Revised Agency Reviewer C2015

AGENCY'reviewer''❉''C2015'❉'AY'201212013'
Table&of&Contents!
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How!to!use!this!reviewer!.........................................................................................................................................................!2!
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Basic!formula!in!answering!...................................................................................................................................................!2!
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I.!The!Concept!of!Agency!
A.'Purpose'and'definition'..............................................................................................................................................................'3'
B.'Elements'of'agency'......................................................................................................................................................................'4'
C.'Effect'of'agency:'integration'and'extension'......................................................................................................................'6'
D.'Nature'of'agency:'general'and'specific'...............................................................................................................................'8'
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II.!Establishing!Agency!
A.'Oral'or'written'............................................................................................................................................................................'12'
B.'Express/implied'agency'and'agency'by'estoppel'.......................................................................................................'15'
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III.!The!Agent!
A.'The'rights'of'agents'..................................................................................................................................................................'19'
B.'The'obligations'of'agents'.......................................................................................................................................................'25'
C.'The'liability'of'agents'...............................................................................................................................................................'31'
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IV.!The!Principal!
A.'Obligations'of'the'principal'...................................................................................................................................................'33'
B.'Liability'of'the'principal'.........................................................................................................................................................'37'
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V.!The!Third!Party!Dealing!with!the!Agent!
A.'Rights'of'third'parties'.............................................................................................................................................................'38'
B.'Obligation'of'third'parties'.....................................................................................................................................................'39'
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VI.!Extinguishing!the!Agency!
A.'Revocation'....................................................................................................................................................................................'41'
B.'Withdrawal'..................................................................................................................................................................................'45'
C.'Death/civil'interdiction/insanity/insolvency'of'the'principal'..............................................................................'46'
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VII.!Distinguishing!Agency!from!Other!Contracts!
A.'In'general'......................................................................................................................................................................................'46'
B.'Distinguished'from'partnership'.........................................................................................................................................'47'
C.'Distinguished'from'service'providers'..............................................................................................................................'48'
D.'Distinguished'from'sale'..........................................................................................................................................................'49'
E.'Distinguished'from'brokerage'.............................................................................................................................................'51'
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How$to$use$this$reviewer!
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• This'reviewer'was'taken'mainly'from'the'book'Analysis'of'Philippine'Agency'Law'&'Jurisprudence.'In'case'
of'discrepancy,'the'book'is'controlling.'We'apologize'for'such'discrepancies,'if'any.'
• The'cases'cite'only'the'doctrine'as'laid'down'by'the'Supreme'Court.'As'per'Sir'Casis’s'instructions,'these'are'
still'the'doctrines'to'be'used'in'answering'the'exam,'regardless'of'his'commentary.'
• However,'there'are'some'parts'wherein'we'included'Sir'Casis’s'comments'on'the'cases.'These'are'to'be'used'
as'reference'in'formulating'your'own'arguments.'
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Basic&formula&in&answering!
(Based!on!how!class!is!conducted)!
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1. State'your'short'answer.'If'the'question'is'a'yes'or'no'question,'answer'with'“yes”'or'“no”.'
2. State'the'rule'and'the'legal'basis'therefor.'
o There'is'no'need'to'state'the'provisions'verbatim,'however'the'essence'of'the'said'provisions'must'be'
captured.'However,'if'you’ve'memorized'the'provisions'and'are'confident'with'your'memory,'go'ahead'
and'cite'verbatim.'
o When'using'cases'as'legal'basis,'remember'that'what'is'controlling'is'what'the'Supreme'Court'said,'not'
what'Sir'Casis'said'in'the'book.'
3. State'the'exception'to'the'rule,'if'applicable'in'the'case.'
4. Apply'the'rules'or'the'exception,'as'the'case'may'be,'to'the'facts'presented'in'the'problem.''
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Good'luck,'everyone!''
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♥,'
Agency'reviewer'group'
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I.#The#Concept#of#Agency!
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A.#Purpose#and#definition#
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1.!Purpose!
• The'purpose'of'agency'is'to'allow'a'person'to'act'on'behalf'of'another.'
• Agency'is'primarily'a'commercial'relationship,'although'it'can'be'used'even'for'non1commercial'purposes.'It'
expands'the'capacity'of'persons'to'engage'in'commercial'transactions.'
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a.!Accomplishment!of!more!tasks!
• The'underlying'principle'of'the'contract'of'agency'is'to'accomplish'results'by'using'the'services'of'others.'
(Eurotech!v.!Cuison)'
• The'principal'can'accomplish'more'compared'to'a'situation'where'he'has'to'do'everything'himself.'
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b.!Multiple!and!simultaneous!areas!of!activity!
• A'principal'can'be'in'multiple'places'doing'simultaneous'activities'at'the'same'time'through'his'agents,'
thereby'accomplishing'more'tasks'in'less'time.'
• Establishing'an'agency'is'better'than'hiring'workers'because'of'the'agent’s'power'to'enter'into'contracts'on'
behalf'of'his'principal,'allowing'the'agent'to'accomplish'more'than'what'an'ordinary'worker'can'do.'
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c.!Improved!performance!
• Agency'allows'the'principal'to'be'represented'by'someone'who'may'be'more'adept'at'the'skills'required'by'
his'business.'
• By'allowing'the'principal'to'focus'on'what'he'does'best'or'delegating'to'others'what'he'is'not'good'at,'
agency'improves'the'performance'of'a'business.'
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d.!Multiple!businesses!
• Agency'allows'the'principal'to'handle'several'businesses'at'the'same'time.'
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2.!Definition!
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How'is'“agency”'used'in'the'Civil'Code?'
• Art.'1878'–'agency'as'a'type'of'contract'
• Art.'1869'–'manner'the'agency'relationship'is'established,'manner'by'which'authorization'or'acceptance'is'
made'
• Art.'1870,'1876'–'manner'by'which'the'agency'as'the'business'itself'is'handled'by'the'agent'
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a.!Legal!relationship!
• Connection'in'law'between'the'principal'and'the'agent'
• Legal'relationship'between'the'agent'and'the'principal'founded'on'contract'or'created'by'law'(Mechem)'
• Fiduciary'relationship'between'the'principal'and'the'agent,'where'the'agent'is'subject'to'the'principal’s'
control'(Restatement'of'Agency)'
• Fiduciary'relationship'by'which'a'party'confides'to'another'the'management'of'some'business'to'be'
transacted'in'the'former’s'name,'and'by'which'the'other'assumes'to'do'the'business'and'render'an'account'
of'it'(American!Jurisprudence)'
• Relationship'whereby'one'party'authorizes'another'to'act'for'an'in'his'behalf'in'transactions'with'third'
persons'(Rallos!v.!Felix!Go!Chan)'
• Fiduciary'relationship'analogous'to'that'of'a'trust,'where'the'agent'is'estopped'from'acquiring'or'asserting'a'
title'adverse'to'that'of'the'principal'(Severino!v.!Severino)'
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Problem:'
A'law'is'passed'that'for'purposes'of'medical'malpractice,'an'agency'relationship'exists'between'hospitals'and'
doctors.'
Is'the'law'valid?'
YES!'–'it'establishes'a'legal'relationship'for'specific'purpose'
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b.!Contract!
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.!
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Cf.'
(Old!Civil!Code)!Art.!1709.!By!the!contract!of!agency,!one!person!binds!himself!to!render!some!service,!or!to!do!
something!for!the!account!or!at!the!request!of!another.!
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Being'a'contract,'agency'requires'consent,'object'and'cause'(Art.'1305)'
• Consent'is'crucial,'although'some'agency'relationships'may'arise'by'operation'of'law,'meaning'without'the'
parties’'consent.'
• The'object'of'an'agency'is'the'agent’s'performance'of'acts'in'representation'of'the'principal.'This'is'the'
juridical'basis'of'agency.'(Rallos!v.!Felix!Go!Chan)'
• The'cause'of'an'agency'is'compensation.'A'person'may'also'request'appointment'as'an'agent'to'protect'his'
own'interests.'
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B.#Elements#of#agency#
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According!to!statute'(Art.'1868)'
1. Person'binds'himself'to'render'some'service'or'to'do'something'in'representation'or'on'behalf'of'another'
2. With'the'consent'of'the'other'person'
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According!to!jurisprudence!
1. There'is'consent,'express'or'implied,'of'the'parties'to'establish'the'relationship'
o cannot'be'compelled'by'law'or'by'any'court'(Orient!Air!Service!v.!CA)'
Note:'While'courts'cannot'compel'parties'to'enter'into'a'contract'of'agency,'the'Civil'Code'provides'
for'agency'relationships'created'by'operation'of'law.'
o The'fact'that'an'“agent”'corporation'is'100%'owned'by'the'“principal”'corporation'does'not'
automatically'create'an'agency'relationship.'For'an'agency'to'exist,'it'is'essential'that'the'principal'
consent'that'the'other'party,'the'agent,'shall'act'on'its'behalf,'and'the'agent'consents'so'as'to'act.'(Apex!
Mining!Co.!v.!Southeast!Mindanao!Gold!Corp.)'
o There'must'be'an'actual'intention'to'appoint'an'agent'on'the'part'of'the'principal,'and'an'intention'to'
accept'the'appointment'on'the'part'of'the'agent.'Absent'such'mutual'intent,'there'is'generally'no'
agency.'(Tuazon!v.!Heirs!of!Ramos)'
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Bordador'v.'Luz'
Facts:'Deganos,'Luz’s'brother,'was'supposed'to'sell'jewelry'at'a'profit'and'thereafter'remit'the'proceeds'and'return'
the'unsold'items'to'Bordador.'He'only'remitted'a'small'sum'of'money.'Bordador'claimed'that'Deganos'acted'as'Luz’s'
agent'when'he'received'the'jewelry'and'was'therefore'solidarily'liable'with'Luz'because'he'failed'to'pay.'
Held:'Deganos'is'not'an'agent.'The'basis'for'agency'is'representation.'Here,'there'is'no'showing'that'Luz'consented'
to'the'acts'of'Degano'or'authorized'him'to'act'on'her'behalf,'much'less'with'respect'to'the'particular'transactions'
involved.'
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Victorias'Milling'v.'CA'
Facts:'St.'Therese'Merchandising'(STM)'bought'sugar'from'Victorias'Milling'Co.'(VMC)'and'later'sold'its'rights'to'
Consolidated'Sugar'(CSC).'VMC'refused'to'deliver'the'sugar.'CSC'sued.'VMC'alleged'that'CSC'cannot'sue'
independently'because'it'was'merely'an'agent'of'STM.'
Held:'VMC'was'not'an'agent.'There'was'no'intention'to'enter'into'a'contract'of'agency'between'STM'and'VMC,'as'
such,'there'was'no'agency'between'them.'The'question'of'whether'a'contract'is'one'of'sale'or'agency'depends'on'the'
intention'of'the'parties.'
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Problem:'
On'Monday,'P'told'A'he’ll'appoint'him'as'agent'on'Wednesday.'A'hasn’t'accepted'yet.'On'Tuesday,'P'told'A'he'
changed'his'mind.'On'Wednesday,'A'went'to'the'RTC'to'compel'P'to'issue'him'an'SPA.'RTC'granted'A’s'petition.'
Is'RTC'correct?'
NO!'Cite'Orient!Air!v.!CA'–'cannot'be'compelled'by'law'or'any'court'
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Problem:'
Company'A'owns'100%'of'Company'B.'
Company'A'owns'100%'of'Company'B’s'stock.'
All'members'of'Company'B’s'Board'of'Directors'are'under'Company'A’s'control.'
All'profits'go'to'Company'A.'
Is'Company'B'an'agent'of'Company'A?'
NO!'Cite'Apex!Mining!v.!Southeast!Mindanao'–'must'show'that'subsidiary'is'a'duly'authorized'agent'
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Problem:'
A'and'B'never'intended'to'enter'into'an'agency'relationship.'A'merely'wanted'to'hire'B'as'worker.'But'B,'with'A’s'
consent,'performed'acts'usually'performed'by'agents.'
Is'B'an'agent'of'A?'
NO!'cite'Tuazon!v.!Heirs!of!Ramos,'Victorias!Milling!v.!CA'–'intent'must'be'proven'
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2. The'object'is'the'execution'of'a'juridical'act'in'relation'to'a'third'person'
o The'basis'of'agency'is'representation.'If'an'“agent”'is'not'given'the'power'to'represent'the'"principal”,'
then'there'is'really'no'contract'of'agency.'
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De'La'Cruz'v.'Northern'Theatrical'
Facts:'De'La'Cruz,'a'security'guard'of'Northern'Theatrical,'shot'and'killed'a'moviegoer'who'tried'to'crash'the'main'
entrance'of'the'theatre.'He'was'charged'with'homicide'but'was'later'acquitted.'He'sought'reimbursement'from'
Northern'Theatrical'for'his'expenses,'arguing'that'he'was'an'agent.''
Held:'De'La'Cruz'was'not'an'agent.'The'principle'of'representation'is'clearly'absent.'De'La'Cruz'was'not'employed'to'
represent'Northern'Theatrical'in'its'dealings'with'third'persons.'He'did'not'execute'any'juridical'act'on'behalf'of'the'
alleged'principal.'
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3. The'agent'acts'as'representative'and'not'for'himself'
o Based'on'the'principle'that'the'agent'is'the'representative'of'the'principal'
o Sir'Casis'argues:'That'the'agent'actually'represents'the'principal'should'not'be'an'element'of'agency'
because'it'is'a'consequence'of'the'contract.'
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Problem:'
Peter'owns'a'second1hand'car'dealership.'Olivia,'Peter’s'agent,'meets'customers'and'executes'deeds'of'sale.'Olivia'
sold'Walter'a'lemon.'Walter'confronted'Peter.'
Is'Peter'liable?'
YES!'cite'Doles!v.!Angeles'(infra,'page'47)'–'the'principal'doesn’t'have'to'encounter'the'third'person'to'be'liable'
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4. The'agent'acts'within'the'scope'of'his'authority'
o Sir'Casis'argues:'Again,'that'the'agent'acts'within'the'scope'of'authority'is'a'consequence'of'the'agency'
relationship'and'not'a'condition'for'its'existence.'
o Only'goes'into'the'validity'of'the'act'and'not'necessarily'the'existence'of'the'agency'relationship'
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Spouses'Viloria'v.'Continental'Airlines'
Facts:'Fernando'bought'3'round'trip'tickets'on'board'Continental'Airlines'from'Holiday'Travel'after'being'informed'
by'an'employee'that'there'were'no'more'available'seats'on'the'Amtrak.'He'later'discovered'that'Amtrak'seats'were'
available'anytime.'He'demanded'a'refund'from'CAI,'but'the'airline'informed'him'that'he'could'have'the'tickets'
reissued'instead.'When'he'tried'to'have'the'tickets'transferred,'he'was'informed'that'his'wife’s'ticket'was'non1
transferable.'He'sued,'arguing'that'CAI'and'its'agent,'Holiday'Travel,'through'the'latter’s'employee,'had'misled'him'
into'buying'the'CAI'tickets'by'representing'that'Amtrak'was'fully'booked.'
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Page'5'of'51'
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Held:'The'first'and'second'elements'were'present'as'CAI'did'not'deny'that'it'concluded'an'agreement'with'Holiday'
Travel.'The'third'element'was'also'present,'as'Holiday'Travel'was'undisputedly'merely'acting'as'a'representative,'
since'it'was'CAI'that'was'bound'by'the'contracts'entered'into'by'Holiday'Travel.'The'fourth'element'was'also'
present'since'CAI'had'not'made'any'allegation'that'Holiday'Travel'exceeded'its'authority.'However,'although'an'
agency'relationship'existed'between'CAI'and'Holiday'Travel,'CAI'was'not'bound'by'the'acts'of'Holiday'Travel’s'
agents.'
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Note:'Sir'Casis'included'this'case'to'illustrate'the'problem'in'including'the'last'two'elements'of'agency'enumerated'
above.'
• Regarding'the'third'element:'The'SC'held'that'it'was'undisputed'that'Holiday'Travel'had'contracted'in'
behalf'of'CAI.'
o But'Sir'asks,'what'if'CAI'had'disputed'it?'Would'that'mean'there'was'no'contract'of'agency?'
• Regarding'the'fourth'element:'The'SC'held'that'Holiday'Travel'was'acting'within'the'scope'of'its'authority'
because'there'was'no'dispute'from'CAI?'
o But'again'Sir'asks,'what'if'CAI'had'disputed'it?'
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C.#Effect#of#agency:#integration#and#extension#
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Integration'
• Personality'of'the'principal'is'merged'with'that'of'the'agent'
Extension'
• Personality'of'the'principal'is'reproduced'in'the'persons'of'his'agent'
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1.!Authority!to!act!
• By'legal'fiction,'the'agent'becomes'the'principal,'authorized'to'perform'all'acts'which'the'latter'would'have'
him'do.'(Orient!Air!Sevices!v.!CA)'
• The'actual'or'real'absence'of'the'principal'is'converted'into'his'legal'or'juridical'presence.'(Eurotech!v.!
Cuison)'
• The'principal'becomes'liable'for'obligations'contracted'by'the'agent'provided'that'the'act'is'within'the'
authority'of'the'agent.'(Prudential!Bank!v.!CA)'
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2.!Agent!not!real!partyLinLinterest!
• Since'the'agent'is'a'mere'extension'of'the'personality'of'the'principal,'he'is'not'a'party'to'the'contract'with'
the'third'person.'The'liability'of'the'third'party'is'to'the'principal'and'not'to'the'agent.'(See'Obligations'of'
the'principal,'infra,'page'33)'
• This'rule'does'not'apply'in'criminal'cases.'(Ong!v.!CA)'If'the'agent'is'being'sued'in'a'criminal'action,'this'
cannot'be'used'as'a'defense.'Otherwise,'the'agent'can'commit'any'crime'and'not'be'held'liable'for'it.'
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Uy'and'Roxas'v.'CA'
Facts:'Uy'and'Roxas,'as'agents,'sold'5'parcels'of'land'to'NHA.'NHA'later'cancelled'the'sale'but'offered'to'pay'
damages.'Uy'and'Roxas'sued'for'breach.'
Held:'The'agents'are'not'real'parties1in1interest.'They'are'not'parties'in'a'contract'of'sale;'they'only'render'some'
service'or'do'something'in'representation'or'on'behalf'of'their'principals.'The'rendering'of'such'service'does'not'
make'them'parties'to'a'contract.'Though'they'lost'prospective'commission,'this'does'not'make'them'real'parties1in1
interest.'
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Angeles'v.'PNR'
Facts:'Romualdez'bought'scrap'rails'from'PNR.'He'later'informed'PNR'that'Lizette'Wijanco'was'authorized'to'
withdraw'the'rails'for'him.'PNR'later'stopped'the'withdrawal'of'the'rails'because'of'documentary'discrepancies'and'
pilfereages'of'the'scrap'rails.'Wijanco'asked'for'refunds.'PNR'refused'to'pay.'
Held:'Wijanco'had'no'cause'of'action'against'PNR'as'she'was'merely'an'agent'of'Romualdez.'Not'being'a'party'to'the'
contract,'she'could'not'sue.'
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Page'6'of'51'
Ong'v.'CA'
Facts:'Ong'applied'for'two'letters'of'credit'with'SolidBank'on'behalf'of'ARMAGRI.'He'signed'all'documents'
pertaining'to'the'transaction.'ARMAGRI'defaulted.'Ong'was'charged'and'convicted'of'two'counts'of'estafa'under'the'
Trust'Receipts'Law.'
Held:'Ong'was'directly'liable'as'he'had'undertaken'all'the'obligations'and'signed'all'documents'regarding'the'trust'
receipts.'The'law'on'agency'does'not'apply'in'criminal'cases.'Since'it'was'his'representation'alone'that'persuaded'
the'Bank'to'issue'the'letters'of'credit,'he'alone'is'liable.'
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PNB'v.'Ritratto'
Facts:'PNB1IFL,'a'subsidiary'of'PNB,'extended'a'letter'of'credit'to'Ritratto'et.'al.'secured'by'real'estate'mortgages.'
Ritratto'defaulted.'PNB'notified'them'of'the'foreclosure'of'the'mortgages'and'the'sale'of'the'subject'properties.'
Ritratto'et.'al.'filed'for'injunction.'
Held:'Ritratto'had'no'cause'of'action'against'PNB,'as'it'was'not'privy'to'the'loan'contracts'between'Ritratto'and'
PNB1IFL.'PNB,'as'attorney1in1fact'of'PNB1IFL,'is'an'agent'with'limited'authority'and'specific'duties'under'a'special'
power'of'attorney'incorporated'in'the'mortgages.'
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Problem:'
Mozzie'got'Neal'as'his'agent.'Neal'won'over'Adler’s'trust'to'get'his'bank'info.'Adler'sued'Neal'for'estafa.'Neal'
claimed'he'was'not'liable'as'he'was'only'Mozzie’s'agent.'
Is'Neal'correct?'
NO!'cite'Ong!v.!CA'–'the'law'of'agency'does'not'apply'to'criminal'cases'
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3.!Notice!to!agent!is!notice!to!principal!
• General'rule:'Information'relayed'to'the'agent'in'connection'with'the'object'of'the'contract'is'deemed'to'
have'been'relayed'to'the'principal.'
o This'is'known'as'the'theory'of'imputed'knowledge.'
• However,'the'rule'does'not'apply'conversely.'Notice'to'the'principal'is'not'notice'to'the'agent.'(Sunace!Int’l.!
v.!CA)'
• Exception'to'the'rule:'where'the'conduct'and'dealings'of'the'agent'are'such'as'to'raise'a'clear'presumption'
that'he'will'not'communicate'to'the'principal'the'facts'in'controversy'(Cosmic!Lumber!v.!CA)'
o This'is'because'if'the'agent'were'committing'fraud,'it'would'be'contrary'to'common'sense'to'
presume'that'he'would'communicate'the'facts'to'the'principal.'When'an'agent'is'engaged'in'the'
perpetration'of'a'fraud'upon'his'principal'for'his'own'exclusive'benefit,'he'is'not'really'acting'for'
the'principal'but'is'really'acting'for'himself.'
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Problem:'
Patrick'got'Kimball'as'agent'to'sell'his'Belladonna'tea.'Patrick'found'out'that'the'tea'had'hallucinogenic'properties'
but'didn’t'tell'Kimball.'Customer'sued'Kimball'because'of'hallucinogenic'properties.'
Is'Kimball'liable?'
NO!'cite'Sunace!Int’l.!v.!CA'–'notice'to'the'principal'is'not'notice'to'the'agent'
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4.!Bad!faith!of!the!agent!is!bad!faith!of!the!principal!
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Caram'v.'Laureta'
Facts:'Mata'conveyed'a'tract'of'land'in'favor'of'Laureta.'The'sale'was'not'registered'but'Mata'delivered'the'peaceful'
and'lawful'possession'of'the'premises,'as'well'as'the'documents.'The'same'land'was'later'sold'by'Mata'to'Caram,'
through'the'latter’s'agents'Irespe'and'Aportadera.'This'sale'was'registered.'Laureta'sued'to'nullify'the'sale.'
Held:'The'sale'to'Caram'is'null'and'void.'Irespe'and'Aportadera'purchased'the'property'in'bad'faith,'knowing'of'the'
first'sale'to'Laureta.'Caram,'as'principal,'should'be'deemed'to'be'in'bad'faith'as'well.'
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Page'7'of'51'
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Problem:'
Mike'appointed'Sam'as'his'agent'to'sell'his'Mustang.'Sam'sold'it'to'Jesse'but'lied'to'him'about'defects'in'the'engine.'
Jesse'finds'out'and'confronts'Mike.'Mike'says'it’s'not'his'fault'if'Sam'lied'to'Jesse.'
Is'Mike'right?'
NO!'cite'Caram!v.!Laureta'–'bad'faith'of'agent'imputable'to'principal'
YES!'If'principal'had'no'notice,'and'even'expressly'forbade'it,'the'principal'is'not'liable.'(See'Liability'of'the'
principal,'infra,'page'37)'
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D.#Nature#of#agency:#general#and#special#
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1.!Distinguishing!general!agency!and!agency!couched!in!general!terms!
'
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.!
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a.!As!to!scope:!general!agency!
“all'the'business'of'the'principal”'
• Two'interpretations:'
o general'agent'manages'all'of'his'principal’s'several'businesses'
o general'agent'manages'the'entirety'of'a'particular'business'of'the'principal'
• What'is'determinative'of'the'general'agency'is'continuity'of'service'rather'than'extent'of'responsibility'
(American!Jurisprudence)'
• It'is'not'necessary'to'say'that'the'power'granted'to'the'agent'covers'“all'the'business'of'the'principal.”'It'is'
sufficient'that'the'listed'authorized'transactions'apparently'cover'all'that'is'required'to'run'the'business'of'
the'principal.'(Dominion!Insurance!v.!CA)'
'
Dominion'Insurance'v.'CA'
Facts:'Guevarra,'an'agent'of'Dominion'Insurance,'sued'to'claim'reimbursement'for'funds'he'allegedly'advanced'in'
his'capacity'as'manager'to'satisfy'certain'claims'of'clients.'
Held:'Guevarra'acted'in'excess'of'his'authority.'Although'the'document'was'denominated'as'a'“Special'Power'of'
Attorney”,'it'did'not'specify'the'authority'to'settle'claims.'The'powers'enumerated'were'acts'of'administration.'
Therefore,'they'had'only'entered'into'a'general'agency.'However,'he'may'claim'reimbursement'to'avoid'unjust'
enrichment.'
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b.!As!to!authority:!agency!couched!in!general!terms!
• refers'to'the'type'of'authority'granted'to'the'agent'
• only'grants'authority'to'perform'acts'of'administration'
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“acts'of'administration”'
• If'the'nature'of'the'business'requires'the'agent'to'perform'certain'acts'repeatedly'and'without'need'of'
express'authorization'from'the'principal'for'each'transaction,'then'the'act'is'arguably'an'act'of'
administration.'
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2.!Distinguishing!special!agency!and!agency!couched!in!specific!terms!
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a.!As!to!scope:!special!agency!
• Refers'to'scope'of'agent’s'authority'
• Comprises'one'or'more'specific'transactions'
• Agent'handles'specific'aspects'of'principal’s'business'
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Page'8'of'51'
b.!As!to!authority:!special!power!of!attorney!
• It'is'not'the'name'of'a'document,'but'a'description'of'the'nature'of'the'power'granted'to'the'agent,'which'
determines'whether'it'is'a'general'power'of'attorney'or'a'special'power'of'attorney.'
• What'matters'is'the'specificity'of'the'authority'granted'and'not'the'name'given'to'the'instrument'issued'in'
favor'of'the'agent.'
• A'special'power'of'attorney'refers'to'the'nature'of'the'authorization'and'not'to'its'form.'It'may'be'either'
oral'or'written.'The'only'vital'thing'is'that'it'is'express.'If'the'special'power'of'attorney'is'not'written,'it'
must'be'duly'established'by'evidence.'(Lim!Pin!v.!Liao!Tan)'
'
Problem:'
Ducky,'a'singer,'appointed'Palmer'as'his'agent.'Palmer'booked'Ducky'for'a'charity'concert.'Later,'Ducky'refused'to'
sing,'claimed'that'Palmer'was'not'authorized'to'book'him'for'the'event'because'he'did'not'give'him'an'SPA.'
Is'Ducky'correct?'
NO!'cite'Lim!Pin!v.!Liao!Tan'–'SPA'doesn’t'have'to'be'written,'can'be'oral'as'long'as'express'
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! i.!Transactions!covered!
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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!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.!
'
Cf.!
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.!
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Cf.!
Art.!1880.!A!special!power!to!compromise!does!not!authorize!submission!to!arbitration.!
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Veloso'v.'CA'
Facts:'Veloso'executed'a'“General'Power'of'Attorney”'in'favor'of'his'wife.'When'his'wife'left'for'abroad,'he'found'
that'his'copy'of'the'certificate'of'title'of'the'subject'property'was'missing.'He'later'discovered'that'his'wife,'by'virtue'
of'the'power'of'attorney,'had'sold'the'property.'He'claimed'that'never'authorized'anybody,'not'even'his'wife,'to'sell'
the'property.'
Held:'While'the'document'was'denominated'as'a'GPA,'it'stated'an'authority'to'sell.'Thus,'a'separate'SPA'was'not'
necessary'to'execute'the'sale.'The'SPA'can'be'included'in'the'general'power'when'it'is'specified'therein'the'act'or'
transaction'for'which'the'special'power'is'required.'
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Page'9'of'51'
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! ii.!Effect!of!absence!of!specific!authorization!
• Art.'1878'does'not'provide'for'the'effect'of'the'lack'of'specific'authorization'in'the'cases'enumerated.'
However,'they'have'been'held'by'the'SC'to'be'unenforceable.'(Duñgo!v.!Lopena,'Vicente!v.!Geraldez)'
• However,'when'the'contract'involves'the'sale'of'land,'it'is'void,'pursuant'to'Art.'1874.'(Cosmic!Lumber!v.!
CA)'
• All'other'powers'not'included'in'the'instrument'are'deemed'to'be'excluded.'The'SPA'is'strictly'
construed.'(Mercado!v.!Allied!Bank)'
o This'is'because'of'the'disinclination'of'courts'to'expand'the'authority'granted'in'the'SPA.'(PNB!
v.!Sta.!Maria)'
'
Duñgo'v.'Lopena'
Facts:'Duñgo'and'Gonzales'bought'3'parcels'of'land'from'Lopena'and'Ramos.'They'later'defaulted'in'the'payment'of'
the'installments.'Lopena'and'Ramos'filed'for'foreclosure'of'mortgage.'A'compromise'agreement'was'entered'into,'
but'without'the'signature'of'Duñgo.'A'tri1party'agreement'was'later'created,'this'time'with'Duñgo’s'signature.'
Duñgo'and'Gonzales'again'defaulted'in'payment'and'the'mortgaged'properties'were'sold'at'public'auction.'Duñgo'
argued'that'the'proceedings'should'be'null'and'void'insofar'as'he'is'concerned'because'he'did'not'sign'the'
compromise'agreement.'
Held:'Although'the'Civil'Code'expressly'requires'a'special'power'of'attorney'to'bind'another'person'in'a'
compromise'agreement,'it'is'neither'accurate'nor'correct'to'conclude'that'its'absence'renders'the'compromise'
agreement'void.'The'compromise'agreement'is'merely'unenforceable,'governed'by'Art.'1403(1).'However,'the'
compromise'agreement'was'ratified'through'the'tri1party'agreement,'making'it'valid.'
'
Vicente'v.'Geraldez'
Facts:'Vicente,'Bernabe'and'Angeles'claimed'that'their'land'was'within'the'area'that'was'covered'by'Hi'Cement'
Corp.’s'mining'claims.'They'later'entered'into'a'compromise'agreement'stating'their'willingness'to'enter'a'contract'
of'sale'regarding'the'disputed'land.'The'court'approved'the'agreement.'Hi'Cement'later'repudiated'the'agreement,'
claiming'that'its'Board'of'Directors'gave'no'authority'to'the'lawyers'to'execute'a'compromise'agreement.'
Held:'The'compromise'agreement'was'not'valid.'Attorneys'have'authority'to'bind'their'clients'in'any'case,'but'they'
cannot,'without'special'authority,'compromise'their'client’s'litigation.'In'this'case,'the'lawyers'did'not'have'any'
authority'to'enter'into'a'compromise'agreement'in'behalf'of'the'company.'The'officer'or'agent'has'no'authority'to'
compromise'or'settle'a'claim'by'or'against'the'corporation'unless'such'power'is'given'to'him'expressly'or'by'
reasonable'implication'from'the'circumstances.'There'was'no'such'grant'of'authority'by'the'Board'of'Directors.'
Neither'was'there'ratification.'
'
Cosmic'Lumber'v.'CA'
Facts:'Cosmic'Lumber'executed'an'SPOA'in'favor'of'Villamil1Estrada'to'initiate,'institute'and'file'any'court'action'for'
the'ejectment'of'squatters'on'Cosmic'Lumber’s'lots.'Villamil1Estrada'entered'into'a'Compromise'Agreement'with'
one'squatter'which'effectively'sold'him'a'portion'of'the'lot.'
Held:'Although'the'SPA'authorized'Villamil1Estrada'to'enter'into'compromise'agreements,'the'agreement'in'this'
case'effectively'conveyed'the'ownership'of'a'portion'of'the'lot.'Thus,'the'authority'of'an'agent'to'execute'a'contract'
for'the'sale'of'real'estate'must'be'conferred'in'writing'and'must'give'him'specific'authority.'A'special'power'of'
attorney'is'necessary'to'enter'into'any'contract'by'which'the'ownership'of'an'immovable'is'transmitted'or'acquired'
either'gratuitously'or'for'a'valuable'consideration.'
'
Reconciling'Art.'1878(5)'and'Art.'1874:'
Object'of'contract' Specific'authorization' Written'authorization'
Sale'of'land' ✔' ✔'
Sale'of'an'immovable'other'than'land' ✔' '
Transmittal'of'ownership'of'an' ✔' '
immovable'other'than'land'
Transmittal'of'ownership'of'land' ✔' '
other'than'through'a'sale'
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Page'10'of'51'
Mercado'v.'Allied'Bank'
Facts:'Perla'Mercado'executed'an'SPA'in'favor'of'her'husband,'Julian,'over'several'pieces'of'property.'Julian'
contracted'several'loans'and'used'the'subject'property'as'mortgage.'However,'there'was'a'discrepancy'in'the'
property'listed'in'the'SPA'and'the'property'mortgaged.'
Held:'The'mortgaged'property'was'not'among'those'enumerated'in'the'SPA.'A'power'of'attorney'must'be'strictly'
construed'and'pursued.'The'instrument'will'be'held'to'grant'only'those'powers'which'are'specified'therein,'and'the'
agent'may'neither'go'beyond'nor'deviate'from'the'power'of'attorney.'All'other'powers'not'included'in'the'document'
are'excluded.'
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! iii.!Effect!of!specific!authorization!
• The'powers'and'duties'conferred'by'the'instrument'are'limited'to'those'which'are'explicitly'stated'
therein.'All'other'powers'are'excluded.'(BPI!v.!De!Coster)'
• An'instrument'called'a'“general'power'of'attorney”'may'be'sufficient'to'authorize'an'agent'to'sell'real'
property,'provided'that'such'authority'is'specified'in'the'instrument.'(BravoTGuerrero!v.!Bravo)'
'
BPI'v.'De'Coster'
Facts:'Gabriela'Poizat'executed'a'power'of'attorney'in'favor'of'her'husband,'Jean'Poizat.'He'obtained'a'loan'from'BPI'
for'his'own'benefit'and'his'company,'and'secured'the'loan'with'a'mortgage'over'Gabriela’s'property.'He'defaulted'
payment'and'BPI'tried'to'foreclose.'
Held:'The'property'could'not'be'held'liable.'It'does'not'state'in'the'terms'and'provisions'of'the'power'of'attorney'
that'Jean'can'make'Gabriel'liable'for'the'payment'of'the'pre1existing'debt'of'a'third'person.'The'power'to'obtain'
loans'should'be'construed'to'mean'that'Jean'had'power'to'loan'his'wife’s'money'and'to'borrow'money'for'or'on'her'
account,'as'her'agent'and'attorney1in1fact.'Where'in'an'instrument'powers'and'duties'are'specified'and'defined,'the'
powers'and'duties'are'limited'and'confined'to'those'which'are'specified'and'defined,'and'that'all'other'powers'and'
duties'are'excluded.'
'
Insular'Drug'v.'PNB'
Facts:'Alfred'Von'Arend'was'a'salesman'and'collector'of'Insular'Drug.'He'was'instructed'to'receive'checks'and'
deposit'them'to'the'company’s'account.'Instead,'he'deposited'the'checks'to'his'personal'account'and'withdrew'from'
the'funds.'Insular'Drug'sued'PNB.'PNB'claimed'that'the'agent'had'implied'authority'to'indorse'all'checks'made'out'
in'the'company’s'name.'
Held:'A'salesman'with'authority'to'collect'money'belonging'to'his'principal'does'not'have'the'implied'authority'to'
indorse'checks'received'in'payment.'Any'person'taking'checks'made'payable'to'a'corporation,'which'can'act'only'by'
agent'does'so'at'his'peril,'and'must'abide'by'the'consequences'if'the'agent'who'indorses'the'same'is'without'
authority.'
'
Hodges'v.'Salas'
Facts:'Salas'executed'an'SPA'in'favor'of'Yulo.'Yulo'obtained'a'loan'from'Hodges'and'secured'it'with'a'mortgage'on'
real'property'owned'by'Salas.'He'applied'part'of'the'loan'to'the'payment'of'his'personal'debt.'Salas'defaulted.'
Hodges'tried'to'foreclose'the'mortgage.'
Held:'Salas'cannot'be'made'to'pay'for'the'entire'loan.'There'was'nothing'to'indicate'that'Salas'had'authorized'Yulo'
to'convert'the'money'he'obtained'for'his'personal'use.'The'SPA'could'not'be'interpreted'as'also'authorizing'the'
agent'to'dispose'of'the'money'as'he'pleased,'particularly'when'it'does'not'appear'that'such'was'the'intention'of'the'
parties.'He'thus'exceeded'his'authority'in'applying'part'of'the'money'to'pay'for'his'personal'obligations.'
'
Bravo1Guerrero'v.'Bravo'
Facts:'Simona'Bravo'executed'a'GPA'authorizing'her'husband,'Mauricio,'to'mortgage'or'otherwise'sell'or'dispose'of'
her'property.'Mauricio'sold'two'parcels'of'land'to'their'son'and'grandchildren.''
Held:'The'deed'of'sale'was'valid.'Art.'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'SPA'is'met'if'there'is'a'clear'mandate'from'
the'principal'specifically'authorizing'the'performance'of'the'act.'In'this'case,'the'GPA'executed'authorized'Mauricio'
to'“sell,'assign'and'dispose”'of'Simona’s'property.'
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Page'11'of'51'
2.!Written!
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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.!
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“in'writing”'
• It'should'be'sufficient'that'the'authority'in'writing'reflect'the'identity'of'the'agent,'a'proper'description'of'
the'land'and'terms'of'the'sale,'if'any.'
• Such'instrument'would'be'a'special'power'of'attorney'even'if'the'appointment'of'the'agent'was'originally'
merely'oral.'
• In'the'absence'of'statute,'no'form'or'method'of'execution'is'required'for'a'valid'power'of'attorney;'it'may'be'
in'any'form'clearly'showing'on'its'face'the'agent’s'authority.'(Angeles'v.'PNR)'
'
a.!Application!
• Art.'1874'applies'to'a'contact'of'sale'entered'into'through'an'agent.'If'the'agent'is'merely'negotiating'for'his'
principal,'he'need'not'have'authority'in'writing,'provided'it'is'the'principal'himself'who'executed'the'
contract.'
• A'sale'is'only'through'an'agent'if'the'agent'is'the'signatory'to'to'a'contract'on'behalf'of'the'principal.'
• Art.'1874'uses'the'term'“land”'(as'opposed'to'“immovable”'or'“real'property”)'and'should'be'limited'to'such'
objects.'
• The'article'also'applies'to'the'sale'of'“any'interest”'on'a'piece'of'land'(e.g.,'usufruct,'mortgage).'
• Art.'1874'seemingly'also'applies'to'contracts'to'sell,'which'are'preparatory'to'contracts'of'sale.'(illustrated'
in'Oesmer'v.'Paraiso'Development)'
• Art.'1874'admits'of'no'exceptions.'
'
Cosmic'Lumber'v.'CA'
(supra,'page'10)'
'
Oesmer'v.'Paraiso'Development'
Facts:'Six'out'of'eight'Oesmer'siblings'sold'two'parcels'of'land.'Only'Ernesto'and'Enriqueta'signed'the'deed'of'sale;'
the'others'only'signed'in'the'margins.'Later,'the'siblings'filed'a'complaint'for'declaration'of'nullity'of'the'contract'to'
sell.'
Held:'The'contract'to'sell'was'valid.'The'siblings’'signatures'were'found'in'the'margins'of'the'contract.'A'written'
authority'is'no'longer'necessary'in'order'to'sell'their'shares'in'the'subject'parcels'of'land'because'by'affixing'their'
signatures'on'the'contract,'they'were'not'selling'their'shares'through'an'agent'but'rather,'they'were'the'same'
directly'and'in'their'own'right.'
'
b.!Effect!
• The'sale'of'land'without'written'authority'is'void.'
• It'cannot'be'subject'to'ratification.'
'
AF'Realty'v.'Dieselman'
Facts:'Cruz,'Jr.,'a'member'of'Dieselman’s'Board'of'Directors,'authorized'Polintan'to'sell'one'of'Dieselman’s'lots.'AF'
Realthy'accepted'the'offer'to'buy.'Dieselman'later'withdrew'the'offer'and'sold'the'lot'to'Midas'instead.'AF'Realty'
argued'that'the'receipt'of'the'partial'payment'was'ratification'and'effectively'bound'Dieselman'to'the'contract.'
Held:'Art.'1874'requires'written'authorization'for'a'sale'of'land'through'an'agent,'otherwise'the'sale'is'void.'Since'
the'agents'were'not'authorized'by'the'corporation'to'sell'its'lot,'the'contract'is'void.'Being'a'void'contract,'it'is'not'
susceptible'of'ratification,'pursuant'to'Art.'1409.'
'
Pahud'v.'CA'
Facts:'Eight'siblings'inherited'their'parents’'land.'Seven'sold'their'shares'to'the'Pahuds,'but'three'of'them'did'not'
execute'SPAs.'When'it'was'time'to'transfer'the'title,'Virgilio'refused'the'partition.'Later,'the'seven'agreed'to'sell'
their'shares'to'Virgilio,'who'then'sold'the'entire'property'to'the'Belarminos.'
'
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Page'13'of'51'
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Held:'While'the'sale'with'respect'to'3/8'of'the'property'is'void'pursuant'to'Art.'1874,'its'validity'was'upheld'based'
on'estoppel.'The'3'heirs'who'did'not'execute'SPAs'admitted'that'they'had'indeed'sold'their'shares'of'the'property'to'
the'Pahuds.'They'never'assailed'the'validity'of'the'sale'on'the'basis'of'lack'of'written'authority'to'sell.'By'their'
continued'silence,'they'have'caused'the'Pahuds'to'believe'that'they'have'indeed'clothed'their'agent'with'the'
authority'to'transact'on'their'behalf.'
'
Note:'Sir'Casis'argues'that'this'is'an'incorrect'decision.'Even'assuming'that'an'implied'agency'or'agency'by'estoppel'
was'created,'the'contract'would'still'be'void'because'a'written'authority'to'sell'is'expressly'required'by'Art.'1874.'
He'argues'that'Carpio1Morales’'dissent'is'more'in'accord'with'the'law.'
'
Problem:'
P'tells'A,'in'view'of'a'third'party,'that'he’s'authorizing'him'to'sell'a'parcel'of'land.'
If'A'executes'deed'of'sale'with'the'third'party,'is'the'sale'valid?'
NO!'cite'Art.'1874'–'authority'must'be'in'writing'
What'if'instead'of'land,'it’s'a'building?'
YES!'cite'Art.'1874'–'mentions'“land”'specifically'
What'if'instead'of'selling,'agent'is'authorized'to'buy'a'parcel'of'land?'
De'Leon'argues'that'1874'is'applicable'only'when'selling'land,'but'Sir'Casis'argues'that'it'applies'to'both'
buying'and'selling.'(Perhaps'Sales'provisions'can'be'cited'here.'–ed.)'
'
c.!Form!in!case!of!corporations!
• Contracts'or'acts'of'a'corporation'must'be'made'either'by'the'board'of'directors'or'by'a'corporate'agent'
duly'authorized'by'the'board.'(AF!Realty!v.!Dieselman)'
• A'corporation'may'act'only'through'its'board'of'directors'or,'when'authorized'either'by'its'by1laws'or'by'its'
board'resolution,'through'its'officers'or'agents'in'the'normal'course'of'business.'(Litonjua!v.!Eternit)'
• Property'of'the'corporation'may'not'be'sold'without'express'authority'from'the'board'of'directors.'Absent'
such'valid'delegation/authorization,'the'declarations'of'an'individual'director'relating'to'the'affairs'of'the'
corporation,'but'not'in'the'course'of,'or'connected'with,'the'performance'of'authorized'duties'of'such'
director,'are'not'binding'on'the'corporation.'(Litonjua!v.!Eternit)'
'
AF'Realty'v.'Dieselman'
Facts:'(supra,'page'13)'
Held:'The'sale'was'not'valid.'Sec.'23'of'the'Corporation'Code'expressly'provides'that'the'corporate'powers'of'all'
corporations'shall'be'exercised'by'the'board'of'directors.'Contracts'or'acts'of'a'corporation'must'be'made'either'by'
the'board'of'directors'or'by'a'corporate'agent'duly'authorized'by'the'board.'Absent'such'valid'authorization,'the'
declarations'of'an'individual'director'cannot'bind'the'corporation.'
'
Litonjua'v.'Eternit'
Facts:'ESAC,'which'owned'90%'of'Eternit,'decided'to'sell'Eternit’s'property.'They'engaged'the'services'of'
broker/realtor'Marquez.'Marquez'offered'the'property'to'Lintonjua,'and'the'agreement'was'approved'by'Delsaux'
(ESAC’s'regional'director)'and'Glanville'(Eternit’s'president'and'general'manager).'However,'ESAC'later'changed'its'
mind'and'revoked'instructions'to'sell'the'property.'Litonjua'sued'for'damages.'
Held:'Litonjua'failed'to'prove'that'Eternit'empowered'the'agents'to'sell'the'land.'A'board'resolution'evincing'the'
grant'of'authority'is'needed'to'bind'Eternit'to'any'agreement'regarding'the'sale'of'its'properties.'Glanville'and'
Delsaux'were'acting'in'behalf'of'ESAC,'not'Eternit.'The'mere'fact'that'a'corporation'owns'a'majority'of'the'shares'of'
stock'of'another'will'not'justify'their'being'treated'as'one'corporation.'
'
Problem:'
Pepper'negotiates'the'sale'of'Stark'Corporation’s'lot'to'Rhodey.'Pepper'presented'to'Rhodey'a'notarized'document'
entitled'“Special'Power'of'Attorny”'signed'by'Tony'Stark,'the'president'of'Stark'Corporation,'authorizing'Pepper'to'
sell'the'lot'on'behalf'of'Stark'Corp.'
Is'the'sale'through'Pepper'valid?'
NO!'cite'AF!Realty!v.!Dieselman'–'Pepper'needs'a'board'resolution,'unless'Stark'Corporation’s'by1laws'say'
Tony'can'authorize'her'without'one.'
'
'
Page'14'of'51'
Problem:'
Lex'Corporation'owns'100%'of'Planet'Corporation.'Lex,'by'letter,'instructed'White,'Planet’s'president'and'chairman'
of'its'Board'of'Directors,'to'sell'Planet’s'land.'White,'with'the'help'of'Planet'directors'Clark'and'Jim,'negotiated'a'sale'
with'Bugle'Corporation.'White'signed'a'deed'of'sale'on'behalf'of'Planet'with'Clark'and'Jimmy'as'witnesses.'
If'Planet'has'five'directors,'is'the'sale'valid?'
NO!'cite'cases'–'still'requires'resolution,'not'enough'that'White'is'President/Chairman'of'the'Board'
' '''''''''''–'Clark'and'Jimmy'signed'only'as'witnesses'
Reconcile'this'with'the'case'of'Oesmer!v.!Paraiso!Development'(supra,'page'13).'
'
B.#Express/implied#agency#and#agency#by#estoppel#
'
Art.!1869.!(supra,!page!12)!
'
“express'or'implied”'
• Refers'to'the'manner'by'which'agency'is'established'
• How'the'principal'authorizes'the'agent'or'how'the'agent'accepts'the'appointment'
'
1.!Express!agency!
• created'by'the'express'act'of'the'principal'authorizing'the'agent'to'act'on'his'behalf'and'by'the'express'act'
of'the'agent'accepting'such'authority.'
• This'is'the'usual'manner'by'which'an'agency'is'established.'
'
2.!Implied!agency!
!
a.!Implied!from!acts!of!the!principal!
'
'
Requisites'of'an'implied'agency'under'Art.'1869:'
1. The'alleged'principal'should'have'been'aware'of'the'acts'of'the'alleged'agent'
2. The'alleged'principal'has'had'reasonable'opportunity'under'the'circumstances'to'repudiate'the'acts'of'the'
alleged'agent'
3. A'third'party'has'transacted'with'the'alleged'agent'without'being'made'aware'of'the'alleged'agent’s'lack'of'
authority'
4. There'were'no'facts'or'circumstances'that'should'have'raised'any'suspicion'on'the'part'of'the'third'person'
that'the'agent'was'not'authorized'
'
Problem:'
Gibbs'found'out'that'Palmer'was'representing'himself'as'Gibbs’'agent'and'selling'Gibbs’'products.'Gibbs'did'nothing'
about'it'for'one'week.'
Is'there'an'implied'agency?'
How'about'one'day?'Is'there'an'implied'agency?'
What'if'after'three'days'he'tells'Palmer'to'stop'what'he'was'doing'but'doesn’t'inform'third'persons?'Implied'agency?''
'
Problem:'
Mike’s'lightbulb'business'
Mike’s'business'is'selling'light'bulbs.'Casiano'starts'selling'Mike’s'light'bulbs'without'his'knowledge'and'consent.'
Casiano'sells'Justin'100'light'bulbs.'On'the'fourth'day,'Casiano'also'100'light'bulbs'to'Elvin.'
'
Note:'These'problems'illustrate'the'difficulty'in'the'time'frame'(“reasonable'opportunity”)'given'to'the'principal'to'
repudiate'the'alleged'agent’s'acts.'
'
'
'
Page'15'of'51'
'
b.!Implied!from!acts!of!the!agent!
'
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.!
'
“silence'or'inaction”'
Agency'is'established'if'the'agent'does'not'inform'the'principal'of'his'rejection'of'the'agency:'
1. Within'a'reasonable'amount'of'time'under'the'circumstances'
2. Prior'to'the'principal'suffering'damage'as'a'result'of'the'delay'on'the'part'of'the'agent'in'informing'the'
principal'of'such'rejection'
'
Problem:'
Kate'asked'Rick'to'be'her'agent.'Rick'gave'no'response,'but'started'acting'as'such.'
YES!'cite'Art.'1870'–'Rick’s'acts'carry'out'the'agency'
'
Problem:'
Sam'asked'Maddy'to'be'her'agent.'Maddy'did'not'respond'for'one'week.'
What'if'only'one'day'had'lapsed?'One'hour?'
'
Note:'Again,'these'problems'illustrate'the'difficulty'with'regard'to'the'time'frame'(“reasonable'amount'of'time”).'Sir'
Casis'suggests'that'certain'jobs'need'immediate'action,'while'others,'not'so'much.'
'
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.!
'
“delivers'his'power'of'attorney”'
• agent'must'be'aware'of'the'contents'of'the'document'
• mere'physical'receipt'of'the'document'without'specific'knowledge'as'to'its'contents'should'not'be'sufficient'
to'bind'him'
'
Problem:'
Peter'goes'to'Andrew’s'house,'hands'him'an'envelope'containing'the'special'power'of'attorney.'Andrew'says'
“Thanks.”'
NO!'The'person'has'to'know'that'he’s'receiving'an'SPA.'
'
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!is!habitually!engaged!as!an!agent,!and!he!did!not!reply!to!the!letter!or!telegram.!
'
• General'rule:'acceptance'cannot'be'implied'if'the'non1objection'of'the'agent'is'not'made'in'the'principal’s'
presence.'
• The'two'scenarios'in'Art.'1872'are'exceptions'to'this'general'rule.'
'
“entrusts'by'letter'or'telegram”'
• implied'agency'arises'only'when'the'power'of'attorney'pertains'to'a'business'that'the'agent'is'habitually'
engaged'in'
• This'is'not'a'requirement'in'the'case'of'a'transmittal.'
'
'
'
'
Page'16'of'51'
Problem:'
Philip'sends'email'to'Alfred'appointing'him'as'agent.'Alfred'reads'it'but'doesn’t'respond.'
Is'an'email'“transmitted”?'
What'is'the'time'frame'for'the'recipient'to'make'an'“objection”?'
'
Problem:'
Pancho'and'Alma'were'chatting'on'FB'during'class.'Pancho'says:'“If'you'help'me'sell'my'car'I'will'give'you'a'
commission.”'Alma'replies:'“”'
If'Alma'was'a'used'car'salesperson,'is'there'an'implied'agency?'
What'would'“persons'who'are'absent”'contemplate?'Would'this'include'those'who'are'physically'present'but'can’t'
communicate'freely,'as'in'this'problem?'
'
3.!Agency!by!estoppel!
'
a.!Based!on!statute!
!
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.!
'
“agency'by'estoppel”'
• a'real'agency'relationship'does'not'exist;'however,'one'is'established'with'respect'to'a'third'person'who'
relied'on'the'representations'of'the'alleged'principal'or'agent,'as'the'case'may'be.'
• This'does'not'apply'in'cases'where'the'existence'of'an'agency'relationship'is'undisputed.'
• This'article'applies'when'the'alleged'principal'is'the'one'who'specially'informs'another'person,'or'states'by'
public'advertisement,'that'someone'is'his'agent'
• If'it'is'the'other'way'around,'meaning'it'is'the'alleged'agent'who'specially'informs'another'person'or'states'
by'public'advertisement'that'someone'is'his'principal:'
o If'the'alleged'principal'finds'out'and'does'nothing,'there'can'be'an'implied'agency'(Art.'1869)'
o If'the'alleged'principal'is'completely'unaware,'the'third'person'has'no'recourse'against'him.'The'
principal'must'be'aware'of'all'relevant'facts'for'there'to'be'ratification.'(See'Obligations'of'the'
principal,'infra,'page'33)'
'
Two'scenarios'contemplated'in'Art.'1873:'
1. “specially'informs'another”'
o agency'is'established'by'estoppel'with'respect'to'the'person'who'received'the'special'information'
2. “states'by'public'advertisement”'
o agency'is'established'by'estoppel'with'respect'to'any'person'
'
b.!Based!on!jurisprudence!
'
Requisites'for'the'existence'of'an'agency'by'estoppel'(Litonjua!v.!Eternit):'
1. The'principal'manifested'a'representation'of'the'agent’s'authority'or'knowingly'allowed'the'agent'to'
assume'such'authority.'
2. The'third'person,'in'good'faith,'relied'upon'such'representation.'
3. Relying'upon'such'representation,'such'third'person'has'changed'his'position'to'his'detriment.'
'
Requisites'to'hold'a'hospital'vicariously'liable'under'the'doctrine'of'apparent'authority'(Nogales!v.!Capitol!Medical):'
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'created'the'appearance'of'authority,'the'plaintiff'must'also'prove'that'the'
hospital'had'knowledge'of'and'acquiesced'in'them'
3. The'plaintiff'acted'in'reliance'upon'the'conduct'of'the'hospital'or'its'agent,'consistent'with'ordinary'care'
and'prudence'
Page'17'of'51'
'
Factors'to'determine'liability'of'an'independent1contractor'physician'(Nogales!v.!Capitol!Medical):'
1. Manifestation'
o The'hospital'acted'in'a'manner'which'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. Reliance'
o The'plaintiff'acted'in'reliance'upon'the'conduct'of'the'hospital'or'its'agent,'consistent'with'ordinary'
care'and'prudence.'
'
Problem:'
Is'there'an'agency'by'estoppel'if'Peter'posts'on'Alfred’s'FB'wall'that'the'is'appointing'him'as'agent…'
…but'Alfred'doesn’t'comment?'
…and'Alfred'likes'the'post?'
Assuming'an'agency'by'estoppel'is'created,'Alfred'is'an'agent'with'respect'to'whom?'
How'can'Peter'rescind'the'agency?'Delete'the'post'or'another'post?'
'
Note:'This'problem'illustrates'the'difficulty'in'applying'the'provision'to'modern1day'technology.'
'
Problem:'
Angie'specially'informs'Tim'that'Perla'is'her'principal.'
Is'there'agency'by'estoppel?'
NO!'1873'applies'only'to'principal'informing'others'regarding'the'agency,'not'the'other'way'around.'
'
Nogales'v.'Capitol'Medical'
Facts:'Corazon'was'under'the'prenatal'care'of'Dr.'Estrada.'She'was'found'to'have'a'condition'which'made'pregnancy'
dangerous.'Upon'labor,'Dr.'Estrada'advised'that'she'be'admitted'to'Capitol'Medical'(CMC).'During'childbirth,'under'
the'supervision'of'Dr.'Estrada,'Corazon'died'to'to'profuse'bleeding.'The'family'sued'CMC'and'its'personnel'for'
damages.'
Held:'The'general'rule'is'that'a'hospital'is'not'liable'for'the'negligence'of'an'independent'contractor1physician.'
However,'if'the'physician'is'the'“ostensible”'agent'of'the'hospital,'this'falls'as'an'exception'to'the'rule,'under'the'
“doctrine'of'apparent'authority.”'The'element'of'“holding'out”'on'the'part'of'the'hospital'is'satisfied'if'the'hospital'
holds'itself'out'as'a'provider'of'emergency'room'care'without'informing'the'patient'that'the'care'is'provided'by'
independent'contractors.'
'
Philippine'Realty'v.'Ley'Construction'
Facts:'Philippine'Realty'(PHRC)'entered'into'an'agreement'with'Ley'Construction'(LCDC)'to'construct'the'Tektite'
towers'and'other'buildings.'The'construction'was'delayed'and'LCDC'sought'to'have'the'contract'price'increased'in'
order'to'finish'the'project.'Representatives'of'PRHC'agreed'to'the'escalation'despite'not'having'been'approved'by'
PRHC’s'Board'of'Directors.'
Held:'The'agreement'on'the'price'escalation'was'valid.'As'far'as'LCDC'was'concerned,'the'two'were'representatives'
of'PRHC,'and'when'the'two'agreed'to'the'escalation'agreement'with'LCDC,'PRHC'effectively'agreed'to'it.'There'were'
other'contracts'wherein'the'two'signed'in'behalf'of'PRHC.'Said'agreement'were'not'questioned'by'PRHC,'in'effect'
admitting'that'the'two'had'authority.'
'
4.!Distinguishing!implied!agency!and!agency!by!estoppel!
'
Agency'by'estoppel' Implied'agency'
Not'a'real'agency'relationship' There'is'a'real'agency'relationship'
Rights'and'obligations'arise'only'as'to' All'agency'law'apply'as'to'principal,'agent'
“principal”'and'third'person' and'third'person'
'
Note:'Sir'Casis,'in'his'book,'mainly'argues'that'the'Supreme'Court'tends'to'confuse'“implied'agency”'and'“agency'by'
estoppel”.'This'part'is'included'in'the'reviewer'because'Court'rulings'are'still'considered'authority'(despite'
everything'Sir'Casis'says'against'them)'and,'for'purposes'of'the'exam,'are'still'citable.'However,'Sir’s'critiques'on'the'
Court’s'discussions'are'also'included'for'our'guidance,'because'as'Sir'says,'we'should'know'better'than'the'Court.'
'
'
Page'18'of'51'
'
• An'agent'receives'commission'upon'the'successful'conclusion'of'a'sale.'A'broker'earns'his'pay'merely'by'
bringing'the'buyer'and'seller'together,'even'if'no'sale'is'eventually'made.'(Hahn!v.!CA,'infra,'page'51)'
• It'is'sufficient'that'the'agent'“set'the'sale'in'motion.”'(Tan!v.!Gullas)'
• The'agent'may'be'entitled'to'commission'even'if'the'sale'is'consummated'after'the'revocation'of'his'
authority,'if'the'revocation'was'done'in'bad'faith'by'the'principal'to'avoid'the'payment'of'commission'
(Infante!v.!Cunanan).'To'deprive'the'agent'of'his'commission'subsequent'to'the'sale'which'was'
consummated'through'his'efforts'would'be'a'breach'of'his'agency'contract'(Lim!v.!Saban).'
'
Problem:'
A'is'a'well'known'lawyer'who'works'pro'bono'for'the'poor.'P'hired'A'to'represent'him'in'a'labor'dispute'(illegal'
dismissal).'P'lost.'When'A'sent'the'bill,'P'refused'to'pay.'
Is'A'entitled'to'compensation?'
YES!'cite'Art.'1875'–'presumed'to'be'for'compensation'
'
a.!Procuring!cause!
• a'cause'originating'a'series'of'events'which,'without'break'in'their'continuity,'result'in'the'accomplihment'
of'the'prime'objective'of'the'employment'of'the'broker'–'producing'a'purchaser'ready,'willing,'and'able'to'
buy'on'the'owner’s'terms'(Philippine!HealthTCare!Providers!v.!Estrada)'
• must'have'been'the'foundation'on'which'the'negotiations'resulting'in'a'sale'began'
'
“procuring'cause”'as'regards'brokers'and'agents'
Brokers' Agents'
Bringing'the'buyer'and'seller'together' Successful'conclusion'of'sale'
sufficient'to'be'entitled'to'commission' necessary'to'be'entitled'to'
commission'
“set'the'sale'in'motion”' Efforts'resulted'in'a'sale'
Penetrated'the'market,'laid'the' '
groundwork'
Efforts'were'the'foundation'of' '
negotiations'
'
Danon'v.'Brimo'&'Co.'
Facts:'Defendant'employed'plaintiff'to'find'a'buyer'for'its'factory,'promising'to'pay'commission'upon'plaintiff's'
success'in'finding'an'able'and'willing'buyer.'Plaintiff'did'his'part'but'then'the'defendant'refused'to'sell'the'factory.'It'
turned'out'that'despite'plaintiff's'efforts'to'secure'a'buyer,'a'competing'broker'closed'the'deal'at'a'higher'price.'
Held:!Plaintiff'is'not'entitled'to'compensation'because'he'did'not'contribute'to'the'sale'and'was'not'the'sale’s'
efficient'agent'or'procuring'cause.'Quoting'Sibbald'v.'Bethlehem'Iron,'“a'broker'is'never'entitled'to'commissions'for'
unsuccessful'efforts...[R]eward'only'comes'with'success.”'
'
Tan'v.'Gullas'
Facts:'Petitioners'were'authorized'brokers'for'the'sale'of'the'Gullases’'land.'They'introduced'the'Sisters'of'Mary'to'
the'property'and'to'Gullas,'but'did'not'receive'commissions'for'the'sale'because,'allegedly,'another'broker'
negotiated'the'final'sale.'
Held:'Petitioners'are'still'entitled'to'a'commission'because'they,'at'the'very'least,'set'the'sale'in'motion.'As'brokers,'
they'are'entitled'to'a'commission'by'merely'bringing'the'buyer'and'seller'together,'whether'a'sale'is'eventually'
made'or'not.''!
'
Philippine'Health1Care'Providers'v.'Estrada'
Facts:''Estrada'hired'as'a'general'agent'of'Maxicare.'She'landed'the'Meralco'account'but'was'denied'the'commission'
to'the'premiums'paid'by'Meralco.'
Held:'Estrada'is'entitled'to'the'commissions'since'she'is'the'efficient'procuring'cause'of'the'service'agreement'
between'the'parties.'At'the'very'least,'she'was'the'one'who'penetrated'the'Meralco'market,'initially'closed'to'
Maxicare,'and'laid'the'groundwork'for'a'business'relationship.'
'
'
'
Page'20'of'51'
Sanchez'v.'Medicard'
Facts:'Through'petitioner’s'efforts,'Medicard'and'Unilab'executed'a'Health'Care'Program'Contract.'Unilab'later'
decided'to'discontinue'it,'but'negotiated'with'Dr.'Montoya'and'other'officers'of'Medicard'ways'in'order'to'continue'
the'insurance'coverage'of'those'personnel'who'were'aleady'receiving'health'benegits.'Parties'thus'entered'into'a'
new'agreement.'
Held:'Sanchez'not'entitled'to'commission'from'new'agreement.'For'an'agent'to'be'entitled'to'a'commission,'he'must'
be'the'procuring'cause'of'the'sale.'The'measures'employed'by'him'and'the'efforts'he'exerted'must'result'in'a'sale;'
where'his'efforts'are'unsuccessful,'he'is'not'entitled'to'a'commission.'
'
Infante'v.'Cunanan'
Facts:'Infante'contracted'Cunanan'and'Mijares'to'sell'her'property'for'and'agreed'to'pay'commission.'Respondents'
found'a'buyer'but'Infante'then'claimed'not'to'be'interested'to'sell'her'property'anymore.'She'also'cancelled'the'
authority'granted'to'respondents.'Infante'then'dealt'directly'with'the'buyer'and'sold'the'property.'
Held:'The'Court'ruled'that'even'though'there'is'no'proof'of'an'oral'assurance'that'Infante'should'pay'the'
commission'if'she'changed'her'mind,'the'circumstance'shows'bad'faith'on'her'part'to'avoid'the'payment'of'the'
commission.'
'
Lim'v.'Saban'
Facts:'Saban'was'Ybanez’s'agent,'and'through'him,'Ybanez'was'able'to'sell'his'lot'to'Lim'and'the'Spouses'Lim.'After'
the'sale,'however,'Ybanez'was'able'to'convince'Lim'to'cancel'the'last'four'checks'she'had'issued'in'Saban’s'favor,'
which'allegedly'made'up'Saban’s'commission'on'the'sale.'
Held:'Agency'was'not'revoked'because'Ybanez'asked'Lim'to'stop'payment'orders'for'the'checks'payable'to'Saban.'At'
the'time,'Saban'had'already'performed'his'obligation'as'Ybanez’s'agent.'To'deprive'the'agent'of'his'commission'after'
the'sale'–'which'was'consummated'through'his'efforts'–'would'be'a'breach'of'his'contract'of'agency.'
'
b.!Prats!doctrine!and!Manotok!test!
• Prats'doctrine'
o An'agent'who'was'not'the'procuring'cause'of'the'sale'may'nevertheless'be'awarded'a'sum'of'
money'if'he'were'somehow'instrumental'in'bringing'the'parties'together'again'and'finally'
consummating'the'transaction.'
• Manotok'test'
o When'there'is'a'close,'proximate'and'causal'connection'between'the'agent’s'efforts'and'labor'and'
the'principal’s'sale'of'his'property,'the'agent'is'entitled'to'commission.'
o Note:'Sir'Casis'says'that'this'is'the'best'way'to'determine'whether'an'agent'is'entitled'to'
commission'or'not.'
• What'is'crucial'is'the'effect'of'the'agent’s'efforts'on'the'sale,'not'whether'such'sale'was'consummated'
within'the'period'of'the'authority'of'the'agent.'
'
Prats'v.'CA'
Facts:'Doronila'negotiated'with'SSS'regarding'the'sale'of'his'land.'The'proposed'sale'did'not'push'through.'Doronila'
then'granted'Prats'the'authority'to'sell'the'land.'Prats'offered'the'sale'of'the'land'to'SSS,'but'no'sale'was'perfected.'
After'the'expiration'of'the'authority'of'Prats'to'sell'the'land,'Doronila'once'again'offered'the'land'to'SSS.'They'agreed'
on'the'price,'and'the'sale'was'consummated.'Prats'demanded'that'he'be'paid'his'commission'for'the'sale,'but'
Doronila'refused'to'pay'him.'
Held:'Prats'is'not'entitled'to'any'commission'from'the'sale.'His'authority'to'sell'the'property'was'already'expired.'
However,'his'efforts'were'somehow'instrumental'in'bringing'the'parties'together'and'in'finally'consummating'the'
sale.'By'reason'of'equity,'he'is'awarded'a'sum'of'money'for'his'efforts.'
'
Manotok'Brothers'v.'CA'
Facts:'Saligumba'brokered'a'sale'for'Manotok'Brothers'with'the'City'of'Manila.'The'ordinance'for'the'appropriation'
of'funds'for'the'sale'was'approved'by'the'city'after'several'extensions'of'Saligumba’s'authority,'but'the'mayor'was'
able'to'sign'the'documents'three'days'after'the'expiry'of'the'same.'Manotok'refused'to'pay'Saligumba’s'commission.'
'
'
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Page'21'of'51'
'
Held:'The'Court'ruled'that'Saligumba’s'fell'within'the'exception.'He'was'entitled'to'his'commission'since'there'was'a'
causal'connection'between'his'efforts'and'the'consummation'of'the'sale.'The'characterization'of'an'agent'as'the'
procuring'cause'should'not'be'based'on'whether'the'sale'is'consummated'within'the'period'of'authority'of'the'
agent.'Time'period'may'be'taken'into'account,'however,'if'the'agency'contract'specifically'stipulated'that'the'deed'of'
sale'be'executed'within'an'agreed'time'period.'
'
Uniland'Resources'v.'DBP'
Facts:'DBP'redeemed'2'lots'then'offered'them'for'sale'in'a'public'bidding.'One'of'the'lots'was'bought'by'Charges'
Realty'Corporation,'an'affiliate'of'one'of'Uniland’s'clients,'Glaxo'Philippines.'After'the'sale,'Uniland,'asked'for'the'
payment'of'its'broker's'fee'for'being'instrumental'in'the'sale'of'the'lot'to'Charges'Realty.'
Held:'Uniland'was'not'able'to'secure'accreditation'from'DBP'to'transact'businesses'on'their'behalf.'An'implied'
agency'also'did'not'exist'between'them.'However,'due'to'equity'considerations'–'for'being'the'ones'to'advise'Glaxo'
on'the'availability'of'the'warehouse'lot'and'for'communicating'with'DBP'on'the'offer'–'they'were'entitled'to'
P100,000'compensation.!
'
Problem:'
Peter'authorized'Ana'in'writing'to'sell'Peter’s'land'for'P1'million.'The'agency'would'expire'one'month'from'Jan.'1.'
On'Jan.'15,'Ana'found'Tim'ready,'willing'and'able'to'buy'the'land.'Peter'said'that'he'would'think'it'over'first.'The'
sale'pushed'through'on'Feb.'28.'Peter'refused'to'pay'commission.'
Is'Ana'entitled'to'commission?'
YES!'cite'Philippine!HealthTCare!Providers!v.!Estrada,'Sanchez!v.!Medicard,'Manotok!v.!CA'–'procuring'cause,'
set'the'sale'in'motion,'causal'connection'
'
c.!Forfeiture!of!right!
• When'an'agent'is'generally'entitled'to'commission'for'successful'transactions,'he'may'forfeit'this'right'for'
committing'acts'inimical'to'the'interest'of'his'principal.'
'
Domingo'v.'Domingo'
Facts:'Gregorio,'acting'as'an'agent'of'Vicente'to'sell'the'latter’s'property,'received'a'monetary'gift'from'the'
prospective'buyer'which'was'not'disclosed'to'Vicente.'
Held:'Gregorio’s'right'to'a'commission'under'the'agency'contract'can'be'revoked'by'his'principal.'An'agent'who'
takes'a'secret'profit'in'the'nature'of'a'bonus,'gratuity'or'personal'benefit'from'the'vendee,'without'revealing'the'
same'to'his'principal,'the'vendor,'is'guilty'of'breach'of'loyalty'of'the'principal'and'forfeits'his'right'to'collect'his'
commission,'even'if'the'principal'does'not'suffer'any'injury'by'reason'of'such'breach.'
'
Problem:'
Pong'executed'an'SPA'authorizing'Aster'to'sell'his'lot'for'P2'million.'Aster'found'Tess.'Tess'gave'Aster'P5,000'as'a'
“gift”.'
Is'Aster'entitled'to'commission?'
NO!'cite'Domingo!v.!Domingo'
What'if'Tess'paid'Pong'P2.5m?'
still'NO!'It'doesn’t'affect'the'“gift”'Aster'received.'
'
2.!Lend!to/borrow!money!from!the!agency!
'
Art.!1890.!If!the!agent!has!been!empowered!to!borrow!money,!he!may!himself!be!the!lender!at!the!current!rate!of!
interest.!If!he!has!been!authorized!to!lend!money!at!interest,!he!cannot!borrow!it!without!the!consent!of!the!principal.!
• Because'the'agency'has'no'separate'juridical'personality,'the'agent'is'in'effect'lending'money'to'his'
principal.'
'
'
'
'
'
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Page'22'of'51'
3.!Appoint!a!substitute!
'
a.!When!allowed!
'
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.!
'
b.!Responsibility!for!acts!of!substitute!
• If'an'agent'validly'appoints'a'substitute,'the'principal'will'be'responsible'for'the'substitute’s'acts.'The'
substitute'becomes'the'agent.'
• Exception:'
o when'the'agent'appoints'a'substitute'without'having'the'power'to'do'so'
o when'the'agent'is'given'the'power'to'appoint'one'without'designating'the'person'he'can'appoint,'
yet'he'appoints'a'substitute'who'is'notoriously'incompetent'or'insolvent'
'
#1:'When'he'was'not'given'the'power'to'appoint'one'
• First'interpretation:'agent'appoints'substitute'despite'prohibition'
o Contemplates'a'scenario'where'there'is'no'express'power'given'to'the'agent'
o Follows'from'the'rule'that'an'agent'is'empowered'to'appoint'a'substitute'as'long'as'there'is'no'
prohibition.'
o Thus'if'he'disobeys'the'prohibition,'agent'becomes'responsible'for'substitute’s'acts.'
• Second'interpretation:'agent'appoints'substitute'without'express'authority'of'the'principal'
o Contemplates'a'scenario'where'express'power'is'given'but'there'is'no'designation'as'to'whom'to'
appoint'
o While'the'appointment'without'express'authority'is'valid,'he'becomes'responsible'for'the'acts'of'
the'substitute.''
o A'substitute'appointed'without'express'authority'from'the'principal'does'not'become'the'agent'of'
the'principal.'
'
#2:'When'he'was'given'such'power,'but'without'designating'the'person,'and'the'person'appointed'was'notoriously'
incompetent'or'insolvent'
'
Two'requisites:'
1. the'agent'is'given'the'power'to'appoint'but'without'designating'the'person'to'appoint'
o could'mean'that'the'authority'granted'did'not'identify'a'specific'person'to'appoint'
2. the'agent'appoints'as'substitute'someone'who'is'nototriously'incompetent'or'insolvent'
o not'clear'from'the'provision'if'the'notoriety'refers'to'both'incompetence'and'insolvency'
o may'be'sufficient'to'show'that'the'person'appointed'has'a'history'or'record'of'failures'in'previous'
business'ventures'similar'to'what'he'was'appointed'to'as'substitute'
'
Problem:'
Perry'executed'an'SPA'in'favor'of'Aura.'It'was'not'stated'that'she'can'appoint'substitute.'
Can'she'appoint'one?'YES!'
What'if'Aura'appoints'Sammy'as'substitute?'
Who'is'responsible'for'Sammy’s'acts?'PERRY!'
What'if'the'SPA'states'that'Aura'can'appoint'a'female'substitute'and'Sammy'is'male?'
Who'is'responsible'for'Sammy’s'acts?'AURA!'Because'the'SPA'specifies'that'it'must'be'female'
What'if'Sammy'is'female'but'notoriously'incompetent?'
'
'
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Page'23'of'51'
'
c.!Validity!of!acts!of!substitute!
'
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.!
• If'the'principal'prohibits'the'appointment'of'a'substitute,'all'acts'of'the'substitute'are'void.'
• What'happens'to'third'persons'dealing'with'the'substitute?'Substitute'is,'in'effect,'a'person'acting'as'an'
agent'but'is'not'authorized.'
o If'principal'is'aware'that'the'substitute'is'acting'on'his'behalf'without'authority'and'he'fails'to'
repudiate'the'acts,'an'implied'agency'is'established.'The'act'of'the'substitute,'thus,'will'not'be'
voided.'
o If'the'principal'is'not'aware'that'the'substitute'is'acting'in'his'behalf'or'once'aware,'repudiates'
them,'the'third'person’s'recourse'is'against'the'agent'and/or'the'substitute.'
• If'the'acts'of'the'substitute'be'declared'valid,'principal'has'the'right'to'bring'an'action'against'the'substitute'
with'respect'to'the'obligations'which'the'latter'contracted'under'the'substitution.'
'
Problem:'
Pablo'executed'an'SPA'in'favor'of'Abdul'prohibiting'the'appointment'of'subsitute.'Abdul'appoints'Sacha'as'sub.'
Sacha'deals'with'Tracy.'Tracy'pays'but'Sacha'fails'to'deliver.'
Can'Tracy'sue'Pablo'for'breach?'
' NO!'cite'Art.'1892(1)'
What'if'the'SPA'doesn’t'prohibit'the'appointment'of'a'substitute,'but'Sacha'is'notoriously'incompetent?'Can'Tracy'
sue'Pablo?'
'
d.!Substitute!agent:!alternate!not!delegate!
• Confusion'as'to'the'term'“sub1agent”'may'be'explained'by'the'improper'application'of'the'U.S.'common'law'
concept'of'“subagent.”'American'jurispridence'defines'a'subagent'as'a'person'employed'by'the'agent'“to'
assist'him'or'her'in'conducting'the'principal’s'affairs.”''He'can'be'either'the'agent'of'the'principal'or'just'the'
agent'of'the'agent.''
• Distinction'between'an'alternate/substitute'agent'and'a'delegating'the'agency'is'important'as'far'as'privity'
of'contract'is'concerned.'In'the'case'of'the'alternate,'the'validity'of'actions'filed'by'the'principal'or'the'third'
party'against'each'other'for'the'acts'of'the'alternate'seem'clear;'with'the'delegate,'not'so'much.'
'
Baltazar'v.'Ombudsman'
Facts:'Ernesto'Salenga'was'a'watchman'of'the'fishpond'owned'by'Patricia'Regala,'represented'by'Faustino'Mercado.'
He'was'hired'by'the'lessee,'Eduardo'Lapid,'and'the'sub1lessee,'Rafael'Lopez.'Salenga'filed'a'complaint'with'the'
PARAB,'praying'for'payment'of'salaries'and'the'share'of'the'harvest,'among'other'reliefs.'Pending'resolution,'
Antonio'Baltazar,'duly'authorized'by'Mercado,'filed'a'complaint'with'the'Ombudsman'against'respondents'for'
violation'of'RA'3019.'
Held:'Baltazar'had'no'standing'to'file'the'case'because'he'was'not'a'real'party'in'interest.'His'principal,'Mercado,'
was'merely'an'agent'of'Regala.'Agency'cannot'be'further'delegated.'An'agent'cannot'delegate'to'another'the'same'
agency.'Art.'1892'allows'the'substitution,'not're1delegation.'
'
Serona'v.'People'
Facts:'Serona,'Quilatan’s'agent,'was'tasked'to'sell'jewelry.'When'Serona'failed'to'pay'for'the'jewelry'after'she'gave'
them'to'her'sub1agent,'Labrador,'to'sell,'she'was'convicted'of'estafa'by'misappropriation/conversion.'
Held:'Serona'was'not'expressly'prohibited'from'appointing'a'sub1agent.'The'Civil'Code'allows'an'agent’s'
appointment'of'a'substitute'in'the'absence'of'express'prohibition.'The'agent’s'act'of'entrusting'the'jewelry'to'a'
substitute'was'not'an'abuse'of'confidence.'She'is'not'guilty'of'estafa.'
'
4.!Retain!in!pledge!objects!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!therefor,!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.!
Page'24'of'51'
Art.!1913.!The!principal!must!also!indemnify!the!agent!for!all!the!damages!which!the!executive!of!the!agency!may!have!
caused!the!latter,!without!fault!or!negligence!on!his!part.!
!
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.!
!
Grounds'by'which'an'agent'may'lawfully'retain'in'pledge'the'things'which'are'the'object'of'the'agency:'
1. if'the'agent'advances'funds'for'the'execution'of'the'agency'
2. if'the'agency'has'suffered'injury'caused'by'the'execution'of'the'agency'
'
Problem:'
Pedro'owns'a'gun'shop'and'appoints'Alfred'as'his'agent'to'manage'the'shop.'One'day,'while'managing'the'shop,'a'
defective'gun'discharged'and'a'bullet'hit'Alfred.'
Can'Alfred'keep'the'items'in'the'gun'shop'in'pledge'until'Pedro'indemnifies'him'for'medical'expenses?'
' YES!'cite'Art.'1913'and'1914'
' NO!'cite'Art.'1913'
What'factor'not'mentioned'in'the'facts'is'necessary'to'determine'the'answer'to'the'question?'
fault'or'negligence'–'Art.'1913'“without'fault'or'negligence'on'[the'agent’s]'part'
'
B.#The#obligations#of#agents#
'
1.!Act!within!the!scope!of!authority!
'
a.!In!general!
'
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.!!
!
• Agency'is'established'so'that'the'agent'may'act'on'behalf'of'a'principal.'However,'his'ability'to'bind'his'
principal'is'limited'by'the'authority'given.!
• The'act'done'must'be'legally'identical'with'that'authorized'to'be'done.'(Woodchild!v.!Roxas)!
• Arts.'1881'and'1882'must'be'read'together'with'other'provisions.!
o A'transaction'requiring'a'special'power'of'attorney'as'required'under'Art.'1878'may'not'be'validly'
performed'without'such'SPA''on'the'ground'that'it'is'conducive'or'advantageous'to'the'principal.'
(Woodchild!v.!Roxas)!
'
Woodchild'v.'Roxas'
Facts:'Roxas'Electric'and'Construction'Company,'Inc.'(RECCI),'through'a'Board'Resolution,'authorized'its'president,'
Roberto'Roxas,'to'sell'one'of'its'lots'which'had'a'dirt'road'accessing'the'Sumulong'Highway.'Roxas'sold'the'lot'to'
Woodchild'Holdings,'Inc.'(WHI)'and,'in'the'deed'of'absolute'sale,'granted'Woodchild'the'use'of'a'right'of'way'as'well'
as'the'option'to'purchase'an'additional'portion'of'an'adjoining'lot'which'likewise'belonged'to'RECCI.'After'the'sale,'
WHI'expressed'its'desire'to'purchase'an'additional'portion'but'Roxas'died'soon'afterwards.'WHI'wrote'RECCI'
reiterating'its'request'to'exercise'its'above1mentioned'right'in'accordance'with'the'deed'of'absolute'sale'but'RECCI'
did'not'respond.'
Held:'The'Board'Resolution,'as'worded,'clearly'did'not'authorize'Roxas'to'make'the'aforementioned'arrangements.'
It'merely'authorized'him'to'sell'one'of'the'lots.'While'it'is'true'that'generally,'the'acts'of'corporate'officers'within'the'
scope'of'their'authority'are'binding'on'the'corporation,'Art.'1910'of'the'Civil'Code'states'that'acts'done'by'such'
officers'beyond'the'scope'of'their'authority'cannot'bind'the'corporation'unless'it'has'ratified'the'said'acts'expressly'
or'tacitly,'or'is'estopped'from'denying'them.'
'
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Page'25'of'51'
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“conducive'acts”'and'“advantageous'acts”'
• considered'within'the'scope'of'the'agent’s'authority'
• principal'does'not'need'to'list'everything'the'agent'is'allowed'to'do,'nor'does'agent'need'detailed'
authorization'for'each'act'he'needs'to'do'
• without'prejudice'to'specific'requirements'for'particular'transactions'(e.g.'Art.'1878)'
• As'long'as'acts'meet'the'standards'of'conduciveness,'they'are'considered'as'being'performed'within'the'
scope'of'the'agent’s'authority.'
• However,'the'principal'may'challenge'whether'an'act'is'in'fact'conducive'or'advantageous'to'him.'
'
“collateral'acts”'
• those'which'are'the'natural'and'ordinary'incidents'of'the'main'act'or'business'authorized'(Guinhawa!v.!
People)'
• Certain'collateral'acts'are'impliedly'within'the'authority'of'the'agent.'(Guinhawa!v.!People)'
'
Problem:'
Pina'authorized'Apple'to'manage'her'canteen.'Apple'noticed'that'the'canteen'will'get'more'customers'if'they'adopt'
an'“eat'now'pay'later”'scheme.'
Is'Apple'working'within'the'scope'of'her'authority?'
YES!'conducive,'advantageous'
What'if'it'works'for'a'few'months'but'then'customers'stop'paying?'
'
b.!As!regards!third!persons!
'
Art.!1900.!So!far!as!third!persons!are!concerned,!an!act!is!deemed!to!have!been!performed!within!the!scope!of!the!
agent’s!authority!if!such!act!is!within!the!terms!of!the!power!of!attorney,!as!written,!even!if!the!agent!has!in!fact!
exceeded!the!limits!of!his!authority!according!to!an!understanding!between!the!principal!and!the!agent.!
• Art.'1900'contemplates'a'situation'wherein'the'principal'provided'limitations'to'the'authority'of'the'agent'
orally'or'in'some'other'document'apart'from'the'written'power'of'attorney.'!
• The'rule,'however,'should'not'apply'if'the'third'person'dealing'with'the'agent'was'aware'of'the'
understanding'between'the'principal'and'the'agent.!
'
Problem:'
Pancho'got'Alma'as'his'agent'for'his'catering'business.'Alma'gave'a'discount'to'Ted'despite'Pancho’s'instruction'not'
to'do'so.'
Did'Alma'act'within'the'scope'of'her'authority?'
' YES!'cite'Art.'1900'–'as'regards'Ted'(third'persons)'
' NO!'cite'Art.'1881,'1887'–'as'regards'principal'
'
c.!Authority!of!corporate!officers!
• Where'similar'acts'have'been'approved'by'the'directors'as'a'matter'of'general'practice,'custom'and'policy,'
the'general'manager'may'bind'the'corporation'without'formal'authorization'of'the'board'of'directors.'
(Board!of!Liquidators!v.!Kalaw)'
• 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...such'powers'as...are'
incidental'to,'or'may'be'implied'from,'the'powers'intentionally'conferred,'powers'added'by'custom'and'
usage,...and'such'apparent'powers'as'the'corporation'has'caused'persons'dealing'with'the'officer'or'agent'to'
believe'that'it'has'conferred.'(San!Juan!v.!CA)'
• The'declarations'of'an'individual'director'relating'to'the'affairs'of'the'corporation,'but'not'in'the'course'of,'
or'connected'with,'the'performance'of'authorized'duties'of'such'director,'are'held'not'binding'on'the'
corporation.'(AF!Realty!v.!Dieselman)'
• If'a'corporation'knowingly'permits'one'of'its'officers,'or'any'other'agent,'to'do'acts'within'the'scope'of'an'
apparent'authority,'and'thus'holds'him'out'to'the'public'as'possessing'power'to'do'those'acts,'the'
corporation'will,'as'against'anyone'who'has'in'good'faith'dealth'with'the'corporation'through'such'agent,'be'
estopped'from'denying'his'authority.'(Francisco!v.!GSIS)'
'
'
Page'26'of'51'
Board'of'Liquidators'v.'Heirs'of'Maximo'Kalaw'
Facts:'Kalaw'approved'some'contracts'without'prior'approval'of'the'Board'of'Directors,'leading'to'severe'losses.'The'
Board'of'Liquidators'sued'him'(his'estate),'saying'that'he'acted'without'authority.'
Held:'The'Court'ruled'that'because'it'was'customary'for'Kalaw'to'enter'into'contracts'without'prior'board'approval,'
and'that'in'these'previous'contracts'the'board'did'not'take'any'action'against'him'because'the'contracts'were'
successful,'Kalaw'cannot'be'considered'as'having'acted'without'authority'as'a'corporate'officer.'Where'similar'acts'
have'been'approved'by'the'directors'as'a'matter'of'general'practce,'custom,'and'policy,'the'general'manager'may'
bind'the'company'without'formal'authorization.'
'
San'Juan'v.'CA'
Facts:'San'Juan,'through'its'President,'and'Motorich,'thru'its'Treasurer,'entered'into'an'agreement'concerning'sale'
of'a'parcel'of'land.'However,'Motorich'refused'to'transfer'the'rights'to'the'land.'
Held:'The'contract'was'not'binding'on'Motorich'because'it'never'authorized'or'ratified'the'sale.'It'was'not'proven'
that'the'Treasurer'was'authorized'to'enter'into'the'contract.'Selling'is'an'obviously'foreign'act'to'a'corporate'
treasurer’s'function.'
'
Francisco'v.'GSIS'
Facts:'After'the'plaintiff'was'in'arrears'on'her'monthly'installment'payments'on'her'loan,'her'father'made'a'
proposal'to'GSIS'as'to'the'arrears’'settlement.'GSIS'approved'the'request'regarding'the'redemption'of'the'property'
through'a'telegram'sent'by'Andal,'one'of'its'officers.'However,'GSIS'later'sent'letters'asking'plaintiff'for'a'proposal'
for'payment'of'her'indebtedness.'It'also'said'that'the'telegram'should'be'disregarded'in'view'of'its'failure'to'express'
the'contents'of'the'board'resolution'due'to'the'error'of'its'minor'employees'in'couching'the'correct'wording'of'the'
telegram.'
Held:'The'acceptance'via'telegram'was'binding'upon'GSIS.'There'was'nothing'in'the'telegram'that'hinted'at'any'
anomaly,'or'gave'ground'to'suspect'its'veracity,'and'the'plaintiff,'therefore,'cannot'be'blamed'for'relying'upon'it.'If'a'
private'corporation'intentionally'or'negligently'clothes'its'officers'or'agents'with'apparent'power'to'perform'acts'
for'it,'the'corporation'will'be'estopped'to'deny'that'such'apparent'authority'is'real,'as'to'innocent'third'persons'
dealing'in'good'faith'with'such'officers'or'agents.!
'
2.!Act!in!accordance!with!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.!
• Not'only'must'an'agent'act'within'specific'limits'of'authority,'but'he'must'also'perform'such'acts'in'the'
manner'dictated'by'his'principal.!
• Principal'may'indicate'to'his'agent'the'way'he'wants'the'transactions'handled.'If'the'principal'does'not'
provide'instructions,'the'rule'is'that'the'diligence'of'a'good'father'of'a'family'is'expected.!
o Such'diligence'is'determined'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.!
• If'an'agent'was'simply'following'instructions'but'a'third'person'is'injured'in'some'way,'the'principal'cannot'
blame'the'agent'if'the'injury'was'caused'by'circumstances'the'agent'was'unaware'of'but'the'principal'was'
aware'of.'
!
3.!Carry!out!the!agency!
'
a.!In!general!
'
Art.!1884.!The!agent!is!bound!by!his!acceptance!to!carry!out!the!agency!and!is!liable!for!the!damages!which,!through!his!
nonLperformance,!the!principal!may!suffer.!
! He!must!also!finish!the!business!already!begun!on!the!death!of!the!principal,!should!delay!entail!any!danger.!
• Once'the'agent'accepts'the'authorization'granted'by'the'principal,'he'is'bound'to'carry'out'his'duties'as'
agent.'If'he'does'not'and'the'principal'suffers'injury,'he'is'liable'for'damages'to'the'latter.!
• An'agent'is'also'responsible'for'any'negligence'in'the'performance'of'its'function'and'is'liable'for'damages'
which'the'principal'may'suffer'by'reason'of'its'negligent'act.'(British!Airways!v.!CA)!
Page'27'of'51'
'
British'Airways'v.'CA'
Facts:'Mahtani,'through'Mr.'Guamar''purchased'a'ticket'from'British'Airlines.'BA'had'no'direct'flights'from'Manila'to'
Bombay'so'he'had'to'take'a'connecting'flight'(from'Hongkong''to'Bombay).'Upon'arrival'in'Bombay,'he'discovered'
that'his'check'in'luggage'was'missing.'He'filed'a'complaint'for'damages'and'attorney’s'fees'against'BA'and'Mr.'
Gumar.'BA'filed'a'third1party'complaint'against'PAL'but'the'court'dismissed'it'which'was'affirmed'by'CA.''
Held:'Dismissal'was'not'proper.'PAL,'in'transporting'Mahtani'from'Manila'to'Hongkong'acted'as'the'agent'of'BA.'An'
agent'is'responsible'for'any'negligence'in'the'performance'of'its'function'and'is'liable'for'damages'which'the'
principal'may'suffer'by'reason'of'its'negligent'act.'In'China'Air'Lines,'Ltd.'v.'Court'of'Appeals,'the'court'recognized'
that'a'carrier'(PAL),'acting'as'an'agent'of'another'carrier,'is'also'liable'for'its'own'negligent'acts'or'omission'in'the'
performance'of'its'duties.''
'
b.!Continuing!business!
• Agent'must'finish'the'business'already'begun'even'if'the'principal'subsequently'dies,'should'delay'entail'
any'danger.'
• The'general'idea'behind'the'provision'is'that'the'agent'must'continue'carrying'out'duties'which'were'
pending'when'the'principal'died'if'non1continuation'will'cause'economic'prejudice'to'the'principal’s'
interest.'
• Such'continuing'business'should'only'be'to'the'extent'necessary'to'avoid'the'danger'contemplated.'
'
c.!In!case!of!withdrawal!
'
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.!
'
d.!When!not!required!to!carry!out!
'
Art.!1888.!An!agent!shall!not!carry!out!an!agency!if!its!execution!would!manifestly!result!in!loss!or!damage!to!the!
principal.!
• The'agent'must'prove'that'carrying'out'the'agency'would'manifestly'result'in'loss'or'damage'to'the'
principal.'
'
4.!Advance!funds!
'
Art.!1886.!Should!there!be!a!stipulation!that!the!agent!shall!advance!the!necessary!funds,!he!shall!be!bound!to!do!so!
except!when!the!principal!is!insolvent.!
'
Two'conditions'must'be'present'for'this'provision'to'apply:'
1. There'must'be'stipulation'that'the'agent'must'advance'funds'
2. The'principal'is'solvent'
'
5.!Prefer!interest!of!the!principal!over!personal!interest!
'
a.!In!general!
'
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.!
• Agency'is'a'fiduciary'relationship'which'means'that'in'case'of'a'conflict'of'interest'between'the'agent'and'
the'principal,'the'agent'must'prefer'the'interest'of'his'principal'over'his'own.!
• Article'does'not'state'that'the'agency'is'dissolved'or'the'contract'is'invalidated'if'the'agent'prefers'his'own'
interest.!
'
'
'
'
'
'
Page'28'of'51'
b.!Property!administered!
'
Art.!1491.!The!following!persons!cannot!acquire!by!purchase,!even!at!a!public!or!judicial!auction,!either!in!person!or!
through!the!mediation!of!another:!
! x!x!x!
! (2)!Agents,!the!property!whose!administration!or!sale!may!have!been!intrusted!to!them,!unless!the!consent!of!the!
principal!has!been!given;!
! x!x!x!
• An'agent'is'analogous'to'a'trustee'and'he'cannot'consistently,'with'the'principles'of'good'faith,'be'allowed'
to'create'in'himself'an'interest'in'opposition'to'that'of'his'principal.'(Severino!v.!Severino)'
• The'agent’s'incapacity'to'buy'his'principal’s'property'rests'in'the'fact'that'the'agent'and'the'principal'form'
one'juridical'person.'(Araneta,!Inc.!v.!De!Paterno)'
'
Severino'v.'Severino'
Facts:'Melecio'owned'several'parcels'of'land'which'was'administered'by'Guillermo.''After'his,'Guillermo'continued'
to'occupy'the'land.''Later,'cadastral'proceedings'were'instituted'for'the'registration'of'the'land'titles'within'the'
surveyed'area.'Court'decreed'the'title'in'Guillermo’s'favour.''Fabiola'filed'an'action'to'compel'Guillermo'to'convey'to'
her'4'parcels'of'land'or'for'payment'of'the'damages.''Felicitas'Villanueva,'in'her'capacity'as'administratrix'of'the'
estate'of'Melecio'Severino,'filed'a'complaint'in'intervention'claiming'the'same'relief'as'Fabiola,'except'insofar'as'she'
prayed'that'the'conveyance'be'made'or'damages'be'paid,'to'the'estate.'
Held:'The'relations'of'an'agent'to'his'principal'are'fiduciary'and'it'is'an'elementary'rule'that'with'regard'to'property'
forming'the'subject1matter'of'the'agency,'the'agent'is'estopped'from'acquiring'or'asserting'a'title'adverse'to'that'of'
the'principal.'His'position'is'analogous'to'that'of'a'trustee'and'he'cannot'consistently,'with'the'principles'of'good'
faith,'be'allowed'to'create'in'himself'an'interest'in'opposition'to'that'of'his'principal'or'cestui'que'trust.'
'
c.!Double!sales!
'
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!preceding!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.!
!
Art.!1544.!If!the!same!thing!should!have!been!sold!to!different!vendees,!the!ownership!shall!be!transferred!to!the!person!
who!may!have!first!taken!possession!thereof!in!good!faith,!if!it!should!be!movable!property.!
Should!it!be!imovable!property,!the!ownership!shall!belong!to!the!person!acquiring!it!who!in!good!faith!first!recorded!it!
in!the!Registry!of!Property.!
Should!there!be!no!inscription,!the!ownership!shall!pertain!to!the!person!who!in!good!faith!was!first!in!possession;!and,!
in!the!absence!thereof,!to!the!person!who!presents!the!oldest!title,!provided!there!is!good!faith.!
'
• The'situation'contemplated'here'involves'a'case'where'the'principal'and'agent'contract'with'different'
persons'for'the'same'thing'and'the'contracts'are'incompatible.'
• If'the'agent'was'in'good'faith,'the'principal'is'liable'for'damages'to'the'person'whose'contract'would'have'to'
be'rejected.'
• If'the'agent'was'in'bad'faith,'he'will'be'liable'for'damages'to'such'third'person,'and'to'the'principal'under'
Art.'1889.'
'
'
'
'
'
'
'
'
Page'29'of'51'
'
6.!Render!account/deliver!
'
Art.!1891.!Every!agent!is!bound!to!render!an!account!of!his!transactions!and!to!deliver!to!the!principal!whatever!he!may!
have!received!by!virtue!of!the!agency,!even!though!it!may!not!be!owing!to!the!principal.!
! Every!stipulation!exempting!the!agent!from!the!obligation!to!render!an!account!shall!be!void.!
• The'obligation'discourages'agents'from'soliciting'or'accepting'gifts'from'third'persons'he'deals'with'on'
behalf'of'the'principal'because'he'is'bound'to'turn'over'such'to'the'latter.!
• The'law'demands'the'utmost'good'faith,'fidelity,'honesty,'candor'and'fairness'on'the'part'of'the'agent'to'his'
principal.'(Domingo!v.!Domingo)!
• All'profits'made'and'any'advantage'gained'by'an'agent'in'the'execution'of'his'agency'should'belong'to'the'
principal.'(Murao!v.!People)!
'
Murao'v.'People'
Facts:'Murao'is'the'sole'owner'of'LMICE'while'Huertazuela'is'the'Branch'Manager.'Federico,'petitioners’'sales'agent,'
filed'for'estafa'against'petitioners'because'he'was'not'given'his'sales'commission.''
Held:'There'can'be'no'estafa'because'LMICE'is'the'lawful'owner'of'the'entire'proceeds'of'the'check'payment,'even'to'
the'portion'pertaining'to'the'agent’s'commission.''His'right'to'a'commission'does'not'make'him'a'joint'owner'of'the'
money.'It'merely'establishes'the'relation'of'agent'and'principal.'
'
Two'scenarios'where'Art.'1891'will'not'apply'(Domingo!v.!Domingo):'
• If'the'agent'or'broker'acted'only'as'a'middleman'with'the'task'of'merely'bringing'together'the'vendor'and'
vendee,'who'themselves'thereafter'will'negotiate'on'the'terms'and'conditions'of'the'transaction'
o A'middleman'is'an'agent'of'both'parties,'or'an'agent'of'neither'of'them.'Thus,'the'receipt'of'gifts'
from'the'transacting'parties'will'not'amount'to'a'breach'of'fiduciary'duty.'
• If'the'agent'or'broker'had'informed'the'principal'of'the'gift'or'bonus'he'received'from'the'purchaser'and'his'
principal'did'not'object'
'
7.!Pay!interest!
'
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.!
• The'obligation'to'pay'interest'pertains'to'funds'the'agent'applied'to'personal'use.''
• Article'provides'that'an'agent'is'only'entitled'to'borrow'funds'from'the'agency'if'the'agent'has'been'
authorized'to'lend'money'at'interest.'Authorization'is'required.'
o If'the'agent'uses'agency'funds'for'personal'use,'there'is'no'reason'why'he'should'not'be'required'to'
pay'interest'apart'from'other'penalties'arising'from'such'use'despite'lack'of'authorization.'
'
8.!Responsibility!for!fault!or!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.!
• If'the'agent'was'compensated'for'his'services,'the'amount'of'damages'he'is'liable'for'in'case'of'fraud'or'
negligence'may'be'more'as'compared'to'if'he'rendered'service'gratuitously.'
• The'provision'may'also'be'interpreted'to'mean'that'an'agent'who'is'paid'is'required'to'exercise'a'higher'
degree'of'diligence'than'an'agent'who'is'not.'
'
Metrobank'v.'CA'
Facts:'Eduardo'Gomez'opened'an'account'with'respondent'Golden'Savings'and'deposited'38'treasury'warrants.'All'
warrants'were'subsequently'indorsed'by'respondent'Gloria'Castillo,'Golden'Savings’'cashier,'and'deposited'to'
Golden'Savings’'savings'account'in'Metrobank’s'Calapan,'Mindoro'branch.'They'were'then'sent'for'clearing'to'
Metrobank’s'principal'office,'which'forwarded'them'to'the'Bureau'of'Treasury'for'special'clearing.'Before'the'
warrants'had'been'cleared,'Metrobank'allowed'Golden'Savings'to'withdraw'from'the'proceeds'of'the'warrants.'In'
turn,'Golden'Savings'allowed'Gomez'to'withdraw'from'his'account.'Afterwards,'Metrobank'informed'Golden'Savings'
that'32'of'the'38'warrants'had'been'dishonored'by'the'Bureau'of'Treasury'and'demanded'Golden'Savings'to'refund'
the'amount'it'had'previously'withdrawn.'When'Golden'Savings'refused,'Metrobank'sued.''
Page'30'of'51'
Held:'Though'Metrobank'only'acted'as'a'collecting'agent'for'Golden'Savings,'Art.'1909,'Civil'Code'clearly'provides'
that'“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.”'
'
C.#The#liability#of#agents#
'
1.!When!solidary!
'
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!nonLfulfillment!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.!
!
• If'there'is'joint'agency,'agency'acts'are'performed'by'unanimous'action'by'the'designated'agents'unless'
otherwise'stipulated.'There'is'no'requirement'for'agents'appointed'simultaneously'under'the'code.'
'
2.!When!personally!liable!
'
a.!Expressly!bound!or!in!excess!of!authority!
'
Art.!1897.!The!agent!who!acts!as!such!is!not!personally!liable!to!the!party!withwhom!he!contracts,!unless!he!expressly!
binds!himself!or!exceeds!the!limits!of!his!authority!without!giving!such!party!sufficient!notice!of!his!powers.!
!
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.!
'
When'the'agent'can'be'personally'liable:'
• when'the'agent'expressly'binds'himself'(Art.'1897)'
• when'the'agent'exceeds'the'limits'of'his'authority'without'giviing'the'person'he'is'transacting'with'
sufficient'notice'of'his'powers'(Art.'1897)'
o The'agent'cannot'be'held'liable'if'he'does'not'give'the'third'party'sufficient'notice'of'his'powers.'
(Eurotech!v.!Cuizon)'
o In'case'of'excess'of'authority'by'the'agent,'the'law'does'not'say'that'a'third'person'can'recover'from'
both'the'principal'and'the'agent.'(Eurotech!v.!Cuizon)'
• when'the'following'elements'are'present'(Art.'1898):'
1. person'transacting'with'the'agent'is'aware'of'the'limits'of'the'agent’s'authority'
2. the'agent'exceeded'the'scope'of'his'authority'
3. the'agent'undertook'to'secure'the'principal’s'ratification'
4. the'principal'does'not'ratify'the'contract'
'
DBP'v.'CA'
Facts:'Dans,'a'76'year'old'man,'took'out'a'loan'with'DBP.'Considering'his'age,'DBP'persuaded'Dans'to'take'some'
insurance'with'the'Mortgage'Redemption'Insurance'pool'of'DBP.'DBP'handled'Dans’'insurance'application'and'
deducted'from'the'proceeds'of'the'loan'the'premium'payment'and'its'supposed'commission.'Dans'died'and'it'is'
discovered'that'he'was'too'old'to'get'the'insurance.'The'MRI'pool'did'not'cover'him.'DBP'and'the'MRI'pool'were'
sued.'
Held:'DBP,'in'acting'as'an'insurance'agent'of'the'MRI'pool,'and'knowing'full'well'the'age'limit'for'the'insurance'and'
the'age'of'Dans,'exceeded'its'authority'as'an'agent'without'Dans’'knowledge.'Because'of'this,'DBP'is'solely'liable'for'
all'damages'that'are'incurred.''
'
'
'
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Page'31'of'51'
'
b.!Act!in!own!name!
'
Art.!1883.!If!an!agent!acts!in!his!own!name,!the!principal!has!no!right!of!action!against!the!persons!with!whom!the!agent!
has!contracted;!neither!have!such!persons!against!the!principal.!
! In!such!case!the!agent!is!the!one!directly!bound!in!favor!of!the!person!with!whom!he!has!contracted,!as!if!the!
transaction!were!his!own,!except!when!the!contract!involves!things!belonging!to!the!principal.!
! The!provisions!of!this!article!shall!be!understood!to!be!without!prejudice!to!the!actions!between!the!principal!and!
the!agent.!
!
“acts'in'his'own'name”'
• An'agent'acts'in'his'own'name'when'he'enters'into'a'contract'covering'the'subject'matter'of'the'agency'
wihtout'notice'to'the'third'party'that'he'was'acting'as'an'agent.!
• In'such'a'scenario,'the'third'person'believes'in'good'faith'that'he'is'dealing'with'the'agent'only.'The'agent'is'
directly'bound'as'a'party'to'the'contract.'Hence,'the'principal'and'the'third'person'have'no'cause'of'action'
against'each'other.!
• often'referred'to'as'an'agency'with'an'undisclosed'principal!
• If'the'contract'involves'things'belonging'to'the'principal,'the'agent'remains'liable'to'both'the'principal'and'
the'third'person.'The'exception'does'not'say'that'such'third'person'does'not'have,'and'cannot'bring'an'
action'against'the'agent'also.'(Beaumont!v.!Prieto)!
'
Beaumont'v.'Prieto'
Facts:'Borck'wanted'to'purchase'Legarda’s'property'and'was'negotiating'with'the'latter’s'agent,'Valdes.'Since'there'
was'a'violation'of'the'agreement,'particularly'failure'to'deliver'pertinent'documents,'Borck'filed'a'complaint'against'
Valdes'and'Legarda.'Valdes'claimed'that'he'should'not'be'included'for'he'was'merely'an'agent.'
Held:'Since'the'Civil'Code'merely'states'that'a'person'who'contracts'with'an'agent'has'a'cause'of'action'against'the'
principal'but'is'silent'as'to'whether'or'not'the'agent'may'be'included'in'the'suit,'such'agent'may'be'included.''
'
c.!Special!obligations!of!commission!agents!
'
“commission'agent”'
• also'known'as'“factor”'or'“commission'merchant”'
• one'who'receives'goods'from'his'principal'for'sale'to'third'persons,'and'for'which'service'is'entitled'to'
commission'for'the'goods'sold'
• an'agent'entitled'to'the'possession'of'the'goods'of'the'principal'(Padilla)'
• one'whose'business'it'is'to'receive'and'sell'goods'for'a'commission'(Mechem)'
• a'commercial'agent,'employed'by'a'principal'to'sell'merchandise'consigned'to'him'for'that'purpose,'for'and'
in'behalf'of'the'principal,'but'usually'in'his'own'name,'being'intrusted'with'the'possession'and'control'of'
the'goods'and'being'remunerated'by'a'commission,'commonly'called'“factorage”'(Lindstrom!v.!Baybank)'
'
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!then!he!should!make!a!written!statement!of!the!damage!and!
deterioration!suffered!by!the!same.!
• Agent'is'estopped'from'claiming'that'the'goods'he'received'was'not'as'described'in'the'consignment'
• If'there'is'damage'or'deterioration,'the'agent'should'have'made'a'written'statement'of'the'same.'Otherwise,'
he'cannot'return'the'goods'on'the'ground'of'such'damage.'
!
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.!
• Agent'is'prohibited'from'commingling'goods'belonging'to'different'owners.'
• The'rule'applies'when'the'goods'appear'to'be'identical.'
'
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.!
• A'sale'on'credit'must'be'made'with'the'express'authority'from'the'principal.'
'
Page'32'of'51'
'
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.!
• Principal'can'bind'the'third'person'to'the'unauthorized'act'of'his'agent'by'ratifying'or'signifying'his'
willingness'to'ratify'it.'
o There'is'binding'effect'to'an'unauthorized'act'even'prior'to'actual'ratification.'Of'course,'the'
principal'would'have'to'eventually'ratify'the'act.'
o The'provision'is'meant'to'bind'the'third'person'to'the'agent’s'act,'but'it'is'also'reasonable'that'the'
same'should'apply'to'the'principal.'
• However,'the'ambiguity'lies'in'determining'when'the'principal'is'considered'to'have'signified'his'
willingness'to'ratify.'
'
Problem:'
P'Corp.'manufactures'flags.'A'is'P’s'sales'agent.'P'instructed'A'not'to'enter'into'contracts'for'more'than'100'flags.'A'
contracted'with'DepEd'for'200'flags.'P’s'directors'told'A'that'they'may'issue'a'resolution'ratifying'the'sale.'
Prior'to'such'resolution,'is'the'contract'valid?'
YES!'cite'Art.'1901'–'signified'willingness'to'ratify'
'
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.!
• 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.'If'material'facts'were'
suppressed'or'unknown,'there'can'be'no'valid'ratification.'(Manila!Memorial!v.!Linsangan)'
o does'not'apply'if'the'principal’s'ignorance'was'willful,'or'that'he'chooses'to'act'in'ignorance'of'the'
facts.'(Manila!Memorial!v.!Linsangan)'
• 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.'(Woodchild!v.!Roxas)'
'
General'rule:'The'acts'of'an'agent'beyond'the'scope'of'his'authority'do'not'bind'the'principal.'
Exception:'when'the'principal'ratifies'them,'expressly'or'impliedly'(Art.'1910)'
Exception'to'the'exception:'if'the'principal'does'not'have'full'knowledge'of'all'material'facts'(Manila!Memorial!v.!
Linsangan)'
Exception'to'the'exception'to'the'exception:'when'the'principal’s'ignorance'was'willful'(Manila!Memorial!v.!
Linsangan)'
'
Filipinas'Life'v.'Pedroso'
Facts:'Pedroso'confirmed'the'existence'of'a'Filipinas'Life'insurance'agent’s'proposed'investment'scheme'via'the'
Filipinas'Life'branch'manager'and'supervisor’s'assurances.'Money'was'deposited'into'Filipinas'Life’s'bank'account.'
It'turned'out'to'be'a'scam.'Pedroso'filed'action'for'recovery'of'sum'of'money,'but'Filipinas'Life'contended'that'the'
investment'scheme'concocted'by'the'agent'was'outside'his'authority'as'agent,'and'thus'the'company'could'not'be'
held'solidarily'liable'with'the'agent.'
Held:'Filipinas'Life'ratified'the'acts'of'its'agent'by'benefitting'from'the'alleged'unauthorized'investments;'hence,'
Filipinas'Life'is'estopped'from'denying'that'it'ratified'the'agent'Valle’s'acts.'Generally,'the'principal'is'responsible'
for'the'acts'of'its'agent'done'within'the'scope'of'his'authority.'When'the'agent'exceeds'his'authority,'the'agent'
becomes'personally'liable'for'the'damage.'But'when'the'agent'exceeds'his'authority'and'the'principal'allowed'the'
agent'to'act'thusly,'the'principal'is'solidarily'liable'together'with'the'agent.'Ratification'in'agency'is'the'adoption'or'
confirmation'by'one'person'of'an'act'performed'on'his'behalf'by'another'without'authority.'
'
Francisco'v.'GSIS'
Facts:'(supra,'page'27)'
Held:'Third'person'should'not'be'blamed'for'relying'on'the'representation'of'the'agent,'in'this'case,'the'telegram.'
Also,'GSIS'accepted'the'remitted'amount'from'Francisco,'and'kept'silent'about'the'telegram'not'being'in'accordance'
with'true'facts.'This'silence,'taken'together'with'the'unconditional'acceptance'of'other'remittances,'constitutes'a'
binding'ratification'of'the'original'agreement.'
'
Page'34'of'51'
Manila'Memorial'v.'Linsangan'
Facts:'Baluyot,'an'MMPCI'agent,'had'an'arrangement'with'Linsangan,'the'terms'of'which'were'outside'the'terms'of'
the'MMPCI'contract'signed'by'Linsangan.'The'agreement'was'cancelled,'so'Linsangan'filed'complaint'against'MMPCI'
for'breach'of'contract,'alleging'that'as'Baluyot’s'principal,'MMPCI'should'be'held'liable'because'it'impliedly'ratified'
the'agent’s'acts'when'it'received'the'checks'issued'by'Linsangan.'
Held:'MMPCI'cannot'be'held'solidarily'liable'with'Baluyot'because'there'was'no'implied'ratification.'Mere'
acceptance'of'benefits'from'a'disputed'contract'is'not'sufficient'basis'for'ratification.'For'there'to'be'a'valid'
ratification'by'the'principal,'he'must'have'full'knowledge'of'the'material'facts'and'circumstances'relating'to'the'
unauthorized'act'of'the'person'who'assumed'to'act'as'agent.'Nevertheless,'the'principle'does'not'apply'if'the'
principal’s'ignorance'was'willful.'
'
Woodchild'v.'Roxas'
(supra,'page'25)'
'
Prieto'v.'CA'
Facts:'Marcos'Prieto'sought'to'annul'real'estate'mortgages'he'executed'through'his'agent'Antonio'Prieto'in'favor'of'
Far'East'bank.'He'alleged'that'the'promissory'notes'were'in'Antonio’s'own'name,'thus'he'had'no'liability'as'
principal.'
Held:'Marcos'cannot'exculpate'himself'from'liability'since'he'ratified'the'acts'of'his'agent'via'a'letter'of'
acknowledgement.'Ratification'or'confirmation'may'validate'an'act'done'in'behalf'of'another'without'authority'from'
the'latter.'The'effect'is'as'if'the'latter'did'the'act'himself.'
'
Problem:'
P'owns'a'bookstore.'He'appoints'A'to'manage'the'bookstore.'Later,'A'started'renting'out'the'books'instead'of'selling'
them.'Unaware'of'this,'P'issued'a'statement'that'all'A’s'acts'were'valid.'
Is'there'ratification?'
' YES!'cite'Prieto!v.!CA'–'ratification'through'the'statement'
' NO!'cite'Manila!Memorial!v.!Linsangan'–'principal'must'be'aware'of'all'material'facts'
'
c.!When!estopped!
'
Art.!1911.!Even!when!the!agent!has!exceeded!his!authority,!the!principal!is!solidarily!liable!with!the!agent!if!the!former!
allowed!the!latter!to!act!as!though!he!had!full!powers.!
'
• There'is'an'actual'agency'relationship,'but'the'agent'acts'in'excess'of'his'authority.'It'is'not'a'case'of'agency'
by'estoppel'because'there'is'an'actual'agency.'It'can'apply'to'both'implied'and'express'agencies.'
o The'rule'covers'the'absence'of'express'authority,'not'the'absence'of'an'agency.'
• Despite'the'absence'of'express'authority,'the'principal'is'solidarily'liable'because'he'allowed'the'agent'to'
act'as'if'he'had'authority.'(See'Board!of!Liquidators!v.!Kalaw'and'Francisco!v.!GSIS,'supra,'page'27)'
o The'principal'is'estopped'due'to'his'failure'to'repudiate,'which'indicates'an'implied'agency.'
'
Rural'Bank'of'Milaor'v.'Ocfemia'
Facts:'Rural'Bank'of'sold'parcels'of'lands'to'Ocfemia'spouses.'For'the'property'to'be'transferred'in'their'names,'the'
register'of'deeds'required'the'submission'of'a'board'resolution'from'the'bank'confirming'the'Deed'of'Sale'and'the'
authority'of'bank'manager'Fe'Tena'to'enter'into'such'transaction.'However,'Rural'Bank'refused'to'issue'the'
resolution.'
Held:'The'bank'acknowledged,'by'its'own'acts'or'failure'to'act,'the'authority'of'Tena'to'enter'into'binding'contracts.'
Likewise,'Tena'had'previously'transacted'business'on'behalf'of'the'bank,'and'the'latter'had'acknowledged'her'
authority.'A'bank'is'liable'to'innocent'third'persons'where'representation'is'made'in'the'course'of'its'normal'
business'by'an'agent,'even'though'such'agent'is'abusing'her'authority.'
'
Cuison'v.'CA'
Facts:'Tiac,'the'manager'of'Cuison’s'store,'made'a'purchase'from'Valiant'and'paid'with'a'check,'but'it'was'
dishonored.'Cuison'denied'involvement'in'the'transaction.'
'
Page'35'of'51'
'
Held:'There'is'authority'by'estoppel.'Cuison'is'liable'because'he'held'out'Tiac'to'the'public'as'the'store'manager.'
Because'of'his'representations,'Cuison'was'estopped'from'disclaiming'liability'for'the'transaction'entered'into'by'
Tiac.'It'does'not'matter'whether'the'representations'were'intentional'or'merely'negligent,'so'long'as'innocent'third'
persons'relied'upon'such'representations'in'good'faith'and'for'value.''
'
Country'Bankers'Insurance'v.'Keppel'Cebu'Shipyard'
Facts:'Unimarine'contracted'the'services'of'Cebu'Shipyard,'but'failed'to'pay.'Judgment'was'rendered'against'
Unimarine'and'its'two'sureties,'one'being'Country'Bankers,'to'pay'Cebu'Shipyard.'Country'Bankers'denied'liability'
on'the'ground'that'the'surety'bond'was'issued'in'excess'of'its'agent’s'authority.'
Held:'Country'Bankers'is'not'liable.'Art.'1911'is'based'on'the'principle'of'estoppel'for'the'protection'of'persons,'
making'the'principal'solidarily'liable'with'the'agent,'even'when'the'latter'has'exceeded'his'authority,'if'the'principal'
allowed'him'to'act'as'if'he'had'full'powers.'It'was'not'shown'that'Country'Bankers'allowed'the'public'to'believe'that'
its'agent'had'authority'to'issue'the'surety'bond.'
'
2.!Advance/reimburse!
(See'also'Rights'of'agents,'supra,'page'24)'
'
'
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!unfavorable!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.!
• Item'(4)'does'not'exempt'the'principal'from'reimbursement'in'all'cases.'It'must'be'reasonably'interpreted'
in'a'way'that'the'principal'is'exempted'from'reimbursing'expenses'beyond'the'stipulated'amount.'
'
3.!Indemnify!
'
• This'contemplates'a'situation'where'the'agent'suffered'damage'as'a'result'of'performing'his'duties'as'an'
agent,'such'damage'not'resulting'from'his'own'fault'or'negligence.'
• Equity'dictates'that'it'is'sufficient'that'the'damage'was'incurred'during'the'execution'of'the'agency,'and'
does'not'have'to'be'a'direct'consequence'of'the'execution'of'the'agency,'provided'that'the'damage'would'
not'have'arisen'had'the'agent'not'been'performing'his'duties.'
• Principal'must'indemnify'even'if'the'damage'was'caused'by'the'fault'or'negligence'of'a'third'person.'
'
4.!Compensate!
'
• The'principal'has'to'compensate'the'agent'even'if'it'is'not'specified'in'the'power'of'attorney,'because'
agency'is'presumed'to'be'for'compensation.'
'
'
'
'
'
'
'
'
'
Page'36'of'51'
Rules'regarding'circumstances'when'an'agent'is'entitled'to'compensation'(See'Rights'of'agents,'supra,'page'19)'
1. Determine'whether'the'person'is'an'agent'or'a'broker'by'analyzing'the'authority'and'the'terms'of'
compensation'of'the'agent'
o For'sales,'an'agent'is'required'to'be'the'procuring'agent'of'the'sale,'while'a'broker'is'only'required'
to'bring'the'parties'together.'(Hahn!v.!CA)'
2. If'he'is'an'agent,'determine'if'he'has'completed'the'task'required'of'him.'
o For'equity,'however,'the'court'sometimes'grants'compensation:'
 Even'if'the'transaction'was'not'completed'within'the'period'of'agency'
 Even'if'the'agent’s'authority'has'expired,'if'there'is'a'close,'proximate'connection'between'
his'efforts'and'the'sale'(Manotok!v.!CA)'
'
B.#Liability#of#the#principal#
'
1.!Be!solidarily!liable!
'
'
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'
Facts:'The'de'Castros,'as'co1owners'of'a'piece'of'property,'entered'into'a'contract'of'agency'with'Artigo,'with'a'
clause'that'Artigo'gets'a'5%'commission'to'sell'4'lots.'Artigo'however'only'received'a'small'part'of'the'5%'of'sale'
price.'The'de'Castros'argued'that'Artigo’s'complaint'to'collect'the'balance'should'be'dismissed'for'not'impleading'
the'other'owners'of'the'lots.'
Held:'The'de'Castros'signed'the'note'authorizing'Artigo'to'act'as'an'agent'as'owner'and'as'representative'of'the'
other'co1owners.'The'co1owners'are'solidarily'liable'under'the'contract'of'agency.'Art.'1915'applies'even'when'the'
appointments'were'made'by'the'principals'in'separate'acts,'provided'they'are'for'the'same'transaction.'The'
solidarity'arises'from'the'common'interest'of'the'principals,'and'not'from'the'act'of'constituting'the'agency.'The'
agent'can'thus'recover'from'any'principal'the'whole'compensation'and'indemnity'owed'to'him'by'the'others.''
'
2.!Contract!involves!things!belonging!to!principal!
'
'
General'rule:'The'principal'is'not'bound'when'the'agent'acts'in'his'own'name.'(Art.'1883)'
• Third'person'has'no'cause'of'action'against'principal,'and'vice'versa.'
Exception:'when'the'contract'involves'things'belonging'to'the'principal'(Art.'1883,'second'paragraph)'
• The'principal'is'considered'a'party'tot'eh'contract.'He'can'enforce'rights'under'the'contract.'(NFA'v.'IAC)'
• The'principal'is'entitled'to'the'benefits'of'the'transaction.'(Syjuco!v.!Syjuco)'
Exception'to'the'exception:'when'the'agent'acts'beyond'the'scope'of'his'authority'
• The'principal'is'not'bound'in'this'event'(PNB!v.!Agudelo)'
'
Gold'Star'Mining'v.'Jimena'
Facts:'Lincallo'and'Jimena'entered'into'an'agreement'where'Jimena'would'receive'½'of'the'proceeds'from'all'mining'
claims'entered'into.'Lincallo'entered'into'agreement'with'Gold'Star'Mining'and'others,'but'never'remitted'to'Jimena'
his'share'of'the'royalties.'
Held:'Lincallo,'in'transferring'the'mining'claims'to'Gold'Star'without'disclosing'that'Jimena'was'a'co1owner,'acted'as'
Jimena’s'agent'with'respect'to'Jimena’s'share'of'the'claims.'Pursuant'to'Art.'1883,'the'principal'may'sue'the'person'
with'whom'the'agent'dealt'with'in'his'own'name,'when'the'transaction'involves'things'belonging'to'the'principal.'
Jimena'has'an'action'against'Gold'Star'Mining'as'the'principal'of'Lincallo,'since'the'transactions'entered'into'by'
Lincallo'concerned'his'property.'
'
'
'
Page'37'of'51'
2.!Reliance!on!representation!
'
• If'a'principal'informs'a'person'that'he'has'given'a'power'of'attorney'to'an'agent,'the'latter'is'a'duly'
authorized'agent'as'far'as'that'person'is'concerned,'and'an'agency'by'estoppel'is'created.'The'principal'is'
liable'for'the'acts'of'the'agent'by'estoppel.'
'
B.#Obligation#of#third#parties#
'
1.!The!Keeler!rules!
'
a.!Fundamental!principles!
1. The'law'indulges'in'no'bare'presumptions'that'an'agency'exists:'it'must'be'proved'or'presumed'from'facts.'
o An'agency'requires'consent'from'both'principal'and'agent.'Hence,'merely'acting'like'an'agent'or'a'
principal'does'not'necessarily'mean'that'an'agency'exists.'
o However,'the'Civil'Code'allows'for'the'existence'of'an'implied'agency,'where'the'consent'of'either'
principal'or'agent'is'impliedly'given.'(See'Implied'agency,'supra,'page'15)'
2. The'agent'cannot'establish'his'own'authority,'either'by'representations'or'by'assuming'to'exercise'it.'
o The'agent'is'not'deemed'authorized'simply'by'his'representations'or'by'his'performance'of'the'
impugned'acts.'
o However,'if'the'principal'was'aware'of'such'representation'or'acts'and'did'not'repudiate'them,'the'
principal'may'be'estopped'from'denying'such'authority.'(See'implied'agency,'supra,'page'15)'
3. An'authority'cannot'be'established'by'mere'rumor'or'general'reputation.'
o Even'if'a'person'is'widely'believed'in'a'community'to'be'authorized'to'perform'certain'acts'for'his'
principal,'it'is'not'sufficient'basis'for'the'third'party'to'believe'that'he'was'in'fact'authorized.'
o However,'if'the'alleged'principal'clothed'the'alleged'agent'with'authority,'the'principal'may'be'
estopped'from'denying'such'authority.'(See'agency'by'estoppel,'supra,'page'17)'
4. Even'a'general'authority'is'not'an'unlimited'one.'
o “General'authority”'refers'to'an'agency'couched'in'general'terms.'
o A'general'authority'does'not'mean'that'an'agent'can'do'anything,'because'acts'of'strict'dominion'
require'a'special'power'of'attorney'(Art.'1878).'
5. Every'authority'must'find'its'source'in'some'act'or'omission'of'the'principal.'
o The'principal'must'authorize'the'act'of'agent'expressly'or'impliedly.'
'
Problem:'
P'and'A'are'very'close'friends.'P'owns'a'travel'agency,'where'A'is'often'seen'seated'at'the'desk'and'talking'to'clients.'
T'is'a'regular'customer'of'the'agency.'T'called'A'and'asked'her'if'she'could'book'a'flight'for'him.'A'agreed'and'
received'payment,'but'T'never'got'the'ticket.'T'sued'P.'P'claimed'that'A'was'not'her'agent'and'she'knew'nothing'
about'the'transaction.'
Is'P'liable'for'A’s'acts?'
YES!'cite'Cuison!v.!CA'
NO!'cite'Keeler'rules'–agency'cannot'be'established'by'reputation'
What'if'prior'to'T’s'call,'A'previously'introduced'herself'to'T'as'P’s'agent?'
'
b.!Duty!to!inquire!
Inquire'and'ascertain'the'following:'
1. Actual'existence'of'an'agency'relationship'
2. Nature'of'agency/authority'granted'
3. Extent'of'such'authority'
'
c.!Burden!of!proof!
• Persons'dealing'with'an'assumed'agent,'whether'the'assumed'be'a'general'or'special'one,'are'bound'at'their'
peril,'if'they'hold'the'principal,'to'ascertain'not'only'the'fact'of'the'agency'but'the'nature'and'extent'of'the'
authority,'and'in'case'either'is'controverted,'the'burden'of'proof'is'upon'them'to'establish'it.'(Keeler!Electric!
v.!Rodriguez,'citing'Mechem)'
'
Page'39'of'51'
'
d.!Standard!of!care!
• Third'party'dealing'with'the'agent'must'act'with'ordinary'prudence'and'reasonable'diligence'
• If'the'third'party'knew'or'had'good'reason'to'believe'that'the'agent'exceeded'his'authority,'he'cannot'claim'
protection.'These'reasons'include:'
o Suggestions'of'probable'limitations'be'of'clear'and'reasonable'quality'
o Character'assumed'by'agent'is'of'such'a'suspicious'or'unreasonable'nature'
o Authority'which'agent'seeks'to'exercise'is'of'such'an'unusual'or'improbable'character'
'
Keeler'Electric'v.'Rodriguez'
Facts:'Montelibano'sold'a'Keeler'Electric'plant'to'Rodriguez.'Rodriguez'paid'the'purchase'price'to'Montelibano,'
without'the'knowledge'of'Keeler'Electric.'
Held:'Payment'to'Montelibano'cannot'be'considered'as'payment'to'Keeler'Electric,'because'Motelibano'is'not'an'
agent'of'Keeler'Electric.'Keeler'Electric'never'authorized'Montelibano'to'receive'money'in'its'behalf,'and'Rodriguez'
had'no'right'to'assume'by'any'act'of'Keeler'Electric'that'Montelibano'was'authorized'to'receive'money.'Persons'
dealing'with'an'assumed'agent'are'bound'to'ascertain'not'only'the'fact'of'the'agency,'but'the'nature'and'extent'of'
the'authority.'The'Court'applied'the'rules'enumerated'by'Mechem'in'determining'whether'an'assumed'authority'
exists'(discussed'supra).'
'
2.!Later!jurisprudence!
'
a.!Fundamental!principles!
• No'presumption'of'agency'
o The'law'makes'no'presumption'of'agency;'proving'its'existence,'nature'and'extent'is'incumbent'
upon'the'person'alleging'it.'(Tuazon!v.!Heirs!of!Ramos,'citing'People!v.!Yabut)'
• Insufficiency'of'declarations'of'agent'
o The'declaration'of'agents'alone'are'generally'insufficient'to'establish'the'fact'of'their'authority.'
(Tuazon!v.!Heirs!of!Ramos,'citing'Litonjua!v.!Fernandez)'
o While'as'far'as'a'third'person'is'concerned,'an'agency'cannot'be'established'by'mere'statements'of'
an'agent,'said'agent'may'be'estopped'from'denying'such'statements'as'far'as'the'third'person'or'
principal'is'concerned.'(Doles!v.!Angeles)'
'
b.!Duty!to!inquire!
• A'person'dealing'with'an'agent'is'put'upon'inquiry'and'must'discover'upon'his'peril'the'authority'of'the'
agent.'Even'if'the'third'party'does'not'inquire'into'the'authority'of'the'agent,'it'will'be'presumed'that'he'
knew'the'actual'authority'of'the'agent.'(Manila!Memorial!v.!Linsangan)'
• The'principal,'on'the'other'hand,'may'act'on'the'presumption'that'third'persons'dealing'with'agent'will'not'
be'negligent'in'failing'to'ascertain'the'extent'of'his'authority'as'well'as'the'existence'of'his'agency.'(Manila!
Memorial!v.!Linsangan)'
'
BA'Finance'v.'CA'
Facts:'The'credit'administrator'of'BA'Finance'guaranteed'the'loan'that'the'Gaytano'spouses'obtained'from'Trader’s'
Royal'Bank.'The'spouses'defaulted,'and'Trader’s'sued'the'spouses'and'BA'Finance.'BA'Finance'contended'that'the'
credit'administrator'was'not'authorized'to'issue'such'guaranty.'
Held:'Trader’s'had'the'burden'to'prove'that'the'credit'administrator'acted'within'the'authority'given'by'BA'Finance.'
Persons'dealing'with'an'assumed'agent'are'bound'at'their'peril'to'ascertain'not'only'the'fact'of'agency'but'also'the'
nature'and'extent'of'authority,'if'they'would'hold'the'principal'liable.'In'case'such'agency'is'controverted,'the'
burden'of'proof'is'upon'them'to'establish'it.'
'
NPC'v.'National'Merchandising'
Facts:'Namerco,'agent,'despite'warnings'from'ICC,'its'principal,'agreed'to'sell'sulfur'to'NPC.''The'sulfur'was'not'
delivered.''NPC'filed'an'action'to'recover'the'liquidated'damages'as'stipulated.'
Held:'The'rule'that'every'person'is'put'upon'inquiry'and'must'discover'upon'his'peril'the'authority'of'the'agent'does'
not'apply'in'this'case.''The'rule'only'applies'when'the'principal'is'sought'to'be'held'liable'on'the'contract'entered'
into'by'the'agent,'which'is'not'the'case'here,'since'the'agent'acted'beyond'its'authority.'
'
'
Page'40'of'51'
'
• Generally,'the'agent'cannot'object'or'claim'damages'arising'from'the'revocation'(CMS!Logging!v.!CA),'unless'
such'revocation'was'done'in'bad'faith'to'evade'payment'(Infante!v.!Cunanan).'
• There'is'no'rule'in'case'the'principal'revokes'the'agency'but'does'not'order'the'return'of'the'written'power'
of'attorney,'and'the'agent'uses'the'same'to'transact.'
o It'may'still'be'binding'on'the'principal'if'an'implied'agency'is'established'where'the'principal'knew'
that'the'agent'was'still'using'the'written'power'of'attorney'on'the'principals'and'failed'to'repudiate'
it.'
'
2.!When!not!binding!on!third!persons!
'
a.!When!notice!is!required!
'
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.!!
'
• The'principal'has'the'duty'to'give'due'and'timely'notice'to'third'persons'of'the'termination'of'the'
relationship'and'the'principal'is'responsible'to'third'persons'for'whatever'goods'may'have'been'in'good'
faith'and'without'negligence'sent'to'the'agent'without'knowledge'of'the'termination.'(Rallos!v.!Yangco)'
'
'
Lustan'v.'CA'
Facts:'Lustan'owned'a'piece'of'land'which'she'leased'to'Parangan.'She'also'executed'a'SPA'in'his'favor'to'secure'a'
loan'from'PNB'with'the'lot'as'collateral.'Lustan'executed'a'second'SPA'and'by'this,'Parangan'secured'4'additional'
loans,'3'of'which'were'without'her'knowledge'and'for'his'own'benefit.'She'signed'a'Deed'of'Pacto'de'Retro'Sale'
when'Parangan'told'him'it'would'only'evidence'his'loans'extended'to'her,'and'later'demanded'the'return'of'her'
certificate'of'title.'
Held:'The'mortgages'can'enforced'against'Lustan.'The'fact'that'the'loans'were'solely'for'Parangan's'benefit'does'not'
invalidate'the'mortgages'because'third'persons'can'secure'mortgages'to'which'they'aren't'parties.'Her'SPAs'were'
also'continuing,'absent'a'valid'revocation'duly'furnished'to'Parangan.'PNB'cannot'be'prejudiced'by'the'lack'of'
express'authority'from'Lustan'for'those'last'three'loans.'
'
'
b.!Third!person!in!good!faith!without!knowledge!of!revocation!
'
Art.!1922.!If!the!agent!had!general!powers,!revocation!of!the!agency!does!not!prejudice!third!persons!who!acted!in!good!
faith!and!without!knowledge!of!the!revocation.!Notice!of!the!revocation!in!a!newspaper!of!general!circulation!is!a!
sufficient!warning!to!third!persons.!
'
Cf.!
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.!
'
“agent'with'general'powers”'
• general'agent'who'manages'all'the'principal’s'business'
• agent'performing'only'acts'of'administration'over'the'principal’s'business,'or'one'without'specific'powers'
of'the'exercise'of'acts'of'strict'dominion'
• an'agent'authorized'to'transact'with'the'general'public'
o Sir'Casis'argues'that'this'is,'most'likely,'the'interpretation'contemplated'by'the'framers,'in'light'of'
Art.'1922’s'“counterpart”'provision,'Art.'1921.'
'
'
'
'
'
'
Page'42'of'51'
Problem:'
P'appointed'A'to'manage'his'event'planning'agency.'A'dealt'with'T'for'the'latter's'wedding.'P'revoked'A's'agency'on'
Jan.'10'and'published'it'on'Jan.'13.'The'wedding'was'held'on'Jan.'12.'T'paid'A'on'that'day.'
Was'there'revocation'as'to'T?'
' NO!'
What'if'P'told'T'on'Jan.'11'about'the'revocation?'Is'the'revocation'valid?'
' YES!'
What'if'T'heard'rumors'about'revocation'on'Jan.'11?'Is'the'revocation'valid'as'to'T?'
' NO!'cite'Keeler'rules'–'agency'cannot'be'established'by'mere'rumor'
'
3.!Appointment!of!a!new!agent!
'
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.!
• Revocation'does'not'take'effect'upon'appointment'of'the'new'agent,'but'upon'notification'of'the'old'agent.'
• If'the'notice'came'before'the'effectivity'of'the'appointment,'it'will'be'considered'an'advance'notice.'
• The'revocation'is'effective'as'to'third'persons'depending'on'whether'the'agency'was'entrusted'for'the'
purpose'of'contracting'with'specified'persons'or'whether'the'agent'has'general'powers.'
'
Problem:'
On'Monday,'P'appoints'A'to'sell'his'lots.'On'Tuesday,'P'appoints'B'to'sell'the'same.'On'Wednesday,'P'informs'A'of'B's'
appointment.'
When'is'the'revocation'effective?'
If'A'and'B'were'appointed'to'sell'to'X,'when'is'the'revocation'effective?'
'
4.!Direct!management!by!the!principal!
'
Art.!1924.!The!agency!is!revoked!if!the!principal!directly!manages!the!business!entrusted!to!the!agent,!dealing!directly!
with!third!persons.!
• The'principal’s'intent'must'be'taken'into'account.'A'principal'working'on'his'business'from'time'to'time'
should'not'be'taken'as'revocation.'
'
Problem:'
P'manufactures'tuba'and'appointed'A'as'a'US'distributor'for'5'years.'3'years'into'the'contract,'P'started'selling'in'
California.'
Did'P'revoke'the'agency?'
YES!'cite'CMS!Logging!v.!CA!
NO!'at'least'not'entirely!'cite'Art.'1924'and'Art.'1926'–'It'was'only'revoked'with'respect'to'California.'
'
Problem:'
P'issued'to'A'a'GPA'to'manage'his'funeral'parlor'and'flower'shop.'P'issued'a'B'an'SPA'to'sell'the'funeral'parlor'and'
flower'shop.'
Is'there'revocation?'
NO!'
'
CMS'Logging'v.'CA'
Facts:'CMS'appointed'DRACOR'as'its'exclusive'export'and'sales'agent'for'all'logs'CMS'may'produce'for'5'years,'and'
DRACOR'would'receive'5%'commission.'6'months'before'expiration'of'their'agreement,'CMS's'president'and'
general'manager'discovered'that'DRACOR'had'used'Shinko'Trading'as'an'agent'in'selling'CMS's'logs'in'Japan,'and'
Shinko'earned'commission.'CMS'said'this'was'in'violation'of'their'agreement'and'later'sold'and'shipped'logs'
without'DRACOR's'help.'
Held:'When'CMS'started'selling'its'logs'directly'to'Japanese'firms,'this'constituted'an'implied'revocation'of'the'
agency.'Because'of'this,'DRACOR'is'no'longer'entitled'to'its'commission'from'the'proceeds'of'such'sale'and'also'
cannot'claim'damages'due'to'the'principal's'power'to'revoke'the'agency'at'will.'
'
Page'43'of'51'
'
5.!Special!revokes!general!in!part!
'
Art.!1926.!A!general!power!of!attorney!is!revoked!by!a!special!one!granted!to!another!agent,!as!regards!the!special!
matter!involved!in!the!latter.!
• This'provision'refers'to'a'general'agency'(covering'all'the'business'of'the'principal)'and'a'special'agency'
(only'one'or'some'out'of'all'the'business'of'the'principal).'
• This'does'not'apply'to'an'agency'couched'in'general'terms'and'a'subsequent'special'power'of'attorney.'
o There'is'no'authority'in'the'agency'couched'in'general'terms'(covers'only'acts'of'administration)'
which'conflicts'with'the'SPA'(covers'acts'of'strict'dominion),'thus'there'is'nothing'to'revoke.'
• It'is'possible'to'apply'the'rule'in'a'certain'case'involving'a'general'agency'and'a'special'power'of'attorney.'
o If'the'general'agency'granted'to'the'first'agent'included'acts'of'strict'dominion,'then'an'SPA'granted'
to'another'agent'covering'the'same'acts'will'revoke'the'prior'authority'granted'to'the'first'agent.'
o This'does'not'apply'if'the'general'agency'does'not'include'acts'of'strict'dominion.'
'
6.!When!agency!cannot!be!revoked!
'
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!in!the!contract!of!partnership!and!
his!removal!from!the!management!is!unjustifiable.!!
'
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.!
'
“agency'coupled'with'an'interest”'
• where'a'bilateral'contract'is'dependent'on'it'(Art.'1927)'
• it'is'the'means'of'fulfilling'an'obligation'already'contracted'(Art.'1927)'
• a'partner'is'appointed'manager'of'a'partnership,'and'his'removal'from'the'management'is'unjustifiable'
(Art.'1927)'
• constituted'in'the'common'interest'of'the'principal'and'the'agent,'or'in'the'interest'of'a'third'person'
(stipulation'pour!autrui)'(Art.'1930)'
• 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.'(Lim!v.!Saban)'
• The'agency'becomes'part'of'another'obligation'or'agreement.'It'is'not'solely'the'rights'of'the'principal'but'
also'that'of'the'agent'and'third'persons'which'are'affected.'(Republic!v.!Evangelista)'
'
Requisites'for'agency'to'be'coupled'with'interest'(Del'Rosario'v.'Abad):'
1. The'interest'must'be'specified'in'the'power'of'attorney.'
2. It'must'be'pertinent'to'the'power'granted'to'the'agent.'
'
General'rule:'Agency'is'revocable'at'the'will'of'the'principal.'
Exception:'if'it'is'an'agency'coupled'with'an'interest'
Exception'to'the'exception:'if'it'is'for'just'cause'(Coleongco!v.!Claparols)'
'
Del'Rosario'v.'Abad'
Facts:'Del'Rosario,'grantee'of'a'homestead'patent,'obtained'a'loan'from'Abad,'mortgaged'the'improvements'of'the'
land'and'executed'an'“irrevocable'SPA'coupled'with'interest”.'He'authorized'Abad'to'sell'and'convey'the'land.'Del'
Rosario'later'died'leaving'the'mortgage'debt'unpaid.'Abad'sold'the'land'to'his'son'Teodorico'for'P1'and'the'payment'
by'the'vendee'of'the'debt.'
Held:'The'written'power'of'attorney'provided'that'it'was'coupled'with'an'interest'in'the'subject'matter'thereof'in'
favor'of'the'agent,'but'this'did'not'create'an'agency'coupled'with'an'interest.'The'power'of'attorney'must'also'state'
what'that'interest'is.'But'even'if'the'interest'had'been'stated,'it'would'not'have'mattered'because'the'agency'had'
nothing'to'do'with'the'interest'of'the'agent.'The'mortgage'on'the'improvements'had'nothing'to'do'with'the'power'of'
attorney.'
'
'
Page'44'of'51'
Valenzuela'v.'CA'
Facts:'Valenzuela'was'a'General'Agent'of'Philamgen,'and'he'solicited'marine'insurance'from'one'of'his'clients.'
However,'he'did'not'receive'his'full'commission'(32%).'Philamgen'soon'expressed'its'intent'to'share'in'the'
commission'due'to'Valenzuela'on'a'fifty1fifty'basis'but'he'refused.'Philamgen'and'its'officers'then'did'not'credit'the'
commission'due'him,'placed'agency'transactions'on'a'cash1and1carry'basis,'threatened'the'cancellation'of'policies'
issued'by'his'agency'and'leaked'news'that'he'had'a'substantial'account'with'Philamgen.'Valenzuela's'business'
suffered'and'Philamgen'terminated'the'General'Agency'Agreement.'
Held:!The'principal'cause'of'Valenzuela's'termination'as'General'Agent'was'his'refusal'to'share'his'commission,'and'
the'agency'is'coupled'with'interest'and'therefore'not'freely'revocable'by'Philamgen.'With'that'termination,'
Valenzuela'was'no'longer'entitled'to'his'commission'but'was'still'held'jointly'and'severally'liable'with'the'insured'
for'unpaid'premiums.'The'principal'cannot'defeat'the'agent's'right'to'indemnification.'
'
Republic'v.'Evangelista'
Facts:'Gen.'Jose'Calimlim'entered'into'a'MOA'with'Reyes'granting'the'latter'a'permit'to'hunt'for'treasure'in'a'piece'
of'land.'Reyes'then'commenced'his'search'on'Legaspi's'land,'and'Legaspi'executed'a'SPA'appointing'nephew'
Gutierrez'to'deal'with'the'treasure'hunting'activities,'agreeing'to'give'the'latter'40%'of'the'treasure.'Gutierrez'then'
filed'a'case'against'the'intruders'for'illegally'entering'Legaspi's'land'and'agreed'that'Atty.'Adaza'should'be'entitled'
to'30%'of'Legaspi's'share'in'the'treasure.'Reyes'contended'that'Legaspi'had'already'revoked'the'SPA'by'a'Deed'of'
Revocation.'
Held:'The'agency'was'coupled'with'an'interest'because'a'bilateral'contract'depended'on'it'–'that'is,'the'agreement'
between'Gutierrez'and'Atty.'Adaza.'Thus,'it'is'not'revocable'solely'by'Legaspi,'so'his'Deed'of'Revocation'has'no'
effect.'
'
Coleongco'v.'Claparols'
Facts:'Claparols'executed'in'favor'of'Coleongco'a'SPA'and'the'latter'became'an'assistant'manager'at'the'former's'nail'
factory.'An'alias'writ'of'execution'was'served'upon'Claparols'to'enforce'a'judgment'against'him'obtained'by'PNB'
despite'the'fact'that'he'had'submitted'an'amortization'plan'to'settle'the'account.'It'turned'out'that'the'execution'had'
been'procured'because'Coleongco'had'charged'Claparols'with'taking'machines'mortgaged'to'the'bank,'and'this'was'
later'lifted,'but'Claparols'revoked'the'SPA.'It'turned'out'later'on'that'Coleongco'had'plans'to'sabotage'the'machinery'
and'take'control'of'the'factory.'
Held:'The'financing'agreement'contained'clauses'for'the'protection'of'the'agent's'interest'so'a'power'of'attorney'
was'not'needed.'The'agency'had'to'be'essential'to'protecting'the'interest,'or'the'interest'must'require'the'agency'for'
it'to'be'exercised.'In'any'case,'a'power'of'attorney'made'irrevocable'can'still'be'revoked'for'just'cause'because'it'
must'not'be'used'to'shield'acts'in'bad'faith,'breach'of'confidence'or'betrayal'of'trust.'Here,'Coleongco'was'shown'to'
have'acted'in'bad'faith'by'attempting'to'undermine'the'credit'of'his'principal'and'to'acquire'the'factory'through'acts'
of'sabotage.'
'
B.#Withdrawal#
'
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!therefor,!unless!the!agent!should!base!his!
withdrawal!upon!the!impossibility!of!continuing!the!performance!of!the!agency!without!grave!detriment!to!himself.!
'
Valera'v.'Velasco'
Facts:'Valera'appointed'Velasco'as'attorney1in1fact'with'authority'to'manage'his'property,'including'the'usufruct'of'
a'real'property.'Velasco'brought'suit'against'Valera'and'won'the'case,'and'as'a'result,'the'sheriff'levied'upon'Valera's'
right'of'usufruct,'sold'it'at'a'public'auction'and'adjudicated'it'to'Velasco.'Valera'sold'his'right'of'redemption'to'
Hernandez,'who'conveyed'this'same'right'for'P200'to'Valera.'Vallejo,'who'had'an'execution'upon'a'judgment'against'
Valera'rendered,'levied'upon'the'right'of'redemption'and'sold'it'to'Vallejo'at'public'auction.'Vallejo'would'later'
transfer'that'right'of'redemption'to'Velasco.'
Held:'The'fact'that'Velasco'filed'a'complaint'against'Valera'for'the'recovery'of'a'sum'of'money'from'the'liquidation'
of'the'accounts'between'them'in'connection'with'the'agency'expressly'shows'that'Velasco'renounced'the'agency.'
Thus,'Velasco's'purchase'of'Valera's'right'of'usufruct'was'valid.'
'
'
'
Page'45'of'51'
'
C.#Death/civil#interdiction/insanity/insolvency#of#the#principal#
'
'
Cf.!
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.!
'
• By'reason'of'the'nature'of'the'relationship'between'principal'and'agent,'agency'is'extinguished'by'the'death'
of'the'principal'or'agent.'There'being'an'integration'of'the'personality'of'the'principal'into'that'of'the'agent,'
it'is'not'possible'for'the'representation'to'continue'once'one'of'them'dies,'unless'the'power'be'coupled'with'
an'interest.'(Rallos!v.!Felix!Go!Chan)'
• If'the'principal'dies,'nothing'in'the'CC'gives'the'heirs'a'duty'to'notify'the'agent.'But'if'the'agent'dies,'the'
heirs'must'notify'the'principal'and'“in'the'meantime'adopt'such'measures'as'the'circumstances'may'
demand'in'the'interest'of'the'[principal].”'(Art.'1932)'
'
1.!Agency!coupled!with!an!interest!
(See'when'agency'cannot'be'revoked,'supra,'page'44)'
'
2.!Contract!between!agent!without!knowledge!and!third!person!in!good!faith!
'
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.!
!
Two'conditions'for'the'application'of'Art.'1931'(Rallos!v.!Felix!Go!Chan):'
1. The'agent'acted'without'knowledge'of'the'death'of'the'principal'
2. The'third'person'who'contracted'with'the'agent'himself'acted'in'good'faith'
'
• The'same'rule'would'apply'even'if'the'cause'of'the'extinguishment'were'something'other'than'the'death'of'
the'principal.'Strictly'speaking,'the'agency'no'longer'exists'but'the'law'simply'gives'effect'to'the'act'of'the'
agent.'
• Because'Art.'1931'is'an'exception'to'the'general'rule,'it'should'be'strictly'construed.'
'
“Is!Miss!PhilippinesTUniverse!an!agent!of!the!Philippines!
because!she!represents!the!Philippines?”!
'
'
'
VII.$Distinguishing$Agency$from$Other$Contracts!
'
A.#In#general#
• The'contract’s'real'nature'must'be'determined'and'differentiated'from'other'contracts'in'order'to'
adjudicate'claims'or'determine'liability'of'parties.'
• The'proper'question'to'ask'is:'“Based'on'the'issue'to'be'determined,'does'an'agency'relationship'exist'
between'the'relevant'parties?”'
'
Problem:'
A'and'B'executed'a'lease'agreement'where'A'rented'B’s'restaurant.'Rentals'were'80%'of'the'profits'per'month.'
Is'there'an'agency'relationship?'
YES!'NO!'depends'on'how'you'spin'it'
'
Page'46'of'51'
1.!Determined!by!acts!
• The'nature'of'the'acts'of'the'parties'or'the'nature'of'their'relationship'with'each'other'determines'the'
nature'of'their'contract.'
• The'manner'by'which'the'parties'call'each'other'or'refer'to'their'contract'does'not'determine'the'nature'of'
the'contract.'
• If'one'acts'in'representation'of'another,'he'is'an'agent'regardless'of'what'he'is'called.'The'contract'is'of'
agency'even'if'it'is'called'by'another'name.'(Doles!v.!Angeles)'
• The'fact'that'the'parties'may'not'be'aware'of'all'the'nuances'of'an'agency'relationship'does'not'prevent'the'
establishment'of'such'relationship'between'them.'
'
Doles'v.'Angeles'
Facts:'Angeles'alleged'that'the'house'ceded'to'her'by'Doles'was'to'satisfy'Doles’'personal'loan'with'her,'so'she'filed'a'
case'against'Doles'for'execution'of'the'papers'to'transfer'title'over'the'property.'Doles'denied'having'made'such'
loan,'and'said'that'she'merely'referred'her'friends'to'Angeles'whom'she'knew'was'engaged'in'the'business'of'
lending'money'through'her'capitalist,'Pua.'She'further'averred'that'when'her'friends'borrowed'money'from'Angeles'
and'their'checks'bounced'for'insufficiency'of'funds,'she'was'forced'to'issue'eight'checks'and'execute'a'deed'of'sale'
over'the'house.'
Held:'There'is'a'contract'of'agency'between'Angeles'and'her'capitalist'Pua,'and'also'another'contract'of'agency'
between'Doles'and'her'friends.'Both'were'only'agents'and'as'such,'they'were'not'parties'to'the'contract'of'loan'
between'Pua'and'Doles’'friends.'Thus,'the'contract'of'sale'for'the'house'is'void'for'lack'of'consideration.'Even'if'the'
contract'was'denominated'as'a'contract'of'sale,'the'contract'was'still'one'of'agency.'The'manner'by'which'parties'
refer'to'their'contract'or'to'themselves'in'relation'to'the'contract,'does'not'determine'the'nature'of'the'contract.'
What'is'determinative'is'the'nature'of'the'acts'performed'by'the'parties'or'the'nature'of'the'relationship'between'
the'parties.''
'
2.!The!element!of!control!
• Control'most'clearly'distinguishes'agency'from'other'legal'concepts,'where'one'person'(the'agent)'agrees'to'
act'under'the'control'or'direction'of'another'(the'principal).'(Victorias!Milling!v.!CA)'
• A'prime'element'of'an'agency'relationship'is'the'existence'of'some'degree'of'control'by'the'principal'over'
the'conduct'and'activities'of'the'agent.'(American!Jurisprudence)'
• Sir'argues'that'while'control'may'be'an'important'element'or'indicator'of'an'agency'relationship,'it'may'not'
be'accurate'to'say'that'it'is'the'main'distinguishing'factor.'It'is'more'accurate'to'say'that'representation'is'
the'distinguishing'factor,'based'on'Art.'1868.'
• Intent'should'temper'control'in'determining'if'a'contract'is'that'of'agency.'
'
Cf.!
'
B.#Distinguished#from#partnership#
!
Art.!1767.!By!the!contract!of!partnership!two!or!more!persons!bind!themselves!to!contribute!money,!property,!or!
industry!to!a!common!fund,!with!the!intention!of!dividing!the!profits!among!themselves.!!
! Two!or!more!persons!may!also!form!a!partnership!for!the!exercise!of!a!profession.!
'
• The'overlap'between'agency'and'partnership'exists'in'the'nature'of'the'relationship'between'the'partners'
and'between'the'partnership'and'the'partners.'
• If'there'is'a'partnership,'there'is'also'an'agency'relationship'because'the'latter'describes'the'nature'of'the'
relationship'between'the'parties'and'each'partner'and'among'the'partners'themselves'(mutual'agency).'
• Distinguishing'factor'in'partnership'is'the'parity'of'standing'between'the'partners.'(See'Sevilla!v.!CA,'infra,'
page'48)'
'
'
'
'
'
Page'47'of'51'
'
Sevilla'v.'CA'
Facts:'Sevilla'ran'a'branch'of'Tourist'World'Services,'Inc.'(TWSI)'The'branch'was'closed'and'padlocked'so'Sevilla'
sued'TWSI'for'damages,'contending'that'she'was'TWSI’s'partner.'TWSI'argued'that'Sevilla'was'a'mere'employee.'
Held:'Sevilla'was'an'agent'of'TWSI'since'she'solicited'airline'fares'on'behalf'of'TWSI,'received'4%'of'the'proceeds,'
and'acknowledged'TWSI’s'authority'as'owner'of'the'business'based'on'her'letter.'Sevilla'was'not'an'employee'
because'she'was'not'subject'to'the'control'of'TWSI'and'she'was'solidarily'liable'with'it'in'its'contract'of'lease.'She'
also'did'not'earn'a'fixed'salary'but'was'entitled'to'commissions'that'fluctuated.'Sevilla'was'also'not'a'partner'since'
she'did'not'enjoy'the'parity'of'standing'between'herself'and'TWSI,'and'they'both'did'not'hold'themselves'out'as'
partners.'
'
Note:'Sir'says'the'ruling'in'this'case'should'be'taken'with'a'grain'of'salt,'as'it'is'not'all'the'time'that'partners'actual'
enjoy'parity'of'standing.'
'
C.#Distinguished#from#service#providers#
'
1.!Lessor!of!services!
!
Art.!1644.!In!the!lease!of!work!or!service,!one!of!the!parties!binds!himself!to!execute!a!piece!of!work!or!to!render!to!the!
other!some!service!for!a!price!certain,!but!the!relation!of!principal!and!agent!does!not!exist!between!them.!
'
• By'express'provision'of'law,'a'lessor'of'work'or'services'cannot'be'an'agent.'There'is'no'representation.'A'
lessor'of'work'cannot'perform'juridical'acts'which'bind'the'principal'and'enter'into'contracts'on'behalf'of'
the'lessee.'
• The'basis'of'agency'is'representation,'while'in'the'lease'of'work'or'services'the'basis'is'employment.'
(Nielson!v.!Lepanto)'
• The'most'characteristic'feature'of'an'agency'relationship'is'the'agent’s'power'to'bring'about'business'
relations'between'his'principal'and'third'person.'The'agent'is'destined'to'execute'juridical'acts.'Lease'of'
services'contemplate'only'material'(non1juridical'acts).'(Nielson!v.!Lepanto)'
'
Nielson'v.'Lepanto'
Facts:'Nielson'was'to'manage'and'operate'the'mining'properties'and'mill'on'behalf,'and'for'the'account,'of'Lepanto.'
Nielson'was'authorized'to'represent'Lepanto'in'entering'into'contracts'for'the'hiring'of'laborers,'purchase'of'
supplies,'and'the'sale'and'marketing'of'the'ores'mined,'with'prior'approval'of'Lepanto.'
Held:'The'contract'between'Nielson'and'Lepanto'was'a'lease'of'services,'as'Nielson’s'principal'undertaking'was'the'
management,'operation,'and'development'of'the'mine'and'mill.'All'the'other'undertakings'mentioned'are'only'
necessary'or'incidental'to'the'principal'undertaking.'Nielson'was'not'an'agent,'as'it'did'not'execute'juridical'acts'for'
Lepanto'nor'represented'it.'
'
Agency' Lease'of'services'
Principle'of'representation'is'applied' Principle'of'employment'is'applied'
Extinguished'at'will'of'the'principal' Concurrence'of'parties'is'necessary'
Agent'exercise'discretionary'power' Employee'exercises'ministerial'functions'
only'
Preparatory'contract' Principal'contract'
(purpose'is'to'enter'into'other'contracts)'
'
2.!Independent!contractor!
'
Art.!1713.!By!the!contract!for!a!piece!of!work!the!contractor!binds!himself!to!execute!a!piece!of!work!for!the!employer,!in!
consideration!of!a!certain!price!or!compensation.!The!contractor!may!either!employ!only!his!labor!or!skill,!or!also!
furnish!the!material.!
'
'
'
Page'48'of'51'
The'distinction'becomes'important'for'purposes'of'determining'liability,'particularly'when'it'comes'to'hospitals.'
(See'the'case'of'Nogales!v.!Capitol!Medical,'supra,'page'18)'
• General'rule:'A'hospital'is'not'liable'for'the'negligence'of'an'independent'contractor1physician.'
• Exception:'when'the'physician'is'the'ostensible'agent'of'the'hospital'
'
Fressel'v.'Mariano'Uy'Chaco'
Facts:'Uy'Chaco'Sons'&'Company'entered'into'a'contract'with'Merritt,'whereby'Merritt'undertook'and'agreed'to'
build'an'edifice'for'Uy'Chaco.'Fressel'delivered'to'Merritt'construction'materials,'which'Merritt'agreed'to'pay'for.'
However,'Uy'Chaco'took'possession'of'the'incomplete'edifice'and'the'materials'on'said'premises,'by'virtue'of'a'
stipulation'in'their'contract'that'Uy'Chaco'may'do'so'before'the'completion'of'the'edifice.'Fressel'sued'Mariano'on'
the'premise'that'Merritt'acted'as'Uy'Chaco’s'agent'in'the'acquisition'of'the'materials.'
Held:'Merritt'was'an'independent'contractor'who'purchased'the'materials'without'the'intervention'of'the'alleged'
principal,'Uy'Chaco.'No'agency'relationship'because'Merritt'was'authorized'to'do'the'work'according'to'his'own'
method'and'without'being'subject'to'the'defendant’s'control,'except'as'to'the'result,'and'that'Merritt'could'purchase'
his'materials'and'supplies'from'whom'he'pleased'at'such'prices'as'he'desired'to'pay.'
'
Shell'v.'Firemen’s'Insurance'
Facts:'Sison’s'car'was'brought'to'a'Shell'Service'Station'operated'by'De'La'Fuente.'The'car'fell'from'the'hydraulic'
lifter.'The'insurance'company'who'paid'for'the'car'sued'Shell'to'recover'the'cost.'
Held:'De'La'Fuente'was'an'agent'of'Shell,'not'an'independent'contractor.'This'is'because:'De'La'Fuente'owed'his'
position'to'the'company'and'Shell'could'terminate'him'at'will.'The'service'station'belonged'to'the'company'and'De'
La'Fuente'sold'only'Shell’s'products.'The'equipment'belonged'to'Shell'and'were'just'loaned'to'De'La'Fuente,'it'was'
Shell'who'took'charge'of'their'repair'and'maintenance.'A'Shell'employee'periodically'inspects'and'supervises'the'
operator'and'service'station.'The'prices'of'the'products'sold'by'De'La'Fuente'were'fixed'by'Shell.'Thus,'it'was'Shell'
who'is'liable'to'reimburse'the'insurance'company'since'its'employees'were'negligent'in'seeing'to'it'that'the'
hydraulic'lifter'was'in'good'running'order.'
'
Note:'Sir'mentioned'that'applying'this'ruling'to'a'different'set'of'facts'might'be'difficult.'For'instance,'what'would'be'
the'difference'between'De'La'Fuente'and'an'employee'tasked'to'man'a'sari1sari'store?'
'
D.#Distinguished#from#sale#
'
Art.!1458.!By!the!contract!of!sale,!one!of!the!contracting!parties!obligates!himself!to!transfer!the!ownership!of!and!to!
deliver!a!determinate!thing,!and!the!other!to!pay!therefor!a!price!certain!in!money!or!its!equivalent.!
! A!contract!of!sale!may!be!absolute!or!conditional.!
'
• A'sale'is'primarily'based'on:'
o Whether'the'party'receiving'the'item'pays'the'price'
o Whether'the'recipient'can'return'the'items'if'unsold'by'him'(Quiroga!v.!Parsons)'
• The'essence'of'the'contract'determines'what'law'should'apply'to'the'relation'between'the'parties.'Only'the'
acts'of'the'contracting'parties,'subsequent'to'and'in'connection'with'the'execution'of'the'contract,'must'be'
considered'for'purposes'of'interpretation.'(American!Rubber!v.!CIR)'
• The'transfer'of'title'or'agreement'to'transfer'it'for'a'price'paid'or'promised'is'the'essence'of'sale;'while'the'
essence'of'an'agency'to'sell'is'the'delivery'to'an'agent,'not'as'his'property,'but'as'the'property'of'the'
principal,'who'remains'the'owner'and'has'the'right'to'control'sales,'fix'the'price,'etc.'(Ker!v.!Lingad)'
'
Agency'to'sell' Sale'
Agent'receives'the'goods'as'property'of'the' Buyer'receives'the'goods'as'his'own'
principal' property'
Agent'delivers'the'proceeds'of'the'sale' Buyer'pays'the'purchase'price'
Agent'can'return'the'object'in'case'he'is' The'buyer'cannot'return'the'object'sold.'
unable'to'sell'
Agent'is'bound'to'act'according'to'the' The'buyer,'as'the'owner,'can'deal'with'the'
instructions'of'the'principal' thing'as'he'pleases.'
'
'
Page'49'of'51'
'
Quiroga'v.'Parsons'
Facts:'Quiroga'and'Parsons'Hardware'entered'into'a'contract'whereby'Quiroga'granted'the'exclusive'right'to'sell'his'
beds'in'Visayas'to'Parsons.'
Held:'Quiroga'and'Parsons'entered'into'a'contract'of'sale,'not'of'agency,'because'the'essential'clauses'in'the'contract'
constituted'the'elements'of'a'sale:'one'was'to'deliver'a'thing'while'the'other'was'to'pay'the'price.'On'receiving'the'
beds,'Parsons'was'obliged'to'pay'the'price'within'a'fixed'term,'regardless'as'to'whether'the'beds'were'sold'or'not.'
What'differentiates'a'sale'from'agency'created'for'the'purpose'of'selling'is'whether'the'party'receiving'the'items'
pays'the'price,'and'whether'the'percipient'can'return'unsold'items.'There'was'also'mutual'tolerance'in'their'
performance'of'the'contract'in'disregard'of'its'terms.'Hence,'it'gives'no'right'to'have'the'contract'considered,'not'as'
the'parties'stipulated'it,'but'as'they'performed'it.'
'
Note:'Sir'disagrees'with'this'rules,'as'there'is'enough'evidence'to'show'the'intention'to'establish'an'agency.'He'also'
argues'that'the'Court'effectively'implied'the'existence'of'a'hierarchy'between'the'contracts'of'sale'and'agency,'such'
that'if'the'basic'elements'of'a'sale'are'present,'it'is'to'be'regarded'as'a'contract'of'sale'even'if'features'of'a'contract'
of'agency'are'also'present.'
'
American'Rubber'v.'CIR'
Facts:'American'Rubber'Company'(ARCO)'acquired'some'of'its'products'from'a'forest'covered'by'a'land'grant'
operated'by'Santa'Clara'Lumber'Co.,'Inc.'(SCLCO).'The'lumber'from'the'said'land'grant'were'sold'to'buyers'at'Manila'
through'contracts'executed'by'SCLCO.'Later,'ARCO'was'assessed'deficiency'sales'tax'and'surcharge'by'the'CIR'for'its'
transactions'through'SCLCO,'in'view'of'its'finding'that'SCLCO'acted'as'an'agent'of'ARCO'in'the'transactions.'
Held:'The'circumstances'clearly'indicate'that'SCLCO'acted'as'an'agent'of'ARCO,'contrary'to'ARCO’s'allegation'that'
what'exists'between'them'is'a'contract'of'sale'or'contract'for'a'piece'of'work.'The'essence'of'a'contract'determines'
what'law'should'apply'to'the'relation'between'the'parties'and'not'what'the'parties'prefer'to'call'that'relationship.'
Only'the'acts'of'the'parties,'subsequent'to'and'in'connection'with'execution'of'the'contract,'must'be'considered'for'
the'purpose'of'interpreting'the'same.'These'circumstances'include'the'following:'SCLCO'is'reimbursed'its'freight'
expenses'by'ARCO,'and'SCLCO'gets'5%'commission'on'the'Manila'sales'as'compensation'for'its'services'and'then'
deposits'the'rest'to'ARCO’s'bank'account.'
'
Ker'v.'Lingad'
Facts:'Ker'and'Co.'was'assessed'P20,000'as'commercial'broker’s'percentage'tax'arising'out'of'a'contract'with'US'
Rubber.'It'requested'for'the'cancellation'of'the'assessment'because'the'contract'was'allegedly'one'of'sale,'not'of'
brokerage,'based'on'a'stipulation'in'their'contract'that'Ker'and'Co.'was'not'an'agent'or'representative'of'US'Rubber.'
However,'the'contract'also'provides'that'the'agent'merely'receives'the'products'upon'consignment'which'remain'
properties'of'the'principal.''
Held:'It'was'a'contract'of'agency,'notwithstanding'the'stipulation,'because,'if'ownership'in'the'goods'transferred'
from'a'company'to'a'dealer'was'retained'by'the'transferor,'the'relationship'is'that'of'agency,'not'of'sale.'Transfer'of'
title'is'the'essence'of'sale.'Mere'disclaimer'in'a'contract'that'the'entity'is'not'an'agent'or'legal'representative'does'
not'suffice'to'yield'the'conclusion'that'it'is'an'independent'merchant'if'the'principal’s'control'over'the'goods'for'
resale'is'pervasive'in'character.''
'
Note:'Sir'believes'that'this'is'the'best'way'to'distinguish'a'sale'from'an'agency'–'that'the'title'to'the'thing'is'
transferred.'
'
Puyat'v.'Arco'Amusement'
Facts:'Puyat'is'an'exclusive'agent'of'Starr.'Arco'and'Puyat'agreed'that'Puyat'would'obtain'Starr1manufactured'
equipment'for'Arco'in'exchange'for'the'price'of'the'equipment'plus'10%'commission'and'other'expenses.'The'
equipment'was'delivered.'However,'Arco'later'discovered'that'Puyat'had'charged'Arco'the'list'price'(SRP'of'the'
manufacturing'company)'and'not'the'net'price.'Apparently'Puyat,'as'an'agent'of'Starr,'obtained'a'25%'discount.'
Arco'sued'for'the'reimbursement'of'the'difference'between'the'list'price'and'the'purchase'price,'claiming'that'Puyat'
was'acting'as'Arco’s'agent'when'Puyat'purchased'the'equipment'for'them'and'that'Puyat'had'committed'fraud'
against'them.'
'
'
'
'
Page'50'of'51'

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