AGENCY

REVIEW
AGENCY AND OTHER CONTRACTS DISTINGUISHED

One factor which most clearly distinguishes agency from other legal
concepts is control; one person – the agent – agrees to act under the
control or direction of another – the principal [Victorias Milling v. CA
(2000)].
Note: Agency is presumed to be for a compensation, unless there is
proof to the contrary [Art. 1875].
As to the extent of business covered:
(1) Universal;
(2) General;
(3) Special.
As to the authority conferred: (1) Couched in general terms; (2) Couched
in specific terms.
As to nature and effect:
(1) Ostensible or representative, where the agent acts in the name and
representation of the principal [Art. 1868];
(2) Simple or commission,where the agent acts in his own name but for
the account of the principal.
Kinds of Agency
IN GENERAL
As to manner of creation:
(1) Express;
(2) Implied.
As to cause or consideration:
(1) Gratuitous;
(2) Compensated or onerous
AS TO MANNER OF CREATION
EXPRESS AGENCY
An express agency is one where the agent has been actually authorized by the principal, either:
(1) Orally; or
(2) Inwriting[Art.1869].
IMPLIED AGENCY
The appointment and acceptance are implied:
(1) As to the appointment of an agent by the principal:
(a) From his acts;
(b) From his silence or lack of action; or
(c) From his failure to repudiate the agency knowing that another person is acting on his behalf without authority
[Art. 1869].
(2) As to the acceptance of the agency by the agent:
(a) From his acts which carry out the agency;
(b) From his silence or inaction according to the circumstances (i.e.,
presence or absence of the parties) [Arts. 1870, 1871 and 1872].
• AS TO EXTENT OF BUSINESS COVERED
(1)  Universal agency comprises all acts which the principal can lawfully
delegate to an agent;
(2)  General agency comprises all the business of the principal.
(3)  Special agency comprises one or more specific transactions [Art. 1876].
• AS TO AUTHORITY CONFERRED
• COUCHED IN GENERAL TERMS
• An agency couched in general terms is one created in general terms
and is deemed to comprise only acts of administration, even if:
• (1)  The principal should state that he withholds
• no power;
• (2)  He should state that the agent may execute
• such acts as he may consider appropriate;
• or
• (3)  Even though the agency should authorize a
• general and unlimited management [Art. 1877].
COUCHED IN SPECIFIC TERMS
An agency couched in specific terms authorizes only the performance of specific
acts. Certain specific acts, however, require special powers of attorney.
A special power of attorney is an instrument in writing by which one person, as
principal, appoints another as his agent and confers upon him the authority to
perform certain specified acts or kinds of acts on behalf of the principal.
The following acts of strict dominion require special powers of attorney:
(1)  To make such payments as are not usually considered as acts of administration;
(2)  To effect novations which put an end to obligations already in existence at the
time the agency was constituted;
(3)  To compromise, to submit questions to arbitration, to renounce the right to
appeal from a judgment, to waive objections to the venue of an action or to
abandon a prescription already acquired;
(4)  To waive any obligation gratuitously;
(5)  To enter into any contract by which the ownership of an immovable
is transmitted or acquired either gratuitously or for a valuable
consideration;
(6)  To make gifts, except customary ones for charity or those made to
employees in the business managed by the agent;
(7)  To loan or borrow money, unless the latter act be urgent and
indispensable for the preservation of the things which are under
administration;
(8) To lease any real property to another person for more than one year;
(9) To bind the principal to render some service without compensation;
(10)To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety
(12) To create or convey real rights over immovable property;
(13)  To accept or repudiate an inheritance;
(14)  To ratify or recognize obligations contracted before the agency;
(15)  Any other act of strict dominion
The requirement of special power of attorney refers to the nature of the
authorization, not to its form. Thus, even if a document is titled as a
general power of attorney, the requirement of a special power of
attorney is met if there is a clear mandate from the principal specifically
authorizing the performance of the act [Bravo- Guerrero v. Bravo (2005)].
• A special power of attorney can be included in the general power when
it is specified therein the act or transaction for which the special power
is required [Veloso v. CA (1996)].
Art. 1879. A special power to sell excludes the power to mortgage; and a special
power to mortgage does not include the power to sell.
Art. 1879. A special power to compromise does not authorize submission to
arbitration.
The power to “exact the payment” of sums of money “by legal means” includes the
power to institute suits for their recovery [Germann & Co., v. Donaldson, Sim & Co.
(1901)].
A power of attorney “to loan and borrow money” and to mortgage the principal’s
property does not carry with it or imply that that the agent has a legal right to make
the principal liable for the personal debts of the agent [BPI v. De Coster (1925)].
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 [Duñgo v.
Lopena (1962)].
IV. AGENCY BY ESTOPPEL
Q: When is there an agency by estoppel?
A: When one leads another to believe that a
certain person is his agent, when as a matter of
fact such is not true, and the latter acts on such
misrepresentation, the former cannot disclaim
liability, for he has created an agency by estoppel.
(Paras, Civil Code of the Philippines Annotated, Vol.
V, p. 558, 6th ed)
Q: What are the rules regarding estoppel in
agency?
Estoppel of agent – One professing to act as agent
for another may be estopped to deny his agency
both as against his asserted principal and the third
persons interested in the transaction in which he
engaged.
2. Estoppel of principal
a. As to agent – One who knows that another is acting as his agent and fails to
repudiate his acts, or accepts the benefits, will be estopped to deny the agency as
against the other.
b. As to sub‐agent – To estop the principal from denying his liability to a third person, he
must have known or be charged with knowledge of the fact of the transaction and the
terms of the agreement between the agent and sub‐agent.
c. As to third persons – One who knows that another is acting as his agent or permitted
another to appear as his agent, to the injury of third persons who have dealt with the
apparent agent as such in good faith and in the exercise of reasonable prudence, is
estopped to deny the agency.
Estoppel of third persons – A third person, having dealt with one as agent may be
estopped to deny the agency as against the principal, agent, or third persons in interest.
Estoppel of the government – The government is neither estopped by the mistake or
error on the part of its agents.
As to liability, implied agency and agency by estoppel are different in that, in the
former, the principal is liable, while in the latter, the person who acts in bad faith is
liable.
Article 1911 states that: “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.” In this case, there is a duly formed agency and estoppel only applies
to the excess of authority. This is an application of the doctrine of apparent authority.
The doctrine of apparent authority is to the effect that: One who clothes another with
apparent authority as his agent, and holds him out to the public as such, cannot be
permitted to deny the authority of such person to act as his agent, to the prejudice of
innocent third parties dealing with such person in good faith.
Under the doctrine of apparent authority, the question in every case is whether the
principal has, by his voluntary act, placed the agent in such a situation that a person of
ordinary prudence, conversant with business usages and the nature of the particular
business, is justified in presuming that such agent has authority to perform the
particular act in question [Professional Services v. Agana (2008)].
AGENCY WITH UNDISCLOSED PRINCIPAL
General Rule: If an agent acts in his own name (the principal is
undisclosed), the agent is directly bound in favor of the person with whom
he has contracted as if the transaction were his own.
Ratio: There is no representation of the principal when the agent acts in
his own name. The third person cannot allege that he was misled by any
representation since he did not know of the existence of the undisclosed
principal.
Exception: The principal is bound when the contract involves things
belonging to him [Art. 1883]. In this case, the contract is considered as one
between the principal and the third person.
Qualification: The exception only applies if the agent contracts with the
properties of the principal within the scope of his authority [PNB v.
Agudelo (1933)].
AGENCY BY OPERATION OF LAW
An agency may exist by operation of
law, such as in the following cases:
(1)  Every partner is an agent of the
partnership for the purpose of its
business [Art. 1818];
(2)  When the principal’s actions
would reasonably lead a third
person to conclude that an agency
exists, an agency by estoppel is
created by operation law [Black’s
Law Dictionary (9th)];
(3)  Incase of certain necessity or
emergency, an agency by necessity
may arise.
IRREVOCABLE AGENCY
Article 1927 (on agency coupled with an interest) mentions three instances where the sole will of the
principal cannot terminate an agency:
(1) A bilateral contract depends upon it;
(2) It is the means of fulfilling an obligation already contracted; or
(3) A partner is appointed manager of a partnership in the contract of partnership and his removal
from the management is unjustifiable.
Qualifications:
(1) Coupled with interest or not, the authority certainly can be revoked for a just cause, such as
when the attorney-in-fact betrays the interest of the principal. It is not open to serious doubt that
the irrevocability of the power of attorney may not be used to shield the perpetration of acts in bad
faith, breach of confidence, or betrayal of trust, by the agent for that would amount to holding that a
power coupled with an interest authorizes the agent to commit frauds against the principal
[Coleongco v. Claparols (1964)].
(2) A mere statement in the power of attorney that it is coupled with an interest is not enough. In
what does such interest consist must be stated in the power of attorney [Del Rosario v. Abad (1958)].
3) An agency couple with an interest cannot affect third persons. They are obligatory only on the
principal who executed the agency [New Manila Lumber v. Republic (1960)].
Powers of the Agent
AUTHORITY OF AN AGENT
Authority is the power of the agent to affect the legal relations of his principal by acts
done in accordance with the principal’s manifestations of consent. An agent can make
the principal legally responsible only when he is authorized by the principal to act the
way he did [De Leon (2010)].
KINDS OF AUTHORITY
(1)  Actual, when it is actually granted, and it may be express or implied. It is the
authority that the agent does, in fact, have. It results from what the principal indicates
to the agent;
(2)  Express, when it is directly conferred by words;
(3)  Implied, when it is incidental to the transaction or reasonably necessary to
accomplish the main purpose of the agency;
(4)  Apparent or ostensible, when it arises by the acts or conduct of the principal giving
rise to an appearance of authority. It makes the principal responsible to third persons for
certain actions of the agent that were not really authorized;
(5)  General, when it refers to all the business of the principal;
(6)  Special, when it is limited only to one or more specific transactions;
(7)  By necessity or by operation of law, when it is demanded by necessity or by
virtue of the existence of an emergency. The agency terminates when the
emergency passes.
SCOPE OF AUTHORITY
• General rule: The scope of the authority of the agent is what appears in the
terms of the power of attorney [Siredy Enterprises v. CA (2002)].
Exceptions: An agent is considered acting within the scope of his authority when:
(1)  He performs acts which are conducive to the accomplishment of the purpose
of the agency [Art. 1881];
(2)  He performed the agency in a manner more advantageous to the principal
than that specified by said principal [Art. 1881];
(3)  The principal ratifies the act, expressly or tacitly [Art. 1910].
Siredy Enterprises v. Court of AppealsG.R. No. 129039,
17 September 2002
FACTS:
Private respondent Conrado De Guzman is an architect-
contractor doing business under the name and style of
Jigscon Construction. Herein petitioner Siredy
Enterprises, Inc. is the owner and developer of Ysmael
Village, a subdivision in Sta. Cruz, Marilao, Bulacan. The
president of Siredy is Ismael E. Yanga. As stated in its
Articles of Incorporation, the primary corporate purpose
of Siredy is to acquire lands, subdivide and develop
them, erect buildings and houses thereon, and sell,
lease or otherwise dispose of said properties to
interested buyers. Sometime before October 1978,
Yanga executed an undated Letter of Authority, duly
authorizing MR. HERMOGENES B. SANTOS, to negotiate
and enter into contract or contracts to build Housing
Units on our subdivision lots in Ysmael Village, Sta. Rosa,
Marilao, Bulacan and to sell lots on our subdivisions.
On October 15, 1978, Santos entered into a Deed of
Agreement with De Guzman. The deed expressly stated
that Santos was “representing Siredy Enterprises, Inc.”
Private respondent was referred to as “contractor” while
petitioner Siredy was cited as “principal” . To build for
them 2-bedroom single housing units and 4-bedroom
duplex housing units; at YSMAEL VILLAGE, Bo. Sta. Rosa,
Marilao, Bulacan owned and developed by SIREDY
ENTERPRISES and Mr. Ismael E. Yanga, Sr.; the
CONTRACTOR intends to build for the PRINCIPAL eighty
(80) units singles and eighteen (18) units duplex
residences at the cost above mentioned or a lump sum
total of FOUR MILLION, EIGHT HUNDRED FORTY TWO
THOUSAND (P4,842,000.00) PESOS, Philippine Currency;
From October 1978 to April 1990, De Guzman
constructed 26 residential units at Ysmael Village.
Thirteen (13) of these were fully paid but the other 13
remained unpaid. The total contractual price of these 13
unpaid houses is P412,154.93 which was verified and
confirmed to be correct by Santos, per an
Accomplishment Billing that the latter signed. De
Guzman tried but failed to collect the unpaid account
from petitioner. Thus, he instituted the action below for
specific performance against Siredy, Yanga, and Santos
who all denied liability. During the trial, Santos
disappeared and his whereabouts remain unknown.
• In its defense, petitioner presented
testimonial evidence to the effect
that Siredy had no contract with De
Guzman and had not authorized
Santos to enter into a contract with
anyone for the construction of
housing units at Ysmael Village. The
trial court agreed with petitioner
based on the doctrine of privity of
contract.
• Thus, the trial court disposed of the
case in favor of Siredy Enterprises
and Dr. Yanga and directing
defendant Hermogenes B. Santos to
pay unto plaintiff Conrado de
Guzman the amount of P412,154.93
as actual damages.
• On appeal, De Guzman obtained a
favorable judgment from the Court
of Appeals. The CA ordered Siredy
Enterprises, Inc. to pay appellant
ISSUE:
Whether or not Hermogenes B. Santos was a duly constituted
agent of Siredy, with authority to enter into contracts for the
construction of residential units in Ysmael Village and thus the
capacity to bind Siredy to the Deed of Agreement.
RULING:
By the relationship of agency, one party called the principal
authorizes another called the agent to act for and in his behalf
in transactions with third persons. The authority of the agent to
act emanates from the powers granted to him by his principal;
his act is the act of the principal if done within the scope of the
authority. “He who acts through another acts himself.”
Resolution of this issue necessitates a review of the Letter of
Authority executed by Ismael E. Yanga as president of Siredy in
favor of Santos. Within its terms can be found the nature and
extent of the authority granted to Santos which, in turn,
determines the extent of Siredy’s participation in the Deed of
Agreement.
On its face, the instrument executed by Yanga clearly and
unequivocally constituted Santos “to do and execute”, among
other things, the act of negotiating and entering into “contract
or contracts to build Housing Units on our subdivision lots in
Ysmael Village. Nothing could be more express than the written
stipulations contained therein. It was upon the authority of this
document that De Guzman transacted business with Santos that
resulted in the construction contract denominated as the Deed
of Agreement.
Aside from the Letter of Authority, Siredy’s Articles of
Incorporation, duly approved by the Securities and Exchange
Commission, shows that Siredy may also undertake to erect
buildings and houses on the lots and sell, lease, or otherwise
dispose of said properties to interested buyers. Such Articles,
coupled with the Letter of Authority, is sufficient to have given
De Guzman reason to believe that Santos was duly authorized
to represent Siredy for the purpose stated in the Deed of
Agreement.
We find that a valid agency was created between Siredy and
Santos, and the authority conferred upon the latter includes the
power to enter into a construction contract to build houses such
as the Deed of Agreement between Santos and De Guzman’s
Jigscon Construction. Hence, the inescapable conclusion is that
Siredy is bound by the contract through the representation of
its agent Santos.
This petition is DENIED for lack of merit. The Decision of the
Court of Appeals dated April 26, 1996, is hereby AFFIRMED.
Principles Applied by SC The basis of agency is representation, that is, the agent
acts for and in behalf of the principal on matters within
the scope of his authority (Art. 1881) and said acts have
the same legal effect as if they were personally done by
the principal. By this legal fiction of representation, the
actual or legal absence of the principal is converted into
his legal or juridical presence. 26
Moreover, even if arguendo Santos’ mandate was only to
sell subdivision lots as Siredy asserts, the latter is still
bound to pay De Guzman. De Guzman is considered a
third party to the agency agreement who had no
knowledge of the specific instructions or agreements
between Siredy and its agent. What De Guzman only saw
was the written Letter of Authority where Santos appears
to be duly authorized. Article 1900 of the Civil Code
provides:chanrob1es virtual 1aw library
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.
The scope of the agent’s authority is what appears in the
written terms of the power of attorney. While third
persons are bound to inquire into the extent or scope of
the agent’s authority, they are not required to go beyond
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.
While third persons are bound to inquire into the extent or scope of
the agent’s authority, they are not required to go beyond the terms of
the written power of attorney. Third persons cannot be adversely
affected by an understanding between the principal and his agent as
to the limits of the latter’s authority. Third persons need not concern
themselves with instructions given by the principal to his agent
outside of the written power of attorney [Siredy Enterprises v. CA
(2002)].
POWER TO BIND THE PRINCIPAL
Requisites:
(1) The agent must act within the scope of his authority; and
(2) The agent must act in behalf of the principal.
Even when the agent acts in his own name the principal is still bound
in the following instances:
(1) When the contract involves things belonging to the principal [Art.
1883]; or
(2) When the principal ratifies the contract, expressly or tacitly [Art.
1910].
EFFECTS OF THE ACTS OF AN AGENT
When the agent acts:
(1) With authority of the principal:
(a) If done in the name of the principal, the principal is bound to comply
with the obligations contracted [Art. 1910] and the agent is not personally
liable to the party with whom he contracts [Art. 1897];
(b) If done in the name of the agent, the agent is directly bound in favor of
the person with whom he has contracted, except when the contract
involves things belonging to the principal;
(2) Without authority or beyond the authority granted by the principal:
(a) If done in the name of the principal,it is unenforceable against him,
unless he
(a) ratifies it expressly or tacitly [Art. 1910];
(b) If done in the name of the agent, the is personally liable.
Obligations of Agent
IN GENERAL GOOD FAITH AND LOYALTY TO HIS TRUST
The duty of good faith is also called the fiduciary duty, which imposes
upon the agent the obligation of faithful service. 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 third parties (see Art. 1889).
General rule: Until proven otherwise, 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.
Exception: The presumption does not arise when there is no relation of
trust or confidence between the parties (e.g., the agent is bound merely
as an instrument/servant, or there is no agency relationship) [De Leon
(2010)].
EXERCISE OF REASONABLE CARE
By accepting an employment whose requirements he knows, without
stipulating otherwise the agent impliedly undertakes that:
(1) He possesses a degree of skill reasonably and ordinarily competent for
the performance of the service; and
(2) In performing his undertaking, he will exercise reasonable care, skill
and diligence.
OBLIGATION TO CARRY OUT AGENCY
General rule: The agent is:
(1) Bound by his acceptance to carry out the agency;
(2)  Liable for damages, which the principal may
suffer, in case of non-performance;
(3)  Bound to finish the business already begun on the death of the
principal should delay entail danger [Art. 1884].
Exception: An agent shall not carry out an agency if its execution would
manifestly result in loss or damage to the principal [Art. 1888].
OBLIGATION WHEN AGENT DECLINES
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.
The obligation lasts until the owner, as soon as practicable:
(1) Appoints an agent; or
(2) Takes charge of the goods[Art.1885].
Declining an agency is different from withdrawal. In the former, no agency
was formed. Withdrawal, on the other hand, presupposes an existing
agency.
The obligation of the agent, in case of withdrawal, is to continue to act as
such agent until the principal has had reasonable opportunity to take the
necessary steps to meet the situation [Art. 1929].
OBLIGATION TO ADVANCE NECESSARY FUNDS
General rule: The agent is not bound to advance the necessary funds. The principal is
obliged to advance to the agent, should the latter so request, the sums necessary for
the execution of the agency.
Exception: He shall be bound to do so should there be a stipulation to that effect,
subject to the obligation of the principal to reimburse the agent.
Exception to the Exception: He is not bound to do so, even when there is a
stipulation, when the principal is insolvent [Art. 1886].
Note: Insolvency of the principal is also a ground for extinguishment.
OBLIGATION TO ACT IN
ACCORDANCE WITH INSTRUCTIONS
In the execution of the agency:
(1) The agent shall act in accordance with the instructions of the principal; or
(2) In default thereof, he shall do all that a good father of a family would do, as
required by the nature of the business [Art. 1887].
Note: The limits of the agent’s authority shall not be considered exceeded should it
have been performed in a manner more advantageous to the principal than that
specified by him [Art. 1882].
• A specific application of this
subordination of interests is
found in Article 1890:
• (1)  If the agent has been
empowered to borrow
• money, he may himself be the
lender at the
• current rate of interest.
• (2)  If he has been authorized
to lend money at
• interest, he cannot borrow it
without the consent of the
principal.
WHEN OBLIGATION IS NOT APPLICABLE
(1) If the agent or broker acted only as a
middleman with the task of merely bringing together the vendor
and the vendee [Domingo v. Domingo (1971)].
(2)  If the agent had informed the principal of the gift or bonus or
profit he received from the purchaser and the principal did not
object thereto;
(3)  When a right of lien exists in favor of the agent.
RESPONSIBILITY FOR ACTS OF SUBSTITUTE
The agent may appoint a substitute if the principal has not
prohibited him from doing so.
The agent is 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:
(a) Without designating the person; and
(b) The person appointed was notoriously incompetent or
insolvent.
All acts of the substitute appointed against the prohibition of the
principal shall be void [Art. 1892].
The principal may bring an action against the substitute with
respect to the obligations which the latter contracted under the
substitution [Art. 1893].
SUB-AGENCY
• A sub-agent or substitute is a person employed or appointed by
an agent as his agent, to assist him in the performance of an act
for the principal, which the agent has been empowered to
perform. The agent is a principal with respect to the sub-agent.
• General rule: The agent may appoint a sub- agent.
• Ratio: The law allows such substitution for reasons of
convenience and practicality.
• Exceptions:
(1) The appointment is prohibited by the
• principal [Art. 1892];
(2) The work entrusted to the agent requires
• special knowledge, skill, or competence, unless authorized to do
so by the principal [De Leon (2010)].
RELATIONS AMONG THE PARTIES
(1) When the sub-agent has been employed for own account of the agent, to assist
him, the sub-agent is a stranger to the principal.
(2) When the appointment was authorized by the principal a fiduciary relationship is
created between and among the principal, agent, and sub-agent. Neither the agent
nor the substitute can be held personally liable so long as they act within the scope of
their authority [Macias & Co. v. Warner, Barnes & Co. (1922)].
EFFECTS OF SUBSTITUTION
(1) When substitution was prohibited by the principal, appointment by the agent is an
act in excess of the limits of his authority. All acts of the substitute are void.
(2)  When substitution was authorized, the agent is only liable when he appointed one
who is notoriously incompetent or insolvent, unless the person was designated by the
principal.
(3)  When substitution was not authorized, but also not prohibited, the appointment
is valid, but the agent is liable for damage caused by the substitution to the principal.
(4)  When substitution was authorized and the sub-agent was designated by the
principal, the agent is released from any liability for the acts of the sub-agent [Art.
1892].
RESPONSIBILITY OF TWO OR MORE AGENTS
• General rule: The responsibility of two or more agents is not
solidary, even though they have been appointed simultaneously.
They are liable jointly.
• Exception: They are solidarily liable if solidarity has been
expressly stipulated [Art. 1894].
• If solidarity has been thus agreed upon, each of the agents is
responsible for:
(1) The non-fulfillment of agency, even when
• the fellow agents acted beyond the scope of
• their authority; and
(2) The fault or negligence of his fellow agents, except when the
fellow agents acted beyond their authority
OBLIGATION FOR SUMS APPLIED TO HIS OWN USE
The agent owes interest:
(1) On the sums applied to his own use from the day on which he did
so; and
(2) On the sums which he still owes after the agency is extinguished
[Art. 1896].
The liability of the agent for interest for sums converted to his own
use is without prejudice to a criminal action that may be brought
against him [De Leon (2010)].
The sums referred to as still owing to the principal after
extinguishment of the agency are those which were not misapplied
by the agent, but were found to be owing to the principal after such
extinguishment.
OBLIGATIONS TO THIRD PERSONS
LIABILITY OF AGENT FOR OBLIGATIONS CONTRACTED
General rule: The agent who acts as such is not personally liable to
the party with whom he contracts. The principal is responsible for
such acts done within the scope of the authority granted to the
agent, and should bear any damage caused to third persons [Art.
1910].
Exceptions: He is personally liable when:
(1) He acts in his own name [Art. 1883];
(2) He expressly binds himself; or
(3) He exceeds the limits of his authority without giving such party
sufficient notice of his powers [Art. 1897].
VOID CONTRACTS
The contract entered into by an agent on behalf of the principal shall
be void when:
(1) The agent contracts in the name of the principal;
(2)  He exceeded the scope of his authority;
(3)  The principal does not ratify the contract;
and
(4)  The party with whom the agent contracted is aware of the limits
of the powers granted by the principal.
The agent, however, is liable if he undertook to secure the principal’s
ratification.
PRESENTATION OF POWER OF ATTORNEY
A third person, with whom the agent wishes to contract on behalf of the principal may
require the presentation of:
(1) The power of attorney; or
(2) The instructions as regards the agency.
Private or secret orders and instructions of the principal do not prejudice third persons
who have relied upon the power of attorney or instructions shown them [Art. 1902].
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.
• RATIFICATION OF ACTS OF AGENT
A third person, who contracts with the agent (thereby recognizing the authority of the
agent), cannot later disaffirm his contract based on the fact that the agent has exceeded
his powers, if the principal has:
(1) Ratified the acts of the agent; or
(2) Signified his willingness to ratify said acts [Art. 1901].
The ratification has retroactive effect, relating back to the time of the act or contract
ratified and is equivalent to original authority [Board of Liquidators v. Kalaw (1967)].
A principal may not accept the benefits of a transaction and repudiate its burdens.
Thus, a principal who seeks to enforce a sale made by the agent cannot ordinarily
allege that the agent exceeded his authority.
Before ratification, however, the third person may repudiate the contract.
IGNORANCE OF AGENT
If a duly authorized agent acts in accordance with the orders of the principal, the
principal cannot set up the ignorance of the agent as to circumstances whereof he
himself was, or ought to have been, aware [Art. 1899].
Ratio: If the principal appoints an agent who is ignorant, the fault is his alone. He is
bound by the acts of the agent. The agent is not liable to third persons in this case.
OBLIGATIONS OF A COMMISSION AGENT
FACTOR OR COMMISSION AGENT
A factor or commission agent is one whose business is to receive and sell goods for a
commission (also called factorage) and who is entrusted by the principal with the
possession of goods to be sold, and usually selling in his own name. He may act in his
own name or in that of the principal.
An ordinary agent need not have possession of the goods of the principal, while the
commission agent must be in possession [De Leon (2010)].
• RESPONSIBILITY RECEIVED
(1) The commission agent shall be responsible for goods received by him in the
terms and conditions and as described in the consignment, unless upon receiving
them he should make a written statement of the damage and deterioration suffered
by the same [Art. 1903].
(2) The commission agent who handles goods
of the same kind and mark, which belong to different owners, shall:
(a) Distinguish them by countermarks; and
(b) Designate the merchandise respectively belonging to each principal [Art. 1904].
SALE OF GOODS ON CREDIT WITHOUT AUTHORITY
General rule: The commission agent cannot sell on credit. Should he do so, the
principal may:
(1)  Demand from him payment in cash, in which case the commission agent shall be
entitled to any interest or benefit, which may result from such sale [Art. 1905]; or
(2)  Ratify the sale on credit, in which case the principal will have all the risks and
advantages to him [De Leon (2010)].
Exception: The commission agent can sell on credit with the express or implied
consent of the principal.
SALE OF GOODS ON CREDIT WITH AUTHORITY
If the commission agent was authorized to sell on credit and should he so sell on credit, he
shall inform the principal of such sale, with a statement of the names of the buyers. Should he
fail to inform the principal, the sale is deemed to have been made for cash as far as the
principal is concerned [Art. 1906].
The commission agent is obliged to collect the credits of his principal when they become due
and demandable [Art. 1908].
General rule: Failing to so collect, the agent shall be liable for damages.
Exception: He is not liable if he proves that he exercised due diligence for that purpose.
Should the commission agent receive a guarantee commission (del credere commission) on a
sale, in addition to the ordinary commission, he shall:
(1) Bear the risk of collection; and
(2) Pay the principal the proceeds of the sale on the terms agreed upon with the purchaser
[Art. 1907].
RESPONSIBILITY FOR FRAUD AND NEGLIGENCE
In the fulfillment of his obligation, the agent is responsible for:
(1) Fraud; and
(2) Negligence.
The circumstance that the agency is or is not gratuitous will be considered by the courts in
fixing the liability for negligence only [Art. 1909]. The liability may be to the principal or to
third persons.
Obligations of the Principal
IN GENERAL
In addition to his duties specified under the contract itself, the principal is
under obligation to deal fairly and in good faith with his agent, who owes the
same to his principal.
OBLIGATION TO COMPLY WITH CONTRACTS
General rule: The principal must comply with all the obligations which the
agent may have contracted within the scope of his authority [Art. 1910, par.
1]. As for any obligation where in the agent has exceeded his power, the
principal is not bound.
Exceptions: The principal is:
(1)  Bound by the obligation entered into by the agent in excess of his power,
when he ratifies it expressly or tacitly [Art. 1910, par. 2];
(2)  Solidarily liable with the agent if the principal allowed the agent to act as
though he had full powers [Art. 1911].
Note: If the agent acts in his own name, but the contract involves things belonging to the principal, the
contract must be considered as
entered into between the principal and the third person [Sy-Juco and Viardo v. Sy-Juco (1920)].
RATIFICATION
Ratification is the adoption or affirmance by a person of a prior act which did not bind him, but which
was done or professed to be done on his account, thus giving effect to the acts as if originally authorized.
Aside from the intent to ratify, the following conditions must be fulfilled for ratification to be effective:
(1) The principal must have the capacity and power to ratify;
(2)  He must have had knowledge or had reason to know of material or essential facts about the
transaction;
(3)  He must ratify the acts entirely;
(4)  The act must be capable of ratification; and
(5)  The act must be done in behalf of the principal [De Leon (2010)].
Ratification has the following effects:
(1)  With respect to the agent, it relieves him of liability. He may thus recover compensation
from the principal.
(2)  With respect to the principal, he assumes responsibility for the unauthorized act as fully as if the
agent had acted under an original authority. But he is not liable for acts outside the authority affirmed
by his ratification.
(3)  With respect to third persons, they are bound by the ratification and cannot set up the fact that the
agent has exceeded his powers [Art. 1901].
SEPARATE CONTRACTS WITH PRINCIPAL AND AGENT
When (1) two persons contract with regard to the same thing, one with the
agent and the other with the principal, and (2) the two contracts are
incompatible with each other, that of prior date shall be preferred, subject to
the rules on double sales [Art. 1916].
The rules on double sales [Art. 1544] provide:
(1) If the same movable property is sold to different persons, ownership is
transferred to whoever first took possession in good faith.
(2) If it be an immovable:
(a) Ownership belongs to the person who in good faith first recorded it in the
Registry of Property.
(b) If there is no inscription,ownership shall belong to the person who, in
good faith was first in possession; and in the absence of such, to the one who
presents the oldest title, provided there is good faith.
The liability for damages suffered by the third person whose contract must
be rejected shall be borne by:
(1) The principal, if the agent acted in good faith; or
(2) Theagent,ifheactedinbadfaith[Art.1918].
WHEN PRINCIPAL IS NOT LIABLE, IN SUMMARY
(1) Void or inexistent contracts [Art. 1409];
(2) Sale of a piece of land or any interest therein when the authority of the agent
is not in writing [Art. 1874];
(3) Acts of the substitute appointed against the prohibition of the principal [Art.
1892];
(4) Acts done in excess of the scope of the agent’s authority [Art. 1898 and 1910];
(5) When the agent acts in his own name, except when the contract involves
things belonging to the principal [Art. 1883];
(6) Unenforceable contracts[Art.1403].
OBLIGATION FOR COMPENSATION OF AGENT
• Art. 1875. Agency is presumed to be for a compensation, unless there is proof
tothe contrary.
• AMOUNT
The principal must pay the agent:
(1) The compensation agreed upon; or
(2) The reasonable value of the agent's services
if no compensation was specified.
COMPENSATION OF BROKER
• A broker is entitled to the usual commissions whenever he brings to his principal
a party who is able and willing to take the property and enter into a valid
contract upon the terms named by the principal. A broker is never entitled to
commission for unsuccessful efforts.
• He must prove that he was the procuring cause of the transaction. Otherwise, he
is not entitled to the stipulated broker’s commission [Inland Realty v. CA (1997)].
• Procuring cause refers to a cause originating a series of events which, without
break in their continuity, result in the accomplishment of the prime objective of
the employment of the broker – producing a purchaser ready, willing and able to
buy on the owner’s terms.
• Since the broker’s only job is to bring together the parties to a transaction, it
follows that if the broker does not succeed in bringing the mind of the purchaser
and the vendor to an agreement with reference to the terms of a sale, he is not
entitled to a commission [Rocha v. Prats (1922)].
• If the principal breaks off from negotiations with a buyer brought by the agent in
order to deliberately deal later with the buyer personally, this is evident bad
faith. In such case, justice demands compensation for the agent [Infante v.
Cunanan (1953)].
LIABILITY FOR EXPENSES AND DAMAGES
NECESSARY FUNDS
(1) The principal must advance to the agent, should the latter so request, the
sums necessary for the execution of the agency.
(2) In case the agent already advanced them, the principal must reimburse
him therefor:
(a) Even if the business or undertaking was not successful;
(b) Provided that the agent is free from all fault [Art. 1912].
The reimbursement shall include the interest on the sums advanced from the
day the advances were made.
WHEN THE PRINCIPAL IS NOT LIABLE FOR EXPENSES
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:
(a) The expenses would be borne by the agent; or
(b) That the latter would be allowed only a certain sum [Art. 1918].
DAMAGES
Art. 1913. The principal must also indemnify the agent for all the damages
which the execution of the agency may have caused the latter, without fault
or negligence or his part.
RIGHT OF RETENTION BY AN AGENT
The agent may retain in pledge the things which are the object of the agency
until the principal effects:
(1) Reimbursement of necessary funds advanced; and
(2) Payment of indemnity for damages [Art. 1914].
• This is a case of legal pledge. However, the agent is not entitled to the
excess in case the things are sold to satisfy his claims.
MULTIPLE PRINCIPALS
If there are two or more principals who appointed the agent for a
common transaction or undertaking, they shall be solidarily liable for all
the consequences of the agency [Art. 1915].
Requisites:
(1) There are two or more principals;
(2) The principals have all concurred in the appointment of the same
agent; and
(3) The agent is appointed for a common transaction or undertaking.
LIABILITY FOR QUASI-DELICT BY AN AGENT

The principal is solidarily liable to third persons for torts of an agent

committed:
(1) At the principal’s direction; or
(2) In the course and within the scope of the agent’s employment.
Modes of Extinguishment
IN GENERAL
Agency is extinguished:
(1)  By its revocation;
(2)  By the withdrawal of the agent;
(3)  By the death, civil interdiction, insanity or insolvency of the principal
or of the agent;
(4)  By the dissolution of the firm or corporation which entrusted or
accepted the agency;
(5)  By the accomplishment of the object or purpose of the agency;
(6)  By the expiration of the period for which the agency was constituted
[Art. 1919].
The provision enumerates only those which are peculiar to agency and is,
therefore, not exclusive. Agency may also be extinguished by the modes of
extinguishment of obligations in general [De Leon (2010)].
The modes of extinguishment may be classified into three:
(1)  By agreement (Nos. 5 and 6);
(2)  By subsequent acts of the parties:
(a) By the act of both parties or by mutual consent; or
(b) By the unilateral act of one of them (Nos. 1 and 2);
(3)  By operation of law (Nos. 3 and 4).
REVOCATION BY PRINCIPAL
General rule: The principal may:
(1) Revoke the agency at will; and
(2) Compel the agent to return the document evidencing the agency.
Qualifications: The right of the principal to terminate the authority of
his agent is absolute and unrestricted, except that he is liable for
damages in case:
(1)  He revokes the agency in bad faith [Danon v. Brimo (1921)]; or
(2)  He revokes the agency before the expiration of the period
stipulated in the agency contract. Exception: Agency cannot be revoked
if it is coupled with an interest, such that:
(1)  A bilateral contract depends upon it;
(2)  It is the means of fulfilling an obligation already contracted; or
(3)  A partner is appointed manager of a partnership in the contract of
partnership and his removal from the management is unjustifiable.
• Art. 1925. When two or more principals have granted a power of attorney for a
common transaction, any one of them may revoke the same without the consent of
the others.
• MANNER
• Revocation may be express or implied.
• There is express revocation when the principal clearly and directly makes a
cancellation of the authority of the agent orally or in writing.
• There is implied revocation in the following cases:
(1) 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 requirement
of notice to third persons [Art. 1923].
• (2)  The agency is revoked if the principal directly manages the business entrusted
to the agent, dealing directly with third persons [Art. 1924].
• (3)  A general power of attorney is revoked by a special one granted to another
agent, as regards the special matter involved in the latter [Art. 1926].
• There is implied revocation only where the new appointment is incompatible with
the previous one.
• EFFECT OF REVOCATION IN RELATION TO THIRD PARTIES
• 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.
• If the agent had general powers, revocation of the agency does not prejudice
third persons who acted:
(1) In good faith; and
• (2) Without knowledge of the revocation.
• Notice of the revocation in a newspaper of general circulation is a sufficient
warning to third persons [Art. 1922].
• WITHDRAWAL BY AGENT
• The agent may withdraw from the agency by giving due notice to the principal.
• General rule: If the principal should suffer any damage by reason of the
withdrawal, the agent must indemnify him therefor.
• Exception: The agent is not liable for damages if he should base his withdrawal
upon the impossibility of continuing the performance of the agency without
grave detriment to himself [Art. 1928].
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.
DEATH, CIVIL INTERDICTION, INSANITY OR INSOLVENCY
DEATH OF PRINCIPAL
• General rule: Death extinguishes agency.
• Exceptions:
(1)  The agency remains in full force and effect
even after the death of the principal, if it has been constituted:
(a) In the common interest of the principal and agent; or
(b) In the interest of a third person who has accepted the stipulation in
his favor
[Art. 1930].
(2)  Anything done by the agent, without knowledge of the death of the principal or
of any other cause which extinguishes the agency, is valid and shall be fully effective
with respect to third persons who may have contracted with him in good faith [Art.
1931].
(3)  The agent must finish business already begun on the death of the principal,
should delay entail any danger [Art. 1884].
DEATH OF AGENT
If the agent dies, his heirs must:
(1) Notify the principal thereof; and
(2) In the meantime adopt such measures as the circumstances may demand in the
interest of the latter [Art. 1932].
ACCOMPLISHMENT OF OBJECT OR PURPOSE
The fulfillment of the purpose for which agency was created ipso facto terminates
agency even though it was expressly made irrevocable. If the purpose has not been
accomplished, the agency continues indefinitely for as long as the intent to continue
is manifested through words or actions of the parties.
DISSOLUTION OF FIRM OR CORPORATION
The dissolution of a partnership or corporation which entrusted (principal)
or accepted (agent) the agency extinguishes its juridical existence, except
for the purpose of winding up its affairs. It is equivalent to death.
EXPIRATION OF TERM
(1)  If created for fixed period, expiration of the period extinguishes agency
even if the purpose was not accomplished.
(2)  If no time is specified, the courts may fix the period as under the
circumstances have been probably contemplated by the parties [Art.
1197]. Otherwise, the agency terminates at the end of a reasonable period
of time. Either party can terminate the relationship at will by giving notice
to the other [De Leon (2010)].
The period contemplated may be implied from terms of agreement,
purpose of agency, and the circumstances of the parties.
Philpotts vs. Philippine Manufacturing Co. and Berry
W.G. Philpotts (Petitioner) , a stockholder in Philippine Manufacturing Company sought to compel
respondents to permit plaintiff, a person or by some authorized agent or attorney to inspect and examine the
records of the business transacted by said company since January 1, 1918.
Respondent corporation or any of its officials has refused to allow the petitioner himself to examine anything
relating to the affairs of the company, and the petitioner prays for an order commanding respondents to place
records of all business transactions of the company, during a specific period, at the disposal of the plaintiff or
his duly authorized agent or attorney. Petitioner desires to exercise said right through agent or attorney.
Petition is filed originally in the Supreme Court under authority of Section 515 of Code of Civil Procedure,
which gives SC concurrent jurisdiction with then Court of First Instance in cases where any corporation or
person unlawfully excludes the plaintiff from use and enjoyment and some right he is entitled.
ISSUE:
Whether the right which the law concedes to a stockholder to inspect the records can be exercised by a
proper agent or attorney of the stockholder as well as by stockholder in person
HELD:
Yes. Right of inspection of records can be exercised by proper agent or attorney of the stockholder as well as
by stockholder in person.
The right of inspection / examination into corporate affairs given to a stockholder in section 51 of the
Corporation Law which states: “The records of all business transactions of the corporation and the minutes of
any meeting shall be open to the inspection of any director, member, or stockholder of the corporation at
reasonable hour” can be exercised either by himself or by any duly authorized representative or attorney in
fact, and either with or without the attendance of the stockholder. This is in conformity with the general
rule that what a man may do in person he may do through another.
Quiroga v. Parsons
FACTS: Quiroga and Parsons entered into a contract for the exclusive sale of Quiroga beds in the Visayan
Islands. They agreed on the following terms: a) Quiroga shall furnish the beds and shall give a 25% discount
on the invoiced prices as commission sales and Parsons shall order by the dozen; b) Payment shall be made
within 60 days from date of shipment; c) Transportation and shipment expenses shall be borne by Quiroga
while freight, insurance, and cost of unloading by Parsons; d) If before an invoice falls due, Quiroga should
request payment, payment made shall be prompt payment and a deduction of 2% shall be given; same
discount if payment is in cash; e) Notice from Quiroga shall be given at least 15 days before any change in
price; f) Parsons binds himself not to sell any other kind of bed; and g) Contract is for an unlimited period.
Parsons violated some of the conditions such as not to sell the beds at higher prices, pay for the
advertisement expenses, and to order beds by the dozen. Quiroga alleged that Parsons was his agent and
that the obligations are implied in a commercial agency contract.
ISSUE: w/n Parsons, by reason of the contract, was a purchaser or an agent of Quiroga for the sale of the
latter’s beds.
HELD: NO, Parsons was not an agent.
In order to classify a contract, due regard must be given to the essential clauses. In this case, there was an
obligation on Quiroga’s part to supply beds while an obligations on Parson’s part to pay the price. These are
essential features of a contract of purchase and sale. None of the clauses conveys the idea of an agency
where an agent received the thing to sell it and does not pay the price but delivers to the principal the
price he obtains from the sale to a third person, and if he does not sell it, he returns it.
The word ‘agency’ used in the contract only expresses that Parsons was the only one who could sell the
petitioner’s beds in the Visayan Islands. A contract is what the law defines it to be and not what the parties
call it.
Issue: WON dela Fuente is merely an agent of Shell Co.
Held: Yes
De la Fuente was the operator of the station "by grace" of the Defendant Company
which could and did remove him as it pleased; that all the equipments needed to
operate the station was owned by the Defendant Company which took charge of their
proper care and maintenance, despite the fact that they were loaned to him; that the
Defendant company did not leave the fixing of price for gasoline to De la Fuente;
That the service station belonged to the company and bore its tradename and the
operator sold only the products of the company; that the equipment used by the
operator belonged to the company and were just loaned to the operator and the
company took charge of their repair and maintenance
As the act of the agent or his employees acting within the scope of his authority is the
act of the principal, the breach of the undertaking by the agent is one for which the
principal is answerable
The latter was negligent and the company must answer for the negligent act of its
mechanic which was the cause of the fall of the car from the hydraulic lifter.
Dela Cruz v Northern Theatrical Enterprises, Inc., et al
Northern Theatrical Enterprises Inc. operated a movie house in Laoag, Ilocos Norte. Domingo Dela Cruz was one of
their security guards. He carried a revolver. One day, a Benjamin Martin wanted to enter without a ticket but dela
Cruz refused him entrance. Infuriated, Martin attacked him with a bolo and in order to save his life, dela Cruz shot
and killed Martin. Martin, thereafter, was charged with homicide which, after re-investigation, was dismissed. A few
years later, dela Cruz again figured in a homicide case related to his work as security guard for the theater. He was
acquitted for the second charge. In both instances, dela Cruz employed a lawyer. He thereafter demanded
reimbursement for his litigation expenses but was refused by the theater. After which, he filed an action for
reimbursement plus damages.
Northern Theater moved for the dismissal of the complaint. The Court found for Northern Theater and dismissed
the complaint saying that dela Cruz had no cause of action. Dela Cruz filed present appeal (for the reason that only
questions of law are involved).
Held: Judgment affirmed.
Agency Doctrine
CFI was correct in rejecting the theory of dela Cruz that he was an agent of the defendants and that as such agent
he was entitled to reimbursement for the expenses incurred by him in connection with the agency. The relationship
between the theater and the plaintiff was not that of principal and agent because the principle of representation
was not involved. He was not employed to represent defendant corporation in its dealings with third parties. He was
merely an employee hired to guard the cinema.
Issue is primarily one of employer – employee. Whether an employee who in line with the performance of his duty
incur expenses caused not directly by his employer or fellow employees but by a third party or stranger, may
recover against his employer. In this case, there’s no legal obligation on the part of the employer, it might yet be
regarded as a moral obligation. Since employer not legally obligated to give legal assistance, plaintiff naturally
cannot recover the amount from defendant.
SC also says that the damage incurred did not flow from the performance of his duties but only indirectly. Filing of
the criminal charges was the efficient, intervening cause. As such, plaintiff cannot fix civil responsibility to the
defendant.
GUARDEX ENTERPRISES V. NLRC
Facts:
A claim for alleged unpaid commissions of an agent is what is basically involved in the action at bar.
The two parties in this case are: Marcelina A. Escandor (engaged in the manufacture and sale of fire-fighting equipment and
the building or fabrication of fire trucks under Guardex Enterprises) and Jumbee Orbeta (a “freelance” salesman).
It appears that Orbeta somehow learned that Escandor had offered to fabricate a fire truck for Rubberworld (Phil) Inc. He
wrote to Escandor inquiring about the amount of commission for the sale of a fire truck. Escandor wrote back on the same
day to advise that it was P15,000 per unit. Four days later, Orbeta offered to “follow up” Escandor’s pending proposal to sell a
fire truck to Rubberworld, and asked for P250 as representation expenses. Escandor agreed and gave him the money. When
no word was received by Escandor from Orbeta after 3 days, she herself inquired in writing from Rubberworld about her offer
of sale of a fire truck. After 7 months, Escandor finally concluded a contract with Rubberworld for the latter’s purchase of a
fire truck. At this point, Orbeta suddenly reappeared and asked for his commission for the sale of the fire truck to
Rubberworld. Escandor refused, saying that he had nothing to do with the offer, negotiation and consummation of the sale.
Issue:
Whether or not Orbeta (acting as an agent) is entitled to commission as regards the sale of a fire truck to Rubberworld?
Held:
No. He is not entitled to any commission.
Rationale:
Even finding that under these circumstances, an agency had indeed been constituted will not save the day for Orbeta, because
nothing in the record tends to prove that he succeeded in carrying out its terms or ever as much as attempted to do so. The
evidence in fact clearly indicates otherwise. The terms of Escandor’s letter – assuming that it was indeed an “authority to sell,”
as Orbeta insists – are to the effect that entitlement to the P15,000 commission is contingent on the purchase by a customer
of a fire truck, the implicit condition being that the agent would earn the commission if he was instrumental in bringing the
sale about. Orbeta certainly had nothing to do with the sale of the fire truck, and is not therefore entitled to any commission
at all.
Furthermore, even if Orbeta is considered to have been Escandor’s agent for the time he was supposed to “follow up” the
offer to sell, such agency would have been deemed revoked upon the resumption of direct negotiations between Escandor
and Rubberworld, Orbeta having in the meantime abandoned all efforts (if indeed any were exerted) to secure the deal in
Escandor’s behalf.
• BORDADOR vs. LUZ
• FACTS:Petitioners Bordador spouses were engaged in the business of purchase and sale of
jewelry, while respondent Brigida Luz was their regular customer. Respondent Narciso Deganos,
Luz's brother, received several pieces of jewelry from the Bordadors amounting to P382,816.00,
which items were indicated in 17 receipts covering the same--11 of the receipts stated that they
were received by Deganos for a certain Evelyn Aquino, while the remaining 6 indicated that they
were received by Deganos for Luz.Deganos was supposed to sell the items at a profit and remit
the proceeds and return the unsold items to the Bordadors. Deganos remitted only P53,207.00.
He neither paid the balance of the sales proceeds, nor did he return any unsold item to the
Bordadors, which led them to file an action for recovery of a sum of money and damages against
Deganos and Luz with the RTC. The Bordadors claimed that Deganos acted as the agent of Luz
when he received the items of jewelry, and because he failed to pay for the same, Luz, as
principal, became solidarily liable with him.Deganos asserted that it was he alone who was
involved in the transaction with the Bordadors; that he neither acted as agent for nor was he
authorized to act as an agent by Luz, notwithstanding the fact that 6 of the receipts indicated
that the items were received by him for Luz. He added that he never delivered any of the items
to Luz. Luz corroborated the claims of Deganos.The RTC found that only Deganos was liable to
the Bordados. It further found that it was petitioner Lydia Bordador who indicated in the receipts
that the items were received by Deganos for Evelyn Aquino and for Luz. It said that it was
"persuaded that Brigida D. Luz was behind Deganos," but because there was no memorandum to
this effect, the agreement between the parties was unenforceable under the Statute of Frauds.
Absent the required memorandum or any written document connecting Luz with the subject
receipts or authorizing Deganos to act on her behalf, the alleged agreement between the
Bordadors and Luz was unenforceable.The Bordadors elevated the case to the CA which affirmed
said judgment, hence the instant petition.
ISSUE:Whether Luz is liable to the Bordadors for the latter's claim for money
and damages despite the fact that Luz did not sign any of the subject receipts
or authorized Deganos to receive the items of jewelry on her behalf
HELD:No, Luz is not liable to the Bordadors.
RATIONALETHE BASIS FOR AGENCY IS REPRESENTATION.The basis for agency is
representation. Here, there is no showing that Luz consented to the acts of
Deganos or authorized him to act on her behalf, much less with respect to the
particular transactions involved. The Bordadors' attempt to foist liability on Luz
through the supposed agency relation with Deganos is groundless and ill-
advised.A PERSON DEALING WITH AN AGENT IS PUT UPON INQUIRY AND MUST
DISCOVER UPON HIS PERIL THE AUTHORITY OF THE AGENT.Besides, it was
grossly and inexcusably negligent of the Bordadors to entrust to Deganos, not
once or twice but on at least 6 occasions as evidenced by 6 receipts, several
pieces of jewelry of substantial value without requiring a written authorization
from his alleged principal. A person dealing with an agent is put upon inquiry
and must discover upon his peril the authority of the agent.
CONDE v. RIVERA ( December 15, 1982) HELD: YES! There was an impled agency. The Alteras did
not repudiate the deed that Pio Cordero had signed. If, as
FACTS: 7 April 1938, Dominga Conde, together with her alleged, Dominga never exerted any effort to procure the
siblings, sold a parcel of land located in Burauen Leyte, to signature of Pio Altera after he had recovered from his
Casimira Pasagui married to Pio Altera (ALTERAS) with a illness, neither did the Alteras repudiate the deed that Pio
right of repurchase, within 10 years from said date. The executed. Thus, an implied agency must be held to have
“Pacto de retro sale” provided that if the end of 10 years been created from their silence or lack of action, or their
the said land is not repurchased, a new agreement shall be failure to repudiate the agency. Alteras must be held
made between the parties and in no case title and bound by the clear terms of the Memorandum of
ownership shall be vested in the hand of the ALTERAS. On a Repurchase. If the contract is plain and unequivocal in its
later date, Paciente Cordero, son-in-law, of the ALTERAS terms he is ordinarily bound thereby.
signed a document. In substance, the said document
provides that the original document was lost in spite of (The court also held that the ALTERAS were guilty of laches.
diligent efforts to locate the same; that the representative They, for 24 years, slept on their right to institute an action
of the CONDES, Eusebio Amarille, repurchased the subject for quieting of title against petitioner. Furthermore, the
lot; that Alteras and Pio Cordero received the payment for court also ruled that the spouses Conde were not
the repurchase; and that if Dominga et. al., will be purchasers in good faith. They bought the disputed
disturbed by other persons, Altera and Pio will defend in property despite the notice of the condition in the title that
behalf of the property was subject to repurchase.)
Dominga el. Al., because the same was already repurchased
by them. To be noted is the fact that the Alteras did not sign
the deed and only Pio was the signatory to the deed. On a
relevant date, Pio Altera sold the disputed lo to the spouses
Ramon Conde and Catalina Conde (their relationship to
petitioner was not established). After 24 years, Dominga
Conde filed with the CFI of Leyte a civil case for quieting of
title against the ALTERAS and the spouses CONDE. Dominga
contended that Pio signed the Memorandum in
representation of the Pio Aletra, who was very ill on that
occasion. Alteras, on the other hand, contended that Pio
was not their agent and Pio signed because he has no
objection to the repurchase.. The CFI dismissed the
complaint which was affirmed by the CA. Hence, this
RAET v. CA
Facts
In 1984 Spouses Raet and Spouses Mitra negotiated with Amparu Gatus concerning the possibility of buying his
rights to certain units at the Las Villas de Sto. Niño Subdivision, Bulacan, which was developed by Phil-Ville
Development and Housing Corporation (PVDHC) primarily for parties qualified to obtain loans from the Government
Service Insurance System (GSIS). They paid Gatus P40,000 (Raet) and 35,000 (Mitra), and which Gatus issued
receipts in her own name. In 1985, the spouses applied directly with PVDHC, with the condition that their
application would be processed upon the approval of the GSIS Loans using policy names of Casidsid (for Raet) and
Lim (for Mitra), since the spouses are not GSIS members. They paid P32,653 (Raet) and P27,000 (Mitra) to PVDHC,
which would be credited to purchase units upon the loan’s approval. In the meantime, PVDHC had allowed them to
occupy certain units. However, the GSIS loans were disapproved, therefore PVDHC told them to seek other sources
of financing, while allowing them to stay in the units.
Elvira Raet filed an estafa case against Gatus, where the RTC acquitted her. Later in an ejectment case by the PVDHC,
the spouses were ordered to surrender possession of the units. Therefore the spouses filed a complaint for specific
performances and damages against Gatus and PVDHC. The Housing and Land Use Arbiter ruled in favor of spouses,
which the Board of Commissioners of Housing and Land Use Regulatory Board (HLURB) reversed.
Yet, the Office of the President sustained the HLU Arbiter, and the CA dismissed it.
Issue: Whether Gatus was acting as an agent of PVDHC.
Held: NO!
Rationale
Gatus was not the agent of private respondent PVDHC. Indeed, the criminal case for estafa against her was
dismissed because it was found that she never represented herself to be an agent of private respondent PVDHC.
Moreover, Art. 1874 of the Civil Code requires for the validity of a sale involving land that the agent should have an
authorization in writing, which Gatus did not possess. Petitioners knew from the beginning that Gatus was
negotiating with them in her own behalf, and not as an agent of private respondent PVDHC. There is, therefore, no
basis in fact for the finding of the Housing and Land Use Arbiter that Gatus was the agent of private respondent
PVDHC with respect to the transactions in question.
Aguna v Larena
Facts
This action is brought to recover the sum of P29,600 on two cause against the administrator. The
plaintiff claims the sum of P9,600, the alleged value of the services rendered by him to said deceased
as his agent in charge of the deceased's houses situated in Manila.
From the evidence it appears undisputed that from February, 1922, to February, 1930, the plaintiff
rendered services to the deceased, consisting in the collection of the rents due from the tenants
occupying the deceased's houses in Manila and attending to the repair of said houses when necessary.
The evidence also shows that during the time the plaintiff rendered his services, he did not receive any
compensation. It is, however, a fact admitted that during said period the plaintiff occupied a house
belonging to the deceased without paying any rent at all.
Issue
W/n Agency is for compensation.
Held
The service rendered by the agent was deemed to be gratuitous
Rationale
The plaintiff-appellant insists that, the services having been rendered, an obligation to compensate
them must necessarily arise. The trial court held that the compensation for the services of the plaintiff
was the gratuitous use and occupation of some of the houses of the deceased by the plaintiff and his
family. This conclusion is correct. if it were true that the plaintiff and the deceased had an
understanding to the effect that the plaintiff was to receive compensation aside from the use and
occupation of the houses of the deceased, it cannot be explained how the plaintiff could have
rendered services as he did for eight years without receiving and claiming any compensation from the
deceased.
Insular Drug Company VS National Bank
Facts:
U.E. Foerster was formerly a salesman of the drug company for the
island of Panay and Negros. He also acted as a collector of the
company, mainly taking checks from the Iloilo branch of the drug
company and depositing them to the company account with Philippine
National Bank.
Upon examination of the checks deposited by Foerster with PNB,
there were several indorsements guaranteed by the PNB manager
Angel Padilla for Carmen E. de Foerster, the wife of U.E. Foerster,
which was consequently withdrawn by the couple and a certain V.
Bacaldo (stenographer of Foerster).
When the Manila office of the drug company investigated and
discovered the anomalies, Foerster committed suicide. Although there
was no evidence showing that the bank knew that Foerster was
misappropriating the funds of his principal, the Insular Drug Co. claims
that it never received the face value of the 132 checks in question
covering a total of Php 18, 285.92.
The drug company saw fit to stand on the proposition that checks
drawn in its favor were improperly and illegally cashed by the bank for
Foerster’s personal account.
Issue:
Whether the bank is liable for the amount indorsed and withdrawn by
Foerster using company checks even if the latter is an agent of the
drug company.
Whether the bank is liable for the negligence of its agents when they
allowed encashing of the checks without prior authority from the
company.
RULING:
• Yes on both issues.
• The bank is liable for the amount withdrawn by Foerster and will
have to stand the loss occasioned by negligence of its agents.
• The right of an agent to indorse commercial paper is a very
responsible power and will not be lightly inferred. 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 [be acted upon] only by agents does so at his peril, and must
abide by the consequences if the agent who indorses the same is
without authority
• The fact that the bank acted in good faith does not relieve it from
responsibility. The bank could tell by the checks themselves that the
money belonged to the Insular Drug Company and not to Foerster,
his wife or his clerk. When the bank permitted the withdrawals
without the authority from the drug company, the bank made itself
responsible to the drug company for the amounts represented by
the checks.
• The bank could have relieved itself from the responsibility had it
proven that the money withdrawn by Foerster passed to the drug
company but it hasn’t done so.
• DOMINION INSURANCE CORPORATION v. CA •  
•   • HELD: The petition is without merit. By the contract of agency, a
person binds himself to render some service or to do something in
• FACTS: On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted representation or on behalf of another, with the consent or
a civil case for collection of sum of money against defendant authority of the latter. The basis for agency is representation. On
Dominion Insurance Corporation. Plaintiff sought to recover the the part of the principal, there must be an actual intention to
sum of P156,473.90 which he claimed to have advanced in his appoint or an intention naturally inferable from his words or
capacity as manager of defendant to satisfy certain car insurance actions; and on the part of the agent, there must be an intention to
claims filed by defendant’s clients. The CA affirmed trial court’s accept the appointment and act on it, and in the absence of such
decision for Dominion to pay plaintiff Guevarra. Dominion filed a intent, there is generally no agency. A perusal of the Special Power
motion for reconsideration with the Court of Appeals which was of Attorney would show that petitioner Dominion and respondent
denied, hence, this appeal. Guevarra intended to enter into a principal-agent relationship.
•   Despite the word “special” in the title of the document, the
contents reveal that what was constituted was actually a general
• ISSUES: Dominion assails whether respondent Guevarra acted agency. The agency comprises all the business of the principal, but,
within his authority as agent for petitioner, and whether couched in general terms, it is limited only to acts of administration.
respondent Guevarra is entitled to reimbursement of amounts he A general power permits the agent to do all acts for which the law
paid out of his personal money in settling the claims of several does not require a special power. Thus, the acts enumerated in or
insured. similar to those enumerated in the Special Power of Attorney do
not require a special power of attorney.
• Article 1878, Civil Code, enumerates the instances when a special
power of attorney is required.
• The payment of claims is not an act of administration. The
settlement of claims is not included among the acts enumerated in
the Special Power of Attorney, neither is it of a character similar to
the acts enumerated therein. A special power of attorney is
required before respondent Guevarra could settle the insurance
claims of the insured. Nevertheless, Guevarra’s authority to settle
claims is embodied in the Memorandum of Management
Agreement which enumerates the scope of respondent Guevarra’s
duties and responsibilities as agency manager for San Fernando,
Pampanga. In settling the claims mentioned, Guevarra’s authority is
further limited by the written standard authority to pay, which
states that the payment shall come from Guevarra’s revolving fund
or collection. Therefore, the instruction of Dominion as the
• Prudential Bank vs. CA
• Facts: The complaint in this case arose when private • The liability of the principal for the acts of the agent
respondent Aurora F. Cruz, with her sister as co-
depositor, invested P200, 000.00 in Central Bank bills
with the Prudential Bank at its branch in Quezon
Avenue, Quezon City, on June 23, 1986. Susan
Quimbo, the Bank employee assisted her on all her
dealings. One of such dealing involves Cruz
withdrawal from her Savings Account No. 2546 and
applying such amount to the investment with the
same bank. Cruz was asked to sign a Withdrawal Slip
for P196, 122.98, representing the amount to be re-
invested after deduction of the prepaid interest.
Quimbo explained this was a new requirement of the
bank. Several days later, Cruz received another
Confirmation of Sale and a copy of the Debit Memo
coming from Quimbo. On October 27, 1986, Cruz
returned to the bank and sought to withdraw her
P200, 000.00. After verification of her records,
however, she was informed that the investment
appeared to have been already withdrawn by her on
August 25, 1986. There was no copy on file of the
Confirmation of Sale and the Debit Memo allegedly
issued to her by Quimbo. Quimbo herself was not
available for questioning as she had not been
reporting for the past week. Prompted by the event
Cruz's reaction was to file a complaint for breach of
contract against Prudential Bank in the Regional Trial
Court of Quezon City. She demanded the return of
• Held:
is not debatable. Law and jurisprudence are clearly
and absolutely against the petitioner. Such liability
dates back to the Roman Law maxim, Qui per alium
facit per seipsum facere videtur. "He who does a
thing by an agent is considered as doing it himself."
This rule is affirmed by the Civil Code thus: Art. 1910.
The principal must comply with all the obligations
which the agent may have contracted within the
scope of his authority. Art. 1911. Even when the
agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed
the latter to act as though he had full powers.
Conformably, we have declared in countless
decisions that the principal is liable for obligations
contracted by the agent. The agent's apparent
representation yields to the principal's true
representation and the contract is considered as
entered into between the principal and the third
person. WHEREFORE, the petition is DENIED and the
appealed decision is AFFIRMED
EDWARD C. ONG vs. THE COURT OF APPEALS AND THE PEOPLE OFTHE PHILIPPINES, respondents.,
G.R. No. 119858. April 29, 2003Case Digest
 Facts:
Petitioner, representing ARMAGRI, applied for a letter of credit for P2,532,500.00 with SOLIDBANK
Corporation to finance the purchase of differential assemblies from Metropole Industrial Sales. On
6 July 1990, petitioner, representing ARMAGRI, executed a trust receipt acknowledging receipt from
the Bank of the goods valued at P2,532,500.00.
On 12 July 1990, petitioner and Benito Ong, representing ARMAGRI, applied for another letter of
credit for P2,050,000.00 to finance the purchase of merchandise from Fertiphil Corporation. The
Bank approved the application, opened the letter of credit and paid to Fertiphil Corporation the
amount of P2,050,000.00.  On 23 July 1990, petitioner, signing for ARMAGRI, executed another
trust receipt in favor of the Bank acknowledging receipt of the merchandise.
Both trust receipts contained the same stipulations. Under the trust receipts, ARMAGRI undertook
to account for the goods held in trust for the Bank, or if the goods are sold, to turn over the
proceeds to the Bank. ARMAGRI also undertook the obligation to keep the proceeds in the form of
money, bills or receivables as the separate property of the Bank or to return the goods upon
demand by the Bank, if not sold
When the trust receipts became due and demandable, ARMAGRI failed to pay or deliver the goods
to the Bank despite several demand letters. Consequently, as of 31 May 1991, the unpaid account
under the first trust receipt amounted to P1,527,180.66, while the unpaid account under the
second trust receipt amounted to P1,449,395.71
Assistant City Prosecutor Dina P. Teves of the City of Manila charged petitioner and Benito Ong with
two counts of estafa.
WON Ong may be held liable for estafa as he was only acting as agent.
The Trust Receipts Law is violated whenever the entrustee fails to:  (1) turn over the proceeds of the
sale of the goods, or (2) return the goods covered by the trust receipts if the goods are not sold.
The mere failure to account or return gives rise to the crime which is malum prohibitum.  There is
no requirement to prove intent to defraud.
The Trust Receipts Law recognizes the impossibility of imposing the penalty of imprisonment on a
corporation. Hence, if the entrustee is a corporation, the law makes the officers or employees or
other persons responsible for the offense liable to suffer the penalty of imprisonment. The reason is
obvious: corporations, partnerships, associations and other juridical entities cannot be put to jail.
Hence, the criminal liability falls on the human agent responsible for the violation of the Trust
Receipts Law.
In the instant case, the Bank was the entruster while ARMAGRI was the entrustee. Being the
entrustee, ARMAGRI was the one responsible to account for the goods or its proceeds in case of
sale. However, the criminal liability for violation of the Trust Receipts Law falls on the human agent
responsible for the violation. Petitioner, who admits being the agent of ARMAGRI, is the person
responsible for the offense for two reasons. First, petitioner is the signatory to the trust receipts,
the loan applications and the letters of credit. Second, despite being the signatory to the trust
receipts and the other documents, petitioner did not explain or show why he is not responsible for
the failure to turn over the proceeds of the sale or account for the goods covered by the trust
receipts.
• The Bank released the goods to ARMAGRI upon execution of the trust receipts and as part of
the loan transactions of ARMAGRI. The Bank had a right to demand from ARMAGRI payment
or at least a return of the goods. ARMAGRI failed to pay or return the goods despite repeated
demands by the Bank.
• It is a well-settled doctrine long before the enactment of the Trust Receipts Law, that the failure
to account, upon demand, for funds or property held in trust is evidence of conversion or
misappropriation. Under the law, mere failure by the entrustee to account for the goods
received in trust constitutes estafa. The Trust Receipts Law punishes dishonesty and abuse of
confidence in the handling of money or goods to the prejudice of public order. The mere failure
to deliver the proceeds of the sale or the goods if not sold constitutes a criminal offense that
causes prejudice not only to the creditor, but also to the public interest. Evidently, the Bank
suffered prejudice for neither money nor the goods were turned over to the Bank.
• The Trust Receipts Law expressly makes the corporation’s officers or employees or other
persons therein responsible for the offense liable to suffer the penalty of imprisonment. In the
instant case, petitioner signed the two trust receipts on behalf of ARMAGRI as the latter could
only act through its agents. When petitioner signed the trust receipts, he acknowledged receipt
of the goods covered by the trust receipts. In addition, petitioner was fully aware of the terms
and conditions stated in the trust receipts, including the obligation to turn over the proceeds of
the sale or return the goods to the Bank
• 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
 SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC. v. NLRC
 FACTS:Petitioner, Sunace International Management Services (Sunace), deployed to Taiwan Divina A.
Montehermozo (Divina) as a domestic helper under a 12-month contract effective February 1, 1997.  The
deployment was with the assistance of a Taiwanese broker, Edmund Wang, President of Jet Crown
International Co., Ltd. After her 12-month contract expired on February 1, 1998, Divina continued working
for her Taiwanese employer, Hang Rui Xiong, for two more years, after which she returned to the Philippines
on February 4, 2000. Shortly after her return or on February 14, 2000, Divina filed a complaint before the
National Labor Relations Commission (NLRC) against Sunace, one Adelaide Perez, the Taiwanese broker, and
the employer-foreign principal alleging that she was jailed for three months and that she was underpaid
Reacting to Divina's Position Paper, Sunace filed on April 25, 2000 an ". . . ANSWER TO COMPLAINANT'S
POSITION PAPER" alleging that Divina's 2-year extension of her contract was without its knowledge and
consent, hence, it had no liability attaching to any claim arising therefrom, and Divina in fact executed a
Waiver/Quitclaim and Release of Responsibility and an Affidavit of Desistance, copy of each document was
annexed to said
The Labor Arbiter, rejected Sunace's claim that the extension of Divina's contract for two more years was
without its knowledge and consent.
 ISSUE: Whether the act of the foreigner-principal in renewing the contract of Divina be attributable to
Sunace
HELD: No, the act of the foreigner-principal in renewing the contract of Divina is not attributable to Sunace.
There being no substantial proof that Sunace knew of and consented to be bound under the 2-year
employment contract extension, it cannot be said to be privy thereto. As such, it and its "owner" cannot be
held solidarily liable for any of Divina's claims arising from the 2-year employment extension. Furthermore,
as Sunace correctly points out, there was an implied revocation of its agency relationship with its foreign
principal when, after the termination of the original employment contract, the foreign principal directly
negotiated with Divina and entered into a new and separate employment contract in Taiwan.