Agency; The underlying principle of the contract of agency is to accomplish results by using

the services of others—to do a great variety of things like selling, buying, manufacturing, and
transporting.—In a contract of agency, a person binds himself to render some service or to do
something in representation or on behalf of another with the latter’s consent. The underlying
principle of the contract of agency is to accomplish results by using the services of others—to
do a great variety of things like selling, buying, manufacturing, and transporting. Its purpose is
to extend the personality of the principal or the party for whom another acts and from whom
he or she derives the authority to act. It is said that the basis of agency is representation, that
is, the agent acts for and on behalf of the principal on matters within the scope of his authority
and said acts have the same legal effect as if they were personally executed by the principal.
By this legal fiction, the actual or real absence of the principal is converted into his legal or
juridical presence—qui facit per alium facit per se.
Same; Elements.—The elements of the contract of agency are:
(1) consent, express or implied, of the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) the agent acts as a representative
and not for himself; (4) the agent acts within the scope of his authority.

Same; Article 1897 of the Civil Code reinforces the familiar doctrine that an agent, who acts
as such, is not personally liable to the party with whom he contracts; Exceptions.—Article
1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable
to the party with whom he contracts. The same provision, however, presents two instances
when an agent becomes personally liable to a third person. The first is when he expressly
binds himself to the obligation and the second is when he exceeds his authority. In the last
instance, the agent can be held liable if he does not give the third party sufficient notice of his
powers. We hold that respondent EDWIN does not fall within any of the exceptions contained
in this provision.

Same; Managers; The position of manager is unique in that it presupposes the grant of broad
powers with which to conduct the business of the principal.—The Deed of Assignment clearly
states that respondent EDWIN signed thereon as the sales manager of Impact Systems. As
discussed elsewhere, the position of manager is unique in that it presupposes the grant of
broad powers with which to conduct the business of the principal, thus: The powers of an
agent are particularly broad in the case of one acting as a general agent or manager; such a
position presupposes a degree of confidence reposed and investiture with liberal powers for
the exercise of judgment and discretion in transactions and concerns which are incidental or
appurtenant to the business entrusted to his care and management. In the absence of an
agreement to the contrary, a managing agent may enter into any contracts that he deems
reasonably necessary or requisite for the protection of the interests of his principal entrusted
to his management. x x x.

Same; 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.—We likewise take note of the fact that in
this case, petitioner is seeking to recover both from respondents ERWIN, the principal, and
EDWIN, the agent. It is well to state here that Article 1897 of the New Civil Code upon which
petitioner anchors its claim against respondent EDWIN “does not hold that in case of excess
of authority, both the agent and the principal are liable to the other contracting party.” To
reiterate, the first part of Article 1897 declares that the principal is liable in cases when the
agent acted within the bounds of his authority. Under this, the agent is completely absolved of
any liability. The second part of the said provision presents the situations when the agent
himself becomes liable to a third party when he expressly binds himself or he exceeds the
limits of his authority without giving notice of his powers to the third person. However, it must
be pointed out that in case of excess of authority by the agent, like what petitioner claims
exists here, the law does not say that a third person can recover from both the principal and
the agent.

Same; Actions; Parties; Words and Phrases; An agent acting within his authority as such,
who did not acquire any right nor incur any liability arising from a Deed, is not a real property
in interest who should be impleaded; A real party in interest is one who stands to be benefited
or injured by the judgment in the suit, or the party entitled to the avails of the suit.—As we
declare that respondent EDWIN acted within his authority as an agent, who did not acquire
any right nor incur any liability arising from the Deed of Assignment, it follows that he is not a
real party in interest who should be impleaded in this case. A real party in interest is one who
“stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails
of the suit.” In this respect, we sustain his exclusion as a defendant in the suit before the court
a quo.

G.R. No. 149353. June 26, 2006.

JOCELYN B. DOLES, petitioner, vs. MA. AURA TINA ANGELES, respondent.
Agency; Evidence; Estoppel; The basis of agency is representation; The question of whether
an agency has been created is ordinarily a question which may be established in the same
way as any other fact, either by direct or circumstantial evidence; Though that fact or extent
of authority of the agents may not, as a general rule, be established from the declarations of
the agents alone, if one professes to act as agent for another, she may be estopped to deny
her agency both as against the asserted principal and the third persons interested in the
transaction in which he or she is engaged.—This Court has affirmed that, under Article 1868
of the Civil Code, the basis of agency is representation. The question of whether an agency
has been created is ordinarily a question which may be established in the same way as any
other fact, either by direct or circumstantial evidence. The question is ultimately one of
intention. Agency may even be implied from the words and conduct of the parties and the
circumstances of the particular case. Though the fact or extent of authority of the agents may
not, as a general rule, be established from the declarations of the agents alone, if one
professes to act as agent for another, she may be estopped to deny her agency both as
against the asserted principal and the third persons interested in the transaction in which he
or she is engaged.
Same; For an agency to arise, it is not necessary that the principal personally encounter the
third person with whom the agent interacts—precisely, the purpose of agency is to extend the
personality of the principal through the facility of the agent.—The CA is incorrect when it
considered the fact that the “supposed friends of [petitioner], the actual borrowers, did not
present themselves to [respondent]” as evidence that negates the agency relationship—it is
sufficient that petitioner disclosed to respondent that the former was acting in behalf of her
principals, her friends whom she referred to respondent. For an agency to arise, it is not
necessary that the principal personally encounter the third person with whom the agent
interacts. The law in fact contemplates, and to a great degree, impersonal dealings where the
principal need not personally know or meet the third person with whom her agent transacts:
precisely, the purpose of agency is to extend the personality of the principal through the
facility of the agent.
Same; If the principals do not actually and personally know each other, such ignorance does
not affect their juridical standing as agents.—In the case at bar, both petitioner and
respondent have undeniably disclosed to each other that they are representing someone
else, and so both of them are estopped to deny the same. It is evident from the record that
petitioner merely refers actual borrowers and then collects and disburses the amounts of the
loan upon which she received a commission; and that respondent transacts on behalf of her
“principal financier,” a certain Arsenio Pua. If their respective principals do not actually and
personally know each other, such ignorance does not affect their juridical standing as agents,
especially since the very purpose of agency is to extend the personality of the principal
through the facility of the agent.

Same; Words and Phrases; If an act done by one person in behalf of another is in its
essential nature one of agency, the former is the agent of the latter notwithstanding he or she
is not so called
—it will be an agency whether the parties understood the exact nature of the relation or not.—
With respect to the admission of petitioner that she is “re-lending” the money loaned from
respondent to other individuals for profit, it must be stressed that the manner in which the
parties designate the relationship is not controlling. If an act done by one person in behalf of
another is in its essential nature one of agency, the former is the agent of the latter
notwithstanding he or she is not so called. The question is to be determined by the fact that
one represents and is acting for another, and if relations exist which will constitute an agency,
it will be an agency whether the parties understood the exact nature of the relation or not.
Same; Loans; Sales; A sale predicated on a loan between the principals in which the agents
are not privy to is void for lack of consideration.—In view of the two agency relationships,
petitioner and respondent are not privy to the contract of loan between their principals. Since
the sale is predicated on that loan, then the sale is void for lack of consideration.
Sales; Mortgages; An assumption of a mortgage debt may constitute a valid consideration for
a sale.—A further scrutiny of the record shows, however, that the sale might have been
backed up by another consideration that is separate and distinct from the debt: respondent
averred in her complaint and testified that the parties had agreed that as a condition for the
conveyance of the property the respondent shall assume the balance of the mortgage loan
which petitioner allegedly owed to the NHMFC. This Court in the recent past has declared
that an assumption of a mortgage debt may constitute a valid consideration for a sale.

G.R. No. 120465. September 9, 1999.

WILLIAM UY and RODEL ROXAS, petitioners, vs. COURT OF APPEALS, HON. ROBERT
BALAO and NATIONAL HOUSING AUTHORITY, respondents.

Actions; Parties; Words and Phrases; An action shall be prosecuted in the name of the party
who, by the substantive law, has the right sought to be enforced; “Real Party-in-Interest,”
Explained.—Section 2, Rule 3 of the Rules of Court requires that every action must be
prosecuted and defended in the name of the real party-in-interest. The real party-in-interest is
the party who stands to be benefited or injured by the judgment or the party entitled to the
avails of the suit. “Interest,” within the meaning of the rule, means material interest, an interest
in the issue and to be affected by the decree, as distinguished from mere interest in the
question involved, or a mere incidental interest. Cases construing the real party-in-interest
provision can be more easily understood if it is borne in mind that the true meaning of real
party-in-interest may be summarized as follows: An action shall be prosecuted in the name of
the party who, by the substantive law, has the right sought to be enforced.
Same; Same; Agency; Sales; An agent of the seller is not a party to the contract of sale
between his principal and the buyer; Since a contract may be violated only by the parties
thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in an
action upon that contract must, generally, either be parties to said contract.—Petitioners are
not parties to the contract of sale between their principals and NHA. They are mere agents of
the owners of the land subject of the sale. As agents, they only render some service or do
something in representation or on behalf of their principals. The rendering of such service did
not make them parties to the contracts of sale executed in behalf of the latter. Since a
contract may be violated only by the parties thereto as against each other, the real parties-in-
interest, either as plaintiff or defendant, in an action upon that contract must, generally, either
be parties to said contract.
Same; Same; Same; Assignment; The rule requiring every action to be prosecuted in the
name of the real party-in-interest xxx recognizes the assignments of rights of action and also
recognizes that when one has a right of action assigned to him he is then the real party in
interest and may maintain an action upon such claim or right.—Are petitioners assignees to
the rights under the contracts of sale? In McMicking vs. Banco Español-Filipino, we held that
the rule requiring every action to be prosecuted in the name of the real party-in-interest x x x
recognizes the assignments of rights of action and also recognizes that when one has a right
of action assigned to him he is then the real party in interest and may maintain an action upon
such claim or right. The purpose of [this rule] is to require the plaintiff to be the real party in
interest, or, in other words, he must be the person to whom the proceeds of the action shall
belong, and to prevent actions by persons who have no interest in the result of the same. x x
x
Same; Same; Same; Same; An agent, in his own behalf, may bring an action founded on a
contract made for his principal, as an assignee of such contract.—An agent, in his own behalf,
may bring an action founded on a contract made for his principal, as an assignee of such
contract. We find the following declaration in Section 372 (1) of the Restatement of the Law
on Agency (Second): Section 372. Agent as Owner of Contract Right: (1) Unless otherwise
agreed, an agent who has or who acquires an interest in a contract which he makes on behalf
of his principal can, although not a promisee, maintain such action thereon as might a
transferee having a similar interest.
Same; Same; Same; Sales; Stipulations Pour Autrui; Where an agent is not a beneficiary of a
stipulation pour autrui, the fact that he did not obtain his commissions or recoup his advances
because of the non-performance of the contract does not entitle him to file an action against
the buyer. It does not appear that petitioners are beneficiaries of a stipulation pour autrui
under the second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in
any of the Deeds of Absolute Sale “clearly and deliberately” conferring a favor to any third
person. That petitioners did not obtain their commissions or recoup their advances because of
the non-performance of the contract did not entitle them to file the action below against
respondent NHA. Section 372 (2) of the Restatement of the Law on Agency (Second) states:
(2) An agent does not have such an interest in a contract as to entitle him to maintain an
action at law upon it in his own name merely because he is entitled to a portion of the
proceeds as compensation for making it or because he is liable for its breach.
Contracts; Sales; Rescission; The right of rescission or, more accurately, resolution, of a party
to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the
other party that violates the reciprocity between them. Petitioners confuse the cancellation of
the contract by the NHA as a rescission of the contract under Article 1191 of the Civil Code.
The right of rescission or, more accurately, resolution, of a party to an obligation under Article
1191 is predicated on a breach of faith by the other party that violates the reciprocity between
them. The power to rescind, therefore, is given to the injured party.
Same; Same; Same; Cause; Motive; Words and Phrases; Cause is the essential reason
which moves the contracting parties to enter into it—it is the immediate, direct and proximate
reason which justifies the creation of an obligation through the will of the contracting parties.
The cancellation, therefore, was not a rescission under Article 1191. Rather, the cancellation
was based on the negation of the cause arising from the realization that the lands, which were
the object of the sale, were not suitable for housing. Cause is the essential reason which
moves the contracting parties to enter into it. In other words, the cause is the immediate,
direct and proximate reason which justifies the creation of an obligation through the will of the
contracting parties. Cause, which is the essential reason for the contract, should be
distinguished from motive, which is the particular reason of a contracting party which does not
affect the other party.
Same; Same; Same; Same; Same; Ordinarily, a party’s motives for entering into a contract do
not affect the contract, but when the motive predetermines the cause, the motive may be
regarded as the cause. Ordinarily, a party’s motives for entering into the contract do not affect
the contract. However, when the motive predetermines the cause, the motive may be
regarded as the cause. In Liguez vs. Court of Appeals, this Court, speaking through Justice
J.B.L. Reyes, held: x x x It is well to note, however, that Manresa himself (Vol. 8, pp. 641-
642), while maintaining the distinction and upholding the inoperativeness of the motives of the
parties to determine the validity of the contract, expressly excepts from the rule those
contracts that are conditioned upon the attainment of the motives of either party. The same
view is held by the Supreme Court of Spain, in its decisions of February 4, 1941, and
December 4, 1946, holding that the motive may be regarded as causa when it predetermines
the purpose of the contract.
Same; Same; Same; Same; Same; A buyer may justifiably cancel a contract of sale upon
realization of the mistake as regards the quality of the land, resulting in the negation of the
motive/cause thus rendering the contract inexistent. We hold that the NHA was justified in
canceling the contract. The realization of the mistake as regards the quality of the land
resulted in the negation of the motive/cause thus rendering the contract inexistent.

G.R. No. 119858. April 29, 2003.

EDWARD C. ONG, petitioner, vs. THE COURT OF APPEALS AND THE PEOPLE OF THE
PHILIPPINES, respondents.
Same; Same; Same; Same; Agency; It is a well-settled rule that the law of agency governing
civil cases has no application in criminal cases.—True, petitioner acted on behalf of
ARMAGRI. However, it is a well-settled rule that the law of agency governing civil cases has
no application in criminal cases. When a person participates in the commission of a crime, he
cannot escape punishment on the ground that he simply acted as an agent of another party.
In the instant case, the Bank accepted the trust receipts signed by petitioner based on
petitioner’s representations. It is the fact of being the signatory to the two trust receipts, and
thus a direct participant to the crime, which makes petitioner a person responsible for the
offense.
Same; Same; Same; Evidence; An agent could raise the defense that he had nothing to do
with the failure of the corporation to account for the proceeds or to return the goods, or could
show that he had severed his relationship with the corporation prior to the loss of the
proceeds or the disappearance of the goods.—Petitioner could have raised the defense that
he had nothing to do with the failure to account for the proceeds or to return the goods.
Petitioner could have shown that he had severed his relationship with ARMAGRI prior to the
loss of the proceeds or the disappearance of the goods. Petitioner, however, waived his right
to present any evidence, and thus failed to show that he is not responsible for the violation of
the Trust Receipts Law.

No. L-18155. March 30, 1963.

TRINIDAD J. FRANCISCO, plaintiff-appellant, vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-appellee
Same; Same; When corporation estopped to deny apparent authority of its officers.—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 Fletcher’s Encyclopedia, Priv. Corp. 255, Perm. Ed.)

No. L-28740. February 24, 1981.

FERMIN Z. CARAM, JR., petitioner, vs. CLARO L. LAURETA, respondent.

Same; Same; Same; Same; Agency; Principal should be deemed a purchaser in bad faith if
agents purchased the property in bad faith.—There is no doubt then that Irespe and
Aportadera, acting as agents of Caram, purchased the property of Mata in bad faith. Applying
the princple of agency, Caram, as principal, should also be deemed to have acted in bad faith.

No. L-18377. December 29, 1962.

ANASTACIO G. DUÑGO, petitioner, vs. ADRIANO LOPENA, ROSA RAMOS and
HON.ANDRES REYES,
Judge of the Court of First Instance of Rizal, respondents.
Contracts; Compromise; Special Power of Attorney.—It is true that a compromise is, in itself,
a contract. It is as such that the Civil Code speaks of it in Article 2028. Moreover, under Article
1878 of the Civil Code, a third person cannot bind another to a compromise agreement unless
he, the third person, has obtained a special power of attorney for that purpose from the party
intended to be bound.

Same; Same; Same; Absence of special power of attorney does not render agreement void
but merely unenforceable.—However, although the Civil Code expressly requires a special
power of attorney in order that one may compromise an interest of another, it is neither
accurate nor correct to conclude that its absence renders the compromise agreement void. In
such a case, the compromise is merely unenforceable. This results from its nature as a
contract.

Same; Compromise; Ratification by client of compromise made by his attorney.—When it

appears that the client, on becoming aware of the compromise and the judgment thereon,
fails to repudiate promptly the action of his attorney, he will not afterwards be heard to contest
its validity (Rivero vs. Rivero, 59 Phil. 15).

G.R. No. 171460. July 27 2007.

LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and

JULIAN MERCADO, JR., represented by their Attorney- In-Fact, ALFREDO M. PEREZ,
petitioners, vs. ALLIED BANKING CORPORATION, respondent.