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Victoria Milling Co., Inc. v. CA and Consolidated Sugar Corporation G.R. No. 117356 June 19, 2000Quisumbing, J.

FACTS: St. Therese Merchandising regularly bought sugar from Victorias Milling Co., Inc. In the course of their dealings, Victorias Milling issued several Shipping List/Delivery Receipts (SLDRs) to St. Therese Merchandising as proof of purchases. Among these was SLDR No. 1214M which covers 25,000 bags of sugar. Each bag contained 50 kilograms and priced at P638.00 per bag. The transaction it covered was a direct sale. On October 25, 1989, St. Therese Merchandising sold to Consolidated Sugar Corp. its rights in SLDR No.1214M for P14,750,000.00. Consolidated Sugar Corp. issued checks in payment. That same day, Consolidated Sugar Corp. wrote Victorias Milling that it had been authorized by St. Therese Merchandising to withdraw the sugar covered by SLDR No. 1214M. Consolidated Sugar Corp. surrendered SLDR No. 1214M to Victorias Millings NAWACO warehouse and was allowed to withdraw sugar. However, after 2,000 bags had been released, Victorias Milling refused to allow further withdrawals of sugar against SLDR No. 1214M because, according to it, St. Therese Merchandising had already withdrawn all the sugar covered by the cleared checks. ISSUE: WON the contract was one of agency or sale HELD: Sale. Victorias Milling heavily relies upon St. Therese Merchandisings letter of authority allowing Consolidated Sugar Corp. to withdraw sugar against SLDR No. 1214M to show that the latter was St. Therese Merchandisings agent.The pertinent portion of said letter reads: This is to authorize Consolidated Sugar Corporation or its representative to withdraw for and in ourbehalf (stress supplied)t he refined sugar covered by Shipping List/Delivery Receipt = Refined Sugar (SDR)No. 1214 dated October 16, 1989 in the total quantity of 25, 000 bags. Art. 1868. By the contract of agency a person binds himself to render some service or to do somethinginrepresentation or on behalf of another, with the consent or authority of the latter. The basis of agency is representation. On the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or actions; and on the part of the agent, there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency. One factor which most clearly distinguishes agency from other legal concepts is control; one person - the agent - agrees to act under the control or direction of another the principal. Victorias Milling failed to sufficiently establish the existence of an agency relation between Consolidated Sugar Corp. and St. Therese Merchandising. The fact alone that it (St. Therese Merchandising) had authorized withdrawal of sugar by Consolidated Sugar Corp. for and in our (St. Therese Merchandisings behalf

should not be eyed as pointing to the existence of an agency relation. Further, Consolidated Sugar Corp. has shown that the 25,000 bags of sugar covered by the SLDR No. 1214M were sold and transferred by St. Therese Merchandising to it. A conclusion that there was a valid sale and transfer to Consolidated Sugar Corp. may, therefore, be made thus capacitating Consolidated Sugar Corp. to sue in its own name,without need of j oining its imputed principal St. Therese Merchandising as co-plaintiff. Consolidated Sugar Corp. was a buyer of the SLDFR form, and not an agent of STM. Consolidated Sugar Corp. was not subject to St. Therese Merchandising s control. That no agency was meant to be established by the Consolidated Sugar Corp. and STM is clearly shown by Consolidated Sugar Corp.s communication to petitioner that SLDR No. 1214M had been sold and endorsed to it.27 The use of the words sold and endorsed means that St. Therese Merchandising and Consolidated Sugar Corp. intended a contract of sale, and not an agency.

SANTOS vs BUENCONSEJO FACTS: Lot- originally owned in common by Anatolio Buenconsejo (1/2) and Lorenzo and Santiago Bon (1/2) Anatolios rights, interests and participation over the portion of the said lot was transferred and conveyed to Atty. Tecla San Andres Ziga awardee in an auction sale (decision in juvenile delinquency and domestic relations court) By virtue of Certificate of redemption- rights, interests, claim and/or participation of Atty Ziga were transferred and conveyed to petitioner (Santos) in his capacity as attorney-in-fact of the children of Anatolio It would appear that petitioner Santos had redeemed the aforementioned share of Anatolio , upon the authority of a special power of attorney (SPA) executed in his favor by the children of Anatolio Santos now claims to have acquired the share of Anatolio in the said lot caused a subdivision plan- he wants said to segregate his allegedshare in the lot and a TCT issued in his nameISSUE: WON Santos can claim ownership over the said portion of the lotHELD: NO Said SPA athorized him to act on behalf of the children of Anatolio, hence, it could not have possibly vested in him any property right inhis own name Children of Anatolio had no authotity to execute said power of attorney, because Anatolio is still alive, in fact he opposed the petition of Santos Assuming SPA-valid, Santos could have acquired no more than the share pro-indiviso of Anatolio so that he cannot, without the conformityof the other co-owners, or a judicial decree of partition, adjudicate to himself in fee simple a determinate portion of said Lot

Conde vs. CA
G.R. No. L-40242 December 15, 1982 DOMINGA CONDE, petitioner, vs. THE HONORABLE COURT OF APPEALS, MANILA PACIENTE CORDERO, together with his wife, NICETAS ALTERA, RAMON CONDE, together with his wife, CATALINA T. CONDE, respondents. The established facts, as found by the Court of Appeals, show that on 7 April 1938. Margarita Conde, Bernardo Conde and the petitioner Dominga Conde, as heirs of Santiago Conde, sold with right of repurchase, within ten (10) years from said date, a parcel of agricultural land located in Leyte. The Original Certificate of Title was adjudicated in favor of the Alteras with right of redemption by the petitioner. In 1945, the Alteras was about to repurchase the lot. However, during that time, the pacto de retro document was lost. For this reason, the Alteras executed a Memorandum Document stating that Pio Altera already intended to repurchase the lot. It would be noticed that the document was signed by Paciente Cordero instead of Pio Altera. Respondents contend they have validly repurchased the lot. The Memorandum document was signed by Paciente Cordero in representation of his sick father-in-law Pio Altera. Lower Court ordered petitioner to vacate the property. On appeal, the Court of Appeals upheld the findings of the Court a quo that petitioner had failed to validly exercise her right of repurchase in view of the fact that the Memorandum of Repurchase was signed by Paciente Cordero and not by Pio Altera, the vendee-a-retro, and that there is nothing in said document to show that Cordero was specifically authorized to act for and on behalf of the vendee a retro, Pio Altera. Reconsideration having been denied by the Appellate Court, the case is before us on review. ISSUE: WON the Paciente Cordero validly represented Pio Altera. WON the sale was valid. RULING: Private respondents Ramon Conde and Catalina Conde, to whom Pio Altera sold the disputed property in 1965, assuming that there was, indeed, such a sale, cannot be said to be purchasers in good faith. OCT No. 534 in the name of the Alteras specifically contained the condition that it was subject to the right of repurchase within 10 years from 1938. Although the ten-year period had lapsed in 1965 and there was no annotation of any repurchase by petitioner, neither had the title been cleared of that encumbrance. The purchasers were put on notice that some other person could have a right to or interest in the property. It behooved Ramon Conde and Catalina Conde to have looked into the right of redemption inscribed on the title, and particularly the matter of possession, which, as also admitted by them at the pre-trial, had been with petitioner since 1945. There is nothing in the document of repurchase to show that Paciente Cordero had signed the same merely to indicate that he had no objection to petitioner's right of repurchase. Besides, he would have had no personality to object. To uphold his oral testimony on that point, would be a departure from the parol evidence rule 5 and would defeat the purpose for which the doctrine is intended. ... The purpose of the rule is to give stability to written agreements, and to remove the temptation and possibility of perjury, which would be afforded if parol evidence was admissible. 6

DE LA PENA V. HIDALGOFACTS:1887-1893 FACTS: 1887-1893 (1st period ) FEDERICO 1893-1902 (2nd period) ANTONIO 1902-1904 (3rdperiod) FRANCISCO Before DE LA PENA went to Spain, he executed a power of attorney in favor ofFEDERICO and 3 other people. Their task is to represent him and administer various properties he owned in Manila. FEDERICO took charge in Nov. 1887.After a few years, FEDERICO wrote a letter to DE LA PENA. It contains arequest that DE LA PENA assign a person who might substitute FEDERICO inthe event that he leaves the Philippines because one of the agents died and theother 2 are unwilling to take charge. DE LA PENA did not answer the letter - there was neither approval nor objection on the accounts and no appointmentof another person who might substitute FEDERICO. Because of health reasons,FEDERICO went to Spain. Before he departed, he sent another letter to DE LAPENA a summary of accounts and informing that he will be leaving thePhilippines and that he turned over the administration to ANTONIO (thoughFEDERICO stated that if DE LA PENA is not happy with this, DE LA PENA mustsend ANTONIO a new power of attorney).DE LA PENA files in court for the collection of revenue from his accounts whichwas handled by FEDERICO. DE LA PENA alleges that FEDERICO has onlyremitted 1.2k and still owes him roughly 72k. Furthermore, DE LA PENA seeks tohold FEDERICO liable for the administration from the period of 1887 until 1904.FEDERICO asserts that he cannot be liable for the period after he renouncedhis agency. Furthermore FEDERICO argues that his renunciation andappointment of a substitute was legal for there was no objection on the part ofDE LA PENA.ISSUE:Whether there was a valid agency in the case of ANTONIO (2ndperiod) HELD: There was an implied agency in the case of ANTONIO. DE LA PENA created animplied agency in favor of ANTONIO because of his silence on the matter for anumber of years.There was a valid renunciation in the case of FEDERICO. His reason for leavingthe country is legitimate. Furthermore, he gave notice to DE LA PENA about hissituation in which the latter failed to give his objection.Being a valid agency on the part of ANTONIO and a valid renunciation on theparty of FEDERICO, it must follow that the liability of FEDERICO only extendsup to the point before his renunciation of the agency (1 st period).DOCTRINE: he implied agency is founded on the lack of contradiction or opposition,which constitutes simultaneous agreement on the part of the presumedprincipal to the execution of the contract.The agent and administrator who was obliged to leave his charge for alegitimate cause and who duly informed his principal, is thenceforwardreleased and freed from the results and consequences of the management ofthe person who substituted him with the consent, even tacit though it be, ofhis principal.SIDE NOTE ON POWER OF ATTORNEY:It was also argued by DE LA PENA that there was no authority on the part ofFEDERICO to appoint a substitute. The COURT ruled that the power of attorneygiven by DE LA PENA to FEDERICO did not include a power to appoint asubstitute. Nevertheless, it was pointed out that the appointment made byFEDERICO was not based on the power of attorney of DE LA PENA. Theappointment was grounded on a new power of attorney FEDERICO himselfexecuted in favor of ANTONIO. Thus, there was no violation incurred byFEDERICO. And as stated in the case, DE LA PENA was duly informed of this butnevertheless kept his silence on the matter.

Severino v Severino [G.R. No. 34642, September 24, 1931] STREET, J.

FACTS:

Melecio Severino upon his death, left considerable properties. To end litigation among heirs, a

compromise was effected where defendant Guillermo (son of MS) took over the property of deceased and agreed to pay installment of 100K to plaintiff (wife of MS) payable first in 40K cash upon execution of document in 3 equal installments. Enrique Echauz became guarantor.

Upon failure to pay the balance, plaintiff filed and action against the defendant and Echauz. Enchauz

contends that he received nothing from affixing his signature in the document and the contract lacked the consideration as to him. ISSUE: WON there is a consideration for the guaranty? HELD:

The proof shows that the money claimed in this action has never been paid and is still owing to the

plaintiff; and the only defense worth noting in this decision is the assertion on the part of Enrique Echaus that he received nothing for affixing his signature as guarantor to the contract which is the subject of suit and that in effect the contract was lacking in consideration as to him.

The guarantor or surety is bound by the same consideration that makes the contract effective between The compromise and dismissal of a lawsuit is recognized in law as a valuable consideration; and the

the principal parties thereto. dismissal of the action which Felicitas Villanueva and Fabiola Severino had instituted against Guillermo Severino was an adequate consideration to support the promise on the part of Guillermo Severino to pay the sum of money stipulated in the contract which is the subject of this action. The promise of the appellant Echaus as guarantor therefore binding.

It is neither necessary that guarantor or surety should receive any part of the benefit, if such there be Thus, judgment affirmed.

accruing to his principal.

QUIROGA v PARSONS HARDWARE CO38 Phil FACTS:On January 24, 1911, in this city of manila, a contractwas entered into by and between the plaintiff, as party of thefirst part, and J. Parsons (to whose rights and obligations thepresent defendant later subrogated itself), as party of thesecond part.Of the three causes of action alleged by the plaintiff in his complaint, only two of them constitute the subjectmatter of this appeal and both substantially amount to theaverment that the defendant violated the followingobligations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself toconduct the agency; to keep the beds on public exhibition,and to pay for the advertisement expenses for the same; andto order the beds by the dozen and in no other manner. Asmay be seen, with the exception of the obligation on the partof the defendant to order the beds by the dozen and in noother manner, none of the obligations imputed to thedefendant in the two causes of action are expressly set forthin the contract. But the plaintiff alleged that the defendantwas his agent for the sale of his beds in Iloilo, and that saidobligations are implied in a contract of commercial agency.

ISSUE: whether the defendant, by reason of the contracthereinbefore transcribed, was a purchaser or an agent of theplaintiff for the sale of his beds.. HELD: In order to classify a contract, due regard must begiven to its essential clauses. In the contract in question,what was essential, as constituting its cause and subjectmatter, is that the plaintiff was to furnish the defendant withthe beds which the latter might order, at the price stipulated,and that the defendant was to pay the price in the mannerstipulated. The price agreed upon was the one determined bythe plaintiff for the sale of these beds in Manila, with adiscount of from 20 to 25 per cent, according to their class.Payment was to be made at the end of sixty days, or before,at the plaintiff's request, or in cash, if the defendant sopreferred, and in these last two cases an additional discountwas to be allowed for prompt payment. These are preciselythe essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supplythe beds, and, on the part of the defendant, to pay theirprice. These features exclude the legal conception of anagency or order to sell whereby the mandatory or agentreceived the thing to sell it, and does not pay its price, butdelivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed inselling it, he returns it. By virtue of the contract between theplaintiff and the defendant, the latter, on receiving the beds,was necessarily obliged to pay their price within the termfixed, without any other consideration and regardless as towhether he had or had not sold the beds.It would be enough to hold, as we do, that thecontract by and between the defendant and the plaintiff isone of purchase and sale, in order to show that it was notone made on the basis of a commission on sales, as theplaintiff claims it was, for these contracts are incompatiblewith each other. But, besides, examining the clauses of thiscontract, none of them is found that substantiallysupports the plaintiff's contention. Not a single one of theseclauses necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 meannothing else, as stated in the contract itself, than a merediscount on the invoice price. The word agency , also used inarticles 2 and 3, only expresses that the defendant was theonly one that could sell the plaintiff's beds in the VisayanIslands. With regard to the remaining clauses, the least thatcan be said is that they are not incompatible with thecontract of purchase and sale. The plaintiff calls attention to the testimony of Ernesto Vidal, a former vicepresident of the defendantcorporation and who established and managed the latter'sbusiness in Iloilo. It appears that this witness, prior to thetime of his testimony, had serious trouble with thedefendant, had maintained a civil suit against it, and hadeven accused one of its partners, Guillermo Parsons, of falsification. He testified that it was he who drafted thecontract Exhibit A, and, when questioned as to what was hispurpose in contracting with the plaintiff, replied that it was tobe an agent for his beds and to collect a commission onsales . However, according to the defendant's evidence, itwas Mariano Lopez Santos, a director of the corporation, whoprepared Exhibit A. But, even supposing that Ernesto Vidalhas stated the truth, his statement as to what was his idea incontracting with the plaintiff is of no importance, inasmuchas the agreements contained in Exhibit A which he claims tohave drafted, constitute, as we have said, a contract of purchase and sale, and not one of commercial agency. Thisonly means that Ernesto Vidal was mistaken in hisclassification of the contract. But it must be understood thata contract is what the law defines it to be, and not what it iscalled by the contracting parties. The plaintiff also endeavored to prove that thedefendant had returned beds that it could not sell; that,without previous notice, it forwarded to the defendant thebeds that it wanted; and that the defendant received itscommission for the beds sold by the plaintiff directly topersons in Iloilo. But all this, at the most only shows that, onthe part of both of them, there was mutual tolerance in theperformance of the contract in disregard of its terms; and itgives no right to have the contract considered, not as theparties stipulated it, but as they performed it. Only the actsof the contracting parties, subsequent to, and in connectionwith, the execution of the contract, must be considered forthe purpose of interpreting the contract, when suchinterpretation is necessary, but not when, as in the instantcase, its essential agreements are clearly set forth andplainly show that the contract belongs to a certain kind andnot to another. Furthermore, the return made was of certainbrass beds, and was not effected in exchange for the pricepaid for them, but was for other beds of another kind; and forthe letter Exhibit L-1, requested the plaintiff's prior consentwith respect to said beds, which shows that it was notconsidered that the defendant had a right, by virtue of thecontract, to make this return. As regards the shipment of beds without previous notice, it is insinuated in the recordthat these brass beds were precisely the ones so shipped,and that, for this very reason, the plaintiff agreed to theirreturn. And with respect to the so-called commissions, wehave said that they merely constituted a discount on theinvoice price, and the reason for applying this benefit to thebeds sold directly by the plaintiff to persons in Iloilo wasbecause, as the defendant obligated itself in the contract toincur the expenses of advertisement of the plaintiff's beds,such sales were to be considered as a result of thatadvertisement. In respect to the defendant's obligation to order by thedozen, the only one expressly imposed by the contract, theeffect of its breach would only entitle the plaintiff todisregard the orders which the defendant might place underother conditions; but if the plaintiff consents to fill them, hewaives his right and cannot complain for having acted thus athis own free will.For the foregoing reasons, we are of opinion that the contractby and between the plaintiff and the defendant was one

of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed uponthe defendant, either by agreement or by law. The judgment appealed from is affirmed, with costsagainst the appellant. So ordered.

Quiroga v. ParsonsFACTS: Quiroga and Parsons entered into a contract for the exclusive sale ofQuiroga 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 invoicedprices as commission sales and Parsons shall order by the dozen; b) Paymentshall be made within 60 days from date of shipment; c) Transportation andshipment expenses shall be borne by Quiroga while freight, insurance, and costof unloading by Parsons; d) If before an invoice falls due, Quiroga shouldrequest payment, payment made shall be prompt payment and a deduction of2% shall be given; same discount if payment is in cash; e) Notice from Quirogashall be given at least 15 days before any change in price; f) Parsons bindshimself not to sell any other kind of bed; and g) Contract is for an unlimitedperiod.Parsons violated some of the conditions such as not to sell the beds athigher prices, pay for the advertisement expenses, and to order beds by thedozen. Quiroga alleged that Parsons was his agent and that the obligations areimplied 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 latters 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 Quirogas part tosupply beds while an obligations on Parsons part to pay the price. These are essential features of a contract of purchase and sale. None of the clausesconveys 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 fromthe 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 Parsonswas the only one who could sell the petitioners beds in the Visayan Islands. A contract is what the law defines it to be and not what the parties call it

NIELSON V. LEPANTO 26 SCRA 540 GRN L-21601 December 28, 1968 Facts: Operating agreement between Nielson and Co., Inc andLepanto Consolidated Mining Company, whereby the former operated and managed the latters mining property.

Contract was entered into on Jan. 30, 1937, for five years,with an option to renew for the same term on the samebasis. Contract was renewed in 1941. Dec. 1941 WW II Jan. 1942 mining operations ceased. Feb. 1942 mills, plants and other property were destroyedand occupied by the Japanese Army. 1945 Japanese forces are ousted and parties regaincontrol of the property. 1945 disagreement between Nielson and Lepanto as tow/n contract is to expire in 1947. June 26, 1948 mining operations officially resumed underLepanto. Terms of the contract : Both parties to this agreement fully recognize that the terms of this Agreement are made possible only because of the faith or confidence that the officials of each company have in the other; therefore , inorder to assure that such confidence and faith shall abideand continue, NIELSON agrees that LEPANTO may cancel thisAgreement at any time upon ninety (90) days written notice, in theevent that NIELSON for any reason whatsoever, except acts of God,strike and other causes beyond its control, shall cease to prosecutethe operation and development of the properties hereindescribed, in good faith and in accordance with approvedmining practice. Nielson contends that the contract was suspended andshould be extended. Lepanto contends that the contract expired in 1947 andthat period of suspension did not extend the contract. The Court of First Instance (CFI) in Manila held for thedefendant, Lepanto. Nielsen appealed to the Supreme Court (SC) and the SCreversed the decision of the CFI; It held that the contract was suspended until Jan. 26, 1948, when mining operationsresumed. Lepanto seeks for motion for reconsideration based on theff grounds:1. That the contract entered into was a contract of agencywhich was effectively revoked and terminated in 1945;2. That the court erred in holding that the period of suspension extended the life of the management contract.3.

The court erred in reversing the ruling of the trialjudge that the management agreement was onlysuspended but not extended on account of the war.4. The court erred in reversing the finding of the trialjudge that Nielson's action had prescribed, but considering only the first claim and ignoring theprescriptibility of the other claims.5. The court erred in holding that the period of suspension of the contract on account of the war lastedfrom February 1942 to June 26, 1948.6. Assuming arguendo that Nielson is entitled to anyrelief, the court erred in awarding as damages (a) 10%of the cash dividends declared and paid in December,1941; (b) the management fee of P2,500.00 for themonth of January, 1942; and (c) the full contract pricefor the extended period of sixty months, since thesedamages were neither demanded nor proved and, inany case, not allowable under the general law of damages.7. Assuming arguendo that appellant is entitled to anyrelief, the court erred in ordering appellee to issue anddeliver to appellant share's of stock together withfruits thereof.8. The court erred in awarding to appellant anundetermined amount of shares of stock and/or cash,which award cannot be ascertained and executedwithout further litigation.9. The court erred in rendering judgment for attorney'sfees. Issue 1: (AGENCY-RELEVANT)L: W/N management contract be considered a contract of agency and therefore effectively revokedand terminated. Held: No, the SC held that this ground of the motion forreconsideration be brushed aside. It is the rule, and the settleddoctrine of this Court, that a party cannot change his theory onappeal-that is, that a party cannot raise in the appellate court any question of law or of fact that was not raised in the court below or which was not within the issue made by the parties intheir pleadings(Obiter) Even if allowed, it cannot be sustained. It is the SCs view that the management contract is not a contract of agency but a contract of lease of services hence cannot beunilaterally revoked from http://berneguerrero.com/node/210: Article 1709 of the Old Civil Code, defining contract of agency, provides that "By the contract of agency, one person bindshimself to render some service or do something for the account or at the request of another." Article 1544, defining contract of lease of service, provides that "In a lease of work or services, one of the partiesbinds himself to make or construct something or to render a service tothe other for a price certain." In both agency and lease of services oneof the parties binds himself to render some service to the other party.Agency, however, is distinguished from lease of work or services inthat the basis of agency is representation, while in the lease of work orservices the basis is employment. The lessor of services does not represent his employer, while the agent represents his principal.Further, agency is a preparatory contract, as agency "does not stopwith

the agency because the purpose is to enter into other contracts."The most characteristic feature of an agency relationship is the agent'spower to bring about business relations between his principal andthird persons. "The agent is destined to execute juridical acts (creation,modification or extinction of relations with third parties). Lease of services contemplate only material (non-juridical) acts." Herein, theprincipal and paramount undertaking of Nielson under themanagement contract was the operation and development of the mineand the operation of the mill. All the other undertakings mentioned inthe contract are necessary or incidental to the principal undertaking these other undertakings being dependent upon the work on thedevelopment of the mine and the operation of the mill. In theperformance of this principal undertaking Nielson was not in any wayexecuting juridical acts for Lepanto, destined to create, modify orextinguish business relations between Lepanto and third persons. Inother words, in performing its principal undertaking Nielson was not acting as an agent of Lepanto, in the sense that the term agent isinterpreted under the law of agency, but as one who was performingmaterial acts for an employer, for a compensation. It is true that themanagement contract provides that Nielson would also act aspurchasing agent of supplies and enter into contracts regarding thesale of mineral, but the contract also provides that Nielson could not make any purchase, or sell the minerals, without the prior approval of Lepanto. It is clear, therefore, that even in these cases Nielson could not execute juridical acts which would bind Lepanto without first securingthe approval of Lepanto. Nielson, then, was to act only as anintermediary, not as an agent. Further, from the statements in theannual report for 1936, and from the provision of paragraph XI of theManagement contract, that the employment by Lepanto of Nielson tooperate and manage its mines was principally in consideration of theknow-how and technical services that Nielson offered Lepanto. Thecontract thus entered into pursuant to the offer made by Nielson andaccepted by Lepanto was a "detailed operating contract". It was not acontract of agency. Nowhere in the record is it shown that Lepantoconsidered Nielson as its agent and that Lepanto terminated themanagement contract because it had lost its trust and confidence inNielson. Issue 2: W/N the contract was actually suspended and extendeduntil 1948, on account of the war and its aftermath. Held: Yes, the contract was suspended and extended until 1948.The management contract provides as follows: In the event of inundation, flooding of the mine, typhoon, earthquake or any other force majeure, war,insurrection, civil commotion, organized strike, riot, fire, injuryto the machinery or other event or cause reasonably beyond thecontrol of NIELSON and which adversely affects the work of mining and milling; NIELSON shall report such fact to LEPANTOand without liability or breach of the terms of this Agreement,the same shall remain in suspense, wholly or partially during the terms of such inability. Also, since damages caused by the war were severe, rebuilding of the mines had to be undergone andthus causing the operations to officially resume on June 26,1948. Issue 3:

W/N damages awarded to Nielson is proper; (a) 10% of the cash dividends declared and paid in December, 1941; (b) the management feeof P2,500.00 for the month of January, 1942; and (c) the full contract price forthe extended period of sixty months; (d) to issue and deliver to appellant share's of stock together with fruits thereof; (e) an undetermined amount of shares of stock and/or cash, and; (f) attorney's fees Held: Awards (a), (b), (c), and (f), with proper discretion of thecourt, are granted. Awards (d), and (c), however, are not granted.Awards (a), (b), (c) are awarded because it is based onthe stipulations stated in the contract agreed upon by both parties. Award (f), is granted since attorneys fees are given to the discretion of the court. Award (d) and (c) is not grantedbecause it is under the Corporation Law that stock dividends can only be given to stockholders of the said corporation, of which,Nielson and Co., Inc., is not a part of.

NIELSON V. LEPANTO 26 SCRA 540 GRN L-21601 December 28, 1968 Facts: Operating agreement between Nielson and Co., Inc andLepanto Consolidated Mining Company, whereby the former operated and managed the latters mining property. Contract was entered into on Jan. 30, 1937, for five years,with an option to renew for the same term on the samebasis. Contract was renewed in 1941. Dec. 1941 WW II Jan. 1942 mining operations ceased. Feb. 1942 mills, plants and other property were destroyedand occupied by the Japanese Army. 1945 Japanese forces are ousted and parties regaincontrol of the property. 1945 disagreement between Nielson and Lepanto as tow/n contract is to expire in 1947.

June 26, 1948 mining operations officially resumed underLepanto. Terms of the contract : Both parties to this agreement fully recognize that the terms of this Agreement are made possible only because of the faith or confidence that the officials of each company have in the other; therefore , inorder to assure that such confidence and faith shall abideand continue, NIELSON agrees that LEPANTO may cancel thisAgreement at any time upon ninety (90) days written notice, in theevent that NIELSON for any reason whatsoever, except acts of God,strike and other causes beyond its control, shall cease to prosecutethe operation and development of the properties hereindescribed, in good faith and in accordance with approvedmining practice. Nielson contends that the contract was suspended andshould be extended. Lepanto contends that the contract expired in 1947 andthat period of suspension did not extend the contract. The Court of First Instance (CFI) in Manila held for thedefendant, Lepanto. Nielsen appealed to the Supreme Court (SC) and the SCreversed the decision of the CFI; It held that the contract was suspended until Jan. 26, 1948, when mining operationsresumed. Lepanto seeks for motion for reconsideration based on theff grounds:1. That the contract entered into was a contract of agencywhich was effectively revoked and terminated in 1945;2. That the court erred in holding that the period of suspension extended the life of the management contract.3. The court erred in reversing the ruling of the trialjudge that the management agreement was onlysuspended but not extended on account of the war.4. The court erred in reversing the finding of the trialjudge that Nielson's action had prescribed, but considering only the first claim and ignoring theprescriptibility of the other claims.5. The court erred in holding that the period of suspension of the contract on account of the war lastedfrom February 1942 to June 26, 1948.6. Assuming arguendo that Nielson is entitled to anyrelief, the court erred in awarding as damages (a) 10%of the cash dividends declared and paid in December,1941; (b) the management fee of P2,500.00 for themonth of January, 1942; and (c) the full contract pricefor the extended period of sixty months, since thesedamages were neither demanded nor proved and, inany case, not allowable under the general law of damages.7.

Assuming arguendo that appellant is entitled to anyrelief, the court erred in ordering appellee to issue anddeliver to appellant share's of stock together withfruits thereof.8. The court erred in awarding to appellant anundetermined amount of shares of stock and/or cash,which award cannot be ascertained and executedwithout further litigation.9. The court erred in rendering judgment for attorney'sfees. Issue 1: (AGENCY-RELEVANT)L: W/N management contract be considered a contract of agency and therefore effectively revokedand terminated. Held: No, the SC held that this ground of the motion forreconsideration be brushed aside. It is the rule, and the settleddoctrine of this Court, that a party cannot change his theory onappeal-that is, that a party cannot raise in the appellate court any question of law or of fact that was not raised in the court below or which was not within the issue made by the parties intheir pleadings(Obiter) Even if allowed, it cannot be sustained. It is the SCs view that the management contract is not a contract of agency but a contract of lease of services hence cannot beunilaterally revoked from http://berneguerrero.com/node/210: Article 1709 of the Old Civil Code, defining contract of agency, provides that "By the contract of agency, one person bindshimself to render some service or do something for the account or at the request of another." Article 1544, defining contract of lease of service, provides that "In a lease of work or services, one of the partiesbinds himself to make or construct something or to render a service tothe other for a price certain." In both agency and lease of services oneof the parties binds himself to render some service to the other party.Agency, however, is distinguished from lease of work or services inthat the basis of agency is representation, while in the lease of work orservices the basis is employment. The lessor of services does not represent his employer, while the agent represents his principal.Further, agency is a preparatory contract, as agency "does not stopwith the agency because the purpose is to enter into other contracts."The most characteristic feature of an agency relationship is the agent'spower to bring about business relations between his principal andthird persons. "The agent is destined to execute juridical acts (creation,modification or extinction of relations with third parties). Lease of services contemplate only material (non-juridical) acts." Herein, theprincipal and paramount undertaking of Nielson under themanagement contract was the operation and development of the mineand the operation of the mill. All the other undertakings mentioned inthe contract are necessary or incidental to the principal undertaking these other undertakings being dependent upon the work on thedevelopment of the mine and the operation of the mill. In theperformance of this principal undertaking Nielson was not in any wayexecuting juridical acts for Lepanto, destined to create, modify orextinguish business relations between Lepanto and third persons. Inother words, in performing its principal undertaking Nielson was not acting as an agent of Lepanto, in the sense that the term agent isinterpreted under the law of agency, but as one who was performingmaterial acts for an

employer, for a compensation. It is true that themanagement contract provides that Nielson would also act aspurchasing agent of supplies and enter into contracts regarding thesale of mineral, but the contract also provides that Nielson could not make any purchase, or sell the minerals, without the prior approval of Lepanto. It is clear, therefore, that even in these cases Nielson could not execute juridical acts which would bind Lepanto without first securingthe approval of Lepanto. Nielson, then, was to act only as anintermediary, not as an agent. Further, from the statements in theannual report for 1936, and from the provision of paragraph XI of theManagement contract, that the employment by Lepanto of Nielson tooperate and manage its mines was principally in consideration of theknow-how and technical services that Nielson offered Lepanto. Thecontract thus entered into pursuant to the offer made by Nielson andaccepted by Lepanto was a "detailed operating contract". It was not acontract of agency. Nowhere in the record is it shown that Lepantoconsidered Nielson as its agent and that Lepanto terminated themanagement contract because it had lost its trust and confidence inNielson. Issue 2: W/N the contract was actually suspended and extendeduntil 1948, on account of the war and its aftermath. Held: Yes, the contract was suspended and extended until 1948.The management contract provides as follows: In the event of inundation, flooding of the mine, typhoon, earthquake or any other force majeure, war,insurrection, civil commotion, organized strike, riot, fire, injuryto the machinery or other event or cause reasonably beyond thecontrol of NIELSON and which adversely affects the work of mining and milling; NIELSON shall report such fact to LEPANTOand without liability or breach of the terms of this Agreement,the same shall remain in suspense, wholly or partially during the terms of such inability. Also, since damages caused by the war were severe, rebuilding of the mines had to be undergone andthus causing the operations to officially resume on June 26,1948. Issue 3: W/N damages awarded to Nielson is proper; (a) 10% of the cash dividends declared and paid in December, 1941; (b) the management feeof P2,500.00 for the month of January, 1942; and (c) the full contract price forthe extended period of sixty months; (d) to issue and deliver to appellant share's of stock together with fruits thereof; (e) an undetermined amount of shares of stock and/or cash, and; (f) attorney's fees Held: Awards (a), (b), (c), and (f), with proper discretion of thecourt, are granted. Awards (d), and (c), however, are not granted.Awards (a), (b), (c) are awarded because it is based onthe stipulations stated in the contract agreed upon by both parties. Award (f), is granted since attorneys fees are given to the discretion of the court. Award (d) and (c) is not grantedbecause it is under the Corporation Law that stock dividends can only be given to stockholders of the said corporation, of which,Nielson and Co., Inc., is not a part of.

Sevilla vs. CA FACTS: A contract by and between Noguera and Tourist World Service (TWS), represented by Canilao, wherein TWS leasedthe premises belonging to Noguera as branch office of TWS. When the branch office was opened, it wasrun by appellant Sevilla payable to TWS by any airline for any fare brought in on the efforts of Mrs. Sevilla,4% was to go to Sevilla and 3% was to be withheld by the TWS. Later, TWS was informed that Sevillawas connected with rival firm, and since the branch office was losing, TWS considered closing down itsoffice. On January 3, 1962, the contract with appellee for the use of the branch office premises wasterminated and while the effectivity thereof was January 31, 1962, the appellees no longer used it.Because of this, Canilao, the secretary of TWS, went over to the branch office, and finding thepremises locked, he padlocked the premises. When neither appellant Sevilla nor any of hisemployees could enter, a complaint was filed by the appellants against the appellees. TWS insisted that Sevilla was a mere employee, being the branch manager of its branch office and that she had no say on the lease executed with the private respondent, Noguera. ISSUE: W/N ER-EE relationship exists between Sevilla and TWS HELD: The records show that petitioner, Sevilla, was not subject to control by the private respondent TWS. Inthe first place, under the contract of lease, she had bound herself in solidum as andfor rental payments, an arrangement that would belie claims of a masterservant relationship. That does notmake her an employee of TWS, since a true empl oyee cannot be made to part with his own money in pursuance of his employers business, or otherwise, assume any liability thereof. In the second place,when the branch office was opened, the same was run by the appellant Sevilla payable to TWS by anyairline for any fare brought in on the effort of Sevilla. Thus, it cannot be said that Sevilla was under thecontrol of TWS. Sevilla in pursuing the business, relied on her own capabilities. It is further admitted that Sevilla was not in the companys payroll. For her efforts, she retained 4% in commissions from airlinebookings, the remaining 3% going to TWS. Unlike an employee, who earns a fixed salary, she earnedcompensation in fluctuating amount depending on her booking successes. The fact that Sevilla had been designated branch manager does not make her a TWS employee. It appears that Sevillais a bona fide travel agent herself, and she acquired an interest in the business entrusted to her. Shealso had assumed personal obligation for the operation thereof, holding herself solidaryliable for the payment of rentals. Wherefore, TWS and Canilao are jointly and severally liable to indemnify thepetition er, Sevilla.