Saturday, 16 October 2021

AGENCY

PROFESSIONAL SERVICES, INC., vs. NATIVIDAD and ENRIQUE AGANA G.R. No.
126297 January 31, 2007

Facts:

Natividad Agana was rushed to the Medical City Hospital because of difficulty of bowel
movement and bloody anal discharge. Dr. Miguel Ampil, diagnosed her to be suffering
from “cancer of the sigmoid.” Dr. Ampil, assisted by the medical staff of the Medical
City Hospital, performed an anterior resection surgery on Natividad. He found that the
malignancy in her sigmoid area had spread on her left ovary, necessitating the removal
of certain portions of it. Thus, Dr. Ampil obtained the consent of Natividad’s husband,
Enrique Agana, to permit Dr. Juan Fuentes, to perform hysterectomy on her.

After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the
operation and closed the incision. However, the operation appeared to be flawed. After
a couple of days, Natividad complained of excruciating pain in her anal region. She
consulted both Dr. Ampil and Dr. Fuentes about it. They told her that the pain was the
natural consequence of the surgery.

Two weeks after Natividad returned from the United States to seek further treatment,
her daughter found a piece of gauze protruding from her vagina. Upon being informed
about it, Dr. Ampil proceeded to her house where he managed to extract by hand a
piece of gauze measuring 1.5 inches in width. He then assured her that the pains
would soon vanish.

Dr. Ampil’s assurance did not come true. Instead, the pains intensified, prompting
Natividad to seek treatment at the Polymedic General Hospital. While confined there,
Dr. Ramon Gutierrez detected the presence of another foreign object in her vagina — a
foul-smelling gauze measuring 1.5 inches in width which badly infected her vaginal
vault. A recto-vaginal fistula had formed in her reproductive organs which forced stool
to excrete through the vagina. Another surgical operation was needed to remedy the
damage.

Natividad and her husband filed with the RTC a complaint for damages against the
Professional Services, Inc. (PSI), owner of the Medical City Hospital, Dr. Ampil, and Dr.
Fuentes. They alleged that the latter are liable for negligence for leaving two pieces of
gauze inside Natividad’s body and malpractice for concealing their acts of negligence.

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Pending the outcome of the above cases, Natividad died and was duly substituted by
her children (the Aganas). The RTC rendered its Decision in favor of the Aganas, finding
PSI, Dr. Ampil and Dr. Fuentes liable for negligence and malpractice.

The Court of Appeals rendered its Decision dismissing the case against Dr. Fuentes
with Dr. Ampil liable to reimburse Professional Services, Inc., whatever amount the
latter will pay or had paid to the plaintiffs.

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

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

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

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

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

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

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

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

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

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

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What is agency by estoppel?

When it appears that an agent has an apparent authority to transact with the third
person on behalf of the principal and the third person has relied to such authority.

It exists when it does not comply with the rules provided in Article 1873 in relation to
Article 1921 and 1922 of the civil code.

As a rule, the Principal shall notify the third person or anyone regarding the authority he
vested to the agent, through:

1. Special information, with regard to specific third person; or

2. Public advertisement, with regard to anyone. Revocation shall be made in the same
manner how the Principal notified the third person or anyone. (Art. 1873)

Thus, if the principal failed to revoke the authority in the same manner as it is instituted
as provided in Article 1873, an agency by estoppel is created and the following rules
shall be observed:

1. For specified persons, the revocation shall not prejudice him if they were not given
notice thereof; (1921)

2. If the agent had general powers, revocation of the agency does not prejudice third
persons who acted in good faith and without knowledge of the revocation. Notice
of revocation in a newspaper of general circulation is a sufficient warning to third
persons. (Art. 1922)

Article 1900. So far as third persons are concerned, an act is deemed to have
been performed within the scope of the agent's authority, if such act is within the
terms of the power of attorney, as written, even if the agent has in fact exceeded
the limits of his authority according to an understanding between the principal
and the agent

Meaning of “Performance within the scope of authority”

So far as third persons are concerned, an act is deemed to have been performed
within the scope of the agent's authority, if such act is within the terms of the power of

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attorney, as written, even if the agent has in fact exceeded the limits of his authority
according to an understanding between the principal and the agent. (Art. 1900)

Boundary which the agent cannot trespass

Goes into the consent of the principal to the Agency

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

Third Person Cannot Set-up Facts of Agent’s Exceeding Authority Where Principal
Ratified or Signified Willingness to Ratify Agent’s Acts (Art. 1901)

1. Principal Should Be the One to Question Agent’s Lack or Excess of Authority

2. Presentation of Power of Attorney (Must) Be Required by Third Party (Art. 1902)

3. Private or Secret Orders of Principal Do Not Prejudice Third Persons Who Relied
Upon Agent’s Power of Attorney or Principal’s Instruction (Art. 1902)

Article 1902. A third person with whom the agent wishes to contract on behalf of
the principal may require the presentation of the power of attorney, or the
instructions as regards the agency. Private or secret orders and instructions of
the principal do not prejudice third persons who have relied upon the power of
attorney or instructions shown them.

OBLIGATION OF THE THIRD PERSON

Ask for the presentation of power of attorney, or the instructions as regard to the
agency. Private or secret orders and instructions of the principal do not prejudice third
persons who have relied upon the power of attorney or instructions shown them. (Art.
1902).

Exception: The agent shall not carry out an agency if its execution would manifestly
result in loss or damage of the principal.

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POA - A power of attorney is an instrument in writing by which one person, as

principal, appoints another as his agent and confers upon him the authority to perform
certain specified acts or kinds of acts on behalf of the principal.

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

What are the obligations of Principal?

Discuss each.

1. C – Comply

2. A – Advance funds

3. R – Reimburse

4. D - Damages

5. C - Compensation

A. COMPLY - The principal must comply with all the obligations which the agent may
have contracted with the scope of his authority (Art. 1910)

Under Article 1910, the client assumed all obligations or inherent risks entailed by
transactions emanating from the arrangement, and the bank may be held liable, as an
agent, only when it exceeds its authority, or acts with fraud, negligence or bad faith.
Principals in an agency relationship are solely obliged to observe the solemnity of the
transaction entered into by the agent on their behalf, absent any proof that the latter
acted beyond its authority, and concomitant to this obligation is that the principal also
assumes the risks that may arise from the transaction.

Article 1911. Even when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to act as though he
had full powers.

When the principal has allowed the purported agent to act as though he had full
powers (Art. 1911)

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Under Article 1911 of the New Civil Code, even when the agent has exceeded his
authority, the principal is solidarily liable with the agent if the former allowed the latter
to act as though he had full powers. This is termed as "agency by estoppel" It is also
referred to as the doctrine of apparent authority in Corporate Law.

Prudential Bank v. Court of Appeals, 223 SCRA 350

Facts:

The complaint in this case arose when private respondent  Aurora  F. Cruz,  with her
sister as co- depositor, invested P200, 000.00 in Central Bank bills with the Prudential
Bank at its branch in QuezonAvenue, Quezon City, on June 23, 1986. Susan Quimbo,
the Bank employee assisted her on all her dealings. One of such dealing involves Cruz
withdrawal from her Savings Account No. 2546 and applying such amount to the
investment with the same bank.

Cruz was asked to sign a Withdrawal Slip for P196, 122.98, representing the amount to
be re-invested after deduction of the prepaid interest. Quimbo explained this was a
new requirement of the bank. Several days later, Cruz received another Confirmation of
Sale and a copy of the Debit Memo coming from Quimbo. On October 27, 1986, Cruz
returned to the bank and sought to

withdraw her P200, 000.00. After verification of her records, however, she was
informed that the investment appeared to have been already withdrawn by her on
August 25, 1986. There was no copy on file of the Confirmation of Sale and the Debit
Memo allegedly issued to her by Quimbo. Quimbo herself was not available for
questioning as she had not been reporting for the past week.

Prompted by the event Cruz's reaction was to file a complaint for breach of contract
against Prudential Bank in the Regional Trial Court of Quezon City. She demanded the
return of her money with interest, plus damages and attorney's fees. Cruz won the
case in both the RTC and CA.

ISSUE:

Does the fault of bank employee bind the Bank

HELD:

Such liability dates back to the Roman Law maxim,  Qui per alium facit per seipsum
facere videtur. "He who does a thing by an agent is considered as doing it himself."
This rule is affirmed by the Civil Code thus:

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

Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he had full powers.

Conformably, we have declared in countless decisions that the principal is liable for
obligations contracted by the agent. The agent's apparent representation yields to the
principal's true representation and the contract is considered as entered into between
the principal and the third person.

Application of these principles is especially necessary because banks have a fiduciary

relationship with the public and their stability depends on the confidence of the people
in their honesty and efficiency. Such faith will be eroded where banks do not exercise
strict care in the selection and supervision of its employees, resulting in prejudice to
their depositors.

It would appear from the facts established in the case before us that the petitioner was
less than eager to present Quimbo at the trial or even to establish her liability although
it made the initial effort - which it did not pursue - to hold her answerable in the third-
party complaint. What ever happened to her does not appear in the record. Her
absence from the proceedings feeds the suspicion of her possible misdeed, which the
bank seems to have studiously ignored by its insistence that the missing money had
been actually withdrawn by Cruz. By such insistence, the bank is absolving not only
itself but also, in effect and by extension, the disappeared Quimbo who apparently has
much to explain.

We agree with the lower courts that the petitioner acted in bad faith in denying Cruz the
obligation she was claiming against it. It was obvious that an irregularity had been
committed by the bank's personnel, but instead of repairing the injury to Cruz by
immediately restoring her money to her, it sought to gloss over the anomaly in its own
operations.

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Manila Remnant Co., Inc. v. Court of Appeals

G.R. No. 82978, 22 November 1990


FACTS:

Manila Remnant Co. owns Capital Homes Subdivision with Artemio Valencia as
President. A.U. Valencia and Co., is the authorized agent of Manila Remnant to develop
the subdivision with authority to manage the sales, execute contracts to sell to lot
buyers and issue official receipts. Artemio Valencia is also the president of this
company.

Sometime in March 1970, Manila Remnant thru A.U. Valencia, executed contracts to
sell with Ventanilla covering two lots amounting to P66k to paid monthly for 10 years.
Ventanilla paid the downpayment. After 10 days, Artemio Valencia sold the same lots
without informing Ventanilla to Crisostomo, his sales agent without any consideration.
Artemio Valencia then transmitted the fictitious Crisostomo contracts to Manila
Remnant while he kept in his files the contracts to sell in favor of the Ventanillas. All the
amounts paid by the Ventanillas were deposited in Valencia’s bank account and this is
remitted to Manila Remnant in favor of Crisostomo. Receipts issued by Manila
Remnant in favor of Crisostomo are kept by Valencia. Ventanilla is not aware of
Valencia’s scheme and thus continued paying their monthly installments.

Sometime in May 1973, Manila Remnant terminated its collection agreement with AU
Valencia due to discrepancies and irregularities discovered in its collections and
remittances. Valencia was also removed as the President of Manila Remnant. The
Ventanilla couple unaware of the circumstances happened continued paying their
installments to Valencia. It is only in 1978 they learned the termination of Valencia, thus
they went immediately to Manila Remnant to pay their balance but to their shock they
discovered from Gloria Caballes, an accountant of Manila Remnant, that their names
did not appear in the records of A.U. Valencia and Co. as lot buyers. Thus, the
Ventanillas commenced an action for specific performance, annulment of deeds and
damages against Manila Remnant, A.U. Valencia and Co. and Carlos Crisostomo.

Lower court’s rendered judgment in favor of Ventanilla, and in the decision, the court
ordered defendants A.U. Valencia and Co. Inc., Manila Remnant and Carlos
Crisostomo jointly and severally to pay the Ventanillas the amount of P100,000.00 as
moral damages, P100,000.00 as exemplary damages, and P100,000.00 as attorney’s
fees and in case the transfer of lots cannot be effected for any legal reason, the
defendants should reimburse jointly and severally to the Ventanillas the total amount of

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P73,122.35 representing the total amount paid for the two lots plus legal interest
thereon from March 1970 plus damages. While petitioner Manila Remnant has not
refuted the legality of the award of damages per se, it believes that it cannot be made
jointly and severally liable with its agent A.U. Valencia and Co. since it was not aware of
the illegal acts perpetrated nor did it consent or ratify said acts of its agent.

ISSUE:

Whether or not petitioner Manila Remnant should be held solidarily liable together
with A.U. Valencia and Co. and Carlos Crisostomo for the payment of moral,
exemplary damages and attorney’s fees in favor of the Ventanillas.

RULING:

Yes. Due to the following:

The unique relationship existing between the principal and the agent at the time of the
dual sale must be underscored. Bear in mind that the president then of both firms was
Artemio U. Valencia, the individual directly responsible for the sale scam. Hence,
despite the fact that the double sale was beyond the power of the agent, Manila
Remnant as principal was chargeable with the knowledge or constructive notice of that
fact and not having done anything to correct such an irregularity was deemed to have
ratified the same.

The principle of estoppel, Manila Remnant is deemed to have allowed its agent to act
as though it had plenary powers. Article 1911 of the Civil Code provides:

“Even when the agent has exceeded his authority, the principal is solidarily liable with
the agent if the former allowed the latter to act as though he had full powers.”

Authority by estoppel has arisen in the instant case because by its negligence, the
principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to exercise
powers not granted to it.

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Cuison v. Court of Appeals

G.R. No. 88539, 26 October 1993


FACTS:

Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and sale of
newsprint, bond paper and scrap, with places of business at Baesa, Quezon City, and
Sto. Cristo, Binondo, Manila. Private respondent Valiant Investment Associates, on the
other hand, is a partnership duly organized and existing under the laws of the
Philippines with business address at Kalookan City.

From December 4, 1979 to February 15, 1980, private respondent delivered various
kinds of paper products amounting to P297,487.30 to a certain Lilian Tan of LT Trading.
The deliveries were made by respondent pursuant to orders allegedly placed by Tiu
Huy Tiac who was then employed in the Binondo office of petitioner. It was likewise
pursuant to Tiac’s instructions that the merchandise was delivered to Lilian Tan. Upon
delivery, Lilian Tan paid for the merchandise by issuing several checks payable to cash
at the specific request of Tiu Huy Tiac.

In turn, Tiac issued nine (9) postdated checks to private respondent as payment for the
paper products. Unfortunately, sad checks were later dishonored by the drawee bank.

Thereafter, private respondent made several demands upon petitioner to pay for the
merchandise in question, claiming that Tiu Huy Tiac was duly authorized by petitioner
as the manager of his Binondo office, to enter into the questioned transactions with
private respondent and Lilian Tan. Petitioner denied any involvement in the transaction
entered into by Tiu Huy Tiac and refused to pay private respondent the amount
corresponding to the selling price of the subject merchandise.

Left with no recourse, private respondent filed an action against petitioner for the
collection of P297,487.30 representing the price of the merchandise. After due hearing,
the trial court dismissed the complaint against petitioner for lack of merit. On appeal,
however, the decision of the trial court was modified, but was in effect reversed by the
Court of Appeals. Hence, this appeal.

ISSUE:

Whether or not Tiu Huy Tiac possessed the required authority from petitioner
sufficient to hold the latter liable for the disputed transaction?

RULING:

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Yes.

As to the merits of the case, it is a well-established rule that one who clothes another
with apparent authority as his agent and holds him out to the public as such cannot be
permitted to deny the authority of such person to act as his agent, to the prejudice of
innocent third parties dealing with such person in good faith and in the honest belief
that he is what he appears to be (Macke, et al, v. Camps, 7 Phil. 553 (1907]; Philippine
National Bank. v Court of Appeals, 94 SCRA 357 [1979]). From the facts and the
evidence on record, there is no doubt that this rule obtains. The petition must therefore
fail.

It is evident from the records that by his own acts and admission, petitioner held out
Tiu Huy Tiac to the public as the manager of his store in Sto. Cristo, Binondo, Manila.
More particularly, petitioner explicitly introduced Tiu Huy Tiac to Bernardino Villanueva,
respondent’s manager, as his (petitioner’s) branch manager as testified to by
Bernardino Villanueva. Secondly, Lilian Tan, who has been doing business with
petitioner for quite a while, also testified that she knew Tiu Huy Tiac to be the manager
of petitioner’s Sto. Cristo, Binondo branch. This general perception of Tiu Huy Tiac as
the manager of petitioner’s Sto. Cristo store is even made manifest by the fact that Tiu
Huy Tiac is known in the community to be the “kinakapatid” (godbrother) of petitioner.
In fact, even petitioner admitted his close relationship with Tiu Huy Tiac when he said
that they are “like brothers” (Rollo, p. 54). There was thus no reason for anybody
especially those transacting business with petitioner to even doubt the authority of Tiu
Huy Tiac as his manager in the Sto. Cristo Binondo branch.

But of even greater weight than any of these testimonies, is petitioner’s categorical
admission on the witness stand that Tiu Huy Tiac was the manager of his store in Sto.
Cristo, Binondo, Such admission, spontaneous no doubt, and standing alone, is
sufficient to negate all the denials made by petitioner regarding the capacity of Tiu Huy
Tiac to enter into the transaction in question. Furthermore, consistent with and as an
obvious indication of the fact that Tiu Huy Tiac was the manager of the Sto. Cristo
branch, three (3) months after Tiu Huy Tiac left petitioner’s employ, petitioner even sent,
communications to its customers notifying them that Tiu Huy Tiac is no longer
connected with petitioner’s business. Such undertaking spoke unmistakenly of Tiu Huy
Tiac’s valuable position as petitioner’s manager than any uttered disclaimer. More than
anything else, this act taken together with the declaration of petitioner in open court
amount to admissions under Rule 130 Section 22 of the Rules of Court, to wit : “The
act, declaration or omission of a party as to a relevant fact may be given in evidence
against him.” For well-settled is the rule that “a man’s acts, conduct, and declaration,

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wherever made, if voluntary, are admissible against him, for the reason that it is fair to
presume that they correspond with the truth, and it is his fault if they do not. If a man’s
extrajudicial admissions are admissible against him, there seems to be no reason why
his admissions made in open court, under oath, should not be accepted against him.”

Moreover, petitioner’s unexplained delay in disowning the transactions entered into by

Tiu Huy Tiac despite several attempts made by respondent to collect the amount from
him, proved all the more that petitioner was aware of the questioned commission was
tantamount to an admission by silence under Rule 130 Section 23 of the Rules of
Court, thus: “Any act or declaration made in the presence of and within the observation
of a party who does or says nothing when the act or declaration is such as naturally to
call for action or comment if not true, may be given in evidence against him.”

All of these point to the fact that at the time of the transaction Tiu Huy Tiac was
admittedly the manager of petitioner’s store in Sto. Cristo, Binondo. Consequently, the
transaction in question as well as the concomitant obligation is valid and binding upon
petitioner. By his representations, petitioner is now estopped from disclaiming liability
for the transaction entered by Tiu Huy Tiac on his behalf.

Tiu Huy Tiac, therefore, by petitioner’s own representations and manifestations,

became an agent of petitioner by estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as against
the person relying thereon (Article 1431, Civil Code of the Philippines). A party cannot
be allowed to go back on his own acts and representations to the prejudice of the
other party who, in good faith, relied upon them (Philippine National Bank v.
Intermediate Appellate Court, et al., 189 SCRA 680 [1990]).

Taken in this light,. petitioner is liable for the transaction entered into by Tiu Huy Tiac
on his behalf. Thus, even when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to fact as though he had
full powers (Article 1911 Civil Code), as in the case at bar.

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Siredy Enterprises v. Court of Appeals

G.R. No. 129039, 17 September 2002


FACTS:

Private respondent Conrado De Guzman is an architect-contractor doing business

under the name and style of Jigscon Construction. Herein petitioner Siredy Enterprises,
Inc. is the owner and developer of Ysmael Village, a subdivision in Sta. Cruz, Marilao,
Bulacan. The president of Siredy is Ismael E. Yanga. As stated in its Articles of
Incorporation, the primary corporate purpose of Siredy is to acquire lands, subdivide
and develop them, erect buildings and houses thereon, and sell, lease or otherwise
dispose of said properties to interested buyers. Sometime before October 1978, Yanga
executed an undated Letter of Authority, duly authorizing MR. HERMOGENES B.
SANTOS, to negotiate and enter into contract or contracts to build Housing Units on
our subdivision lots in Ysmael Village, Sta. Rosa, Marilao, Bulacan and to sell lots on
our subdivisions.

On October 15, 1978, Santos entered into a Deed of Agreement with De Guzman. The
deed expressly stated that Santos was “representing Siredy Enterprises, Inc.” Private
respondent was referred to as “contractor” while petitioner Siredy was cited as
“principal” . To build for them 2-bedroom single housing units and 4-bedroom duplex
housing units; at YSMAEL VILLAGE, Bo. Sta. Rosa, Marilao, Bulacan owned and
developed by SIREDY ENTERPRISES and Mr. Ismael E. Yanga, Sr.; the CONTRACTOR
intends to build for the PRINCIPAL eighty (80) units singles and eighteen (18) units
duplex residences at the cost above mentioned or a lump sum total of FOUR MILLION,
EIGHT HUNDRED FORTY TWO THOUSAND (P4,842,000.00) PESOS, Philippine
Currency;

From October 1978 to April 1990, De Guzman constructed 26 residential units at

Ysmael Village. Thirteen (13) of these were fully paid but the other 13 remained unpaid.
The total contractual price of these 13 unpaid houses is P412,154.93 which was
verified and confirmed to be correct by Santos, per an Accomplishment Billing that the
latter signed. De Guzman tried but failed to collect the unpaid account from petitioner.
Thus, he instituted the action below for specific performance against Siredy, Yanga,
and Santos who all denied liability. During the trial, Santos disappeared and his
whereabouts remain unknown.

In its defense, petitioner presented testimonial evidence to the effect that Siredy had
no contract with De Guzman and had not authorized Santos to enter into a contract

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with anyone for the construction of housing units at Ysmael Village. The trial court
agreed with petitioner based on the doctrine of privity of contract.

Thus, the trial court disposed of the case in favor of Siredy Enterprises and Dr. Yanga
and directing defendant Hermogenes B. Santos to pay unto plaintiff Conrado de
Guzman the amount of P412,154.93 as actual damages.

On appeal, De Guzman obtained a favorable judgment from the Court of Appeals. The
CA ordered Siredy Enterprises, Inc. to pay appellant Conrado de Guzman cost and
P412,154.93 as actual damage plus legal interest thereon. Hence this petition for
review on certiorari under Rule 45 of the Rules of Court.

ISSUE:

Whether or not Hermogenes B. Santos was a duly constituted agent of Siredy,

with authority to enter into contracts for the construction of residential units in
Ysmael Village and thus the capacity to bind Siredy to the Deed of Agreement.

RULING:

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 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.”

Resolution of this issue necessitates a review of the Letter of Authority executed by

Ismael E. Yanga as president of Siredy in favor of Santos. Within its terms can be found
the nature and extent of the authority granted to Santos which, in turn, determines the
extent of Siredy’s participation in the Deed of Agreement.

On its face, the instrument executed by Yanga clearly and unequivocally constituted
Santos “to do and execute”, among other things, the act of negotiating and entering
into “contract or contracts to build Housing Units on our subdivision lots in Ysmael
Village. Nothing could be more express than the written stipulations contained therein.
It was upon the authority of this document that De Guzman transacted business with
Santos that resulted in the construction contract denominated as the Deed of
Agreement.

Aside from the Letter of Authority, Siredy’s Articles of Incorporation, duly approved by
the Securities and Exchange Commission, shows that Siredy may also undertake to
erect buildings and houses on the lots and sell, lease, or otherwise dispose of said

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properties to interested buyers. Such Articles, coupled with the Letter of Authority, is
sufficient to have given De Guzman reason to believe that Santos was duly authorized
to represent Siredy for the purpose stated in the Deed of Agreement.

We find that a valid agency was created between Siredy and Santos, and the authority
conferred upon the latter includes the power to enter into a construction contract to
build houses such as the Deed of Agreement between Santos and De Guzman’s
Jigscon Construction. Hence, the inescapable conclusion is that Siredy is bound by the
contract through the representation of its agent Santos.

This petition is DENIED for lack of merit. The Decision of the Court of Appeals dated
April 26, 1996, is hereby AFFIRMED.

Manila Memorial Park Cemetery, Inc. v. Linsangan

G.R. No. 151319, 22 November 2004


FACTS:

Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the Holy
Cross Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former
owner of a memorial lot under Contract No. 25012 was no longer interested in
acquiring the lot and had opted to sell his rights subject to reimbursement of the
amounts he already paid. The contract was for P95,000.00. Baluyot reassured Atty.
Linsangan that once reimbursement is made to the former buyer, the contract would be
transferred to him. Atty. Linsangan agreed and gave Baluyot P35,295.00 representing
the amount to be reimbursed to the original buyer and to complete the down payment
to MMPCI.3 Baluyot issued handwritten and typewritten receipts for these payments.

For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty.
Linsangan filed a Complaint7 for Breach of Contract and Damages against the former.

The trial court held MMPCI and Baluyot jointly and severally liable.13 It found that
Baluyot was an agent of MMPCI and that the latter was estopped from denying this
agency, having received and enchased the checks issued by Atty. Linsangan and given
to it by Baluyot.

MMPCI further alleged that it cannot be held jointly and solidarily liable with Baluyot as
the latter exceeded the terms of her agency, neither did MMPCI ratify Baluyot’s acts.

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ISSUE:

Whether or not Baluyot is the agent of Manila Memorial Park Cemetry?

RULING:

No. It is not its agent.

The Court does not agree. Pertinent to this case are the following provisions of the Civil
Code:

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

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

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

Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he had full powers.

Thus, the acts of an agent beyond the scope of his authority do not bind the principal,
unless he ratifies them, expressly or impliedly. Only the principal can ratify; the agent
cannot ratify his own unauthorized acts. Moreover, the principal must have knowledge
of the acts he is to ratify.

Ratification in agency is the adoption or confirmation by one person of an act

performed on his behalf by another without authority. The substance of the doctrine is
confirmation after conduct, amounting to a substitute for a prior authority. Ordinarily,
the principal must have full knowledge at the time of ratification of all the material facts
and circumstances relating to the unauthorized act of the person who assumed to act
as agent. Thus, if material facts were suppressed or unknown, there can be no valid
ratification and this regardless of the purpose or lack thereof in concealing such facts
and regardless of the parties between whom the question of ratification may arise.45
Nevertheless, this principle does not apply if the principal’s ignorance of the material
facts and circumstances was willful, or that the principal chooses to act in ignorance of
the facts. However, in the absence of circumstances putting a reasonably prudent man

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on inquiry, ratification cannot be implied as against the principal who is ignorant of the
facts.

No ratification can be implied in the instant case.

A perusal of Baluyot’s Answer reveals that the real arrangement between her and Atty.
Linsangan was for the latter to pay a monthly installment of P1,800.00 whereas Baluyot
was to shoulder the counterpart amount of P1,455.00 to meet the P3,255.00 monthly
installments as indicated in the contract. Thus, every time an installment falls due,
payment was to be made through a check from Atty. Linsangan for P1,800.00 and a
cash component of P1,455.00 from Baluyot. However, it appears that while Atty.
Linsangan issued the post-dated checks, Baluyot failed to come up with her part of the
bargain. This was supported by Baluyot’s statements in her letterto Mr. Clyde Williams,
Jr., Sales Manager of MMPCI, two days after she received the copy of the Complaint.
In the letter, she admitted that she was remiss in her duties when she consented to
Atty. Linsangan’s proposal that he will pay the old price while the difference will be
shouldered by her. She likewise admitted that the contract suffered arrearages because
while Atty. Linsangan issued the agreed checks, she was unable to give her share of
P1,455.00 due to her own financial difficulties. Baluyot even asked for compassion
from MMPCI for the error she committed.

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