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When Caoibes made use of the power of attorney, the principal

was already dead.

FACTS: Adams & Taguba Corporation (ATACO) constituted PNB

as its assignee and attorney-in-fact to receive and collect from the
Bureau of Public Works the amount to pay for the asphalt
delivered to it under a trust receipt guaranteed by Manila Surety.
ATACO delivered to BPW asphalt worth P431,466.52. Of this
amount, PNB was able to regularly collect a total of P106,382.01.
However, due to unexplained reasons, PNB was not able to collect
until the investigators found out that more money were payable
to ATACO from BPW. The latter allowed another creditor to
collect funds due to ATACO under the same purchase order, to a
total of P311,230.41.
An agent is required to act with the care of a good father of a
family and becomes liable for the damages, which the principal
may suffer through his non-performance. A bank is answerable
for negligence in failing to collect the sums due its debtor from
the latters own debtor, contrary to said banks duty as holder of
an exclusive and irrevocable power of attorney to make such
collections. The general rule under A1883 is that an agent who
acts in his own name is a bar against the right of action of the
principal against the person to whom the agent has contracted
with. In this case, the agent is the one primarily bound.
Exception: When the contract involves things belonging to the
Thus, PNB sued both ATACO and Manila Surety to recover the
balance of P158,563.18, plus interests and damages. CA ruled
that PNB was negligent in having stopped collecting from BPW
before ATACOs debt is fully collected, thereby allowing funds to
be taken by other creditors to the prejudice of the surety. PNB
asserts that the power of attorney executed in it is favor from
ATACO was merely an additional security; that it was the duty of
the surety to see to it that the obligor fulfills his obligation; and
that PNB has no obligation to the surety to collect any sum from
ISSUE: W/N PNB is negligent as an agent-creditor of ATACO in
collecting sums due to it
HELD: YES. The CA did not hold PNB responsible for its
negligence in failing to collect from ATACO for its debt to PNB,
FROM BPW. An agent is required to act with the care and
diligence of a good father of a family and becomes liable for the
damages, which the principal may suffer through its nonperformance. PNBs power to collect was expressly made
irrevocable so that BPW could very well refuse to make payments
to ATACO itself, and reject any demands by the surety.

Additional: Verbal donation requires the simultaneous delivery of

the gift. In the absence of this requisite the donation shall
produce no effect, unless made in writing and accepted in the
same form. The alleged donation was made in writing but it has
not been accepted in the same form, and consequently, has no
Gutierrez Hermanos vs Oria Hermanos
Gutierrez Hermanos and Oria Hermanos entered into a contract
wherein GH bound itself to acquire for and forward to OH certain
goods such as rice, cash, petroleum, etc. Because of this, GH and
OH decided to open a mutual current account under Oria
Hermanos on the books of Gutierrez Hermanos with 8%
interest. Gutierrez Hermanos informed Oria Hermanos. that said
current account would be closed within 30 days, after which, Oria
Hermanos would have to settle the balance due to Gutierrez
Hermanos, if any. However, despite repeated demands from
Gutierrez Hermanos to Oria Hermanos, the latter never paid
which led to the filing of this suit.
Up until the closing of the account, GH had sent OH various
quantities of salt, petroleum, tobacco, groceries, and beverages
and had collected a commission on the sale. The semiannual
accounts rendered by GH were never questioned. However, OH
claims that GH had set higher prices than the price actually paid,
thereby defrauding OH. OH prayed that GH render an account as
well as the vouchers used to determine the purchase price of the
said goods. OH also claimed that GH had kept the discount in
addition to collecting commission on the sale of goods.
Issue: whether or not OH is liable to GH for its unsettled account?
Yes, but only upon proper accounting of the expenses for the
shipment of rice and petroleum which were claimed to be
When an agent in executing the orders and commissions of his
principal carries out the instructions he has received from his
principal, and does not appear to have exceeded his authority or
to have acted with negligence, deceit, or fraud, he cannot be held
responsible for the failure of his principal to accomplish the
object of the agency.
Since it was not proven that the price of the goods were
overstated, thereby defrauding OH, OH cannot escape the liability
of paying GH for performing the task given to him by OH as his

Ramos vs. Caoibes, 94 Phil. 440

Domingo vs. Domingo
FACTS: Concepcion Ramos appointed Caoibes through a power of
attorney to collect an amount due him from the Philippine War
Damage Commission. Half of that amount will then be given to
the sister of Concepcion and half to her niece and nephew as
evidenced by an affidavit. Days after Concepcion died, a Check
was issued to Caoibes when he presented the power of attorney
and affidavit and later on encashed it for himself. The
administratrix discovered the collection made by Caoibes. The
administratrix filed to the court asking Caoibes to deposit the
money to the clerk of court. Caoibes contended that he will
deliver half of the amount to the clerk of court and then said that
he had the right to retain half of the money by virtue of the power
of attorney and the Affidavit.
ISSUE: Whether Caoibes is correct with her contention that he
had the right to retain the money by virtue of the power of
RULING: No. Caoibes as an agent had the obligation to deliver the
amount collected by virtue of the power of attorney to his
principla, Concepcion or the administratrix since she died. No
where in the in power of attorney did it state that the was a
cession of rights made in favour of Caoibes. And the prevailing
provision during the time of the transaction stated that a contract
of agency is deemed gratuitous unless the agent is a professional
agent and there was no showing that Caoibes was such. Lastly, an
agency is terminated by death of the principal or of the agent.

Vicente Domingo granted Gregorio Domingo the exclusive agency
to sell his lot with a commission of 5% on the total price
Gregorio authorized Teofilo Purisima to look for a buyer with half
of the 5% as his commission
Teofilo introduced Oscar de Leon to Gregorio as a prospective
Oscar offered to purchase the lot at a lower price than that made
by Vicente.
Gregorio was able to persuade Vicente to accept Oscar's offer and
an agreement was made between Vicente and Oscar
P1,000 was given by Oscar as earnest money P300 of which was
advanced by Vicente to Gregorio as his commission
Also, Gregorio received P1,000 from Oscar as 'promised' by Oscar
if Gregorio will be able to persuade Vicente to sell the lot at a
lower price
This 'promised money' or secret bonus of Gregorio was not
disclosed to Vicente
Oscar talked to Gregorio that he is now canceling the sale but he
will not try to recover the earnest money of the secret bonus he
Gregorio, sensing something fishy, went to the Register of Deeds
and discovered that Vicente actually sold the land to Oscar's wife
as shown in the title
Gregorio approached Vicente and demanded his commission but
the latter refused to give him any amount

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W/N Vicente is still liable to pay Gregorio his commission even
though the latter failed to disclose everything he received form
the transaction
Gregorio cannot demand from Vicente his commission
Article 1891 states that every agent is bound to render an
account of his transactions and to deliver to the principal
whatever he may have received by virtue of the agency
When Gregorio accepted the secret bonus and failed to disclose
this to his principal, he violated the agency agreement and
PRINCIPAL. This is regardless to W/N the principal suffered any
injury because of the breach of trust.
His acceptance of the secret profit corrupted his duty to serve the
interest only of the principal. Instead of exerting his best to
persuade the buyer to purchase the lot on the most advantageous
terms desired by his principal, he succeeded in persuading his
principal to accept the terms of the buyer to the detriment of his
U.S. VS. REYES (36 PHIL. 791)
R. B. Blackman, a surveyor in Pangasinan had an oral agreement
with Domingo Reyes. The latter would collect in behalf of
Blackman amounts due from 12 individuals in connection with
the survey of their lands totaling to Php 860.00. He only
succeeded in collecting Php 540 and delivered Php 368 to
Blackman, retaining the balance of Php 172.00. Both parties had
different claims. Blackman said that the
agreement was 10% commission for Reyes. But Reyes insisted it
was 20%. If the Court would accept
Blackmans claims, Reyes would be entitled to Php 54.00
therefore Php 172.00 misappropriated or Php
118.00 if commission was deducted. On the other hand, if the
Court accepts Reyes claims which was
20% then 20% of the amount supposed to be collected was Php
172.00. Reyes was found guilty of estafa.
1) Whether there was a contract of agency between the parties?
2) Whether its terms and conditions are complied with?
There was a contract of agency. But with the terms and
conditions are not complied with. On the onset there was a
contract of agency through an oral agreement. Reyes was bound
to pay the principal all he received from the collecting dues as
stated by Blackman. In view of the discrepancy in the evidence
the court was not disposed to set up judgment as superior to that
of the trial court. Also conceding that Reyes was to receive 20%,
this unless some contrary and express stipulation was included
would not entitle him in advance to 20% of the amount actually
collected. The right to receive a commission of either 10% or
20% did not make to hold out any sum he chose. Since for all
practical purposes the agency was terminated the agent was
under the obligation to turn over to the principal the amount
collected, minus his commission or that amount.

which had been sold to Bosque and Ruiz by the plaintiff, acting
through her attorney in fact, one Manuel Pirretas y Monros.
The case stemmed from the following:
1. Prior to September 17, 1919, the plaintiff Villa was the
owner of a printing establishment and bookstore
located at Escolta, Manila, and known as La Flor de
Cataluna, Viuda de E. Bota, with the machinery, motors,
bindery, type material furniture, and stock appurtenant
thereto. Upon the date stated, the plaintiff, then and
now a resident of Barcelona, Spain, acting through
Manuel Pirretas, as attorney in fact, sold the
establishment above-mentioned to the defendants
Guillermo Garcia Bosque and Jose Pomar Ruiz,
residents of the City of Manila, for the stipulated sum of
2. In 1920, Pirretas absented himself from the Philippine
Islands on a prolonged visit to Spain; and in
contemplation of his departure he executed a
document purporting to be a partial substitution of
agency, whereby he transferred to "the mercantile
entity Figueras Hermanos, or the person, or persons,
having legal representation of the same," the powers
that had been previously conferred on Pirretas by the
plaintiff "in order that," so the document runs, "they
may be able to effect the collection of such sums of
money as may be due to the plaintiff by reason of the
sale of the bookstore and printing establishment
already mentioned, issuing for such purpose the
receipts, vouchers, letters of payment, and other
necessary documents for whatever they shall have
received and collected of the character indicated."
3. When the time came for the payment of the second
installment and accrued interest due at the time, the
purchasers were unable to comply. Figueras Hermanos,
acting as attorney in fact for the plaintiff, an agreement
was Afterwhich, another document was entered
(Exhibit 1) whereby the partnership in said document
it stated that Bosque is indebted to Villa in the amount
of 32k which France and Goulette are bound as joint
and several sureties, and that the latters partnership
had transferred all its assets to the Bota Printing
4. Rosa is now alleging that Figueras had no authority to
execute the contract containing the release of
Guillermo from the liability, and that she had not
ratified the same. Defendants argue otherwise, using
the agreement as a novation releasing him from
personal liability.
CFIs ruling:
The defendant Ruiz put in no appearance, and after
publication judgment by default was entered against him. The
other defendants answered with a general denial and various
special defenses. The trial judge gave judgment in favor of the
plaintiff, requiring all of the defendants, jointly and severally, to
pay to the plaintiff the sum of P19,230.01, as capital, with
stipulated interest, plus the further sum of P1,279.70 as interest
already accrued and unpaid upon the date of the institution of the
action, with interest.

ROSA VILLA MONNA, plaintiff-appellee,

FRANCE, appellants.


W/N Figueras had actual authority whatever to release the

sureties or to make a novation of the contract without their
additional guaranty


This action was instituted in the Court of First Instance

of Manila by Rosa Villa y Monna, widow of Enrique Bota, for the
purpose of recovering from the defendants, Guillermo Garcia
Bosque and Jose Romar Ruiz, as principals, and from the
defendants R. G. France and F. H. Goulette, as solidary sureties for
said principals, the sum of P20,509.71, with interest, as a balance
alleged to be due to the plaintiff upon the purchase price of a
printing establishment and bookstore located at Escolta, Manila,

NO. The partial substitution of agency (Exhibit B to

amended complaint) purports to confer on Figueras Hermanos or
the person or persons exercising legal representation of the same
all of the powers that had been conferred on Pirretas by the
plaintiff in the original power of attorney. This original power of
attorney is not before the SC, but assuming, as is stated in Exhibit
B, that the document contained a general power to Pirretas to sell
the business known as La Flor de Catalua upon conditions to be

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fixed by him and power to collect money due to the plaintiff upon
any account, with a further power of substitution, yet it is
obvious upon the face of the act of substitution (Exhibit B) that
the sole purpose was to authorize Figueras Hermanos to collect
the balance due to the plaintiff upon the price of La Flor de
Catalua, the sale of which had already been affected by Pirretas.
The act of substitution conferred no authority whatever
on M. T. Figueras as an individual.
In view of these defects in the granting and exercise of
the substituted power, we agree with the trial judge that the
Exhibit 1 is not binding on the plaintiff. Figueras had no authority
to execute the contract of release and novation in the manner
attempted; and apart from this it is shown that in releasing the
sureties Figueras acted contrary to instructions. From this it is
obvious that Figueras had no actual authority whatever to release
the sureties or to make a novation of the contract without their
additional guaranty.
As a result of our examination of the case the SC find no error in
the record prejudicial to any of the appellants, and the judgment
appealed from was affirmed, So ordered, with costs against the
An agent acting as such is not personally liable unless he
expressly binds himself or exceeds his authority. FACTS: Juan
Dans, together with his wife Candida, applied for a loan of P500K
with the DBP. He was 76 at that time. He was advised by DBP to
obtain a mortgage redemption insurance with the DBP Mortage
Redemption Insurance Pool (DBP MRI pool)
The loan was approved at a reduced amount of P300K. DBP
also deducted P1,476 as payment of the MRI premium. After than,
Dans accomplished the application for Insurance and Health
statement for the DBP MRI pool. The premium minus a 10%
service fee was credited by DBP to the account of DBP MRI pool.
And then, Dans died of cardiac arrest. DBP MRI Pool notified
DBP that he was not eligible for MRI coverage for being over the
acceptance age limit of 60 years at the time of the application.
DBP informed Candida of the disapproval of her late husbands
application and offered to refund that premium of P1,476 but she
refused. She also refused the ex gratia settlement of P30,000.
Candida, as administratix of her late husbands estate, filed a
complaint for collection of sum of money with damages. The RTC
rules in her favor but absolved DBP MRI Pool from liability for
there was no privity of contract between it and the deceased. The
RTC also found DBP in estoppel for having led Dans into applying
despite knowledge of the age ineligibility. The CA affirmed thus
the case at bar.
ISSUE: W/N DBP is liable
In dealing with Dans, DBP was wearing 2 hats, one, that of a
lender and two that of an insurance agent. It required the
borrower, as a matter of policy and practice, to secure MRI
coverage but instead of allowing Dans to look for his own
insurance carrier, DBP compelled him to apply with the DBP MRI
Pool. It also deducted from the proceeds of the loan, MRI
premium and deducted from this 10% as service fee for the
application form and his health statement. As an insurance agent,
DBP made Dans go through the motion of applying for said
insurance despite knowing that his application would never be
approved for being over the age limit.
Art. 1897 provides that the agent who acts as such is not
personally liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limit of his authority
without giving such party sufficient notice of his powers.
DBP exceeded the scope of its authority when it accepted Dans
application for it is not authorized to accept applications for MRI
when its clients are over 60 years of age. Also there is no showing
that Dans knew of the limitation on DBPs authority to solicit
applications for MRI. If the 3rd person dealing with an agent is
unaware of the limits of the authority conferred by the principal
on the agent and the 3rd person has been deceived by the nondisclosure by the agent, the latter is liable for damages to him.
But DBP cannot be liable for the entire value of the insurance
policy. Considering his advanced age, there is no absolute
certainty that Dans could obtain an insurance coverage from

another company since he died almost immediately. But Dans is

entitled to moral damages.
Philippine Products Company vs Primateria Societe
Anonyme Pour Le Commerce Exterieur
15 SCRA 301 Business Organization Corporation Law
Liability of Foreign Corporations and their Agents
Primateria Societe Anonyme Pour Le Commerce Exterieur
(Primateria Zurich, a sociedad anonima formed in Zurich),
through Alexander Baylin, entered into an agreement with
Philippine Products Company (PPC) whereby it was agreed that
from 1951 to 1953, PPC shall ship copra products abroad.
Apparently, Primateria Zurich was not licensed by the Securities
and Exchange Commission to do business in the Philippines.
Primateria Zurich also failed to pay its obligations amounting to
P31,009.71. PPC sued Primateria Zurich and it impleaded Baylin,
Primateria Philippines, and one Jose Crame, the latter three being
impleaded as agents of Primateria Zurich.
The lower court ruled in favor PPC but it absolved Baylin, Crame,
and Primateria Philippines.
PPC appealed as it insists that Baylin et al should be liable as
agents because under Section 68 and 69 of the Corporation Law,
the agents of foreign corporations not licensed to transact in the
Philippines shall be personally liable for contracts made in their
(foreign corporations) behalf.
ISSUE: Whether or not PPC is correct.
HELD: No. PPC was not able to prove that Primateria Zurich, a
sociedad anonima, is a foreign corporation. And as a sociedad
anonima, Primateria Zurich is not a corporation under our
Corporation Law. As such, Sections 68 and 69 cannot be invoked
in order to make the alleged agents of Primateria Zurich be liable.
PPC will have to enforce the judgment against Primateria Zurich


The agent who exceeds the limits of his authority without giving
the party with whom he contracts sufficient notice of his powers
is personally liable to such party.
FACTS: National Merchandising Corp, as representative of
International Commodities Corp, and National Power Corp (NPC)
executed a contract for the purchase by NPC of 4000 long tons of
crude sulfur for its Ma. Cristina Fertilizer Plant. Domestic
Insurance Co. executed a performance bond in the sum of
P90,143.20 to guarantee the Namercos obligation.
In the contract of sale, it was stipulated that delivery should be
made within 60 days from the establishment on Namercos favor
of a letter of credit otherwise it would be liable for the payment
of liquidated damages.
The letter of credit was opened and was received by cable by
the New York firm thereby making Jan. 15, 1957 the deadline for
the delivery of the sulfur. The New York supplier was not able to
deliver due to its inability to secure shipping space. Because of
this from Jan 20-26, there was a shutdown of NPCs fertilizer
plant because there was no sulfur. It could not produce fertilizer.
NPC advices Namerco that under Art. 9 of the contract of sale,
non-availability of bottom or vessel was not a fortuitous event
that would excuse non-performance. The Govt Corporate
Counsel informed Namerco that it rescinded the contract of sale
and demanded payment of P360, 572.80. NPC sued for recovery
of stipulated liquidated damages against the New York firm,
Namerco and the Domestic Insurance Company.
The CFI dismissed the case as to the New York firm for lack of
jurisdiction because it was not doing business in the Philippines.
It then ordered Namerco and the Domestic Insurance Corp to pay
solidarily reduced liquidated damages. Both parties appealed to
the SC which was consolidated thus the case at bar.
ISSUE: W/N Namerco can be held liable
HELD: YES Art. 1897 provides that an agent who exceeds the
limits of his authority without giving the party with whom he
contracts sufficient notice of his powers is personally liable to
such party. This provision is complemented by Art. 1898 in which

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it states that if the agent contracts in the name of the principal,

exceeding the scope of his authority, and the principal does not
ratify the contract, it shall be void if the party with whom the
agent contracted is aware of the limits of the powers granted by
the principal.
Namerco acted beyond the bounds of its authority therefore it
is personally liable to the party with whom he contracted.
Namercos principal expressly provided instructions that the sale
would be subject to the availability of a steamer. Even before the
signing of the contract of sale, Namerco was aware that its
principal was having difficulty in booking shipping space. It was
also advised not to sign the contract unless it would assume full
responsibility for the shipment. However, the president of
Namerco had no choice but to sign for NPC would forfeit the
bidders bond if the contract was not formalized. Also NPC was
not aware of the limitations on the powers of Namerco. Since
Namerco exceeded the limits of its authority, it virtually acted in
its own name and is not being held liable under the contract of
sale and is bound by the stipulation for liquidated damages.


Mariano Albert entered into a contract with University Publishing
Co., Inc. through Jose M. Aruego, its President, whereby
University would pay plaintiff for the exclusive right to publish
his revised Commentaries on the Revised Penal Code. The
contract stipulated that failure to pay one installment would
render the rest of the payments due. When University failed to
pay the second installment, Albert sued for collection and won.
However, upon execution, it was found that the records of this
Commission do not show the registration of UNIVERSITY
PUBLISHING CO., INC., either as a corporation or
partnership. Albert petitioned for a writ of execution against Jose
M. Aruego as the real defendant. University opposed, on the
ground that Aruego was not a party to the case.
ISSUE: WON University Publishing Co., Inc. is an existing
corporation with an independent juridical personality despite not
being registered with the SEC.

HELD: No. On account of the non-registration it cannot be

considered a corporation, not even a corporation de facto (Hall
vs. Piccio, 86 Phil. 603). It has therefore no personality separate
from Jose M. Aruego; it cannot be sued independently.
In the case at bar, Aruego represented a non-existent entity and
induced not only Albert but the court to believe in such
representation. He signed the contract as President of
University Publishing Co., Inc., stating that this was a
corporation duly organized and existing under the laws of the
A person acting or purporting to act on behalf of a corporation
which has no valid existence assumes such privileges and
obligations and becomes personally liable for contracts entered
into or for other acts performed as such agent.
Aruego, acting as representative of such non-existent principal,
was the real party to the contract sued upon, and thus assumed
such privileges and obligations and became personally liable for
the contract entered into or for other acts performed as such
The Supreme Court likewise held that the doctrine of corporation
by estoppel cannot be set up against Albert since it was Aruego
who had induced him to act upon his (Aruegos) willful
representation that University had been duly organized and was
existing under the law.


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
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
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 Azurinis 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
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 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.
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.

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Agency Digests Set B and C


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.
Metropolitan Bank & Trust Company vs. Court of Appeals
G.R. No. 88866
February, 18, 1991
Eduardo Gomez opened an account with Golden Savings
and deposited 38 treasury warrants. All warrants were
subsequently indorsed by Gloria Castillo as Cashier of Golden
Savings and deposited to its Savings account in Metrobank
branch in Calapan, Mindoro. They were sent for clearance.
Meanwhile, Gomez is not allowed to withdraw from his account,
later, however, exasperated over Floria repeated inquiries and
also as an accommodation for a valued client Metrobank
decided to allow Golden Savings to withdraw from proceeds of
the warrants. In turn, Golden Savings subsequently allowed
Gomez to make withdrawals from his own account. Metrobank
informed Golden Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury and demanded the refund
by Golden Savings of the amount it had previously withdrawn, to
make up the deficit in its account. The demand was rejected.
Metrobank then sued Golden Savings.
1. Whether or not Metrobank can demand refund agaist
Golden Savings with regard to the amount withdraws to make up
with the deficit as a result of the dishonored treasury warrants.
2. Whether or not treasury warrants are negotiable
No. Metrobank is 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. Without
such assurance, Golden Savings would not have allowed the
withdrawals. Indeed, Golden Savings might even have incurred
liability for its refusal to return the money that all appearances
belonged to the depositor, who could therefore withdraw it
anytime and for any reason he saw fit.
It was, in fact, to secure the clearance of the treasury
warrants that Golden Savings deposited them to its account with
Metrobank. Golden Savings had no clearing facilities of its own. It
relied on Metrobank to determine the validity of the warrants
through its own services. The proceeds of the warrants were
withheld from Gomez until Metrobank allowed Golden Savings
itself to withdraw them from its own deposit.
Metrobank cannot contend that by indorsing the warrants in
general, Golden Savings assumed that they were genuine and in
all respects what they purport to be, in accordance with Sec. 66
of NIL. The simple reason that NIL is not applicable to non
negotiable instruments, treasury warrants.
No. The treasury warrants are not negotiable instruments.
Clearly stamped on their face is the word: non negotiable.
Moreover, and this is equal significance, it is indicated that they

are payable from a particular fund, to wit, Fund 501. An

instrument to be negotiable instrument must contain an
unconditional promise or orders to pay a sum certain in money.
As provided by Sec 3 of NIL an unqualified order or promise to
pay is unconditional though coupled with: 1st, an indication of a
particular fund out of which reimbursement is to be made or a
particular account to be debited with the amount; or 2 nd, a
statement of the transaction which give rise to the instrument.
But an order to promise to pay out of particular fund is not
unconditional. The indication of Fund 501 as the source of the
payment to be made on the treasury warrants makes the order or
promise to pay not conditional and the warrants themselves
non-negotiable. There should be no question that the exception
on Section 3 of NIL is applicable in the case at bar.
Prudential Bank vs. CA
Facts: The complaint in this case arose when private respondent
Aurora F. Cruz, with her sister as co-depositor, invested P200,
000.00 in Central Bank bills with the Prudential Bank at its
branch in Quezon Avenue, Quezon City, on June 23, 1986. Susan
Quimbo, the Bank employee assisted her on all her dealings. One
of such dealing involves Cruz withdrawal from her Savings
Account No. 2546 and applying such amount to the investment
with the same bank. Cruz was asked to sign a Withdrawal Slip for
P196, 122.98, representing the amount to be re-invested after
deduction of the prepaid interest. Quimbo explained this was a
new requirement of the bank. Several days later, Cruz received
another Confirmation of Sale and a copy of the Debit Memo
coming from Quimbo. On October 27, 1986, Cruz returned to the
bank and sought to withdraw her P200, 000.00. After verification
of her records, however, she was informed that the investment
appeared to have been already withdrawn by her on August 25,
1986. There was no copy on file of the Confirmation of Sale and
the Debit Memo allegedly issued to her by Quimbo. Quimbo
herself was not available for questioning as she had not been
reporting for the past week. Prompted by the event Cruz's
reaction was to file a complaint for breach of contract against
Prudential Bank in the Regional Trial Court of Quezon City. She
demanded the return of her money with interest, plus damages
and attorney's fees. Cruz won the case in both the RTC and CA.
Issue: Does the fault of bank employee bind the Bank particularly
in cases where the bank employee created blunder or, worse,
intentionally cheat the depositor?
The liability of the principal for the acts of the agent is not
debatable. Law and jurisprudence are clearly and absolutely
against the petitioner. Such liability dates back to the Roman Law
maxim, Qui per alium facit per seipsum facere videtur. "He who
does a thing by an agent is considered as doing it himself." This
rule is affirmed by the Civil Code thus: Art. 1910. The principal
must comply with all the obligations which the agent may have
contracted within the scope of his authority. Art. 1911. Even
when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to
act as though he had full powers. Conformably, we have declared
in countless decisions that the principal is liable for obligations
contracted by the agent. The agent's apparent representation
yields to the principal's true representation and the contract is
considered as entered into between the principal and the third
person. WHEREFORE, the petition is DENIED and the appealed
decision is AFFIRMED.
G.R. No. 88539 October 26, 1993
KUE CUISON, doing business under the firm name and
style"KUE CUISON PAPER SUPPLY," petitioner,
ASSOCIATES, respondents.
FACTS: Kue Cuison is a sole proprietorship engaged in the
purchase and sale of newsprint, bond paper and scrap.
Valiant Investment Associates delivered various kinds of paper
products to a certain Tan. The deliveries were made by Valiant
pursuant to orders allegedly placed by Tiac who was then
employed in the Binondo office of petitioner. Upon delivery, Tan
paid for the merchandise by issuing several checks payable to

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cash at the specific request of Tiac. In turn, Tiac issued nine (9)
postdated checks to Valiant as payment for the paper products.
Unfortunately, sad checks were later dishonored by the drawee
Thereafter, Valiant made several demands upon petitioner to pay
for the merchandise in question, claiming that Tiac was duly
authorized by petitioner as the manager of his Binondo office, to
enter into the questioned transactions with Valiant and Tan.
Petitioner denied any involvement in the transaction entered into
by Tiac and refused to pay Valiant.

in good faith, relied upon them. Taken in this light,. petitioner is

liable for the transaction entered into by Tiac on his behalf. Thus,
even when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to
fact as though he had full powers (Article 1911 Civil Code), as in
the case at bar.
Finally, although it may appear that Tiac defrauded his principal
(petitioner) in not turning over the proceeds of the transaction to
the latter, such fact cannot in any way relieve nor exonerate
petitioner of his liability to private respondent. For it is an
equitable maxim that as between two innocent parties, the one
who made it possible for the wrong to be done should be the one
to bear the resulting loss.

Left with no recourse, private respondent filed an action against

petitioner for the collection of sum of money representing the
price of the merchandise. After due hearing, the trial court
dismissed the complaint against petitioner for lack of merit. On
appeal, however, the decision of the trial court was modified, but
was in effect reversed by the CA. CA ordered petitioner to pay
Valiant with the sum plus interest, AF and costs.
ISSUE: WON Tiac possessed the required authority from
petitioner sufficient to hold the latter liable for the disputed

As to the merits of the case, it is a well-established rule that one

who clothes another with apparent authority as his agent and
holds him out to the public as such cannot be permitted to deny
the authority of such person to act as his agent, to the prejudice
of innocent third parties dealing with such person in good faith
and in the honest belief that he is what he appears to be
It matters not whether the representations are intentional or
merely negligent so long as innocent, third persons relied upon
such representations in good faith and for value. Article 1911 of
the Civil Code provides:
Even when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to
act as though he had full powers.
The above-quoted article is new. It is intended to protect the
rights of innocent persons. In such a situation, both the principal
and the agent may be considered as joint tortfeasors whose
liability is joint and solidary.
It is evident from the records that by his own acts and admission,
petitioner held out Tiac to the public as the manager of his store
in Binondo. More particularly, petitioner explicitly introduced to
Villanueva, Valiants manager, as his (petitioners) branch
manager as testified to by Villanueva. Secondly, Tan, who has
been doing business with petitioner for quite a while, also
testified that she knew Tiac to be the manager of the Binondo
branch. Even petitioner admitted his close relationship with Tiu
Huy Tiac when he said that they are like brothers There was
thus no reason for anybody especially those transacting business
with petitioner to even doubt the authority of Tiac as his
manager in the Binondo branch.

Tiac, therefore, by petitioners own representations and

manifestations, became an agent of petitioner by estoppel, an
admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against
the person relying thereon (Article 1431, Civil Code of the
Philippines). A party cannot be allowed to go back on his own
acts and representations to the prejudice of the other party who,
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