AGENCY REVIEWER respondent.
The basis for agency is representation and a person
Prof. Diane A. Desierto
Chapter 1: Nature, Form and Kinds of Agency
A. Nature of the Agency Relationship
Art. 1868. By the contract of agency a person binds
himself to render some service or to do something in
representation or on behalf of another, with the consent or
authority of the latter.
Why do we have agency relationships?
Because of recognition of human frailty… cannot always be
present, cannot do everything
Agency is a contract!
Elements: Consent – of agent and principal
Object – fulfilment of acts and payment
Cause – consideration/ gratuity
What is the test?
1. Elements: consent, object, representation,
limitation
2. Reciprocal (only if onerous)
- Principal: to pay the compensation
- Agent: represent
Doles v Angeles
For an agency to arise, it is not necessary that the principal
personally encounter the third person with whom the agent
interacts. The law in fact contemplates, and to a great
degree, impersonal dealings where the principal need not
personally know or meet the third person with whom her
agent transacts: precisely, the purpose of agency is to
extend the personality of the principal through the facility of
the agent. If their respective principals do not actually and
personally know each other, such ignorance does not affect
their juridical standing as agents, especially since the very
purpose of agency is to extend the personality of the
principal through the facility of the agent. If an act done by
one person in behalf of another is in its essential nature one
of agency, the former is the agent of the latter
notwithstanding he or she is not so called. The question is
to be determined by the fact that one represents and is
acting for another, and if relations exist which will
constitute an agency, it will be an agency whether the
parties understood the exact nature of the relation or not.
Victoria’s Milling Co. Inc. v CA
It is clear from Article 1868 that the basis of agency is
representation. On the part of the principal, there must be
an actual intention to appoint or an intention naturally
inferable from his words or actions; and on the part of the
agent, there must be an intention to accept the
appointment and act on it, and in the absence of such
intent, there is generally no agency. One factor which most
clearly distinguishes agency from other legal concepts is
control; one person - the agent - agrees to act under the
control or direction of another - the principal. Indeed, the
very word "agency" has come to connote control by the
principal. Where the relation of agency is dependent upon
the acts of the parties, the law makes no presumption of
agency, and it is always a fact to be proved, with the
burden of proof resting upon the persons alleging the
agency, to show not only the fact of its existence, but also
its nature and extent.
Dizon, et al. v CA
There was no valid consent by the petitioners (as co-owners
of the leased premises) on the supposed sale entered into
by Alice A. Dizon, as petitioners’ alleged agent, and private
dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent. Every person dealing
with an agent is put upon inquiry and must discover upon his
peril the authority of the agent. If he does not make such
inquiry, he is chargeable with knowledge of the agent’s
authority, and his ignorance of that authority will not be any
excuse. Persons dealing with an assumed agent, whether the
assumed agency be a general or special one, are bound at their
peril, if they would hold the principal, to ascertain not only the
fact of the agency but also the nature and extent of the
authority, and in case either is controverted, the burden of
proof is upon them to establish it.
1. Presumed to be for compensation
Art. 1875. Agency is presumed to be for compensation, unless
there is proof to the contrary.
Murao, et al. v People
All profits made and any advantage gained by an agent in the
execution of his agency should belong to the principal. LMICE is
the lawful owner of the entire proceeds. The current Petition
concerns an agency contract whereby the principal already
received payment from the client but refused to give the sales
agent, who negotiated the sale, his commission The obligation
of LMICE to pay private complainant Federico his commission
does not arise from any duty to deliver or return the money to
its supposed owner, but rather from the duty of a principal to
give just compensation to its agent for the services rendered by
the latter.
Scope of agent authority
Art. 1881. The agent must act within the scope of his
authority. He may do such acts as may be conducive to the
accomplishment of the purpose of the agency.
Art. 1882. The limits of the agent’s authority shall not be
considered exceeded should it have been performed in a
manner more advantageous to the principal than that specified
by him.
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
favour 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 provisions of this article shall be understood to be
without prejudice to the actions between the principal and
agent.
Can an employer-employee relationship be an agency
relationship?
Not always. Only when they meet the requisites of an agency
relationship. Agency can be stipulated against.
Doctrine of apparent authority – exception to the usual test, to
prevent fraud
Third party transactions
A. In own name
- agent liable except when it involves things
belonging to the principal
B. A discloses agency
- agent not liable to third party except when he
expressly binds himself
- third party ought to be aware limits of agent’s
powers
C. A does not disclose
 - agent is liable to third persons but
principal is liable to agent
D. A acts without knowledge
- agent liable except when principal ratifies
or is in estoppel
Apparent authority vs. estoppel
There is apparent authority when the principal clothes the
agent with authority. There is estoppel when by the agent’s
conduct, declaration, admission, a third party believes such
agency exist.
Special cases
1. medical negligence
2. corporations: board approvals/resolutions,
delegated authority, acts of reatification
3. ER-EE/independent contractor
Authority of corporate officers
- corporation by-laws
- authority from board of directors
Eugenio, et al. v CA
The substantive law is that payment shall be made to the
person in whose favor the obligation has been constituted,
or his successor-in-interest or any person authorized to
receive it. As far as third persons are concerned, an act is
deemed to have been performed within the scope of the
agent's authority, if such 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 his agent.
Tuazon, et al. v Heirs of Ramos
In a contract of agency, one binds oneself to render some
service or to do something in representation or on behalf of
another, with the latter’s consent or authority. The following
are the elements of agency: (1) the parties’ consent,
express or implied, to establish the relationship; (2) the
object, which is the execution of a juridical act in relation to
a third person; (3) the representation, by which the one
who acts as an agent does so, not for oneself, but as a
representative; (4) the limitation that the agent acts within
the scope of his or her authority. As the basis of agency is
representation, there must be, on the part of the principal,
an actual intention to appoint, an intention naturally
inferable from the principal’s words or actions. In the same
manner, there must be an intention on the part of the
agent to accept the appointment and act upon it. Absent
such mutual intent, there is generally no agency.
The question of whether a contract is one of sale or of
agency depends on the intention of the parties.
The declarations of agents alone are generally insufficient to
establish the fact or extent of their authority. The law
makes no presumption of agency; proving its existence,
nature and extent is incumbent upon the person alleging it.
The petitioners, on their own behalf, sued Evangeline
Santos for collection of the amounts represented by the
bounced checks, in a separate civil case that they sought to
be consolidated with the current one. If, as they claim,
they were mere agents of respondents, petitioners should
have brought the suit against Santos for and on behalf of
their alleged principal, in accordance with Section 2 of Rule
3 of the Rules on Civil Procedure. Their filing a suit against
her in their own names negates their claim that they acted
as mere agents in selling the rice obtained from Bartolome
Ramos.
Inter-Asia Investments Industries v CA
The general rule is that, in the absence of authority from the
board of directors, no person, not even its officers, can validly
bind a corporation. A corporation is a juridical person, separate
and distinct from its stockholders and members, "having x x x
powers, attributes and properties expressly authorized by law or
incident to its existence."
Being a juridical entity, a corporation may act through its board
of directors, which exercises almost all corporate powers, lays
down all corporate business policies and is responsible for the
efficiency of management, as provided in Section 23 of the
Corporation Code of the Philippines.
Under this provision, the power and responsibility to decide
whether the corporation should enter into a contract that will
bind the corporation is lodged in the board, subject to the
articles of incorporation, bylaws, or relevant provisions of law.
However, just as a natural person may authorize another to do
certain acts for and on his behalf, the board of directors may
validly delegate some of its functions and powers to officers,
committees or agents. The authority of such individuals to bind
the corporation is generally derived from law, corporate bylaws
or authorization from the board, either expressly or impliedly by
habit, custom or acquiescence in the general course of
business, viz:
A corporate officer or agent may represent and bind the
corporation in transactions with third persons to the extent that
[the] authority to do so has been conferred upon him, and this
includes powers as, in the usual course of the particular
business, are incidental to, or may be implied from, the powers
intentionally conferred, powers added by custom and usage, as
usually pertaining to the particular officer or agent, and such
apparent powers as the corporation has caused person dealing
with the officer or agent to believe that it has conferred.
Apparent authority is derived not merely from practice. Its
existence may be ascertained through (1) the general manner
in which the corporation holds out an officer or agent as having
the power to act or, in other words the apparent authority to
act in general, with which it clothes him; or (2) the
acquiescence in his acts of a particular nature, with actual or
constructive knowledge thereof, within or beyond the scope of
his ordinary powers. It requires presentation of evidence of
similar act(s) executed either in its favor or in favor of other
parties. It is not the quantity of similar acts which establishes
apparent authority, but the vesting of a corporate officer with
power to bind the corporation.
Lipat, et al. v Pacific Banking Corporation
Just as a natural person may authorize another to do certain
acts for and on his behalf, the board of directors may validly
delegate some of its functions and powers to officers,
committees, or agents. The authority of such individuals to
bind the corporation is generally derived from law, corporate
by-laws, or authorization from the board, either expressly or
impliedly by habit, custom, or acquiescence in the general
course of business. Apparent authority, is derived not merely
from practice. Its existence may be ascertained through (1) the
general manner in which the corporation holds out an officer or
agent as having the power to act or, in other words, the
apparent authority to act in general, with which it clothes him;
or (2) the acquiescence in his acts of a particular nature, with
actual or constructive knowledge thereof, whether within or
beyond the scope of his ordinary powers.
If a corporation knowingly permits one of its officers or any
other agent to act within the scope of an apparent authority, it
holds him out to the public as possessing the power to do those
acts; thus, the corporation will, as against anyone who has in
good faith dealt with it through such agent, be estopped from
denying the agent’s authority
 Siredy Enterprises v CA
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.”
The scope of the agent’s authority is what appears in the
written terms of the power of attorney. While third persons
are bound to inquire into the extent or scope of the agent’s
authority, they are not required to go beyond the terms of
the written power of attorney. Third persons cannot be
adversely affected by an understanding between the
principal and his agent as to the limits of the latter’s
authority. In the same way, third persons need not concern
themselves with instructions given by the principal to his
agent outside of the written power of attorney.
The essence of agency being the representation of another,
it is evident that the obligations contracted are for and on
behalf of the principal. This is what gives rise to the juridical
relation. A consequence of this representation is the liability
of the principal for the acts of his agent performed within
the limits of his authority that is equivalent to the
performance by the principal himself who should answer
therefor
Spouses Yu Eng Cho, et al. v Pan American World Airways
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 elements of agency are: (1) 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; (4) the agent acts within the scope of his authority.
It is a settled rule that persons dealing with an assumed
agent 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. The declarations of the agent alone are generally
insufficient to establish the fact or extent of his authority.
People’s Aircargo and Warehousing Co. v CA
Apparent authority is derived not merely from practice. Its
existence may be ascertained through (1) the general
manner in which the corporation holds out an officer or
agent as having the power to act or, in other words, the
apparent authority to act in general, with which it clothes
him; or (2) the acquiescence in his acts of a particular
nature, with actual or constructive knowledge thereof,
whether within or beyond the scope of his ordinary powers.
Inasmuch as a corporate president is often given general
supervision and control over corporate operations, the strict
rule that said officer has no inherent power to act for the
corporation is slowly giving way to the realization that such
officer has certain limited powers in the transaction of the
usual and ordinary business of the corporation. In the
absence of a charter or bylaw provision to the contrary, the
president is presumed to have the authority to act within
the domain of the general objectives of its business and
within the scope of his or her usual duties. The president of
a corporation possesses the power to enter into a contract
for the corporation, when the "conduct on the part of both
the president and the corporation [shows] that he had been
in the habit of acting in similar matters on behalf of the
company and that the company had authorized him so to
act and had recognized, approved and ratified his former
and similar actions.
Lustan v CA
The Special Power of Attorney executed by petitioner in favor of
Parangan duly authorized the latter to represent and act on
behalf of the former. Having done so, petitioner clothed
Parangan with authority to deal with PNB on her behalf and in
the absence of any proof that the bank had knowledge that the
last three loans were without the express authority of
petitioner, it cannot be prejudiced thereby. As far as third
persons are concerned, an act is deemed to have been
performed within the scope of the agent's authority if such 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 the understanding between the principal and the agent. The
SPA particularly provides that the same is good not only for the
principal loan but also for subsequent commercial, industrial,
agricultural loan or credit accommodation that the attorney-in-
fact may obtain and until the power of attorney is revoked in a
public instrument and a copy of which is furnished to PNB. 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.
Bacaltos Coal Mines v CA
A third person dealing with a known agent may not act
negligently with regard to the extent of the agent's authority or
blindly trust the agent's statements in such respect. Rather, he
must use reasonable diligence and prudence to ascertain
whether the agent is acting and dealing with him within the
scope of his powers. The mere opinion of an agent as to the
extent of his powers, or his mere assumption of authority
without the foundation, will not bind the principal; and a third
person dealing with a known agent must bear the burden of
determining for himself, by the exercise of the reasonable
diligence and prudence, the existence or nonexistence of the
agent's authority to act in the premises. In other words,
whether the agency is general or special, the third person is
bound to ascertain not only the fact of agency, but the nature
and extent of the authority . The principal, on the other hand,
may act on the presumption that third persons dealing with his
agent will not be negligent in failing to ascertain the extent of
his authority as well as the existence of his agency.
Since the agency of Savellon is based on a written document,
the extent and scope of his powers must be determined on the
basis thereof.
Professional Services v Agana
[The hospital’s] liability is also anchored upon the agency
principle of apparent authority or agency by estoppel and the
doctrine of corporate negligence which have gained acceptance
in the determination of a hospital’s liability for negligent acts of
health professionals.
Apparent authority, or what is sometimes referred to as the
"holding out" theory, or doctrine of ostensible agency or agency
by estoppel, has its origin from the law of agency. It imposes
liability, not as the result of the reality of a contractual
relationship, but rather because of the actions of a principal or
an employer in somehow misleading the public into believing
that the relationship or the authority exists. The concept is
essentially one of estoppel and has been explained in this
manner: "The principal is bound by the acts of his agent with
the apparent authority which he knowingly permits the agent to
assume, or which he holds the agent out to the public as
possessing. The question in every case is whether the principal
has by his voluntary act placed the agent in such a situation
that a person of ordinary prudence, conversant with business
usages and the nature of the particular business, is justified in
presuming that such agent has authority to perform the
particular act in question.”
In cases where it can be shown that a hospital, by its
actions, has held out a particular physician as its agent
and/or employee and that a patient has accepted treatment
from that physician in the reasonable belief that it is being
rendered in behalf of the hospital, then the hospital will be
liable for the physician’s negligence
2. Form
Art. 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.
Agency may be oral, unless the law requires a
specific form.
Calibo v CA
As indicated in Article 1869, for an agency relationship to
be deemed as implied, the principal must know that another
person is acting on his behalf without authority. Here,
appellee categorically stated that the only purpose for his
leaving the subject tractor in the care and custody of Mike
Abella was for safekeeping, and definitely not for him to
pledge or alienate the same. If it were true that Mike
pledged appellee’s tractor to appellant, then Mike was
acting not only without appellee’s authority but without the
latter’s knowledge as well.
Article 1911, on the other hand, mandates that the principal
is solidarily liable with the agent if the former allowed the
latter to act as though he had full powers. Again, in view of
appellee’s lack of knowledge of Mike’s pledging the tractor
without any authority from him, it stands to reason that the
former could not have allowed the latter to pledge the
tractor as if he had full powers to do so.
Equitable PCI Bank v Rosita Ku
An agency may be express but it may also be 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. Likewise,
acceptance by the agent may also be express, although it
may also be implied from his acts which carry out the
agency, or from his silence or inaction according to the
circumstances. In this case, Joel Rosales averred that "on
occasions when I receive mail matters for said law office, it
is only to help them receive their letters promptly,"
implying that counsel had allowed the practice of Rosales
receiving mail in behalf of the former.
Murao v People
It is unequivocal that an agency existed between LMICE and
private complainant Federico. Article 1868 of the Civil
Code defines agency as a special 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.” Although private
complainant Federico never had the opportunity to operate
as a dealer for LMICE under the terms of the Dealership
Agreement, he was allowed to act as a sales agent for
LMICE. He can negotiate for and on behalf of LMICE for the
refill and delivery of fire extinguishers, which he, in fact, did
on two occasions – with Landbank and with the City
Government of Puerto Princesa. Unlike the Dealership
Agreement, however, the agreement that private
complainant Federico may act as sales agent of LMICE was
based on an oral agreement.
B. Creation of the Agency Relationship
Art. 1870. Acceptance by the agent may also be express,
or implied from his acts which carry out the agency, or from
his silence or inaction according to the circumstances.
Art. 1871. Between persons who are present, the acceptance
of the agency may also be implied if the principal delivers his
power of attorney to the agent and the latter receives it without
any objection.
Art. 1872. Between persons who are absent, the acceptance of
the agency cannot be implied from the silence of the agent,
except:
(1) When the principal transmits his power of attorney to the
agent, who receives it without any objection;
(2) When the principal entrusts to him by letter or telegram a
power of attorney with respect to the business in which he
habitually engaged as an agent, and he did not reply to the
letter or telegram.
Art. 1873. If a person specially informs another or states by
public advertisement that he has given a power of attorney to a
third person, the latter thereby becomes a duly authorized
agent, in the former case with respect to the person who
received the special information, and in the latter case with
regard to any person.
The power shall continue to be in full force until the
notice is rescinded in the same manner in which it was given.
British Airways v CA
An agent is also responsible for any negligence in the
performance of its functioni and is liable for damages which the
principal may suffer by reason of its negligent act.
Nogales v Capitol Medical Center
In general, a hospital is not liable for the negligence of an
independent contractor-physician. There is, however, an
exception to this principle. The hospital may be liable if the
physician is the “ostensible” agent of the hospital. This
exception is also known as the “doctrine of apparent authority.”
Under the doctrine of apparent authority a hospital can be held
vicariously liable for the negligent acts of a physician providing
care at the hospital, regardless of whether the physician is an
independent contractor, unless the patient knows, or should
have known, that the physician is an independent contractor.
The elements of the action have been set out as follows: “For a
hospital to be liable under the doctrine of apparent authority, a
plaintiff must show that: (1) the hospital, or its agent, acted in
a manner that would lead a reasonable person to conclude that
the individual who was alleged to be negligent was an employee
or agent of the hospital; (2) where the acts of the agent
create the appearance of authority, the plaintiff must also prove
that the hospital had knowledge of and acquiesced in them; and
(3) the plaintiff acted in reliance upon the conduct of the
hospital or its agent, consistent with ordinary care and
prudence.”
Litonjua, Jr. v Eternit Corporation
While a corporation may appoint agents to negotiate for the
sale of its real properties, the final say will have to be with the
board of directors through its officers and agents as authorized
by a board resolution or by its by-laws. An unauthorized act of
an officer of the corporation is not binding on it unless the latter
ratifies the same expressly or impliedly by its board of directors.
Any sale of real property of a corporation by a person
purporting to be an agent thereof but without written authority
from the corporation is null and void. The declarations of the
agent alone are generally insufficient to establish the fact or
extent of his/her authority.
By the contract of agency, a person binds himself to render
some service or to do something in representation on behalf of
another, with the consent or authority of the latter. Consent of
both principal and agent is necessary to create an agency. The
principal must intend that the agent shall act for him; the agent
must intend to accept the authority and act on it, and the
intention of the parties must find expression either in words
or conduct between them.
An agency may be expressed or implied from the act 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. Acceptance by the agent
may be expressed, or implied from his acts which carry out
the agency, or from his silence or inaction according to the
circumstances. Agency may be oral unless the law requires
a specific form. However, to create or convey real rights
over immovable property, a special power of attorney is
necessary. Thus, when a sale of a piece of land or any
portion thereof is through an agent, the authority of the
latter shall be in writing, otherwise, the sale shall be void.
Manila Memorial Park Cemetery v Linsangan
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. Thus, the elements of agency are (i) consent,
express or implied, of the parties to establish the
relationship; (ii) the object is the execution of a juridical act
in relation to a third person; (iii) the agent acts as a
representative and not for himself; and (iv) the agent acts
within the scope of his authority
Under its Agency Manager Agreement; an agency manager
such as Baluyot is considered an independent contractor
and not an agent. However, Baluyot is still an agent of
MMPCI, having represented the interest of the latter, and
having been allowed by MMPCI to represent it in her
dealings with its clients/prospective buyers.
BA Finance Corporation v CA
Under the deed of chattel mortgage, B.A. Finance
Corporation was constituted attorney-in-fact with full power
and authority to file, follow-up, prosecute, compromise or
settle insurance claims; to sign execute and deliver the
corresponding papers, receipts and documents to the
Insurance Company as may be necessary to prove the
claim, and to collect from the latter the proceeds of
insurance to the extent of its interests, in the event that the
mortgaged car suffers any loss or damage. In granting B.A.
Finance Corporation the aforementioned powers and
prerogatives, the Cuady spouses created in the former's
favor an agency. Thus, under Article 1884 of the Civil Code
of the Philippines, B.A. Finance Corporation is bound by its
acceptance to carry out the agency, and is liable for
damages which, through its non-performance, the Cuadys,
the principal in the case at bar, may suffer.
Gozun v Mercado
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. Contracts 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 are
classified as unauthorized contracts and are declared
unenforceable, unless they are ratified.
Generally, the agency may be oral, unless the law requires
a specific form. However, a special power of attorney is
necessary for an agent to, as in this case, borrow money,
unless it be urgent and indispensable for the preservation of
the things which are under administration.
Naguiat v CA
The Court of Appeals recognized the existence of an
“agency by estoppel” citing Article 1873 of the Civil Code.
Apparently, it considered that at the very least, as a
consequence of the interaction between Naguiat and
Ruebenfeldt, Queaño got the impression that Ruebenfeldt was
the agent of Naguiat, but Naguiat did nothing to correct
Queaño’s impression. In that situation, the rule is clear. One
who clothes another with apparent authority as his agent, and
holds him out to the public as such, cannot be permitted to
deny the authority of such person to act as his agent, to the
prejudice of innocent third parties dealing with such person in
good faith, and in the honest belief that he is what he appears
to be.
Delos Reyes v CA
There is no effective consent in law without the capacity to give
such consent. In other words, legal consent presupposes
capacity. Thus, there is said to be no consent, and
consequently, no contract when the agreement is entered into
by one in behalf of another who has never given him
authorization therefore unless he has by law a right to
represent the latter. It has also been held that if the vendor is
not the owner of the property at the time of the sale, the sale is
null and void, because a person can sell only what he owns or is
authorized to sell. One exception is when a contract entered
into in behalf of another who has not authorized it,
subsequently confirmed or ratified the same in which case, the
transaction becomes valid and binding against him and he is
estopped to question its legality.
When the sale of a piece of land or any interest therein is
through an agent, the authority of the latter shall be in writing;
otherwise the sale shall be void. In other words, for want of
capacity (to give consent) on the part of Renato Gabriel, the
oral contract of sale lacks one of the essential requisites for its
validity prescribed under Article 1318, and is therefore null and
void ab initio.
San Juan Structural Steel Fabricators v CA
As a general rule, the acts of corporate officers within the scope
of their authority are binding on the corporation. But when
these officers exceed their authority, their actions "cannot bind
the corporation, unless it has ratified such acts or is estopped
from disclaiming them."
C. Categories and Consequences
Art. 1876. An agency is either general or special.
The former comprises all the business of the principal.
The latter, one or more specific transactions.
Art. 1877. An agency couched in general terms comprises only
acts of administration, even if the principal should state that he
withholds no power or that the agent may execute such acts as
he may consider appropriate, or even though the agency should
authorize a general and unlimited management.
Art. 1878. Special powers of attorney are necessary in the
following cases:
(1) To make such payments as are not usually considered as
acts of administration;
(2) To effect novations which put an end to obligations already
in existence at the time the agency was constituted;
(3) To compromise, to submit questions to arbitration, to
renounce the right to appeal from a judgment, to waive
objections to the venue of an action or to abandon a
prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a
valuable consideration;
(6) To make gifts, except customary ones for charity or those
made to employees in the business managed by the agent;
(7) To loan or borrow money, unless the latter act be
urgent and indispensable for the preservation of the things
which are under administration;
(8) To lease any real property to another person for more
than one year;
(9) To bind the principal to render some service without
compensation;
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable
property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the
agency;
(15) Any other act of strict dominion.
Art. 1874. When a sale of a piece of land or any interest
therein is through an agent, the authority of the latter shall
be in writing; otherwise, the sale shall be void.
Art. 1879. A special power to sell excludes the power to
mortgage; and a special power to mortgage does not
include the power to sell.
Art. 1880. A special power to compromise does not
authorize submission to arbitration.
General power – acts of administration
Special power- acts of dominion/ ownership --> executed to
show the public at large
The acts in Art. 1878 involve greater risk to the principal, in
that they change the legal relation for the principal.
1. Significance of an SPA
United Coconut Planters Bank v Magpayo
Noteworthy is the fact that Section 4, Rule 18 of the 1997
Rules of Court is a new provision; and requires nothing less
than that the representative should appear in a party’s
behalf fully authorized in writing to enter into an amicable
settlement, to submit to alternative modes of dispute
resolution, and to enter into stipulations of facts and of
documents. The rules now require the special power of
attorney be in writing because the courts can neither
second-guess the specific powers given to the
representative, nor can the courts assume that all the
powers specified in Section 4 of Rule 18 are granted by the
party to his representative.
Paras v Paras
Respondent presented a Special Power of Attorney (SPA)
executed in his favor by complainant to negotiate for an
agricultural or crop loan from the Bais Rural Bank of Bais
City. Instead of exculpating respondent, the presence of the
SPA places him in hot water. For if he was so authorized to
obtain loans from the banks, then why did he have to falsify
his wife's signatures in the bank loan documents? The
purpose of an SPA is to especially authorize the attorney-in-
fact to sign for and on behalf of the principal using his own
name.
Orbete v Sendiong
The signing of the verification and certification of non-forum
shopping are covered under the said provisions of the
General Power of Attorney. A special power of attorney
simply refers to a clear mandate specifically authorizing the
performance of a specific power and of express acts
subsumed therein, and there is a specific authority given to
Mae Sendiong to sign her name in behalf of Paul Sendiong
in contracts and agreements and to institute suits in behalf
of her father. Neither would the fact that the document is
captioned “General Power of Attorney” militate against its
construction as granting specific powers to the agent pertaining
to the petition for annulment of judgment she instituted in
behalf of her father. A general power of attorney may include a
special power if such special power is mentioned or referred to
in the general power.
Veloso v CA
Whether the instrument be denominated as "general power of
attorney" or "special power of attorney", what matters is the
extent of the power or powers contemplated upon the agent or
attorney in fact. If the power is couched in general terms, then
such power cannot go beyond acts of administration. However,
where the power to sell is specific, it not being merely implied,
much less couched in general terms, there can not be any doubt
that the attorney in fact may execute a valid sale. An
instrument may be captioned as "special power of attorney" but
if the powers granted are couched in general terms without
mentioning any specific power to sell or mortgage or to do other
specific acts of strict dominion, then in that case only acts of
administration may be deemed conferred.
Respondent Aglaloma relied on the power of attorney presented
by petitioner's wife, Irma. Being the wife of the owner and
having with her the title of the property, there was no reason
for the private respondent not to believe in her authority.
Moreover, the power of attorney was notarized and as such,
carried with it the presumption of its due execution.
2. Rationale for requiring an SPA in specific cases
Bravo-Guerrero v Bravo
Simona authorized Mauricio to dispose of the Properties when
she executed the GPA. True, Article 1878 requires a special
power of attorney for an agent to execute a contract that
transfers the ownership of an immovable. However, the Court
has clarified that Article 1878 refers to the nature of the
authorization, not to its form. Even if a document is titled as a
general power of attorney, the requirement of a special power
of attorney is met if there is a clear mandate from the principal
specifically authorizing the performance of the act.
Dizon v CA
There was no valid consent by the petitioners (as co-owners of
the leased premises) on the supposed sale entered into by Alice
A. Dizon, as petitioners’ alleged agent, and private respondent.
The basis for agency is representation and a person dealing
with an agent is put upon inquiry and must discover upon his
peril the authority of the agent. Every person dealing with an
agent is put upon inquiry and must discover upon his peril the
authority of the agent. If he does not make such inquiry, he is
chargeable with knowledge of the agent’s authority, and his
ignorance of that authority will not be any excuse. Persons
dealing with an assumed agent, whether the assumed agency
be a general or special one, are bound at their peril, if they
would hold the principal, to ascertain not only the fact of the
agency but also the nature and extent of the authority, and in
case either is controverted, the burden of proof is upon them to
establish it.
Gozun v Mercado
Generally, the agency may be oral, unless the law requires a
specific form. However, a special power of attorney is necessary
for an agent to, as in this case, borrow money, unless it be
urgent and indispensable for the preservation of the things
which are under administration.
The requirement of a special power of attorney refers to the
nature of the authorization and not to its form. If the special
authority is not written, then it must be duly established by
evidence.
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.
3. SPA for sale vis-à-vis mortgage
Art. 1879. A special power to sell excludes the power to
mortgage; and a special power to mortgage does not
include the power to sell.
Bicol Savings and Loan Association v CA
The sale proscribed by a special power to mortgage under
Article 1879 is a voluntary and independent contract, and
not an auction sale resulting from extrajudicial foreclosure,
which is precipitated by the default of a mortgagor. Absent
that default, no foreclosure results. The stipulation granting
an authority to extrajudicially foreclose a mortgage is an
ancillary stipulation supported by the same cause or
consideration for the mortgage and forms an essential or
inseparable part of that bilateral agreement.
The power to foreclose is not an ordinary agency that
contemplates exclusively the representation of the principal
by the agent but is primarily an authority conferred upon
the mortgagee for the latter's own protection. That power
survives the death of the mortgagor.
4. SPA for compromise does not imply
submission to arbitration
Art. 1880. A special power to compromise does not
authorize submission to arbitration.
RA 9285. Alternative Dispute Resolution Actof 2004.
SEC. 14. Participation in Mediation. - Except as otherwise
provided in this Act, a party may designate a lawyer or any
other person to provide assistance in the mediation. A
lawyer of this right shall be made in writing by the party
waiving it. A waiver of participation or legal representation
may be rescinded at any time.
SEC. 16. Effect of Agreement to Submit Dispute to
Mediation Under Institutional Rules. - An agreement to
submit a dispute to mediation by any institution shall
include an agreement to be bound by the internal mediation
and administrative policies of such institution. Further, an
agreement to submit a dispute to mediation under
international mediation rule shall be deemed to include an
agreement to have such rules govern the mediation of the
dispute and for the mediator, the parties, their respective
counsel, and nonparty participants to abide by such rules.
In case of conflict between the institutional mediation rules
and the provisions of this Act, the latter shall prevail.
SEC. 22. Legal Representation in International Arbitration.
- In international arbitration conducted in the Philippines, a
party may be presented by any person of his choice.
Provided, that such representative, unless admitted to the
practice of law in the Philippines, shall not be authorized to
appear as counsel in any Philippine court, or any other
quasi-judicial body whether or not such appearance is in
relation to the arbitration in which he appears.
RA 876. Arbitration Law.
Section 2. Persons and matters subject to arbitration. -
Two or more persons or parties may submit to the
arbitration of one or more arbitrators any controversy
existing between them at the time of the submission and
which may be the subject of an action, or the parties to any
contract may in such contract agree to settle by arbitration a
controversy thereafter arising between them. Such submission
or contract shall be valid, enforceable and irrevocable, save
upon such grounds as exist at law for the revocation of any
contract.
Such submission or contract may include question arising out of
valuations, appraisals or other controversies which may be
collateral, incidental, precedent or subsequent to any issue
between the parties.
A controversy cannot be arbitrated where one of the parties to
the controversy is an infant, or a person judicially declared to
be incompetent, unless the appropriate court having jurisdiction
approve a petition for permission to submit such controversy to
arbitration made by the general guardian or guardian ad litem
of the infant or of the incompetent.
But where a person capable of entering into a submission or
contract has knowingly entered into the same with a person
incapable of so doing, the objection on the ground of incapacity
can be taken only in behalf of the person so incapacitated.
Section 3. Controversies or cases not subject to the provisions
of this Act. - This Act shall not apply to controversies and to
cases which are subject to the jurisdiction of the Court of
Industrial Relations or which have been submitted to it as
provided by Commonwealth Act Numbered One hundred and
three, as amended.
Section 4. Form of arbitration agreement. - A contract to
arbitrate a controversy thereafter arising between the parties,
as well as a submission to arbitrate an existing controversy
shall be in writing and subscribed by the party sought to be
charged, or by his lawful agent.
The making of a contract or submission for arbitration described
in section two hereof, providing for arbitration of any
controversy, shall be deemed a consent of the parties to the
jurisdiction of the Court of First Instance of the province or city
where any of the parties resides, to enforce such contract or
submission.
UNCITRAL Model Law
Article 8. Arbitration agreement and substantive claim before
court
(1) A court before which an action is brought in a matter which
is the subject of an arbitration agreement shall, if a party so
requests not later than when submitting his fi rst statement on
the substance of the dispute, refer the parties to arbitration
unless it fi nds that the agreement is null and void, inoperative
or incapable of being performed.
(2) Where an action referred to in paragraph (1) of this article
has been brought, arbitral proceedings may nevertheless be
commenced or continued, and an award may be made, while
the issue is pending before the court.
Article 10. Number of arbitrators
(1) The parties are free to determine the number of arbitrators.
(2) Failing such determination, the number of arbitrators shall
be three.
Article 11. Appointment of arbitrators
(1) No person shall be precluded by reason of his nationality
from acting as an arbitrator, unless otherwise agreed by the
parties.
(2) The parties are free to agree on a procedure of appointing
the arbitrator or arbitrators, subject to the provisions of
paragraphs (4) and (5) of this article.
(3) Failing such agreement,
(a) in an arbitration with three arbitrators, each party shall
appoint one arbitrator, and the two arbitrators thus appointed
shall appoint the third arbitrator; if a party fails to appoint the
arbitrator within thirty days of receipt of a request to do so from
the other party, or if the two arbitrators fail to agree on the
third arbitrator within thirty days of their appointment, the
appointment shall be made, upon request of a party, by the
court or other authority specified in article 6;
(b) in an arbitration with a sole arbitrator, if the parties are
unable to agree on the arbitrator, he shall be appointed,
upon request of a party, by the court or other authority
specified in article 6.
(4) Where, under an appointment procedure agreed upon
by the parties,
(a) a party fails to act as required under such procedure, or
(b) the parties, or two arbitrators, are unable to reach an
agreement expected of them under such procedure, or
(c) a third party, including an institution, fails to perform
any function entrusted to it under such procedure, any
party may request the court or other authority specified in
article 6 to take the necessary measure, unless the
agreement on the appointment procedure provides other
means for securing the appointment.
(5) A decision on a matter entrusted by paragraph (3) or
(4) of this article to the court or other authority specified in
article 6 shall be subject to no appeal. The court or other
authority, in appointing an arbitrator, shall have due regard
to any qualifications required of the arbitrator by the
agreement of the parties and to such considerations as are
likely to secure the appointment of an independent and
impartial arbitrator and, in the case of a sole or third
arbitrator, shall take into account as well the advisability of
appointing an arbitrator of a nationality other than those of
the parties.
Article 12. Grounds for challenge
(1) When a person is approached in connection with his
possible appointment as an arbitrator, he shall disclose any
circumstances likely to give rise to justifiable doubts as to
his impartiality or independence. An arbitrator, from the
time of his appointment and throughout the arbitral
proceedings, shall without delay disclose any such
circumstances to the parties unless they have already been
informed of them by him.
(2) An arbitrator may be challenged only if circumstances
exist that give rise to justifiable doubts as to his impartiality
or independence, or if he does not possess qualifications
agreed to by the parties. A party may challenge an
arbitrator appointed by him, or in whose appointment he
has participated, only for reasons of which he becomes
aware after the appointment has been made.
Article 13. Challenge procedure
(1) The parties are free to agree on a procedure for
challenging an arbitrator, subject to the provisions of
paragraph (3) of this article.
(2) Failing such agreement, a party who intends to
challenge an arbitrator shall, within fifteen days after
becoming aware of the constitution of the arbitral tribunal
or after becoming aware of any circumstance referred to in
article 12(2), send a written statement of the reasons for
the challenge to the arbitral tribunal. Unless the challenged
arbitrator withdraws from his office or the other party
agrees to the challenge, the arbitral tribunal shall decide on
the challenge.
(3) If a challenge under any procedure agreed upon by the
parties or under the procedure of paragraph (2) of this
article is not successful, the challenging party may request,
within thirty days after having received notice of the
decision rejecting the challenge, the court or other authority
specified in article 6 to decide on the challenge, which
decision shall be subject to no appeal; while such a request
is pending, the arbitral tribunal, including the challenged
arbitrator, may continue the arbitral proceedings and make
an award.
Article 14. Failure or impossibility to act
(1) If an arbitrator becomes de jure or de facto unable to
perform his functions or for other reasons fails to act
without undue delay, his mandate terminates if he withdraws
from his office or if the parties agree on the termination.
Otherwise, if a controversy remains concerning any of these
grounds, any party may request the court or other authority
specified in article 6 to decide on the termination of the
mandate, which decision shall
be subject to no appeal.
(2) If, under this article or article 13(2), an arbitrator withdraws
from his office or a party agrees to the termination of the
mandate of an arbitrator, this does not imply acceptance of the
validity of any ground referred to in this article or article 12(2).
Article 18. Equal treatment of parties
The parties shall be treated with equality and each party shall
be given a full opportunity of presenting his case.
Article 19. Determination of rules of procedure
(1) Subject to the provisions of this Law, the parties are free to
agree on the procedure to be followed by the arbitral tribunal in
conducting the proceedings.
(2) Failing such agreement, the arbitral tribunal may, subject to
the provisions of this Law, conduct the arbitration in such
manner as it considers appropriate. The power conferred upon
the arbitral tribunal includes the power to determine the
admissibility, relevance, materiality and weight of any evidence.
5. General agency vis-à-vis special agency
Art. 1876. An agency is either general or special.
The former comprises all the business of the principal.
The latter, one or more specific transactions.
Reyes v Reyes
While undoubtedly Duran was an agent of Ramon, he was not a
general agent of the latter with respect to the landholding. The
record shows that as overseer, Duran’s duties and
responsibilities were limited to "issuing receipts, selling
mangoes and bamboo trees and all other things saleable." Thus,
by his own admission, Duran was a special agent under Article
1876 of the Civil Code. Duran’s duties and responsibilities as a
special agent do not include the acceptance of rentals from
persons other than the tenant so designated by the landowner.
Duran’s authority as a special agent likewise excludes the power
to appoint tenants or successor-tenants. Clearly, Duran acted
beyond the limits of his authority as an agent. We cannot agree
with the Court of Appeals did that since Duran had been the
overseer of the Castros for 16 years, he thereby made
respondents believe he had full authority from the Castro family
relative to the administration of the subject property.
Regardless of the number of years that Duran had been the
overseer of the Castros, there is absolutely no showing that he
was ever authorized to appoint tenants or successor-tenants for
the Castros, nor to accept rentals from the persons he would
appoint. Absent substantial evidence to show Duran’s authority
from the Castros to give consent to the creation of a tenancy
relationship, his actions could not give rise to an implied
tenancy.
Dominion Insurance Corp v CA
A perusal of the Special Power of Attorney would show that
petitioner 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 agency
comprises all the business of the principal, but, couched in
general terms, it is limited only to acts of administration.
A general power permits the agent to do all acts for which the
law does not require a special power. Thus, the acts
enumerated in or similar to those enumerated in the Special
Power of Attorney do not require a special power of attorney.
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, neither 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.
6. Generally termed agency only refers to acts
of administration
Art. 1877. An agency couched in general terms comprises
only acts of administration, even if the principal should
state that he withholds no power or that the agent may
execute such acts as he may consider appropriate, or even
though the agency should authorize a general and unlimited
management.
Act of administration or dominion?
Juridical tie (act) nature of obligation
between actors (actors)
Fabia v David
All the acts of administration — to collect the rents for
herself, and to conserve the property by making all
necessary repairs and paying all the taxes, special
assessments, and insurance premiums thereon — were by
said judgment vested in the usufructuary. The pretension of
the respondent Juan Grey that he is the administrator of
the property with the right to choose the tenants and to
dictate the conditions of the lease is contrary to both the
letter and the spirit of the said clause of the will, the
stipulation of the parties, and the judgment of the court. He
cannot manage or administer the property after all the acts
of management or administration have been vested by the
court, with his consent, in the usufructuary. He admitted
that before said judgment he had been collecting the rents
as agent of the usufructuary under an agreement with the
latter. What legal justification or valid excuse could he have
to claim the right to choose the tenant and fix the amount
of the rent when under the will, the stipulation of the
parties, and the final judgment of the court it is not he but
the usufructuary who is entitled to said rents?
Nario v Philippine American Life Insurance Co.
The result would be the same even if we regarded the
interest of the ward to be worth less than P2,000.00. While
the father or mother would in such event be exempt from
the duty of filing a bond, and securing judicial appointment,
still the parent's authority over the estate of the ward as a
legal-guardian would not extend to acts of encumbrance or
disposition, as distinguished from acts of management or
administration. The distinction between one and the other
kind of power is too basic in our law to be ignored. Thus,
under Article 1877 of the Civil Code of the Philippines, an
agency in general terms does not include power to
encumber or dispose the property of the principal; and the
Code explicitly requires a special power or authority for the
agent "to loan or borrow money, unless the latter act be
urgent or indispensable for the preservation of the thing
under administration" (Art. 1878, no. 7). Similarly, special
powers are required to effect novations, to waive any
obligation gratuitously or obligate the principal as guarantor
or surety (Do., nos. 2, 4 and 11). By analogy, since the law
merely constitutes the parent as legal administrator of the
child's property (which is a general power), the parent
requires special authority for the acts above specified, and
this authority can be given only by a court. This restricted
interpretation of the parent's authority becomes all the
more necessary where as in case before us, there is no
bond to guarantee the ward against eventual losses.
Chapter 2: Obligations of the Agent
A. If agency is declined
Art. 1885. In case a person declines an agency, he is bound to
observe the diligence of a good father of a family in the custody
and preservation of the goods forwarded to him by the owner
until the latter should appoint an agent. The owner shall as
soon as practicable either appoint an agent or take charge of
the goods.
B. If agency is accepted
1. Agent’s general obligation
Art. 1884. The agent is bound by his acceptance to carry out
the agency and is liable for the damages which, through his
non-performance, the principal may suffer.
He must also finish the business already begun on the
death of the principal, should delay entail any danger.
Principal – Agent
1. funds – receipt, lending/borrowing, accounting
2. interest – of third party, of principal
3. contracting – authority, scope, ratification
4. special rules for commission
BA Finance v CA
Under the deed of chattel mortgage, B.A. Finance Corporation
was constituted attorney-in-fact with full power and authority to
file, follow-up, prosecute, compromise or settle insurance
claims; to sign execute and deliver the corresponding papers,
receipts and documents to the Insurance Company as may be
necessary to prove the claim, and to collect from the latter the
proceeds of insurance to the extent of its interests, in the event
that the mortgaged car suffers any loss or damage. In granting
B.A. Finance Corporation the aforementioned powers and
prerogatives, the Cuady spouses created in the former's favor
an agency. Thus, under Article 1884 of the Civil Code of the
Philippines, B.A. Finance Corporation is bound by its acceptance
to carry out the agency, and is liable for damages which,
through its non-performance, the Cuadys, the principal in the
case at bar, may suffer.
Gutierrez Hermanos v Oria Hermanos
The whole case as presented, both by the oral testimony and
the exhibits, demonstrates beyond shadow of doubt that the
plaintiff was acting as the agent of the defendant in placing the
insurance upon the vessels in question and that such act
redounded to its benefit. The idea presented in argument of
counsel for appellant that all relations were broken off and
terminated by the commencement of the action upon the
account current by the plaintiff in March, 1909, and that,
therefore, the plaintiff could do nothing whatever on behalf of
the defendant thereafter, wholly loses its force when we
observe that, in reality, the plaintiff did not do anything on
behalf of the defendant after that time. What it did and all it did
was to fulfill a contract which it had made with the insurance
company prior to the beginning of that action. The plaintiff had
secured the insurance of the two vessels during the years 1907,
1908, and 1909, and had agreed to pay the insurance company
the premiums thereon. The three contracts for those years had
been made by the plaintiff and it had become liable to fulfill the
same on its part prior to the commencement of the action on
the 30th of March, 1909. The payment thereafter of the
insurance premiums for those three years is no proof that the
plaintiff was still exercising a relation which existed after the
commencement of that action, but indicates simply that it was
completing an obligation which it had made when that relation
was admittedly in force.
2. When agent can refuse to carry out agency
Art. 1888. An agent shall not carry out an agency if its
execution would materially result in loss or damage to the
principal.

Agent should refuse when the act is in contravention of the
purpose of the agency.
3. Agent substitutes and multiple agents
Art. 1892. The agent may appoint a substitute if the
principal has not prohibited him from doing so; but he shall
be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating
the person, and the person appointed was notoriously
incompetent or insolvent.
All acts of the substitute appointed against the
prohibition of the principal shall be void.
Art. 1893. In the cases mentioned in Nos. 1 and 2 of the
preceding article, the principal may furthermore bring an
action against the substitute with respect to the obligations
which the latter has contracted under the substitution.
Art. 1894. The responsibility of two or more agents, even
though they have been appointed simultaneously, is not
solidary, if solidarity has not been expressly stipulated.
Art. 1895. If solidarity has been agreed upon, each of the
agents is responsible for the non-fulfillment of the agency,
and for the fault or negligence of his fellow agents, except
in the latter case when the fellow agents acted beyond the
scope of their authority.
Liability under Art. 1893 is joint only.
Difference between substitute and sub-agent
Principal Agent
Substitute
Sub-agent
In case of a substitute, the juridical tie between principal
and original agent is lost. The substitute takes the place of
the original agent.
In case of a sub-agent, the original agent still has a juridical
tie with the principal. The sub-agent is bound to the original
agent and not to the principal.
Serona v CA
The law on agency in our jurisdiction allows the
appointment by an agent of a substitute or sub-agent in the
absence of an express agreement to the contrary between
the agent and the principal. In the case at bar, the
appointment of Labrador as petitioner’s sub-agent was not
expressly prohibited by Quilatan, as the acknowledgment
receipt does not contain any such limitation. Neither does it
appear that petitioner was verbally forbidden by Quilatan
from passing on the jewelry to another person before the
acknowledgment receipt was executed or at any other time.
Thus, it cannot be said that petitioner’s act of entrusting the
jewelry to Labrador is characterized by abuse of confidence
because such an act was not proscribed and is, in fact,
legally sanctioned.
Where, as in the present case, the agents to whom personal
property was entrusted for sale, conclusively proves the
inability to return the same is solely due to malfeasance of
a subagent to whom the first agent had actually entrusted
the property in good faith, and for the same purpose for
which it was received; there being no prohibition to do so
and the chattel being delivered to the subagent before the
owner demands its return or before such return becomes
due, we hold that the first agent can not be held guilty of
estafa by either misappropriation or conversion. The abuse of
confidence that is characteristic of this offense is missing under
the circumstances
Vizconde v IAC
Nothing in the language of the receipt, Exhibit "A", or in the
proven circumstances attending its execution can logically be
considered as evidencing the creation of an agency between
Perlas, as principal, and Vizconde, as agent, for the sale of the
former's ring. True, reference to what may be taken for an
agency agreement appears in the clause ". . . which I agree to
sell . . . on commission basis" in the main text of that
document. But it is clear that if any agency was established, it
was one between Perlas and Pagulayan only, this being the only
logical conclusion from the use of the singular "I" in said clause,
in conjunction with the fact that the part of the receipt in which
the clause appears bears only the signature of Pagulayan. To
warrant anything more than a mere conjecture that the receipt
also constituted Vizconde the agent of Perlas for the same
purpose of selling the ring, the cited clause should at least have
used the plural "we," or the text of the receipt containing that
clause should also have carried Vizconde's signature.
The joint and several undertaking assumed by Vizconde in a
separate writing below the main body of the receipt, Exhibit "A",
merely guaranteed the civil obligation of Pagulayan to pay
Perlas the value of the ring in the event of her (Pagulayan's)
failure to return said article. It cannot, in any sense, be
construed as assuming any criminal responsibility consequent
upon the failure of Pagulayan to return the ring or deliver its
value. It is fundamental that criminal responsibility is personal
and that in the absence of conspiracy, one cannot be held
criminally liable for the act or default of another.
4. Specific obligations in the execution of the
agency
a. Act pursuant to principal’s instructions
Art. 1887. In the execution of the agency, the agent shall act
in accordance with the instructions of the principal.
In default thereof, he shall do all that a good father of
a family would do, as required by the nature of the business.
Art. 1899. If a duly authorized agent acts in accordance with
the orders of the principal, the latter cannot set up the
ignorance of the agent as to circumstances whereof he himself
was, or ought to have been, aware.
Roxas v CA
What gave rise to this litigation was a general power of attorney
made on October 28, 1973 by Elisea G. Roxas authorizing
Edgardo Jose, among other things, "(t)o buy or sell, hire or
lease, mortgage or otherwise hypothecate lands, tenements,
and hereditaments and other forms of real property, upon such
terms and conditions and under covenant as said attorney shall
deem fit and proper." On the strength of this general power,
Edgardo Jose sold to Clarence Pimentel on May 30, 1975,
Roxas' house and lot. The transaction took place while Roxas
was in the United States. On July 26, 1975, shortly upon her
return to the Philippines, she revoked Jose's general power of
attorney and then, by her attorney's letter dated November 28,
1975, demanded from Jose the delivery of the cash proceeds of
the sale, as well as the chattels and effects she had left in her
house. But Jose evidently failed to comply with Roxas' demand.
The sale is valid. Prior to the execution of the deed of sale,
Roxas had been informed while in America of the terms thereof
and had approved them; that on her return to this country she
had confirmed the sale through two documents: one entitled
"Acknowledgement and/or Confirmation" dated July 29, 1975
and the other, "Receipt Confirmation and/or Acknowledgment"
dated August 17, 1975; and that her ratification had been made
indubitable by her counsel's aforementioned letter of out of the proceeds to reimburse [themselves] for advances and
November 28, 1975 demanding from Jose delivery or commissions before turning the balance over to the principals.”
accounting of the proceeds of the sale.
c. Borrowing and lending money
Samar Mining Co. v Lloyd
Two undertakings appeared embodied and/or provided for Art. 1890. If the agent has been empowered to borrow money,
in the Bill of Lading in question. The first is FOR THE he may himself be the lender at the current rate of interest. If
TRANSPORT OF GOODS from Bremen, Germany to Manila. he has been authorized to lend money at interest, he cannot
The second, THE TRANSSHIPMENT OF THE SAME GOODS borrow it without the consent of the principal.
from Manila to Davao, with appellant acting as agent of the
consignee. At the hiatus between these two undertakings of
DBP v CA
appellant which is the moment when the subject goods are
The DBP is not authorized to accept applications for MRI when
discharged in Manila, its personality changes from that of
its clients are more than 60 years of age. Knowing all the while
carrier to that of agent of the consignee. Thus, the
that Dans was ineligible for MRI coverage because of his
character of appellant's possession also changes, from
advanced age, DBP exceeded the scope of its authority when it
possession in its own name as carrier, into possession in
accepted Dan's application for MRI by collecting the insurance
the name of consignee as the latter's agent. Such being the
premium, and deducting its agent's commission and service fee.
case, there was, in effect, actual delivery of the goods from
appellant as carrier to the same appellant as agent of the
The liability of an agent who exceeds the scope of his authority
consignee. Upon such delivery, the appellant, as erstwhile
depends upon whether the third person is aware of the limits of
carrier, ceases to be responsible for any loss or damage
the agent's powers. There is no showing that Dans knew of the
that may befall the goods from that point onwards. This is
limitation on DBP's authority to solicit applications for MRI.
the full import of Article 1736, as applied to the case before
If the third person dealing with an agent is unaware of the
Us.
limits of the authority conferred by the principal on the agent
and he (third person) has been deceived by the non-disclosure
But even as agent of the consignee, the appellant cannot be
thereof by the agent, then the latter is liable for damages to
made answerable for the value of the missing goods, It is
him. The rule that the agent is liable when he acts without
true that the transshipment of the goods, which was the
authority is founded upon the supposition that there has been
object of the agency, was not fully performed. However,
some wrong or omission on his part either in misrepresenting,
appellant had commenced said performance, the
or in affirming, or concealing the authority under which he
completion of which was aborted by circumstances beyond
assumes to act. Inasmuch as the non-disclosure of the limits of
its control. An agent who carries out the orders and
the agency carries with it the implication that a deception was
instructions of the principal without being guilty of
perpetrated on the unsuspecting client, the provisions of
negligence, deceit or fraud, cannot be held responsible for
Articles 19, 20 and 21 of the Civil Code of the Philippines come
the failure of the principal to accomplish the object of the
into play.
agency.
d. Accounting and delivery to principal
Salonga v Warner Bros & Co. Ltd.
The scope and extent of the functions of an adjustment and Art. 1891. Every agent is bound to render an account of his
settlement agent do not include personal liability. His transactions and to deliver to the principal whatever he may
functions are merely to settle and adjusts claims in behalf have received by virtue of the agency, even though it may not
of his principal if those claims are proven and undisputed, be owing to the principal.
and if the claim is disputed or is disapproved by the Every stipulation exempting the agent from the
principal, like in the instant case, the agent does not obligation to render an account shall be void.
assume any personal liability.
b. Advance funds when stipulated Northcott v Canon
except when principal insolvent Under such a conditional advance of funds the agent would
doubtless be required to account to the company for all
Art. 1886. Should there be a stipulation that the agent expenditures, and under the terms of the bonds the sureties
shall advance the necessary funds, he shall be bound to do would, perhaps, be liable for his failure so to do, and might be
so except when the principal is insolvent. required to refund any part of such advances not satisfactorily
accounted for. But even in that event they would not be liable
for moneys so advanced and actually expended and accounted
Agency coupled with an interest – agent has interest in the
for. The covenant of the bond manifestly contemplates merely
contract which is the object of the agency; irrevocable
the failure to account for, or the misappropriation of moneys,
because it involves or protects a third person.
securities, etc., payable to, or the property of the company; and
any money expended and accounted for under the conditions
Uy v CA
indicated would cease to be payable to, or the property of the
We find the following declaration in Section 372 (1) of the
company, the effect of the lawful expenditure of such money
Restatement of the Law on Agency (Second):
being to convert the conditional advance into an absolute one.
Section 372. Agent as Owner of Contract Right
(1) Unless otherwise agreed, an agent who has or who
Mirasol v CA
acquires an interest in a contract which he makes on
An agent’s failure to render an accounting to his principal is
behalf of his principal can, although not a promisee,
contrary to Article 1891 of the Civil Code, The erring agent is
maintain such action thereon as might a transferee
liable for damages under Article 1170 of the Civil Code, which
having a similar interest.
states: “Those who in the performance of their obligations are
(2) An agent does not have such an interest in a
guilty of fraud, negligence, or delay, and those who in any
contract as to entitle him to maintain an action at law
manner contravene the tenor thereof, are liable for damages.”
upon it in his own name merely because he is entilted to
petitioners have failed to show malice or bad faith on the part of
a portion of the proceeds as compensation for making it
PNB in failing to render an accounting. Absent such showing,
or because he is liable for its breach.
moral damages cannot be awarded.
While they alleged that they made advances and that they
suffered loss of commissions, they have not established any
Filadams Pharma v CA
agreement granting them “the right to receive payment and
The essence of estafa under Article 315 (1)(b) of the
Revised Penal Code is the appropriation or conversion of
money or property received, to the prejudice of the owner
thereof. It takes place when a person actually appropriates
the property of another for his own benefit, use and
enjoyment. The failure to account, upon demand, for funds
or property held in trust is circumstantial evidence of
misappropriation. The rule that “the failure to account, upon
demand, for funds or property held in trust is circumstantial
evidence of misappropriation” applies without doubt in the
present case.
e. Responsibility for fraud and
negligence
Art. 1909. The agent is responsible not only for fraud, but
also for negligence, which shall be judged with more or less
rigor by the courts, according to whether the agency was or
was not for a compensation.
Metrobank v CA
In stressing that it was acting only as a collecting agent for
Golden Savings, Metrobank seems to be suggesting that as
a mere agent it cannot be liable to the principal. This is not
exactly true The agent is responsible not only for fraud, but
also for negligence, which shall be judged 'with more or less
rigor by the courts, according to whether the agency was or
was not for a compensation.
Associated Bank v Tan
As a general rule, a bank is liable for the wrongful or
tortuous acts and declarations of its officers or agents
within the course and scope of their employment. Due to
the very nature of their business, banks are expected to
exercise the highest degree of diligence in the selection and
supervision of their employees. Jurisprudence has
established that the lack of diligence of a servant is imputed
to the negligence of the employer, when the negligent or
wrongful act of the former proximately results in an injury
to a third person; in this case, the depositor.
Being the branch manager, Santiago clearly acted within
the scope of her authority in authorizing the withdrawal and
the subsequent debiting without notice. Accordingly, what
remains to be determined is whether her actions
proximately caused respondent’s injury. Proximate cause is
that which -- in a natural and continuous sequence,
unbroken by any efficient intervening cause --produces the
injury, and without which the result would not have
occurred.
f. Conflict of interest with principal and
consequences
Art. 1889. The agent shall be liable for damages if, there
being a conflict between his interests and those of the
principal, he should prefer his own.
Art. 1896. The agent owes interest on the sums he has
applied to his own use from the day on which he did so, and
on those which he still owes after the extinguishment of the
agency.
Molina v Pacific Plans
While acting as an agent of his employer, an employee
owes the duty of fidelity and loyalty. Being a fiduciary, he
cannot act inconsistently with his agency or trust. He
cannot solicit his employer’s customers or co-employees for
himself or for a business competitor of his employer. If
such employee or officer connives with and induces another
to betray his employer in favor of a business competitor of
his employer, he is held accountable for his mischief.
g. Agent authority to contract in principal’s
name
Art. 1897. The agent who acts as such is not personally liable
to the party with whom he contracts, unless he expressly binds
himself or exceeds the limits of his authority, without giving
such party sufficient notice of his powers.
Art. 1899. If a duly authorized agent acts in accordance with
the orders of the principal, the latter cannot set up the
ignorance of the agent as to circumstances whereof he himself
was, or ought to have been, aware.
Rustan Pulp and Paper Mills v IAC
The President and Manager of a corporation who entered into
and signed a contract in his official capacity, cannot be made
liable thereunder in his individual capacity in the absence of
stipulation to that effect due to the personality of the
corporation being separate and distinct from the person
composing it.. And because of this precept, Vergara's supposed
non-participation in the contract of sale although he signed the
letter dated September 30, 1968 is completely immaterial. The
two exceptions contemplated by Article 1897 of the New Civil
Code where agents are directly responsible are absent and
wanting.
Manila Remnant v CA
In the case at bar, the Valencia realty firm had clearly
overstepped the bounds of its authority as agent and for that
matter, even the law when it undertook the double sale of the
disputed lots. Such being the case, the principal, Manila
Remnant, would have been in the clear pursuant to Article 1897
of the Civil Code which states that "(t)he agent who acts as
such is not personally liable to that party with whom he
contracts, unless he expressly binds himself or exceeds the
limits of his authority without giving such party sufficient notice
of his powers."
However, 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.
Manila Memorial Park Cemetery v Linsangan
Persons dealing with an agent 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. The basis for agency is representation and a person
dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent. If he does not make
such an inquiry, he is chargeable with knowledge of the agent’s
authority and his ignorance of that authority will not be any
excuse.
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. 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 on inquiry, ratification cannot be implied as
against the principal who is ignorant of the facts.
(1) Performance within scope
of agent authority
Art. 1900. So far as third persons are concerned, a 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.
Esguerra v CA
The Civil Code provides that a contract is unenforceable
when it is ". . . 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." And
that "(a) contract entered into in the name of another by
one who has no authority or legal representation, or who
has acted beyond his powers, shall be unenforceable, . . ."
After a thorough review of the case at bench, the Court
finds the sale of Esguerra Building II by VECCI to private
respondent Sureste Properties, Inc. valid. The sale was
expressly and clearly authorized under the judicially-
approved compromise agreement freely consented to and
voluntarily signed by petitioner Julieta Esguerra.
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.
(2) Contract where agent
exceeds limits of authority
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. 1899. If a duly authorized agent acts in accordance
with the orders of the principal, the latter cannot set up the
ignorance of the agent as to circumstances whereof he
himself was, or ought to have been, aware.
Cervantes v CA
Under Article 1898 of the New Civil Code, the acts of an
agent beyond the scope of his authority do not bind the
principal, unless the latter ratifies the same expressly or
impliedly. Furthermore, when the third person knows that
the agent was acting beyond his power or authority, the
principal cannot be held liable for the acts of the agent. If
the said third person is aware of such limits of authority, he
is to blame, and is not entitled to recover damages from the
agent, unless the latter undertook to secure the principal’s
ratification.
Safic Alcan & Cie v Imperial Vegetable Oil Co.
It can be clearly seen from the foregoing provision of IVO's By-
laws that Monteverde had no blanket authority to bind IVO to
any contract. He must act according to the instructions of the
Board of Directors. Even in instances when he was authorized to
act according to his discretion, that discretion must not conflict
with prior Board orders, resolutions and instructions. The
evidence shows that the IVO Board knew nothing of the 1986
contracts[6] and that it did not authorize Monteverde to enter
into speculative contracts.[7] In fact, Monteverde had earlier
proposed that the company engage in such transactions but the
IVO Board rejected his proposal.[8] Since the 1986 contracts
marked a sharp departure from past IVO transactions, Safic
should have obtained from Monteverde the prior authorization
of the IVO Board. Safic can not rely on the doctrine of implied
agency because before the controversial 1986 contracts, IVO
did not enter into identical contracts with Safic..
Under Article 1898 of the Civil Code, the acts of an agent
beyond the scope of his authority do not bind the principal
unless the latter ratifies the same expressly or impliedly. It also
bears emphasizing that when the third person knows that the
agent was acting beyond his power or authority, the principal
can not be held liable for the acts of the agent. If the said third
person is aware of such limits of authority, he is to blame, and
is not entitled to recover damages from the agent, unless the
latter undertook to secure the principal's ratification.
(3) Effect of ratification by
principal
Art. 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.
(4) Principal’s private/secret
instructions unavailing against
third persons relying on power
of attorney or instructions
previously shown
Art. 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.
Cruz v CA
Needless to state, since on the face of the document, the
"owner/manager" of the "Mang Uro Store", which is written on
the column Trade Name, is Lauro Cruz, and not the parties
signing the same, it was incumbent upon the private
respondent to inquire into the relationship of the signatories to
the petitioner or to satisfy itself as to their authority to act for
or represent the petitioner. Under the circumstances, it is
apparent that petitioner had no direct participation and that the
two applicants could have acted without authority from him or
as his duly authorized representatives. In either case, for the
protection of its interest, private respondent should have made
the necessary inquiry verification as to the authority of the
applicants and to find out from them whether Lauro Cruz is both
the owner and manager or merely the owner or the manager,
for that is what "owner/manager" in its form could signify.
A person dealing with an agent is put upon inquiry and must
discover upon his peril the authority of the agent. It is for this
reason that under Article No. 1902 of the Civil Code, 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, and that 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.
h. Rules on commission agents
Art. 1903. The commission agent shall be responsible for
the goods received by him in the terms and conditions and
as described in the consignment, unless upon receiving
them he should make a written statement of the damage
and deterioration suffered by the same.
Art. 1904. The commission agent who handles goods of
the same kind and mark, which belong to different owners,
shall distinguish them by countermarks, and designate the
merchandise respectively belonging to each principal.
Art. 1905. The commission agent cannot, without the
express or implied consent of the principal, sell on credit.
Should he do so, the principal may demand from him
payment in cash, but the commission agent shall be entitled
to any interest or benefit, which may result from such sale.
Art. 1906. Should the commission agent, with authority of
the principal, sell on credit, he shall inform the principal,
with a statement of the names of the buyers. Should he fail
to do so, the sale shall be deemed to have been made for
cash insofar as the principal is concerned.
Art. 1907. Should the commission agent receive on a sale,
in addition to the ordinary commission, another called a
guarantee commission, he shall bear the risk of collection
and shall pay the principal the proceeds of the sale on the
same terms agreed upon with the purchaser.
Art. 1908. The commission agent who does not collect the
credits of his principal at the time when they become due
and demandable shall be liable for damages, unless he
proves that he exercised due diligence for that purpose.
“Commission agents”, “brokers”, “commission
merchants”
What is a commission agent? One who has possession of
the goods of the principal
Medrano v CA
A broker is generally defined 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;he is
strictly a middleman and for some purposes the agent of
both parties. A broker is one whose occupation is to bring
parties together, in matters of trade, commerce or
navigation.
“Procuring cause” is meant to be the proximate cause. The
term “procuring cause,” in describing a broker’s activity,
refers to a cause originating a series of events which,
without break in their continuity, result in accomplishment
of prime objective of the employment of the broker –
producing a purchaser ready, willing and able to buy real
estate on the owner’s terms. A broker will be regarded as
the “procuring cause” of a sale, so as to be entitled to
commission, if his efforts are the foundation on which the
negotiations resulting in a sale are begun. The broker must
be the efficient agent or the procuring cause of the sale.
The means employed by him and his efforts must result in
the sale. He must find the purchaser, and the sale must
proceed from his efforts acting as broker.
Schmid & Oberly v RJL Martinez Fishing Corp.
A broker is generally defined 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; he is strictly a middleman and for
some purpose the agent of both parties. A broker is one whose
occupation it is to bring parties together to bargain, or to
bargain for them, in matters of trade, commerce or navigation.
Judge Storey, in his work on Agency, defines a broker as an
agent employed to make bargains and contracts between other
persons, in matters of trade, commerce or navigation, for
compensation commonly called brokerage.
A commission merchant is one engaged in the purchase or sale
for another of personal property which, for this purpose, is
placed in his possession and at his disposal. He maintains a
relation not only with his principal and the purchasers or
vendors, but also with the property which is subject matter of
the transaction
Webster defines an indent as "a purchase order for goods
especially when sent from a foreign country." It would appear
that there are three parties to an indent transaction, namely,
the buyer, the indentor, and the supplier who is usually a
nonresident manufacturer residing in the country where the
goods are to be bought. An indentor may therefore be best
described as one who, for compensation, acts as a middleman
in bringing about a purchase and sale of goods between a
foreign supplier and a local purchaser.
Kerr & Co. v Collector
Merchant- a person engaged in the sale, barter or exchange of
personal property of whatever character
Commission merchants – have their establishments of own for
the keeping and disposal of goods of which sales or exchanges
are effected.
“Sale on credit”
Toyota Shaw v CA
In a sale on installment basis which is financed by a financing
company, three parties are thus involved: the buyer who
executes a note or notes for the unpaid balance of the price of
the thing purchased on installment, the seller who assigns the
notes or discounts them with a financing company, and the
financing company which is subrogated in the place of the
seller, as the creditor of the installment buyer. Since B.A.
Finance did not approve Sosa's application, there was then no
meeting of minds on the sale on installment basis.
Chapter 3: Obligations of the Principal
A. Principal’s obligations to persons with whom
the agent contracted
1. Within scope of agent authority
Art. 1910. The principal must comply with all the obligations
which the agent may have contracted within the scope of his
authority.
As for any obligation wherein the agent has exceeded
his power, the principal is not bound except when he ratifies it
expressly or tacitly.
When is the principal liable for the acts of the agent outside the
scope of his authority?
1. When he ratifies it
2. Apparent authority
3. Agency by estoppel
4. Plenary power
Bedia v White
If the plaintiffs had any doubt about the capacity in which
Bedia was acting, what they should have done was verify
the matter with Hontiveros. They did not. Instead, they
simply accepted Bedia's representation that she was an
agent of Hontiveros and dealt with her as such. Under
Article 1910 of the Civil Code, "the principal must comply
with all the obligations which the agent may have
contracted within the scope of his authority." Hence, the
private respondents cannot now hold Bedia liable for the
acts performed by her for, and imputable to, Hontiveros as
her principal.
Woodchild Holdings v Roxas Electric and Construction
Roxas was not specifically authorized under the said
resolution to grant a right of way in favor of the petitioner
on a portion of Lot No. 491-A-3-B-1 or to agree to sell to
the petitioner a portion thereof. Under paragraph 12, Article
1878 of the New Civil Code, a special power of attorney is
required to convey real rights over immovable property.
Article 1358 of the New Civil Code requires that contracts
which have for their object the creation of real rights over
immovable property must appear in a public document. The
petitioner cannot feign ignorance of the need for Roxas to
have been specifically authorized in writing by the Board of
Directors to be able to validly grant a right of way and
agree to sell a portion of Lot No. 491-A-3-B-1. The rule is
that if the act of the agent is one which requires authority
in writing, those dealing with him are charged with notice of
that fact.
Powers of attorney are generally construed strictly and
courts will not infer or presume broad powers from deeds
which do not sufficiently include property or subject under
which the agent is to deal. The general rule is that the
power of attorney must be pursued within legal strictures,
and the agent can neither go beyond it; nor beside it. The
act done must be legally identical with that authorized to be
done. In sum, then, the consent of the respondent to the
assailed provisions in the deed of absolute sale was not
obtained; hence, the assailed provisions are not binding on
it.
Apparent authority is based on estoppel and can arise from
two instances: first, the principal may knowingly permit the
agent to so hold himself out as having such authority, and
in this way, the principal becomes estopped to claim that
the agent does not have such authority; second, the
principal may so clothe the agent with the indicia of
authority as to lead a reasonably prudent person to believe
that he actually has such authority. There can be no
apparent authority of an agent without acts or conduct on
the part of the principal and such acts or conduct of the
principal must have been known and relied upon in good
faith and as a result of the exercise of reasonable prudence
by a third person as claimant and such must have produced
a change of position to its detriment. The apparent power of
an agent is to be determined by the acts of the principal
and not by the acts of the agent.
For an act of the principal to be considered as an implied
ratification of an unauthorized act of an agent, such act
must be inconsistent with any other hypothesis than that he
approved and intended to adopt what had been done in his
name. Ratification is based on waiver- the intentional
relinquishment of a known right. Ratification cannot be
inferred from acts that a principal has a right to do
independently of the unauthorized act of the agent.
Moreover, if a writing is required to grant an authority to do
a particular act, ratification of that act must also be in
writing.
Areola v CA
A bank is liable for wrongful acts of its officers done in the
interests of the bank or in the course of dealings of the officers
in their representative capacity but not for acts outside the
scope of their authority. A bank holding out its officers and
agent as worthy of confidence will not be permitted to profit by
the frauds they may thus be enabled to perpetrate in the
apparent scope of their employment; nor will it be permitted to
shirk its responsibility for such frauds, even though no benefit
may accrue to the bank therefrom. Accordingly, a banking
corporation is liable to innocent third persons where the
representation is made in the course of its business by an agent
acting within the general scope of his authority even though, in
the particular case, the agent is secretly abusing his authority
and attempting to perpetrate a fraud upon his principal or some
other person, for his own ultimate benefit.
2. Beyond scope of agent authority but with
ratification by principal or agency by estoppel
Art. 1910. The principal must comply with all the obligations
which the agent may have contracted within the scope of his
authority.
As for any obligation wherein the agent has exceeded
his power, the principal is not bound except when he ratifies it
expressly or tacitly.
Art. 1911. Even when the agent has exceeded his authority,
the principal is soldarily liable with the agent if the former
allowed the latter to act as though he had full powers.
Manila Remnant v CA
In the case at bar, the Valencia realty firm had clearly
overstepped the bounds of its authority as agent and for that
matter, even the law when it undertook the double sale of the
disputed lots. Such being the case, the principal, Manila
Remnant, would have been in the clear pursuant to Article 1897
of the Civil Code which states that "(t)he agent who acts as
such is not personally liable to that party with whom he
contracts, unless he expressly binds himself or exceeds the
limits of his authority without giving such party sufficient notice
of his powers."
However, 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.
By the principle of estoppel, Manila Remnant is deemed to have
allowed its agent to act as though it had plenary powers. In
essence, therefore, the basis for Manila Remnant's solidary
liability is estoppel which, in turn, is rooted in the principal's
neglectfulness in failing to properly supervise and control the
affairs of its agent and to adopt the needed measures to
prevent further misrepresentation. As a consequence, Manila
Remnant is considered estopped from pleading the truth that it
had no direct hand in the deception employed by its agent.
Cuison v CA
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. 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). 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.
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.
3. “Double” contracting with principal and
agent
Art. 1916. When two persons contract with regard to the
same thing, one of them with the agent and the other with
the principal, and the two contracts are incompatible with
each other, that of the prior date shall be preferred, without
prejudice to the provisions of article 1544.
Art. 1917. In the case referred to in the proceeding article,
if the agent has acted in good faith, the principal shall be
liable in damages to the third person whose contract must
be rejected. If the agent acted in bad faith, he alone shall
be responsible.
Sta. Romana v Imperio
The vendor warrants his title to the thing sold, and that, in
the event of eviction, the vendee shall be entitled to the
return of the value which the thing sold has at the time of
the eviction, be it greater or less than the price of the sale.
Said contract is governed by Title VI of the same Book, on
Sales in particular, specially by the aforesaid Articles 1495,
1547 and 1555, which are part of said Title VI, regarding
breach of the warranty arising from a valid contract of sale,
due to the application of Art. 1544 of the same title,
regulating the effects of double sales. Incidentally, these
provisions suggest, also, the remedies available to appellant
herein.
B. Principal’s obligations to the agent
1. Solidary liability to common agent
Art. 1915. If two or more persons have appointed an agent
for a common transaction or undertaking, they shall be
solidarily liable to the agent for all the consequences of the
agency.
De Castro v CA
Constante signed the note as owner and as representative
of the other co-owners. Under this note, a contract of
agency was clearly constituted between Constante and
Artigo. Whether Constante appointed Artigo as agent, in
Constante's individual or representative capacity, or both,
the De Castros cannot seek the dismissal of the case for
failure to implead the other co-owners as indispensable
parties. The De Castros admit that the other co-owners are
solidarily liable under the contract of agency, citing Article
1915 of the Civil Code.
When the law expressly provides for solidarity of the
obligation, as in the liability of co-principals in a contract of
agency, each obligor may be compelled to pay the entire
obligation The agent may recover the whole compensation
from any one of the co-principals.
2. Pay necessary sums and expenses
incurred for execution of the agency
Art. 1912. The principal must advance to the agent, should
the latter so request, the sums necessary for the execution
of the agency.
Should the agent have advanced them, the principal
must reimburse him therefore, even if the business or
undertaking was not successful, provided the agent is free from
all fault.
The reimbursement shall include interest on the sums
advanced, from the day on which the advance was made.
a. Exceptions
Art. 1918. 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;
(2) When the expenses were due to the fault of the agent;
(3) When the agent incurred them with knowledge that an
unfavourable result would ensue, if the principal was not aware
thereof;
(4) When it was stipulated that the expenses would be borne by
the agent, or that the latter would be allowed only a certain
sum.
Uy v CA
Even though the agent has not settled with his principal, he
may, by agreement with the principal, have a right to receive
payment and out of the proceeds to reimburse himself for
advances and commissions before turning the balance over to
the principal. In such a case, although there is no formal
assignment, the agent is in the position of a transferee of the
whole claim for security; he has an irrevocable power to sue in
his principal’s name and, under statutes which permit the real
party in interest to sue, he can maintain an action in his own
name. While they alleged that they made advances and that
they suffered loss of commissions, they have not established
any agreement granting them “the right to receive payment and
out of the proceeds to reimburse [themselves] for advances and
commissions before turning the balance over to the principals.”
An agent does not have such an interest in a contract as to
entitle him to maintain an action at law upon it in his own name
merely because he is entilted to a portion of the proceeds as
compensation for making it or because he is liable for its
breach. The fact that an agent who makes a contract for his
principal will gain or suffer loss by the performance or
nonperformance of the contract by the principal or by the other
party thereto does not entitle him to maintain an action on his
own behalf against the other party for its breach. An agent
entitled to receive a commission from his principal upon the
performance of a contract which he has made on his principal’s
account does not, from this fact alone, have any claim against
the other party for breach of the contract, either in an action on
the contract or otherwise. An agent who is not a promisee
cannot maintain an action at law against a purchaser merely
because he is entitled to have his compensation or advances
paid out of the purchase price before payment to the principal.
b. Agent’s right of retention in pledge
Art. 1914. The agent may retain in pledge the things which are
the object of the agency until the principal effects the
reimbursement and pays the indemnity set forth in the two
preceding articles.
Only applicable to movable property. Why?
Because possession of immovable property can ripen into
ownership.
3. Indemnify all damages caused by execution
of the agency without fault or negligence
Art. 1913. The principal must also indemnify the agent for
all the damages which the execution of the agency may
have caused the latter, without fault or negligence on his
part.
Chapter 4: Modes of Extinguishment of Agency
Art. 1919. Agency is extinguished by:
(1) By its revocation;
(2) By the withdrawal by the agent;
(3) By the death, civil interdiction, insanity or insolvency of
the principal or of the agent;
(4) By the dissolution of the firm or corporation which
entrusted or accepted the agency;
(5) By the accomplishment of the object or purpose of the
agency;
(6) By the expiration of the period for which the agency was
constituted.
Can be revoked at will? YES Agency coupled
Except: Bilateral contract with an interest
Means of fulfilling
Partner appointed
Mode of revocation: Purpose
General or special?
implied express
-------------------------------------------------------
except: just causes (Art. 1170, NCC)
- see rescission vis-à-vis resolution
A. Revocation by the principal
Art. 1920. The principal may revoke the agency at will,
and compel the agent to return the document evidencing
the agency. Such revocation may be express or implied.
Art. 1925. When two or more principals have granted a
power of attorney for a common transaction, any one of
them may revoke the same without the consent of the
others.
1. Principal revocation at will
Art. 1920. The principal may revoke the agency at will,
and compel the agent to return the document evidencing
the agency. Such revocation may be express or implied.
Why allow principal to revoke at will?
Agency primarily serves his interest.
CMS Logging v CA
The principal may revoke a contract of agency at will, and
such revocation may be express, or implied, and may be
availed of even if the period fixed in the contract of agency
as not yet expired. As the principal has this absolute right
to revoke the agency, the agent can not object thereto;
neither may he claim damages arising from such
revocation, unless it is shown that such was done in order
to evade the payment of agent's commission.
CMS appointed DRACOR as its agent for the sale of its logs
to Japanese firms. Yet, during the existence of the contract
of agency, DRACOR admitted that CMS sold its logs directly
to several Japanese firms. This act constituted an implied
revocation of the contract of agency under Article 1924 of
the Civil Code. Since the contract of agency was revoked by
CMS when its sold its logs to Japanese firms without the
intervention of DRACOR, the latter is no longer entitled to
its commission from the proceeds of such sale and is not
entitled to retain whatever moneys it may have received as
its commission for said transactions. Neither would DRACOR
be entitled to collect damages from CMS, since damages are
generally not awarded to the agent for the revocation of the
agency, and the case at bar is not one falling under the
exception mentioned, which is to evade the payment of the
agent's commission.
Barretto v Santa Marina
What did occur was that, in view of the resignation tendered by
the plaintiff for the reasons which he himself conscientiously
deemed to warrant his surrender of the position he was holding
in the La Insular factory, the principal owner of this
establishment, the defendant Santa Marina, had to look for and
appoint another agent and manager to relieve and substitute
him in the said employment ---- a lawful act performed by the
principal owner of the factory and one which cannot serve as a
ground upon which to demand from the latter an indemnity for
losses and damages, inasmuch as, in view of the facts that
occurred and were acknowledged and confessed by Barretto in
is letters, the plaintiff could not expect, nor ought to have
expected, that the defendant should have insisted on the
unsuccessful agent's continuance in his position, or that he
should not have accepted the resignation tendered by the
plaintiff in his first letter. By the mere fact that the defendant
remained silent and designated another person, Mr. J. McGavin,
to discharge in the plaintiff's stead the powers and duties of
agent and manager of the said factory, Barretto should have
understood that his resignation had been accepted and that if
its acceptance was not communicated to him immediately it was
owing to the circumstance that the principal owner of the
factory did not then have, nor until several months afterwards,
any other person whom he could appoint and place in his stead,
for, as soon as the defendant Santa Marina could appoint the
said McGavin, he revoked the power he had conferred upon the
plaintiff and communicated this fact to the latter, by means of
the letter, which was presented to him by the bearer thereof,
McGavin himself, the new manager and agent appointed.
From the mere fact that the principal no longer had confidence
in the agent, he is entitled to withdraw it and to revoke the
power he conferred upon the latter, even before the expiration
of the period of the period of the engagement or of the
agreement made between them; but, in the present case, once
it has been shown that, between the deceased Joaquin Santa
Marina and the latter's heir, now the defendant, on the one
hand, and the plaintiff Barretto, on the other, no period
whatever was stipulated during which the last-named should
hold the office of agent manager of the said factory, it is
unquestionable that the defendant, even without good reasons,
could lawfully revoke the power conferred upon the plaintiff and
appoint in his place Mr. McGavin, and thereby contracted no
liability whatever other than the obligation to pay the plaintiff
the salary pertaining to one month and some odd days.
2. Principal directly manages the business
Art. 1924. The agency is revoked if the principal directly
manages the business entrusted to the agent, dealing directly
with third persons.
Policarpio v CA
We hold that an implied trust was created by the agreement
between petitioner (and other tenants) and private respondent.
Implied trusts are those which, without being expressed, are
deducible from the nature of the transaction by operation of law
as matters of equity, independently of the particular intention of
the parties. Constructive trusts are created in order to satisfy
the demands of justice and prevent unjust enrichment. They
arise against one who, by fraud, duress or abuse of confidence,
obtains or holds the legal right to property which he ought not,
in equity and good conscience, to hold. It is not necessary that
the intention of the tenants to purchase their apartments units
be categorically stated in the purposes of their Association. A
constructive trust as invoked by petitioner can be implied from
the nature of the transaction as a matter of equity,
regardless of the absence of such intention in the purposes
of their Association.
A constructive trust, otherwise known as a trust ex
maleficio, a trust ex delicto, a trust de son tort, an
involuntary trust, or an implied trust, is a trust by operation
of law which arises contrary to intention and in invitum,
against one who, by fraud, actual or constructive, by duress
or abuse of confidence, by commission of wrong, or by any
form of unconscionable conduct, artifice, concealment, or
questionable means, or who in any way against equity and
good conscience, either has obtained or holds the legal right
to property which he ought not, in equity and good
conscience, hold and enjoy. It is raised by equity to satisfy
the demands of justice. However, a constructive trust does
not arise on every moral wrong in acquiring or holding
property or on every abuse of confidence in business or
other affairs; ordinarily such a trust arises and will be
declared only on wrongful acquisitions or retentions of
property of which equity, in accordance with its
fundamental principles and the traditional exercise of its
jurisdiction or in accordance with statutory provision, takes
cognizance. It has been broadly ruled that a breach of
confidence, although in business or social relations,
rendering an acquisition or retention of property by one
person unconscionable against another, raises
constructive trust.
3. Principal appoints new agent for same
business
Art. 1923. The appointment of a new agent for the same
business or transaction revokes the previous agency from
the day on which notice thereof was given to the former
agent, without prejudice to the provisions of the two
preceding articles.
4. Principal’s issuance of SPA to another agent
prevails over general power of attorney
previously given
partner is appointed manager of a partnership in the contract of
partnership and his removal from the management is
unjustifiable. Stated differently, an agency is deemed as one
coupled with an interest where it is established for the mutual
benefit of the principal and of the agent, or for the interest of
the principal and of third persons, and it cannot be revoked by
the principal so long as the interest of the agent or of a third
person subsists. In an agency coupled with an interest, the
agent’s interest must be in the subject matter of the power
conferred and not merely an interest in the exercise of the
power because it entitles him to compensation. When an
agent’s interest is confined to earning his agreed compensation,
the agency is not one coupled with an interest, since an agent’s
interest in obtaining his compensation as such agent is an
ordinary incident of the agency relationship.
Dela Rama Steamship v Tan
Held: Agreement was an agency coupled with an interest on the
first year when agent made investments on the ships and got
part of the profits. Thereafter, it became a simple agency
notwithstanding the fact that agent has the right to purchase
the ships after the 5th year. Thus, principal may validly revoke
at will the management agreement.
B. Withdrawal by agent
a Art. 1920. The principal may revoke the agency at will, and
compel the agent to return the document evidencing the
agency. Such revocation may be express or implied.
Art. 1928. The agent may withdraw from the agency by giving
due notice to the principal. If the latter should suffer any
damage by reason of the withdrawal, the agent must indemnify
him therefore, unless the agent should base his withdrawal
upon the impossibility of continuing the performance of the
agency without grave detriment to himself.
Art. 1929. The agent, even if he should withdraw from the
agency for a valid reason, must continue to act until the
principal has had reasonable opportunity to take the necessary
steps to meet the situation.

Art. 1926. A general power of attorney is revoked by a

How? Due notice – no particular form
special one granted to another agent, as regards the special
Indemnification except impossibility of performance or
matter involved in the latter.
prejudice to agent

5. When revocation cannot be made; agency
“coupled with an interest”
Art. 1927. An agency cannot be revoked if a bilateral
contract depends upon it, or if it is the means of fulfilling an
obligation already contracted, or if a partner is appointed
manager of a partnership and his removal from the
management is unjustifiable.
Jurisprudence refers to this as “agency coupled with an
interest”
When a bilateral contract depends upon the agency –
essential elements of bilateral contract depends on agency.
Example: A buys from B. A makes B his agent to collect
money from C. Amount B collects will be applied to the
purchase price still not paid by A.
When the agency is the means of fulfilling an obligation
already conracted – without the agency, the previous
obligation will become potestative.
Lim v Saban
Under Article 1927 of the Civil Code, an agency cannot be
revoked if a bilateral contract depends upon it, or if it is the
means of fulfilling an obligation already contracted, or if a
Withdrawal of counsels – still act as counsel until court approval
If third parties will not be prejudiced, no notice or specific form
is revoke the agency.
Revocation is between the principal and agent.
Mode/binding effect is considered for third parties.
Art. 1929 refers to preservative acts only, not the fulfilment of
the agency.
Dela Pena v Hidalgo
From the procedure followed by the agent, Federico Hidalgo, it
is logically inferred that he had definitely renounced his agency
was duly terminated, according to the provisions of article 1732
of the Civil Code, because, although in the said letter of March
22, 1894, the word "renounce" was not employed in connection
with the agency or power of attorney executed in his favor, yet
when the agent informs his principal that for reasons of health
and by medical advice he is about to depart from the place
where he is exercising his trust and where the property subject
to his administration is situated, abandons the property, turns it
over a third party, without stating when he may return to take
charge of the administration, renders accounts of its revenues
up to a certain date, and transmits to his principal a general
statement which summarizes and embraces all the balances of
his accounts since he began to exercise his agency to the
date when he ceased to hold his trust, and asks that a
power of attorney in due form in due form be executed and
transmitted to another person who substituted him and
took charge of the administration of the principal's
property, it is then reasonable and just to conclude that the
said agent expressly and definitely renounced his agency,
and it may not be alleged that the designation of Antonio
Hidalgo to take charge of the said administration was that
of a mere proceed lasted for more than fifteen years, for
such an allegation would be in conflict with the nature of
the agency.
This renouncement was confirmed by the subsequent
procedure, as well as of the agent as of the principal, until
the latter died, on August 2, 1902, since the principal Peña
did not disapprove the designation of Antonio Hidalgo, nor
did he appoint another, nor send a new power of attorney
to the same, as he was requested to by the previous
administrator who abandoned his charge; and the trial
record certainly contains no proof that the defendant, since
he left these Islands in March, 1894, until January, 1904,
when he returned to this city, took any part whatever,
directly or even indirectly, in the said administration of the
principal's property, while Antonio Hidalgo was the only
person who was in charge of the aforementioned
administration of De la Peña y Gomiz's property and the
one who was to represent the latter in his business affairs,
with his tacit consent. From all of which it is perfectly
concluded (unless here be proof to the contrary, and none
appears in the record), that Antonio Hidalgo acted in the
matter of the administration of the property of Jose de la
Peña y Gomiz by virtue of an implied agency derived from
the latter, in accordance with the provisions of Art 1710 of
the Civil Code.
Valera v Velasco
The fact that an agent institutes an action against his
principle for the recovery of the balance in his favor
resulting from the liquidation of the accounts between them
arising from the agency and renders a final accounts of his
operations is equivalent to an express renunciation of the
agency and terminates the juridical relation between them.
C. Death, civil interdiction, insanity, insolvency
of principal OR agent
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.
Art. 1932. If the agent dies, his heirs must notify the
principal thereof, and in the meantime adopt such measures
as the circumstances may demand in the interest of the
latter.
Coleongco v Claparols
It is first contended by the appellant Coleongco that the
power of attorney was made to protect his interest under
the financing agreement, and was one coupled with an
interest that the appellee Claparols had no legal power to
revoke. This point can not be sustained. The financing
agreement itself already contained clauses for the
protection of appellant's interest, and did not call for the
execution of any power of attorney in favor of Coleongco. But
granting appellant's view, it must not be forgotten that a power
of attorney can be made irrevocable by contract only in the
sense that the principal may not recall it at his pleasure; but
coupled with interest or not, the authority certainly can be
revoked for a just cause, such as when the attorney- in-fact
betrays the interest of the principal, as happened in this case. It
is not open to serious doubt that the irrevocability of the power
of attorney may not be used to shield the perpetration of acts in
bad faith, breach of confidence, or betrayal of trust, by the
agent, for that would amount to holding that a power, coupled
with an interest authorizes the agent to commit frauds against
the principal.
Article 1172, expressly provides the contrary in prescribing that
responsibility arising from fraud is demandable in all
obligations, and that any waiver of action for future fraud is
void. It is also on this principle that the Civil Code, in its Article
1800, declares that the powers of a partner, appointed as
manager, in the articles of copartnership are irrevocable without
just or lawful cause; and an agent with power coupled with an
interest can not stand on better ground than such a partner in
so far as irrevocability of the power is concerned.
Rallos v Felix Go Chan & Sons Realty
Article 1931 is the applicable law. Under this provision, an act
done by the agent after the death of his principal is valid and
effective only under two conditions, viz: (1) that the agent
acted without knowledge of the death of the principal, and (2)
that the third person who contracted with the agent himself
acted in good faith. Good faith here means that the third son
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
unenforceable.
Article 1919 provides the general rule that the death of the
principal extinguishes the agency. That being the general rule it
follows a fortiori that any act o an agent after the death of his
principal is void ab initio unless the same falls under the
exceptions 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.
D. Dissolution of the firm or corporation which
entrusted or accepted the agency
Art. 1921. If the agency has been entrusted for the purpose of
contracting with specified persons, its revocation shall not
prejudice the latter if they were not given notice thereof.
Lustan v CA
The SPA executed by petitioner in favor of Parangan duly
authorized the latter to represent and act on behalf of the
former. Having done so, petitioner clothed Parangan with
authority to deal with PNB on her behalf and in the absence of
any proof that the bank had knowledge that the last three loans
were without the express authority of petitioner, it cannot be
prejudiced thereby. As far as third persons are concerned, an
act is deemed to have been performed within the scope of the
agent's authority if such 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 the understanding between
the principal and the agent. The SPA particularly provides that
the same is good not only for the principal loan but also for
subsequent commercial, industrial, agricultural loan or credit
accommodation that the attorney-in-fact may obtain and until
the power of attorney is revoked in a public instrument and a
copy of which is furnished to PNB. 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.

E. Accomplishment of the object or purpose of

the agency

Art. 1231. (1) Obligations are extinguished:

(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and
debtor;
(5) By compensation;
(6) By novation.

F. Expiration of the period for which agency was

constituted

Art. 1231. (last paragraph) Other causes of

extinguishment of obligations, such as annulment,
rescission, fulfilment of a resolutory condition, and
prescription, are governed elsewhere in this Code.

Art. 1193. (2) Obligations with a resolutory period take

effect at once, but terminate upon arrival of the day certain.
i