AGENCY CASE DIGESTS | ART. 1899-1918 | ATTY.

OBIETA | 2D 2012
(1) CASON V. RICKARDS AND SMITH BELL
When money is received as a deposit by an agent, and
that money is by the agent turned over to his principal,
with notice that it is the money of the depositor, the
principal is bound to deliver it to the depositor, even if
his agent was not authorized to received such deposits.
FACTS: Rickards was the agent in Dagupan of Smith Bell
and Co. He received from Cason as a deposit P2,000.xx.
When he left the employ of Smith Bell and Co., the
money was delivered to another agent of Smith Bell and
Co. in the area. Furthermore, he notified Smith Bell that
it was the money of Cason.
During trial, Rickards testified that a few days after he
received the P2,000.xx he received from her an order or
warrant upon the Spanish treasury for the sum of
P4,200.xx. He then wrote Smith Bell asking if it could be
collected. It was sent to Manila and collected through
Hongkong and Shanghai Bank and paid all of it out in the
business of Smith Bell and Co. P4,200.xx less 5%
commision for collection, of which commission, Smith
Bell and Co. received the benefit. The books which were
then produced in court by Smith Bell and Co. contained
an entry or entries of the receipt by Smith Bell of this
P4,200.xx. Rickards testified that he received express
directions in regard to this particular transaction.
Smith Bell and Co. did not present as witness any of
their employees or agents. They also did present their
books which according to Rickards would corroborate his
testimony. Their lone witness was a bookkeeper of
Hongkong and Shanghai Bank. The witness could not
testify to whom the cash was paid but said that based on
the books of the bank, Rickards received P4,200.xx. .
The lower court found in favor of Smith Bell and Co.,
relieving it from its responsibility of P4,200.xx.
ISSUE:
1.
2.

W/N the positive testimony of Rickards can be

overcome by the testimony of the bookkeeper.
W/N Rickards may be held liable for the money
of Cason

HELD: Judgement of the lower court cannot be affirmed

and must be reversed. The case is remanded back.
Smith Bell could demonstrate the falsity of the
testimony of Rickards by producing the books which it did
not. Rickards being an agent and someone who explicitly
turned over the money to Smith Bell as he left cannot be
made liable to Cason.

(2) EUGENIO V. CA
As far as third persons are concerned, an act is deemed
to have been performed within the scope of the agents
authority, if such is within the terms of the power of
attorney, as written, even if the agent has in fact
exceeded the limits of his authority according to the
understanding between the principal and his agent.

FACTS: Nora Eugenio was a dealer of Pepsi. She had one

store in Marikina but had a regular charge account in
Q.C. And Muntinlupa. Her husband Alfredo used to be a
route manager for Pepsi in its Q.C. Plant.
Pepsi filed a complaint for a sum of money against
Eugenio spouses. since according to them the spouses (1)
had an outstanding balance since it purchased and
received on credit various products from both its Q.C.
and Muntinlupa plant and (2) had an unpaid obligation for
the loaned empties from Pepsi. They contend that the
total outstanding account was P94,651.xx.
Eugenio's in their defense presented four Trade
Provisional Receipts (TPR) allegedly issued to and
received by them from Pepsi's Route Manager (Malate
Warehouse) Jovencio Estrada showing that they paid a
total sum of P80,500.xx.
They also claim that the signature of Nora Eugenio in a
Sales Invoice (85366) for the amount of P5,631.xx which
was included in the computation of their debt was
falsified.
Therefore, without these errors, petitioner contend that
(1) they do not have any outstanding debt, and (2) it is
Pepsi who owes them P3,546.02.
RTC found in favor of Pepsi. CA affirmed the decision.
ISSUE: W/N the amounts in the TPR should be credited in
favor of the spouses.
HELD: CA decision is annulled and set-aside. Pepsi is
ordered to pay Eugenio.
Background: Eugenio submitted the TPR's to Atty. Rosario
(Pepsi's lawyer). Thereafter, Rosario ordered Daniel
Azurin (asst.personnel manager) to conduct an
investigation to verify the claim of the petitioners.
According to Azurin, Estrada denied that he issued and
signed the TPR's. Azurin testified to this in Court
(However, Estrada never did. He failed to appear and
was never found. Therefore, his testimony- as told by
Azurin- is barred by the Hearsay Evidence Rule).
Furthermore, the investigation conducted was really
more of an interview without any safeguards and did not
give Eugenio opportunity to object or cross-examine
Estrada. The other points of Estrada (and Pepsi) were all
invalid since Estrada was nowhere to be found and Pepsi
failed to comply with the pertinent rules for the
admission of the evidence by which it sought to prove its
contentions. Pepsi therefore was unable to rebut the
aforestated presumptions in favor of valid payment by
petitioners,
In relation to Agency: Assuming in this case that Pepsi
never received the amounts reflected in the TPR's, Pepsi
still failed to prove that Estrada (its duly authorized
agent) did not receive the amounts. In so far as Eugenio
is concerned, their obligation is extinguished when they
paid Estrada using Pepsi's official receipt. The
substantive law is that payment shall be made to the
person in whose favor the obligation has been
constituted, or his successor in interest, or any person
authorized to receive it.
*TPR: Trade Provisional Receipts are bound and given in
booklets to the company sales representatives, under

DE LUZURIAGA | GAVINO | HIPOLITO

AGENCY CASE DIGESTS | ART. 1899-1918 | ATTY. OBIETA | 2D 2012

proper acknowledgement by them and with a record of
the distribution thereof. After every transaction, when a
collection is made the customer is given by the sales
representative a copy of the TPR, that is, the triplicate
copy or customer's copy, properly filled up to reflect the
completed transactions. All unused TPR's,as well as the
collections made, are turned over by the sales
representative to the appropriate company officer.

(3) TOYOTA SHAW INC. V. CA

A person dealing with an agent is put upon inquiry
and must discover upon his peril the authority of the
agent.
FACTS: Sosa wanted to purchase a Toyota Lite Ace and
was able to find one (with a little difficulty since it was a
seller's market) at Toyota Shaw Blvd, Pasig. There they
met a Sales Representative of Toyota Popong Bernardo.
Sosa expicitly mentioned that he needed the Lite Ace not
later than June 17, '89 because his family and a
balikbayan was going to use it the following day.
Bernardo assured Sosa that the car would be ready.
Bernardo then signed the Agreement Between Mr. Sosa
and Popong Bernardo of Toyota Shaw, Inc. and it was
also agreed that the balance would be paid by credit
financing through BA Finance (for this document, Gilbertthe son of Sosa signed).
The following day Sosa and Gilbert delivered the
downpayment of P100,000.xx.They then proceeded to
sign a Vehicle Sales Proposal (VSP). On June 17,'89 (after
much waiting) Bernanrdo informed them that the car
could not be delivered because nasulot ang unit ng
ibang malakas.
Toyota however contends that the reason the car was
not delivered was because the credit financing
application of Sosa was denied by BA Finance. Toyota
then gave Sosa the option to purchase the vehicle in full
and in cash. Sosa refused. Sosa asked that the
downpayment be refunded which Toyota did.
Thereafter, Sosa sent to letters to Toyota basically
demanding that he be paid damages (moral damages
amounting to 1 million pesos) or he shall be forced to
take legal action. Before Toyota could reply, Sosa filed a
complaint with the RTC.
Toyota alleged that there was no sale entered into
between Sosa and Toyota and that Bernardo had no
authority to sign Agreement Between Mr. Sosa and
Popong Bernardo of Toyota Shaw, Inc. in behalf of
Toyota...in effect, Toyota claims that Bernardo signed it
in his personal capacity.
RTC found in favor of Sosa. The trial court held that
the extent of Bernardo's authority was not made known
to Sosa. Bernardo was an agent of Toyota Shaw and
would in effect bind them (Toyota) with his actions.
CA affirmed RTC's decision.
ISSUE:
1.
2.

The said Agreement is not a perfected contract of

sale (A.1475). There is therefore no obligation on
Toyota's part to transfer ownership. The downpayment
paid made no reference to the sale of a vehicle..there
was no definite agreement as to the manner of payment
which is tantamaount to failure to agree on the price.
Also, there was no meeting of the minds as to the
Agreement- evidenced by Sosa not signing it.
Sosa also was well aware that he was not dealing with
Toyota but with Bernardo and that the latter did not
misrepresent that he has authority to sell any Toyota
vehicle. He knew that Bernardo was a sales
representative and a mere agent of Toyota. It was
incumbent upon Sosa to act with ordinary prudence and
reasonable diligence to know the extent of Bernardo's
authority as an agent. A person dealing with an agent is
put upon inquiry and must discover upon his peril the
authority of the agent.
Therefore, Toyota not liable and RTC Judgment
reversed.

(4) COMMISSIONER V. SAN DIEGO

The case tackles Art. 1901 of the NCC which states;
Third persons cannot set up the fact that the agent
exceeded his powers if the principal has ratified or
has signified his willingness to ratify the acts of the
agent.
FACTS: The case involves an expropriation proceeding
where the government took possession of a parcel of land
owned by N.T. HASHIM. The land of Hashim was used to
construct a public road now known as Epifanio (Christian)
de los Santos Aveneo (EDSA). For not having been paid
properly by the government, the Judicial Administrator
of the estate of N.T. Hashim - Tomas N. Hashim, filed
cases against the government to recover the amount. To
avoid lengthy litigation, a lawyer of the estate of Hashim
was able to enter into a compromise agreement with the
government wherein they proposed that the government
pay the area of the land taken at a rate of P 14 per sq.
m., the total for the whole area taken amounted to some
P200,000+. The government through the Solicitor General
agreed. The agent then filed cases asking for writ of
executions and for garnishment of the amount owed by
the government to the Hashim estate. The writ and
garnishment were served with the Philippine National
Bank who was holding the funds of the Bureau of Public
Highways. The payment of 200K was supposed to come
from said funds. However, without permission from the
proper government officials, PNB paid the P200K to the
estate of Hashim. The case mainly centers on the efforts
of the Commissioner of Public Highways (the head of the
Bureau of Public Highways) to recover the amount
garnished by the court and given to the estate of Hashim.
ISSUE: W/N the writ of execution and the garnishment of
government funds by the court was proper.

W/N there was a valid sale

W/N Toyota may be held for damages

HELD: Petition has merit.

DE LUZURIAGA | GAVINO | HIPOLITO

RULING: NO. The garnishment was illegal. By reason of

public policy government funds are exempt from
execution or garnishment.
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AGENCY CASE DIGESTS | ART. 1899-1918 | ATTY. OBIETA | 2D 2012

The agency issue in this case was mentioned only in
passing
as
they
were
merely
ancillary
(additional/secondary) and not the principal issue of the
case. One of the ancillary issues raised by the
government was questioning the validity of the
compromise agreement entered into by the Solicitor
General on behalf of the State on the ground that it was
executed only by the lawyer of the estate of Hashim,
without any showing of having been specially authorized
to bind the estate thereby. Such alleged lack of authority
may be questioned only by the principal or client, and
the estate of Hashim as such principal has already
confirmed and ratified the compromise agreement.

(5) GREEN VALLEY V. IAC

In an agency to sell, the agent is liable to pay the
principal for goods sold by the agent without the
principals consent.
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.
FACTS: In 1969, GREEN VALEY POULTRY AND ALLIED
PRODUCTS entered into a letter agreement with SQUIBB
& SONS PHILIPPINE CORPORATION. The details of the
agreement state that Green Valley will be the nonexclusive distributor of the products of Squibb Veterinary
Products. As its distributor Green Valley is entitled to
10% discount on Squibbs whole sale price and catalogue
price. Green Valley is also limited to selling Squibbs
products to central and northern Luzon. Payment for
purchases from Squibb will be due 60 days from date of
invoice, etc. For goods delivered to Green Valley but
unpaid, Squibb filed a suit to collect. Squibb argues that
their relationship with Green Valley is a mere contract of
sale as evidenced by the stipulation that Green Valley
was obligated to pay for the goods received upon the
expiration of the 60-day credit period. Green Valley
counters that the relationship between itself and Squibb
is that of an agency to sell.
ISSUE: W/N Green Valley is an agent of Squibb.
RULING: Whether viewed as an agency to sell or as a
contract of sale GREEN VALLEY is liable to Squibb for the
unpaid products. If it is a contract of sale then the Green
Valley is liable by just merely enforcing the clear words
of the contract. If it is an agency then Green Valley is
liable because it sold on credit without authority from its
principal. The Civil Code says:
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.

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(6) INTERNATIONAL FILMS (CHINA) V. LYRIC FILM

A subagent is not obliged to fulfill more than the
contents of the mandate and to answer for the
damages caused to the principal by his failure to do
so.
FACTS: Bernard Gabelman was the Philippine agent of
International Films by virtue of a power of attorney in
1933. In the same year, International Films, through its
agent, leased the film entitled, Monte Carlo Madness,
to Lyric Film to be shown in different theaters. One of
the conditions was that Lyric Film would answer for the
loss of the film whatever the cause.
After the last showing of the film, Gabelman requested
Albo, chief of the film department of Lyric Film, to
permit him to deposit the film in the latters vault under
Gabelmans responsibility, since this would not be
covered by the insurance, which Lyric Film carries.
In 1933, Gabelman was succeeded by Lazarus Joseph as
agent of International Films. Upon his possession of the
agency, he asked for the return of the films White
Devils, Congress Dances, and Monte Carlo Madness.
However, Lyric Film only returned the first 2 movies,
since Monte Carlo Madness would still be shown in
Cebu. Subsequently, the bodega of Lyric Film burned
down before it was shown in Cebu, together with the film
Monte Carlo Madness.
ISSUE: W/N Lyric Film is liable to International Films for
the destruction by fire of the film
HELD: NO. Preponderance of evidence has shown that
the verbal agreement between Gabelman and Albo was
that the film would remain deposited in the safety vault
of Lyric Film under the responsibility of Gabelman and
that Lyric Film, as his subagent, could show it in his
theaters. As the agreement is one of sub-agency, Lyric
Film cannot be held liable to International Films because
it was not obliged to fulfill more than the contents of the
mandate and to answer for the damages caused to
International Films by his failure to do so. The fact that
the film was not insured against fire does not constitute
fraud or negligence on the part of Lyric Film, because as
subagent, it received no instruction to that effect from
International Films, as its principal, and the insurance of
the film does not form part of the obligation imposed
upon it by law.

(7) LIM CHAI SENG V. TRINIDAD

A principal is bound by the acts of his agent in the
scope of the agency.
FACTS: Cu Chiat is the agent and the intermediary of Lim
Chai Seng in making reports to the Collector of Internal
Revenue of the business done by Lim Chai Seng and in
the making of payments for the taxes due from the
latter. However, instead of doing his duty punctually, Cu
Chiat submitted false reports of the business of Lim Chai
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AGENCY CASE DIGESTS | ART. 1899-1918 | ATTY. OBIETA | 2D 2012

Seng by making it appear that the taxes due were much
lower than what is really due and misappropriated the
excess of the taxes, as reflected on the checks paid by
Lim Chai Seng, to the payment of similar taxes due from
other Chinese firms of whom Cu Chiat is also an agent.
When the CIR found out about these under
declarations, it required Lim Chai Seng to pay the
deficiency in the tax and to pay additional 25%
surcharge; but the latter refused to pay and instead filed
an action to recover the entire amount he paid.

ISSUE: W/N Fortis, as an agent of Gutierrez Hermanos in

Hongkong, is entitled to reimbursement of the P600
expense he incurred

ISSUE: W/N the CIR was liable to account to Lim Chai

Seng the amount which represents the excess of the 3
checks over the amount apparently due upon the returns
made and which was applied to the payment of the taxes
due from other persons

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 therefore, 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)

HELD: NO. Cu Chiat had full authority to make returns to

the CIR of the business done each quarter by Lim Chai
Seng and to make payment of the proper amount of the
taxes due by those returns. When Cu Chiat made returns
showing a certain amount of business transacted and the
taxes due were computed according to those returns, the
CIR could not legitimately collect a greater amount. It
was entirely proper for the CIR to allow the check of Lim
Chai Seng to be applied to the similar taxes other
merchants as well--the more so as according to the proof
it was not unusual for checks drawn by one to be applied
to another. Moreover, the CIR applied such payment in
good faith and without knowledge that such was being
misapplied.
The principal is bound by the act of his agent, and the
effects of the dishonesty of the agent must be borne by
the principal, not by an innocent third party who has
dealt with the dishonest in good faith.

(8) FORTIS V. GUTIERREZ HERMANOS

In an action by an agent to recover the amount of
certain disbursements and not compensation for
services, Art. 1728, not Art. 1711, is applicable.
FACTS: Fortis, an employee of Gutierrez Hermanos,
brought the action to recover the balance of his salary
for the year 1902, which is 5% of the net profits of
Hermanos business, and the amount he expended for the
year 1903 amounting to P600. The salary was in
accordance with the contract made by Miguel Alonzo
Gutierrez, who was made as one of the managers of the
company, with full power to transact all of the business
and to make a contract of employment.
In 1903, Fortis went to Hongkong to look after the
business of Gutierrez Hermanos in the matter of the
repair of a certain steamship, for which he expended
P600. Gutierrez Hermanos contended that Fortis is not
entitled to compensation for the services rendered,
because according to Art. 1711 of the Civil Code, the
contract of agency is supposed to be gratuitous in the
absence of an agreement to the contrary.
Lower court ruled in favor of Fortis.

DE LUZURIAGA | GAVINO | HIPOLITO

HELD: YES. Art. 1711 is INAPPLICABLE in this case

because the amount of P600 is not claimed as
compensation for services but as a reimbursement for
money expended by him in the business of Hermanos.
Thus, it is Art. 1728 (now Art. 1912 of the NCC) that is
applicable

(9) ALBALADEJO Y CIA V. PRC

This case involves a contract of sale, not a contract
of agency. Thus, principal buyer cannot be held
liable to reimburse agent seller for the expenses it
incurred in maintaining its purchasing organization
intact over a period during which the actual buying of
the product was suspended.
FACTS: Albaladejo y Cia was engaged in the buying and
selling of copra in Albay, while Visayan Refining Corp.
(VRC) was engaged in the manufacture of coconut oil, for
which purpose it must continually purchase large
quantities of copra. Pursuant to an agreement which
both parties made, Albaladejo y Cia, as VRCs agent,
bought copra extensively for VRC. During the years that
they contracted with each other, VRC required large
quantities of copra which compelled Albaladejo y Cia to
extend its business by establishing some 20 agencies or
subagencies in various ports and places in Albay and
neighboring provinces. Affairs between them remained
until 1920 when VRC closed down its factory in Opon,
Cebu and withdrew from the copra market.
Upon the liquidation of their accounts, VRC rendered
the last account to Albaladejo y Cia amounting to a
balance of P288 in favor of VRC as of April 1921. This
account was approved by Albaladejo. This time,
Philippine Refining Co. (PRC) succeeded to the rights and
liabilities of VRC.
Six weeks after, Albaladejo alleged that VRC
negligently failed to provide opportune transportation for
the copra it collected and deposited for shipment at
various places, pursuant to their agreement that VRC
obligated itself to provide transportation by sea to Opon,
Cebu. Due to VRCs failure, the copra diminished in
weight and value due to its shrinkage through excessive
drying. The total value of these copra was P201,599.53,
in which amount Albaladejo y Cia was damaged and
injured. However, the lower court ruled that VRC was
not negligent in the delay of the transportation but the
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AGENCY CASE DIGESTS | ART. 1899-1918 | ATTY. OBIETA | 2D 2012

occasional irregularities were due at times to the
condition of the weather as to the transportation by sea.
Albaladejo also sought to recover P110,000, the
amount it expended in maintaining and extending its
organization, on the basis that VRC requested such, with
repeated assurances that it would resume its activity as a
purchaser of copra.
ISSUE: W/N Albaladejo y Cia, as agent of VRC, is entitled
to reimbursement for the expenses in maintaining and
extending its organization for the purchase of copra in
the period when VRC was closed which it incurred at the
instance and request of VRC or upon any promise of the
defendant to make that expenditure good
HELD: NO. Albaladejo y Cia presented several trade
letters of VRC and PRC as evidence that PRC hoped that
it would soon re-enter the copra market. But nothing in
these letters held PRC liable for the expenses incurred by
Albaladejo y Cia in keeping its organization intact.
The contract between VRC/PRC and Albaladejo y Cia is
one of purchase, and not of agency. Although VRC/PRC
used agents in its trade letters to refer to Albaladejo y
Cia and other suppliers, it was only used for convenience
and it is very clear that in its activities as a buyer,
Albaladejo y Cia was acting upon its own account and not
as agent of VRC. When it turned over the copra to VRC, a
second sale was effected.
Not having a contract of agency with VRC, Albaladejo y
Cia is NOT entitled to reimbursement, as contemplated
under
Art.
1729,
now
Art.
1913,
for
the
damages/expenses it incurred in maintaining and
extending VRCs organization.
Art. 1913. The principal must also indemnify the
agent for all the damages which the execution of
the agency my have caused the latter, without
fault or negligence on his part. (1729)
* END *

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