by and between Mrs. Segundina Noguera (lessor), party of the first part; the Tourist World Service, Inc., represented
by Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as appellants, the Tourist World
Service, Inc. leased the premises belonging to the party of the first part at Mabini St., Manila for the former-s use as
a branch office.
In the said contract the party of the third part held Sevilla herself solidarily liable with the party of the part for the
prompt payment of the monthly rental agreed on.
When the branch office was opened, the same was run by the herein appellant Una 0. Sevilla payable to Tourist
World Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina
Sevilla and 3% was to be withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been informed that
Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the branch office was anyhow
losing, the Tourist World Service considered closing down its office.
This was firmed up by two resolutions of the board of directors of Tourist World Service, Inc. dated Dec. 2, 1961
(Exhibits 12 and 13), the first abolishing the office of the manager and vice-president of the Tourist World Service,
Inc., Ermita Branch, and the second, authorizing the corporate secretary to receive the properties of the Tourist
World Service then located at the said branch office. It further appears that on Jan. 3, 1962, the contract with the
appellees for the use of the Branch Office premises was terminated and while the effectivity thereof was Jan. 31,
1962, the appellees no longer used it. As a matter of fact appellants used it since Nov. 1961.
Because of this, and to comply with the mandate of the Tourist World Service, the corporate secretary Gabino
Canilao went over to the branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla,
he padlocked the premises on June 4, 1962 to protect the interests of the Tourist World Service.
When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises, a complaint wall
filed by the herein appellants against the appellees with a prayer for the issuance of mandatory preliminary
injunction.
Both appellees answered with counterclaims. For apparent lack of interest of the parties therein, the trial court
ordered the dismissal of the case without prejudice.
Issue/s:
Whether or not appellant Sevilla was in a joint venture with TWS or at least its agent coupled with an interest which
could not be terminated or revoked unilaterally by TWS
Ruling:
Yes, an agency coupled with interest.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private respondent,
Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency.
It is the essence of this contract that the agent renders services in representation or on behalf of another.
In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World
Service, Inc.
As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself,
based on her letter of November 28, 1961, presumed her principal's authority as owner of the business undertaking.
We are convinced, considering the circumstances and from the respondent Court's recital of facts, that the parties
had contemplated a principal-agent relationship, rather than a joint management or a partnership.
The agency that we hereby declare to be compatible with the intent of the parties, cannot be revoked at will. The
reason is that it is one coupled with an interest, the agency having been created for the mutual interest of the agent
and the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages.
And apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of November 28,
1961, she expressly "concedes your (Tourist World Service, Inc.'s) right to stop the operation of your branch office,
in effect, accepting Tourist World Service, Inc.'s control over the manner in which the business was run. A joint
venture, including a partnership, presupposes generally a parity of standing between the joint co-venturers or
partners, in which each party has an equal proprietary interest in the capital or property contributed and where each
party exercises equal rights in the conduct of the business. Furthermore, the parties did not hold themselves out as
partners, and the building itself was embellished with the electric sign "Tourist World Service, Inc." In lieu of a
distinct partnership name.
12. Lourdes Valerio Lim vs. People, GR No. L-34338, November 21, 1984
PRELIMINARIES
Who is the plaintiff: Lourdes Valerio Lim was found guilty of the crime of estafa. Originally the defendant
Who is the defendant: Maria Ayroso, owner of tobacco. Originally the plaintiff
Nature of the Action filed in the SC? Petition for review by certiorari What is the case all about in Summary?
Lourdes Lim was not able to pay Maria Ayroso of the remaining agreed proceeds of the sold tobacco owned by
Ayroso.
What is the Case filed in the original court? Estafa
What is the cause of action? Fraud and indemnification

If Based on law, cite the legal basis of the claim.
From which court Originated? RTC
Court of Appeals which affirmed the decision of the lower court but modified the penalty imposed by
sentencing her "to suffer an indeterminate penalty of one (1) month and one (1) day of arresto mayor as
minimum to one (1) year and one (1) day of prision correccional as maximum, to indemnify the complainant
in the amount of P550.50 without subsidiary imprisonment, and to pay the costs of suit." or lowering her
penalty.

Maria Ayroso won. Lordes lim is Liable. ACCORDINGLY, the petition for review on certiorari is dismissed
for lack of merit. With costs.
Principle: 1. CIVIL LAW; OBLIGATIONS AND CONTRACTS: PERIOD OF OBLIGATION; MAY NOT
BE FIXED BY COURT WHERE AGREEMENT IN CASE AT BAR CLEARLY FIXES A PERIOD. — It is
clear in the agreement, Exhibit "A", that the proceeds of the sale of the tobacco should be turned over to the
complainant as soon as the same was sold, or, that the obligation was immediately demandable as soon as the
tobacco was disposed of Hence, Article 1197 of the New Civil Code, which provides that the courts may fix
the duration of the obligation if it does not fix a period, does not apply.
2. ID.; ID.; AGENCY; SUBJECT AGREEMENT IS A CONTRACT OF AGENCY TO SELL NOT A

CONTRACT OF SALE. — The fact that appellant received the tobacco to be sold at P1.30 per kilo and the
proceeds to be given to complainant as soon as it was sold, strongly negates transfer of ownership of the goods
to the petitioner. The agreement (Exhibit "A") constituted her as an agent with the obligation to return the
tobacco if the same was not sold.
Facts:
An agreement was drawn between the petitioner and Maria Ayroso to sell her tobacco at P 1.30 a kilo, with the
petitioner receiving the overprice as a result of the sale.
The receipt, made in the presence of plaintiff’s sister and her maid, was as follows:
This is to certify that I have received from Mrs. Maria de Guzman Vda. de Ayroso, of Gapan, Nueva Ecija,
six hundred fifteen kilos of leaf tobacco to be sold at P1.30 per kilo. The proceed in the amount of Seven
Hundred Ninety Nine Pesos and 50/100 (P799.50) will be given to her as soon as it was sold.
Since then, petitioner was only able to pay P240, paid on three different times.
Multiple demands were made, including a letter, but the petitioner did not comply.
Issue/s: Whether the receipt, Exhibit "A", is a contract of agency to sell or a contract of sale of the subject
tobacco between petitioner and the complainant, Maria de Guzman Vda. de Ayroso, thereby precluding criminal
liability of petitioner for the crime charged.
Ruling:
CONTRACT OF AGENCY TO SELL.
The fact that appellant received the tobacco to be sold at P1.30 per kilo and the proceeds to be given to complainant
as soon as it was sold, strongly negates transfer of ownership of the goods to the petitioner.
The agreement (Exhibit "A") constituted her as an agent with the obligation to return the tobacco if the same was not
sold.
. . Aside from the fact that Maria Ayroso testified that the appellant asked her to be her agent in selling Ayroso’s
tobacco, the appellant herself admitted that there was an agreement that upon the sale of the tobacco she would be
given something.
The appellant is a businesswoman, and it is unbelievable that she would go to the extent of going to Ayroso’s house
and take the tobacco with a jeep which she had brought if she did not intend to make a profit out of the transaction.
Certainly, if she was doing a favor to Maria Ayroso and it was Ayroso who had requested her to sell her tobacco, it
would not have been the appellant who would have gone to the house of Ayroso, but it would have been Ayroso
who would have gone to the house of the appellant and deliver the tobacco to the appellant." (p. 19, Rollo)
It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the tobacco should be turned over to the
complainant as soon as the same was sold, or, that the obligation was immediately demandable as soon as the
tobacco was disposed of.
13. San Diego, Sr. vs. Nombre, 11 SCRA 165
PRELIMINARIES

Principle:
The provisions on agency should not apply to a judicial administrator. A judicial administrator is appointed by the
court. He is not only the representative of said Court, but also the heirs and creditors of the estate. Before entering
into his duties, he is required to file a bond. These circumstances are not required in agency.
The agent is only answerable to his principal. The protection which law gives the principal in limiting the powers
and rights of an agent stems from the fact that control by the principal can only be through agreements. Whereas,
the acts of a judicial administrator are subject to specific provisions of law and orders of the appointing court.
Facts:
Respondent Adelo Nombre was the duly constituted judicial administrator.
As such, he leased one of the properties of the estate—a fishpond—to Pedro Escanlar, the other respondent.
The terms of the lease was for 3 years, with a yearly rental of P3,000. The transaction was done without previous
authority or approval of the Court.
A year after, Nombre was removed as administrator, and was replaced by one Sofronio Campillanos.
Escalanlar was cited for contempt for allegedly refusing to surrender the fishpond to the newly appointed
administrator.
(3) Subsequently, Campillanos filed a motion for authority to execute a lease contract over the fishpond, in
favor of petitioner Moises San Diego, for 5 years with yearly rental of P5,000.
Escanlar was not notified of the said motion.
Nombre, on the other hand, opposed to the motion, pointing out that the fishpond was leased by him to Escanlar for
3 years. He alleged that the validity of the lease contract entered into by a judicial administrator must be
recognized unless declared void in a separate action.
(4) The lower court declared the contract in favor of Escanlar null and void for want of judicial authority
and that San Diego offered better lease conditions than Escanlar.
In light of this, Escanlar agreed to increase the rental to P5,000 after the termination of his original contract.
However, the trial judge stated that such contract was fraudulent and executed in bad faith because Nombre was
removed as administrator and the rentals of the property was inadequate.
From this Order, a petition for Certiorari asking for the annulment of the Orders of April 8 and 24,
1961 was presented by Nombre and Escanlar with the Court of Appeals. A Writ of preliminary
injunction was likewise prayed for to restrain the new administrator Campillanos from possessing the
fishpond and from executing a new lease contract covering it; requiring him to return the possession
thereof to Escanlar
The CA ruled:
No such limitation on the power of a judicial administrator to grant lease of property placed under his custody is
provided for in the present law.
Under Art. 1647, it is only when the lease is to be recorded in the Registry of Property that it cannot be instituted
without special authority. Thus, regardless of the period of lease, there is no need for special authority unless the
contract is to be recorded in the Registry.
On the contrary, Rule 85, Section 3, of the Rules of Court authorizes a judicial administrator,
among other things, to administer the estate of the deceased not disposed of by will.
Commenting on this Section in the light of several Supreme Court decisions (Jocson de
Hilado v. Nava, 69 Phil. 1; Gamboa v. Gamboa, 68 Phil. 304; Ferraris v. Rodas, 65 Phil. 732;
Rodriguez v. Borromeo, 43 Phil. 479), Moran says: "Under this provision, the executor or
administrator has the power of administering the estate of the deceased for purposes of
liquidation and distribution. He may, therefore, exercise all acts of administration without
special authority of the Court. For instance, he may lease the property without securing
previously any permission from the court. And where the lease has formally been entered
into, the court cannot, in the same proceeding, annul the same, to the prejudice of the
lessee, over whose person it had no jurisdiction. The proper remedy would be a separate
action by the administrator or the heirs to annul the lease. ... .
On appeal to the SC, petitioner San Diego contends that Art. 1878(8) limits the right of a judicial administrator to
lease the real property without prior court authority and approval, if it exceeds 1 year. The lease in favor of
Escanlar, being 3 years and without court approval, is therefore void.
The Civil Code, on lease, provides:
If a lease is to be recorded in the Registry of Property, the following persons cannot

constitute the same without proper authority, the husband with respect to the wife's
paraphernal real estate, the father or guardian as to the property of the minor or ward, and
the manager without special power. (Art. 1647).
The same Code, on Agency, states:
Special powers of attorneys are necessary in the following cases:
(8) To lease any real property to another person for more than one year. (A
Issue/s:
W/N the provisions on Agency should apply in this case. (NO)
WON a judicial administrator can validly lease property of the estate without prior judicial authority
and approval", and "whether the provisions of the New Civil Code on Agency should apply to judicial
administrators."
Ruling:
No.
The Rules of Court provide that —
An executor or administrator shall have the right to the possession of the real as well as the
personal estate of the deceased so long as it is necessary for the payment of the debts and
the expenses of administration, and shall administer the estate of the deceased not
disposed of by his will. (Sec. 3, Rule 85, old Rules).
Lease has been considered an act of administration (Jocson v. Nava; Gamboa v. Gamboa;
Rodriguez v. Borromeo; Ferraris v. Rodas, supra).
The Civil Code, on lease, provides:
If a lease is to be recorded in the Registry of Property, the following persons cannot

constitute the same without proper authority, the husband with respect to the wife's
paraphernal real estate, the father or guardian as to the property of the minor or ward, and
the manager without special power. (Art. 1647).
The same Code, on Agency, states:
Special powers of attorneys are necessary in the following cases:
(8) To lease any real property to another person for more than one year. (Art. 1878)
Petitioner contends, that No. 8, Art. 1878 is the limitation to the right of a judicial administrator to
lease real property without prior court authority and approval, if it exceeds one year. The lease
contract in favor of Escanlar being for 3 years and without such court approval and authority is,
therefore, null and void. Upon the other hand, respondents maintain that there is no limitation of
such right; and that Article 1878 does not apply in the instant case.
We believe that the Court of Appeals was correct in sustaining the validity of the contract of lease in
favor of Escanlar, notwithstanding the lack of prior authority and approval. The law and prevailing
jurisprudence on the matter militates in favor of this view. While it may be admitted that the duties of
a judicial administrator and an agent (petitioner alleges that both act in representative capacity), are
in some respects, identical, the provisions on agency (Art. 1878, C.C.), should not apply to a
judicial administrator.
Because A judicial administrator is appointed by the Court. He is not only the representative of said
Court, but also the heirs and creditors of the estate (Chua Tan v. Del Rosario, 57 Phil. 411). A
judicial administrator before entering into his duties, is required to file a bond.
These circumstances are not true in case of agency. The agent is only answerable to his principal.
The protection which the law gives the principal, in limiting the powers and rights of an agent, stems
from the fact that control by the principal can only be thru agreements, whereas the acts of a judicial
administrator are subject to specific provisions of law and orders of the appointing court.
The observation of former Chief Justice Moran, as quoted in the decision of the Court of Appeals, is
indeed sound, and We are not prone to alter the same, at the moment.
We, likewise, seriously doubt petitioner's legal standing to pursue this appeal. And, if We consider
the fact that after the expiration of the original period of the lease contract executed by respondent
Nombre in favor of Escanlar, a new contract in favor of said Escanlar, was executed on May 1, 1963,
by the new administrator Campillanos. who, incidentally, did not take any active participation in the
present appeal, the right of petitioner to the fishpond becomes a moot and academic issue, which
We need not pass upon.
WHEREFORE, the decision appealed from should be, as it is hereby affirmed, in all respects, with
costs against petitioner Moises San Diego, Sr.
Fallo: The decision of the CA was affirmed.
LINK TO DIGEST: San Diego V Nombre Digest | PDF | Law Of Agency | Lease
14. Rallos v. Yangco, 20 Phil 269
PRELIMINARIES
FLORENTINO RALLOS, ET AL.

TEODORO R. YANGCO
This is an appeal from the judgment of the Court of First Instance of the Province of Cebu, the Hon. Adolph
Wislizenus presiding, in favor of the plaintiffs, in the sum of P1,537.08, with interest at 6 per cent per annum
from the month of July, 1909, with costs.
Defendant Yangco wrote a letter to Plaintiff Rallos inviting the latter about his newly-opened steamship office
in Binondo, Manila where it had shipping and commission department accepting buy and sell of tobacco leaf
products for a fee/charge.
Plaintiff Rallos proceeded to do business with defendant Yangco thru his agent, Collantes.
But later on, plaintiff Rallos filed a case before the CFI-Cebu for recovery of sum of money P1, 537.08
representing the net proceeds from the sale of tobacco which Collantes misappropriated to his own use.
Plaintiff Rallos sued the defendant Yangco being the principal in order to recover the amount misapplied by
his agent, Collantes.
Plaintiff Rallos won in the CFI.
Defendant Yangco appealed the decision arguing that he already severed his agency relationship with
Collantes at the time the questioned tobacco delivery was made to Collantes.
The plaintiffs filed a case for the recovery of sum of money before the Court of First Instance of the Province
of Cebu.
The action is based on the existence of principal-agency relationship where the principal was sued for having given
the third party a special invitation to deal with the agent in which said agent misappropriated the money due to the
third party
Under the law, it was the duty of the principal on the termination of the relationship of principal and agent to give
due and timely notice thereof to the third party. Failing to do so, the principal is responsible to the third party for
whatever goods may have been in good faith and without negligence sent to the agent without knowledge, actual or
constructive, of the termination of such relationship.
Court of First Instance Cebu.
A judgment from the Court of First Instance of the Province of Cebu was rendered in favor of the plaintiffs.
The Court ruled in favor of the plaintiffs. According to the Court, We are of the opinion that the defendant is
liable.
For these reasons the judgment appealed from is confirmed, without special finding as to costs.
Principle:
Having advertised the fact that Collantes was his agent and having given them a special invitation to deal with such
agent, it was the duty of the defendant on the termination of the relationship of principal and agent to give due and
timely notice thereof to the plaintiffs. Failing to do so, he is responsible to them for whatever goods may have been
in good faith and without negligence sent to the agent without knowledge, actual or constructive, of the termination
of such relationship.
Facts:
This is an appeal from a judgment of the Court of First Instance of the Province of Cebu in favor of the plaintiffs , in
the sum of P1,537.08, with interest at 6 per cent per annum.
The defendant Teodoro Yangco sent to the plaintiff Florentino Rallos, among others, the following letter:
DEAR SIR: I have the honor to inform you that I have on this date opened in my steamship office at No.
163 Muelle de la Reina, Binondo, Manila, P. I., a shipping and commission department for buying and
selling leaf tobacco and other native products.
If you care to favor me with your patronage, my office is at No. 163 Muelle de la Reinna, Binondo, Manila,
P. I., under the name of "Teodoro R. Yangco." In this connection it gives me great pleasure to introduce to
you Mr. Florentino Collantes, upon whom I have conferred public power of attorney before the notary, Mr.
Perfecto Salas Rodriguez, dated November 16, 1907, to perform in my name and on my behalf all acts
necessary for carrying out my plans, in the belief that through his knowledge and long experience in the
business, along with my commercial connections with the merchants of this city and of the provinces, I may
hope to secure the most advantageous prices for my patrons. Mr. Collantes will sign by power of attorney,
so I beg that you make due note of his signature hereto affixed.
Very respectfully,
(Sgd.) T. R. YANGCO.
(Sgd.) F. COLLANTES.
Accepting the invitation, the plaintiffs proceeded to do business with the defendant through his agent Collantes,
sending plaintiff’s produce to be sold on commission.
In the month of February, 1909, the plaintiffs sent to Collantes another 218 bundles of tobacco leaf to be sold on
commission, as had been other produce previously. Collantes received the tobacco and sold it for the sum of P1,744.
The charges for such sale were P206.96. leaving the sum ofP1,537.08 belonging to the plaintiffs. But this sum was,
apparently, converted by Collantes to his own use.
Prior to the sending of said tobacco the defendant had already severed his relations with Collantes and the
latter was no longer acting as his factor. This fact was not known to the plaintiffs; No notice of any kind was
given by the defendant to the plaintiffs about the termination of the relation between the defendant (Yangco) and his
agent (Collantes).
So the defendant refused to pay the said sum upon demand of the plaintiffs upon the ground that at the time the
said tobacco was received and sold by Collantes he was acting personally, and not as agent of the defendant.
Hence, this action was brought to recover said sum.
Issue/s:
WON the plaintiffs (Rallos), acting in good faith and without knowledge, having sent produce to sell on commission
to Collantes as agent the defendant (Yangco), can recover said sum?
Ruling:
Yes. The Court ruled that the defendant is liable.
Having advertised the fact that Collantes was his agent and having given them a special invitation to deal with such
agent, it was the duty of the defendant on the termination of the relationship of principal and agent to give due and
timely notice thereof to the plaintiffs.
Failing to do so, he is responsible to them for whatever goods may have been in good faith and without negligence
sent to the agent without knowledge, actual or constructive, of the termination of such relationship.
15. Macke v. Camps, 7 Phil 357
G.R. No. 2962 February 27, 1907
B. H. MACKE, ET AL., plaintiffs-appellees,
vs.
JOSE CAMPS, defendant-appellant.
Manuel G. Gavieres for appellant.

Gibbs & Gale for appellees.
PRELIMINARIES
The judgment of the trial court is affirmed with the costs of his instance against the appellant.
Principle:
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.
Facts:
The plaintiffs in this action, B. H. Macke and W.H. Chandler, partners doing business under the firm name of Macke,
Chandler & Company.
Macke, Chandler & Company sold to the defendant (Jose Camps) and delivered at his place of business, known as the
"Washington Cafe," various bills of goods;
During the trial:
that the defendant has only paid 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 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.
According to the plaintiff:
when the goods were ordered they were ordered on the credit of the defendant and that
they were shipped by the plaintiffs after inquiry which satisfied the witness as to the credit
of the defendant and as to the authority of Flores to act as his agent; that the witness
always believed and still believes that Flores was the agent of the defendant; and that when he
went to the Washington Cafe for the purpose of collecting his bill he found Flores, in the
absence of the defendant in the provinces, apparently in charge of the business and claiming
to be the business manager of the defendant, said business being that of a hotel with a bar and
restaurant annexed.
There was also written contract introduced from which it appears that one Galmes, the former owner of the
business now known as the "Washington Cafe," sub rented the building 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 sub rent the
building or the business without the consent of the 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"
(defendant with)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 (defedant’s) name.
Issue/s:
WON Flores is considered an agent of the defendant Camps?
Ruling: Yes.
The contract introduced in evidence sufficiently establishes the fact that the defendant was the owner of
business and of the bar, and the title of "managing agent" attached to the signature of Flores which appears on
that contract, together with the fact that, at the time the purchases in question were made, Flores was
apparently in charge of the business, performing the duties usually entrusted to managing agent, leave
little room for doubt that he was there as authorized agent of the defendant.
One who clothes another 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 following presumptions or deductions, which the law
expressly directs to be made from particular facts, are deemed conclusive:
(1) "Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led
another to believe a particular thing true, and to act upon such belief, he can not, in any litigation
arising out such declaration, act, or omission, be permitted to falsify it" (subsec. 1, sec. 333, Act no.
190); and 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. (15 Conn., 347; 90 N. C. 101; 15
La. Ann, 247; 43 Mich., 364; 93 N. Y., 495; 87 Ind., 187.)
That Flores, as managing agent of the Washington Cafe, had authority to buy such reasonable quantities of
supplies as might from time to time be necessary in carrying on the business of 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 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 his instance against the appellant. After expiration
of twenty days judgment will be rendered in accordance herewith, and ten days thereafter the case remanded to
the lower court for proper action. So ordered.
Arellano, C.J., Torres and Willard, JJ., concur.

Tracey, J., dissents.
16. Conde vs. Court of Appeals, 119 SCRA 245
G.R. No. L-40242 December 15, 1982
DOMINGA CONDE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, MANILA PACIENTE CORDERO, together with his wife,
NICETAS ALTERA, RAMON CONDE, together with his wife, CATALINA T. CONDE, respondents.
PRELIMINARIES
Who is the plaintiff: DOMINGA CONDE
Who is the defendant: THE HONORABLE COURT OF APPEALS, MANILA PACIENTE CORDERO,
together with his wife, NICETAS ALTERA, RAMON CONDE, together with his wife, CATALINA T.
CONDE
An appeal by certiorari from the Decision of respondent Court of Appeals, which dismissed petitioner's Complaint
for Quieting of Title and ordered her to vacate the property in dispute and deliver its possession to private
respondents Ramon Conde and Catalina Conde.
What is the Case filed in the original court? complaint for quieting of title and declaration of ownership against
all the respondents
Failure to validly exercise the right to repurchase in view of the fact that memorandum of repurchase was signed by
Cordero and not by Altera and that Cordero was not authorized to act on behalf of Altera. (Article 1869)
From which court Originated? CFI LEYTE
Lower Court rendered its Decision dismissing the Complaint and the counterclaim and ordering petitioner "to vacate
the property in dispute and deliver its peaceful possession to the defendants Ramon Conde and Catalina T. Conde".
Petitioner Dominga Conde won.
WHEREFORE, the judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE, and
petitioner is hereby declared the owner of the disputed property.
Principle:
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.
Facts:
On 7 April 1938, Margarita Conde, Bernardo Conde and Dominga Conde, as heirs of Santiago Conde, sold with
right to repurchase, within 10 years from said date, a 1 hectare parcel of agricultural land situated in Burauen,
Leyte to Casimira Pasagui and Pio Altera for P165.
Three years later, Original Certificate of Title No. N-534 covering the land in question was issued in the name of the
Altera’s subject to the stipulated right of repurchase by the Conde’s.
On 28 November 1945, private respondent Paciente Cordero, son-in-law of the Alteras, signed a document in
the Visayan dialect, the English translation of which reads:
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.
That we further covenant together with Paciente Cordero who is my son-in-law that from this
day the said Dominga Conde, Bernardo Conde and Margarita Conde will again take
possession of the aforementioned parcel of land because they repurchased the same from me.
If and when their possession over the said parcel of land be disturbed by other persons, I and
Paciente Cordero who is my son-in-law will defend in behalf of the herein brother and sisters
mentioned above, because the same was already repurchased by them.
IN WITNESS WHEREOF, I or We have hereunto affixed our thumbmark or signature to our

respective names below this document or memorandum this 28th day of November 1945 at
Burauen Leyte, Philippines, in the presence of two witnesses.
PIO ALTERA (followed by signature of) PACIENTE CORDERO
WITNESSES:
1. (SGD.) TEODORO C. AGUILLON
To be noted is the fact that neither of the vendees-a-retro, Pio Altera nor Casimira Pasagui, was a signatory to
the deed. Petitioner maintains that because Pio Altera was very ill at the time, Paciente Cordero executed the
deed of resale for and on behalf of his father-in-law. Petitioner further states that she redeemed the property
with her own money as her co-heirs were bereft of funds for the purpose.
The pacto de retro document was eventually found.
On 30 June 1965 Pio Altera sold the disputed lot to the spouses Ramon Conde and Catalina T. Conde (not
related to Dominga Conde), who are also private respondents herein. Their relationship to petitioner does not
appear from the records. Nor has the document of sale been exhibited.
Contending that she (Dominga) had validly repurchased the lot in question in 1945, petitioner filed, on 16
January 1969, in the Court of First Instance of Leyte, Branch IX, Tacloban City, a Complaint (Civil Case No.
B-110), against Paciente Cordero and his wife Nicetas Altera, Ramon Conde and his wife Catalina T. Conde,
and Casimira Pasagui Pio Altera having died in 1966), for quieting of title to real property and declaration
of ownership.
Petitioner's evidence is that Paciente Cordero signed the Memorandum of Repurchase in representation of his
father-in-law Pio Altera, who was seriously sick on that occasion, and of his mother-in-law who was in Manila
at the time, and that Cordero received the repurchase price of P65.00.
Private respondents, for their part, adduced evidence that Paciente Cordero signed the document of
repurchase merely to show that he had no objection to the repurchase; and that he did not receive the amount
of P165.00 from petitioner inasmuch as he had no authority from his parents-in-law who were the vendees-a-
retro.
The trial court dismissed the complaint and ordered Dominga to vacate the premises and to deliver the disputed land
to respondents.
The Court of Appeals affirmed the decision and ruled that Dominga failed to validly exercise her right to
repurchase because the Memorandum of Repurchase was not signed by the Alteras but by Paciente Cordero (son
in law), who was not authorized to sign for the said vendees-a-retro.
Issue/s:
WON there was an implied agency when Cordero signed the Memorandum of Repurchase?
Ruling: Yes.
There is no question that neither of the vendees-a-retro signed the "Memorandum of Repurchase", and that
there was no formal authorization from the vendees for Paciente Cordero to act for and on their behalf.
Of significance, however, is the fact that from the execution of the repurchase document in 1945, possession,
which heretofore had been with the Alteras, has been in the hands of petitioner as stipulated therein. Land
taxes have also been paid for by petitioner yearly from 1947 to 1969 inclusive (Exhibits "D" to "D-15"; and
"E").
If, as opined by both (lower courts 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 pacto 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, but neither did the Alteras also 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. 2
Possession of the lot in dispute having been adversely and uninterruptedly with petitioner from 1945 when the
document of repurchase was executed, to 1969, when she instituted this action, or for 24 years, the Alteras
must be deemed to have incurred in laches. 3 That petitioner merely took advantage of the abandonment of the
land by the Alteras due to the separation of said spouses, and that petitioner's possession was in the concept of a
tenant, remain bare assertions without proof.
Private respondents Ramon Conde and Catalina Conde, to whom Pio Altera sold the disputed property in
1965, assuming that there was, indeed, such a sale, cannot be said to be purchasers in good faith. OCT No.
534 in the name of the Alteras specifically contained the condition that it was subject to the right of
repurchase within 10 years from 1938. Although the ten-year period had lapsed in 1965 and there was no
annotation of any repurchase by petitioner, neither had the title been cleared of that encumbrance. The
purchasers were put on notice that some other person could have a right to or interest in the property. It
behooved Ramon Conde and Catalina Conde to have looked into the right of redemption inscribed on the title,
and particularly the matter of possession, which, as also admitted by them at the pre-trial, had been with
petitioner since 1945.
Private respondent must be held bound by the clear terms of the Memorandum of Repurchase that he had
signed wherein he acknowledged the receipt of P165.00 and assumed the obligation to maintain the
repurchasers in peaceful possession should they be "disturbed by other persons". It was executed in the
Visayan dialect which he understood. He cannot now be allowed to dispute the same. "... If the contract is plain
and unequivocal in its terms he is ordinarily bound thereby. It is the duty of every contracting party to learn
and know its contents before he signs and delivers it." 4
There is nothing in the document of repurchase to show that Paciente Cordero had signed the same merely to
indicate that he had no objection to petitioner's right of repurchase. Besides, he would have had no personality to
object. To uphold his oral testimony on that point, would be a departure from the parol evidence rule 5 and would
defeat the purpose for which the doctrine is intended.
... The purpose of the rule is to give stability to written agreements, and to remove the
temptation and possibility of perjury, which would be afforded if parol evidence was
admissible. 6
In sum, although the contending parties were legally wanting in their respective actuations, the repurchase by
petitioner is supported by the admissions at the pre-trial that petitioner has been in possession since the year
1945, the date of the deed of repurchase, and has been paying land taxes thereon since then. The imperatives of
substantial justice, and the equitable principle of laches brought about by private respondents' inaction and
neglect for 24 years, loom in petitioner's favor.
WHEREFORE, the judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE, and
petitioner is hereby declared the owner of the disputed property. If the original of OCT No. N-534 of the
Province of Leyte is still extant at the office of the Register of Deeds, then said official is hereby ordered to
cancel the same and, in lieu thereof, issue a new Transfer Certificate of Title in the name of petitioner,
Dominga Conde.
No costs.
SO ORDERED.
17. Manotok Brothers, Inc. vs. Court of Appeals, 221 SCRA 224
PRELIMINARIES

Principle:
Facts:
Issue/s:
Ruling:
LINK TO DIGEST: Manotok Brothers, Inc. vs. CA
MANOTOK BROTHERS, INC., vs. THE HONORABLE COURT OF APPEALS, THE HONORABLE JUDGE OF THE
REGIONAL TRIAL COURT OF MANILA (Branch VI), and SALVADOR SALIGUMBA
G.R. No. 94753. April 7, 1993
CAMPOS, JR., J.:
FACTS:
The facts as found by the appellate court, revealed that petitioner (manotok) herein (then defendant-appellant) is the owner of a
certain parcel of land and building which were formerly leased by the City of Manila and used by the Claro M. Recto High
School, at M.F. Jhocson Street, Sampaloc Manila.
By means of a letter 5 dated July 5, 1966, petitioner authorized herein private respondent Salvador Saligumba to negotiate
with the City of Manila the sale of the aforementioned property for not less than P425,000.00.
In the same writing, petitioner agreed to pay private respondent a five percent (5%) commission in the event the sale is finally
consummated and paid.
Finally, through another letter dated November 16, 1967, the corporation with Rufino Manotok, its President , as signatory,
authorized private respondent to finalize and consummate the sale of the property to the City of Manila for not less than
P410,000.00. With this letter came another extension of 180 days.
The Municipal Board of the City of Manila eventually, on April 26, 1968, passed Ordinance No. 6603, appropriating the sum of
P410,816.00 for the purchase of the property which private respondent was authorized to sell.
Said ordinance however, was signed by the City Mayor only on May 17, 1968, one hundred eighty three (183) days after the
last letter of authorization to Salvador Saligumba.
Notwithstanding (despite) the realization of the sale, private respondent never received any commission, which should have
amounted to P20,554.50. This was due to the refusal of petitioner to pay private respondent said amount as the former does
not recognize the latter’s role as agent in the transaction.
Private respondent filed a complaint against petitioner, alleging that he had successfully negotiated the sale of the property.
He claimed that it was because of his efforts that the Municipal Board of Manila passed Ordinance No. 6603 which appropriated
the sum for the payment of the property subject of the sale.
Petitioner claimed otherwise. It denied the claim of private respondent on the following grounds: (1) private respondent
would be entitled to a commission only if the sale was consummated and the price paid within the period given in the
respective letters of authority; and (2) private respondent was not the person responsible for the negotiation and
consummation of the sale, instead it was Filomeno E. Huelgas, the PTA president of the Claro M. Recto High School.
Thereafter, the then Court of First Instance (now, Regional Trial Court) rendered judgment sentencing petitioner and/or
Rufino Manotok to pay unto private respondent the sum of P20,540.00 by way of his commission fees with legal interest
thereon.
Petitioner appealed said decision, but to no avail.
Respondent Court of Appeals affirmed the said ruling of the trial court.
Hence this petition.
ISSUE: The sole issue to be addressed in this petition is whether or not private respondent is entitled to the five percent (5%)
agent’s commission.
RULING: Yes.
It is petitioner’s contention that as a broker, private respondent’s job is to bring together the parties to a transaction. Accordingly,
if the broker does not succeed in bringing the minds of the purchaser and the vendor to an agreement with respect to the sale, he
is not entitled to a commission.
Private respondent, on the other hand, opposes petitioner’s position maintaining that it was because of his efforts that a purchase
actually materialized between the parties.
We rule in favor of private respondent.
At first sight, it would seem that private respondent is not entitled to any commission as he was not successful in consummating
the sale between the parties, for the sole reason that when the Deed of Sale was finally executed, his extended authority had
already expired.
By this alone, one might be misled to believe that this case squarely falls within the ambit of the established principle that a
broker or agent is not entitled to any commission until he has successfully done the job given to him.
But in the case at bar, private respondent is the efficient procuring cause for without his efforts, the municipality would
not have anything to pass and the Mayor would not have anything to approve. This Court ruled in another case that when
there is a close, proximate and causal connection between the agent’s efforts and labor and the principal’s sale of his
property, the agent is entitled to a commission.
We agree with respondent Court that the City of Manila ultimately became the purchaser of petitioner’s property mainly through
the efforts of private respondent. Without discounting the fact that when Municipal Ordinance No. 6603 was signed by the City
Mayor on May 17, 1968, private respondent’s authority had already expired, it is to be noted that the ordinance was approved on
April 26, 1968 when private respondent’s authorization was still in force. Moreover, the approval by the City Mayor came only
three days after the expiration of private respondent’s authority. It is also worth emphasizing that from the records, the only party
given a written authority by petitioner to negotiate the sale from July 5, 1966 to May 14, 1968 was private respondent.
While it may be true that FilomenoHuelgas followed up the matter with Councilor Magsalin, the author of Municipal Ordinance
No. 6603 and Mayor Villegas, his intervention regarding the purchase came only after the ordinance had already been passed —
when the buyer has already agreed to the purchase and to the price for which said property is to be paid. Without the efforts of
private respondent then, Mayor Villegas would have nothing to approve in the first place. It was actually private respondent’s
labor that had set in motion the intervention of the third party that produced the sale, hence he should be amply compensated.
WHEREFORE, in the light of the foregoing and finding no reversible error committed by respondent Court, the decision of the
Court of Appeals is hereby AFFIRMED.
18. Domingo v. Domingo, 42 SCRA 131
G.R. No. L-30573 October 29, 1971
VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO VDA. DE

DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR., SALVADOR, IRENE and JOSELITO, all
surnamed DOMINGO, petitioners-appellants,
vs.
GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P. PURISIMA, intervenor-respondent.
PRELIMINARIES
Who is the plaintiff: VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO VDA. DE
DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR., SALVADOR, IRENE and JOSELITO, all surnamed
DOMINGO, petitioners-appellants
Who is the defendant: GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P. PURISIMA, intervenor-

respondent.
PETITION for review by certiorari of a decision of the Court of Appeals (not in the text, but labeled by E-SCRA) .
What is the Case filed in the original court? N/A
From which court Originated? Trial court (not specified)
Court a quos ruling and brief reason why? Trial COurt and CA Sentenced Vicente M. Domingo to pay
Gregorio M. Domingo P2,307.50 and the intervenor Teofilo P. Purisima P2,607.50 with interest on both
amounts from the date of the filing of the complaint, to pay Gregorio Domingo P1,000.00 as moral and
exemplary damages and P500.00 as attorney's fees plus costs.
WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of Appeals and directing
defendant-appellee Gregorio Domingo: (1) to pay to the heirs of Vicente Domingo the sum of One Thousand Pesos
(P1,000.00) as moral damages and One Thousand Pesos (P1,000.00) as attorney's fees; (2) to pay Teofilo Purisima
the sum of Six Hundred Fifty Pesos (P650.00); and (3) to pay the costs.
Principle:
An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee, without
revealing the same to be his principal is guilty of a breach of his loyalty to the latter and forfeits his right to collect
the commission that may be due him, even if the principal does not suffer any injury by reason of such breach of
fidelity, or that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it;
because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage.
Facts:
Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the exclusive agency to sell his lot No. 883 of
Piedad Estate at the rate of P2.00 per square meter (or for P176,954.00) with a commission of 5% on the total price,
if the property is sold during the 30-day duration of the agency or if the property is sold within three months from
the termination of the agency to a purchaser submitted by Gregorio during the continuance of the agency with notice
to Vicente.
Gregorio authorized the intervenor Teofilo Purisima to look for a buyer, promising him one-half of the 5%
commission.
Thereafter, Teofilo introduced Oscar de Leon to Gregorio as a prospective buyer.
Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per
square meter (Exhibit "B").
Vicente directed Gregorio to tell Oscar de Leon to raise his offer. After several conferences between
Gregorio and Oscar de Leon, the latter raised his offer to P109,000.00 on June 20, 1956 as
evidenced by Exhibit "C", to which Vicente agreed by signing Exhibit "C".
Upon demand of Vicente, Oscar de Leon issued to him a check in the amount of P1,000.00 as
earnest money, after which Vicente advanced to Gregorio the sum of P300.00.
Oscar de Leon confirmed his former offer to pay for the property at P1.20 per square meter in
another letter, Exhibit "D".
Subsequently, Vicente asked for an additional amount of P1,000.00 as earnest money, which Oscar
de Leon promised to deliver to him. Thereafter, Exhibit "C" was amended to the effect that Oscar de
Leon will vacate on or about September 15, 1956 his house and lot at Denver Street, Quezon City
which is part of the purchase price. It was again amended to the effect that Oscar will vacate his
house and lot on December 1, 1956, because his wife was on the family way and Vicente could stay
in lot No. 883 of Piedad Estate until June 1, 1957, in a document dated June 30, 1956 (the year
1957 therein is a mere typographical error) and marked Exhibit "D".
Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the sum of One
Thousand Pesos (P1,000.00) for succeeding in persuading Vicente to sell his lot at P1.20 per
square meter or a total in round figure of One Hundred Nine Thousand Pesos (P109,000.00).
This gift of One Thousand Pesos (P1,000.00) was not disclosed by Gregorio to Vicente.
Neither did Oscar pay Vicente the additional amount of One Thousand Pesos (P1,000.00) by way of
earnest money.
In the deed of sale was not executed. on August 1, 1956 as stipulated in Exhibit "C" nor on August
15, 1956 as extended by Vicente, Oscar told Gregorio that he did not receive his money from his
brother in the United States, for which reason he was giving up the negotiation including the amount
of One Thousand Pesos (P1,000.00) given as earnest money to Vicente and the One Thousand
Pesos (P1,000.00) given to Gregorio as propina or gift.
When Oscar did not see him after several weeks, Gregorio sensed something fishy.
So, he went to Vicente and read a portion of Exhibit "A" marked habit "A-1" to the effect that Vicente
was still committed to pay him 5% commission, if the sale is consummated within three months after
the expiration of the 30-day period of the exclusive agency in his favor from the execution of the
agency contract on June 2, 1956 to a purchaser brought by Gregorio to Vicente during the said 30-
day period.
Vicente grabbed the original of Exhibit "A" and tore it to pieces. Gregorio held his peace, not wanting
to antagonize Vicente further, because he had still duplicate of Exhibit "A".
From his meeting with Vicente, Gregorio proceeded to the office of the Register of Deeds of Quezon
City, where he discovered Exhibit "G' deed of sale executed on September 17, 1956 by Amparo
Diaz, wife of Oscar de Leon, over their house and lot No. 40 Denver Street, Cubao, Quezon City, in
favor Vicente as down payment by Oscar de Leon on the purchase price of Vicente's lot No. 883 of
Piedad Estate.
Upon thus learning that Vicente sold his property to the same buyer, Oscar de Leon and his wife, he
demanded in writing payment of his commission on the sale price of One Hundred Nine Thousand
Pesos (P109,000.00), Exhibit "H". He also conferred with Oscar de Leon, who told him that Vicente
went to him and asked him to eliminate Gregorio in the transaction and that he would sell his
property to him for One Hundred Four Thousand Pesos (P104,000.0
In Vicente's reply to Gregorio's letter, Exhibit "H", Vicente stated that Gregorio is not entitled to the
5% commission because he sold the property not to Gregorio's buyer, Oscar de Leon, but to another
buyer, Amparo Diaz, wife of Oscar de Leon.
The Court of Appeals found from the evidence that Exhibit "A", the exclusive agency contract, is
genuine; that Amparo Diaz, the vendee, being the wife of Oscar de Leon the sale by Vicente of his
property is practically a sale to Oscar de Leon since husband and wife have common or identical
interests; that Gregorio and intervenor Teofilo Purisima were the efficient cause in the
consummation of the sale in favor of the spouses Oscar de Leon and Amparo Diaz; that Oscar de
Leon paid Gregorio the sum of One Thousand Pesos (P1,000.00) as "propina" or gift and not as
additional earnest money to be given to the plaintiff, because Exhibit "66", Vicente's letter addressed
to Oscar de Leon with respect to the additional earnest money, does not appear to have been
answered by Oscar de Leon and therefore there is no writing or document supporting Oscar de
Leon's testimony that he paid an additional earnest money of One Thousand Pesos (P1,000.00) to
Gregorio for delivery to Vicente, unlike the first amount of One Thousand Pesos (P1,000.00) paid by
Oscar de Leon to Vicente as earnest money, evidenced by the letter Exhibit "4"; and that Vicente did
not even mention such additional earnest money in his two replies Exhibits "I" and "J" to Gregorio's
letter of demand of the 5% commission.
Issue/s:
WON Gregorio’s non-disclose to Vicente the payment to him by Oscar de Leon of the amount of P1,000.00 as gift
or “propina” for having persuaded Vicente to reduce the purchase price from P2.00 to P1.20 per square meter, so
constitutes fraud as to cause a forfeiture of his commission on the sale price.
Ruling:
Yes!
The duties and liabilities of a broker to his employer are essentially those which an agent owes to his
principal.1
Consequently, the decisive legal provisions are in found Articles 1891 and 1909 of the New Civil
Code.
Art. 1891. Every agent is bound to render an account of his transactions and to
deliver to the principal whatever he may have received by virtue of the agency, even
though it may not be owing to the principal.
Every stipulation exempting the agent from the obligation to render an account shall
be void.
xxx xxx xxx
Art. 1909. The agent is responsible not only for fraud but also for negligence, which
shall be judged with more less rigor by the courts, according to whether the agency
was or was not for a compensation.
Article 1891 of the New Civil Code amends Article 17 of the old Spanish Civil Code which provides
that:
Art. 1720. Every agent is bound to give an account of his transaction and to pay to
the principal whatever he may have received by virtue of the agency, even though
what he has received is not due to the principal.
The modification contained in the first paragraph Article 1891 consists in changing the phrase "to
pay" to "to deliver", which latter term is more comprehensive than the former.
Paragraph 2 of Article 1891 is a new addition designed to stress the highest loyalty that is required
to an agent — condemning as void any stipulation exempting the agent from the duty and liability
imposed on him in paragraph one thereof.
Article 1909 of the New Civil Code is essentially a reinstatement of Article 1726 of the old Spanish
Civil Code which reads thus:
Art. 1726. The agent is liable not only for fraud, but also for negligence, which shall
be judged with more or less severity by the courts, according to whether the agency
was gratuitous or for a price or reward.
The aforecited provisions demand the utmost good faith, fidelity, honesty, candor and fairness on the
part of the agent, the real estate broker in this case, to his principal, the vendor. The law imposes
upon the agent the absolute obligation to make a full disclosure or complete account to his principal
of all his transactions and other material facts relevant to the agency, so much so that the law as
amended does not countenance any stipulation exempting the agent from such an obligation and
considers such an exemption as void. The duty of an agent is likened to that of a trustee. This is not
a technical or arbitrary rule but a rule founded on the highest and truest principle of morality as well
as of the strictest justice.
2
Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from
the vendee, without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty
to the principal and forfeits his right to collect the commission from his principal, even if the principal
does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or
that the agency is a gratuitous one, or that usage or custom allows it; because the rule is to prevent
the possibility of any wrong, not to remedy or repair an actual damage. 3
By taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a
position wholly inconsistent with that of being an agent for his principal, who has a right to
treat him, insofar as his commission is concerned, as if no agency had existed. The fact that
the principal may have been benefited by the valuable services of the said agent does not exculpate
the agent who has only himself to blame for such a result by reason of his treachery or perfidy.
This Court has been consistent in the rigorous application of Article 1720 of the old Spanish Civil
Code. Thus, for failure to deliver sums of money paid to him as an insurance agent for the account
of his employer as required by said Article 1720, said insurance agent was convicted estafa. An 4
administrator of an estate was likewise under the same Article 1720 for failure to render an account
of his administration to the heirs unless the heirs consented thereto or are estopped by having
accepted the correctness of his account previously rendered. 5
Because of his responsibility under the aforecited article 1720, an agent is likewise liable for estafa
for failure to deliver to his principal the total amount collected by him in behalf of his principal and
cannot retain the commission pertaining to him by subtracting the same from his collections. 6
A lawyer is equally liable unnder said Article 1720 if he fails to deliver to his client all the money and
property received by him for his client despite his attorney's lien. The duty of a commission agent to
7
render a full account his operations to his principal was reiterated in Duhart, etc. vs. Macias. 8
The American jurisprudence on this score is well-nigh unanimous.
Where a principal has paid an agent or broker a commission while ignorant of the
fact that the latter has been unfaithful, the principal may recover back the
commission paid, since an agent or broker who has been unfaithful is not entitled to
any compensation.
xxx xxx xxx
In discussing the right of the principal to recover commissions retained by an

unfaithful agent, the court in Little vs. Phipps (1911) 208 Mass. 331, 94 NE 260, 34
LRA (NS) 1046, said: "It is well settled that the agent is bound to exercise the utmost
good faith in his dealings with his principal. As Lord Cairns said, this rule "is not a
technical or arbitrary rule. It is a rule founded on the highest and truest principles, of
morality." Parker vs. McKenna (1874) LR 10,Ch(Eng) 96,118 ... If the agent does not
conduct himself with entire fidelity towards his principal, but is guilty of taking a secret
profit or commission in regard the matter in which he is employed, he loses his right
to compensation on the ground that he has taken a position wholly inconsistent with
that of agent for his employer, and which gives his employer, upon discovering it, the
right to treat him so far as compensation, at least, is concerned as if no agency had
existed. This may operate to give to the principal the benefit of valuable services
rendered by the agent, but the agent has only himself to blame for that result."
xxx xxx xxx
The intent with which the agent took a secret profit has been held immaterial where
the agent has in fact entered into a relationship inconsistent with his agency, since
the law condemns the corrupting tendency of the inconsistent relationship. Little vs.
Phipps (1911) 94 NE 260. 9
As a general rule, it is a breach of good faith and loyalty to his principal for an agent,
while the agency exists, so to deal with the subject matter thereof, or with information
acquired during the course of the agency, as to make a profit out of it for himself in
excess of his lawful compensation; and if he does so he may be held as a
trustee and may be compelled to account to his principal for all profits, advantages,
rights, or privileges acquired by him in such dealings, whether in performance or in
violation of his duties, and be required to transfer them to his principal upon being
reimbursed for his expenditures for the same, unless the principal has consented to
or ratified the transaction knowing that benefit or profit would accrue or had accrued,
to the agent, or unless with such knowledge he has allowed the agent so as to
change his condition that he cannot be put in status quo. The application of this rule
is not affected by the fact that the principal did not suffer any injury by reason of the
agent's dealings or that he in fact obtained better results; nor is it affected by the fact
that there is a usage or custom to the contrary or that the agency is a gratuitous one.
(Emphasis applied.) 10
In the case at bar, defendant-appellee Gregorio Domingo as the broker, received a gift or propina in
the amount of One Thousand Pesos (P1,000.00) from the prospective buyer Oscar de Leon, without
the knowledge and consent of his principal, herein petitioner-appellant Vicente Domingo. His
acceptance of said substantial monetary gift corrupted his duty to serve the interests only of his
principal and undermined his loyalty to his principal, who gave him partial advance of Three Hundred
Pesos (P300.00) on his commission. As a consequence, instead of exerting his best to persuade his
prospective buyer to purchase the property on the most advantageous terms desired by his
principal, the broker, herein defendant-appellee Gregorio Domingo, succeeded in persuading his
principal to accept the counter-offer of the prospective buyer to purchase the property at P1.20 per
square meter or One Hundred Nine Thousand Pesos (P109,000.00) in round figure for the lot of
88,477 square meters, which is very much lower the the price of P2.00 per square meter or One
Hundred Seventy-Six Thousand Nine Hundred Fifty-Four Pesos (P176,954.00) for said lot originally
offered by his principal.
The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or broker acted
only as a middleman with the task of merely bringing together the vendor and vendee, who
themselves thereafter will negotiate on the terms and conditions of the transaction. Neither would the
rule apply if the agent or broker had informed the principal of the gift or bonus or profit he received
from the purchaser and his principal did not object therto. Herein defendant-appellee Gregorio
11
Domingo was not merely a middleman of the petitioner-appellant Vicente Domingo and the buyer
Oscar de Leon. He was the broker and agent of said petitioner-appellant only. And therein petitioner-
appellant was not aware of the gift of One Thousand Pesos (P1,000.00) received by Gregorio
Domingo from the prospective buyer; much less did he consent to his agent's accepting such a gift.
The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of Oscar de Leon,
does not materially alter the situation; because the transaction, to be valid, must necessarily be with
the consent of the husband Oscar de Leon, who is the administrator of their conjugal assets
including their house and lot at No. 40 Denver Street, Cubao, Quezon City, which were given as part
of and constituted the down payment on, the purchase price of herein petitioner-appellant's lot No.
883 of Piedad Estate. Hence, both in law and in fact, it was still Oscar de Leon who was the buyer.
As a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo must

forfeit his right to the commission and must return the part of the commission he received from his
principal.
Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from Gregorio Domingo his
one-half share of whatever amounts Gregorio Domingo received by virtue of the transaction as his
sub-agency contract was with Gregorio Domingo alone and not with Vicente Domingo, who was not
even aware of such sub-agency. Since Gregorio Domingo received from Vicente Domingo and
Oscar de Leon respectively the amounts of Three Hundred Pesos (P300.00) and One Thousand
Pesos (P1,000.00) or a total of One Thousand Three Hundred Pesos (P1,300.00), one-half of the
same, which is Six Hundred Fifty Pesos (P650.00), should be paid by Gregorio Domingo to Teofilo
Purisima.
Because Gregorio Domingo's clearly unfounded complaint caused Vicente Domingo mental anguish
and serious anxiety as well as wounded feelings, petitioner-appellant Vicente Domingo should be
awarded moral damages in the reasonable amount of One Thousand Pesos (P1,000.00) attorney's
fees in the reasonable amount of One Thousand Pesos (P1,000.00), considering that this case has
been pending for the last fifteen (15) years from its filing on October 3, 1956.
WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of Appeals and
directing defendant-appellee Gregorio Domingo: (1) to pay to the heirs of Vicente Domingo the sum
of One Thousand Pesos (P1,000.00) as moral damages and One Thousand Pesos (P1,000.00) as
attorney's fees; (2) to pay Teofilo Purisima the sum of Six Hundred Fifty Pesos (P650.00); and (3) to
pay the costs.
Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo and
Villamor, JJ., concur.
19. Siasat vs. Intermediate Appellate Court, 139 SCRA 238
PRIMITIVO SIASAT and MARCELINO SIASAT, petitioners,

vs.
INTERMEDIATE APPELLATE COURT and TERESITA NACIANCENO, respondents.
Payawal, Jimenez & Associates for petitioners.

Nelson A. Loyola for private respondent.
PRELIMINARIES
Who is the plaintiff: respondent Teresita Nacianceno
Who is the defendant: PRIMITIVO SIASAT and MARCELINO SIASAT, petitioners
Petition for review of the decision of the Intermediate Appellate Court affirming in toto the judgment of the Court of
First Instance of Manila, Branch XXI, which ordered the petitioner to pay respondent the thirty percent (30%)
commission on 15,666 pieces of Philippine flags worth P936,960.00, moral damages, attorney's fees and the costs of
the suit
What is the Case filed in the original court? Action to recover the following commissions: 25%, as balance on
the first delivery and 30%, on the second delivery.
From which court Originated? Court of First Instance of Manila
● trial court decided in favor of the respondent

● decision was affirmed in toto by the Intermediate Appellate Court

Respondent won, Petitioners lost.
WHEREFORE, the decision of the respondent court is hereby MODIFIED. The petitioners are ordered to pay the
respondent the amount of ONE HUNDRED FOURTY THOUSAND NINE HUNDRED AND NINETY FOUR
PESOS (P140,994.00) as her commission on the second delivery of flags with legal interest from the date of the trial
court's decision. No pronouncement as to costs.
Principle:
A general agent is one authorized to do all acts pertaining to a business of a certain kind or at a particular place, or
all acts pertaining to a business of a particular class or series.
He has usually authority either expressly conferred in general terms or in effect made general by the usages,
customs or nature of the business which he is authorized to transact.
Facts:
Respondent Nacianceno succeeded in convincing officials of then DECS to purchase, without public bidding, one
million pesos worth of national flags for the use of public schools throughout the country. And for her service, she
was entitled to a commission of thirty (30%) percent.
The first delivery was made by the United Flag Industry.
The following day, the respondent’s authority to represent the United Flag Industry was revoked by petitioner
Primitivo Siasat.
According to the findings of the court below, Siasat, after receiving the payment for the first delivery, tendered only
5% of the amount received, to the respondent as payment of her commission which Nacianceno protested. She
refused to accept the said amount insisting on the 30% commission agreed upon.
But the respondent was prevailed upon to accept the same because of the assurance of the petitioners that they would
pay the commission in full after they delivered the other half of the order.
The respondent state that (but) Nacianceno later on learned that petitioner Siasat had already received payment for
the second delivery of 7.833 flags.
When she confronted the petitioners, they vehemently denied receipt of her payment, at the same time claiming that
the respondent had no participation whatsoever with regard to the second delivery of flags and that the agency had
already been revoked.
She then filed a case in court.
The trial court decided in favor of the respondent. The dispositive portion of the decision reads as follows:
WHEREFORE, judgment is hereby rendered sentencing Primitivo Siasat to pay to the

plaintiff the sum of P281,988.00, minus the sum P23,900.00, with legal interest from the date
of this decision, and ordering the defendants to pay jointly and solidarily the sum of
P25,000.00 as moral damages, and P25,000.00 as attorney's fees, also with legal interest from
the date of this decision, and the costs.
The decision was affirmed in toto by the Intermediate Appellate Court.
After their motion for reconsideration was denied, the petitioners went to this Court on a petition for review on
August 6, 1984.
In assailing the appellate court’s decision, the petitioner tenders the following arguments:
first, the authorization making the respondent the petitioner’s representative merely states that she could deal with
any entity in connection with the marketing of their products for a commission of 30%. There was no specific
authorization for the sale of 15,666 Philippine flags to the Department;
second, there were two transactions involved evidenced by the separate purchase orders and separate delivery
receipts. The revocation of agency effected by the parties with mutual consent, therefore, forecloses the respondent’s
claim of 30% commission on the second transaction;
and last, regarding damages and attorneys fees.
ISSUE:
WON respondent is an agent entitled to full commission?
RULING
Yes.
There are several kinds of agents.
An agent may be (1) universal: (2) general, or (3) special.

A universal; agent is one authorized to do all acts for his principal which can lawfully be delegated to an
agent. So far as such a condition is possible, such an agent may be said to have universal authority. (Mec.
Sec. 58).
A general agent is one authorized to do all acts pertaining to a business of a certain kind or at a particular
place, or all acts pertaining to a business of a particular class or series.
He has usually authority either expressly conferred in general terms or in effect made general by the
usages, customs or nature of the business which he is authorized to transact.
An agent, therefore, who is empowered to transact all the business of his principal of a particular kind or in
a particular place, would, for this reason, be ordinarily deemed a general agent. (Mec Sec. ,30).
A special agent is one authorized to do some particular act or to act upon some particular occasion. like
acts usually in accordance with specific instructions or under limitations necessarily implied from the
nature of the act to be done.
According to the Court, 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.
Moreover, we deny the petitioners' contention that respondent Nacianceno is not entitled to the stipulated
commission on the second delivery because of the revocation of the agency effected after the first delivery.
So the revocation of agency could not prevent the respondent from earning her commission because as the trial court
opined, it came too late, the contract of sale having been already perfected and partly executed.
The principal cannot deprive his agent of the commission agreed upon by cancelling the agency
and, thereafter, dealing directly with the buyer.
WHEREFORE, the decision of the respondent court is hereby MODIFIED. The petitioners are
ordered to pay the respondent the amount of ONE HUNDRED FOURTY THOUSAND NINE
HUNDRED AND NINETY FOUR PESOS (P140,994.00) as her commission on the second delivery
of flags with legal interest from the date of the trial court's decision. No pronouncement as to costs.
SO ORDERED
20. Municipal Council of Iloilo vs. Evangelista, 55 Phil. 290
G.R. No. L-32977 November 17, 1930
THE MUNICIPAL COUNCIL OF ILOILO, plaintiff-appellee,

vs.
JOSE EVANGELISTA, ET AL., defendants-appellees.
TAN ONG SZE VDA. DE TAN TOCO, appellant.
PRELIMINARIES
Who is the plaintiff: MUNICIPALITY OF ILOILO
Who is the defendant: TAN ONG SZE VDA. DE TAN TOCO/JOSE EVANGELISTA, ET AL.

Principle:
An agent or attorney-in-fact empowered to pay the debts of the principal, and to employ
lawyers to defend the latter's interests, is impliedly empowered to pay the lawyer's fees for
services rendered in the interests of said principal, and may satisfy, them by an assignment of a
judgment rendered in favor of said principal.
That when a person appoints two attorneys-in-fact independently, the consent of the one will not
be required to validate the acts of the other unless that appears positively to have been the
principal's intention.
Facts:
This is an appeal taken by the defendant Tan Ong Sze Vda. de Tan Toco from the judgment of the Court of
First Instance of Iloilo, providing as follows:
Wherefore, judgment is hereby rendered, declaring valid and binding the deed of assignment of the
credit executed by Tan Toco's widow, through her attorney-in-fact Tan Buntiong, in favor of
late Antero Soriano; likewise the assignment executed by the latter during his lifetime in favor
of the defendant Mauricio Cruz & Co., Inc., and the plaintiff is hereby ordered to pay the said
Mauricio Cruz & Co., Inc., the balance of P30,966.40; the plaintiff is also ordered to deposit said sum
in a local bank within the period of ninety days from the time this judgment shall become final, at the
disposal of the aforesaid Mauricio Cruz & Co. Inc., and in case that the plaintiff shall not make such
deposit in the manner indicated, said amount shall bear the legal interest of six percent per annum
from the date when the plaintiff shall fail to make the deposit within the period herein set forth, until
fully paid.
Without special pronouncement of costs.
In March 1924, Tan Ong Vda. De Tantoco (Tantoco) won in Civil Case 3154 that she filed against the Municipality of Iloilo
wherein she sought to recover from the latter the value of strip of land that she owned which was taken by the Municipality
of Iloilo to widen a public street.
The judgment entitled Tantoco to recover P42,966.40 (this amount was the subject of the controversy because portion of which
was deducted in favor to Antero Soriano for his prof fee in other cases of Tantoco) from the Municipality of Iloilo .
The CA affirmed the trial court’s decision and the case was remanded to the trial court which rendered judgment as final and
executory.
After the case was remanded to the court of origin, and the judgment rendered therein had become final and
executory, Attorney Jose Evangelista, in his own behalf and as counsel for the administratrix of Jose Ma
.Arroyo's intestate estate, filed a claim in the same case for professional services rendered by him
(Arroyo), which the court, acting with the consent of the appellant widow, fixed at 15 per cent of the amount
of the judgment (Exhibit 22 — Soriano).
During the hearing on same said claim, the claimants appeared, as did also the Philippine National Bank,
which prayed that the amount of the judgment be turned over to it because the land taken over had been
mortgaged to it.
During the hearing, Antero Soriano also appeared claiming the amount of the judgment as it had been
assigned to him, and by him, in turn, assigned to Mauricio Cruz & Co., Inc.
After hearing all the adverse claims on the amount of the judgment the court ordered that the attorney's lien in
the amount of 15 per cent of the judgment, be recorded in favor of Attorney Jose Evangelista, in his own
behalf and as counsel for the administratrix of the deceased Jose Ma .Arroyo, and directed the municipality of
Iloilo to file an action of interpleading against the adverse claimants, the Philippine National Bank, Antero
Soriano, Mauricio Cruz & Co., Jose Evangelista and Jose Arroyo, as was done, the case being filed in the
Court of First Instance of Iloilo as civil case No. 7702.
After due hearing, the court rendered the decision:
Wherefore, judgment is hereby rendered, declaring valid and binding the deed of assignment of the
credit executed by Tan Toco's widow, through her attorney-in-fact Tan Buntiong, in favor of late
Antero Soriano; which likewise the assignment executed by the latter during his lifetime in favor of
the defendant Mauricio Cruz & Co.
On March 29, 1928, the municipal treasurer of Iloilo, with the approval of the auditor of the provincial
treasurer of Iloilo and of the Executive Bureau, paid the late Antero Soriano the amount of P6,000 in part
payment of the judgment mentioned above, assigned to him by Tan Boon Tiong, acting as attorney-in-fact of
the appellant herein, Tan Ong Sze Vda. de Tan Toco.
So during the appeal, the issue is confined to the claim of Mauricio Cruz & Co. as alleged assignee of the
rights of the late Attorney Antero Soriano by virtue of the said judgment in payment of professional
services rendered by him (Atty. Soriano) to the said widow and her coheirs.
The defendant-appellant contends that the deed of assignment Exhibit 2-Cruz was drawn up in contravention
of the prohibition contained in article 1459, case 5, of the Civil Code, which reads as follows:
ART. 1459. The following persons cannot take by purchase, even at a public or judicial auction, either
in person or through the mediation of another:
xxx xxx xxx
5. Justices, judges, members of the department of public prosecution, clerks of superior and
inferior courts, and other officers of such courts, the property and rights in litigation before
the court within whose jurisdiction or territory they perform their respective duties .
This prohibition shall include the acquisition of such property by assignment.
Actions between co-heirs concerning the hereditary property, assignments in payment of debts, or to
secure the property of such persons, shall be excluded from this rule.
The prohibition contained in this paragraph shall include lawyers and solicitors with respect to
any property or rights involved in any litigation in which they may take part by virtue of their
profession and office.
ISSUE:
WON the assignment made by Tan Boon Tiong as attorney-in-fact of the appellant Tan Ong Sze Viuda
de Tan Toco, to Attorney Antero Soriano, of all the credits, rights and interests belonging to said appellant
Tan Ong Sze Viuda de Tan Toco by virtue of the judgment rendered in civil case No .3514 of the Court of
First Instance of Iloilo, entitled Viuda de Tan Toco vs. The Municipal Council of Iloilo?
, adjudicating to said widow the amount of P42,966.40, plus the costs of court, against said municipal council
of Iloilo, in consideration of the professional services rendered by said attorney SORIANO to said widow of
Tan Toco and her coheirs, IS LEGAL?
RULING?
YES.
It does not appear that the Attorney Antero Soriano was counsel for the herein appellant in civil case No.
3514 of the Court of First Instance of Iloilo, which she instituted against the municipality of Iloilo, Iloilo,
for the recovery of the value of a strip of land expropriated by said municipality for the widening of a
certain public street. The only lawyers who appear to have represented her in that case were Arroyo and
Evangelista, who filed a claim for their professional fees .
When the appellant's credit, right, and interests in that case were assigned by her attorney-in-fact Tan Boon
Tiong, to Attorney Antero Soriano in payment of professional services rendered by the latter to the appellant
and her coheirs in connection with other cases, that particular case had been decided, and the only thing left to
do was to collect the judgment.
There was no relation of attorney and client, then, between Antero Soriano and the appellant, in the case where
that judgment was rendered; and therefore the assignment of her credit, right and interests to said lawyer
did not violate the prohibition cited above.
With that, as to whether Tan Boon Tiong as attorney-in-fact of the appellant, was empowered by his principal
to make as assignment of credits, rights and interests, in payment of debts for professional services rendered by
lawyers, in paragraph VI of the power of attorney, Exhibit 5-Cruz, Tan Boon Tiong is authorized to employ
and contract for the services of lawyers upon such conditions as he may deem convenient, to take charge
of any actions necessary or expedient for the interests of his principal, and to defend suits brought
against her. This power necessarily implies the authority to pay for the professional services thus
engaged.
In the present case, the assignment made by Tan Boon Tiong, as Attorney-in-fact for the appellant, in favor
of Attorney Antero Soriano for professional services rendered in other cases in the interests of the appellant
and her coheirs, was that credit which she had against the municipality of Iloilo, and such assignment was
equivalent to the payment of the amount of said credit to Antero Soriano for professional services .
With regard to the failure of the other attorney-in-fact of the appellant, Tan Montano, authorized by Exhibit 1
— Tan Toco, to consent to the deed of assignment, the latter being also authorized to pay, in the name and
behalf of the principal, all her debts and the liens and encumbrances her property, the very fact that different
letters of attorney were given to each of these two representatives shows that it was not the principal's intention
that they should act jointly in order to make their acts valid. Furthermore, the appellant was aware of that
assignment and she not only did not repudiate it, but she continued employing Attorney Antero Soriano to
represent her in court.
For the foregoing considerations, the court is of opinion and so holds: (1) That an agent of attorney-in -fact
empowered to pay the debts of the principal, and to employ lawyers to defend the latter's interests, is impliedly
empowered to pay the lawyer's fees for services rendered in the interests of said principal, and may
satisfy them by an assignment of a judgment rendered in favor of said principal ; (2) that when a person
appoints two attorneys-in-fact independently, the consent of the one will not be required to validate the acts of
the other unless that appears positively to have been the principal's attention; and (3) that the assignment of the
amount of a judgment made by a person to his attorney, who has not taken any part in the case wherein said
judgment was rendered, made in payment of professional services in other cases, does not contravene the
prohibition of article 1459, case 5, of the Civil Code.
By virtue whereof, and finding no error in the judgment appealed from, the same is affirmed in its entirety,
with costs against the appellant. So ordered.
Avanceña, C.J., Johnson, Street, Malcolm, Villamor, Ostrand, Johns and Romualdez, JJ., concur.
21. Caballero vs. Deiparine, 60 SCRA 136
G.R. No. L-39059 September 30, 1974
ANTONIO CABALLERO and CONCORDIA CABALLERO, plaintiffs-appellants,

vs.
ALMA DEIPARINE, TOMAS RAGA, OLIMPIO RAGA, ADRIANO RAGA, and MAGDALENA
RAGA, defendant-appellees.
PRELIMINARIES
Who is the plaintiff: Antonio Caballero and Concordia Caballero
Who is the defendant: Alma Deiparine, Tomas Raga, Olimpio Raga, Adriano Raga, Magdalena Raga

Principle:
The broad implied or apparent powers of an attorney with respect to the conduct or control of litigation are,
however, limited to matters which relate only to the procedure or remedy.
The employment of itself confers upon the attorney no implied or power or authority over the subject matter of
the cause of action or defense; and, unless the attorney has expressly been granted authority with respect thereto, the
power to deal with or surrender these matters is regarded as remaining exClusively in the client.
Facts:
On March 21, 1967, plaintiffs Antonio Caballero and Concordia Caballero filed a complaint against
defendant/s Alma Deiparine, Tomas Raga, Olimpio Raga, Adriano Raga and Magdalena Raga.
Plaintiffs Antonio Caballero and Concordia Caballero are the children by the first marriage, and the
defendants, Tomas Raga, Olimpio Raga, Adriano Raga and Magdalena Raga, are the children by second
marriage of Vicenta Bucao, now deceased, who died sometime in February, 1943 in Tabunoc, Talisay, Cebu;
Plaintiffs Caballeros are children by the first marriage of Vicenta Bucao, while defendants surnamed Raga are
children on the second marriage.
Allegations are:
Vicenta Bucao and Tomas Raga acquired by joint purchase a parcel of land identified as Lot 2072, described in TCT
NO. Rt-2485 of the ROD Cebu and further declared for taxation purposes.
Tomas Raga and Vicenta Bucao (seller) sold ¼ of the lot to Antonio Caballero (buyer), but no title had been issued
in his favor.
Plaintiff Antonio Caballero had been paying the taxes thru his mother from the time of acquisition until Vicenta’s
death in 1943.
Even before the death of Vicenta, Antonio had been asking the former to deliver the title of the portion of land sold
to him, but he was told to wait.
Again, he asked defendant Raga for the delivery of the title, but he was again asked to wait and there was no hurry
as Antonio was already in possession thereof. Antonio had an open, continuous, peace and adverse possession of the
land and had built a house thereon, which he used as his dwelling.
Sometime, Antonio Caballero received a demand letter from defendant Alma Deiparine demanding the former to
vacate the house as the land was sold to her by Tomas Raga.
Upon refusal of Antonio, Alma filed an action for ejectment against him in the Municipal Court of TAlisay,
which ruled in favor of Antonio, she appealed the decision to the CFI Cebu, which again ruled the favor of
Antonio.
The decision was appealed to the CA where it was pending.
While Antonio filed a complaint against herein defendants on the grounds that the TCT no 9934 issued in
favor Alma Deiparine is fraudulent and questionable for having deliberately included in the sale made by
defendant Romas Raga to Alma Deiparine the portion previously sold to Plaintiff Antonio Caballero.
Defendant Deiparine Argued that she is a purchaser in good faith and that the sale to Antonio was only made
known to her after she had already filed an action for ejectment. Defendants surnamed Raga denied the sale to
Antonio.
Before the case was called for hearing, the parties through counsel entered into a stipulation of facts on
March 13, 1968, which provides as follows:
STIPULATION OF FACTS
The PLAINTIFFS and the DEFENDANTS in the above-entitled case duly assisted by their
respective counsels, unto this Honorable Court hereby respectfully submit the following
stipulation of facts:
1. That the parties are all of legal ages and residents of Talisay, Cebu;
2. That Plaintiffs Antonio and Concordia, all surnamed Caballero, and Defendant Tomas,
Olimpio, Adriano and Magdalena, all surnamed Raga, are the children of Vicenta Bucao now
deceased, the first two named being the children by the first marriage and the last four named
being the children by the second marriage;
3. That during the lifetime of Vicenta Bucao she with her second husband Casimero Raga and
her son Tomas Raga acquired by joint purchase a parcel of land from the Talisay-Minglanilla
Estate identified as Lot No. 2072 and described in TRANSFER CERTIFICATE OF TITLE
NO. RT-2485 (T-17232) issued by the Register of Deeds of Cebu on October 12, 1936, a
certified true copy of which is identified as Annex "A" in the Complaint and Tomas Raga is
the owner of undivided one-half thereof;
4. That in 1932 Vicenta Bucao and Tomas Raga before Annex "A" mentioned in the next
preceding paragraph had been issued, executed jointly a notarial instrument identified as
Annex "B" wherein they acknowledged that Antonio Caballero had contributed the amount
therein stated for the purchase of the property and they sold 1/4 of the lot to him; when the
title to said lot was issued, Vicenta Bucao and Tomas Raga held it in trust for their co-owner;
5. That the portion mentioned as sold to plaintiff Antonio Caballero remained unsegregated
from Lot 2072 and the deed of sale, Annex "B" of the Complaint; nor had it been registered in
the Register of Deeds; but he, had been in occupation of a portion of this lot peacefully until
the present;
6. That the Tax Declaration of the property remained in the name of Vicenta Bucao;
7. That during the lifetime of Vicenta Bucao, she, with the conformity of her husband, sold
her undivided 1/2 of the above parcel to her co-owner, Tomas Raga;
8. That on March 18, 1963 defendants Olimpio Raga, Adriano Raga, Magdalena Raga and
Tomas Raga executed an instrument known as "Declaration and confirmation of sale" without
the participation of plaintiffs Antonio Caballero and Concordia Caballero, wherein they stated
that they are the heirs of Vicenta Bucao of the 1/2 of the property to Tomas Raga, a certified
true copy of which document is identified as Annex "E" in the Complaint;
9. That on March 28, 1963 Alma Deiparine acquired in good faith, with a just title and for a
valuable consideration, the whole of Lot 2072 from Tomas Raga as per deed of absolute sale
identified as Annex "C" in the complaint which cancelled Transfer Certificate of Title No.
RT-2482 (T-17232) and the issuance in her name of Transfer Certificate of Title No. 9934 on
April 1, 1963, a certified true copy of which is identified as Annex "D" in the complaint;
10. That defendant Alma Deiparine came to know only of Annex "B" when it was presented
by plaintiff Antonio Caballero at the trial of an ejectment case filed by the former in the
Municipal Court of Talisay, Cebu which was docketed as Civil Case No. 108. This case was
decided in favor of Antonio Caballero but the decision was appealed by Alma Deiparine to
the Court of First Instance of Cebu which affirmed the decision for Caballero. The case is
now in the Court of Appeals on appeal by Alma Deiparine;
In April 30, 1968, rendered a decision based on the stipulation of facts, the dispositive portion of which reads
as follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered against

the plaintiffs, dismissing the complaint insofar as the defendant Alma Deiparine is concerned,
but awarding to said plaintiffs and against the other defendants Raga, jointly and severally,
the amount of ONE THOUSAND PESOS (P1,000.00), as moral damages, and FIVE
HUNDRED PESOS (P500.00) as attorney's fees. The defendants Raga are likewise ordered
to pay the costs.
Plaintiffs filed a motion for reconsideration and/or new trial and for leave of court to admit an amended
complaint which the lower court in its order of August 26, 1968, denied.
Hence, this appeal to the Court of Appeals by Antonio Caballero and Concordia Caballero, which was certified
to this Court.
Appellants assigned the following errors to have been committed by the trial court:
1. The court a quo erred in finding that the appellants submitted the stipulation of facts for its approval, the
truth being that they were never made to participate in the preparation and information of said
stipulation of facts;
2. The court a quo erred in finding that the stipulation of facts bear the conformity of the appellants, the truth
being that they never gave their conformity to said stipulation of facts which was made the basis of the
appealed decision;
3. The court a quo erred in approving the stipulation of facts did not bear the conformity of the parties,
particularly by plaintiffs-appellants;
Issue/s:
WON the stipulation of facts entered by the counsel for the plaintiff is valid, without the latter’s signature?
Ruling:
NO.
The conduct of the counsel for plaintiffs-appellants in entering into a compromise agreement or stipulation of facts which
practically confesses judgment, without the consent and conformity of his clients, is not in keeping with the sworn duty of a
lawyer to protect the interest of his clients. It is a grossly reprehensible act which amounts to fraud.
The stipulation of facts should not have been tolerated by the trial court by giving its seal of approval thereto. And to top it all,
plaintiffs-appellants' counsel made the unauthorized admission therein that principal defendant Alma Deiparine acquired in good
faith with a just title and for a valuable consideration the whole of Lot 2072. Their counsel even admitted also in said document
that during the lifetime of VicentaBucao, she, with the conformity of her husband, sold her undivided ½ of Lot 2072 to her co-
owner Tomas Raga. No document was ever shown to him by the Ragas in support of this claim and the record do not disclose
that there was such document.
(Note: No agency-related provision was cited, only the following provision from the Rules of Court)
Rule 138, Section 23 of the Rules of Court specifically provides that:
Authority of attorneys to bind clients. — Attorneys have authority to bind their clients in any case by any
agreement in relation thereto made in writing, and in taking appeals, and in all matters of ordinary judicial procedure. But
they cannot, without special authority, compromise their client's litigation, or receive anything in discharge of a
client's claim but the full amount in cash.
It may be true that during the pre-trial hearing held on February 3, 1968, the parties concerned agreed to execute a stipulation of
facts but it does not mean that the respective counsels of the contending parties can prepare a stipulation of facts the contents of
which is prejudicial to the interest of their clients and sign it themselves without the intervention of their clients.
In the case at bar, the then counsel for plaintiffs-appellants, Atty. Melecio C. Guba, agreed that defendant-appellee Alma
Deiparine bought the land in question in good faith and for a valuable consideration ; that during the lifetime of their mother
Vicenta Bucao, she, with the conformity of her husband, sold her undivided ½ of the land in question to her co-owner and son,
Tomas Raga.
All these adverse facts were made the basis of the appealed decision against the plaintiffs. No further evidence was presented as
there was no hearing.
The attorney for the plaintiffs in making such admission went beyond the scope of his authority as counsel and practically
gave away the plaintiffs' case. The admission does not refer to a matter of judicial procedure related to the enforcement of the
remedy. It related to the very subject matter of the cause of action, or to a matter on which the client alone can make the
admission binding on him.
The broad implied or apparent powers of an attorney with respect to the conduct or control of litigation are,
however, limited to matters which relate only to the procedure or remedy.
The employment of itself confers upon the attorney no implied or power or authority over the subject matter of
the cause of action or defense; and, unless the attorney has expressly been granted authority with respect
thereto, the power to deal with or surrender these matters is regarded as remaining exlusively in the client.
The line of demarcation between the respective rights and powers of an attorney and his client is clearly defined.
The cause of action, the claim or demand sued upon, and the subject matter of the litigation are all within the
exclusive control of a client, and an attorney may not impair, compromise, settle, surrender, or destroy them without
his client's consent. But all the proceedings in court to enforce the remedy, to bring the claim, demand, cause of
action, or subject matter of the suit to hearing, trial, determination, judgment, and execution, are within the exclusive
control of the attorney. (Emphasis supplied)
FOR ALL THE FOREGOING, the decision appealed from is hereby set aside and this case shall be remanded to the
court a quo for further proceedings in consonance with the opinion above set forth, and to admit the amended
complaint submitted by the plaintiffs.
22. Phil. National Bank vs. Sta. Maria, 29 SCRA 303
G.R. No. L-24765 August 29, 1969
PHILIPPINE NATIONAL BANK, plaintiff-appellee,

vs.
MAXIMO STA. MARIA, ET AL., defendant,
VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO and LEONILA, all surnamed STA.
MARIA,defendants-appellants.
Tomas Besa and Jose B. Galang for plaintiff-appellee.

G.P. Nuguid, Jr. for defendants-appellants.
PRELIMINARIES
Who is the plaintiff: PHILIPPINE NATIONAL BANK
Who is the defendant: MAXIMO STA. MARIA, ET AL., defendant,
VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO and LEONILA, all surnamed STA. MARIA,
defendants-appellants.
An appeal certified to this Court by the Court of Appeals. This appeal has been taken by his six brothers and sisters,
defendants-appellants who reiterate in their brief their main contention in their answer to the complaint that under
this special power of attorney they had not given their brother, Maximo, the authority to borrow money but only to
mortgage the real estate jointly owned by them; and that if they are liable at all, their liability should not go beyond
the value of the property which they had authorized to be given as security for the loans obtained by Maximo.
What is the Case filed in the original court? Plaintiff Bank filed the case on February 10,1961 against Defendant
Maximo Sta. Maria and his six brothers and sisters and the Associated Insurance & Surety Co., Inc. for the
collection of unpaid balances of two sugar crop loans.
*Note: Defendant Maximo Sta. Maria and his surety, defendant Associated Insurance & Surety Co., Inc. who did
not resist the action, did not appeal the judgment.
Defendants-appellants who reiterate in their brief their main contention in their answer to the complaint that under
this special power of attorney they had not given their brother, Maximo, the authority to borrow money but only to
mortgage the real estate jointly owned by them; and that if they are liable at all, their liability should not go beyond
the value of the property which they had authorized to be given as security for the loans obtained by Maximo.

The trial court rendered judgment in favor of plaintiff and against defendants thus:
WHEREFORE premises considered, judgment is hereby rendered condemning the defendant Maximo R. Sta. Maria
and his co-defendants Valeriana, Quintin, Rosario, Emeteria, Teofilo, and Leonila all surnamed Sta. Maria and the
Associated Insurance and Surety Company, Inc., jointly and severally, to pay the plaintiff, the Philippine National
Bank, Del Carmen Branch, as follows:
1. On the first cause of action, the sum of P8,500.72 with a daily interest of P0.83 on P6,100.00 at 6% per annum
beginning August 21, 1963 until fully paid;
2. On the second cause of action, the sum of P14,299.79 with a daily interest of P1.53 on P9,346.44 at 6% per
annum until fully paid; and
3. On both causes of action the further sum equivalent to 10% of the total amount due as attorney's fee as of the date
of the execution of this decision, and the costs.
WON- Defendants-appellants Emeteria, Teofilo, Quintin, Rosario and Leonila. (Defendants-appellants' only liability
is that the real estate authorized by them to be mortgaged would be subject to foreclosure and sale to respond for the
obligations contracted by Maximo. But they cannot be held personally liable for the payment of such obligations, as
erroneously held by the trial court.)
WHEREFORE, the judgment of the trial court against defendants-appellants Emeteria, Teofilo, Quintin, Rosario and
Leonila, all surnamed Sta. Maria is hereby reversed and set aside, with costs in both instances against plaintiff. The
judgment against defendant-appellant Valeriana Sta. Maria is modified in that her liability is held to be joint and not
solidary, and the award of attorney's fees is reduced as set forth in the preceding paragraph, without costs in this
instance.
Principle:
Special power of the attorney to mortgage real estate is limited to such authority and does not bind the grantor
personally to other obligations contracted by the grantee.
Facts:
· The sugar crop loans were obtained by Maximo Sta. Maria from the plaintiff PNB bank under the power of
the attorney, executed in his favor by his brothers and sisters to mortgage a 16-odd hectare parcel of land ,
jointly owned by all of them.
· Valeriana, the sister of Maximo, alone also executed in favor of her brother Maximo a special power of
attorney to borrow money and mortgage any real estate owned by her.
That we, VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO and LEONILA all surnamed
STA. MARIA, sole heirs of our deceased parents CANDIDO STA. MARIA and FRANCISCA DE
LOS REYES, all of legal age, Filipinos, and residents of Dinalupihan, Bataan, do hereby name,
constitute and appoint Dr. MAXIMO STA. MARIA, of legal age, married, and residing at
Dinalupihan, Bataan to be our true and lawful attorney of and in our place, name and stead to
mortgage, or convey as security to any bank, company or to any natural or juridical person, our
undivided shares over a certain parcel of land together the improvements thereonwhich parcel of land
is more particularly described as follows, to wit:
"Situated in the Barrio of Pinulot, Municipality of Dinalupihan, Bataan, containing an area of

16.7249 hectares and bounded as follows to wit: North by property of Alejandro Benito; on
the Northeast, by public land and property of Tomas Tulop; on the southeast, by property of
Ramindo Agustin; on the southwest, by properties of Jose V. Reyes and Emilio Reyes; and on
the northwest, by excluded portion claimed by Emilio Reyes."
of which parcel of land aforementioned we are together with our said attorney who is our brother, the
owners in equal undivided shares as evidenced by Transfer Certificate of Title No. T-2785 of the
Registry of Deeds of Bataan dated Feb. 26th 1951. (Exh. E)2
In addition, Valeriana Sta. Maria alone also executed in favor of her brother, Maximo, a special power of
attorney to borrow money and mortgage any real estate owned by her, granting him the following authority:
For me and in my name to borrow money and make, execute, sign and deliver mortgages of real estate
now owned by me standing in my name and to make, execute, sign and deliver any and all
promissory notes necessary in the premises. (Exh. E-I)3
By virtue of the two above powers, Maximo Sta. Maria applied for two separate crop loans, for the 1952-1953
and 1953-1954 crop years, with plaintiff bank, one in the amount of P15,000.00, of which only the sum of
P13,216.11 was actually extended by plaintiff, and the other in the amount of P23,000.00, of which only the
sum of P12,427.57 was actually extended by plaintiff. As security for the two loans, Maximo Sta. Maria
executed in his own name in favor of plaintiff bank two chattel mortgages on the standing crops, guaranteed
by surety bonds for the full authorized amounts of the loans executed by the Associated Insurance & Surety
Co., Inc. as surety with Maximo Sta. Maria as principal. The records of the crop loan application further
disclose that among the securities given by Maximo for the loans were a "2nd mortgage on 25.3023 Has. of
sugarland, including sugar quota rights therein" including, the parcel of land jointly owned by Maximo and his
six brothers and sisters herein for the 1952-1953 crop loan, with the notation that the bank already held a first
mortgage on the same properties for the 1951-1952 crop loan of Maximo, 4 and a 3rd mortgage on the same
properties for the 1953-1954 crop loan. 5
· Plaintiff Bank filed the case on February 10,1961 against Defendant Maximo and his six brothers and sisters
and the Associated Insurance & Surety Co., Inc. for the collection of unpaid balances of two sugar crop loans.
· The Trial Court rendered judgement in favor of the PNB.
· Maximo did not appeal but his siblings appealed and contended that they had given their brother Maximo
the authority to borrow money but only to mortgage the real estate jointly owned by them and that if they are
liable, the liability should not go beyond the value of the property which they had authorized to be given as
security of the loans obtained by Maximo. They further contended that they did not benefit whatsoever from the
loans.
Issue/s:
WON the SPA issued by the siblings of Maximo makes them liable for the loan obligations?
Ruling:
· NO.
The authority granted by defendants-appellants (except Valeriana) unto their brother, Maximo, was merely to
mortgage the property jointly owned by them.
They did not grant Maximo any authority to contract for any loans in their names and behalf.
Maximo alone, with Valeriana who authorized him-to borrow money, must answer for said loans and the other
defendants- appellants' only liability is that the real estate authorized by them to be mortgaged would be subject to
foreclosure and sale to respond for the obligations contracted by Maximo.
But they cannot be held personally liable for the payment of such obligations.
A special power of attorney to mortgage real estate is limited to such authority to mortgage and does not bind the
grantor personally to other obligations contracted by the grantee, in the absence of any ratification or other similar
act that would estop the grantor from questioning or disowning such other obligations contracted by the grantee
23. BA Finance Corp. vs. Court of Appeals, 211 SCRA 112
G.R. No. 94566 July 3, 1992
BA FINANCE CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS and TRADERS ROYAL BANK, respondents.
PRELIMINARIES
Who is the plaintiff: Traders Royal Bank (the private respondent before the SC)
Who is the defendant: BA Finance Corp. (the petitioner before the SC)
Nature of the Action filed in the SC? What is the case all about in Summary? A petition for review on
certiorari of the decision of the respondent appellate court which reversed the ruling of the trial court
dismissing the case against petitioner.
What is the Case filed in the original court? Complaint for sum of money against the Gaytano spouses and
petitioner corporation as alternative defendant.
What is the cause of action? If Based on law, cite the legal basis of the claim. Breach of contract of loan.
Spouses Gaytano refused to pay the P85,807.25 outstanding balance of their loan with Trader’s Royal Bank.
From which court Originated? RTC (branch not mentioned)
RTC’s Decision:
The RTC found for plaintiff Traders Royal Bank. It ordered the Gaytano spouses to pay the plaintiff the sum
demanded with interest plus other costs. However, the RTC, dismissed the case against BA Finance
Corporation.
CAs’ Decision:
CA modified RTC’s ruling and held the Gaytano spouses and BA Finance Corporation jointly and severally
liable to pay the plaintiff the amount of P85,807.25 with including interests plus other costs. The CA held that
BA Finance Corp is estopped from alleging lack of authority due to its failure to cancel or disallow the
guaranty.
Who won? Who is liable? Dispositive Portion. BA Finance Corp. won. Philipp Wong is made personally liable
having exceeded his authority.
Principle:
Obligations of persons dealing with an agent.—It is a settled rule that 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 liable, to ascertain not only the fact of agency but also the nature and extent of authority, and
in case either is controverted, the burden of proof is upon them to establish it (Harry Keeler v. Rodriguez, 4
Phil. 19).
Hence, the burden is on respondent bank to satisfactorily prove that the credit administrator with whom they
transacted acted within the authority given to him by his principal, petitioner corporation.
Authority given to officer to approve loans does not include power to issue guarantees to 3rd persons in
principal’s name.
Rule of estoppel not applicable where no proof of knowledge of principal on transaction shown in evidence.
Facts:
This is a petition for review on certiorari of the decision of the respondent appellate court which reversed the
ruling of the trial court dismissing the case against petitioner.
On December 17, 1980,
Renato Gaytano, doing business under the name Gebbs International, applied for and was granted a loan
with respondent Traders Royal Bank in the amount of P60,000.00.
As security for the payment of said loan, the Gaytano spouses executed a deed of suretyship whereby they
agreed to pay jointly and severally to respondent bank the amount of the loan including interests, penalty and
other bank charges.
Also, in a letter addressed to Traders Royal Bank, Philip Wong as credit administrator of BA Finance
Corporation for and in behalf of the latter, undertook to guarantee the loan of the Gaytano spouses.
Later, with an unpaid of P85,807.25, the Gaytano spouses defaulted on their loan.
Thus, respondent bank filed with the trial court complaint for sum of money against the Gaytano
spouses and petitioner corporation as alternative defendant.
The Gaytano spouses did not present evidence for their defense.
While, petitioner corporation, raised the defense of lack of authority of its credit administrator to bind
the corporation.
RTC Decision:
The RTC found for plaintiff Traders Royal Bank. It ordered the Gaytano spouses to pay the plaintiff the sum
demanded with interest plus other costs. However, the RTC , dismissed the case against BA Finance
Corporation.
Not satisfied with the decision, respondent bank, Traders Royal Bank, appealed with the Court of Appeals.
CAs’ Decision:
CA modified RTC’s ruling and held the Gaytano spouses and BA Finance Corporation jointly and severally
liable to pay the plaintiff the amount of P85,807.25 with including interests plus other costs.
The CA held that BA Finance Corp is estopped from alleging lack of authority due to its failure to cancel or
disallow the guaranty.
Parties’ contention before the SC:
Petitioner, BA Finance Corp, contends that the letter guaranty is ultra vires, and therefore unenforceable; that
said letter-guaranty was issued by an employee of petitioner corporation beyond the scope of his authority
since the petitioner itself is not even empowered by its articles of incorporation and by-laws to issue
guaranties. It also submits that it is not guilty of estoppel because petitioner had no knowledge or notice of
such letter-guaranty.
Defendant, Traders Royal Bank, argues that Philip Wong had the authority to issue guarantees as deduced
from the wording of a memorandum given to him by petitioner corporation on his lending authority. That the
phrase "contingent commitment" set forth in the memorandum means guarantees giving Philip Wong the
power to issue guarantee.
Issue/s:
a) Whether or not BA Finance Corporation is bound by the letter-guaranty made by its credit
administrator Philip Wong in favor of Trader’s Royal Bank over the loans made by Gaytano spouses.
No
b) Whether or not BA Finance Corporation is estopped from alleging lack of authority due to its failure
to cancel or disallow the guaranty. No
Ruling:
a)
No, BA Finance Corporation is not bound by the letter-guaranty made by its credit administrator Philip Wong
in favor of Trader’s Royal Bank over the loans made by Gaytano spouses.
It is a settled rule that 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 liable, to ascertain not only the fact of
agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is
upon them to establish it.
Hence, the burden is on respondent bank to satisfactorily prove that the credit administrator with whom
they transacted acted within the authority given to him by his principal, petitioner corporation.
Although Wong was clearly authorized to approve loans even up to P350,000.00 without any security
requirement, which is far above the amount subject of the guaranty in the amount of P60,000.00, nothing in
the said memorandum expressly vests on the credit administrator power to issue guarantees
Respondent's contention that the phrase "contingent commitment" set forth in the memorandum means
guarantees. It has been held that a power of attorney or authority of an agent should not be inferred from the
use of vague or general words. Guaranty is not presumed, it must be expressed and cannot be extended beyond
its specified limits
The sole allegation of the credit administrator in the absence of any other proof that he is authorized to bind
petitioner in a contract of guaranty with third persons should not be given weight.
The representation of one who acts as agent cannot by itself serve as proof of his authority to act as
agent or of the extent of his authority as agent.
The rule is clear that an agent who exceeds his authority is personally liable for damages
b)
No, BA Finance Corporation is not estopped from alleging lack of authority due to its failure to cancel or
disallow the guaranty.
Rule of estoppel not applicable where no proof of knowledge of principal on transaction shown in evidence.
Here, respondent bank had not shown any evidence aside from the testimony of the credit administrator that
the disputed transaction of guaranty was in fact entered into the official records or files of petitioner
corporation, which will show notice or knowledge on the latter's part and its consequent ratification of the said
transaction.
In the absence of clear proof, it would be unfair to hold petitioner corporation guilty of estoppel in allowing its
credit administrator to act as though the latter had power to guarantee.
24. Director of Public Works vs. Sing Juco, 53 Phil. 205
G.R. No. L-30181 July 12, 1929
THE DIRECTOR OF PUBLIC WORKS, plaintiff-appellee,

vs.
SING JUCO, ET AL., defendants.
SING JUCO, SING BENGCO and PHILIPPINE NATIONAL BANK, appellants.
PRELIMINARIES
Who is the plaintiff: Director of Public Works
Who is the defendant: Sing Juco Et Al.
From what it has been said it results that the appealed judgment must be affirmed, and the same is hereby affirmed, in dismissing, in effect, the
cross-complaint filed by some of the defendants against the plaintiff, the Director of Public Works. Such judgment is further affirmed in its
findings, which are not dispute, with respect to the amount of the Government's claim under the filling contract and the amount of mortgage
credit of the bank, as it is also affirmed in respect to the joint and several judgment entered in favor of the plaintiff against Sing Juco, Sing
Bengco, Tanboontien and Mariano de la Rama Tanbunco (alias Mariano de la Rama) for the amount due to the Government.
Said judgment, however, must be reversed and the same is being reversed in so far as it holds that Tan Ong Sze, Viuda de Tan Toco, is liable
upon the contract of suretyship, and she is hereby absolved from the complaint. The judgment must also be reversed in so far as it declares that
the Government's lien under the filling contract is entitled to priority over the bank's mortgage. On the contrary it is hereby declared that the
bank's credit is entitled to priority out of the proceeds of the foreclosure sale, the residue, if any, to be applied to the Government's lien created by
the filling contract and otherwise in accordance with law. For further proceedings in conformity with this opinion, the cause is hereby remanded
to the cause of origin, without pronouncements as to costs. So ordered.
What is the Case filed in the original court? -

A claim by the Government for the payment of filling operations based on the contract and payment of the
defendants indebtedness.
From which court Originated?-
Who won? Who is liable? Dispositive Portion. The petitioner is entitled to recover from Sing Juco, Sing
Bengco, Tanboontien and Mariano de la Rama Tanbunco (alias Mariano de la Rama)
Principle:
Power to execute a contract so exceptional a nature as a contract of suretyship or guaranty cannot be inferred from
the general words contained in these powers.
In article 1827 of the Civil Code it is declared that guaranty shall not be presumed; it must be expressed and cannot
be extended beyond its specified limits.
By analogy a power of attorney to execute a contract of guaranty should not be inferred from vague or general
words, especially when such words have their origin and explanation in particular powers of a wholly different
nature.
Facts:
From Torrens certificate of title No. 1359 relating to land in the municipality of Iloilo, it appears that on
September 28, 1920, the property title no 1359 was owned, in undivided shares, by Mariano de la Rama,
Gonzalo Mariano Tanboontien, Sing Juco and Sing Bengco.
The interest vested by said certificate in (the undivided share of) Mariano de la Rama was subsequently
transferred to sale to Enrique Enchaus.
It further appears that on November 23, 1920, the owners of the property covered by the said certificate
conveyed it by way of a mortgage to the Philippine National Bank for the purpose of securing a credit in
current account in a mount not in excess of P170,000, with interest at a rate of 12 percent per annum. The
indebtedness covered by this mortgage has not been satisfied, and upon the date of the decision of the court
below it amounted to the sum of P170,000, plus interest at 12 percent per annum from November 24, 1920.
The land above referred to contains an area of nearly 16 hectares, or to be exact, 158,589.44 square meters
according to the certificate. It is located on "Point Llorente" at the mouth of Iloilo river, near the City of Iloilo,
and it is of so low a level that, prior to the improvement to which reference is to be made, it was subject to
frequent flooding.
In 1921, the Government of the Philippine Islands was planning extensive harbor improvements in this
vicinity, requiring extensive dredging by the Bureau of Public Works in the mouth of said river.
The conduct of these dredging operations made it necessary for the Director of Public Works to find a place of
deposit for the dirt and mud taken from the place, or places, dredged. As the land already referred to was low
and easily accessible to the spot where dredging was to be conducted, it was obviously for the interest of the
Government and the said owners of the land that the material taken out by the dredges should be deposited on
the said property.
Accordingly, after preliminary negotiations to this effect have been conducted, a contract was made between
the Director of Public Works, representing the Government of the Philippine Islands, and the four owners, M.
de la Rama, Sing Juco, G. M. Tanboontien, and Seng Bengco, of which, as modified by some respects by
subsequent agreement, the following features are noteworthy.
(1) The Bureau of Public Works agreed to deposit the material to be dredged by it from the Iloilo River, in
connection with the contemplated improvement, upon the lot of the land, already described as covered by
certificate No. 1359, at a price to be determined at the actual cost of the filling, with certain surcharges to be
determined by the Director of Public Works. It was contemplated in the original draft of the contract that the
Bureau would be able to furnish some 250,000 cubic meters of dredged material for filling in the land, was
limited to the material which should be dredged from the river as a result of the proposed improvement. To this
stipulation the four owners of the property assented on March 14, 1921.
(2) With respect to the compensation it was agreed that the amount due should be determined by the Director
of Public Works, under certain conditions mentioned in the contract, of an amount of not less that 20 nor more
than 75 centavos per cubic meter. It was further agreed that, when the work should be finished, the cost thereof
should be paid by the owners in 5 annual installments and that for failure to pay such installment the whole of
the amount thereafter to accrue should become at once due. This contract was noted in the Torrens certificate
of title on January 8, 1924.
In connection with the making of the contract abovementioned, the, Director of Public Works required a bond
to be supplied by the owners in the penal amount of P150,000, approximately twice the estimated cost of the
filling, conditioned for the payment of the amount due from the owners.
This bond was executed contemporaneously with the main contract; and in connection therewith it should be
noted that one of the names appearing upon said contract was that of "Casa Viuda de Tan Toco,"
purporting to be (represented by) signed by M. de la Rama.
The dredging operation were conducted by the Bureau of Public Works in substantial accomplice, we find,
with the terms of said agreement; and after the account with the owners were liquidated and the amount due
from them determined, demand was made upon them for the payment of the first installment.
No such payment was, however, made as a consequence this action was instituted by the Director of Public
Works on October 14, 1926, for the purpose of recovering the amount due to the Government under the
contract from the original owners of the property from the sureties whose names were signed to the
contract of suretyship, and to enforce the obligation as a real lien upon the property.
In said action the Philippine National Bank was made a party defendant, as having an interest under its prior
mortgage upon the property, while Enrique Enchaus was made defendant as successor in interest of M. de
la Rama, and Tan Ong Sze widow of Tan Toco, was also made defendant by reason of her supposed
liability derived from the act of De la Rama in signing the firm "Casa Viuda de Tan Toco" as a surety
on bond.
It was noteworthy that in the complaint it was asked that, in the enforcement of the government's lien, the
property should be sold "subject to the first mortgage in favor of the Philippine National Bank."
To this complaint different defenses were set up, as follows:
On behalf of the owners of the property, it was contended that the government has not complied with that
contract, in that dredged material deposited on the land had not been sufficient in quantity to raise the level of
the land above high water, and that, as a consequence, the land had not been much benefited. It is therefore
asserted that the owners of the property are not obligated to pay the filling operation. These defendants sought
to recover further damages by way of cross-complaint for the same supposed breach of contract on the part of
the Government. On the part of Viuda de Tan Toco the defense was interposed that the name "Casa Viuda de
Tan Toco" signed to the contract of suretyship by Mariano de la Rama was signed without authority; while on
the part of the Philippine National Bank was asserted that the mortgage credit pertaining to the bank is superior
to the Governments lien for improvement, and by way of counterclaim the bank asked that its mortgage be
foreclosed for the amount of its mortgage credit, and that the four mortgagors, Sing Juco, Sing Bengco, M. de
la Rama and G.M. Tanboontien, be required to pay the amount due to the bank, and that in case of their failure
to do so the mortgaged property should be sold and the proceeds paid preferentially to the bank upon its
mortgage.
Upon hearing the cause the trial court, ignoring that part of the original complaint wherein the Government
seeks to enforce its lien in subordination to its first mortgage, made pronouncements:
(1) Declaring Sing Juco, Sing Bengco, M. de la Rama and G. M. Tanboontien indebted to the
Government in the amount of P70, 938, with interest from the date of the filing of the complaint, and
requiring them to pay the said sum to the plaintiff;
(2) Declaring, in effect, that the lien of the Government for the filing improvement was superior to the
mortgage of the Philippine National Bank; and finally
(3) Declaring the defendant Tan Ong Sze, Viuda de Tan Toco, personally liable upon the contract of
suretyship, in case the four principal obligors should not satisfy their indebtedness to the Government,
or if the land should not sell enough to satisfy the same.
From this judgment various parties defendant appealed as follows: All of the defendants, except the Philippine
National Bank, appealed from so much of the decision as held that the defendant owners and signatories to the
contract of suretyship has not been released by non-performance of the contract on the part of the Bureau of
Public Works, and from the refusal of the court to give to the defendant owners damages for breach of contract
on the part of the Government. On the part of Tan Ong Sze, Viuda de Tan Toco, error is assigned to the action
of the court in holding said defendant liable upon the contract of suretyship. Finally, the Philippine National
Bank appealed from so much of the decision as gave the lien of the Government for improvement priority over
the mortgagee executed in favor of the bank.
Issue/s:
Whether or not Tan Ong Sze, widow of Tang Toco, is bound to the contract of Surety. -NO.
Ruling:
1. The court ruled that by the contract the Government was not obligated to raise the land to any specific level. It
was only obligated that the material should be dredged from the mouth of the river in the course of the improvement
undertaken in that place.
Under the original contract as originally drafted, the Government agreed to furnish 250,000 cubic meters, more or
less, of dredged material; but on Mar. 14, 1921, the owners of the property indicated their acceptance of a
modification of the contract effected by the Director of Public Works and the Secretary of Commerce and
Communications, in which it was made clear that the material to be supplied would be such only as should be
dredged from the river as a result of the proposed improvement. In the endorsement of the Director of Public Works,
thus accepted by the owners, it was made clear that the Bureau of Public Works did not undertake to furnish material
to complete the filling of the land to any specified level. Proof submitted on the part of the owners tends to show that
parts of the filled land are still subject to inundation in rainy weather; and it is contended, that the owners have, for
this reason, been able to sell in lots the property to individual occupants. the sum of P15,000, which is claimed upon
this account, as damages by the owners, is the amount of interest alleged to have been accrued upon their
investment, owing to their inability to place the land advantageously upon the market. The claim is, as already
suggested, untenable.
Likewise, there was no breach in the part of the Government in fulfilling the contract. In fact it appears that the
Government deposited in the period covered by the contract 236,460 cubic meters, and after the amount thus
deposited had been reduced by 21,840 cubic meters, owing to the natural process of drying, the Bureau of Public
Works further deposited 53,000 cubic meters on the same land. It is also noted that the charge of the work was
computed on a moderate basis.
2. The contention of Tan Ong Sze, widow of Tan Toco, to the effect that she was not, and is not, bound by the
contract of suretyship, is our opinion, well-founded.
It will be remembered that said contract purports to have been signed by Mariano de la Rama, acting for this
defendant under the power of attorney. But the Government has exhibited no power of attorney which would
authorize the creation, by the attorney-in-fact, of an obligation in the nature of suretyship binding upon this
principal.
It is true that which the Government introduced (in evidence 2) documents exhibiting powers of attorney,
conferred by these documents (Exhibit K, identical with Exhibit 5) which Mariano de la Rama was given the
power, which reads as follows:
. . . and also for me and in my name to sign, seal and execute, and as my act and deed deliver, any
lease or any other deed for the conveying any real or personal property or the other matter or thing
wherein I am or may be personally interested or concerned. And I do hereby further authorize and
empower my said attorney to substitute and point any other attorney or attorneys under him for the
purposes aforesaid, and the same again and pleasure to revoke; and generally for me and in my name
to do, perform, and execute all and any other lawful and reasonable acts and things whatsoever as
fully and effectually as I, the said Tan Ong Sze might or could do if personally present.
In another document, (Exhibits L and M), executed in favor of the same Mariano de la Rama by his uncle Tan
Lien Co, attorney-in-fact of Tan Ong Sze, with power of substitution, there appears the following:
. . . and also for her and for her name to sign, seal and execute, and as her act and deed deliver, any
lease, release, bargain, sale, assignment, conveyance or assurance, any other deed for the conveying
any real or personal property or other matter or thing wherein she or may be personally interested or
concerned.
Neither of these powers officially confers upon Mariano de la Rama the power to bind a principal by a contract
of suretyship.
The clauses noted relate more specifically to the execution of contracts relating to property; and the more
general words at the close of the quoted clauses should be interpreted, under the general rule ejusdem generis,
as referring to the contracts of like character.
Power to execute a contract so exceptional a nature as a contract of suretyship or guaranty cannot be

inferred from the general words contained in these powers.
In article 1827 of the Civil Code it is declared that guaranty shall not be presumed; it must be expressed and
cannot be extended beyond its specified limits.
By analogy a power of attorney to execute a contract of guaranty should not be inferred from vague or general
words, especially when such words have their origin and explanation in particular powers of a wholly different
nature.
It results that the trial court was in error in giving personal judgment against Tan Ong Sze upon the bond upon
which she was sued in this case.
25. Philippine Sugar Estates Development Co., vs. Poizat, 48 Phil. 536
G.R. No. L-23352 December 31, 1925
THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD., INC., plaintiff-appellee,

vs.
JUAN M. POIZAT, ET AL., defendants.
GABRIELA ANDREA DE COSTER, appellant.
PRELIMINARIES
Principle:
1. When a wife gave her husband a power of attorney to loan or borrow money, and "in her name, place and
stead" to mortgage her property, and where the husband negotiated a loan to himself and personally
executed and acknowledged a mortgage upon real property which the wife owned in her own right and
name at the time of her marriage, and which was her paraphernal property at the time the mortgage was
executed, and where the mortgage was not signed by the wife or by her husband as agent or attorney in
fact for his wife, the mortgage was never executed by or for the wife, and as to her it is null and void.
2. It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real
property executed by an agent, it must upon its face purport to be made, signed and sealed in the name
of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent was in fact
authorized to make the mortgage, if he has not acted in the name of the principal. Neither is it ordinarily
sufficient that in the mortgage the agent describes himself as acting by virtue of a power of attorney, if in
fact the agent has acted in his own name and has set his own. hand and seal to the mortgage.
This is especially true where the agent himself is a party to the instrument. However clearly the body of the
mortgage may show and intend that it shall be the act of the principal, yet, unless in fact it is executed by
the agent for and on behalf of his principal and as the act and deed of the principal, it is not valid as to the
principal. (Mechem on Agency, section 1093 et sequor.)
Facts:
Issue/s:
Ruling:
SHORT VERSION
FACTS:
1. Principal – wife – Coster

2. Agent – husband – Poizat
3. Wife authorized his husband to loan or borrow money in her name, place, and stead, and to mortgage her
property
4. Lender – Philippine Sugar Estates Development
5. Loan – 10,000.00 pounds sterling with mortgage upon the real property of Coster -
6. However, the husband negotiated the loan himself and personally executed and acknowledged a mortgage
upon a real property -
7. Only the husband signed and it is not stated on the Deed of Mortgage that he’s doing it on behalf of his
wife -
8. Failed to pay loan, so Philippine Sugar filed an action against the defendant
ISSUE: WON mortgage entered by Poizat is valid.
HELD: No.
The mortgage entered by Poizat is void as it was done beyond the authority given to the husband -
Evidenced that the execution that was done by him only.

The body of the deed must show that the Poizat is acting as an agent of the principal, which is his wife. -
Thus, not binding to his wife.
LONG VERSION:
August 25, 1905, the appellant (Gabriella Andrea De Coster) with his consent executed to and in favor of her
husband, Juan M. Poizat, a general power of attorney, which among other things, authorized him to do in her
name, place and stead, and making use of her rights and actions, the following things:
To loan or borrow any amount in cash or fungible conditions he may deem convenient collecting or
paying the principal or interest, for the time, and under the principal of the interest, when they
respectively should or private documents, and making there transactions with or without mortgage,
pledge or personal securities.
November 2, 1912, Juan M. Poizat applied for and obtained from the plaintiff a credit for the sum of 10,000
Pounds Sterling to be drawn on the" Banco Espanol del Rio de la Plata" in London not later than January,
1913.
Later, to secure the payment of the loan, he executed a mortgage upon the real property of his wife, the
material portions of which are as follows:
This indenture entered into the City of Manila, P.I., by and between Juan M. Poizat, merchant, of
legal age, married and residing in the City of Manila, in his own behalf and in his capacity also as
attorney in fact of his wife Dona Gabriela Andrea de Coster by virtue of the authority vested in him by
the power of attorney duly executed and acknowledge in this City of Manila, etc.
First. That in the name of Dona Gabriela Andrea de Coster, wife of Don Juan M. Poizat, there is
registered on page 89 (back) of Book 3, Urban Property consisting of a house and six adjacent
warehouse, all of strong material and constructed upon her own land, said property being Nos. 5, 3,
and 1 of Calle Urbiztondo, and No. 13 of Calle Barraca in the District of Binondo in the City of
Manila, etc.
Second. That the marriage of Don Juan M. Poizat and Dona Gabriela Andrea de Coster being
subsisting and undissolved, and with the object of constructing a new building over the land
hereinabove described, the aforesaid house with the six warehouse thereon constructed were
demolished and in their stead a building was erected, by permission of the Department of Engineering
and Public Works of this City issued November 10, 1902, said building being of strong material
which, together with the land, now forms only one piece of real estate, etc; which property must be the
subject of a new description in which it must appear that the land belongs in fee simple and in full
ownership as paraphernal property to the said Dona Gabriela Andrea de Coster and the new building
thereon constructed to the conjugal partnership of Don Juan M. Poizat and the said Dona Gabriela
Andrea de Coster, etc.
Third. That the Philippine Sugar Estates Development Company, Ltd., having granted to Don Juan M.
Poizat a credit of Ten Thousand Pounds Sterling with a mortgage upon the real property above
described, etc.
(a) That the Philippine sugar Estated Development Company, Ltd. hereby grants Don Juan M. Poizat
a credit in the amount of Ten Thousand Pounds sterling which the said Mr. Poizat may use within the
entire month of January of the coming year, 1913, upon the bank established in the City of London,
England, known as 'Banco Espanol del Rio de la Plata, which shall be duly advised, so as to place
upon the credit of Mr. Poizat the said amount of Ten Thousand Pounds Sterling, after executing the
necessary receipts therefore.
(c) That Don Juan M. Poizat personally binds himself and also binds his principal Dona Gabriela
Andrea de Coster to pay the Philippine Sugar Estates Development Company, Ltd., for the said
amount of Ten Thousand Pounds Sterling at the yearly interest of 9 per cent which shall be paid at the
end of each quarter, etc.
(d) Don Juan M. Poizat also binds himself personally and his principal Dona Gabriela Andrea de
Coster to return to the Philippine Sugar Estates Development Company, Ltd., the amount of Ten
Thousand Pounds Sterling within four years from the date that the said Mr. Poizat shall receive the
aforesaid sum as evidenced by the receipt that he shall issue to the 'BAnco Espanol del Rio de la
Plata.'
(e) As security for the payment of the said credit, in the case Mr. Poizat should receive the money,
together with its interest hereby constitutes a voluntary especial mortgage upon the Philippine Sugar
Estates Development Company, Ltd., f the urban property above described, etc.
(f) Don Juan M. Poizat in the capacity above mentioned binds himself, should he receive the amount
of the credit, and while he may not return the said amount of Ten thousand Pounds Sterling to the
Philippine Sugar Estates Development Company, Ltd., to insure against fire the mortgaged property
in an amount not less than One hundred Thousand Pesos, etc.
Fourth. Don Buenaventura Campa in the capacity that he holds hereby accepts this indenture in the
form, manner, and condition executed by Don Juan M. Poizat by himself personally and in
representation of his wife Dona Gabriela Andrea de Coster, in favor of the Philippine Sugar Estates
Development Company, Ltd.,
In witness whereof, we have signed these presents in Manila, this November 2, 1912.
(Sgd.) JUAN M. POIZAT

THE PHILIPPINE SUGAR ESTATES
DEVELOPMENT COMPANY, LTD.
The President
BUENAVENTURA CAMPA
Signed in the presence of:
(Sgd.) MANUEL SAPSANO

JOSE SANTOS
For failure to pay the loan, on November 12, 1923, the plaintiff brought an action against the defendants to
foreclose the mortgage.
In this action, the summons was served upon the defendant Juan M. Poizat only, who employed the services of
Antonio A. Sanz to represent the defendants. The attorneys filed a general appearance for all of them, and
later an answer in the nature of a general denial.
February 18, 1924, when the case was called for trial, Jose Galan y Blanco in open court admitted all of the
allegations made in the compliant, and consented that judgment should be rendered as prayed for . Later, Juan
M. Poizat personally, for himself and his codefendants, file an exception to the judgment and moved for a new
trial, which was denied March 31, 1924.
August 22, 1924, execution was issued directing the sale of the mortgaged property to satisfy the judgment. itc@alf
September 18, 1924, the property, which had an assessed value of P342,685, was sold to the plaintiff for the
sum of P100,000.
September 23, 1924, and for the first time, the appellant (Gabriella) personally appeared by her present
attorney, and objected to the confirmation of the sale, among other things, upon illegally executed, and is
null and void, because the agent of this defendant was not authorized to execute it. That there was no
consideration.
That the plaintiff, with full knowledge that J. M. Poizat was acting beyond the scope of his authority,
filed this action to subject the property of this defendant to the payment of the debt which, as to
appellant, was not a valid contract.
That the judgment was rendered by confession when the plaintiff and J. M. Poizat knew that Poizat
was not authorized to confess judgment, and that the proceeding was a constructive fraud.
That at the time the action was filed and the judgment rendered, this defendant was absent from the
Philippine Islands, and had no knowledge of the execution of the mortgage.
That after the judgment of foreclosure became final and order of the sale of the property was made,
that this defendant for the first time learned that he mortgage contract was tainted with fraud, and that
she first knew and learned of such things on the 11th of September, 1924.
That J. M. Poizat was not authorized to bind her property to secure the payment of his personal debts.
That the plaintiff knew that the agent of the defendant was not authorized to bind her or her property.
That the mortgage was executed to secure a loan of 10,000 Pounds which was not made to this
defendant or for her benefit, but was made to him personally and for the personal use and benefit
of J. M. Poizat.
Among other things, the mortgage in question, marked Exhibit B, was introduced in evidence, and
made a part of the record.
All of such objections to the confirmation of the sale were overruled, from which Gabriela Andrea de
Coster appealed and assigns the following errors:
ISSUE:
WON Juan M. Poizat was, under the power of attorney which he had from Gabriela Andrea de Coster,
authorized to mortgage her paraphernal property as security for a loan made by him personally? No.
JOHNS, J.:
For the reasons stated in the decision of this court in the Bank of the Philippine Islands vs. De Coster, the
alleged service of the summons in the foreclosure suit upon the appellant was null and void.
In fact, it was made on J. M. Poizat only, and there is no claim or pretense that any service of summons was
ever made upon her. After service was made upon him, the attorneys in question entered their appearance for
all of the defendants in the action, including the appellant upon whom no service was ever made, and file an
answer for them. Later, in open court, it was agreed that judgment should be entered for the plaintiff as prayed
for in its complaint.
The appellant contends that the appearance made by the attorneys for her was collusive and fraudulent, and
that it was made without her authority, and there maybe some truth in that contention. It is very apparent that
the attorneys made no effort to protect or defend her legal rights, but under our view of the case, that question
is not material to this decision.
The storm center of this case is the legal force and effect of the real mortgage in question , by whom and for
whom it was executed, and upon whom is it binding, and whether or not it is null and void as to the appellant.
It is admitted that the appellant gave her husband, J. M. Poizat, the power of attorney in question, and that it is
in writing and speaks for itself. If the mortgage was legally executed by her attorney in fact for her and in her
name as her act and deed, it would be legal and binding upon her and her property. If not so executed, it is null
and void.
It appears upon the face of the instrument that J. M. Poizat as the husband of the wife, was personally a party
to the mortgage, and that he was the only persona who signed the mortgage. and the he was the only person
who signed the mortgage.
It does not appear from his signature that he signed it for his wife or as her agent or attorney in fact, and
there is nothing in his signature that would indicate that in the signing of it by him, he intended that his
signature should bind his wife.
It also appears from the acknowledgment of the instrument that he executed it as his personal act and deed
only, and there is nothing to show that he acknowledge it as the agent or attorney in fact of his wife, or as her
act and deed.
The mortgage recites that it was entered into by and between Juan M. Poizat in his own behalf and as attorney
in fact of his wife. That the record title of the mortgaged property is registered in the name of his wife, Dona
Gabriela Andrea de Coster. That they were legally married, and that the marriage between them has never
been dissolved. That with the object of constructing a new building on the land. the six warehouses thereon
were demolished, and that a new building was erected. That the property is the subject of a new registration in
which it must be made to appear that the land belongs in fee simple and in full ownership as the paraphernal
property of the wife, and that the new building thereon is the property of the conjugal partnership. " That the
Philippine Sugar Estates Development Company, Ltd., having granted to Don Juan M. Poizat a credit of
10,000 Pounds Sterling with the mortgage upon the real property above described," that the Development
Company "hereby grants Don Juan M. Poizat a credit in the amount of 10,000 Pounds Sterling which the
said Mr. Poizat may use, etc." That should he personally or on behalf of his wife use the credit he
acknowledges, that he and his principal are indebted to the Development Company in the sum of 10,000
Pounds Sterling which "they deem to have received as a loan from the said commercial entity." That he binds
himself and his wife to pay that amount with a yearly interest of 9 per cent, payable quarterly. That as security
for the payment of said credit in the case Mr. Poizat should receive the money at any time, with its interest,
"the said Mr. Poizat in the dual capacity that above mentioned binds himself, should he receive the amount of
the credit."
It thus appears that at the time the power of attorney and the mortgage were executed, Don Juan M. Poizat and
Gabriela Andrea de Coster were husband and wife, and that the real property upon which the mortgage was her
sole property before her marriage, and that it was her paraphernal property at the time the mortgage was
executed, and that the new building constructed on the land was the property of the conjugal partnership.
The instrument further recites that the Development Company "hereby grants Don Juan M. Poizat a credit in
the amount of 10,000 Pounds Sterling which the said Mr. Poizat may use within the entire month of January of
the coming year, 1913." In other words, it appears upon the face of the mortgage that the loan was made to the
husband with authority to use the money for his sole use and benefit. With or without a power of attorney, the
signature of the husband would be necessary to make the instrument a valid mortgage upon the property of the
wife, even though she personally signed the mortgage.
It is contended that the instrument upon its face shows that its purpose and intent was to bind the wife. But it
also shows upon its face that the credit was granted to Don Juan M. Poizat which he might use within the
"entire month of January."
Any authority which he had to bind his wife should be confined and limited to his power of attorney.
Giving to it the very broadest construction, he would not have any authority to mortgage her property,
unless the mortgage was executed for her "and in her name, place or stead," and as her act and deed.
The mortgage in question was not so executed. it was signed by Don Juan M. Poizat in his own name, his own
proper person, and by him only, and it was acknowledge by him in his personal capacity, and there is nothing
in either the signature or acknowledgment which shows or tends to show that it was executed for or on behalf
of his wife or "in her name, place or stead."
It is contended that the instrument shows upon its face that it was intended to make the wife liable for his debt,
and to mortgage her property to secure its payment, and that his personal signature should legally be construed
as the joined or dual signature of both the husband and that of the wife as her agent. That is to say, construing
the recitals in the mortgage and the instrument as a whole, his lone personal signature should be construed in
a double capacity and binding equally and alike both upon the husband and the wife. No authority has been
cited, and none will ever be found to sustain such a construction.
As the husband of the wife, his signature was necessary to make the mortgage valid. In other words, to make it
valid, it should have been signed by the husband in his own proper person and by him as attorney in fact for his
wife, and it should have been executed by both husband and wife, and should have been so acknowledged.
There is no principle of law by which a person can become liable on a real mortgage which she never executed
either in person or by attorney in fact. It should be noted that this is a mortgage upon real property, the title to
which cannot be divested except by sale on execution or the formalities of a will or deed.
For such reasons, the law requires that a power of attorney to mortgage or sell real property should be
executed with all of the formalities required in a deed.
For the same reason that the personal signature of Poizat, standing alone, would not convey the title of his
wife in her own real property, such a signature would not bind her as a mortgagor in real property, the title to
which was in her name.
We make this broad assertion that upon the facts shown in the record, no authority will ever be found to hold
the wife liable on a mortgage of her real property which was executed in the form and manner in which the
mortgage in question was executed. The real question involved is fully discussed in Mechem on Agency,
volume 1, page 784, in which the author says:
It is to be observed that the question here is not how but how such an authority is to be executed. it is
assumed that the agent was authorized to bind his principal, but the question is, has he done so.
That is the question here.
Upon that point, there is a full discussion in the following sections, and numerous authorities are cited:
SEC. 1093. Deed by agent must purport to be made and sealed in the name of the principal. — It is a
general rule in the law of agency that in order to bind the principal by a deed executed by an agent, the
deed must upon its grace purport to be made, signed and sealed in the name of the principal. If, on the
contrary, though the agent describes name, the words of grant, covenant and the like, purport upon the
face of the instrument to be his, and the seal purports to be his seal, the deed will bind the agent if any
one and not the principal.
SEC. 1101. Whose deed is a given deed. — How question determined. — In determining whether a
given deed is the deed of the principal, regard may be had First, to the party named as grantor. Is the
deed stated to be made by the principal or by some other person? Secondly, to the granting clause. Is
the principal or the agent the person who purports to make the grant? Thirdly, to the covenants, if any.
Are these the covenants of the principal? Fourthly, to the testimonium clause. Who is it who is to set
his name and seal in testimony of the grant? Is it the principal or the agent? And Fifthly, to the
signature and seal. Whose signature and seal are these? Are they those of the principal or of the agent?
If upon such an analysis the deed does not upon its face purport to be the deed of the principal, made,
signed, sealed and delivered in his name and his deed, it cannot take effect as such.
SEC. 1102. Not enough to make deed the principal's that the agent is described as such. — It is not
enough merely that not acted in the name of the principal. Nor is it ordinarily sufficient that he
describes himself in the deed as acting by virtue of a power of attorney or otherwise, or for or in
behalf, or as attorney, of the principal, or as a committee, or as trustee of a corporation, etc.; for these
expressions are usually but descriptio personae, and if, in fact, he has acted of action thereon accrue to
and against him personally and not to or against the principal, despite these recital.
SEC. 1103. Not principal's deed where agent appears as grantor and signer. — Neither can the deed
ordinarily be deemed to be the deed of the principal where the agent is the one who is named as the
grantor or maker, and he is also the one who signs and seals it. . . .
SEC. 1108. . . . But however clearly the body of the deed may show an intent that it shall be the act of
he principal, yet unless its executed by his attorney for him, it is not his deed, but the deed of the
attorney or of no one. The most usual and approved form of executing a deed by attorney is by his
writing the name of the principal and adding by A B his attorney or by his attorney A B.'
That is good law. Applying it to the facts, under his power of attorney, Juan M. Poizat may have had authority
to borrow money and mortgage the real property of his wife, but the law specifies how and in what manner it
must be done, and the stubborn fact remains that, as to the transaction in question, that power was never
exercised. The mortgage in question was executed by him and him only, and for such reason, it is not
binding upon the wife, and as to her, it is null and void.
It follows that the whole decree against her and her paraphernal property and the sale of that property to satisfy
the mortgage are null and void, and that any title she may have had in or to her paraphernal property remains
and is now vested in the wife as fully and as absolutely as if the mortgage had never been executed, the decree
rendered or the property sold. As to Don Juan M. Poizat, the decree is valid and binding, and remains in full
force and effect.
It is an undisputed fact, which appears in the mortgage itself, that the land in question was the paraphernal
property of the wife, but after the marriage the old buildings on the property were torn down and a new
building constructed and, in the absence of evidence to the contrary, it must be presumed that the new building
is conjugal property of the husband and wife. As such, it is subject of the debts of the conjugal partnership for
the payment or security of which the husband has the power to mortgage or otherwise encumber the property .
It is very probable that his particular question was not fully presented to or considered by the lower court.
The mortgage as to the paraphernal property of the wife is declared null and void ab initio, and as to her
personally, the decree is declared null and void, and as to her paraphernal property, the sale is set aside and
vacated, and held for naught, leaving it free and clear from the mortgage, decree and sale, and in the same
condition as if the mortgage had never been executed, with costs in favor of the appellant. So ordered.
Johnson, Malcolm, Ostrand, and Romualdez, JJ., concur.
26. Rural Bank of Bombon, Inc. vs. Court of Appeals, 212 SCRA 25
PRELIMINARIES
Who is the plaintiff: Rural bank of Romblon
Who is the defendant: Galardo and Aquino

Principle:
It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed
by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it
will bind the agent only.
It is not enough merely that the agent was in fact authorized to make the mortgage, if he has not acted in the
name of the principal. Neither is it ordinarily sufficient that in the mortgage the agent describes himself as acting
by virtue of a power of attorney, if in fact the agent has acted in his own name and has set his own hand and seal to
the mortgage. This is especially true where the agent himself is a party to the instrument.
However clearly the body of the mortgage may show and intend that it shall be the act of the principal, yet, unless
in fact it is executed by the agent for and on behalf of his principal and as the act and deed of the principal, it is
not valid as to the principal.
Facts:
On January 12, 1981, Ederlinda M. Gallardo, married to Daniel Manzo, executed a special power of attorney in
favor of Rufina S. Aquino authorizing him: – to secure a loan from any institution for any amount or mortgage the
property at Las Pinas, Rizal.
On August 26, 1981, a Deed of Real Estate Mortgage was executed by Rufino S. Aquino in favor of the Rural
Bank of Bombon (Camarines Sur), Inc.
The property was secured for a loan in the total sum of Three Hundred Fifty Thousand Pesos only (P350,000.00),
plus interest at the rate of fourteen (14%) per annum.
Spouses Gallardo filed an action against Rufino Aquino and Rural Bank. They alleged that Rufino Aquino
mortgaged the property to pay for his personal loans, from the same Bank.
The trial court temporarily restrained the Rural Bank “from enforcing the real estate mortgage and from foreclosing
it either judicially or extrajudicially until further orders from the court.”
Aquino, in his answer, alleged that the spouses allowed him to mortgage the property and use the
proceeds thereof to compensate for the pre-existing obligation of P350,000 that the spouse owed him.
Then trial court lifted the TRO against the bank and ordered the foreclosure proceeding against the mortgaged
property.
The Spouses Gallardo appealed to the Court of Appeals (CA).
The CA reversed the trial court and held that Rufino Aquino had no authority to mortgage the land.
Thus, this appeal against the decision.
Issue/s:
WON the Deed of Real Estate Mortgage executed by Aquino, as attorney-in-fact of Ederlinda Gallardo, in favor of
the Rural Bank of Bombon is valid?
Ruling:
No.
In order to bind the principal by a mortgage on real property executed by an agent, it must upon its face purport to
be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough
merely that the agent was in fact authorized to make the mortgage, if he has not acted in the name of the principal.
Neither is it ordinarily sufficient that in the mortgage the agent describes himself as acting by virtue of a power of
attorney, if in fact the agent has acted in his own name and has set his own hand and seal to the mortgage.
In view of this rule, Aquino’s act of signing the Deed of Real Estate Mortgage in his name alone as mortgagor,
without any indication that he was signing for and in behalf of the property owner, Ederlinda Gallardo, bound
himself alone in his personal capacity as a debtor of the petitioner Bank and not as the agent or attorney-in-fact of
Gallardo.
Petitioner claims that the Deed of Real Estate Mortgage is enforceable against Gallardo since it was executed in
accordance with:
Article 1883 which provides:
“If an agent acts in his own name, the principal has no right of action against the persons with whom the
agent has contracted; neither have such persons against the principal.”
In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if
the transaction were his own, except when the contract involves things belonging to the principal.
The above provision of the Civil Code relied upon by the petitioner Bank, is not applicable to the case at bar.
Herein respondent Aquino acted purportedly as an agent of Gallardo, but actually acted in his personal capacity.
Involved herein are properties titled in the name of respondent Gallardo against which the Bank proposes to
foreclose the mortgage constituted by an agent (Aquino) acting in his personal capacity.
Under these circumstances, we hold, as we did in Philippine Sugar Estates Development Co. vs. Poizat, supra, that
Gallardo’s property is not liable on the real estate mortgage that there is no principle of law by which a person can
become liable on a real mortgage which she never executed either in person or by attorney in fact.
27. Commercial Bank & Trust Co. of the Phil. vs. Republic Armored Car
Service Corp., 9 SCRA 142
G.R. Nos. L-18223-24 June 29, 1963
COMMERCIAL BANK & TRUST COMPANY OF THE PHILIPPINES, plaintiff-appellee,

vs.
REPUBLIC ARMORED CAR SERVICE CORPORATION and DAMASO PEREZ, ET
AL., defendants-appellants.
Pompeyo Diaz for plaintiff-appellee.

Halili, Bolinao, Bolinao & Associates and Crispin D. Baizas for defendants-appellants.
PRELIMINARIES
Who is the plaintiff: Commercial Bank and Trust Company of the Phil
Who is the defendant: Republic Armored Car Service Et.Al.
Nature of the Action filed in the SC? Collection of sum of money
What is the case all about in Summary? The case is all about the failure of the defendant corporation to pay
for the credit accommodation extended to it by the plaintiff due to the mismanagement of the business by
some officers of the corporation.
What is the Case filed in the original court? Collection of sum of money
What is the cause of action? Failure of the defendant to pay after the demand of the plaintiff.

Who won? Plaintiff Who is liable? Defendant corporation Dispositive Portion. WHEREFORE, the judgments
appealed from are hereby affirmed, with costs against the defendants-appellants.
Principle:
Under general rules and principles of law the mismanagement of the business of a party by his agent does not relieve said
party from the responsibility that he had contracted to third persons, especially in the case at bar.
This case involves two separate complaints filed by Plaintiff-appellee against defendant corporation and its officers for failure to
pay the former the credit accommodations it extended to defendant corporation in the form of an overdraft line. where the written
agreement contains no limitation to defendants-appellants' liability
These involved two (2) consolidated cases:
Facts:
The above-entitled cases are appeals from judgments rendered by the Court of First Instance of through Judges
Gustavo Victoriano and Conrado M. Vasquez, respectively, of said Court.
In G.R. No. L-8223 plaintiff-appellee filed a complaint alleging that the defendants-appellants were granted
by it credit accommodations in the form of an overdraft line for an amount not exceeding P80,000, with
interest (paragraph 2, Complaint); that defendants or either of them drew regularly upon the above credit line
and as of February 10, 1960, the total of their drawings and interest due amounted to P79,940.80 (par. 3, id.);
that repeated demands were made upon defendants to pay for the drawings but said demands were ignored
(par. 4, id.).
In their answer to the complaint the defendants admit having drawn upon the credit line extended to them as
alleged in the complaint; but claim they have not ignored the demands for the payment of the sums demanded
and have instituted actions against the former officers of defendant corporation who held defrauded the latter;
etc. (par. 4, Answer). And By way of special affirmative defenses, they allege that the former officers and
directors of the defendant corporation had deliberately defrauded and mismanaged the corporations, as a part
of their scheme to wrest control of various corporations owned by Damaso Perez, from the latter, and as a
result of said frauds or mismanagements the defendants have instituted actions for damages for breach of trust;
and that the amounts drawn on the credit line subject of the complaint were received and used by the former
directors and officers of the defendant corporations and constitute part of the funds misapplied by them.
Upon motion, Judge Victoriano (the lower courts) entered for the plaintiff a judgment on the pleadings,
holding that the "special affirmative defenses (of the answer) filled to show that any allegation respecting the
extent of defendants' drawing although they have admitted having drawn against the credit line, subject of the
action, so that said denial, not being specific denial in the true sense, does not controvert the allegation at
which it is aimed," etc. The court also further held that the alleged mismanagement and fraud of the former
directors and officials of defendant corporation and the action now pending in court regarding the same are
merely internal affairs of the corporation which cannot affect or diminish the liability of the defendant
corporation to the plaintiff.
The defendants appealed from the decision to the Court of Appeals, but this Court certified the case to Us.
Same facts below:
In G.R. No. L-18224 the complaint also alleges that the defendants were given credit accommodation in the
form of an overdraft line in an amount not exceeding P150,000 and drew regularly upon said credit line
amounts which with their interest reach the sum of P133,453.17; that demands were made for the payment of
the drawings but defendants have failed to pay the amounts demanded.
Defendants in their answer admit the opening of the credit line in their favor and that demands for the
indebtedness were made upon them, but allege as special defenses that the directors and officers of the
defendant corporation deliberately defrauded and mismanaged the said corporation breach of trust in order to
deprive Damaso Perez of his control and majority interest in the defendant corporation, as a result of which
fraud, mismanagement and breach of trust the defendants suffered tremendous losses; that the amounts drawn
by defendant corporation upon the credit line were received and used by the former directors and officers and
same constitute part of the funds of the defendant corporation misapplied and mismanaged by said former
officers and directors of said corporation. Upon the presentation of the answer the plaintiff presented motion
sustained, for judgment on the pleadings which the court sustained, holding:
The defendants having admitted the indebtedness in question, its liability to pay the plaintiff the
amount of the said indebtedness is beyond question. The alleged fact that the money borrowed from
the plaintiff was misappropriated or misapplied by some officers of the defendant corporation is no
defense against the liability of the defendants to the plaintiff. It is an internal matter of the defendant
corporation in which the plaintiff has no concern or participation whatsoever. This is specially so with
respect to the defendant Damaso Perez who appears to have executed the agreement, Annex A, in his
own personal capacity and not as an officer of the defendant Republic Credit Corporation. The
allegation that the defendants have a right to claim indemnity or contribution from the erring directors
and officers of the defendant corporation is a matter which may be the subject of a separate action, and
in which the plaintiff is not concerned. (p. 37, Record on Appeal)
the defendants appealed the two judgments which are against in their favor.
The Court of Appeals certified the same to Us in accordance with law.
Issue/s:
Whether or not defendant corporation is liable to the plaintiff-appellee?
Ruling:
Yes.
In G.R. No. L-18223, the defendants-appellants argue that the admission made by the defendants in their
answer that the amount demanded was due, is qualified "in the sense that whatever amounts were drawn from
the overdraft line in question were part of those corporate funds of Philippine Armored Car, Inc., misused and
misapplied by (Ramon Racelis, et al.,) former directors and executive officers of said corporation." (p. 13,
Appellee's Brief)
In answer to this argument we call attention to the fact that in the agreement attached to the complaint
Exhibit "A", the obligation of the defendants-appellants to pay for the amount due under the overdraft line is
not in any way qualified; there is no statement that the responsibility of the defendants-appellants for the
amount taken on overdraft would cease or be defeated or reduced upon misappropriations on mismanagement
of the funds of the corporation by the directors and employees thereof. The special defense is, therefore, a
sham defense.
Furthermore, under general rules and principles of law the mismanagement of the business of a party by his
agents does not relieve said party from the responsibility that he had contracted to third persons, especially in
the case at bar where the written agreement contains no limitation to defendants-appellants' liability. 1äwphï1.ñët
The so-called special defense contained in the answer is, therefore, no special defense to the liability of the
defendants-appellants, nor to the action, and the court's action or judgment on the pleadings was properly
taken. The argument contained in the brief of the defendants-appellants that the defendants contemplated a
third-party complaint is of no weight, because a third-party complaint was not available to the defendants
under the facts of the case. A third-party complaint is, under the Rules, available only if the defendant has a
right to demand contribution, indemnity, subrogation or any other relief from the supposed third-party
defendants in respect to the plaintiff's claim. (Sec. 1, Rule 12, Rules of Court). The supposed parties
defendants or alleged officers of the defendant corporation had nothing to do with the overdraft account of
defendant corporation with the plaintiff-appellee. Consequently, they cannot be made parties defendants in a
third party complaint. Anyway the filing of a third party complaint is no hindrance to the issuance of the order
of the court declaring that the defendants' answer presented no issue or defense and that, therefore, plaintiff-
appellee was entitled to judgment.
In G. R. No. L-18224, the ruling in the first case was also applied.
In this second case, it is also alleged that at the time of the agreement for credit in current account the
defendant corporation was under the management of Ramon Racelis and others who defrauded and
mismanaged the corporation, in breach of trust, etc., etc. Again we declare that the written agreement for credit
in current account, Annex "A", contains no limitation about the liability of the defendants-appellants, nor an
express agreement that the responsibility of the defendants-appellants should be conditioned upon the lawful
management of the business of the defendant corporation. The same rulings in the first case are applicable in
this second case.
WHEREFORE, the judgments appealed from are hereby affirmed, with costs against the defendants-
appellants.
Padilla, Bautista Angelo, Concepcion., Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal, JJ.,
concur.
Bengzon, C.J., took no part.
28. Phil. National Bank vs. Agudelo y Gonzaga, 58 Phil. 635
G.R. No. L-39037 October 30, 1933
THE PHILIPPINE NATIONAL BANK, plaintiff-appellee,

vs.
PAZ AGUDELO Y GONZAGA, ET AL., defendants.
PAZ AGUDELO Y GONZAGA, appellant.
Hilado and Hilado and Norberto Romualdez for appellant.

Roman J. Lacson for appellee.
PRELIMINARIES
Who is the plaintiff: PNB
Who is the defendant: PAZ AGUDELO Y GONZAGA, ET AL.

Who won? Who is liable? Dispositive Portion. Wherefore, it is hereby held that the liability constructed by
the aforesaid defendant-appellant Paz Agudelo y Gonzaga is merely subsidiary to that of Mauro A.
Garrucho, limited lot No. 878 of the cadastral survey of Murcia, Occidental Negros, described in
Torrens title No. 2415. However, inasmuch as the principal obligator, Mauro A. Garrucho, has been
absolved from the complaint and the plaintiff- appellee has not appealed from the judgment absolving
him, the law does not afford any remedy whereby Paz Agudelo y Gonzaga may be required to comply
with the said subsidiary obligation in view of the legal maxim that the accessory follows the principal.
Wherefore, the defendant herein should also be absolved from the complaint which is hereby dismissed,
with the costs against the appellee.
Principle:
When an agent negotiates a loan in his personal capacity and executes a promissory note under his own
signature, without express authority from his principal, giving as security therefor real estate belonging to the
letter, also in his own name and not in the name and representation of the said principal, the obligation do
contracted by him is personal and does not bind his aforesaid principal.
Facts:
The defendant Paz Agudelo y Gonzaga appeals to this court from the judgment rendered by the Court of First
Instance of Occidental Negros, the dispositive part of which reads as follows:
Wherefore, judgment is rendered herein absolving the defendant Mauro A. Garrucho from the
complaint and ordering the defendant Paz Agudelo y Gonzaga to pay to the plaintiff the sum of
P31,091.55, Philippine currency, together with the interest on the balance of P20,774.73 at 8 per
cent per annum of P4.55 daily from July 16, 1929, until fully paid, plus the sum of P1,500 as
attorney's fees, and the costs of this suit.
It is hereby ordered that in case the above sums adjudged in favor of the defendant by virtue of this
judgment are not paid to the Philippine National Bank or deposited in the office of the clerk of this
court, for delivery to the plaintiff, within three months from the date of this decision, the provincial
sheriff of Occidental Negros shall set at public auction the mortgaged properties described in annex E
of the second amended complaint, and apply the proceeds thereof to the payment of the sums in
question.
It is further ordered that in case the proceeds of the mortgaged properties are not sufficient to cover
the amount of this judgment, a writ of execution be issued against any other property belonging to the
defendant Paz Agudelo y Gonzaga, not otherwise exempt from execution, to cover the balance
resulting therefrom.
In support of her appeal, the appellant assigns six alleged errors as committed by the trial court, which we shall
discuss in the course of this decision.
On November 9, 1920, the defendant-appellant Paz Agudelo y Gonzaga executed in favor of her nephew,
Mauro A. Garrucho, the document Exhibit K conferring upon him a special power of attorney sufficiently
broad in scope to enable him to sell, alienate and mortgage in the manner and form he might deem convenient,
all her real estate situated in the municipalities of Murcia and Bacolod, Occidental Negros, consisting in lots
Nos. 61 and 207 of the cadastral survey of Bacolod, Occidental Negros, together with the improvement
thereon.
On December 22, 1920, Likwise Amparo A. Garrucho executed the document Exhibit H whereby she
conferred upon her brother Mauro A Garrucho a special power of attorney sufficiently broad in scope to
enable him to sell, alienate, mortgage or otherwise encumber, in the manner and form he might deem
convenient, all her real estate situated in the municipalities of Murcia and Bago, Occidental Negros.
Nothing in the aforesaid powers of attorney expressly authorized Mauro A. Garrucho to contract any loan nor
to constitute a mortgage on the properties belonging to the respective principals, to secure his obligations.
On December 23, 1920, Mauro A. Garrucho executed in the favor of the plaintiff entity, the Philippine
National bank, the document Exhibit G, whereby he constituted a mortgage on lot No. 878 of the cadastral
survey of located at Murcia, Occidental Negros, with all the improvements thereon, described in transfer
certificate of title No. 2415 issued in the name of Amparo A. Garrucho, to secure the payment of credits,
loans, commercial overdrafts, etc., not exceeding P6,000, together with interest thereon, which he might obtain
from the aforesaid plaintiff entity, issuing the corresponding promissory note to that effect.
During certain months of the year 1921 and 1922, Mauro A. Garrucho maintained a personal current account
with the plaintiff bank in the form of a commercial credit withdrawable through checks (Exhibits S, 1 and T).
On August 24, 1931, the said Mauro A. Garrucho executed in favor of the plaintiff entity, the Philippine
National Bank, the another document Exhibit J whereby he constituted a mortgage on lots Nos. 61 and 207 of
the cadastral survey of Bacolod together with the buildings and improvements thereon, described in original
certificates of title Nos. 2216 and 1148, respectively, issued in the name of Paz Agudelo y Gonzaga, to secure
the payment of credits, loans and commercial overdrafts which the said bank might furnish him to the amount
of P16,00, payable on August 24, 1922, executing the corresponding promissory note to that effect.
The mortgage deeds Exhibit G and J as well as the corresponding promissory notes for P6,000 and P16,000,
respectively, were executed in Mauro A. Garrucho's own name and signed by him in his personal capacity,
authorizing the mortgage creditor, the Philippine National Bank, to take possession of the mortgaged
properties, by means of force if necessary, in case he failed to comply with any of the conditions
stipulated therein.
On January 4, 1922, the manager of the Iloilo branch of the Philippine National Bank notified Mauro A.
Garrucho that his promissory note for P6,000 of, and he was given 10 days within which to make payment
thereof (Exhibit O).
1awphil.net
On May 9, 1922, the said manager notified Mauro A. Garrucho that his commercial credit was closed from that
date (Exhibit S).
Inasmuch as Mauro A. Garrucho had overdrawn his credit with the plaintiff-appellee, the said manager thereof,
in a letter dated June 27, 1922 (Exhibit T), requested him to liquidate his account amounting to P15,148.15, at
the same time notifying him that his promissory note for P16,000 giving as security for the commercial
overdraft in question, had fallen due some time since.
On July 15, 1922, Mauro A. Garrucho, executed in favor of the plaintiff entity the deed Exhibit C whereby he
constituted a mortgage on lots Nos. 61 and 207 of the cadastral survey of Bacolod, together with the
improvements thereon, described in transfer certificates of title Nos. 2216 and 1148, respectively, issued in the
name of Paz Agudelo y Gonzaga, and on lot No. 878 of the cadastral survey of Murcia, described in transfer
certificate of title No. 2415, and issued in the name of Amparo A. Garrucho.
In connection of the credits, previous loans and commercial overdrafts amounting to P21,000 which had been
granted him, Mauro A. Garrucho, on the said date July 15, 1922, executed the promissory note, Exhibit B, for
P21,000 (were novated) as a novation of the former promissory notes for P6,000 and P16,000, respectively.
In view of the aforesaid consolidated mortgage, Exhibit C, the Philippine National Bank, on the said date of
July 15, 1922, cancelled the mortgages constituted on lots Nos. 61, 207 and 878 described in Torrens titles
Nos. 2216, 1148 and 2415, respectively.
On November 25, 1925, Amparo A. Garrucho sold lot No. 878 described in certificate of title No. 2415, to Paz
Agudelo y Gonzaga (Exhibit M).
On January 15, 1926, in the City of Manila, Paz Agudelo y Gonzaga signed the affidavit, Exhibit N, which
reads as follows:
Know all men by these presents: That I, Paz Agudelo y Gonzaga, single, of age, and resident
of the City of Manila, P. I., by these present do hereby agree and consent to the transfer in my
favor of lot No. 878 of the Cadastre of Murcia, Occidental Negros, P. I., by Miss Amparo A.
Garrucho, as evidenced by the public instrument dated November 25, 1925, executed before
the notary public Mr. Genaro B. Benedicto, and do hereby further agree to the amount of the
lien thereon stated in the mortgage deed executed by Miss Amparo A. Garrucho in favor of
the Philippine National Bank.
In testimony whereof, I hereunto affix my signature in the City of Manila, P.I., this 15th of
January, 1926.
(Sgd.) PAZ AGUDELO Y GONZAGA.
Pursuant to the sale made by Amparo A. Garrucho in favor of Paz Agudelo y Gonzaga, of lot No. 878 of the
cadastral survey of Murcia, described in certificate of title No. 2145 issued in the name of said Amparo A.
Garrucho, and to the affidavit, Exhibit N, a new transfer certificate of title (No. 5369) was issued in the name
of Paz Agudelo y Gonzaga.
Without discussing and passing upon whether or not the powers of attorney issued in favor of Mauro A.
Garrucho by his sister, Amparo A. Garrucho, and by his aunt, Paz Agudelo y Gonzaga, respectively, to
mortgage their respective real estate, authorized him to obtain loans secured by mortgage in the properties in
question,
we shall consider the question of whether or not Paz Agudelo y Gonzaga is liable for the payment of the loans
obtained by Mauro A. Garrucho from the Philippine National Bank for the security of which he constituted a
mortgage on the aforesaid real estate belonging to the defendant-appellant Paz Agudelo y Gonzaga.
ISSUE:
WON Paz Agudelo y Gonzaga is liable for the payment of the loans obtained by Mauro A. Garrucho from the
Philippine National Bank for the security of which he constituted a mortgage on the aforesaid real estate
belonging to the defendant-appellant Paz Agudelo y Gonzaga.?
RULING: NO.
Aside from the phrases "attorney in fact of his sister, Amparo A. Garrucho, as evidenced by the power of
attorney attached hereto" and "attorney in fact of Paz Agudelo y Gonzaga" written after the name of Mauro
A. Garrucho in the mortgage deeds, Exhibits G. and J, respectively, 1.there is nothing in the said mortgage
deeds to show that Mauro A. Garrucho is attorney in fact of Amparo A. Garrucho and of Paz Agudelo y
Gonzaga, and 2.that he obtained the loans mentioned in the aforesaid mortgage deeds and constituted
said mortgages as security for the payment of said loans, for the account and at the request of said
Amparo A. Garrucho and Paz Agudelo y Gonzaga.
The above-quoted phrases which simply described his legal personality, did not mean that Mauro A. Garrucho
obtained the said loans and constituted the mortgages in question for the account, and at the request, of his
principals.
From the titles as well as from the signatures therein, Mauro A. Garrucho, appears to have acted in his
personal capacity.
In the aforesaid mortgage deeds, Mauro A. Garrucho, in his capacity as mortgage debtor, appointed the
mortgage creditor Philippine National Bank as his attorney in fact so that it might take actual and full
possession of the mortgaged properties by means of force in case of violation of any of the conditions
stipulated in the respective mortgage contracts.
If Mauro A. Garrucho acted in his capacity as mere attorney in fact of Amparo A. Garrucho and of Paz
Agudelo y Gonzaga, he could not delegate his power, in view of the legal principle of "delegata potestas
delegare non potest" (a delegated power cannot be delegated), inasmuch as there is nothing in the records to
show that he has been expressly authorized to do so.
Article 1709 of the Civil Code provides the following:
ART. 1709. By the contract of agency, one person binds himself to render some service, or to
do something for the account or at the request of another.
And article 1717 of the same Code provides as follows:
ART. 1717. When an agent acts in his own name, the principal shall have no right of action
against the persons with whom the agent has contracted, or such persons against the principal.
In such case, the agent is directly liable to the person with whom he has contracted, as if the
transaction were his own. Cases involving things belonging to the principal are excepted.
The provisions of this article shall be understood to be without prejudice to actions between
principal and agent.
He executed the promissory notes evidencing the aforesaid loans, under his own signature, without authority
from his principal and, therefore, were not binding upon the latter (2 Corpus Juris, pp. 630-637, par. 280).
Neither is there anything to show that he executed the promissory notes in question for the account, and at the
request, of his respective principals (8 Corpus Juris, pp. 157-158).
Furthermore, it is noted that the mortgage deeds, Exhibits C and J, were cancelled by the documents, Exhibits I
and L, on July 15, 1922, and in their stead the mortgage deed, The exhibit C, was executed, in which there is
absolutely no mention of Mauro A. Garrucho being attorney in fact of anybody, and which shows that he
obtained such credit for himself in his personal capacity and secured the payment thereof by mortgage
constituted by him in his personal capacity, although on properties belonging to his principal Paz Agudelo y
Gonzaga.
Furthermore, the promissory notes executed by Mauro A. Garrucho in favor of the Philippine National Bank,
evidencing loans of P6,000 and P16,000 have been novated by the promissory notes for P21,000 (Exhibit B)
executed by Mauro A. Garrucho, not only without express authority from his principal Paz Agudelo y
Gonzaga but also under his own signature.
In the case of National Bank vs. Palma Gil (55 Phil., 639), this court laid down the following doctrine:
A promissory note and two mortgages executed by the agent for and on behalf of his principal, in
accordance with a power of attorney executed by the principal in favor of the agent, are valid, and as
provided by article 1727 of contracted by the agent; but a mortgage on real property of the principal
not made and signed in the name of the principal is not valid as to the principal.
It has been intimated, and the trial judge so stated. that it was the intention of the parties that Mauro A.
Garrucho would execute the promissory note, Exhibit B, and the mortgage deed, Exhibit C, in his capacity as
attorney in facts of Paz Agudelo y Gonzaga, and that although the terms of the aforesaid documents appear to
be contrary to the intention of the parties, such intention should prevail in accordance with article 1281 of the
Civil Code.
Commenting on article 1281 of the Civil Code, Manresa, in his Commentaries to the Civil Code, says the
following:
IV. Intention of the contracting parties; its appreciation. — In order that the intention may prevail, it
is necessary that the question of interpretation be raised, either because the words used appear to be
contrary thereto, or by the existence of overt acts opposed to such words, in which the intention of the
contracting parties is made manifest.
Furthermore, in order that it may prevail against the terms of the contract, it must be clear or, in other
words, besides the fact that such intention should be proven by admissible evidence, the latter must be
of such charter as to carry in the mind of the judge an unequivocal conviction.
This requisite as to the kind of evidence is laid down in the decision relative to the Mortgage Law of
September 30, 1891, declaring that article 1281 of the Civil Code gives preference to intention only
when it is clear. When the aforesaid circumstances is not present in a document, the only thing left for
the register of deeds to do is to suspend the registration thereof, leaving the solution of the problem to
the free will of the parties or to the decision of the courts.
However, the evident intention which prevails against the defective wording thereof is not that of one
of the parties, but the general intent, which, being so, is to a certain extent equivalent to mutual
consent, inasmuch as it was the result desired and intended by the contracting parties. (8 Manresa, 3d
edition, pp. 726 and 727.)
Furthermore, the records do not show that the loan obtained by Mauro A. Garrucho, evidenced by the
promissory note, Exhibit B, was for his principal Paz Agudelo y Gonzaga. The special power of attorney,
Exhibit K, does not authorize Mauro A. Garrucho to constitute a mortgage on the real estate of his principal to
secure his personal obligations.
Therefore, in doing so by virtue of the document, Exhibit C, he exceeded the scope if his authority and his
principal is not liable for his acts. (2 Corpus Juris, p. 651; article 1714, Civil Code.)
It is further claimed that inasmuch as the properties mortgaged by Mauro A. Garrucho belong to Paz
Agudelo y Gonzaga, the latter is responsible for the acts of the former although he acted in his
own name, in accordance with the exception contained in article 1717 of the Civil Code.
It would be an exception with the properties of his own name in connection with the properties of his
principal, does so within the scope of his authority.
It is noted that Mauro A. Garrucho was not authorized to execute promissory notes even in the name
of his principal Paz Agudelo y Gonzaga, nor to constitute a mortgage on her real properties to secure
such promissory notes.
The plaintiff Philippine National Bank should know this inasmuch as it is in duty bound to ascertain
the extent of the agent's authority before dealing with him.
We are of the opinion and so hold that when an agent negotiates a loan in his personal capacity and executes a
promissory note under his own signature, without express authority from his principal, giving as security
therefor real estate belonging to the letter, also in his own name and not in the name and representation of the
said principal, the obligation do constructed by him is personal and does not bind his aforesaid principal.
Therefore, Mauro A. Garrucho and not Paz Agudelo y Gonzaga is personally liable for the amount of
the promissory note Exhibit B. (2 Corpus Juris, pp. 563-564.)
However, Paz Agudelo y Gonzaga in an affidavit dated January 15, 1926 (Exhibit AA), and in a letter dated
January 16, 1926 (Exhibit Z), gave her consent to the lien on lot No. 878 of the cadastre of Murcia, Occidental
Negros, described in Torrens title No. 5369, the ownership of which was transferred to her by her niece
Amparo A. Garrucho. This acknowledgment, however, does not extend to lots Nos. 207 and 61 of the cadastral
survey of Bacolod, described in transfer certificates of title Nos. 1148 and 2216, respectively, inasmuch as,
although it is true that a mortgage is indivisible as to the contracting parties and as top their successors in
interest (article 1860, Civil Code), it is not so with respect to a third person who did not take part in the
constitution thereof either personally or through an agent, inasmuch as he can make the acknowledgment
thereof in the form and to the extent he may deem convenient, on the ground that he is not in duty bound to
acknowledge the said mortgage.
Therefore, the only liability of the defendant-appellant Paz Agudelo y Gonzaga is that which arises from the
aforesaid acknowledgment, but only with respect to the lien and not to the principal obligation secured by the
mortgage acknowledged by her to have been constituted on said lot No. 878 of the cadastral survey of Murcia,
Occidental Negros. Such liability is not direct but a subsidiary one.
Having reach this contention, it is unnecessary to pass upon the other questions of law raised by the defendant-
appellant in her brief and upon the law cited therein.
In view of the foregoing consideration, we are of the opinion and so hold that when an agent negotiates a loan
in his personal capacity and executes a promissory note under his own signature, without express authority
from his principal, giving as security therefor real estate belonging to the letter, also in his own name and not
in the name and representation of the said principal, the obligation do constructed by him is personal and does
not bind his aforesaid principal.
Wherefore, it is hereby held that the liability constructed by the aforesaid defendant-appellant Paz Agudelo y
Gonzaga is merely subsidiary to that of Mauro A. Garrucho, limited lot No. 878 of the cadastral survey of
Murcia, Occidental Negros, described in Torrens title No. 2415. However, inasmuch as the principal obligator,
Mauro A. Garrucho, has been absolved from the complaint and the plaintiff- appellee has not appealed from
the judgment absolving him, the law does not afford any remedy whereby Paz Agudelo y Gonzaga may be
required to comply with the said subsidiary obligation in view of the legal maxim that the accessory follows
the principal. Wherefore, the defendant herein should also be absolved from the complaint which is hereby
dismissed, with the costs against the appellee. So ordered.
Avanceña, C.J., Malcolm, Hull, and Imperial, JJ., concur.
29. Syjuco and Viardo vs. Syjuco, 40 Phil. 634
G.R. No. L-13471 January 12, 1920
VICENTE SY-JUCO and CIPRIANA VIARDO, plaintiffs-appellants,

vs.
SANTIAGO V. SY-JUCO, defendant-appellant.
Sumulong and Estrada for plaintiffs and appellants.

Delgado and Delgado for defendant and appellant.
PRELIMINARIES
Who is the plaintiff: VICENTE SY-JUCO and CIPRIANA VIARDO
Who is the defendant: SANTIAGO V. SY-JUCO
Both the defendant and
plaintiffs filed an appeal from the Trial Court’s Judgment in the Supreme Court.

Principle:
From the rule established in article 1717 of the Civil Code that, when an agency acts in his own name, the
principal shall have no right of action against the person with whom the agent has contracted, cases involving
things belonging to the principal are excepted.
Facts:
In 1902 the defendant SANTIAGO SYJUCO was appointed by the plaintiffs administrator of their property
and acted as such until June 30, 1916, when his authority was cancelled.
The plaintiffs are defendant's father and mother who allege that during his administration the defendant
acquired the property claimed in the complaint in his capacity as plaintiffs' administrator with their money and
for their benefit.
After hearing the case the trial court rendered his decision, the dispositive part of which is the following:
Wherefore, the court give judgment for the plaintiffs and orders:
1. That the defendant return to the plaintiffs the launch Malabon, in question, and execute all the
necessary documents and instruments for such delivery and the registration in the records of the
Custom House of said launch as plaintiffs' property;
2. That the defendant return to the plaintiffs the casco No. 2584, or pay to them the value thereof
which has been fixed at the sum of P3,000, and should the return of said casco be made, execute all
the necessary instruments and documents for its registration in plaintiffs' name at the Custom House;
and
3. That the defendant return to the plaintiffs the automobile No. 2060 and execute the necessary
instruments and documents for its registration at the Bureau of Public Works. And judgment is hereby
given for the defendant absolving him from the complaint so far concerns:
1. The rendition of accounts of his administration of plaintiffs property;
2. The return of the casco No. 2545;
3. The return of the typewriting machine;
4. The return of the house occupied by the defendant; and
5. The return of the price of the piano in question.
Both parties appealed from this judgment.

Issue/s:
Whether or not the properties bought by Santiago in his own name, as an administrator, belong to him.
Ruling:
NO, except the second casco, casco No. 2545.
In this instance defendant assigns three errors alleged to have been committed by the lower court in connection
with the three items of the dispositive part of the judgment unfavorable to him. We are of the opinion that the
evidence sufficiently justifies the judgment against the defendant.
Regarding the launch Malabon, it appears that in July, 1914, the defendant bought it in his own name from
the Pacific Commercial Co., and afterwards registered it at the Custom House. But his does not necessarily
show that the defendant bought it for himself and with his own money, as he claims. This transaction was
within the agency which he had received from the plaintiffs. The fact that he has acted in his own name may be
only, as we believe it was, a violation of the agency on his part. As the plaintiffs' counsel truly say, the
question is not in whose favor the document of sale of the launch is executed nor in whose name same was
registered, but with whose money was said launch bought. The plaintiffs' testimony that it was bought with
their money and for them is supported by the fact that, immediately after its purchase, the launch had to be
repaired at their expense, although said expense was collected from the defendant. I the launch was not bought
for the plaintiffs and with their money, it is not explained why they had to pay for its repairs.
The defendant invokes the decision of this Court in the case of Martinez vs. Martinez (1 Phil. Rep., 647),
which we do not believe is applicable to the present case. In said case, Martinez, Jr., bought a vessel in his own
name and in his name registered it at the Custom House. This court then said that although the funds with
which the vessel was bought belonged to Martinez Sr., Martinez Jr. is its sole and exclusive owner. But in said
case the relation of principal and agent, which exists between the plaintiffs and the defendant in the present
case, did not exist between Martinez, Sr., and Martinez, Jr.
By this agency the plaintiffs herein clothed the defendant with their representation in order to purchase the
launch in question. However, the defendant acted without this representation and bought the launch in his own
name thereby violating the agency. If the result of this transaction should be that the defendant has acquired for
himself the ownership of the launch, it would be equivalent to sanctioning this violation and accepting its
consequences. But not only must the consequences of the violation of this agency not be accepted, but the
effects of the agency itself must be sought. If the defendant contracted the obligation to but the launch for the
plaintiffs and in their representation, but virtue of the agency, notwithstanding the fact that he bought it in his
own name, he is obliged to transfer to the plaintiffs the rights he received from the vendor, and the plaintiffs
are entitled to be subrogated in these rights.
There is another point of view leading us to the same conclusion.

From the rule established in article 1717 of the Civil Code that, when an agency acts in his own name, the
principal shall have no right of action against the person with whom the agent has contracted, cases involving
things belonging to the principal are excepted.
According to this exception (when things belonging to the principal are dealt with) the agent is bound to the
principal although he does not assume the character of such agent and appears acting in his own
name (Decision of the Supreme Court of Spain, May 1, 1900).
This means that in the case of this exception the agent's apparent representation yields to the principal's true
representation and that, in reality and in effect, the contract must be considered as entered into between the
principal and the third person; and, consequently, if the obligations belong to the former, to him alone must
also belong the rights arising from the contract.
The money with which the launch was boughT having come from the plaintiff, the exception established
in article 1717 is applicable to the instant case.
Concerning the casco No. 2584, the defendant admits it was constructed by the plaintiff himself in the latter's
ship-yard.
Defendant's allegation that it was constructed at his instance and with his money is not supported by the
evidence.
In fact the only proof presented to support this allegation is his own testimony contradicted, on the on hand, by
the plaintiffs' testimony and, on the other hand, rebutted by the fact that, on the date this casco was
constructed, he did not have sufficient money with which to pay the expense of this construction.
As to the automobile No. 2060, there is sufficient evidence to show that its prices was paid with plaintiffs'
money.
Defendant's adverse allegation that it was paid with his own money is not supported by the evidence. The
circumstances under which, he says, this payment has been made, in order to show that it was made with his
own money, rather indicate the contrary.
He presented in evidence his check-book wherein it appears that on March 24, 1916, he issued a check
for P300 and on the 27th of same month another for P400 and he says that the first installment was
paid with said checks. But it results that, in order to issue the check for P300 on March 24 of that year,
he had to deposit P310 on that same day; and in order to issue the other check for P400 on the 27th of
the same month, he deposited P390 on that same day. It was necessary for the defendant to make these
deposits for on those dates he had not sufficient money in the bank for which he could issue those
checks. But, in order to pay for the price of the automobile, he could have made these payments
directly with the money he deposited without the necessity of depositing and withdrawing it on the
same day. If this action shows something, it shows defendant's preconceived purpose of making it
appear that he made the payment with his own funds deposited in the bank.
The plaintiffs, in turn, assign in this instance the following three errors alleged to have been committed by the
lower court:
1. The court erred in not declaring that the plaintiffs did not sell to the defendant the casco No. 2545
and that they were its owners until it was sunk in June, 1916.
2. The court erred in absolving the defendant from his obligation to render an account of his
administration to the plaintiffs, and to pay to the latter the amount of the balance due in their favor.
3. The court erred in not condemning the defendant to pay to the plaintiffs the value of the woods,
windows and doors taken from their lumber-year by the defendant and used in the construction of the
house on calle Real of the barrio of La Concepcion, municipality of Malabon, Rizal.
Concerning the casco No. 2545, the lower court refrained from making any declaration about its ownership in
view of the fact that this casco had been leased and was sunk while in the lessee's hands before the complaint
in this case was filed.
The lower court, therefore, considered it unnecessary to pass upon this point. We agree with the plaintiffs that
the trial court should have made a pronouncement upon this casco. The lessee may be responsible in damages
for its loss, and it is of interest to the litigants in this case that it be determined who is the owner of
said casco that may enforce this responsibility of the lessee.
Upon an examination of the evidence relative to this casco, we find that it belonged to the plaintiffs and that
the latter sold it afterwards to the defendant by means of a public instrument.
Notwithstanding plaintiffs' allegation that when they signed this instrument they were deceived, believing it
not to be an instrument of sale in favor of the defendant, nevertheless, they have not adduced sufficient proof
of such deceit which would destroy the presumption of truth which a public document carries with it.
Attorney Sevilla, who acted as the notary in the execution of this instrument, testifying as a witness in
the case, said that he never verified any document without first inquiring whether the parties knew its
content.
Our conclusion is that this casco was lawfully sold to the defendant by the plaintiffs.
Concerning the wood, windows and doors given by the plaintiffs to the defendant and used in the construction
of the latter's house on calle Real of the barrio of La Concepcion of the municipality of Malabon, Rizal, we
find correct the trial Court's decision that they were given to the defendant as his and his wife's property.
Concerning the rendition of accounts which the plaintiffs require of the defendant, we likewise find correct the
trial court's decision absolving the latter from this petition, for it appears, from the plaintiffs' own evidence,
that the defendant used to render accounts of his agency after each transactions, to the plaintiffs' satisfaction.
From the foregoing considerations, we affirm the judgment appealed from in all its parts except in so far as
the casco No. 2545 is concerned, and as to this we declare that, it having been sold by the plaintiffs to the
defendant, the latter is absolved. No special findings as to costs. So ordered.
Arellano, C.J., Torres, Johnson, Araullo, Street and Malcolm, JJ., concur.
30. National Food Authority vs. Intermediate Appellate Court, 184 SCRA
166
G.R. No. 75640 April 5, 1990
NATIONAL FOOD AUTHORITY, (NFA), petitioner,

vs.
INTERMEDIATE APPELLATE COURT, SUPERIOR (SG) SHIPPING CORPORATION, respondents.
Zapanta, Gloton & Ulejorada for petitioner.

Sison, Ortiz & Associates for private respondents.
PRELIMINARIES
SUPERIOR (SG) SHIPPING CORPORATION
NATIONAL GRAINS AUTHORITY, (NGA),
petition for review on certiorari made by National Food Authority (NFA for brevity) then known as the National Grains Authority or NGA from
the decision of the Intermediate Appellate Court affirming the decision of the trial court
From which court Originated? TC
defendants Gil Medalla and National Food Authority are ordered to pay jointly and severally the plaintiff:
a. the sum of P25,974.90, with interest at the legal rate from October 17, 1979 until the same is fully paid; and,
b. the sum of P10,000.00 as and for attorney's fees.
Costs against both defendants.
SG SHIPPING won. NFA is liable.
Principle:
The agent's apparent representation yields to the principal's true representation and that, in reality and in effect, the contract must be considered as
entered into between the principal and the third person (Sy Juco and Viardo v. Sy Juco, 40 Phil. 634).
Corollarily, if the principal can be obliged to perform his duties under the contract, then it can also demand the enforcement of its rights arising
from the contract.
Facts:
On September 6, 1979 Gil Medalla, as commission agent of the plaintiff Superior Shipping Corporation, entered into a contract
for hire of ship known as "MV Sea Runner" with defendant National Grains Authority.
Under the said contract Medalla obligated to transport on the "MV Sea Runner" 8,550 sacks of rice belonging to
defendant National Grains Authority from the port of San Jose, Occidental Mindoro, to Malabon, Metro Manila.
Upon completion of the delivery of rice at its destination, plaintiff on October 17, 1979, wrote a letter requesting defendant NGA that
it be allowed to collect the amount stated in its statement of account (Exhibit "D"). The statement of account included not only a claim
for freightage but also claims for demurrage and stevedoring charges amounting to P93,538.70.
On November 5, 1979, plaintiff wrote again defendant NGA, this time specifically requesting that the payment for freightage and
other charges be made to it and not to defendant Medalla because plaintiff was the owner of the vessel "MV Sea Runner " (Exhibit
"E").
In reply, defendant NGA on November 16, 1979 informed plaintiff that it could not grant its request because the contract to
transport the rice was entered into by defendant NGA and defendant Medalla who did not disclose that he was acting as a
mere agent of plaintiff (Exhibit "F").
Thereupon on November 19, 1979, defendant NGA paid defendant Medalla the sum of P25,974.90, for freight services in
connection with the shipment of 8,550 sacks of rice (Exhibit "A").
On December 4, 1979, plaintiff wrote defendant Medalla demanding that he turn over to plaintiff the amount of P27,000.00 paid to
him by defendant NFA.
Defendant Medalla, however, "ignored the demand."
Plaintiff was therefore constrained to file the instant complaint.
Judgment was rendered in favor of the plaintiff.
Defendant National Food Authority appealed to this court on the sole issue as to whether it is jointly and
severally liable with defendant Gil Medalla for freightage. (pp. 61-62, Rollo)
The appellate court affirmed the judgment of the lower court, hence, this appeal by way of certiorari,
petitioner NFA submitting a lone issue to wit: whether or not the instant case falls within the exception of the
general rule provided for in Art. 1883 of the Civil Code of the Philippines.
Issue/s:
WON petitioner NFA is correct when it contended that it is not liable under the exception to the rule (Art. 1883) since it had no knowledge of
the fact of agency between respondent Superior Shipping and Medalla at the time when the contract was entered into between them (NFA and
Medalla).
Ruling:
NO, not correct.
Petitioner submits that "(A)n undisclosed principal cannot maintain an action upon a contract made by his agent unless such principal was
disclosed in such contract. “One who deals with an agent acquires no right against the undisclosed principal."
Petitioner NFA's contention holds no water. It is an undisputed fact that Gil Medalla was a commission agent
of respondent Superior Shipping Corporation which owned the vessel "MV Sea Runner" that transported the
sacks of rice belonging to petitioner NFA.
The context of the law is clear. Art. 1883, which is the applicable law in the case at bar provides:
Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons
with whom the agent has contracted; neither have such persons against the principal.
In such case the agent is the one directly bound in favor of the person with whom he has contracted,
as if the transaction were his own, except when the contract involves things belonging to the principal.
The provision of this article shall be understood to be without prejudice to the actions between the
principal and agent.
Consequently, when things belonging to the principal (in this case, Superior Shipping Corporation) are dealt with, the agent is bound to
the principal although he does not assume the character of such agent and appears acting in his own name.
In other words, the agent's apparent representation yields to the principal's true representation and that, in reality and in effect, the contract must
be considered as entered into between the principal and the third person (Sy Juco and Viardo v. Sy Juco, 40 Phil. 634).
Corollarily, if the principal can be obliged to perform his duties under the contract, then it can also demand the enforcement of its rights arising
from the contract.
31. Awad vs. Filma Mercantile Co., 49 Phil. 816
PRELIMINARIES
E. AWAD

FILMA MERCANTILE CO., INC.
APPEAL from a judgment of the Court of First Instance of Manila.

E. Awad brought a civil action against Chua Lioc for the recovery of the sum of P11,140, the invoice value of the
subject merchandise.

The appealed judgment is in accordance with the law and the facts and is affirmed with the costs against the
appellant. So ordered.
Principle:
Principal and Agent; Undisclosed Principal; Sale by Agent; Damages. –The rule in this jurisdiction is that where
merchandise is purchased from an agent with undisclosed principal and without knowledge on the part of the
purchaser that the vendor is merely an agent, the purchaser takes title to the merchandise and the principal
cannot maintain an action against him for the recovery of the merchandise or for damages, but can only proceed
against the agent.
Facts:
In September 1924, the plaintiff, doing business in the Philippine Islands under the name of E. Awad & Co.,
delivered certain merchandise of the invoice value of P11,140 to Chua Lioc, a merchant operating under the name
of Hang Chua Co. in Manila, which said merchandise to be sold on commission by Chua Lioc.
Representing himself as being the owner of the merchandise, Chua Lioc, on September 8, 1924, sold it to the
defendant Filma Mercantile for the sum of P12,155.60. He owed the Philippine Manufacturing Co., the sum of
P3,480, which the defendant agreed to pay, and was also indebted to the defendant itself in the sum of P2,017.98.
The total amount of the two debts, P5,497.98, was deducted from the purchase price, leaving a balance of P6,657.52
which the defendant promised to pay to Chua Lioc on or before October 9, 1924.
The merchandise so purchased on September 9, was delivered to the defendant FILMA MERCANTILE, who
immediately offered it for sale.
Three days later D. J. Awad, the representative of the plaintiff in the Philippine Islands; having ascertained that the
goods entrusted to Chua Lioc was being offered for sale by the defendant, obtained authorization from Chua Lioc to
collect the sum of P11,707 from said defendant and informed the latter's treasurer of the facts above set forth.
On September 15, D. J. Awad, in behalf of E. Awad & Co., wrote a letter to the defendant corporation (FILMA
MERCANTILE) advising it that, inasmuch as the merchandise belonged to E. Awad & Co., the purchase price
should be paid to them, to which letter, the defendant, on September 18, 1924, responded that since the transaction
was with Chua Lioc, they can only make the payment to Chua Lioc.
On the same date, September 18, 1924, the Philippine Trust Company, brought a civil action against Chua Lioc for
the recovery of the sum of P1,036.36 and under a writ of attachment garnished the balance due Chua Lioc from the
defendant.
On October 7, E. Awad brought a civil action against Chua Lioc for the recovery of the sum of P11,140, the invoice
value of the merchandise above-mentioned and also obtained a writ of attachment under which notice of
garnishment of the said aforesaid balance we served upon the herein defendant.
Upon trial, the court below dismissed the case without costs on the ground that the plaintiff was only entitled to
payment of the sum of P6,657.52, but which sum the defendant had the right to retain subject to the orders of the
court in the previous cases.
From this judgment the plaintiff appealed.
Issue/s:
Whether or not defendant is liable to plaintiff.
Ruling:
NO.
The law applicable to the case is well settled.
Article 246 of the Code of Commerce reads as follows:
When the agent transacts business in his own name, it shall not be necessary for him to state who is the
principal and he shall be directly liable, as if the business were for his own account, to the persons with
whom he transacts the same, said persons not having any right of action against the principal, nor the
latter against the former, the liabilities of the principal and of the agent to each other always being
reserved.
The rule laid down in the article quoted is contrary to the general rule in the United States as to purchases of
merchandise from agents with undisclosed principal, but it has been followed in a number of cases and is the law in
its jurisdiction.
But the appellant points out several circumstances which, in his opinion, indicate that the defendant-appellee was
aware of the condition under which the merchandise was entrusted to the agent Chua Lioc and therefore did not
purchase the goods in good faith.
This, if true, would, of course, lead to a decision of the case in favor of the plaintiff, but there is, in our opinion,
nothing conclusive about the circumstances referred to and they are not sufficient to overcome the presumption of
good faith.
The appealed judgment is in accordance with the law and the facts and is affirmed with the costs against the
appellant. So ordered.
32. Alfred Hahn vs. CA and BMW, GR No. 113074, January 22, 1997
G.R. No. 113074 January 22, 1997
ALFRED HAHN, petitioner,
vs.
COURT OF APPEALS and BAYERSCHE MOTOREN WERKE AKTIENGSELLSCHAFT
(BMW), respondents.
PRELIMINARIES
Alfred Hahn, a Filipino citizen doing business under the name and style "Hahn-Manila."

Bayerische Motoren Werke Aktiengesellschaft (BMW), a nonresident foreign corporation existing under the laws of
the former Federal Republic of Germany, with principal office at Munich, Germany.
This is a petition for review of the decision of the Court of Appeals dismissing a complaint for specific performance
which petitioner had filed against private respondent on the ground that the Regional Trial Court of Quezon City did
not acquire jurisdiction over private respondent, a nonresident foreign corporation, and of the appellate court's order
denying petitioner's motion for reconsideration.

On May 14, 1993, Hahn filed a complaint for specific performance and damages against BMW to compel it to
continue the exclusive dealership. Later he filed an amended complaint to include an application for temporary
restraining order and for writs of preliminary, mandatory and prohibitory injunction to enjoin BMW from
terminating his exclusive dealership.

RTC of Quezon City

The trial court deferred resolution of the motion to dismiss until after trial on the merits for the reason that the
grounds advanced by BMW in its motion did not seem to be indubitable.
The Court of Appeals enjoined the trial court from hearing petitioner's complaint. On December 20, 1993, it
rendered judgment finding the trial court guilty of grave abuse of discretion in deferring resolution of the motion to
dismiss.

WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is REMANDED to the trial court
for further proceedings.
Principle:
Facts:
Petitioner (plaintiff) Alfred Hahn is a Filipino citizen doing business under the name and style "Hahn-Manila."
On the other hand, private respondent (defendant) Bayerische Motoren Werke Aktiengesellschaft (BMW) is a
nonresident foreign corporation existing under the laws of the former Federal Republic of Germany, with principal
office at Munich, Germany.
On March 7, 1967, petitioner executed in favor of private respondent a "Deed of Assignment with Special Power of
Attorney.
WHEREAS, the ASSIGNOR is the present owner and holder of the BMW trademark and device in
the Philippines which ASSIGNOR uses and has been using on the products manufactured by
ASSIGNEE, and for which ASSIGNOR is the authorized exclusive Dealer of the ASSIGNEE in the
Philippines, the same being evidenced by certificate of registration issued by the Director of Patents
on 12 December 1963 and is referred to as Trademark No. 10625;
WHEREAS, the ASSIGNOR has agreed to transfer and consequently record said transfer of the said
BMW trademark and device in favor of the ASSIGNEE herein with the Philippines Patent Office;
NOW THEREFORE, in view of the foregoing and in consideration of the stipulations hereunder
stated, the ASSIGNOR hereby affirms the said assignment and transfer in favor of the ASSIGNEE
under the following terms and conditions:
1. The ASSIGNEE shall take appropriate steps against any user other than ASSIGNOR or infringer of
the BMW trademark in the Philippines; for such purpose, the ASSIGNOR shall inform the
ASSIGNEE immediately of any such use or infringement of the said trademark which comes to his
knowledge and upon such information the ASSIGNOR shall automatically act as Attorney-In-Fact of
the ASSIGNEE for such case, with full power, authority and responsibility to prosecute unilaterally or
in concert with ASSIGNEE, any such infringer of the subject mark and for purposes hereof the
ASSIGNOR is hereby named and constituted as ASSIGNEE's Attorney-In-Fact, but any such suit
without ASSIGNEE's consent will exclusively be the responsibility and for the account of the
ASSIGNOR,
2. That the ASSIGNOR and the ASSIGNEE shall continue business relations as has been usual in the
past without a formal contract, and for that purpose, the dealership of ASSIGNOR shall cover the
ASSIGNEE's complete production program with the only limitation that, for the present, in view of
ASSIGNEE's limited production, the latter shall not be able to supply automobiles to ASSIGNOR.
Per the agreement, the parties "continue[d] business relations as has been usual in the past without a formal
contract."
But on February 16, 1993, in a meeting with a BMW representative and the president of Columbia Motors
Corporation (CMC), Jose Alvarez, petitioner was informed that BMW was arranging to grant the exclusive
dealership of BMW cars and products to CMC, which had expressed interest in acquiring the same.
On February 24, 1993, petitioner received confirmation of the information from BMW which, in a letter, expressed
dissatisfaction with various aspects of petitioner's business, mentioning among other things, decline in sales,
deteriorating services, and inadequate showroom and warehouse facilities, and petitioner's alleged failure to comply
with the standards for an exclusive BMW dealer. 2 Nonetheless, BMW expressed willingness to continue business
relations with the petitioner on the basis of a "standard BMW importer" contract , otherwise, it said, if this was not
acceptable to petitioner, BMW would have no alternative but to terminate petitioner's exclusive dealership effective
June 30, 1993.
Petitioner protested, claiming that the termination of his exclusive dealership would be a breach of the Deed of
Assignment.
Hahn insisted that as long as the assignment of its trademark and device subsisted, he remained BMW's exclusive
dealer in the Philippines because the assignment was made in consideration of the exclusive dealership.
Because of Hahn's insistence on the former business relation, BMW withdrew on March 26, 1993 its offer of a
"standard importer contract" and terminated the exclusive dealer relationship effective June 30, 1993.
Hahn found the proposal unacceptable.
On May 14, 1993, he filed a complaint for specific performance and damages against BMW to compel it to
continue the exclusive dealership.
Later he filed an amended complaint to include an application for temporary restraining order and for writs of
preliminary, mandatory and prohibitory injunction to enjoin BMW from terminating his exclusive dealership.
Hahn's amended complaint alleged in pertinent parts:
2. Defendant [BMW] is a foreign corporation doing business in the Philippines with principal offices
at Munich, Germany. It may be served with summons and other court processes through the Secretary
of the Department of Trade and Industry of the Philippines. . . .
xxx xxx xxx
5. On March 7, 1967, Plaintiff executed in favor of defendant BMW a Deed of Assignment with
Special Power of Attorney covering the trademark and in consideration thereof, under its first whereas
clause, Plaintiff was duly acknowledged as the "exclusive Dealer of the Assignee in the Philippines. . .
.
xxx xxx xxx
8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines
up to the present, Plaintiff, through its firm name "HAHN MANILA" and without any monetary
contribution from defendant BMW, established BMW's goodwill and market presence in the
Philippines. Pursuant thereto, Plaintiff has invested a lot of money and resources in order to single-
handedly compete against other motorcycle and car companies. . . . Moreover, Plaintiff has built
buildings and other infrastructures such as service centers and showrooms to maintain and promote
the car and products of defendant BMW.
xxx xxx xxx
10. In a letter dated February 24, 1993, defendant BMW advised Plaintiff that it was willing to
maintain with Plaintiff a relationship but only "on the basis of a standard BMW importer contract as
adjusted to reflect the particular situation in the Philippines" subject to certain conditions, otherwise,
defendant BMW would terminate Plaintiffs exclusive dealership and any relationship for cause
effective June 30, 1993. . . .
xxx xxx xxx
15. The actuations of defendant BMW are in breach of the assignment agreement between itself and
plaintiff since the consideration for the assignment of the BMW trademark is the continuance of the
exclusive dealership agreement. It thus, follows that the exclusive dealership should continue for so
long as defendant BMW enjoys the use and ownership of the trademark assigned to it by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and raffled to Branch 104 of the Quezon City Regional
Trial Court, which on June 14, 1993 issued a temporary restraining order. Summons and copies of the
complaint and amended complaint were thereafter served on the private respondent through the Department of
Trade and Industry, pursuant to Rule 14, §14 of the Rules of Court. The order, summons and copies of the
complaint and amended complaint were later sent by the DTI to BMW via registered mail on June 15,
1993 and received by the latter on June 24, 1993.
5
On June 17, 1993, without proof of service on BMW, the hearing on the application for the writ of preliminary
injunction proceeded ex parte, with petitioner Hahn testifying.
On June 30, 1993, the trial court issued an order granting the writ of preliminary injunction upon the filing of a
bond of P100,000.00. On July 13, 1993, following the posting of the required bond, a writ of preliminary
injunction was issued.
On July 1, 1993, BMW moved to dismiss the case, contending that the trial court did not acquire jurisdiction
over it through the service of summons on the Department of Trade and Industry, because it (BMW) was a
foreign corporation and it was not doing business in the Philippines. It contended that the execution of the
Deed of Assignment was an isolated transaction; that Hahn was not its agent because the latter undertook to
assemble and sell BMW cars and products without the participation of BMW and sold other products; and that
Hahn was an indentor or middleman transacting business in his own name and for his own account.
Petitioner Alfred Hahn opposed the motion. He argued that BMW was doing business in the Philippines
through him as its agent, as shown by the fact that BMW invoices and order forms were used to document his
transactions; that he gave warranties as exclusive BMW dealer; that BMW officials periodically inspected
standards of service rendered by him; and that he was described in service booklets and international
publications of BMW as a "BMW Importer" or "BMW Trading Company" in the Philippines.
The trial court deferred resolution of the motion to dismiss until after trial on the merits for the reason that the
6
grounds advanced by BMW in its motion did not seem to be indubitable.
Without seeking reconsideration of the aforementioned order, BMW filed a petition for certiorari with the
Court of Appeals alleging that:
I. THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE OR OTHERWISE

INJUDICIOUSLY IN PROCEEDINGS LEADING TOWARD THE ISSUANCE OF THE WRIT OF
PRELIMINARY INJUNCTION, AND IN PRESCRIBING THE TERMS FOR THE ISSUANCE
THEREOF.
II. THE RESPONDENT JUDGE PATENTLY ERRED IN DEFERRING RESOLUTION OF THE

MOTION TO DISMISS ON THE GROUND OF LACK OF JURISDICTION, AND THEREBY
FAILING TO IMMEDIATELY DISMISS THE CASE A QUO.
BMW asked for the immediate issuance of a temporary restraining order and, after hearing, for a writ of
preliminary injunction, to enjoin the trial court from proceeding further in Civil Case No. Q-93-15933. Private
respondent pointed out that, unless the trial court's order was set aside, it would be forced to submit to the
jurisdiction of the court by filing its answer or to accept judgment in default, when the very question was
whether the court had jurisdiction over it.
The Court of Appeals enjoined the trial court from hearing petitioner's complaint. On December 20, 1993, it
rendered judgment finding the trial court guilty of grave abuse of discretion in deferring resolution of the
motion to dismiss. It stated:
Going by the pleadings already filed with the respondent court before it came out with its questioned
order of July 26, 1993, we rule and so hold that petitioner's (BMW) motion to dismiss could be
resolved then and there, and that the respondent judge's deferment of his action thereon until after trial
on the merit constitutes, to our mind, grave abuse of discretion.
xxx xxx xxx
. . . [T]here is not much appreciable disagreement as regards the factual matters relating to the motion
to dismiss. What truly divide (sic) the parties and to which they greatly differ is the legal conclusions
they respectively draw from such facts, (sic) with Hahn maintaining that on the basis thereof, BMW is
doing business in the Philippines while the latter asserts that it is not.
Then, after stating that any ruling which the trial court might make on the motion to dismiss would anyway be
elevated to it on appeal, the Court of Appeals itself resolved the motion. It ruled that BMW was not doing
business in the country and, therefore, jurisdiction over it could not be acquired through service of summons
on the DTI pursuant to Rule 14, §14. 'The court upheld private respondent's contention that Hahn acted in his
own name and for his own account and independently of BMW, based on Alfred Hahn's allegations that he had
invested his own money and resources in establishing BMW's goodwill in the Philippines and on BMW's claim
that Hahn sold products other than those of BMW. It held that petitioner was a mere indentor or broker and not
an agent through whom private respondent BMW transacted business in the Philippines.
Consequently, the Court of Appeals dismissed petitioner's complaint against BMW.

Hence, this appeal.
Petitioner contends that the Court of Appeals erred (1) in finding that the trial court gravely abused its
discretion in deferring action on the motion to dismiss and (2) in finding that private respondent BMW is not
doing business in the Philippines and, for this reason, dismissing petitioner's case.
Issue/s:
WON petitioner Alfred Hahn is the agent or distributor in the Philippines of private respondent BMW?
Ruling:
Yes.
There is nothing to support the appellate court's finding that Hahn solicited orders alone and for his own account and
without "interference from, let alone direction of, BMW." To the contrary, Hahn claimed he took orders for BMW
cars and transmitted them to BMW.
Upon receipt of the orders, BMW fixed the downpayment and pricing charges, notified Hahn of the
scheduled production month for the orders, and reconfirmed the orders by signing and returning to Hahn
the acceptance sheets.
Payment was made by the buyer directly to BMW.
Title to cars purchased passed directly to the buyer and Hahn never paid for the purchase price of BMW
cars sold in the Philippines.
Hahn was credited with a commission equal to 14% of the purchase price upon the invoicing of a vehicle
order by BMW.
Upon confirmation in writing that the vehicles had been registered in the Philippines and serviced by him,
Hahn received an additional 3% of the full purchase price.
Hahn performed after-sale services, including warranty services, for which he received reimbursement
from BMW.
All orders were on invoices and forms of BMW.
Contrary to the appellate court's conclusion, this arrangement shows an agency. An agent receives a commission
upon the successful conclusion of a sale.
On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is
eventually made.
As to the service centers and showrooms which he said he had put up at his own expense, Hahn said that he had to
follow BMW specifications as exclusive dealer of BMW in the Philippines.
According to Hahn, BMW periodically inspected the service centers to see to it that BMW standards were
maintained. Indeed, it would seem from BMW's letter to Hahn that it was for Hahn's alleged failure to maintain
BMW standards that BMW was terminating Hahn's dealership.
The fact that Hahn invested his own money to put up these service centers and showrooms does not necessarily
prove that he is not an agent of BMW. For as already noted, there are facts in the record which suggest that BMW
exercised control over Hahn's activities as a dealer and made regular inspections of Hahn's premises to enforce
compliance with BMW standards and specifications. 10 For example, in its letter to Hahn dated February 23, 1996,
BMW stated:
In the last years we have pointed out to you in several discussions and letters that we have to tackle the
Philippine market more professionally and that we are through your present activities not adequately
prepared to cope with the forthcoming challenges.
In effect, BMW was holding Hahn accountable to it under the 1967 Agreement.
In addition, BMW held out private respondent Hahn as its exclusive distributor in the Philippines, even as it
announced in the Asian region that Hahn was the "official BMW agent" in the Philippines.
WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is REMANDED to the trial court
for further proceedings.
33. Tan vs. Gullas, GR No. 143978, December 3, 2002
G.R. No. 143978 December 3, 2002
MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAÑA, petitioners,

vs.
EDUARDO R. GULLAS and NORMA S. GULLAS, respondents.
PRELIMINARIES

Principle:
"An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker
earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made."
(Underscoring ours). Clearly, therefore, petitioners, as brokers, should be entitled to the
commission whether or not the sale of the property subject matter of the contract was concluded
through their efforts.
Facts:
Ruling:
LINK TO DIGEST SA NET: 23. Tan vs. Gullas - Case Digest
FACTS:
This is a petition for review seeking to set aside the decision1 of the Court of Appeals2 in CA-G.R. CV No.
46539, which reversed and set aside the decision3 of the Regional Trial Court of Cebu City, Branch 22 in Civil
Case No. CEB-12740.
The records show that private respondents, Spouses Eduardo R. Gullas and Norma S. Gullas, were the
registered owners of a parcel of land in the Municipality of Minglanilla, Province of Cebu, measuring 104,114
sq. m., with Transfer Certificate of Title No. 31465.4
On June 29, 1992, they executed a special power of attorney5 authorizing petitioners Manuel B. Tan, a licensed
real estate broker,6 and his associates Gregg M. Tecson and Alexander Saldaña, to negotiate for the sale of the
land at Five Hundred Fifty Pesos (P550.00) per square meter, at a commission of 3% of the gross price. The
power of attorney was non-exclusive and effective for one month from June 29, 1992. 7
On the same date, petitioner Tan contacted Engineer Edsel Ledesma, construction manager of the Sisters of
Mary of Banneaux, Inc. (hereafter, Sisters of Mary), a religious organization interested in acquiring a property
in the Minglanilla area.
In the morning of July 1, 1992, petitioner Tan visited the property with Engineer Ledesma.
Thereafter, the two men accompanied Sisters Michaela Kim and Azucena Gaviola, representing the Sisters of
Mary, to see private respondent Eduardo Gullas in his office at the University of Visayas. The Sisters, who had
already seen and inspected the land, found the same suitable for their purpose and expressed their desire to buy
it.8 However, they requested that the selling price be reduced to Five Hundred Thirty Pesos (P530.00) per
square meter instead of Five Hundred Fifty Pesos (P550.00) per square meter. Private respondent Eduardo
Gullas referred the prospective buyers to his wife.
It was the first time that the buyers came to know that private respondent Eduardo Gullas was the owner of the
property.
On July 3, 1992, private respondents agreed to sell the property to the Sisters of Mary, and subsequently
executed a special power of attorney9 in favor of Eufemia Cañete, giving her the special authority to sell,
transfer and convey the land at a fixed price of Two Hundred Pesos (P200.00) per square meter.
On July 17, 1992, attorney-in-fact Eufemia Cañete executed a deed of sale in favor of the Sisters of Mary for
the price of Twenty Million Eight Hundred Twenty Two Thousand Eight Hundred Pesos (P20,822.800.00), or
at the rate of Two Hundred Pesos (P200.00) per square meter.10 The buyers subsequently paid the
corresponding taxes.11Thereafter, the Register of Deeds of Cebu Province issued TCT No. 75981 in the name
of the Sisters of Mary of Banneaux, Inc.12
Earlier, on July 3, 1992, in the afternoon, petitioners went to see private respondent Eduardo Gullas to claim
their commission, but the latter told them that he and his wife have already agreed to sell the property to the
Sisters of Mary.
Private respondents refused to pay the broker’s fee and alleged that another group of agents was responsible
for the sale of land to the Sisters of Mary.
On August 28, 1992, petitioners filed a complaint13 against the defendants for recovery of their broker’s fee in
the sum of One Million Six Hundred Fifty Five Thousand Four Hundred Twelve and 60/100 Pesos
(P1,655,412.60), as well as moral and exemplary damages and attorney’s fees.
They alleged that they were the efficient procuring cause in bringing about the sale of the property to
the Sisters of Mary, but that their efforts in consummating the sale were frustrated by the private
respondents who, in evident bad faith, malice and in order to evade payment of broker’s fee, dealt
directly with the buyer whom petitioners introduced to them. They further pointed out that the deed of
sale was undervalued obviously to evade payment of the correct amount of capital gains tax,
documentary stamps and other internal revenue taxes.
In their answer, private respondents countered that, contrary to petitioners’ claim, they were not the efficient
procuring cause in bringing about the consummation of the sale because another broker, Roberto Pacana,
introduced the property to the Sisters of Mary ahead of the petitioners.14 Private respondents maintained that
when petitioners introduced the buyers to private respondent Eduardo Gullas, the former were already decided
in buying the property through Pacana, who had been paid his commission. Private respondent Eduardo Gullas
admitted that petitioners were in his office on July 3, 1992, but only to ask for the reimbursement of their
cellular phone expenses.
In their reply and answer to counterclaim,15 petitioners alleged that although the Sisters of Mary knew that the
subject land was for sale through various agents, it was petitioners who introduced them to the owners thereof.
After trial, the lower court rendered judgment in favor of petitioners, the dispositive portion of which reads:
WHEREFORE, UPON THE AEGIS OF THE FOREGOING, judgment is hereby rendered for the
plaintiffs and against the defendants. By virtue hereof, defendants Eduardo and Norma Gullas are
hereby ordered to pay jointly and severally plaintiffs Manuel Tan, Gregg Tecson and Alexander
Saldaña;
1) The sum of SIX HUNDRED TWENTY FOUR THOUSAND AND SIX HUNDRED
EIGHTY FOUR PESOS (P624,684.00) as broker’s fee with legal interest at the rate of 6%
per annum from the date of filing of the complaint; and
2) The sum of FIFTY THOUSAND PESOS (P50,000.00) as attorney’s fees and costs of
litigation.
For lack of merit, defendants’ counterclaim is hereby DISMISSED.
IT IS SO ORDERED.16
Both parties appealed to the Court of Appeals.
Private respondents argued that the lower court committed errors of fact and law in holding that it was
petitioners’ efforts which brought about the sale of the property and disregarding the previous negotiations
between private respondent Norma Gullas and the Sisters of Mary and Pacana. They further alleged that the
lower court had no basis for awarding broker’s fee, attorney’s fees and the costs of litigation to petitioners. 17
Petitioners, for their part, assailed the lower court’s basis of the award of broker’s fee given to them. They
contended that their 3% commission for the sale of the property should be based on the price of
P55,180.420.00, or at P530.00 per square meter as agreed upon and not on the alleged actual selling price of
P20,822,800.00 or at P200.00 per square meter, since the actual purchase price was undervalued for taxation
purposes. They also claimed that the lower court erred in not awarding moral and exemplary damages in spite
of its finding of bad faith; and that the amount of P50,000.00 as attorney’s fees awarded to them is insufficient.
Finally, petitioners argued that the legal interest imposed on their claim should have been pegged at 12% per
annum instead of the 6% fixed by the court.18
The Court of Appeals reversed and set aside the lower court’s decision and rendered another judgment
dismissing the complaint.19
Hence, this appeal.
ISSUE:
WON the petitioners are entitled to the broker’s commission?
RULING:
The petition is impressed with merit.
The records show that petitioner Manuel B. Tan is a licensed real estate broker, and petitioners Gregg M.
Tecson and Alexander Saldaña are his associates.
In Schmid and Oberly v. RJL Martinez Fishing Corporation,20 we defined a "broker" as "one who is engaged,
for others, on a commission, negotiating contracts relative to property with the custody of which he has no
concern; the negotiator between other parties, never acting in his own name but in the name of those who
employed him. x x x a broker is one whose occupation is to bring the parties together, in matters of trade,
commerce or navigation." (Emphasis supplied)
During the trial, it was established that petitioners, as brokers, were authorized by private respondents to
negotiate for the sale of their land within a period of one month reckoned from June 29, 1992. The authority
given to petitioners was non-exclusive, which meant that private respondents were not precluded from granting
the same authority to other agents with respect to the sale of the same property. In fact, private respondent
authorized another agent in the person of Mr. Bobby Pacana to sell the same property. There was nothing
illegal or amiss in this arrangement, per se, considering the non-exclusivity of petitioners’ authority to sell. The
problem arose when it eventually turned out that these agents were entertaining one and the same buyer, the
Sisters of Mary.
As correctly observed by the trial court, the argument of the private respondents that Pacana was the one
entitled to the stipulated 3% commission is untenable, considering that it was the petitioners who were
responsible for the introduction of the representatives of the Sisters of Mary to private respondent Eduardo
Gullas. Private respondents, however, maintain that they were not aware that their respective agents were
negotiating to sell said property to the same buyer.
Private respondents failed to prove their contention that Pacana began negotiations with private
respondent Norma Gullas way ahead of petitioners. They failed to present witnesses to substantiate
this claim. It is curious that Mrs. Gullas herself was not presented in court to testify about her
dealings with Pacana. Neither was Atty. Nachura who was supposedly the one actively negotiating on
behalf of the Sisters of Mary, ever presented in court.
Private respondents’ contention that Pacana was the one responsible for the sale of the land is also
unsubstantiated. There was nothing on record which established the existence of a previous
negotiation among Pacana, Mrs. Gullas and the Sisters of Mary. The only piece of evidence that the
private respondents were able to present is an undated and unnotarized Special Power of Attorney in
favor of Pacana. While the lack of a date and an oath do not necessarily render said Special Power of
Attorney invalid, it should be borne in mind that the contract involves a considerable amount of
money. Hence, it is inconsistent with sound business practice that the authority to sell is contained in
an undated and unnotarized Special Power of Attorney. Petitioners, on the other hand, were given the
written authority to sell by the private respondents.
The trial court’s evaluation of the witnesses is accorded great respect and finality in the absence of any
indication that it overlooked certain facts or circumstances of weight and influence, which if reconsidered,
would alter the result of the case.21
Indeed, it is readily apparent that private respondents are trying to evade payment of the commission which
rightfully belong to petitioners as brokers with respect to the sale. There was no dispute as to the role that
petitioners played in the transaction. At the very least, petitioners set the sale in motion. They were not able to
participate in its consummation only because they were prevented from doing so by the acts of the private
respondents.
In the case of Alfred Hahn v. Court of Appeals and Bayerische Motoren Werke Aktiengesellschaft
(BMW)22 we ruled that, "An agent receives a commission upon the successful conclusion of a sale. On
the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no
sale is eventually made." (Underscoring ours). Clearly, therefore, petitioners, as brokers, should be
entitled to the commission whether or not the sale of the property subject matter of the contract
was concluded through their efforts.
Having ruled that petitioners are entitled to the brokers’ commission, we should now resolve how much
commission are petitioners entitled to?
Following the stipulation in the Special Power of Attorney, petitioners are entitled to 3% commission for the
sale of the land in question. Petitioners maintain that their commission should be based on the price at which
the land was offered for sale, i.e., P530.00 per square meter. However, the actual purchase price for which the
land was sold was only P200.00 per square meter. Therefore, equity considerations dictate that petitioners’
commission must be based on this price. To rule otherwise would constitute unjust enrichment on the part of
petitioners as brokers.
In the matter of attorney’s fees and expenses of litigation, we affirm the amount of P50,000.00 awarded by the
trial court to the petitioners.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The May 29, 2000 decision of the Court
of Appeals is REVERSED and SET ASIDE.
The decision of the Regional Trial Court of Cebu City, Branch 22, in Civil Case No. CEB-12740 ordering
private respondents Eduardo Gullas and Norma S. Gullas to pay jointly and severally petitioners Manuel B.
Tan, Gregg Tecson and Alexander Saldaña the sum of Six Hundred Twenty-Four Thousand and Six Hundred
Eighty-Four Pesos (P624,684.00) as broker’s fee with legal interest at the rate of 6% per annum from the filing
of the complaint; and the sum of Fifty Thousand Pesos (P50,000.00) as attorney’s fees and costs of litigation,
is REINSTATED.
SO ORDERED.
34. Quiroga vs. Parsons Hardware Co., 38 Phil 501
G.R. No. L-11491 August 23, 1918
ANDRES QUIROGA, plaintiff-appellant,
vs.
PARSONS HARDWARE CO., defendant-appellee.
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant.
Crossfield & O'Brien for appellee.
PRELIMINARIES
Who is the plaintiff: ANDRES QUIROGA
Who is the defendant: PARSONS HARDWARE CO.
Nature of the Action filed in the SC? What is the case all about in Summary? See principle
What is the Case filed in the original court? Civil case for Breach of agency contract
From which court Originated? CA.
Court a quos ruling and brief reason why? Not discussed
Parsons. For the foregoing reasons, we are of the opinion that the contract by and between the plaintiff and the
defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a cause of action
are not imposed upon the defendant, either by agreement or by law.
Principle:
Although the parties designated the arrangement as agency, the Court found the arrangement to be one of sale since
the essential clause provided that “Payment was to be made at the end of sixty day, or before, at the principal’s
request, or in cash, if the agent so preferred, and in these two cases an additional discount was to be allowed for
prompt payment.”
When the terms of agreement compels the purported agent to pay for the products received from the purported
principal within the stipulated period, even when there has been no sale thereof to the public, the underlying
relationship is not one of agency to sell, but of actual sale.
A true agent does not assume responsibility for the payment of the price of the object of agency; his duty is to
merely turn-over to the principal the proceeds of the sale once he receives them from the buyer.
Facts:
On January 24, 1911, in this city of manila, a contract in the following tenor was entered into by and
between the plaintiff (Andres Quiroga), as party of the first part, and J. Parsons, defeNdant (to
whose rights and obligations the present defendant later subrogated itself), as party of the second
part:
GO DIRECTLY BELOW YELLOW:
CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J.

PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE
EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan
Islands to J. Parsons under the following conditions:
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's
establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in
Manila, and, in the invoices, shall make and allowance of a discount of 25 per cent of the
invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the
dozen, whether of the same or of different styles.
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of
sixty days from the date of their shipment.
(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and the
freight, insurance, and cost of unloading from the vessel at the point where the beds are
received, shall be paid by Mr. Parsons.
(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment
when made shall be considered as a prompt payment, and as such a deduction of 2 per cent
shall be made from the amount of the invoice.
The same discount shall be made on the amount of any invoice which Mr. Parsons may
deem convenient to pay in cash.
(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration
in price which he may plan to make in respect to his beds, and agrees that if on the date
when such alteration takes effect he should have any order pending to be served to Mr.
Parsons, such order shall enjoy the advantage of the alteration if the price thereby be
lowered, but shall not be affected by said alteration if the price thereby be increased, for, in
this latter case, Mr. Quiroga assumed the obligation to invoice the beds at the price at which
the order was given.
(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.
ART. 2. In compensation for the expenses of advertisement which, for the benefit of both
contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the
obligation to offer and give the preference to Mr. Parsons in case anyone should apply for
the exclusive agency for any island not comprised with the Visayan group.
ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga"
beds in all the towns of the Archipelago where there are no exclusive agents, and shall
immediately report such action to Mr. Quiroga for his approval.
ART. 4. This contract is made for an unlimited period, and may be terminated by either of the
contracting parties on a previous notice of ninety days to the other party.
Of the three causes of action alleged by the plaintiff in his complaint, only two of them constitute the
subject matter of this appeal and both substantially amount to the averment that the defendant
violated the following obligations: not to sell the beds at higher prices than those of the invoices; to
have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public
exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the
dozen and in no other manner. As may be seen, with the exception of the obligation on the part of
the defendant to order the beds by the dozen and in no other manner, none of the obligations
imputed to the defendant in the two causes of action are expressly set forth in the contract. But the
plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said
obligations are implied in a contract of commercial agency. The whole question, therefore, reduced
itself to a determination as to whether the defendant, by reason of the contract hereinbefore
transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds.
In order to classify a contract, due regard must be given to its essential clauses. In the contract in
question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to
furnish the defendant with the beds which the latter might order, at the price stipulated, and that the
defendant was to pay the price in the manner stipulated. The price agreed upon was the one
determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per
cent, according to their class. Payment was to be made at the end of sixty days, or before, at the
plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an additional
discount was to be allowed for prompt payment. These are precisely the essential features of a
contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds,
and, on the part of the defendant, to pay their price. These features exclude the legal conception of
an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not
pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third
person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the
plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their
price within the term fixed, without any other consideration and regardless as to whether he had or
had not sold the beds.
It would be enough to hold, as we do, that the contract by and between the defendant and the
plaintiff is one of purchase and sale, in order to show that it was not one made on the basis of a
commission on sales, as the plaintiff claims it was, for these contracts are incompatible with each
other. But, besides, examining the clauses of this contract, none of them is found that substantially
supports the plaintiff's contention. Not a single one of these clauses necessarily conveys the idea of
an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as
stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in
articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff's
beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that
they are not incompatible with the contract of purchase and sale.
The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the defendant
corporation and who established and managed the latter's business in Iloilo. It appears that this
witness, prior to the time of his testimony, had serious trouble with the defendant, had maintained a
civil suit against it, and had even accused one of its partners, Guillermo Parsons, of falsification. He
testified that it was he who drafted the contract Exhibit A, and, when questioned as to what was his
purpose in contracting with the plaintiff, replied that it was to be an agent for his beds and to collect
a commission on sales. However, according to the defendant's evidence, it was Mariano Lopez
Santos, a director of the corporation, who prepared Exhibit A. But, even supposing that Ernesto
Vidal has stated the truth, his statement as to what was his idea in contracting with the plaintiff is of
no importance, inasmuch as the agreements contained in Exhibit A which he claims to have drafted,
constitute, as we have said, a contract of purchase and sale, and not one of commercial agency.
This only means that Ernesto Vidal was mistaken in his classification of the contract. But it must be
understood that a contract is what the law defines it to be, and not what it is called by the contracting
parties.
The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell;
that, without previous notice, it forwarded to the defendant the beds that it wanted; and that the
defendant received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But
all this, at the most only shows that, on the part of both of them, there was mutual tolerance in the
performance of the contract in disregard of its terms; and it gives no right to have the contract
considered, not as the parties stipulated it, but as they performed it. Only the acts of the contracting
parties, subsequent to, and in connection with, the execution of the contract, must be considered for
the purpose of interpreting the contract, when such interpretation is necessary, but not when, as in
the instant case, its essential agreements are clearly set forth and plainly show that the contract
belongs to a certain kind and not to another. Furthermore, the return made was of certain brass
beds, and was not effected in exchange for the price paid for them, but was for other beds of another
kind; and for the letter Exhibit L-1, requested the plaintiff's prior consent with respect to said beds,
which shows that it was not considered that the defendant had a right, by virtue of the contract, to
make this return. As regards the shipment of beds without previous notice, it is insinuated in the
record that these brass beds were precisely the ones so shipped, and that, for this very reason, the
plaintiff agreed to their return. And with respect to the so-called commissions, we have said that they
merely constituted a discount on the invoice price, and the reason for applying this benefit to the
beds sold directly by the plaintiff to persons in Iloilo was because, as the defendant obligated itself in
the contract to incur the expenses of advertisement of the plaintiff's beds, such sales were to be
considered as a result of that advertisement.
In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the
contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the
defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his
right and cannot complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the
defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a
cause of action are not imposed upon the defendant, either by agreement or by law.
The judgment appealed from is affirmed, with costs against the appellant. So ordered.
Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.
Quiroga and Parsons entered into a contract for the exclusive sale of “Quiroga” beds in the Visayas islands.
CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J.

PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE
EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan
Islands to J. Parsons under the following conditions:
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's
establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in
Manila, and, in the invoices, shall make and allowance of a discount of 25 per cent of the
invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the
dozen, whether of the same or of different styles.
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of
sixty days from the date of their shipment.
(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and the
freight, insurance, and cost of unloading from the vessel at the point where the beds are
received, shall be paid by Mr. Parsons.
(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment
when made shall be considered as a prompt payment, and as such a deduction of 2 per cent
shall be made from the amount of the invoice.
The same discount shall be made on the amount of any invoice which Mr. Parsons may
deem convenient to pay in cash.
(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration
in price which he may plan to make in respect to his beds, and agrees that if on the date
when such alteration takes effect he should have any order pending to be served to Mr.
Parsons, such order shall enjoy the advantage of the alteration if the price thereby be
lowered, but shall not be affected by said alteration if the price thereby be increased, for, in
this latter case, Mr. Quiroga assumed the obligation to invoice the beds at the price at which
the order was given.
(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.
ART. 2. In compensation for the expenses of advertisement which, for the benefit of both
contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the
obligation to offer and give the preference to Mr. Parsons in case anyone should apply for
the exclusive agency for any island not comprised with the Visayan group.
ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga"
beds in all the towns of the Archipelago where there are no exclusive agents, and shall
immediately report such action to Mr. Quiroga for his approval.
ART. 4. This contract is made for an unlimited period, and may be terminated by either of the
contracting parties on a previous notice of ninety days to the other party.
Don Quiroga filed a complaint against Parsons for not complying with several obligations, to wit:
“not to sell the beds at higher prices than those of the invoices;
to have an open establishment in Iloilo; itself to conduct the agency;
to keep the beds on public exhibition, and to pay for the advertisement expenses for the same;
and to order the beds by the dozen and in no other manner”.
These constitute the subject matter of the complaint.
Parsons argued that with the exception of the obligation on the part of the defendant to order the beds by the dozen
and in no other manner, none of the obligations imputed to the defendant in the two causes of action are expressly
set forth in the contract.
However, Quiroga alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations
are implied in a contract of commercial agency.
Issue/s:
Whether the defendant (Parsons), by reason of the contract, was an agent of the plaintiff for the sale of his beds?
PURCHASER. Contract entered into was a contract of sale, not agency to sell.
Ruling: NO.
In order to classify a contract, due regard must be given to its essential clauses.
In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintiff was
to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the
defendant was to pay the price in the manner stipulated.
The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a
discount of from 20 to 25 per cent, according to their class.
Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the
defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt
payment.
These matters are precisely the essential features of a contract of purchase and sale .
There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their
price.
These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent
received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale
of the thing to a third person, and if he does not succeed in selling it, he returns it.
By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily
obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had
or had not sold the beds.
It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff is o ne of
purchase and sale, in order to show that it was not one made on the basis of a commission on sales, as the plaintiff
claims it was, for these contracts are incompatible with each other.
But, besides, examining the clauses of this contract, none of them is found that substantially supports the
plaintiff's contention. Not a single one of these clauses necessarily conveys the idea of an agency.
The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract
itself, than a mere discount on the invoice price.
The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that
could sell the plaintiff's beds in the Visayan Islands.
With regard to the remaining clauses, the least that can be said is that they are not incompatible with the
contract of purchase and sale.
35. Dominion Insurance Corp. vs. CA, GR No. 129919, February 6, 2002
PRELIMINARIES
Who is the plaintiff: DOMINION INSURANCE CORPORATION
Who is the defendant: COURT OF APPEALS, RODOLFO S. GUEVARRA, and FERNANDO AUSTRIA
This is an appeal via certiorari from the decision of the Court of Appeals affirming the decision of the Regional Trial
Court.

Civil Case for the collection of sum of money.
From which court Originated? Court of Appeals

The court a quo found Dominion Insurance Corporation liable and ordered payment of P156,473.90, attorney’s fees
plus damages.

The respondents won. Dominion Insurance Corporation was liable.
IN VIEW WHEREOF, we DENY the Petition. However, we MODIFY the decision of the Court of Appeals and that
of the Regional Trial Court, Branch 44, San Fernando, Pampanga, in that petitioner is ordered to pay respondent
Guevarra the amount of P112,672.11 representing the total amount advanced by the latter in the payment of the
claims of petitioner’s clients.
No costs in this instance.
Principle:
"Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the
debtor."
Facts:
On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted Civil Case No. 8855 for sum of money against
defendant Dominion Insurance Corporation.
Plaintiff sought to recover thereunder the sum of P156,473.90 which he claimed to have advanced in his capacity as
manager of defendant to satisfy certain claims filed by defendant’s clients.
In its traverse, the defendant denied any liability to plaintiff and asserted a counterclaim for P249,672.53,
representing premiums that plaintiff allegedly failed to remit.
On August 8, 1991, the defendant filed a third-party complaint against Fernando Austria, who, at the time relevant
to the case, was its Regional Manager for Central Luzon area.
Finding the verbal motion of plaintiff’s counsel to be meritorious and considering that the pre-trial conference has
been repeatedly postponed on motion of the defendant Corporation, the defendant Dominion Insurance Corporation
is hereby declared (as) in default and plaintiff is allowed to present his evidence on June 16, 1992 at 9:00 o’clock in
the morning.
On August 7, 1992 defendant corporation filed a ‘MOTION TO LIFT ORDER OF DEFAULT.’

It alleged therein that the failure of counsel to attend the pre-trial conference was ‘due to an unavoidable
circumstance’ and that counsel had sent his representative on that date to inform the trial court of his
inability to appear. The Motion was vehemently opposed by the plaintiff.
On November 18, 1992, the court a quo rendered judgment against the defendant.
On December 14, 1992, Dominion appealed the decision to the Court of Appeals.
On July 19, 1996, the Court of Appeals promulgated a decision affirming that of the trial court.6
On September 3, 1996, Dominion filed with the Court of Appeals a motion for reconsideration.
On July 16, 1997, the Court of Appeals denied the motion.
Hence, his appeal.
Issue/s:
Whether or not respondent Guevarra acted within his authority as agent for petitioner? NO.
Ruling:
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 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.
A perusal of the Special Power of Attorney would show that petitioner (represented by third-party defendant
Austria) and respondent Guevarra intended to enter into a principal-agent relationship.
Despite the word “special” in the title of the document, the contents reveal that what was constituted was actually a
general agency.
The payment of claims is not an act of administration. The settlement of claims is not included among the acts
enumerated in the Special Power of Attorney, nor is it of a character similar to the acts enumerated therein.
A special power of attorney is required before respondent Guevarra could settle the insurance claims of the insured.
In settling the claims mentioned above, respondent Guevarra’s authority is further limited by the written standard
authority to pay, which states that the payment shall come from respondent Guevarra’s revolving fund or
collection.
The instruction of the petitioner as the principal could not be any clearer. Respondent Guevarra was authorized to
pay the claim of the insured, but the payment shall come from the revolving fund or collection in his possession.
Having deviated from the instructions of the principal, the expenses that respondent Guevarra incurred in the
settlement of the claims of the insured may not be reimbursed from petitioner Dominion.
This conclusion is in accord with Article 1918, Civil Code, which states that:
“The principal is not liable for the expenses incurred by the agent in the following cases:
“(1) If the agent acted in contravention of the principal’s instructions, unless the latter should wish to avail
himself of the benefits derived from the contract;
”xxxxxxxxx“
However, while the law on agency prohibits respondent Guevarra from obtaining reimbursement, his right to
recover may still be justified under the general law on obligations and contracts.
Article 1236, second paragraph, Civil Code, provides:
“Whoever pays for another may demand from the debtor what he has paid, except that if he paid without
the knowledge or against the will of the debtor, he can recover only insofar as the payment has been
beneficial to the debtor.”
In this case, when the risk insured against occurred, the petitioner’s liability as insurer arose.
This obligation was extinguished when respondent Guevarra paid the claims and obtained Release of Claim Loss
and Subrogation Receipts from the insured who were paid.
Thus, to the extent that the obligation of the petitioner has been extinguished, respondent Guevarra may demand
for reimbursement from his principal.
To rule otherwise would result in unjust enrichment of the petitioner.

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General Provisions

DEADLINE: OCTOBER 24, SUNDAY BEFORE 12AM.

CASES ASSIGNEE STATUS

1. Rallos v. Felix Go Chan & Sons CATAPANG, JORAINE ●

2. Orient Air Services & Hotel CHING, GEORGE JURIS INTING ●

3. Air France vs. Court of Appeals, CUIZON, ANALIE SERICON ●

4. Santos vs. Buenconsejo, 14 DAPITAN, JAIRUS MIRAL ●

5. Albaladejo y Cia vs. Phil. DAUD, BEGUM NAZWA M ●

6. Cui vs. Cui, 100 Phil. 913 DELA CRUZ, MELODY ●

7. Allied Free Worker’s Union DEMAFILES, EMMELIE ●

8. Far Eastern Export & Import Co. DIANA, SALVADOR JR PAMAT ●

9. Nielson & Co., Inc. vs. Lepanto DIRECTO, RONAH FAE ●

10. Shell Co., of the Phil. Ltd. vs. ECHEGORIN, NIKKO ●

11. Sevilla vs. Court of Appeals, ELORDE, CARLIN DON ASIS ●

12. Lourdes Valerio Lim vs. People, FERNANDEZ, THESSALOE ●

13. San Diego, Sr. vs. Nombre, 11 GALVEZ, LENIE ANNE ●

14. Rallos v. Yangco, 20 Phil 269 GONZALES, CYRIL ARELLANO ●

15. Macke v. Camps, 7 Phil 357 GONZALES, JASHERA ●

17. Manotok Brothers, Inc. vs. GUINTO, EUAN ESPARAGOZA ●

18. Domingo v. Domingo, 42 HAO, KATRINA BEATRICE ●

19. Siasat vs. Intermediate JAYME, REINA ANNE CEJAS ●

20. Municipal Council of Iloilo vs. JOSOL, NEIL RANIEL ●

21. Caballero vs. Deiparine, 60 LAGARTO, BLESSY JOYCE ●

22. Phil. National Bank vs. Sta. LIBARIOS, SARAH JHYNE ●

23. BA Finance Corp. vs. Court of MACADINE, JOJI SERENATAS ●

24. Director of Public Works vs. MALABUTE, ALASTAIR MARK ●

25. Philippine Sugar Estates MAÑALAC, GLANERY ANNE ●

27. Commercial Bank & Trust Co. MUAÑA, LOWELL LENDIO ●

28. Phil. National Bank vs. Agudelo RAPISURA, COLEEN M ●

29. Syjuco and Viardo vs. Syjuco, SAGULO, RHONALEN ●

30. National Food Authority vs. SAID, SITTIE A'SHIA ●

31. Awad vs. Filma Mercantile Co., SERRANO, MARIA CRISTINA ●

32. Alfred Hahn vs. CA and BMW, TORREVILLAS, JOVANEY ●

34. Quiroga vs. Parsons Hardware YU, FAYE ASTORETH ●

35. Dominion Insurance Corp. vs. ZAMBRANO, ERWIN SEROMA ●

1. Rallos v. Felix Go Chan & Sons Realty Corp., 81 SCRA

From which court Originated?

1. AGENCY DEFINED: ITS ELEMENTS:

Agency is basically personal, representative, and derivative in nature.

Rationale for the provision.—

Hence, this Petition for Review on certiorari.

On March 1955, Concepcion Rallos died.

After trial the court a quo rendered judgment:

Hence, this Petition for Review on certiorari

Agency is basically personal representative, and derivative in nature. The authority of the agent to

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Here the Article 1931 is the applicable law.

To support such argument reference is made to a portion in Manresa's Commentaries which We

But there is a narrower ground on which the defenses of the

As between two innocent persons, one of whom must suffer the

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The production of the owner's duplicate certificate whenever any voluntary

Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American

From which court Originated? Court of First Instance of Manila, Branch 24

The agreement contained provisions such as the following:

1. Representation of American by Orient Air Services

Ruling: No, it cannot.

3. Air France vs. Court of Appeals, 126 SCRA 448

G.R. No. L-57339 December 29, 1983

Who is the defendant:

What is the Case filed in the original court?

From which court Originated?

Court a quos ruling and brief reason why?