PART I

A. DEFINITION OF AGENCY- Article 1868 defines the contract of agency:

Article 1868. By the contract of agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter.
PURPOSE

The purpose of agency is to extend the personality of the principal. It enables the activity
of man which is naturally limited in its exercise by the impositions of his physiological
conditions to be legally extended by permitting him to be constructively present in many
different places and to perform diverse juridical acts and carry on many different
activities through another when physical presence is impossible or inadvisable at the
same time.

ELEMENTS OF AGENCY
(according to the Courts decision in Rallos vs Felix Go Chan)
a.
b.
c.
d.

There is consent, express or implied, of the parties to establish the relationship;

The object is the execution of a juridical act in relation to a third person;
The agent acts as a representative and not for himself; and
The agent acts within the scope of his authority.

CONSENT ----to say there is consent to enter into an agency, there must be intent
to enter in the relationship
The intention of the parties is important in determining the existence of agency.
Principal: there must be an actual intention to appoint; an intention inferable from the
principals words or actions
Agent:

intention to accept the appointment and act on it.

Absence of mutual intention between principal and agent = no agency

OBJECT ----execution of juridical act in relation to third person
*it is not necessary that the third person with whom the agent is to transact be identified
nor is it required that the specific juridical relation be specified upon
establishment of agency.
Subject matter representation; this is the basis of agency
*Requirements c & d are not conditions for the existence of agency relationship
Effects of Agency: Integration and Extension
Integration- Personality of the principal is merged with that of the agent.

Extension- Personality of the principal is reproduced in the persons of his agent

1

Authority to act.
By legal fiction, the agent becomes the principal, authorized to perform all acts
which the latter would have him do. (Orient Air Services v. CA)
The actual or real absence of the principal is converted into his legal or juridical
presence. (Eurotech vs. Cuison)
The principal becomes liable for obligations contracted by the agent provided that
the act is within the authority of the agent. (Prudential Bank vs. CA)
Agent not real party-in-interest
Since the agent is a mere extension of the personality of the principal, he is not a
party to the contract with the third person. The liability of the third party is to the
principal and not to the agent.
This rule does not apply in criminal cases. (Ong vs. CA) If the agent is being
sued in a criminal action, this cannot be used as a defense. Otherwise, the agent
can commit any crime and not be held liable for it.
Notice to agent is notice to principal.
General rule: information relayed to the agent in connection with the object of the
contract is deemed to have been relayed to the principal. (this is known as the
theory of imputed knowledge)
However, the rule does not apply conversely. Notice to the principal is not notice
to the agent. (Sunace Intl vs. CA)
Exception to the rule: where the conduct and dealings of the agent re such as to
raise a clear presumption that he will not communicate to the principal the facts
in controversy. (Cosmic Lumber vs. CA)
o This is because if the agent were committing fraud, it would be
contrary to common sense to presume that he would
communicate the facts to the principal. When an agent is engaged
in the perpetration of fraud upon his principal for his own exclusive
benefit, he is not really acting for the principal but is really acting
for himself.
Bad faith of the agent is bad faith of the principal.

Distinguished General Agency from Agency couched in general

terms.
Article 1876, Civil Code: General agency comprises all the business of the
principal.
Article 1877, CC: An Agency couched in general terms comprises only acts of
administration, even if the principal should state that she withholds no power or
that the agent may execute such acts as he may consider appropriate, or
eventhough the agency should authorize a general and unlimited management.

PBN vs. RITRATTO - Anarna

BAD FAITH OF AGENT IS BAD FAITH OF PRINCIPAL

CARAM vs. LAURETA
FACTS:
On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land in favor of Claro
Laureta, the respondent herein. The deed of absolute sale was not registered because it was
not acknowledged before a notary public or any other authorized officer. However, Mata
delivered to Laureta the peaceful and lawful possession of the premises of the land together
with the pertinent papers thereof.
Since June 10, 1945, Laureta had been and is stin in continuous, adverse and notorious
occupation of said land, without being molested, disturbed or stopped by any of the defendants
or their representatives. In fact, Laureta had been paying realty taxes due thereon and had
introduced improvements at the time of the filing of the complaint.
On May 5, 1947, the same land was sold by Mata to Fermin Z. Caram, Jr., petitioner herein. The
deed of sale in favor of Caram was acknowledged before Atty. Abelardo Aportadera. The
second sale between Mata and Caram, Jr. was registered with the Register of Deeds. On the
same date, Transfer Certificate of Title No. 140 was issued in favor of Caram Jr.
Laureta filed in the Court of First Instance of Davao an action for nullity, recovery of ownership
and/or reconveyance with damages and attorney's fees against Mata, Caram, Jr. and the
Register of Deeds of Davao City.
Mata admitted the existence of a record in the Registry of Deeds regarding a document
allegedly signed by him in favor of Caram, Jr. but denies that he ever signed the same.
Caram Jr. filed his answer alleging that he has no knowledge or information about the previous
encumbrances, transactions, and alienations in favor of plaintiff until the filing of the complaints.
RTC favored Laureta and ordered the nullity of the deed of sale of the land to Caram. CA
affirmed RTC decision.
Caram assails the finding of the trial court that the second sale of the property was made
through his representatives, Irespe and Atty. Aportadera. He argues that Pedro Irespe was
acting merely as a broker or intermediary with the specific task and duty to pay Mata the sum of
P1,000.00 for the latter's property and to see to it that the requisite deed of sale covering the
purchase was properly executed by Marcos Mata; and that the other alleged representative,
Atty. Aportadera, merely acted as a notary public in the execution of the deed of sale.

The petitioner also contends that he cannot be considered to have acted in bad faith because
there is no direct proof showing that Irespe and Aportadera, his alleged agents, had knowledge
of the first sale to Laureta.
ISSUE:
1.) Whether or not Irespe and Atty, Aportadera acted as agents of Caram?
2.) Whether or not bad faith of agent is bad faith of principal?
HELD:
1.) Yes. Irespe and Atty. Aportadera are agents of Caram.
The facts of record show that Mata, the vendor, and Caram, the second vendee had never met.
During the trial, Marcos Mata testified that he knows Atty. Aportadera but did not know
Caram. Thus, the sale of the property could have only been through Caram's representatives,
Irespe and Aportadera. The petitioner, in his answer, admitted that Atty. Aportadera acted as his
notary public and attorney-in-fact at the same time in the purchase of the property.
2.) Yes. Bad faith of the agent is bad faith of the principal.
In this case, the Court cannot help being convinced that Irespe, attorney-in-fact of Caram, Jr.
had knowledge of the prior existing transaction, between Mata and Laureta over the land, was
executed by Mata in favor of Caram, Jr. and this knowledge has the effect of registration as to
Caram.
Even if Irespe and Aportadera did not have actual knowledge of the first sale, still their actions
have not satisfied the requirement of good faith. Bad faith is not based solely on the fact that a
vendee had knowledge of the defect or lack of title of his vendor. There is no doubt then
that Irespe and Aportadera, acting as agents of Caram, purchased
the property of Mata in bad faith.
Applying the principle of agency, Caram as principal, should also be deemed to have acted in
bad faith. Since Caram was a registrant in bad faith, the situation is as if there was no
registration at all.
Dominion Insurance v CA
FACTS:
Rodolfo S. Guevarra instituted a civil case for a sum of money against petitioner seeking
to recover the sum of P156, 473.90 which he claimed to have advanced in his capacity as
manager of Dominion Insurance to satisfy certain claims filed by its clients.
The petitioner however stated that they are not liable to pay Guevarra because he had
not acted within his authority as an agent for petitioner. They have instructed the respondent
that the payment for the claims of the insured should be taken from the revolving fund, not from
his (Guevarras) personal money.

The RTC rendered its decision making petitioner liable to repay Guevarra. On appeal,
the trial court decision was affirmed.
ISSUE:

Whether Gueverra acted within his authority as agent of petitioner

HELD:
The Special Power of Attorney would show that the parties intended to enter into a
principal-agent relationship but despite the word special in the title of the document, the
contents reveal that what was constituted was actually a general agency. The Court in
examining the language of the SPA found that it was comprehensive enough to cover all the
business of the principal. A general power permits the agent to do all acts for which the law does
not require a special power and contents I the document did not require a special power of
attorney
In this case, although the agency covered all of the business of the principal it was
couched in general terms which meant that his authority was limited only to acts of
administration. The payment of claims, being an act of strict dominion, requires a special power
of attorney (Art.1878). Thus, although he was a general agent, he was not authorized to pay the
claims.
Under 1918 of CC, the principal will not be liable for the expenses incurred by the agent who
acted in contravention of the formers instruction. Fortunately for the agent, although he acted
beyond his authority, the Court allowed him to recover the amounts he advanced on the basis of
1246.

Veloso vs CA
FACTS:
Petitioner Francisco Veloso was the owner of a parcel of land situated in the district of Tondo,
Manila, with an area of 177 square meters. The title was registered in the name of Francisco A.
Veloso. The said title was subsequently cancelled and a new one issued in the name of
Aglaloma B. Escario. On August 24, 1988, petitioner Veloso filed an action for annulment of
documents, reconveyance of property with damages and preliminary injunction and/or
restraining order. Petitioner alleged therein that he was the absolute owner of the subject
property and he never authorized anybody, not even his wife, to sell it. He alleged that he was in
possession of the title but when his wife, Irma, left for abroad, he found out that his copy was
missing. He then verified with the Registry of Deeds of Manila and there he discovered that his
title was already canceled in favor of defendant Aglaloma Escario. The transfer of property was
supported by a General Power of Attorney and Deed of Absolute Sale executed by Irma Veloso,
wife of the petitioner and appearing as his attorney-in-fact, and defendant Aglaloma Escario.
Petitioner Veloso, however, denied having executed the power of attorney and alleged that his
signature was falsified. He also denied having seen or even known Rosemarie Reyes and
Imelda Santos, the supposed witnesses in the execution of the power of attorney. He
vehemently denied having met or transacted with the defendant. Thus, he contended that the
sale of the property, and the subsequent transfer thereof, were null and void. Defendant
Aglaloma Escario in her answer alleged that she was a buyer in good faith and denied any
knowledge of the alleged irregularity. She allegedly relied on the general power of attorney of
Irma Veloso which was sufficient in form and substance and was duly notarized.
ISSUE:
Whether there was a valid sale of the subject property?
HELD:
Yes, the sale of the subject property is valid. The Supreme Court held that an examination of the
records showed that the assailed power of attorney was valid and regular on its face. It was
notarized and as such, it carries the evidentiary weight conferred upon it with respect to its due
execution. While it is true that it was denominated as a general power of attorney, a perusal
thereof revealed that it stated an authority to sell. Respondent Aglaloma relied on the power of
attorney presented by petitioner's wife, Irma. Being the wife of the owner and having with her
the title of the property, there was no reason for the private respondent not to believe, in her
authority. Thus, having had no inkling on any irregularity and having no participation thereof,
private respondent was a buyer in good faith. It has been consistently held that a purchaser in
good faith is one who buys property of another, without notice that some other person has a
right to, or interest in such property and pays a full and fair price for the same, at the time of
such purchase, or before he has notice of the claim or interest of some other person in the
property. Besides, the records of this case disclosed that the plaintiff is not entirely free from
blame. He admitted that he is the sole person who has access to the TCT and other documents
appertaining thereto. However, the fact remains that the Certificate of Title, as well as other

documents necessary for the transfer of title were in the possession of plaintiffs wife, Irma L.
Veloso, consequently leaving no doubt or any suspicion on the part of the defendant as to her
authority. Under Section 55 of Act 496, as amended, Irmas possession and production of the
Certificate of Title to defendant operated as conclusive authority from the plaintiff to the Register
of Deeds to enter a new certificate.
Dungo vs. Lupena - Ceras
IGNACIO VICENTE and MOISES ANGELES, petitioners,
vs.
HON. AMBROSIO M. GERALDEZ, as Judge of the Court of First Instance of Bulacan,
Branch V (Sta. Maria), and HI CEMENT CORPORATION, respondents
FACTS:
Hi Cement Corporation acquired a mining license to give them the authority to to operate
mining facilities. Within the limits of Placer Mining Claim Red Star VIII are three parcels of land
claimed by the petitioners Juan Bernabe, Vicente and Angeles. Disagreement arose between
the petitioner and the respondents because of the said mining area. During pre-trial, the
possibility of an amicable settlement was explored where HI Cement offered to purchase the
areas of claims of Vicente et al at the rate of P0.90 per square meter however petitioners
refused to accept the rate because they wanted P10.00 per square meter.
Consequently,the lawyers of HI Cement agreed to enter into a compromise agreement with
the three whereby commissioners shall be assigned by the court for the purpose of assessing
the value of the disputed areas of claim. After the assessment was made, the commissioners
recommended a price rate of P15.00 per square meter. However the Board of Directors of HI
Cement disapproved the said compromise agreement. Consequently , Atty. Ventura, lawyer of
HI Cement, filed a motion with the court to disregard the compromise agreement.
The petitioners questioned the motion filed by Atty. Ventura. Petitioners insisted that the
compromise agreement is binding because prior to entering into the compromise agreement,
the three lawyers of HI Cement declared in open court that they are authorized to enter into a
compromise agreement for HI Cement; that one of the lawyers of HI Cement, Atty. Florentino
Cardenas, is an executive official of HI Cement. They also emphasized that being an executive
official means that such act ratified the compromise agreement even if it was not approved by
the Board. On the other side, HI Cement contended that the lawyers were not authorized and
that in fact there was no special power of attorney executed in their favor for the purpose of
entering into a compromise agreement
The trial court dismissed the complaint of the petitioners and ruled in favor of HI Cement.
ISSUE:
Whether or not a compromise agreement entered into by a lawyer purportedly in
behalf of the corporation is valid without a written authority.

HELD:
No, a compromise agreement entered into by a lawyer purportedly in behalf of the
corporation is valid without a written authority.
The law specifically requires that "juridical persons may compromise only in the form
and with the requisites which may be necessary to alienate their property." Under the
corporation law the power to compromise or settle claims in favor of or against the
corporation is ordinarily and primarily committed to the Board of Directors. The right of
the Directors "to compromise a disputed claim against the corporation rests upon their
right to manage the affairs of the corporation according to their honest and informed
judgment and discretion as to what is for the best interests of the corporation." This
power may however be delegated either expressly or impliedly to other corporate
officials or agents. Thus it has been stated, that as a general rule an officer or agent of
the corporation has no power to compromise or settle a claim by or against the
corporation, except to the extent that such power is given to him either expressly or by
reasonable implication from the circumstances. It is therefore necessary to ascertain
whether from the relevant facts it could be reasonably concluded that the Board of
Directors of the HI Cement Corporation had authorized its lawyers to enter into the said
compromise agreement.
Petitioners claim that private respondent's attorneys admitted twice in open court on January
30, 1969, that they were authorized to compromise their client's case, which according to them,
was never denied by the said lawyers in any of the pleadings filed by them in the case. The
claim is unsupported by evidence. On the contrary, in private respondent's "Reply to Defendant
Bernabe's Answer Dated November 8, 1969," said counsels categorically denied that they ever
represented to the court that they were authorized to enter into a compromise. Indeed, the
complete transcript of stenographic notes taken at the proceedings on January 30, 1969 are
before Us, and nowhere does it appear therein that respondent corporation's lawyers ever made
such a representation. In any event, assuming arguendo that they did, such a self-serving
assertion cannot properly be the basis for the conclusion that the respondent corporation had in
fact authorized its lawyers to compromise the litigation.
It having been found by the trial court that "the counsel for the plaintiff entered into the
compromise agreement without the written authority of his client and the latter did not ratify, on
the contrary it repudiated and disowned the same ...", We therefore declare that the orders of
the court a quo subject of these two petitions, have not been issued in excess of its jurisdictional
authority or in grave abuse of its discretion.

COSMIC LUMBER CORPORATION V CA

FACTS

Cosmic Corporation, through its General Manager executed a Special Power of

Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact to initiate, institute and
file any court action for the ejectment of third persons and/or squatters of the entire lot
9127 and 443 for the said squatters to remove their houses and vacate the premises in
order that the corporation may take material possession of the entire lot
Paz G. Villamil Estrada, by virtue of her power of attorney, instituted an action for
the ejectment of private respondent Isidro Perez and recover the possession of a
portion of lot 443 before the RTC
Estrada entered into a Compromise Agreement with Perez, the terms and
conditions such as:
In order for Perez to buy the said lot he is presently occupying, he has to pay to
plaintiff through Estada the sum of P26,640 computed at P80/square meter and that
Cosmic Lumber recognizes ownership and possession of Perez by virtue of this
compromise agreement over said portion of 333 sqm of lot 443 and whatever expenses
of subdivision, registration and other incidental expenses shall be shouldered by Perez
although the agreement was approved by the trial court and the decision became final
and executory it was not executed within the 5 year period from date of its finality
allegedly due to the failure of Cosmic Lumber to produce the owners duplicate copy of
title needed to segregate from lot 443 the portion sold by the attorney-in-fact, Paz
Estrada to Perez under the compromise agreement
ISSUE:
W/N there is a contract of agency between Cosmic Lumber, principal and Paz
Estrada, agent thus binding the principal over the compromise agreement made by the
agent to a third person, Perez in selling the portion of the said property
RULING:
No
The authority granted to Villamil-Estrada under the special power of attorney was
explicit and exclusionary: for her to institute any action in court to eject all persons found
on lots number 9127 and 443 so that Cosmic Lumber could take material possession
thereof and for this purpose, to appear at the pre-trial and enter into any stipulation of
facts and/or compromise agreement but only insofar as this was protective of the rights
and interests of Cosmic Lumber in the property
Nowhere in this authorization was Villamil-Estrada granted expressly or impliedly
any power to sell the subject property nor a portion thereof
Neither can a conferment of the power to sell be validly inferred from the specific
authority to enter into a compromise agreement because of the explicit limitation fixed
by the grantor that the compromise entered into shall only be so far as it shall protect
the rights and interest of the corporation in the aforementioned lots.
In the context of special investiture of powers to Villamil-Estrada, alienation by
sale of an immovable certainly cannot be deemed protective of the right of Cosmic

Lumber to physically possess the same, more so when the land was being sold for a
price of P80/sqm , very much less than its assessed value of P250/sqm and considering
further that plaintiff never received the proceeds of the sale
When the sale of a piece of land or any interest thereon is through an agent, the
authority of the latter shall be in writing; otherwise, the sale should be void. Thus, the
authority of an agent to execute a contract for the sale of real estate must be conferred
in writing and must give him specific authority, either to conduct the general business of
the principal or to execute a binding contract containing terms and conditions which are
in the contract he did execute
For the principal to confer the right upon an agent to sell real estate, a power of
attorney must so express the powers of the agent in clear and unmistakable language
It is therefore clear that by selling to Perez a portion of Cosmic Lumbers land
through a compromise agreement, Villamil-Estrada acted without or in obvious authority.
The sale ipso jure is consequently void and so is the compromise agreement. This
being the case, the judgment based thereon is necessarily void
When an agent is engaged in the perpetration of a fraud upon his principal for his
own exclusive benefit, he is not really acting for the principal but is really acting for
himself, entirely outside the scope of his agency
Mercado vs. Allied Banking Corporation Galicinao

BPI vs. De Coster

Facts:
De Coster, La Orden and Poizat issued a promissory note in favor of BPI for
P292,000. The promissory note was secured by several mortgages on the
several properties of the debtors. The debtors defaulted so BPI asked the court
to foreclose the mortgages. CFI issued an execution order against the three
debtors. Gabriela de Coster, wife of Poizat, complained that at the time of the
filing of the complaint she was in Paris and was absent in the Philippines and has
no knowledge of the actual facts. De Coster also alleged that the mortgage was
made without her consent and made in excess of the authority given his husband
and therefore it was null and void.
Issue:
Whether or not Gabriela de Coster y Roxas is liable fo the mortgage executed by
her agent-husband Jean Poizat.
Held: No. Husband has no authority to execute a promissory note in behalf of his
wife or to make the latter liable as an accommodation maker. Also, the debt was
a preexisting debt of the husband wherein the wife was not a party and has no
legal obligation to pay. The obligation of the husband stated in the power if
attorney was to borrow money for or in account of his wife as her agent and as
her attorney in fact. That does not carry with it the power to make his wife liable

as a surety for his preexisting debt. Also, the husband, the agent of his wife,
failed to represent the interest of his principal in court.
Insular Drug vs. PNB Mogello

Hodges v. Salas and Salas

63 Phil. 567
Facts: On September 2, 1923, the defendants executed a power of attorney in favor of their
brother-in-law Felix S. Yulo to enable him to obtain a loan and secure it with a mortgage on the
real property described in transfer certificate of title No. 3335. The power of attorney was
registered in the registry of deeds of the Province of Occidental Negros. Acting under said
power of attorney, Felix S. Yulo, on March 27,1926, obtained a loan of P28,000 from the plaintiff,
binding his principals jointly and severally, to pay it within ten (10) years, together with interest
thereon at 12 per cent per annum payable annually in advance, to which effect he signed a
promissory note for said amount and executed a deed of mortgage of the real property. It was
stated in the deed that in case the defendants failed to pay the stipulated interest and the taxes
on the real property mortgaged and if the plaintiff were compelled to bring an action to recover
his credit, said defendants would be obliged to pay 10 per cent more on the unpaid capital, as
fees for the plaintiff's attorneys. The mortgage so constituted was registered in the registry of
deeds of the Province of Occidental Negros and noted on the back of the transfer certificate of
title. The defendants failed to pay at maturity the interest stipulated which should have been
paid one year inadvance. Plaintiff therefore brought an action for foreclosure of the
mortgage. The trial court ordered in favor of the defendants and held that the loan and the
mortgage were illegal.
Issue: Whether or not the loan obtained and the mortgage executed by Yulo was valid and
therefore defendants are bound to pay?
Ruling: Yes. The loan obtained and the mortgage executed by Yulo was valid and therefore
defendants are bound to pay for it. By virtue of the authority conferred by the defendants by
executing a power of attorney, agent Yulo was authorized to borrow money and invest it as he
wished, without being obliged to apply it necessarily for the benefit of his principals.

Effect of Specific Authorization

Bravo-Guerrero vs. Bravo
Facts: Spouses Mauricio and Simona Bravo owned two parcels of land loacated alon
Evangelista Street, Makati City, Metro Manila. The properties contain a large residential
dwelling, a smaller house and other improvements. The spouses had three children Roland,
Cesar and Lily, all surnamed Bravo. Cesar died without issue. Lily Lily Bravo married David
Diaz, and had a son, David B. Diaz, Jr. (David Jr.). Roland had six children, namely, Lily

Elizabeth Bravo-Guerrero (Elizabeth), Edward Bravo (Edward), Roland Bravo, Jr. (Roland Jr.),
Senia Bravo, Benjamin Mauricio Bravo, and their half-sister, Ofelia Bravo (Ofelia).
Simona executed a General Power of Attorney (GPA) on 17 June 1966 appointing Mauricio as
her attorney-in-fact. In the GPA, Simona authorized Mauricio to mortgage or otherwise
hypothecate, sell, assign and dispose of any and all of my property, real, personal or mixed, of
any kind whatsoever and wheresoever situated, or any interest therein xxx.[6] Mauricio
subsequently mortgaged the Properties to the Philippine National Bank (PNB) and Development
Bank of the Philippines (DBP) for P10,000 and P5,000, respectively.
On a later date, Mauricio executed a Deed of Sale with Assumption of Real Estate Mortgage
conveying the properties to Roland A. Bravo, Ofelia A. Bravo and Elizabeth Bravo. The
consideration was for P1,000 and assumption of mortgage obligation. When Mauricio died on
November 20, 1973 followed by Simona in 1977. Respondents herein moved for the judicial
partition of the Properties however the petitioner refuses with the respondents the possession
and rental income of the Properties. The complaint was amended to include the annulment of
the Deed of Sale.
The RTC ruled to the validity of the Sale, However on appeal the CA reversed said Decision.
Hence this petition
Issue: Whether or not the General Power of Attorney did not authorize Mauricio to sell the
property. (Agency issue only)
Ruling:
Yes, Mauricio was granted with such authority.
Article 1878 requires a special power of attorney for an agent to execute a contract that
transfers the ownership of an immovable. However, the Court has clarified that Article 1878
refers to the nature of the authorization, not to its form. Even if a document is titled as a general
power of attorney, the requirement of a special power of attorney is met if there is a clear
mandate from the principal specifically authorizing the performance of the act.
Simona authorized Mauricio to mortgage or otherwise hypothecate, sell, x x x

II. ESTABLISHING AGENCY

A. ORAL OR WRITTEN EXPRESS KIND OF AGENCY ( as opposed to implied)

Art. 1869. Agency may be express, or implied from the acts of the principal, from
his silence or lack of action, or his failure to repudiate the agency, knowing that
another person is acting on his behalf without authority.
Agency may be oral, unless the law requires a specific form. (1710a)

SIASAT V. IAC G.R NO.L-67889, OCTOBER 10 1985

FACTS: Nacianceno, as the agent of United Flag Industry, got DECS to purchase 1 million
pesos worth of national flag to be used for public schools throughout the country. Siasat, the
owner and general manager of United Flag, formalized the companys agreement with
Nacianceno through a letter, where they agreed to give Nacianceno 30% commission. After the
first delivery of flags was made, Nacianceno received only 5% commission and her authority
revoked.
ISSUE: Whether or not Nacianceno is a general agent.
HELD: Yes, Nacianceno is a general agent. The agreement clearly showed that Nacianceno
was a general agent. It could easily be seen by the way general words were employed in the
agreement that no restrictions were intended as to the manner the agency was to be carried
out. The power granted to Nacianceno was so broad that it practically covers the negotiations
leader to, and the execution of a contract of sale.

20. AIR FRANCE vs CA

G.R. No. L-57339 December 29, 1983
Facts:
In Februry 1970, the late Jose G. Gana and his family, purchased from AIR FRANCE through Imperial
Travels, Incorporated, a duly authorized travel agent an air passage tickets for the
Manila/Osaka/Tokyo/Manila route. On 24 April 1970, AIR FRANCE exchanged or substituted the
aforementioned tickets with other tickets for the same route. At this time, the GANAS were booked for the
Manila/Osaka segment on AIR FRANCE Flight 184 for 8 May 1970, and for the Tokyo/Manila return trip
on AIR FRANCE Flight 187 on 22 May 1970. The aforesaid tickets were valid until 8 May 1971,
The GANAS did not depart on 8 May 1970.
Sometime in January, 1971, Jose Gana sought the assistance of Teresita Manucdoc, a Secretary of the
Company where Jose Gana was the Director and Treasurer, for the extension of the validity of their
tickets, which were due to expire on 8 May 1971. Teresita enlisted the help of Lee Ella Manager of the
Philippine Travel Bureau, who used to handle travel arrangements for the personnel of the Sta. Clara
Lumber Company. Ella sent the tickets to Cesar Rillo, Office Manager of AIR FRANCE. The tickets were
returned to Ella who was informed that extension was not possible unless the fare differentials resulting
from the increase in fares triggered by an increase of the exchange rate of the US dollar to the Philippine
peso and the increased travel tax were first paid. Ella then returned the tickets to Teresita and informed
her of the impossibility of extension.
Despite repeated warnings by Ella, The GANAS departed from Manila in the afternoon of 7 May 1971 on
board AIR FRANCE to Osaka Japan. There is no question with respect to this leg of the trip.
However, for the Osaka/Tokyo flight on 17 May 1971, Japan Airlines refused to honor the tickets because
of their expiration, and the GANAS had to purchase new tickets. They encountered the same difficulty
with respect to their return trip to Manila as AIR FRANCE also refused to honor their tickets. They were
able to return only after pre-payment in Manila, through their relatives, of the readjusted rates.
Issue:
Whether or not the notice of the agent Ella of the rejection of the request for extension of the validity of
the plane tickets, also notice to the principal.
Held:

YES. The GANAS cannot defend by contending lack of knowledge of those rules since the evidence
bears out that Teresita, who handled travel arrangements for the GANAS, was duly informed by travel
agent Ella of the advice of Reno, the Office Manager of Air France, that the tickets in question could not
be extended beyond the period of their validity without paying the fare differentials and additional travel
taxes brought about by the increased fare rate and travel taxes.
The ruling relied on by respondent Appellate Court, therefore, in KLM. vs. Court of Appeals, 65 SCRA 237
(1975), holding that it would be unfair to charge respondents therein with automatic knowledge or notice
of conditions in contracts of adhesion, is inapplicable. To all legal intents and purposes, Teresita was the
agent of the GANAS and notice to her of the rejection of the request for extension of the validity of the
tickets was notice to the GANAS, her principals

Cosmic Lumber vs CA G.R. No. 114311

Facts: Petitioner Cosmic Lumber through its General Manager executed a special
power of Attorney appointing Paz Villamil-Estrada as attorney in fact to initiate, institute
and file any court action for the ejectment of third persons and/or squatters of the entire
lot 9127 and 433 for the said squatters to remove their houses and vacate the premises
in order that the corporation may take material possession of the entire lot.
Paz Villamil-Estrada, by virtue of her power of attorney, instituted an action for the
ejectment of private respondent Isidro Perez and recover the possession of a portion of
lot.
Villamil-Estrada entered into a Compromise Agreement with Perez which was then
approved by the trial court. It appeared later on that the said Compromise Agreement
was not known to Cosmic Lumber. Petitioner sought annulment of the decision of the
RTC on the ground that the compromise agreement was void for lack of authority.
Issue: WON there is a contract of agency between Cosmic Lumber, principal and Paz
Villamil-Estrada, agent thus binding the principal over the compromise agreement made
by the agent to a third person, Perez in selling the portion of the said property.
Held: No. The authority granted Villamil-Estrada under the special power of attorney
was explicit and exclusionary: for her to institute any action in court to eject all persons
found on lots number 9127 and 443 so that Cosmic Lumber could take material
possession thereof and for this purpose, to appear at the pre-trial and enter into any
stipulation of facts and/or compromise agreement but only insofar as this was protective
of the rights and interests of Cosmic Lumber in the property.
Nowhere in this authorization was Villamil-Estrada granted expressly or impliedly any
power to sell the subject property nor a portion thereof. Neither can a conferment of the
power to sell be validly inferred from the specific authority to enter into a compromise
agreement because of the explicit limitation fixed by the grantor that the compromise
entered into shall only be so far as it shall protect the rights and interest of the
corporation in the aforementioned lots. In the context of special investiture of powers to

Villamil-Estrada, alienation by sale of an immovable certainly cannot be deemed

protective of the right of Cosmic Lumber to physically possess the same, more so when
the land was being sold for a price of P80/sqm , very much less than its assessed value
of P250/sqm and considering further that plaintiff never received the proceeds of the
sale.
When the sale of a piece of land or any interest thereon is through an agent, the
authority of the latter shall be in writing; otherwise, the sale should be void. Thus, the
authority of an agent to execute a contract for the sale of real estate must be conferred
in writing and must give him specific authority, either to conduct the general business of
the principal or to execute a binding contract containing terms and conditions which are
in the contract he did execute or the principal to confer the right upon an agent to sell
real estate, a power of attorney must so express the powers of the agent in clear and
unmistakable language.
It is therefore clear that by selling to Perez a portion of Cosmic Lumbers land through a
compromise agreement, Villamil-Estrada acted without or in obvious authority. The sale
ipso jure is consequently void and so is the compromise agreement. This being the
case, the judgment based thereon is necessarily void. When an agent is engaged in the
perpetration of a fraud upon his principal for his own exclusive benefit, he is not really
acting for the principal but is really acting for himself, entirely outside the scope of his
agency.
Oesmer vs. Paraiso Development Anarna
ESTABLISHING AGENCY- 2. WRITTEN- b. EFFECT
AF REALTY vs. DIESELMAN
FACTS:
Dieselman Freight Service Co. (Dieselman for brevity) is a domestic corporation and a
registered owner of a parcel of commercial lot.
Manuel C. Cruz, Jr., a member of the board of directors of Dieselman, issued a letter
denominated as "Authority To Sell Real Estate" to Cristeta N. Polintan, a real estate broker of
the CNP Real Estate Brokerage. Cruz, Jr. authorized Polintan "to look for a buyer/buyers and
negotiate the sale" of the lot. Cruz, Jr. has no written authority from Dieselman to sell the lot.
In turn, Cristeta Polintan, through a letter, authorized Felicisima ("Mimi") Noble to sell the same
lot.
Felicisima Noble then offered for sale the property to AF Realty & Development, Inc. (AF
Realty). Zenaida Ranullo, board member and vice-president of AF Realty, accepted the offer
and issued a check payable to the order of Dieselman. Polintan received the check and signed
an "Acknowledgement Receipt".

AF Realty confirmed its intention to buy the lot. Hence, Ranullo asked Polintan for the board
resolution of Dieselman authorizing the sale of the property. However, Polintan could only give
Ranullo the original copy of TCT No. 39849, the tax declaration and tax receipt for the lot, and a
photocopy of the Articles of Incorporation of Dieselman.
However, Mr. Cruz, jr. terminated the offer and demanded from AF Realty the return of the title
of the lot earlier delivered by Polintan.
Claiming that there was a perfected contract of sale between them, AF Realty filed with the
Regional Trial Court, a complaint for specific performance against Dieselman and Cruz, Jr.. The
complaint prays that Dieselman be ordered to execute and deliver a final deed of sale in favor of
AF Realty
In its answer, Dieselman alleged that there was no meeting of the minds between the parties in
the sale of the property and that it did not authorize any person to enter into such transaction on
its behalf.
After trial, the lower court rendered the challenged Decision holding that the acts of Cruz, Jr.
bound Dieselman in the sale of the lot to AF Realty.
Dissatisfied, all the parties appealed to the Court of Appeals.
The Court of Appeals reversed the judgment of the trial court holding that since Cruz, Jr. was
not authorized in writing by Dieselman to sell the subject property to AF Realty, the sale was not
perfected;
ISSUE:
Whether or not Cruz is an agent of Dieselman, despite the fact that he has no written authority
to sell or negotiate the sale of the lot
HELD:
NO. Cruz is not an agent of Dieselman.
In the instant case, it is undisputed that respondent Cruz, Jr. has no written authority from the
board of directors of respondent Dieselman to sell or to negotiate the sale of the lot, much less
to appoint other persons for the same purpose. Respondent Cruz, Jr.s lack of such authority
precludes him from conferring any authority to Polintan involving the subject realty. Necessarily,
neither could Polintan authorize Felicisima Noble. Clearly, the collective acts of respondent
Cruz, Jr., Polintan and Noble cannot bind Dieselman in the purported contract of sale.
Petitioner AF Realty maintains that the sale of land by an unauthorized agent may be ratified
where, as here, there is acceptance of the benefits involved. In this case the receipt by
respondent Cruz, Jr. from AF Realty of the partial payment of the lot effectively binds
respondent Dieselman.
The Court disagreed.

Involved in this case is a sale of land through an agent. Thus, the law on agency under the Civil
Code takes precedence. This is well stressed in Yao Ka Sin Trading vs. Court of Appeals:
Since a corporation, such as the private respondent, can act only through its officers and
agents, all acts within the powers of said corporation may be performed by agents of its
selection; and, except so far as limitations or restrictions may be imposed by special charter, bylaw, or statutory provisions, the same general principles of law which govern the relation of
agency for a natural person govern the officer or agent of a corporation, of whatever status or
rank, in respect to his power to act for the corporation; and agents when once
appointed, or members acting in their stead, are subject to the same rules, liabilities, and
incapacities as are agents of individuals and private persons. (Emphasis supplied)
Pertinently, Article 1874 of the same Code provides:
ART. 1874. When a sale of piece of land or any interest therein is through an agent,
the authority of the latter shall be in writing; otherwise, the sale shall be void. (Emphasis
supplied)
Considering that respondent Cruz, Jr., Cristeta Polintan and Felicisima Ranullo were not
authorized by respondent Dieselman to sell its lot, the supposed contract is void. Being a void
contract, it is not susceptible of ratification.
Pahubad v CA
FACTS:
Sps.Pedro San Agustin and Agatona Genil owned a 246-sqm parcel of land and they
died intestate, survived by their 8 children: Eufemia, Raul, Ferdinand, Zenaida, Milagros,
Minerva, Isabelita and Virgilio. In 1992, Eufemia, Ferdinand and Raul executed a Deed of
Absolute Sale of Undivided Shares conveying in favor of Pahuds their respective shares from
the lot they inherited from their deceased parents for P525K. Eufemia also signed the deed on
behalf of her sister Isabelita on the basis of a special power of attorney and also for Milagros,
Minerva and Zenaida but without their apparent authority. The deed of sale was also not
authorized. The Pahuds paid P35,792.31 to the Los Banos Rural Bank where the subject
property was mortgaged. The bank issued a release of mortgage and turned over the owners
copy of the OCT to the Pahuds. The Pahuds made more payments to Eufemia and her co-heirs
drafted an extra-judicial settlement of estate to facilitate the transfer of the title to the Pahuds,
Virgilio refused to sign it.
In 1993, Virgilios co-heirs filed a complaint for judicial partition. In the course of the
proceedings, a Compromise Agreement was signed by 7 of the co-heirs agreeing to sell their
undivided shares tto Virgilio for P700K. it was not approved by the trial court because Atty.
Dimetrio Hilbero, lawyer of Eufemia, refused to sign the agreement because he knew of the
previous sale to the Pahuds.
Later, Eufemia acknowledged having received P700K from Virgilio, who then sold the
entire property to spouses Belarmino sometime in 1994. The Belarminos immediately

constricted a building on the subject property. The Pahuds immediately confronted Eufemia who
confirmed to them that Virgilio had sold the property to the Belrminos. Aggrieved, the Pahuds
filed a complaint in intervention in the pending case for judicial partition.
ISSUE:
heirs is valid

Whether the sale in favor of the Pahuds made by Eufemia in behalf of her co-

HELD:
The absence of a written authority to sell a piece of land is ipso jure, void, to protect the
interest of an unsuspecting owner from being prejudiced by the unwarranted act of the other.
Based on the foregoing, the Court ruled that the sale with respect to the 3/8 portion,
representing the shares of Zenaida, Milagros, and Minerva, is void because Eufemia could not
dispose of the interest of her co-heirs in the said lot absent any written authority from the latter,
as explicitly required by law.
However, the Court upheld the validity of the sale on the basis of the common law
principle of estoppel.
***the Court held the validity of the sale for the following reasons: a) the admission of the heirs
regarding the sale of 7/8 of the property to the Pahuds (during the preliminary conference); b)
failure of the three heirs (who did not authorized Eufemia) to assail the validity of the
transaction; and c) the apparent authority given by the three heirs to Eufemia by reason of their
continued silence.
Litonjua vs Eternit Corp.
Facts:
The Eternit Corporation (EC) manufactures roofing materials and pipe products. Ninety (90%)
percent of the shares of stocks of EC were owned by Eteroutremer S.A. Corporation (ESAC), a
corporation registered under the laws of Belgium. Jack Glanville was the General Manager and
President of EC, while Frederick Delsaux was the Regional Director for Asia of ESAC. In 1986,
because of the political situation in the Philippines the management of ESAC wanted to stop its
operations and to dispose their 8 parcels of land located in Mandaluyong City. They engaged
the services of realtor/broker Lauro G. Marquez. Marquez thereafter offered the land to Eduardo
B. Litonjua, Jr. for P27,000,000.00. Litonjua counter offered P20,000,000.00 cash. Marquez
apprised Glanville & Delsaux of the offer. Delsaux sent a telex stating that, based on the
"Belgian/Swiss decision," the final offer was "US$1,000,000.00 and P2,500,000.00 to cover all
existing obligations prior to final liquidation. The Litonjua brothers deposited US$1,000,000.00
with the Security Bank & Trust Company, and drafted an Escrow Agreement to expedite the
sale. Meanwhile, with the assumption of Corazon C. Aquino as President, the political situation
improved. Marquez received a letter from Delsaux that the ESAC Regional Office decided not to
proceed with the sale. When informed of this, the Litonjuas, filed a complaint for specific
performance and payment for damages on account of the aborted sale. Both the trial court and
appellate court rendered judgment in favor of defendants and dismissed the complaint. The

lower court declared that since the authority of the agents/realtors was not in writing, the sale is
void and not merely unenforceable.
Issue:
WON there was already a perfected contract of sale of the parcels of land that would in effect
make the respondents in default and therefore liable for damages?
Ruling:
None. Respondents maintain that Glanville, Delsaux and Marquez had no authority from the
stockholders of EC and its Board of Directors to offer the properties for sale to the petitioners.
Petitioners assert that there was no need for a written authority from the Board of Directors of
EC for Marquez to validly act as broker. As broker, Marquez was not an ordinary agent because
his only job as a broker was to look for a buyer and to bring together the parties to the
transaction. He was not authorized to sell the properties; hence, petitioners argue, Article 1874
of the New Civil Code does not apply.
A corporation is a juridical person separate and distinct from its stockholders and is not affected
by the personal rights, obligations and transactions of the latter. It may act only through its board
of directors or, when authorized by its board resolution, through its officers or agents. The
general principles of agency govern the relation between the corporation and its officers or
agents, subject to the articles of incorporation, by-laws, or relevant provisions of law. Agency
may be oral unless the law requires a specific form. However, to create or convey real rights
over immovable property, a special power of attorney is necessary. Thus, when a sale of
a piece of land or any portion thereof is through an agent, the authority of the latter shall
be in writing, otherwise, the sale shall be void. In this case, the petitioners failed to adduce
in evidence any resolution of the Board of Directors of EC empowering Marquez, Glanville or
Delsaux as its agents, to sell, let alone offer for sale, for and in its behalf, the eight parcels of
land owned by it. Moreover, the evidence of petitioners shows that Adams and Glanville acted
on the authority of Delsaux, who, in turn, acted on the authority of ESAC, through its Committee
for Asia, and the Belgian/Swiss component of the management of ESAC. The offer of Delsaux
emanated only from the "Belgian/Swiss decision," and not the entire management or Board of
Directors of ESAC. While it is true that petitioners accepted the counter-offer of ESAC, EC was
not a party to the transaction between them; hence, EC was not bound by such acceptance.
Decision of the lower court is affirmed.
Estoppel vs. Implied
For an agency by estoppel to exist, the following must be established: (1) the principal manifested a
representation of the agents authority or knowlingly allowed the agent to assume such authority; (2)
the third person, in good faith, relied upon such representation; (3) relying upon such representation,
such third person has changed his position to his detriment. 48 An agency by estoppel, which is
similar to the doctrine of apparent authority, requires proof of reliance upon the representations, and
that, in turn, needs proof that the representations predated the action taken in reliance. ( Litonjua vs.
Eternit )

While implied agency is only extant when the circumstances stated in Articles 1871 and 1872 are
present.

Nagoles vs. Capitol Medical Ceras

G.R. No. 167879
LEY CONSTRUCTION AND DEVELOPMENT CORPORATION, Petitioner,
vs.
PHILIPPINE REALTY AND HOLDINGS CORPORATION, Respondent.
FACTS:
Ley Construction and Development Corporation (LCDC), herein petitioner , was the project
contractor for the construction of several buildings for Philippine Realty & Holdings Corporation
(PRHC), herein respondent. The petitioner and respondent entered into a contract , by which
the former committed to construct buildings needed by the latter. In turn the respondent
committed to pay the contract price agreed.
However LCDC president, Ley, met with Abcede ( Project owner of PRHC) to discuss the
unanticipated delay in construction due to sudden, unexpected hike in the prices of construction
materials. Abcede asked LCDC to advance the amount necessary to complete construction. Ley
acceded on condition that PRHC would allow escalation of contract price and disregard the
prohibition contained in the agreements. However the PRHC board of directors turned down the
request, but it gave no notice to LCDC of said denial neither Abcede. Instead, Abcede signed a
letter and sent it to LCDC, asking for its conformity. The project eventually infuse P36M, a
contract price escalation for the same amount would be granted in LCDCs favor. However, it
later revealed no signature above PRHCs name. Notwithstanding the absence of said
signature, LCDC proceeded with the construction of Tektite Building.
The project incurred cost a total of P38.2M, and religiously submitted to PRHC monthly
reports on the same. But PRHC never replied to any of these monthly reports. When Ley
inquired from Abcede why its requests for extension of time were not granted in full, instead of
informing the real reason to Ley, Abcede assured that the former will not incur any liability.
However, when the Tektite Building was almost complete and LCDC requested the release of
the P36M escalation price, PRHC did not reply. PRHC refused to pay the LCDC because they
alleged that the latter incurred delay it did not heed the agreement regarding the escalation of
contract price.
LCDC filed a Complaint before the RTC to recovered the amount, which ruled in its favor.
PRHC filed a Notice of Appeal. The Court of Appeals (CA) reversed the RTC decision.
ISSUE:

Whether or not the signed letter of Abcede, could bind PRHC to the escalation agreement
with LCDC.
HELD:
Yes, the signed letter of Abcede, could bind PRHC to the escalation agreement with
LCDC.
In Yao Ka Sin Trading v. Court of Appeals, et al,.43 this Court discussed the applicable rules on
the doctrine of apparent authority, to wit:
The rule is of course settled that "[a]lthough an officer or agent acts without, or in excess of,
his actual authority if he acts within the scope of an apparent authority with which the
corporation has clothed him by holding him out or permitting him to appear as having such
authority, the corporation is bound thereby in favor of a person who deals with him in good faith
in reliance on such apparent authority, as where an officer is allowed to exercise a particular
authority with respect to the business, or a particular branch of it, continuously and publicly, for a
considerable time." Also, "if a private corporation intentionally or negligently clothes its officers
or agents with apparent power to perform acts for it, the corporation will be estopped to deny
that such apparent authority is real, as to innocent third persons dealing in good faith with such
officers or agents." 44
In Peoples Aircargo and Warehousing Co. Inc. v. Court of Appeals, et al.,45 we held that
apparent authority is derived not merely from practice:
Its existence may be ascertained through (1) the general manner in which the corporation holds
out an officer or agent as having the power to act or, in other words, the apparent authority to
act in general, with which it clothes him; or (2) the acquiescence in his acts of a particular
nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his
ordinary powers.
The SC rule that Santos and Abcede held themselves out as possessing the authority to act,
negotiate and sign documents on behalf of PRHC; and that PRHC sanctioned these acts. It
would be the height of incongruity to now allow PRHC to deny the extent of the authority with
which it had clothed both individuals. We find that Abcedes role as construction manager, with
regard to the construction projects, was akin to that of a general manager with regard to the
general operations of the corporation he or she is representing.
Consequently, the escalation agreement entered into by LCDC and Abcede is a valid
agreement that PRHC is obligated to comply with. This escalation agreement whether written
or verbal has lifted, through novation, the prohibition contained in the Tektite Building
Agreement.
SC further agreed with LCDC that the actions of Abcede and Santos, assuming they were
beyond the authority given to them by PRHC which they were representing, still bound PRHC

under the doctrine of apparent authority2. Thus, the lack of authority on their part should not be
used to prejudice it, considering that the two were clothed with apparent authority to execute
such agreements
RIEGO - The Rights of Agents
a. Compensation
i. Article 1875. Agency is presumed to be for a compensation, unless there
is proof to the contrary.
b. Lend to/borrow money from the agency
i. Article 1890. If the agent has been empowered to borrow money, he may
himself be the lender at the current rate of interest. If he has been
authorized to lend money at interest, he cannot borrow it without the
consent of the principal. (n)
c. Appoint substitute
i. Article 1892. The agent may appoint a substitute if the principal has not
prohibited him from doing so; but he shall be responsible for the acts of
the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person,
and the person appointed was notoriously incompetent or insolvent.
All acts of the substitute appointed against the prohibition of the principal
shall be void. (1721)
d. Retain in pledge objects of the agency
i. Article 1912. The principal must advance to the agent, should the latter so
request, the sums necessary for the execution of the agency.
Should the agent have advanced them, the principal must reimburse him
therefor, even if the business or undertaking was not successful, provided
the agent is free from all fault.
The reimbursement shall include interest on the sums advanced, from the
day on which the advance was made. (1728)

J. DANON vs. A. BRIMO (1921)

Procuring Cause
NATURE:
Action to recover the sum of P60,000, alleged to be the value of services by the
plaintiff as a broker.

QUICK FACTS & HELD:

Danon (Broker) found a purchaser for the factory of his manager (Brimo), who
promised 5% commission to Danon; Another broker found anotherpurchaser who would
buy the factory at a higher price, said factory was sold to this purchaser; As such,
Danons client did not perfect the sale with Brimo.
Held:
Danon not the procuring cause. A broker is never entitled to commissions for
unsuccessful efforts. The risk of failure is only his. Thereward comes only with his
success. Where no time for the continuance of the contract is fixed by its terms, either
party is at liberty to terminate it atwill, subject only to the ordinary requirements of good
faith.
DETAILED FACTS:
Antonio Brimo, informed the Danon, that he (Brimo) desired to sell his factory, the
Holland American Oil Co., for the sum of P1,200,000
Brimo agreed and promised to pay to the Danon commission of 5% provided the
latter could sell said factory for that amount3.
No definite period of time was fixed within which the Danon should effect the
sale. It seems that another broker, Sellner, was also negotiating thesale, or trying to find
a purchaser for the same property and that the plaintiff was informed of the fact either
by Brimo himself or by someone else;at least, it is probable that the plaintiff was
aware that he was not alone in the field, and his whole effort was to forestall his
competitor by being the first to find a purchaser and effect the sale.
Immediately after having an interview with Mr. Brimo, Danon went to see Mr.
Mauro Prieto, president of the Santa Ana Oil Mill, a corporation,and offered to sell to him
the defendant's property at P1,200,000.
The said corporation was at that time in need of such a factory, and Mr.
Prieto,instructed the manager, Samuel E. Kane, to see Mr. Brimo and ascertain whether
he really wanted to sell said factory, and, if so, to get permissionfrom him to inspect the
premises. Mr. Kane inspected the factory and, presumably, made a favorable report to
Mr. Prieto. The latter asked for anappointment with Mr. Brimo to perfect the negotiation.
In the meantime Sellner, the other broker referred to, had found a purchaser for the
same property, who ultimately bought it for P1,300,000.
For that reason Mr. Prieto, the would be purchaser found by the plaintiff, never
came to seeMr. Brimo to perfect the proposed negotiation.
ISSUE:

Whether Danon as broker was theProcuring Causeof Sale? NO

Whether Danon is entitled to Compensation -NO
HELD:
The most that can be said as to what the plaintiff had accomplished is, that he
had found a person who might have bought the defendant's factory.The evidence does
not show that the Santa Ana Oil Mill had definitely decided to buy the property at the
fixed price of P1,200,000. The plaintiff claims that the reason why the sale was
not consummated was because Mr. Brimo refused to sell.
Defendant agreed and promised to pay him a commission of 5% provided he
(the plaintiff) could sell the factory at P1,200.000.It is difficult to see how the plaintiff can
recover anything in the premises. The plaintiff's action is an action to recover "the
reasonable value" of services rendered.
It is clear that his "services" did not contribute towards bringing about the sale.
He was not "the efficient agent or the procuring cause of the sale."
The broker must be the efficient agent or the procuring cause of sale.The
means employed by him and his efforts must result in the sale.
The duty assumed by the broker is to bring the minds of the buyer and seller to
an agreement for a sale, and the price and terms on which it is to bemade, and until that
is done his right to commissions does not accrue.
It follows, that a broker is never entitled to commissions for unsuccessful
efforts.The risk of a failure is wholly his. The reward comes only with hissuccess. He
may have introduced to each other parties who otherwise would have never met; he
may have created impressions, which under laterand more favorable circumstances
naturally lead to and materially assist in the consummation of a sale; he may have
planted the very seed from which others reap the harvest; but all that gives him no
claim.
The failure therefore and its consequences were the risk of the broker only. This
however must be taken with one important and necessarylimitation. If the efforts of
the broker are rendered a failure by the fault of the employer; if
capriciously he changes his mind after the purchaser,ready and willing, and
consenting to the prescribed terms, is produced; or if the latter declines to
complete the contract because of some defectof title in the ownership of the
seller, some unremoved incumbrance, some defect which is the fault of the latter,
then the broker does not losehis commissions.

But this limitation is not even an exception to the general rule affecting the
broker's right for it goes on the ground that thebroker has done his duty, that he has
brought buyer and seller to an agreement, but that the contract is not consummated and
fails though theafter-fault of the seller.
One other principle applicable: Where no time for the continuance of the contract
is fixed by its terms either party is at liberty to terminate it at will ,subject only to the
ordinary requirements of good faith. Usually the broker is entitled to a fair and
reasonable opportunity to perform his obligation, subject of course to the right of the
seller to sell independently. But having been granted him, the right of the principal to
terminate his authority is absolute and unrestricted, except only that he may not do it in
bad faith.
Although the present plaintiff could probably have effected the sale,he is not
entitled to the commissions agreed upon because he had no intervention
whatever in, and much sale in question. It must be borne in mind that
no definite periodwas fixed by the defendant within which theplaintiff might effect the
sale of its factory. Nor was the plaintiff given by the defendant the exclusive agency
of such sale.
Therefore, the plaintiff cannot complaint of the defendant's conduct in selling the
property through another agent before the plaintiff's efforts were crowned with
success."One who has employed a broker can himself sell the property to a purchaser
whom he has procured, without any aid from the broker."
DISPOSITIVE:
For the foregoing reasons the judgment appealed from is hereby revoked and the
defendant is hereby absolved from all liability underthe plaintiff's complaint, with costs in
both instances against the plaintiff. So ordered
Tan vs. Gullas Galicinao

Philippine Health-Care Providers, Inc. v. Estrada (2008)

FACTS:Philippine Health-Care Providers, Inc. (Maxicare) formally appointed
Estrada as its General Agent evidenced by a letter-agreement dated February
16, 1991 granting him a commission. Maxicare had a "franchising system" in
dealing with its agents whereby an agent had to first secure permission from to
list a prospective company as client. MERALCO account was included as
corporate accounts applied by Estrada. Estrada submitted proposals and made
representations to the officers of MERALCO regarding the MAXICARE Plan but
MERALCO directly negotiated with MAXICARE from December 1, 1991 to
November 30, 1992 and was renewed twice for a term of 3 years each March 24,
1992: Estrada through counsel demanded his commission for the MERALCO

account and 9 other accounts but it was denied by MAXICARE because he was
not given a go signal to intervene in the negotiations for the terms and conditions.
RTC ruled that Maxicare liable for breach of contract and ordered it to pay
Estrada actual damages in the amount equivalent to 10% of P20,169,335
representing her commission for Meralco. CA affirmed in toto.
ISSUE: Whether or not Estrada as broker should be paid his commission for the
Maxicare Plans subscribed by Meralco.
HELD: Yes. Both courts were one in the conclusion that Maxicare successfully
landed the Meralco account for the sale of healthcare plans only by virtue of
Estradas involvement and participation in the negotiations. Maxicares contention
that Estrada may only claim commissions from membership dues which she has
collected and remitted to Maxicare as expressly provided for in the letteragreement does not convince us. It is readily apparent that Maxicare is
attempting to evade payment of the commission which rightfully belongs to
Estrada as the broker who brought the parties together. The only reason Estrada
was not able to participate in the collection and remittance of premium dues to
Maxicare was because she was prevented from doing so by the acts of
Maxicare, its officers, and employees. Even a cursory reading of the Complaint
and all the pleadings filed thereafter before the RTC, CA, and this Court, readily
show that Estrada does not concede, at any point, that her negotiations with
Meralco failed. strada is entitled to 10% of the total amount of premiums paid by
Meralco to Maxicare as of May 1996 (includingsucceeding renewals).
Additional Notes:
Agent vs. Broker:
agent
receives a commission upon the successful conclusion of a
sale
broker
earns his pay merely by bringing the buyer and the seller
together, even if no sale is eventually made
"procuring cause" in describing a brokers activity
cause originating a series of events which, without break in their
continuity, result in the accomplishment
efforts must have been the foundation on which the negotiations
resulting in a sale began.
Sanchez vs. Medicard Mogello

Infante vs. Cunanan

G.R L- 5180 August 31, 1953
Bautista Angelo, J:
Facts:
Infante was the owner of the land with a house built on it. Cunanan and Mijares were contracted
to sell the property from which they would receive commission. Noche agreed to purchase the
lot but Infante informed C & M about her change of mind to sell the lot and had them sign a
document stating that their authority to sell was already cancelled. Subsequently, Infante sold
the lot & house to Noche. Defendants herein demanded for their commission.RTC ordered
Infante to pay commission. CA affirmed.
Issue:
Whether or not petitioner was duty bound to pay commission notwithstanding that authority to
sell has been cancelled.
Ruling:
A principal may withdraw the authority given to an agent at will. But respondents agreed to
cancel the authority given to them upon assurance by petitioner that should property be sold to
Noche, they would be given commission.
That petitioner had changed her mind even if respondents had found a buyer who was willing to
close the deal, is a matter that would give rise to a legal consequence if respondents agree to
call off to transaction in deference to the request of the petitioner. Petitioner took advantage of
the services of respondents, but believing that she could evade payment of their commission,
she made use of a ruse by inducing them to sign the deed of cancellation.This act of subversion
cannot be sanctioned and cannot serve as basis for petitioner to escape payment of the
commissions agreed upon.
Lim vs. Saban
The late Eduardo Ybaez (Ybaez), the owner of a 1,000-square meter lot in Cebu City (the lot),
entered into an Agreement and Authority to Negotiate and Sell (Agency Agreement) with
respondent Florencio Saban (Saban) on February 8, 1994. Under the Agency Agreement,
Ybaez authorized Saban to look for a buyer of the lot for Two Hundred Thousand Pesos
(P200,000.00) and to mark up the selling price to include the amounts needed for payment of
taxes, transfer of title and other expenses incident to the sale, as well as Sabans commission
for the sale.
Through Sabans efforts, Ybaez and his wife were able to sell the lot to the petitioner Genevieve
Lim (Lim) and the spouses Benjamin and Lourdes Lim (the Spouses Lim) on March 10, 1994. It
appears, however, that the vendees agreed to purchase the lot at the price of Six Hundred
Thousand Pesos (P600,000.00), inclusive of taxes and other incidental expenses of the sale.
Lim issued in the name of Saban four postdated checks in the aggregate amount of Two
Hundred Thirty Six Thousand Seven Hundred Forty Three Pesos (P236,743.00).(Sabans
commission)

However, Ybaez sent a letter dated June 10, 1994 addressed to Lim. In the letter Ybaez asked
Lim to cancel all the checks issued by her in Sabans favor and to extend another partial
payment for the lot in his (Ybaezs) favor. After the four checks in his favor were dishonored
upon presentment, Saban filed a Complaint in the RTC.(During the proceedings Ybaez died).
RTC dismissed the complaint, On appeal the CA reversed the DECISION stating the Saban was
entitled to the amounts on the checks issued.
Issue: Whether Saban is entitled to receive his commission from the sale
Ybaezs reason for cancellation - Ybaez claimed that Saban was not entitled to any commission
because he concealed the actual selling price from him and because he was not a licensed real
estate broker.
Ruling: Yes, Saban as an agent of Ybaezs is entitled to his commission.
The Court affirms the appellate courts finding that the agency was not revoked since Ybaez
requested that Lim make stop payment orders for the checks payable to Saban only after the
consummation of the sale on March 10, 1994. At that time, Saban had already performed his
obligation as Ybaezs agent when, through his (Sabans) efforts, Ybaez executed the Deed of
Absolute Sale of the lot with Lim and the Spouses Lim.
To deprive Saban of his commission subsequent to the sale which was consummated through
his efforts would be a breach of his contract of agency with Ybaez which expressly states that
Saban would be entitled to any excess in the purchase price after deducting the P200,000.00
due to Ybaez and the transfer taxes and other incidental expenses of the sale.
PRATS V. CA G.R NOL-39822 JAN 31, 1978
FACTS: Doronila negotiated with SSS regarding the sale of his land. The proposed sale din not
push through. Doronila then granted Prats the authority to sell the land. Prats offered the sale of
land to SSS, but no sale was perfected. After the expiration of the authority of Prats to sell the
land, Doronila once again offered the land to SSS. They agreed on the price, and the sale was
consummated. Prats demanded that he be paid his commission for the sale, but Doronila
refused to pay him.
ISSUE: Whether or not Prats is entitled to any commission from the sale.
DOCTRINE: An agent who was not the procuring cause of the sale may nevertheless be
awarded a sum of money if he were somehow instrumental in bringing the parties together
again and finally consummating the transaction.
HELD: No, Prats is not entitled to any commission from the sale. His authority to sell the
property was already expired. However, his efforts were somehow instrumental in bringing the
parties together and finally consummating the sale. By reason of equity, he is awarded a sum of
money for his efforts.

Manotoc vs CA
G.R. No. 94753. April 7, 1993.
Facts:
Petitioners is the owner of a certain parcel of land and building which were formerly leased by
the City of Manila and used by the Claro M. Recto High School. By means of a letter 5 dated
July 5, 1966, petitioner authorized herein private respondent Salvador Saligumba to negotiate
with the City of Manila the sale of the aforementioned property. In the same writing, petitioner
agreed to pay private respondent a (5%) commission in the event the sale is finally
consummated and paid.
And other letters, which executed the authority of petitioner. Finally, through another letter 8
dated November 16, 1967, the corporation with Rufino Manotok, its President, as signatory,
authorized private respondent to finalize and consummate the sale of the property to the City of
Manila for not less than P410,000.00. With this letter came another extension of 180 days.
The Municipal Board of the City of Manila eventually, on April 26, 1968, passed Ordinance No.
6603, appropriating the sum for the purchase of the property which private respondent was
authorized to sell. Said ordinance however, was signed by the City Mayor only on May 17, 1968,
183 days after the last letter of authorization.
On January 14, 1969, the parties signed the deed of sale of the subject property. The initial
payment having been made, the purchase price was fully satisfied with a second payment on
April 8, 1969 by a check for full payment. Notwithstanding the realization of the sale, private
respondent never received any commission, which should have amounted to P20,554.50. This
was due to the refusal of petitioner to pay private respondent said amount as the former does
not recognize the latter's role as agent in the transaction.
Private respondent filed a complaint against petitioner, alleging that he had successfully
negotiated the sale of the property. He claimed that it was because of his efforts that the
Municipal Board of Manila passed Ordinance No. 6603 which appropriated the sum for the
payment of the property subject of the sale.
Petitioner claimed otherwise. It denied the claim of private respondent on the following grounds:
(1) private respondent would be entitled to a commission only if the sale was consummated and
the price paid within the period given in the respective letters of authority; and (2) private
respondent was not the person responsible for the negotiation and consummation of the sale
Issue: Whether or not private respondent is entitled to the five percent (5%) agent's
commission.
Held:
Yes, the private respondent is entitled to the 5% agents commission. The Court ruled that when
there is a close, proximate and causal connection between the agent's efforts and labor and the
principal's sale of his property, the agent is entitled to a commission. The Court agreed that the
City of Manila ultimately became the purchaser of petitioner's property mainly through the efforts
of private respondent. Without discounting the fact that when Municipal Ordinance No. 6603
was signed by the City Mayor on May 17, 1968, private respondent's authority had already
expired, it is to be noted that the ordinance was approved on April 26, 1968 when private
respondent's authorization was still in force. Moreover, the approval by the City Mayor came

only three days after the expiration of private respondent's authority. It is also worth
emphasizing that from the records, the only party given a written authority by petitioner to
negotiate the sale from July 5, 1966 to May 14, 1968 was private respondent.

Unilad Resources vs. DBP G.R. No. 95909

Facts: Marinduque Mining Corporation got hold of a loan from the DBP and mortgaged
a warehouse lot and an office building lot previously mortgaged by MMC to Caltex, and
the mortgage in favor of DBP was entered on their titles as a second mortgage. The
account of the Marinduque Mining Corp., with the DBP was later transferred to the
Assets Privatization Trust (APT).
Caltex foreclosed the mortgage due to the nonpayment of MMC. APT on the other hand
offered for sale to the public through DBP its right of redemption on said two lots by
public bidding. DBP subsequently retrieved the account from APT and redeemed said
lots from Caltex . A public bidding for the sale of the two lots was held and the
warehouse lot was sold to Charges Realty Corp . The office building lot was later sold
by DBP to a different buyer. After the aforesaid sale, Unilad Resources sent two letters
to DBP asking for the payment of its broker's fee in instrumenting the sale of its
warehouse lot to Charges Realty Corp. Unilad filed a case to recover from DBP the
broker's fee.
The Trial Court ordered DBP to pay the brokers fee to the petitioner. On appeal, the
Court of Appeals reversed the judgment of the lower court.
Issue: WON there is a contract of agency between DBP and Unilad in the sale of
warehouse lot.
Held: No. There is no contract of agency, express or implied. The petitioner was never
able to secure the required accreditation from respondent DBP to transact business on
behalf of the latter. It was always made clear to petitioner that only accredited brokers
may look for buyers on behalf of respondent DBP. The contract of Agency is one
founded on mutual consent: the principal agrees to be bound by the acts of the agent
and the latter in turn consents to render service on behalf or in representation of the
principal.
Domingo vs. Domingo Anarna
SUBSTITUTE CASES: ALTERNATE NOT DELEGATE
BALTAZAR v. OMBUDSMAN
FACTS:

Paciencia Regala owns a seven (7)-hectare fishpond located at Sasmuan, Pampanga. Her
Attorney-in-Fact Faustino R. Mercado leased the fishpond for PhP 230,000.00 to Eduardo Lapid
for a three (3)-year period. Lessee Eduardo Lapid in turn sub-leased the fishpond to Rafael
Lopez for PhP 50,000.00 during the last seven (7) months of the original lease. Respondent
Ernesto Salenga was hired by Eduardo Lapid as fishpond watchman (bante-encargado). In the
sub-lease, Rafael Lopez rehired respondent Salenga.
Meanwhile, on March 11, 1993, respondent Salenga, through a certain Francis Lagman, sent
his January 28, 1993 demand letter to Rafael Lopez and Lourdes Lapid for unpaid salaries and
non-payment of the 10% share in the harvest.
On June 5, 1993, sub-lessee Rafael Lopez wrote a letter to respondent Salenga informing the
latter that for the last two (2) months of the sub-lease, he had given the rights over the fishpond
to Mario Palad and Ambit Perez for PhP 20,000.00. This prompted respondent Salenga to file a
Complaint before the Provincial Agrarian Reform Adjudication Board (PARAB).
On November 24, 1994, pending resolution of the agrarian case, the instant case was instituted
by petitioner Antonio Baltazar, an alleged nephew of Faustino Mercado, through a ComplaintAffidavit against private respondents before the Office of the Ombudsman.
Petitioner charged private respondents of conspiracy through the issuance of the TRO in
allowing respondent Salenga to retain possession of the fishpond, operate it, harvest the
produce, and keep the sales under the safekeeping of other private respondents
Petitioner asserts that he is duly authorized by Faustino Mercado to institute the suit and
presented a Special Power of Attorney (SPA) from Faustino Mercado.
ISSUE:
Whether Faustino Mercado can delegate his agency to his nephew Antonio Baltazar
HELD:
NO. Faustino Mercado cannot delegate his agency to his nephew Antonio Baltazar.
For one, petitioners principal, Faustino Mercado, is an agent himself and as such cannot further
delegate his agency to another. Otherwise put, an agent cannot delegate to another the same
agency. The legal maxim potestas delegata non delegare potest; a power once delegated
cannot be re-delegated, while applied primarily in political law to the exercise of legislative
power, is a principle of agency.
For another, a re-delegation of the agency would be detrimental to the principal as the second
agent has no privity of contract with the former. In the instant case, petitioner has no privity of
contract with Paciencia Regala, owner of the fishpond and principal of Faustino Mercado.
Moreover, while the Civil Code under Article 1892 allows the agent to appoint a substitute, such
is not the situation in the instant case. The SPA clearly delegates the agency to petitioner to

pursue the case and not merely as a substitute. Besides, it is clear in the aforecited Article that
what is allowed is a substitute and not a delegation of the agency.
Clearly, petitioner is neither a real party in interest with regard to the agrarian case, nor is he a
real party in interest in the criminal proceedings conducted by the Ombudsman as elevated to
the Sandiganbayan. He is not a party who will be benefited or injured by the results of both
cases.
Serona v People
FACTS:
Leonida Quilatan delivered pieces of jewelry to Virgie Serona to be sold on commission
basis. By oral agreement of the parties, Serona was to remit payment or return the pieces of
jewelry to Quilatan if not sold within 30 days from receipt of the items. Because of Seronas
failure to pay, Quilatan required to execute an acknowledgement receipt indicating the
agreement and the total amount due. But unknown to Quilatan, Serona had earlier entrusted the
jewelry to one Marichu Labrador for the latter to sell on commission basis. Serona was not able
to collect payment from Labrador which caused her to likewise fail to pay her obligation to
Quilatan. Subsequently, Quilatan, after sending a formal letter of demand to Serona, executed a
complaint affidavit against her. Thereafter, an information for estafa was filed against Serona.
The lower courts convicted Serona. They concluded that petitioners act of entrusting the jewelry
to Labrador is characterized by abuse of confidence and that Serona disposed the jewelry as if
it was hers (misappropriation or conversion).
ISSUE:
Whether the act of entrusting the jewelry to Labrador is to be characterized as
abuse of confidence
HELD: No.
The law on agency in our jurisdiction allows the appointment by an agent of a substitute
or sub-agent in the absence of express agreement to the contrary between the agent and the
principal.
In the case at bar, the appointment of Labrador was not expressly prohibited by
Quilatan, as the acknowledgement receipt does not contain any such limitation. Neither does it
appear that petitioner was verbally forbidden by Quilatan from passing on the jewelry to another
person before the acknowledgement receipt was executed or at any other time.
Notably, Labrador testified that she obligated herself to sell the jewelry in behalf of the
petitioner also on commission basis or to return the same if not sold. In other words, the pieces
of jewelry were given by the petitioner to Labrador to achieve the very same end for which they
were delivered to her in the first place. Consequently, there is no conversion since the pieces of
jewelry were not devoted to a purpose or use different from that agreed upon.
Part III - B
Specific Obligations of Agent to Principal

1. To carry out the agency in accordance with its terms (Art. 1884)
2. To answer the damages which is through his non-performance the principal may suffer.
3. To finish the business already begun on the death of the principal, should delay detail any
danger
4. To observe the diligence of the good father of a family in the custody and preservation of the
goods forwarded to him by the owner in case he declines an agency, until an agent is
appointed. (Art. 1885)
5. To advance the necessary funds should there be a stipulation to that effect (Art. 1886)
6. To act in accordance with the instructions of the principal (Art. 1887)
7. Not to carry out its agency if its execution would manifestly result in loss or damage to the
principal (Art. 1888)
8. To answer for damages should he refer in case of conflict, his own interests to those of the
principal (Art.1889)
9. Not to loan to himself without the consent of the principal where he has been authorized to
lend at interest (Art. 1890)
10. To render an account of his transactions and to deliver to the principal whatever he may
have received by virtue of the agency (art.1891)
11. To distinguish goods by countermarks and designate the merchandise respective belonging
to each principal, in the case of a commission agent who handles goods of the same kind and
mark, which belong to different owners. (Art. 1904)
12. To responsible in certain cases for the acts of substitute appointed by him (Art. 1892)
13. To pay interest on funds he has applied to his own use (Art. 1896)
14. To inform the principal, where an authorized sale of credit has been made, of such sale (Art.
1906)
15. To bear the risk of collection, should he receive also on sale, a guarantee commission (Art.
1907)
16. To indemnify the principal for damages for his failure to collect the credits of his principal at
the time that they become due (Art. 1908)
17. To answer for his fraud or negligence. (Art.1909)
Woodchild vs Roxas Electric Company
Roxas Electric and Construction Company, Inc. (RECCI) authorized its President Roberto B.
Roxas through a resolution to sell a parcel of land owned by the corporation, and to execute,
sign and deliver for and on behalf of the company. Petitioner Woodchild Holdings, Inc. (WHI)
through its President Jonathan Y. Dy, offered to buy the land from RECCI. The offer to purchase
stated that it is made on the representation and warranty of the OWNER/SELLER, that he holds
a good and registrable title to the property, which shall be conveyed clear and free of all liens
and encumbrances, and that in the event that the right of way is insufficient for the buyers
purpose, the seller ag rees to sell additional square meter from his current adjacent property to
allow the buyer full access and full use of the property. Roxas accepted the offer. The sale was
consummated. WHI subsequently entered into a construction agreement with Wimbeco
Builders Inc. (WBI) for the construction of a warehouse, and a lease agreement with Poderosa
Leather Goods Company, Inc. with a condition that the warehouse be ready by April 1,
1992.The building was finished and Poderosa became the lessee. WHI complained to Roberto
Roxas that the vehicles of RECCI were parked on a portion of the property over which WHI had
been granted a right of way. Roxas promised to look into the matter. Dy and Roxas discussed

the need of the WHI to buy a 500-square-meter portion of the adjacent lot as provided for in the
deed of absolute sale. However, Roxas died soon thereafter. WHI wrote the RECCI, reiterating
its verbal requests to purchase a portion of the said lot as provided for in the deed of absolute
sale, and complained about the latters failure to eject the squatters within the three-month
period agreed upon in the said deed. RECCI rejected the demand of WHI, so WHI filed a case
for Specific Performance and Damages in the RTC. The lower court ruled in favor of WHI. But
the CA reversed the RTC decision and dismissed the complaint. The CA ruled that, under the
resolution of the Board of Directors of RECCI, Roxas was merely authorized to sell the first lot,
but not to grant right of way in favor of the WHI over a portion of the second lot, or to grant an
option to the petitioner to buy a portion thereof.
Issue:
WON whether the respondent company is bound by the provisions in the deed of absolute sale
granting to the petitioner beneficial use and a right of way over a portion of the adjacent lot?
Ruling:
NO. Generally, the acts of the corporate officers within the scope of their authority are binding
on the corporation. However, under Article 1910 of the New Civil Code, acts done by such
officers beyond the scope of their authority cannot bind the corporation unless it has ratified
such acts expressly or tacitly, or is estopped from denying them. Thus, contracts entered into by
corporate officers beyond the scope of authority are unenforceable against the corporation
unless ratified by the corporation. Evidently, Roxas was not specifically authorized under the
said resolution to grant a right of way in favor of the petitioner on a portion of Lot No. 491-A-3-B1 or to agree to sell to the petitioner a portion thereof. The authority of Roxas, under the
resolution, to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086 did not include the authority
to sell a portion of the adjacent lot, Lot No. 491-A-3-B-1, or to create or convey real rights
thereon. Neither may such authority be implied from the authority granted to Roxas to sell Lot
No. 491-A-3-B-2 to the petitioner on such terms and conditions which he deems most
reasonable and advantageous. The general rule is that the power of attorney must be pursued
within legal strictures, and the agent can neither go beyond it; nor beside it. The act done must
be legally identical with that authorized to be done. In sum, then, the consent of the respondent
to the assailed provisions in the deed of absolute sale was not obtained; hence, the assailed
provisions are not binding on it.
Board of Liquidators vs Heir of maximo Kalaw Ceras
G.R. No. 129459 September 29, 1998
SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC., petitioner,
vs.
COURT OF APPEALS, MOTORICH SALES CORPORATION, NENITA LEE GRUENBERG,
ACL DEVELOPMENT CORP. and JNM REALTY AND DEVELOPMENT CORP., respondents.
FACTS:

Petitioner entered into an agreement with private respondent for the transfer of a parcel of
land. Petitioner then paid the unt f P100,000, for down payment and the balance to be paid on
or before Consequently, Mr.Co, president of San Juan, wrote a letter course through Motorich's
broker requesting for a computation of the balance to be paid. March 2, 1989: San Juan was
ready with the amount corresponding to the balance, covered by Metrobank Cashier's Check,
payable to Motorich.
The parties were supposed to meet in the office of San Juan but Motorich's treasurer, Nenita
Lee Gruenberg, did not appear. In that event, respondent refused to execute the Transfer of
Rights/Deed of Assignment which is necessary to transfer the certificate of title.
Petitioner eventually learned that ACL and respondent company entered into a Deed of
Absolute Sale regarding the same land. This event, led Petitioner to file a complaint against
respondents. Motorich, in its defense, argued that it is not bound by the acts of its treasurer,
Nenita, since her act in contracting with San Juan was not authorized by the corporate board.
The RTC ruled in favor of the respondens and affirmed by the Court of Appeals.
ISSUE:
Whether or not the act of corporate treasurer bound the Board of Directors of the
company.
HELD:
No, the act of corporate treasurer do not bound the Board of Directors of the respondent
company.
True, Gruenberg and Co signed on February 14, 1989, the Agreement, according to which a
lot owned by Motorich Sales Corporation was purportedly sold. Such contract, however, cannot
bind Motorich, because it never authorized or ratified such sale.
Indubitably, a corporation may act only through its board of directors or, when authorized
either by its bylaws or by its board resolution, through its officers or agents in the normal course
of business. The general principles of agency govern the relation between the corporation and
its officers or agents, subject to the articles of incorporation, bylaws, or relevant provisions of
law. 11 Thus, this Court has held that "a corporate officer or agent may represent and bind the
corporation in transactions with third persons to the extent that the authority to do so has been
conferred upon him, and this includes powers which have been intentionally conferred, and also
such powers as, in the usual course of the particular business, are incidental to, or may be
implied from, the powers intentionally conferred, powers added by custom and usage, as
usually pertaining to the particular officer or agent, and such apparent powers as the corporation
has caused persons dealing with the officer or agent to believe that it has conferred." 12
Furthermore, the Court has also recognized the rule that "persons dealing with an assumed
agent, whether the assumed agency be a general or special one bound at their peril, if they
would hold the principal liable, to ascertain not only the fact of agency but also the nature and

extent of authority, and in case either is controverted, the burden of proof is upon them to
establish it (Harry Keeler v. Rodriguez, 4 Phil. 19)." 13 Unless duly authorized, a treasurer,
whose powers are limited, cannot bind the corporation in a sale of its assets. 14
In the case at bar, Respondent Motorich categorically denies that it ever authorized Nenita
Gruenberg, its treasurer, to sell the subject parcel of land. Consequently, petitioner had the
burden of proving that Nenita Gruenberg was in fact authorized to represent and bind Motorich
in the transaction. Petitioner failed to discharge this burden. Its offer of evidence before the trial
court contained no proof of such authority. 16 It has not shown any provision of said respondent's
articles of incorporation, bylaws or board resolution to prove that Nenita Gruenberg possessed
such power.
That Nenita Gruenberg is the treasurer of Motorich does not free petitioner from the
responsibility of ascertaining the extent of her authority to represent the corporation. Petitioner
cannot assume that she, by virtue of her position, was authorized to sell the property of the
corporation. Selling is obviously foreign to a corporate treasurer's function, which generally has
been described as "to receive and keep the funds of the corporation, and to disburse them in
accordance with the authority given him by the board or the properly authorized officers." 17
Neither was such real estate sale shown to be a normal business activity of Motorich. The
primary purpose of Motorich is marketing, distribution, export and import in relation to a general
merchandising business. 18 Unmistakably, its treasurer is not cloaked with actual or apparent
authority to buy or sell real property, an activity which falls way beyond the scope of her general
authority.
In this case, there is a clear absence of proof that Motorich ever authorized Nenita
Gruenberg, or made it appear to any third person that she had the authority, to sell its land or to
receive the earnest money. Neither was there any proof that Motorich ratified, expressly or
impliedly, the contract. Petitioner rests its argument on the receipt which, however, does not
prove the fact of ratification. The document is a hand-written one, not a corporate receipt, and it
bears only Nenita Gruenberg's signature. Certainly, this document alone does not prove that her
acts were authorized or ratified by Motorich.

FRANCISCO VS GSIS
Facts:
The plaintiff, Trinidad J. Francisco, in consideration of a loan mortgaged in favor
of the defendant, Government Service Insurance System a parcel of land known as VicMari Compound, located at Baesa, Quezon City. The System extrajudicially foreclosed
the mortgage on the ground that up to that date the plaintiff-mortgagor was in arrears on
her monthly instalments. The System itself was the buyer of the property in the

foreclosure sale. The plaintiffs father, Atty. Vicente J. Francisco, sent a letter to the
general manager of the defendant corporation, Mr. Rodolfo P. Andal. And latter the
System approved the request of Francisco to redeem the land through a telegram.
Defendant received the payment and it did not, however, take over the administration of
the compound. The System then sent a letter to Francisco informing of his indebtedness
and the 1 year period of redemption has been expired. And the System argued that the
telegram sent to Francisco saying that the System has approved the request in
redeeming the property is incorrect due to clerical problems.
Issue:
WON the System is liable for the acts of its employees regarding the telegram?
Held:
Yes. There was nothing in the telegram that hinted at any anomaly, or gave
ground to suspect its veracity, and the plaintiff, therefore, can not be blamed for relying
upon it. There is no denying that the telegram was within Andals apparent authority.
Hence, even if it were the board secretary who sent the telegram, the corporation could
not evade the binding effect produced by the telegram. Knowledge of facts acquired or
possessed by an officer or agent of a corporation in the course of his employment, and
in relation to matters within the scope of his authority, is notice to the corporation,
whether he communicates such knowledge or not. Yet, notwithstanding this notice, the
defendant System pocketed the amount, and kept silent about the telegram not being in
accordance with the true facts, as it now alleges. This silence, taken together with the
unconditional acceptance of three other subsequent remittances from plaintiff,
constitutes in itself a binding ratification of the original agreement.
British Airways vs. CA Galicinao

Severino vs. Severino

Facts: The plaintiff Fabiola Severino is the recognized natural daughter of
Melecio Severino, deceased. Upon the death of Melecio Severino a number of

years ago, he left considerable property and litigation ensued between his widow,
Felicitas Villanueva, and Fabiola Severino, on the one part, and other heirs of the
deceased on the other part. In order to make an end of this litigation a
compromise was effected by which Guillermo Severino, a son of Melecio
Severino, took over the property pertaining to the estate of his father at the same
time agreeing to pay P100,000 to Felicitas Villanueva and Fabiola Severino. To
this contract the appellant Enrique Echaus affixed his name as guarantor. The
first payment of P40,000 was made on July 11, 1924, the date when the contract
of compromise was executed; and of this amount the plaintiff Fabiola Severino
received the sum of P10,000. Of the remaining P60,000, all as yet unpaid,
Fabiola Severino is entitled to the sum of P20,000
This case is now filed by the plaintiff to recover the 20,000. Enrique as a
guarantor protested because 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.
Issue: Whether or not the agreement is invalid due to lack of consideration ton
the part of the guarantor.
Held: No. The agreement as a guarantor is a accessory contract to the principal
and as such the consideration in the principal contract is the same as in the
agreement signed by Enrique as guarantor. A guarantor or surety is bound by the
same consideration that makes the contract effective between the principal
parties thereto. (Pyle vs. Johnson, 9 Phil., 249.) The compromise and dismissal
of a lawsuit is recognized in law as a valuable consideration; and the 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 never necessary that the guarantor or surety
should receive any part of the benefit, if such there be, accruing to his principal.
But the true consideration of this contract was the detriment suffered by the
plaintiffs in the former action in dismissing that proceeding, and it is immaterial
that no benefit may have accrued either to the principal or his guarantor.
Murao v. People Mogello
. METROBANK VS. CA
G.R. No. 88866 February 18, 1991

FACTS: Gomez an account with Golden Savings (a savings and loan association) and
deposited over a period of two months 38 treasury warrants drawn by a government agency
with a total value of more than P1.7 million. Six of these were directly payable to G while the
others appear to have been indorsed by their respective payees followed by Gomez as second
indorser. The warrants were subsequently indorsed by C, Cashier of Golden Savings, and
deposited to Golden Savings account with a branch of Metrobank which forwarded them to the
Bureau of Treasury for special clearing. In the meantime, Gomez was not allowed to withdraw
from his account.
After more than two weeks, "exasperated" over C's repeated inquiries as to whether the
warrants had been cleared, and also as an accommodation for a "valued client," Metrobank
finally decided to allow Golden Savings to withdraw from the proceeds of the warrants. In turn,
Golden Savings subsequently allowed Gomez, to make withdrawals from his own account.
Later, Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the
Bureau of Treasury and demanded the refunded of the amount Golden Savings had previously
withdrawn, to make up for the deficit in its account.
Issue: Was Metrobank negligent in giving Golden Savings the impression that the treasury
warrants had been cleared and that consequently, it was safe to allow Gomez to withdraw the
proceeds thereof from his account with it?
Held: Yes. Metrobank not entitled to refund of amounts withdrawn by Golden Savings. The
argument of Metrobank that Golden Savings would have exercised more care in checking the
personal circumstances of Gomez before accepting his deposit does not hold water. It was
Gomez who was entrusting the warrants, not Golden Savings that was extending him a loan.
And moreover, the treasury warrants were subject to clearing pending which the depositor could
not withdraw its proceeds. In stressing that it was acting only as a collecting agent for Golden
Savings, Metrobank seems to be suggesting that as mere agent it cannot be held liable to the
principal. This is not exactly true. On the contrary, Art. 1909 clearly provides: (see Art. 1909)

C. Liability of agents

When solidary.

Art. 1895. If solidarity has been agreed upon, each of the agents is responsible for the
non-fulfillment of the agency, and for the fault and negligence of his fellow agents,
except in the latter case when the fellow agents acted beyond the scope of their
authority.

In excess of Authority
DBP vs. CA
Facts: Juan Dans, together with his wife Candida, his son and daughter-in-law, applied for a
loan of P500,000.00 with the Development Bank of the Philippines (DBP).
. As the principal mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a
mortgage redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool
(DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by DBP on August 4, 1987 and
released on August 11, 1987. From the proceeds of the loan, DBP deducted the amount of
P1,476.00 as payment for the MRI premium. On August 15, 1987, Dans accomplished and
submitted the "MRI Application for Insurance" and the "Health Statement for DBP MRI Pool.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this
information to the DBP MRI Pool. On September 23, 1987, the DBP MRI Pool notified DBP that
Dans was not eligible for MRI coverage, being over the acceptance age limit of 60 years at the
time of application.
On February 10, 1989, respondent Estate, through Candida Dans as administratrix, filed a
complaint with the Regional Trial Court, Branch I, Basilan, against DBP and the insurance pool
for "Collection of Sum of Money with Damages. The trial court rendered a decision in favor of
respondent Estate and against DBP. The DBP MRI Pool, however, was absolved from liability,
after the trial court found no privity of contract between it and the deceased. On appeal the CA
affirmed in toto the decision of the trial court.
Issue: Whether or not DBP exceeded its authority as agent of DBP MRI Pool.
Ruling: Yes, DBP exceeded its authority.
As explained by the SC, In dealing with Dans, DBP was wearing two legal hats: the first as a
lender, and the second as an insurance agent.
The DBP is not authorized to accept applications for MRI when its clients are more than 60
years of age (Exh. "1-Pool"). Knowing all the while that Dans was ineligible for MRI coverage
because of his advanced age, DBP exceeded the scope of its authority when it accepted Dan's
application for MRI by collecting the insurance premium, and deducting its agent's commission
and service fee.
The liability of an agent who exceeds the scope of his authority depends upon whether the third
person is aware of the limits of the agent's powers. There is no showing that Dans knew of the
limitation on DBP's authority to solicit applications for MRI.

If the third person dealing with an agent is unaware of the limits of the authority conferred by the
principal on the agent and he (third person) has been deceived by the non-disclosure thereof by
the agent, then the latter is liable for damages to him
BEAUMONT V PRIETO G.R NO 8988 MARCH 30 1916
FACTS: Borck wanted to purchase Legardas property and was negotiating with the latters
agent, Valdes. Since there was a violation of the agreement, particularly failure to deliver
pertinent documents, Borck filed a complaint against Valdes and Legarda. Valdes claimed that
he should not be included for he was merely an agent.
ISSUE: Whether or not Valdes can be included in the complaint.
HELD: Yes, Valdes can be included in the complaint. Since the Civil Code merely states that a
person who contracts with an agent has cause of action against the principal but is silent to
whether or not the agent may be included in the suit, such agent may be included.
D. SPECIAL OBLIGATION OF COMMISSION AGENTS
Art. 1903. The commission agent shall be responsible for the goods received by him in
the terms and conditions and as described in the consignment, unless upon receiving
them he should make a written statement of the damage and deterioration suffered by
the same. (n)
A factor or commission agent is on 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.
Art. 1904. The commission agent who handles goods of the same kind and mark, which
belong to different owners, shall distinguish them by countermarks, and designate the
merchandise respectively belonging to each principal. (n)
OBLIGATION OF COMMISSION AGENT HANDLING GOODS OF SAME KIND AND MARK
The provision explains itself. The evident purpose is to prevent any possible confusion or
deception. He may not comingle the goods without authority.
An agent is also under a duty not to mingle his principals property with his own or to deal with
his principals property in a way which would make it appear to be his own property. Ordinarily,
the agent must hold the property only in the name of the principal. Where he violates that duty
by mingling the property with his own, he becomes a debtor of the principal and liable to him for
any losses suffered as a result of the mingling.
Art. 1905. The commission agent cannot, without the express or implied consent of the
principal, sell on credit. Should he do so, the principal may demand from him payment in
cash, but the commission agent shall be entitled to any interest or benefit, which may
result from such sale. (n)

RIGHT OF PRINCIPAL WHERE SALE ON CREDIT MADE WITHOUT AUTHORITY

A commission agent can sell on credit only with the express or implied consent of the principal.
If such sale is made without authority, the principal is given 2 alternatives:
1. He may require payment in cash, in which case, any interest or benefit from the sale on
credit shall belong to the agent since the principal cannot be allowed to enrich himself at
the agents expense; or
2. He may ratify the sale on credit in which case it will have all the risks and advantages to
him.
Art. 1906. Should the commission agent, with authority of the principal, sell on credit, he
shall so inform the principal, with a statement of the names of the buyers. Should he fail
to do so, the sale shall be deemed to have been made for cash insofar as the principal is
concerned. (n)
OBLIGATION OF COMMISSION AGENT WHERE SALE ON CREDIT AUTHORIZED
Under this article, an authorized sale on credit shall be deemed to have been on cash basis
insofar as the principal is concerned, upon the failure of the agent to inform the principal of such
sale on credit with a statement of the names of the buyers. The purpose of the provision is to
prevent the agent from stating that the sale was on credit when in fact it was made for cash.
Again, the agent shall be entitled to the benefits arising from the credit sale. The principal may
also choose to ratify the sale on credit with all its resulting benefits and risks.
Art. 1907. Should the commission agent receive on a sale, in addition to the ordinary
commission, another called a guarantee commission, he shall bear the risk of collection
and shall pay the principal the proceeds of the sale on the same terms agreed upon with
the purchaser. (n)
Art. 1908. The commission agent who does not collect the credits of his principal at the
time when they become due and demandable shall be liable for damages, unless he
proves that he exercised due diligence for that purpose. (n)
OBLIGATIONS OF COMMISION AGENT TO COLLECT CREDITS OF PRINCIPAL
A commission agent who has made an authorized sale on credit must collect the credits due the
principal at the time they become due and demandable. If he fails to do so, he shall be liable for
damages unless he can show that the credit could not be collected notwithstanding the exercise
of due diligence on his part. Where the agent is not liable, the principals remedy is to proceed
against the debtor.
This article does not apply to a case where there is a guarantee commission.
Art. 1909. The agent is responsible not only for fraud, but also for negligence, which shall
be judged with more or less rigor by the courts, according to whether the agency was or
was not for a compensation. (1726)