Art. 1883.
If an agent acts in his own name, the principal has The reason for the rule is that there is no representation of
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
agent. (1717)
Kinds of principal
The principal may be disclosed, partially disclosed, or
undisclosed.
(1) ​Disclosed principal​ — if at the time of the transaction
contracted by the agent, the other party thereto has known
that the agent is acting for a principal and of the principal’s
identity. This is the usual type of agency.
(2) ​Partially disclosed principal​ — if the other party knows or
has reason to know that the agent is or may be acting for a
principal but is unaware of the principal’s identity. The
partially disclosed principal may enforce against the third
person the contract of the agent like any disclosed principal.
Similarly, the third person has a right of action against the
principal. In sum, the liability of the third party and the
principal is the same as in the case of a disclosed principal,
except that the agent is also liable to the third party, unless
they agree otherwise.
(3) ​Undisclosed principal​ — if the party has no notice of the
fact that the agent is acting as such for a principal.
If a person purports to act for a non-existent principal,
obviously he is liable to the party with whom he contracted.
Since there is no principal, there is no agent at all; the person
merely claims to be one.
If an agent transacts business in his own name, it is not
necessary for him to state who is the principal, and he is
directly liable as if the business were for his own account, to
the person with whom he transacts the same. ​(Lim v. Ruiz y
Rementeria, 15 Phil. 367)
Agency with undisclosed principal
In order that an agent may bind his principal (whether
identified by name or not), he must act on behalf of the latter
(Art. 1868) and within the scope of his authority. (Art. 1881).
(1) ​General rule​ — Article 1883 speaks of a case where the
agent (a) being authorized to act on behalf of the principal,
(b) acts instead in his own name. In such case, the general
rule is that the agent is the one directly liable to the person
with whom he had contracted as if the transaction were his
own.
the principal when the agent acts in his own name. In effect,
the resulting contractual relation is only between the agent
and the third person. Therefore, the principal cannot have a
right of action against the third person nor the third person
against him.
The third person cannot very well allege that he was misled
by any representation of the agent since he did not know of
the existence of the undisclosed principal.
(2) ​Exception​ — The exception to the rule that an agent acting
in his own name does not bind the principal is when the
contract involves things belonging to the principal. In such
case, the contract is considered as entered into between the
principal and the third person.
This exception is necessary for the protection of third persons
against possible collusion between the agent and the
principal. It applies only when the agent has, in fact, been
authorized by the principal to enter into the particular
transaction, but the agent, instead of contracting for and in
behalf of the principal, acts in his own name.
The agent is bound to the principal although he does not
assume the character of such agent and appears acting in his
own name. This means that in the case of this exception, the
agent’s apparent representation yields to the principal’s true
representation and that, in reality and in effect, the contract
must be considered as entered into between the principal
and the third person. Consequently, if the obligations belong
to the former, to him alone must also belong the rights
arising from the contract.
The fact that the agent sold as owner thereof the property of
the principal and that he personally executed the deed of sale
may be only a violation of the agency on his part, without,
however, affecting his authority to sell it. The question is not
what representation he made and/or what he did to sell it,
but whose property he sold. If the property he sold belonged
to the principal and he was authorized to sell the same,
whatever the agent said or did to effect the sale is beside the
point.
(3) ​Remedy of principal​ — The foregoing is without prejudice
to the principal’s right to demand from the agent damages
for his failure to comply with the agency. Where merchandise
is purchased from an agent with undisclosed principal and
without knowledge on the part of the purchaser that the
vendor is merely an agent, the purchaser takes title to the
merchandise and the principal cannot maintain an action
against him for the recovery of the merchandise or for
damages, but can only proceed against the agent. ​(Awad vs.
Filma Mercantile Co., 49 Phil. 816)
(4) ​Remedy of third person​ — If it cannot be determined
whether or not the agent was authorized, or had disclosed a
principal, the action must be directed against both the
"agent" and the "principal."
If an authorized agent buys in his own name but really in
behalf of his principal, the seller has the option to look to
either for payment unless:
(a) he trusted the agent exclusively;
(b) or by the usage and understanding of business, the agent
only is held;
(c) or unless the special circumstances of the case reveal that
only the agent was intended to be bound and the seller knew
it, or was chargeable with knowledge of it. ​(Wing Lee v. Bark
"Monogabela", 41 Phil. 670)
In the case of the exception or that regarding to the "things
belonging to the principal", the agent's apparent
representation yields to the principal's true representation;
and that in reality and in effect, the contract must be
considered as entered into between the principal and the
third person and consequently, if the obligations belong to
the former, to him alone must also belong the rights arising
from the contract. ​(Sy-Juco and Viardo v. Sy-Juco, 40 Phil.
634)
Art. 1884. The agent is bound by his acceptance to carry out
the agency and is liable for the damages which, through his
non-performance, the principal may suffer.
He must also finish the business already begun on the death
of the principal, should delay entail any danger. (1718)
Obligations, in general, of agent to principal
(1) ​Good faith and loyalty to his trust, agent’s first duty​ — The
relationship existing between principal and agent is a
fiduciary one, demanding conditions of trust and confidence.
The duty to be loyal to the principal demands that the agent
look out for the best interests of the principal as against his
own or those of the third party.
It is immaterial in the application of this rule that the agency
is one coupled with interest, or that the compensation given
the agency is small or nominal, or that it is a gratuitous
agency.
(a) ​Presumption​ — An agent’s acts which tend to violate his
fiduciary duty are not only invalid as to the principal, but are
also against public policy. In the absence of proof to the
contrary, however, the presumption arises that an agent has
performed his duty in good faith, and the principal, until
notice is received of a breach of relational duties, may rely
upon his agent’s faithfulness.
(b) ​General rule as to loyalty when not applicable​ — The
general rule as to loyalty does not apply to cases where no
relation of trust or confidence exists between the parties, as
where the agent is bound merely as an instrument, more
properly as a servant, to perform a service, or where there is
no showing of an agency relationship.
(2) ​Obedience to principal’s instruction​ — An agent must obey
all lawful orders and instructions of the principal within the
scope of the agency. If he fails to do so, he becomes liable for
any loss the principal incurs even though he can show that he
acted in good faith or exercised reasonableness. Even a
gratuitous agent must follow instructions or become
responsible for any loss resulting from failure to do so. But an
agent is not liable if he violates the principal’s instructions for
a good reason. Related to the agent’s duty to obey
instructions is the duty to keep within the limits of his
authority when acting for the principal. An agent must know
the extent of his authority. If he is in doubt, he should ask the
principal for clarification.
(3) ​Exercise of reasonable care​ — By accepting an
employment whose requirements he knows, without
stipulating otherwise, the agent impliedly undertakes that he
possesses a degree of skill reasonably or ordinarily competent
for the performance of the service, and that in performing his
undertaking, he will exercise reasonable care, skill and
diligence. He does not agree that he will make no mistake
whatsoever, or that he will exercise the highest skill or
diligence, but he does agree that he will exercise reasonable
skill, and that he will take the usual precautions as a
reasonably careful agent would under similar circumstances.
Failure to do so constitutes a breach of his duty.
Specific obligations of agent to principal
They are the following:
(1) To carry out the agency which he has accepted;
(2) To answer for damages which through his performance
the principal may suffer;
(3) To finish the business already begun on the death of the
principal should delay entail any danger;
(4) To observe the diligence of a good father of a family in the
custody and preservation of the goods forwarded to him by
the owner in case he declines an agency, until an agent is
appointed (Art. 1885.);
(5) To advance the necessary funds should there be a
stipulation to do so (Art. 1886.);
(6) To act in accordance with the instructions of the principal,
and in default thereof, to do all that a good father of a family
would do (Art. 1887.);
(7) Not to carry out the agency if its execution would
manifestly result in loss or damage to the principal (Art.
1888.);
(8) To answer for damages if there being a conflict between
his interests and those of the principal, he should prefer his
own (Art. 1889.);
(9) Not to loan to himself if he has been authorized to lend
money at interest (Art. 1890.);
(10) To render an account of his transactions and to deliver to
the principal whatever he may have received by virtue of the
agency (Art. 1891.);
(11) To distinguish goods by countermarks and designate the
merchandise respectively belonging to each principal, in the
case of a commission agent who handles goods of the same
kind and mark, which belong to different owners (Art. 1904.);
(12) To be responsible in certain cases for the acts of the
substitute appointed by him (Art. 1892.);
(13) To pay interest on funds he has applied to his own use
(Art. 1896.);
(14) To inform the principal, where an authorized sale of
credit has been made, of such sale (Art. 1906.);
(15) To bear the risk of collection, should he receive also on a
sale, a guarantee commission (Art. 1907.);
(16) To indemnify the principal for damages for his failure to
collect the credits of his principal at the time that they
become due (Art. 1908.); and
(17) To be responsible for fraud or negligence. (Art. 1909.)
Obligation to carry out the agency
A person is free to refuse to be an agent (Art. 1885) but once
he accepts the agency, he is bound to carry it out in
accordance with its terms in good faith (Art. 1159) and
following the instructions, if any, of the principal. (Art. 1887)
He is normally expected to exercise the degree of care and
skill that is reasonable under the circumstances. By contract,
the parties may make the agent’s duty of diligence in carrying
out the agency either stricter or more lenient.
If the agent fulfills his duty, he is not personally liable unless
he expressly binds himself. (Art. 1897)
Obligation to answer for damages
Upon his failure to do fulfill his duty, he is liable for the
damage which the principal may suffer. This rule is an
application to agency of the general rule in contracts that any
person guilty of fraud, negligence, or delay in the fulfillment
of his obligation, or who in any other manner fails to comply
with the terms thereof, shall be liable for damages. Having
accepted the agency when he was free to refuse it, the agent
betrays the confidence reposed on him if he does not fulfill
the mandate.
The damages to which the principal is entitled are those
which result from the agent’s non-performance. As there can
be no indemnity when there has been no damage, the
principal must prove his damages and the amount thereof.
Obligation to finish business upon principal’s death
Although the death of the principal extinguishes the agency,
the agent has an obligation to conclude the business already
begun on the death of the principal. The rule is in accord with
the principles of equity. But the duty exists only should delay
entail any danger.
The agency shall also remain in full force even after the death
of the principal if it has been constituted in the common
interest of the latter and of the agent, or in the interest of a
third person who has accepted the stipulation in his favor.
(Art. 1930) Where an agent makes use of the power of
attorney after the death of his principal, the agent has the
obligation to deliver the amount collected by him by virtue of
said power to the administrator of the estate of the principal.
Art. 1885. In case a person declines an agency, he is bound
to observe the diligence of a good father of a family in the
custody and preservation of the goods forwarded to him by
the owner until the latter should appoint an agent. The
owner shall as soon as practicable either appoint an agent
or take charge of the goods.
Obligation of person who declines an agency
In the event a person declines an agency, he is still bound to
observe the diligence of a good father of a family (Art. 1163)
in the custody and preservation of the goods forwarded to
him by the owner. This rule is based on equity. The owner,
however, must act as soon as practicable either (1) by
appointing an agent or (2) by taking charge of the goods.
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. (n)
Obligation to advance necessary funds
As a rule, the principal must advance to the agent, should the
latter so request, the sums necessary for the execution of the
agency. The contract of agency, however, may stipulate that
the agent shall advance the necessary funds. In such case, the
agent is bound to furnish such funds except when the
principal is insolvent. The exception is based on the
principal’s obligation to reimburse the agent. Incidentally, the
insolvency of the principal is a ground for extinguishment of
agency.
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.
(1719)
Instructions (of principal) defined
Instructions are private directions which the principal may
give the agent in regard to the manner of performing his
duties as such agent but of which a third party is ignorant.
They are said to be secret if the principal intended them not
to be made known to such party.
Instructions distinguished from authority
(1) Authority, the sum total of the powers committed or
permitted to the agent by the principal, may be limited in
scope and such limitations are themselves a part of the
authority, but instructions direct the manner of transacting
the authorized business and contemplates only a private rule
of guidance to the agent and are independent and distinct in
character;
(2) Authority relates to the subject with which the agent is
empowered to deal or the kind of business or transactions
upon which he is empowered to act, while instructions refer
to the manner or mode of his action with respect to matters
which in their substance are within the scope of permitted
action;
(3) Limitations of authority are operative as against those
who have or are charged with knowledge of them, while
instructions limiting the agent’s authority are without
significance as against those dealing with the agent with
neither knowledge nor notice of them; and
(4) Authority is contemplated to be made known to the third
person dealing with the agent, while instructions are not
expected to be made known to those with whom the agent
deals.
Effect if agent follows instructions
If an agent carrying out the orders of the principal carried out
the instruction he has received from said principal, he cannot
be held responsible for the failure of his principal to
accomplish the object of the agency unless the said agent
exceeded his authority or has acted with negligence, deceit,
or fraud.
Effect of violation of principal’s instructions
(1) ​Liability of principal to third person​ — If an act done by an
agent is within the apparent scope of the authority with
which he has been clothed, it matters not that it is directly
contrary to the instructions of the principal. The principal will,
nevertheless, be liable unless the third person with whom the
agent dealt knew that he was exceeding his authority or
violating his instructions.
Third persons dealing with an agent do so at their peril and
are bound to inquire as to the extent of his authority but they
are not required to investigate the instructions of the
principal. In other words, the principal after clothing an agent
with apparent powers, cannot, by means of private
communications with the agent, limit the authority which he
allows the agent to assume. The principal will be liable to
third persons, under the doctrine of estoppel, for any
unauthorized acts of the agent who exceeds the instructions
given to him.
Obligation to act in accordance with principal’s instructions
(1) ​Duty to obey reasonable and lawful instructions​ — It is the
fundamental duty of the agent to obey all the reasonable and
lawful instructions given to him by his principal. That the
agent shall, for the time being, put his own will under the
direction of another, is one of the primary elements in the
relation. He must follow instructions even if he thinks they
are capricious or unwise. He violates his duty of obedience
whenever he disregards or deviates from such instructions.
But an agent need not follow instructions that are outside the
scope of the agency relationship agreed upon or that may
subject him to unreasonable risk of injury to himself.
(2) ​Liability for loss or damage​ — If the agent exceeds,
violates, or fails to act upon such instructions, he will be liable
to the principal for any loss or damage resulting therefrom.
(3) ​Duty to act in good faith and with due care​ — In the
absence of specific instructions of the principal, the agent
shall do all that a good father of a family taking care of the
business as if it were his own would do as required by the
nature of the business. If he acts in good faith and with due
care, the agent is not liable for losses due to errors or
mistakes of judgment as regards to matters with which he is
vested with discretionary powers. It will be presumed that
the agent acted in good faith and in accordance with his
power as he understood it.
(4) ​Exemption from liability for failure of undertaking​ — The
agent has the power (not the right) in many cases to bind his
principal even when he acts beyond his authority.
Accordingly, the law imposes upon him the duty not to
exceed the authority given him by his principal. However,
when an agent, in executing the orders and commissions of
his principal, carries out the instructions he has received from
his principal, and does not appear to have exceeded his
authority or to have acted with negligence, deceit, or fraud,
he cannot be held responsible for the failure of his principal
to accomplish the object of the agency.
Since an agent is required to exercise only ordinary care, skill,
and diligence, he is not, in the absence of an agreement, an
insurer of the success of his undertaking, and does not
guarantee the principal against incidental losses.
(5) ​Right to disobey principal’s instructions​ — The agent may
disobey the principal’s instruction where it calls for the
performance of illegal acts, or where he is privileged to do so
to protect his security interest in the subject matter of the
agency.
Clarity of instructions
It is the duty of the principal, if he desires an authority
executed in particular manner to make his terms so clear and
unambiguous that they cannot reasonably be misconstrued.
If he does this, it is the agent's duty to the principal to
execute the authority strictly and faithfully; and third persons
who knows of the limitations or who from the circumstances
of the case ought to have known of them can claim no rights
against the principal based upon their violation.
Different interpretations of instructions
If on the other hand, the authority be couched in such
uncertain terms as to be reasonably susceptible of two
different meanings, and the agent in good faith and without
negligence adopts one of them, the principal cannot be heard
to assert, either as against the agent or against third persons
who have, in like good faith and without negligence, relied
upon the same construction, that he intended the authority
to be executed in accordance with the other interpretation. If
in such a case, the agent exercises his best judgment and an
honest discretion, he fulfills duty, and though a loss ensues, it
cannot be cast upon the agent.
How instructions are to be construed
An instrument conferring authority is generally to be
construed by those having occasion to act in reference to it,
as a "plain man acquainted with the object in view, and
attending reasonably, to the language used, has in fact,
construed it. He is not to take the opinion of an attorney
concerning the meaning of a word not technical and
apparently employed in a popular sense."
When departure from principal’s instructions justified
(1) A departure from instructions may be justified by a
sudden emergency. Where some unexpected emergency or
unforeseen event occurs which will admit no delay for
communication with the principal, the agent is justified in
adopting the course which seems best to him under the
circumstances. The rule is applicable only where the principal
cannot be consulted and where the circumstances cannot
admit delay.
(2) Ambiguous instructions are another instance which may
justify an agent in not following instructions. The agent will
not be liable if he chooses reasonably one of two possible
interpretations. Customs and usage may aid in the
interpretation of ambiguous instructions but not to the
extent of overruling positive instructions to the contrary. Nor
will the agent be justified in following ideas of his own which
are not within any interpretation of the instructions.
Where instructions are ambiguous, the agent is not
chargeable with disobedience or its consequences in case he
makes an honest mistake and adopts a construction different
from that intended by the principal. If the instructions are
ambiguous, the agent cannot disregard them altogether. He
fulfills his duty, when acting in good faith, he interprets them
in a manner that is reasonable under the circumstances. It is
the duty of the principal to couch his instructions in clear
terms.
(3) An agent may not be said to have breached the agency
contract by reason of an insubstantial departure from the
principal’s instructions, which does not affect the result.
However, a departure cannot usually be termed
“insubstantial” in the face of the principal’s countervailing
instruction, for the principal has a right to determine what he
will consider important.
But it has been said that a trivial mistake will not be held a
bar to the agent’s claim for compensation.
How execution may fail
The execution of the authority in a given case may fail, either:
(a) because the agent has negligently failed to fully exercise
his authority;
(b) or because he has exceeded it.
Excessive execution
If there has been a complete execution of the power and the
excess can be distinguished and disregarded. the authorized
portion may be given effect.
Art. 1888. An agent shall not carry out an agency if its
execution would manifestly result in loss or damage to the
principal. (n)
When agent shall not carry out agency
The agent, upon acceptance of the agency, is not bound in all
cases to carry out the agency in accordance with the
instructions of the principal. Thus, the agent must not carry
out the agency if its execution would manifestly result in loss
or damage to the principal.
The duty of the agent who is merely an extension of the
personality of the principal is to render service for the benefit
of the principal and not to act to his detriment. Furthermore,
an agent must exercise due diligence in carrying out the
agency.
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. (n)
The article applies whether the agency is onerous or
gratuitous for here the law does not distinguish. (Paras)
Obligation not to prefer his own interests to those of
principal
(1) ​Reason for the rule​ — Agency being a fiduciary relation,
the agent is required to observe utmost good faith and
loyalty towards his principal. He must look after the
principal’s interests as if they were his own. He is not
permitted without the knowledge and consent of the
principal, to assume two distinct and opposite characters in
the same transaction — acting for himself and pretending to
act for his principal. An agent, therefore, is liable for damages
if, there being a conflict between his interests and those of
the principal, he should prefer his own.
(2) ​Basis of the rule​ — The underlying basis of the rule
precluding an agent from engaging in self-dealing is to shut
the door against temptation and keep the agent’s eye single
to the rights and welfare of his principal. The rule is one of
preventive, not remedial justice, which operates however fair
the transaction may have been — however free from every
taint of moral wrong.
The principal, however, may waive the benefit of the rule so
far as he is concerned, if he does so with full knowledge of
the facts; but in the absence of such waiver, the rule is
absolute.
(3) ​Where agent’s interests are superior​ — Normally, where
there is a conflict between the agent’s own interests and
those of the principal, the agent has the duty to prefer the
principal’s interest over his own. However, where the agent’s
interests are superior, such as where he has a security
interest in goods of the principal in his possession, he may
protect this interest even if in so doing he disobeys the
principal’s orders or injures his interest. An agent, to be sure,
is not required to expose himself to great physical risks not
within the contemplation of the parties, or to perform
services when he is ill. On the other hand, if the conflict
resulted from his breach of a duty owed to the principal, the
agent cannot prefer his own interest.
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. (n)
Obligation not to loan to himself
The agent cannot, without a special power of attorney, loan
or borrow money
(1) If he has been expressly empowered to borrow money, he
may himself be the lender at the current rate of interest for
there is no danger of the principal suffering any damage since
the current rate of interest would have to be paid in any case
if the loan were obtained from a third person.
(2) If the agent has been authorized to lend money at
interest, he cannot be the borrower without the consent of
the principal because the agent may prove to be a bad
debtor. There is here a possible conflict of interest. The
transaction may thus be prejudicial to the principal.
The borrowing of the money must be for the benefit of the
principal, and not for the agent's personal benefit
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. (1720a)
Obligation to render accounts
It is the duty of the agent to account for and to deliver to the
principal (or an authorized third party) all money and
property which may have come into his hands or of a
sub-agent appointed by him by virtue of or as a result of the
agency. This includes gifts from the third party in connection
with the agency.
(1) ​Source of profits​ — It is immaterial whether such money
or property is the result of the performance or violation of
the agent’s duty, if it be the fruit of the agency. If his duty be
strictly performed, the resulting profit accrues to the principal
as the legitimate consequence of the relation; if profit
accrues from his violation of duty while executing the agency,
that likewise belongs to the principal, not only because the
principal has to assume the responsibility of the transaction,
but also because the agent cannot be permitted to derive
advantage from his own default.
It matters not how fair the conduct of the agent may have
been in a particular case, nor that the principal would have
been no better off if the agent had strictly pursued his power,
nor that the principal was not, in fact, injured by the
intervention of the agent for his own profit. The result in both
cases is the same.
(2) ​Secret profit​ — It has been held that 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 his loyalty to the
principal and forfeits his right to collect the commission from
his principal, even if the principal does not suffer any injury
by reason of such breach of fidelity, or that he obtained
better results, or that the agency is a gratuitous one, or that
usage or custom allows it; because the rule is to prevent the
possibility of any wrong, not to remedy or repair an actual
damage.
By taking such profit or bonus or gift or propina from the
vendee, the agent thereby assumes a position wholly
inconsistent with that of being an agent for his principal, who
has a right to treat him, insofar as his commission is
concerned, as if no agency existed. The fact that the principal
may have been benefited by the valuable services of the said
agent does not exculpate the agent who has only himself to
blame for such a result by reason of his treachery or perfidy.
Stipulation exempting agent from obligation to account void
The stipulation in paragraph 2 of Article 1891 is contrary to
public policy as it would encourage fraud. It is in the nature of
a waiver of an action for future fraud which is void. (Art.
1171.)
The duty of an agent is likened to that of a trustee. This is not
a technical or arbitrary rule but a rule founded on the highest
and truest principle of morality as well as of the strictest
justice.
Liability for conversion
If the agent fails to deliver and instead converts or
appropriates for his own use the money or property
belonging to the principal, the agent is liable for estafa. He
cannot retain the commission pertaining to him by
subtracting the same from his collections.
When obligation to account not applicable
(1) The duty embodied in Article 1891 will not apply if the
agent or broker acted only as a middleman with the task of
merely bringing together the vendor and the vendee, who
themselves thereafter will negotiate on the terms and
conditions of the transaction.
(2) Neither would the rule apply if the agent or broker had
informed the principal of the gift or bonus or profit he
received from the purchaser and his principal did not object
thereto.
(3) Where a right of lien exists in favor of the agent, the rule
is not also applicable.
(a) The agent may, under Article 1914, retain in pledge the
things which are the object of the agency until the principal
effects the reimbursement and pays the indemnity provided
in Articles 1912 and 1913.
(b) A lawyer shall have a lien upon the funds, documents and
papers of his client and may retain the same until his lawful
fees and disbursements have been paid.
Obligation to turn over proceeds of agency
The obligation imposed upon the agent to render an
accounting and report of his collections, presupposes the
duty of simultaneously turning over his collections. “Report”
imports a statement of collections. “Accounting” means
settling of accounts of administration or agency; delivery or
payment of property funds or money coming into the hands
of the agent; submission of a statement of receipts and
disbursements with the trust funds coming into his hands and
tender or turning over to the one to which he is liable,
moneys and property in respect thereto. The payment is part
of the accounting.
The agent must account for the very property or funds he has
received for his principal. All profits made and any advantage
gained by an agent in the execution of his agency should
belong to the principal.
Nature of agent’s possession of goods or proceeds received
in agency
(1) ​Distinguished from possession of servant or messenger​ —
An agent, unlike a servant or messenger, has both the
physical and juridical possession of the goods received in
agency, or the proceeds thereof, which take the place of the
goods after their sale by the agent. His duty to turn over the
proceeds of the agency depends upon his discharge as well as
the result of the accounting between him and the principal,
and he may not set up his right of possession as against that
of the principal until the agency is terminated.
(2) ​Distinguished from possession of teller of bank​ — There is
an essential distinction between the possession by a receiving
teller of funds received from third persons paid to the bank
and an agent who receives the proceeds of sales of
merchandise delivered to him in agency by his principal.
(a) In the former case, payment by third persons to the teller
is payment to the bank itself; the teller is a mere custodian or
keeper of the funds received, and has no independent right
or title to retain or possess the same as against the bank. An
agent, on the other hand, can even assert, as against his own
principal, an independent, autonomous right to retain the
money or goods received in consequence of the agency, as
when the principal fails to reimburse him for advances he has
made, and indemnify for damages suffered without his fault.
(Art. 1914)
(b) Where a sales agent misappropriates or fails to turn over
to his principal proceeds of things or goods he was
commissioned or authorized to sell for the latter, he is guilty
of estafa. A receiving teller of a bank who misappropriates
money received by him for the bank is guilty of qualified theft
on the theory that the possession of the latter is the
possession of the bank he being a mere bank employee.
Rule 15.03 - A lawyer shall not represent conflicting interest
except by written consent of all concerned given after a full
disclosure of the facts.
Generally, there is inconsistency of interests within the
meaning of the prohibition when, on behalf of one client, it is
the attorney's duty to contend for that which his duty to
another client requires him to oppose, or when the possibility
of such situation develops. This rule covers not only cases in
which confidential communications have been confided but
also those in which no confidence has been bestowed or will
be used.
Another test of the inconsistency of interests is whether the
acceptance of a new relation will prevent an attorney from
the full discharge of his duty of undivided fidelity and loyalty
to his client or invite suspicion of unfaithfulness or
double-dealing in the performance thereof, and also whether
he will be called upon his new relation to use against his first
client any knowledge acquired in the previous employment.
The rule is applicable whether the cases of one client and the
adverse client are related or not.
The rule against representing conflicting interests applies
even if the conflict pertains to the lawyer's private activity or
in the performance in a non-professional capacity, and his
presentation as a lawyer regarding the same subject matter.
The reason for the prohibition is found in the relation of
attorney and client, which is one of trust and confidence of
the highest degree. A lawyer becomes familiar with all the
facts connected with his client's case. He learns from his
client the weak points of the action as well as the strong
ones. Such knowledge must be considered sacred and
guarded with care.
Rule 20.03 - A lawyer shall not, without the full knowledge
and consent of the client, accept any fee, reward, costs,
commission, interest, rebate or forwarding allowance or
other compensation whatsoever related to his professional
employment from anyone other than the client.
Rule 16.01 - A lawyer shall account for all money or property
collected or received for or from the client.