AGENCY CASE DIGEST | A.
General Articles 1868 to 1883 DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
ALCAZAREN 1
1. ORIENT SERVICES AND HOTEL REPRESENTATIVES VS.
CA AND AMERICAN AIRLINES
FACTS:
This case is a consolidation of two (2) petitions for review on certiorari of
a decision of the Court of Appeals. The antecedent facts are as follows:
On 15 January 1977, American Airlines, Inc. (hereinafter referred to as
American Air), an air carrier offering passenger and air cargo
transportation in the Philippines, and Orient Air Services and Hotel
Representatives (hereinafter referred to as Orient Air), entered into a
General Sales Agency Agreement (hereinafter referred to as the
Agreement), whereby the former authorized the latter to act as its
exclusive general sales agent within the Philippines for the sale of air
passenger transportation. 1. Representation of American by Orient Air
Services: Orient Air Services will act on American's behalf as its exclusive
General Sales Agent within the Philippines, including any United States
military installation therein which are not serviced by an Air Carrier
Representation Office (ACRO), for the sale of air passenger
transportation.
On 11 May 1981, alleging that Orient Air had reneged on its obligations
under the Agreement by failing to promptly remit the net proceeds of
sales for the months of January to March 1981 in the amount of US
$254,400.40, American Air by itself undertook the collection of the
proceeds of tickets sold originally by Orient Air and terminated forthwith
the Agreement in accordance with Paragraph 13 thereof (Termination).
Four (4) days later, or on 15 May 1981, American Air instituted suit
against Orient Air with the Court of First Instance of Manila, averring the
aforesaid basis for the termination of the Agreement as well as therein
defendant's previous record of failures "to promptly settle past
outstanding refunds of which there were available funds in the
possession of the defendant, . . . to the damage and prejudice of
plaintiff." Defendant Orient Air denied the material allegations of the
complaint with respect to plaintiff's entitlement to alleged unremitted
amounts, contending that after application thereof to the commissions
due it under the Agreement, plaintiff in fact still owed Orient Air a
balance in unpaid overriding commissions. Further, the defendant
contended that the actions taken by American Air in the course of
terminating the Agreement as well as the termination itself were
untenable, Orient Air claiming that American Air's precipitous conduct
had occasioned prejudice to its business interests.
ISSUE: WON ORIENT AIR FAILED ITS OBLIGATION AS AN AGENT
TO THE PRINCIPAL (AMERICAN AIRLINES)?
HELD: NO. Orient Air was clearly justified in retaining and refusing to
remit the sums claimed by American Air. The latter's termination of the
Agreement was, therefore, without cause and basis, for which it should
be held liable to Orient Air. Orient Air was entitled to an overriding
commission based on total flown revenue. American Air's perception that
Orient Air was remiss or in default of its obligations under the Agreement
was, in fact, a situation where the latter acted in accordance with the
Agreementthat of retaining from the sales proceeds its accrued
commissions before remitting the balance to American Air. Since the
latter was still obligated to Orient Air by way of such commissions.
By affirming this ruling of the trial court, respondent appellate court, in
effect, compels American Air to extend its personality to Orient Air. Such
would be violative of the principles and essence of agency, defined by
law as a contract whereby "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 . (emphasis
supplied) In an agent-principal relationship, the personality of the
principal is extended through the facility of the agent. In so doing, the
agent, by legal fiction, becomes the principal, authorized to perform all
acts which the latter would have him do. Such a relationship can only be
effected with the consent of the principal, which must not, in any way, be
compelled by law or by any court. The Agreement itself between the
parties states that "either party may terminate the Agreement without
cause by giving the other 30 days' notice by letter, telegram or cable."
(emphasis supplied) We, therefore, set aside the portion of the ruling of
the respondent appellate court reinstating Orient Air as general sales
agent of American Air.
WHEREFORE, with the foregoing modification, the Court AFFIRMS the
decision and resolution of the respondent Court of Appeals, dated 27
January 1986 and 17 December 1986, respectively. Costs against
petitioner American Air.
2. RAMON RALLOS, Administrator of the Estate of CONCEPCION
RALLOS vs. FELIX GO CHAN & SONS REALTY CORPORATION and
COURT OF APPEALS
FACTS:
The following facts are not disputed. Concepcion and Gerundia both
surnamed Rallos were sisters and registered co-owners of a parcel of
land. On April 21, 1954, the sisters executed a special power of attorney
in favor of their brother, Simeon Rallos, authorizing him to sell for and in
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 2
their behalf lot 5983. On March 3, 1955, Concepcion Rallos died. On
September 12, 1955, Simeon Rallos sold the undivided shares of his
sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons
Realty Corporation. Ramon Rallos as administrator of the Intestate
Estate of Concepcion Rallos filed a complaint (1) that the sale of the
undivided share of the deceased Concepcion Rallos in lot 5983 be d
unenforceable, and said share be reconveyed to her estate; (2) that the
Certificate of 'title issued in the name of Felix Go Chan & Sons Realty
Corporation be cancelled and another title be issued in the names of the
corporation and the "Intestate estate of Concepcion Rallos". Felix Go
Chan & Sons Realty Corporation appealed in due time to the Court of
Appeals from the foregoing judgment insofar as it set aside the sale of
the one-half (1/2) share of Concepcion Rallos.
ISSUE: What is the legal effect of an act performed by an agent
after the death of his principal?
WON THE DEATH OF THE PRINCIPAL EXTINGUISHES SUCH
AGENCY?
HELD: Out of the above given principles, sprung the creation and
acceptance of the relationship of agency whereby one party, caged the
principal (mandante), authorizes another, called the agent (mandatario),
to act for and in his behalf in transactions with third persons. The
essential elements of agency are: (1) there is consent, express or implied
of the parties to establish the relationship; (2) the object is the execution
of a juridical act in relation to a third person; (3) the agents acts as a
representative and not for himself, and (4) the agent acts within the
scope of his authority. Agency is basically personal representative,
and derivative in nature. The authority of the agent to act emanates
from the powers granted to him by his principal; his act is the act of the
principal if done within the scope of the authority. Qui facit per alium
facit se. "He who acts through another acts himself".
YES. By reason of the very nature of the relationship between Principal
and agent, agency is extinguished by the death of the principal or the
agent. This is the law in this jurisdiction. It is the contention of
respondent corporation which was sustained by respondent court that
notwithstanding the death of the principal Concepcion Rallos the act of
the attorney-in-fact, Simeon Rallos in selling the former's sham in the
property is valid and enforceable inasmuch as the corporation acted in
good faith in buying the property in question. Articles 1930 and 1931 of
the Civil Code provide the exceptions to the general rule afore-
mentioned. ART. 1930. The agency shall remain in full force and effect
even after the death of the principal, if it has been constituted in the
common interest of the latter and of the agent, or in the interest of a
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
third person who has accepted the stipulation in his favor.ART. 1931.
Anything done by the agent, without knowledge of the death of the
principal or of any other cause which extinguishes the agency, is valid
and shall be fully effective with respect to third persons who may have
contracted with him in good. faith. Article 1930 is not involved because
admittedly the special power of attorney executed in favor of Simeon
Rallos was not coupled with an interest.
Article 1931 is the applicable law. Under this provision, an act done by
the agent after the death of his principal is valid and effective only under
two conditions, viz: (1) that the agent acted without knowledge of the
death of the principal and (2) that the third person who contracted with
the agent himself acted in good faith. Good faith here means that the
third person was not aware of the death of the principal at the time he
contracted with said agent. These two requisites must concur the
absence of one will render the act of the agent invalid and
unenforceable.In the instant case, it cannot be questioned that the
agent, Simeon Rallos, knew of the death of his principal at the time he
sold the latter's share in Lot No. 5983 to respondent corporation. The
knowledge of the death is clearly to be inferred from the pleadings filed
by Simon Rallos before the trial court. 12 That Simeon Rallos knew of the
death of his sister Concepcion is also a finding of fact of the court a
quo 13 and of respondent appellate court when the latter stated that
Simon Rallos 'must have known of the death of his sister, and yet he
proceeded with the sale of the lot in the name of both his sisters
Concepcion and Gerundia Rallos without informing appellant (the realty
corporation) of the death of the former. On the basis of the established
knowledge of Simon Rallos concerning the death of his principal
Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law
expressly requires for its application lack of knowledge on the part of the
agent of the death of his principal; it is not enough that the third person
acted in good faith.
Costs against respondent realty corporation at all instances.
3. AIRFANCE VS. CA, GANA
FACTS: Sometime in February, 1970, the late Jose G. Gana and his
family, numbering nine (the GANAS), purchased from AIR FRANCE
through Imperial Travels, Incorporated, a duly authorized travel agent,
nine (9) "open-dated" air passage tickets for the
Manila/Osaka/Tokyo/Manila route. The GANAS paid a total of US$2,528.85
for their economy and first class fares. Said tickets were bought at the
then prevailing exchange rate of P3.90 per US$1.00. The GANAS also
paid travel taxes of P100.00 for each passenger. On 24 April 1970, AIR
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ALCAZAREN 3
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 date written under
the printed words "Non valuable apres de (meaning, "not valid after
the").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 Sta. Clara Lumber 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.
In the meantime, the GANAS had scheduled their departure on 7 May
1971 or one day before the expiry date. In the morning of the very day of
their scheduled departure on the first leg of their trip, Teresita requested
travel agent Ella to arrange the revalidation of the tickets. Ella gave the
same negative answer and warned her that although the tickets could be
used by the GANAS if they left on 7 May 1971, the tickets would no
longer be valid for the rest of their trip because the tickets would then
have expired on 8 May 1971. Teresita replied that it will be up to the
GANAS to make the arrangements. Ella on his own, attached to the
tickets validating stickers for the Osaka/Tokyo flight, one a JAL. sticker
and the other an SAS (Scandinavian Airways System) sticker. The SAS
sticker indicates thereon that it was "Reevaluated by: the Philippine
Travel Bureau, Branch No. 2" (as shown by a circular rubber stamp) and
signed "Ador", and the date is handwritten in the center of the circle.
Notwithstanding the warnings, the GANAS departed from Manila in the
afternoon of 7 May 1971 on board AIR FRANCE Flight 184 for 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.
ISSUE: WON IRREGULAR ACTIONS OF TRAVEL AGENT ELLA WAS
RATIFIED BY ITS PRINCIPAL RENDERING THEM LIABLE?
HELD: NO. The circumstances that AIR FRANCE personnel at the ticket
counter in the airport allowed the GANAS to leave is not tantamount to
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
an implied ratification of travel agent Ella's irregular actuations. It should
be recalled that the GANAS left in Manila the day before the expiry date
of their tickets and that "other arrangements" were to be made with
respect to the remaining segments. Besides, the validating stickers that
Ella affixed on his own merely reflect the status of reservations on the
specified flight and could not legally serve to extend the validity of a
ticket or revive an expired one.
The conclusion is inevitable that the GANAS brought upon themselves
the predicament they were in for having insisted on using tickets that
were due to expire in an effort, perhaps, to beat the deadline and in the
thought that by commencing the trip the day before the expiry date,
they could complete the trip even thereafter. It should be recalled that
AIR FRANCE was even unaware of the validating SAS and JAL. stickers
that Ella had affixed spuriously. Consequently, Japan Air Lines and AIR
FRANCE merely acted within their contractual rights when they
dishonored the tickets on the remaining segments of the trip and when
AIR FRANCE demanded payment of the adjusted fare rates and travel
taxes for the Tokyo/Manila flight.
WHEREFORE, the judgment under review is hereby reversed and set
aside, and the Amended Complaint filed by private respondents hereby
dismissed.
4. IN RE: PETITION FOR ISSUANCE OF SEPARATE CERTIFICATE OF
TITLE.
JOSE A. SANTOS Y Diaz vs. ANATOLIO BUENCONSEJO, ET AL.
FACTS: The main facts are not disputed. They are set forth in the order
appealed from, from which we quote:
It appears that the aforementioned Lot No. 1917 covered by Original
Certificate of Title No. RO-3848 (25322) was originally owned in common
by Anatolio Buenconsejo to the extent of undivided portion and
Lorenzo Bon and Santiago Bon to the extent of the other (Exh. B); that
Anatolio Buenconsejo's rights, interests and participation over the
portion abovementioned were on January 3, 1961 and by a Certificate of
Sale executed by the Provincial Sheriff of Albay, transferred and
conveyed to Atty. Tecla San Andres Ziga, awardee in the corresponding
auction sale conducted by said Sheriff in connection with the execution
of the decision of the Juvenile Delinquency and Domestic Relations Court
in Civil Case No. 25267, entitled "Yolanda Buenconsejo, et al. vs. Anatolio
Buenconsejo"; that on December 26, 1961 and by a certificate of
redemption issued by the Provincial Sheriff of Albay, the rights, interest,
claim and/or or participation which Atty. Tecla San Andres Ziga may have
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 4
acquired over the property in question by reason of the aforementioned
auction sale award, were transferred and conveyed to the herein
petitioner in his capacity as Attorney-in-fact of the children of Anatolio
Buenconsejo, namely, Anastacio Buenconsejo, Elena Buenconsejo and
Azucena Buenconsejo (Exh. C).
It would appear, also, that petitioner Santos had redeemed the
aforementioned share of Anatolio Buenconsejo, upon the authority of a
special power of attorney executed in his favor by the children of
Anatolio Buenconsejo; that relying upon this power of attorney and
redemption made by him, Santos now claims to have acquired the share
of Anatolio Buenconsejo in the aforementioned Lot No. 1917; that as the
alleged present owner of said share, Santos caused a subdivision plan of
said Lot No. 1917 to be made, in which the portion he claims as his share
thereof has been marked as Lot No. 1917-A; and that he wants said
subdivision at No. 1917-A to be segregated from Lot No. 1917 and a
certificate of title issued in his name exclusively for said subdivision Lot
No. 1917-A.
ISSUE: WON THE SPECIAL POWER OF ATTORNEY GIVEN TO JOSE
SANTOS VESTED HIM SUCH PROPERTY RIGHTS IN HIS OWN
NAME?
HELD: NO. As correctly held by the lower court, petitioner's claim is
clearly untenable, for: (1) said special power of attorney authorized him
to act on behalf of the children of Anatolio Buenconsejo, and, hence, it
could not have possibly vested in him any property right in
his own name; (2) the children of Anatolio Buenconsejo had no authority
to execute said power of attorney, because their father is still alive and,
in fact, he and his wife opposed the petition of Santos; (3) in
consequence of said power of attorney (if valid) and redemption, Santos
could have acquired no more than the share pro indiviso of Anatolio
Buenconsejo in Lot No. 1917, so that petitioner cannot without the
conformity of the other co-owners (Lorenzo and Santiago Bon), or a
judicial decree of partition issued pursuant to the provisions of Rule 69 of
the new Rules of Court (Rule 71 of the old Rules of Court) which have not
been followed By Santos adjudicate to himself in fee simple a
determinate portion of said Lot No. 1917, as his share therein, to the
exclusion of the other co-owners.
Inasmuch as the appeal is patently devoid of merit, the order appealed
from is hereby affirmed, with treble cost against petitioner-appellant Jose
A. Santos y Diaz. It is so ordered.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
5. ALBALADEJO Y CIA., S. en C. vs. The PHILIPPINE REFINING CO.,
as successor to The Visayan Refining Co.,
FACTS:
It appears that Albaladejo y Cia. is a limited partnership, organized in
conformity with the laws of these Islands, and having its principal place
of business at Legaspi, in the Province of Albay; and during the
transactions which gave origin to this litigation said firm was engaged in
the buying and selling of the products of the country, especially copra,
and in the conduct of a general mercantile business in Legaspi and in
other places where it maintained agencies, or sub-agencies, for the
prosecution of its commercial enterprises. The Visayan Refining Co. is a
corporation organized under the laws of the Philippine Islands; and prior
to July 9, 1920, it was engaged in operating its extensive plant at Opon,
Cebu, for the manufacture of coconut oil. On August 28, 1918, the
plaintiff made a contract with the Visayan Refining Co.
Pursuant to this agreement the plaintiff, during the year therein
contemplated, bought copra extensively for the Visayan Refining Co. At
the end of said year both parties found themselves satisfied with the
existing arrangement, and they therefore continued by tacit consent to
govern their future relations by the same agreement. In this situation
affairs remained until July 9, 1920, when the Visayan Refining Co. closed
down its factory at Opon and withdrew from the copra market. When the
contract above referred to was originally made, Albaladejo y Cia.
apparently had only one commercial establishment, i.e., that at Legaspi;
but the large requirements of the Visayan Refining Co. for copra
appeared so far to justify the extension of the plaintiff's business that
during the course of the next two or three years it established some
twenty agencies, or subagencies, in various ports and places of the
Province of Albay and neighboring provinces.
After the Visayan Refining Co. had ceased to buy copra, as above stated,
of which fact the plaintiff was duly notified, the supplies of copra already
purchased by the plaintiff were gradually shipped out and accepted by
the Visayan Refining Co., and in the course of the next eight or ten
months the accounts between the two parties were liquidated. The last
account rendered by the Visayan Refining Co. to the plaintiff was for the
month of April, 1921, and it showed a balance of P288 in favor of the
defendant.
Upon reference to paragraph five of the contract reproduced above it will
be seen that the Visayan Refining Co. obligated itself to provide
transportation by sea to Opon, Cebu, for the copra which should be
delivered to it by the plaintiff; and the first cause of action set forth in
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ALCAZAREN 5
the complaint is planted upon the alleged negligent failure of the Visayan
Refining Co. to provide opportune transportation for the copra collected
by the plaintiff and deposited for shipment at various places.
ISSUE: WON contract between the plaintiff and the Visayan
Refining Co. created the relation of principal and agent between
the parties, and the reliance is placed upon article 1729 of the
Civil Code which requires the principal to indemnify the agent
for damages incurred in carrying out the agency
HELD: NO. Attentive perusal of the contract is, however, convincing to
the effect that the relation between the parties was not that of principal
and agent in so far as relates to the purchase of copra by the plaintiff. It
is true that the Visayan Refining Co. made the plaintiff one of its
instruments for the collection of copra; but it is clear that in making its
purchases from the producers the plaintiff was buying upon its own
account and that when it turned over the copra to the Visayan Refining
Co., pursuant to that agreement, a second sale was effected. In
paragraph three of the contract it is declared that during the continuance
of this contract the Visayan Refining Co. would not appoint any other
agent for the purchase of copra in Legaspi; and this gives rise indirectly
to the inference that the plaintiff was considered its buying agent. But
the use of this term in one clause of the contract cannot dominate the
real nature of the agreement as revealed in other clauses, no less than in
the caption of the agreement itself. In some of the trade letters also the
various instrumentalities used by the Visayan Refining Co. for the
collection of copra are spoken of as agents. But this designation was
evidently used for convenience; and it is very clear that in its activities
as a buyer the plaintiff was acting upon its own account and not as
agents, in the legal sense, of the Visayan Refining Co. The title to all of
the copra purchased by the plaintiff undoubtedly remained in it until it
was delivered by way of subsequent sale to said company.
6. THOMAS vs. PINEDA
June 28, 1951; Tuason, J.
FACTS OF THE CASE
Summary: Defendant managed the business as plaintiffs employee or
trustee during the Japanese occupation of the City of Manila and on a
share of the profits basis. The business burned down. After the war,
defendant established a business of the same name, located in the same
place; he also refused to make an accounting of the business. The court
held that the defendant is obliged to account for the business while he
was its manager, and that he acted in bad faith in his failure to do so.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
Plaintiff owns the bar and restaurant known as Silver Dollar Caf located
in Plaza Santa Cruz, Manila. In the course of time, the defendant became
successively cashier and manager of the business. On the onset of the
war, plaintiff made a fictitious sale of the business to defendant to
prevent the business and its property from falling into enemy hands.
Simultaneously with, or soon after the execution of the simulated sale,
the plaintiff and defendant signed a private or secret document stating
that the deed of sale conveying the restaurant was fictitious and upon
the restoration of peace and order, the document automatically becomes
null and void and of no effect. On February 3, 1945, the building was
destroyed by fire but the defendant had been able to remove some of its
furniture. According to the defendant, all of these goods were accounted
for and turned over to the plaintiff. On May 8, 1945, a bar was opened on
Calle Bambang under the name Silver Dollar Caf. On September of the
same year, it was transferred to its original location in Plaza Santa Cruz.
It is alleged that after liberation, plaintiff brought a certified public
accountant to the caf for the purpose of examining the books of the
business. The defendant resisted, and even pointed a gun at them.
Because of this incident, plaintiff brought the present action to compel
an accounting of the business. It also asked the court to enjoin the
defendant from using the name of that business, Silver Dollar Caf. The
defendant avers that there was a third, verbal agreement, the import of
which was that he was to operate the business with no liability other
than to turn it over to the plaintiff as the plaintiff would find it after the
war. He insists therefore that he was relieved of any duty to make an
accounting.
ISSUE OF THE CASE: Whether or not defendant is obliged to render an
accounting to the plaintiff. YES.
RULING OF THE COURT
The defendants contention is at war with the care and precaution which
the plaintiff took to insure his rights in the business and its assets. Unless
Thomas was willing to give away his property and its profits, no man in
his right senses would have given his manager an outright license such
as the defendant claims to have gotten from his employer. The exact
legal character of the defendants relation to the plaintiff matters not a
bit. It was enough to show, and it had been shown, that he had been
entrusted with the possession and management of the plaintiffs
business and property for the owners benefit and had not made an
accounting.
Neither did the defendants sweeping statement at the trial that all the
proceeds from the business had been used to support the plaintiff and
his daughters to entertain or bribe Japanese officers and civilians
dispense with defendants duty to account. It was clear error for the
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 6
court to declare that there were no surplus profits. The courts inquiry
ought to have been confined to the determination of the plaintiffs right
to secure an accounting. The defendant denied that the plaintiff had any
proprietary interest in the saloon in Bambang and at Plaza Sta. Cruz after
liberation. Thomas however said that he borrowed P2000 from a friend,
and with that amount he constructed a temporary building in Bambang
and with the stocks saved by the defendant, opened the business there.
He said that, as before, the defendant now worked as manager, with the
difference that under the new arrangement he was to get one-half the
net profits. The defendant said that he returned several cases of
whiskey, rum, gin and other kinds of liquor to the plaintiff, and he gave
the latter P2000 in cash. He avers that this payment was in full and
complete liquidation of the Silver Dollar Caf. The court said that this
was highly improbable, to put it mildly.
The use of the old name for the bar in Bambang suggests that the
business was in fact an extension and continuation of the Silver Dollar
Caf. It was also the plaintiff who entered into a written contract of lease
with the owner of the Santa Cruz location. Thomas was even named as
its proprietor. That the defendant was only a manager is also made
evident by two sets of business cards of the Silver Dollar Caf which he
himself caused to be printed. On the first set, David Thomas was held
out as the proprietor and Hermogenes Pineda, as manager. On the
second set, which were ordered later, the defendant was not even
mentioned as manager, but one Bill Magner, while David Thomas name
was retained as proprietor. At different times from May 8 to December
15, 1945, the defendant handed the plaintiff averse amounts totaling
P24,100 without so much as asking Thomas to sign a receipt for any of
them. The defendant testified that these amounts were simple loans
secured by plaintiffs mining shares of stock. The court held that the lack
of any receipt is incompatible with the hypothesis of loans. There is no
escaping the conclusion that the plaintiff was the sole owner of the post-
war Silver Dollar bar and restaurant, that the defendant was only an
industrial partner, and that the said amounts were withdrawals on
account of the profits.
As to the use of the trade name:
It appears that the defendant on September 27, 1945, registered the
business and its name as his own. He contends that in 1940, the
plaintiffs right to use this trade name expired and by abandonment and
non-use, the plaintiff ceased to have any title thereto. The alleged
abandonment or non-use is predicated on the testimony that the plaintiff
expressly allowed the defendant to appropriate the trade name in
dispute. The court held that the defendant registered the business in bad
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
faith. The plaintiffs non-use of his trade name did not work as a
forfeiture of his exclusive right to the name.
As legal proposition and in good conscience, the defendants registration
of the trade name Silver Dollar Caf must be deemed to have been
affected for the benefit of its owner of whom he was a mere trustee or
employee.
"The relations of an agent to his principal are fiduciary and it is
an elementary and very old rule that in regard to property
forming the subject matter of the agency, he is estopped from
acquiring or asserting a title adverse to that of principal. His
position is analogous to that of a trustee and he cannot
consistently, with the principles of good faith, be allowed to
create in himself an interest in opposition to that of his principal
or cestui que trust. A receiver, trustee, attorney, agent or any
other person occupying fiduciary relations respecting property
or persons utterly disabled from acquiring for his own benefit
the property committed to his custody for management. This
rule is entirely independent of the fact whether any fraud has
intervened. No fraud in fact need be shown, and no excuse will
be heard from any such inquiry that the rule takes so general
form. The rule stands on the moral obligation to refrain from
placing one's self in position which ordinarily excite conflicts
between self-interest at the expense of one's integrity and duty
to another, by making it possible to profit by yielding to
temptation"
7. PALMA vs CRISTOBAL
FACTS: In 1909, after registration proceedings under ACT 496, the
original certificate of title was issued in the names of Palma and his wife
(Luisa Cristobal). By the year 1923, said certificate was cancelled by
virtue of CFI decree, but was later substituted by another certificate of
title also in the name of Palma and his wife. His wife died. Because of its
death, a new certificate was issued, but this time only in the name of
Palma only. With such, Palma sought to eject Cristobal from a parcel of
land in Tondo (TCT of w/c registered to Palma). Cristobal raised the
question of ownership and the case was dismissed. Palma filed w/ CFI
Manila praying he be declared owner of the land and for Cristobal to be
ordered to restore its possession to him and remove his house therefrom.
The CFI dismissed the case, and when the case was brought to the CA it
was similarly dismissed.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 7
The court of appeals concluded that the parcel of land in question is a
community property held by Palma in trust for the real owners
(respondent Cristobal being an heir of one of them), the registration
having been made in accordance with an understanding between the
coowners, by reason of the confidence they had in Palma and his wife.
This confidence, close relationship, and the fact that co-owners were
receiving their shares in the rentals, were the reasons why no step had
been taken to partition the property. Before the death of Palma's wife,
she called her husband and enjoined him to give her co-owners their
shares and he told her not to worry about it because he would. The CA,
in dismissing the case, invoked SC rulings w/c declared that the
registration of the property in the name of the trustees in possession
thereof, must be deemed to have been effected for the benefit of the
principal/cestui que trust. Thus this appeal by certiorari.
ISSUE OF THE CASE: Whether or not the CA erred in dismissing the
case
RULING OF THE COURT:
NO, the CA did not erred in dismissing the case. Palma contends that if
he did commit fraud, Cristobal was in fact a part of it, but the SC held
that the fact that Cristobal has been a party to the deception which
resulted in Palma's securing in his name the title to a property not
belonging to him, is not a valid reason for changing the legal relationship
between the latter and its true owners to such an extent as to let them
lose their ownership to a person trying to usurp it.
Cristobal is not barred because his appearance as attorney for petitioner
was not a misrepresentation which would induce Palma to believe that
he recognized Palma as the sole owner of the property in controversy.
The misrepresentation could deceive the court and outsiders, because
they were not aware of the understanding between the co-owners that
the property be registered in the name of Palma.
Palma then claimed that even granting the property was owned by
several co-owners he now owns it because of prescription. This theory
holds no water because, according to the pronouncement of the CA,
Palma held the property and secured its the registration in his name in a
fiduciary capacity, and it is elementary that a trustee cannot acquire by
prescription the ownership of a property entrusted to him. The position of
a trustee is of representative nature. His position is the position of a
cestui que trust. It is logical that all benefits derived by the possession
and acts of the agent, as such agent, should accrue to the benefit of his
principal.
The relations of an agent to his principal are fiduciary and in regard to
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
property forming the subject matter of the agency, he is estopped from
acquiring or asserting a title adverse to that of the principal. His position
is analogous to that of a trustee and he cannot consistently, with the
principles of good faith, be allowed to create in himself an interest in
opposition to that of his principal or cestui que trust.
8. FEDERICO VALERA VS. MIGUEL VELASCO
G.R. No. L-28050 March 13, 1928
FACTS OF THE CASE:
By virtue of the powers of attorney executed by the plaintiff-appellant,
the defendant-appellee was appointed attorney-in-fact with authority to
manage his property in the Philippines, consisting of the usufruct of a
real property. The liquidation of accounts revealed that the plaintiff-
appellant owed the defendant P1,100, and as misunderstanding arose
between them, the defendant-appellee brought suit against the plaintiff-
appellant . The trial court decided in favor of agent; sheriff levied upon
plaintiff-appellants right of usufruct, sold it at public auction and
adjudicated it to defendant-appellee in payment of his claim.
Plaintiff-appellant sold his right of redemption to Eduardo Hernandez-
Hernandez conveyed the same right of redemption himself-but then
another person Salvador Vallejo, who had an execution upon a judgment
against the plaintiff rendered in another case, levied upon said right of
redemption- right of redemption sold to Vallejo and was definitely
adjudicated to him. Later, he transferred the said right of redemption to
defendant-appellee. The title was consolidated in his name, thus, the
agent got the title to the right of usufruct to the aforementioned
property.
ISSUE OF THE CASE: Whether or not the agency was terminated
RULING OF THE COURT:
YES. Art 1732- Agency is terminated by:
a) Revocation
b) Withdrawal of agent
c) Death, interdiction, bankruptcy, or insolvency of the principal or of
the agent.
While Art 1736- An agent may withdraw by giving notice to principal. If
principal suffer any damage, agent must indemnify him unless the
agents reason should be the impossibility of continuing to act as such
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 8
without serious detriment to himself. The misunderstanding between the
plaintiff and the defendant over the payment of the balance of P1, 000
due the latter more than prove the breach of the juridical relation
between them;
For, although the agent has not expressly told his principal that
he renounced the agency, yet neither dignity nor decorum
permits the latter to continue representing a person who has
adopted such an antagonistic attitude towards him. When the
agent filed a complaint against his principal for recovery of a sum of
money arising from the liquidation of the accounts between them in
connection with the agency, principal could not have understood
otherwise than that agent renounced the agency; because his act was
more expressive than words and could not have caused any doubt. In
order to terminate their relations by virtue of the agency the defendant,
as agent, rendered his final account on March 31, 1923 to the plaintiff, as
principal.
Briefly, then, the fact that an agent institutes an action against
his principal for the recovery of the balance in his favor resulting
from the liquidation of the accounts between them arising from
the agency, and renders and final account of his operations, is
equivalent to an express renunciation of the agency, and
terminates the juridical relation between them.
Hence, the said agent's purchase of the aforesaid principal's right of
usufruct at public auction held by virtue of an execution issued upon the
judgment rendered in favor of the former and against the latter, is valid
and legal. Moreover, the defendant-appellee, having acquired right of
redemption from Salvador Vallejo, who had acquired it at public auction
by virtue of a writ of execution issued upon the judgment obtained by
the said Vallejo against the said plaintiff, the latter lost all right to said
usufruct. Neither did the trial court err in not ordering the agent to
render a liquidation of accounts from March 31, 1923, inasmuch as he
had acquired the rights of the plaintiff by purchase at the execution sale,
and as purchaser, he was entitled to receive the rents from the date of
the sale until the date of the repurchase, considering them as part of the
redemption price; but not having exercised the right repurchase during
the legal period, and the title of the re purchaser having become
absolute, the latter did not have to account for said rents.
9. JESUS MA. CUI, ET AL. v. ANTONIO MA. CUI, ET AL. [G.R. No. L-
7041. February 21, 1957.]
FACTS OF THE CASE:
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
Jesus and Antonio are the legitimate children of Don Mariano Cui and
Doa Antonia Perales who died intestate in1939. Jesus alleged that
during the marriage of Don Mariano and Dona Antonia, their parents
acquired certain properties in the City of Cebu, namely, Lots Nos. 2312,
2313 and 2319. Upon the death of their mother, the properties were
placed under the administration of their dad. that while the latter was 84
years of age, Antonio by means of deceit, secured the transfer to
themselves the said lots without any pecuniary consideration; that in
the deed of sale executed on March 8, 1946, Rosario Cui appeared
as one of the vendees, but on learning of this fact she subsequently
renounced her rights under the sale and returned her portion to Don
Mariano Cui by executing a deed of resale in his favor on October 11,
1946; that defendants, fraudulently and with the desire of enriching
themselves unjustly at the expense of their father, Don Mariano Cui,
and of their brothers and co-heirs, secured a loan of P130,000 from the
Rehabilitation properties, and with the loan thus obtained, defendants
constructed thereon an apartment building of strong materials consisting
of 14 doors, valued at approximately P130,000 and another building on
the same parcels of land, which buildings were leased to some Chinese
commercial firms a monthly rental of P7,600, which defendants have
collected and will continue to collect to the prejudice of the plaintiffs;
Jesus alleged that the sale should be invalidated so far as the portion of
the property sold to Antonio Cui is concerned, for the reason that when
that sale was effected, Antonio was then acting as the agent or
administrator of the properties of Don Mariano Cui. Jesus lays stress on
the power of attorney Exhibit L which was executed by Don Mariano in
favor of Antonio Cui on March 2,1946, wherein the former has
constituted the latter as his "true and lawful attorney" to perform in his
name and that of theintestate heirs of Doa Antonia Perales.
ISSUE OF THE CASE: Whether or not the sale of the property to Antonio
was valid.
RULING OF THE COURT:
YES. While under article 1459 of the old Civil Code an agent or
administrator is disqualified from purchasing property in his hands for
sale or management, and, in this case, the property in question was sold
to Antonio Cui while he was already the agent or administrator of the
properties of Don Mariano Cui, we however believe that this question
cannot now be raised or invoked.
The prohibition of the law is contained in article 1459 of the old
Civil Code, but this prohibition has already been removed.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 9
Under the provisions of article 1491, section 2, of the new Civil Code, an
agent may now buy property placed in his hands for sale or
administration, provided that the principal gives his consent thereto.
While the new Code came into effect only on August 30, 1950, however,
since this is a right that is declared for the first time, the same may be
given retroactive effect if no vested or acquired right is impaired (Article
2253, new Civil Code). During the lifetime Don Mariano, and particularly
on March 8, 1946, the herein appellants could not claim any vested or
acquired right in these properties, for, as heirs, the most they had was a
mere expectancy. We may, therefore, invoke now this practical and
liberal provision of our new Civil Code even if the sale had taken place
before its effectivity
10. ALLIED FREE WORKERS UNION VS C. MARITIMA et al. [JAN.31,
1967]
NATURE: Petitions for review by certiorari of CIR decision
FACTS: This is a consolidation of 3 cases involving both parties
Respondent Compania Maritima (MARITIMA), a local corp. engaged in
shipping entered into a contract for lease of services with petitioner
Allied Free Workers Union (AFWU), a duly registered legitimate labor
union. In the contract, it was stipulated that AFWU will do and perform all
the work of stevedoring and arrastre services of all vessels or boats of
MARITIMA in Iligan City; that the contract is good and valid for 1 month
starting Aug.12, 1952, but may be renewed by agreement of the parties
with the reservation that MARITIMA has the right to revoke said contract
even before the expiration of the term, if and when AFWU fails to render
good service.
Towards the end of 1953, MARITIMA complained to AFWU of
unsatisfactory and inefficient service. To remedy the situation, MARITIMA
was forced to hire extra laborers from among stand-by workers not
affiliated to any union.
On July 1954, AFWU sent a written proposal to MARITIMA for a CBA, but
the latter did not reply. Thereafter, AFWU instituted an action in the CIR
praying that it be certified as the sole and exclusive bargaining unit
composed of all the laborers doing arrastre and stevedoring work for
MARITIMA, to which action MARITIMA answered, alleging lack of EREE
relationship. On Aug.1954, MARITIMA informed AFWU of the termination
of the contract because of the inefficient service rendered by the latter
which had adversely affected its business. The termination was to take
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
effect as of Sept.1, 1954. MARITIMA then contracted with the Iligan
Stevedoring Union for the arrastre and stevedoring work. The latter
agreed to perform the work subject to the same terms and conditions of
the contract with AFWU. The new agreement was to be carried out on
Sept.1, 1954.
On Aug.26, 1954, AFWU charged MARITIMA of unfair labor practices
(ULPs) before the CIR. MARITIMA answered, again denying the ER-EE
relationship between the parties. On Sept.9, 1954, MARITIMA filed an
action to rescind the contract, enjoin AFWU members from doing arrastre
and stevedoring work in connection with its vessels, and for recovery of
damages against AFWU and its officers. The CFI ordered the rescission of
the contract and permanently enjoined AFWU members from performing
work in connection with MARITIMAs vessels.
AFWU was later able to secure a writ of preliminary injunction ordering
the maintenance of the status quo prior to Jan.6, 1961. Thus, after
Jan.18, 1961, AFWU laborers were again back doing the same work as
before.
On Nov.4, 1963, after almost 10 years, the CFI finally rendered its
decision: In pursuance of the provisions of Sec.12 of R.A. 875 and the
Rules of this court on certification election, the Honorable Secretary of
Labor or any of his authorized representative is hereby requested to
conduct certification election among all the workers and/or stevedores
working in the wharf of Iligan City who are performing stevedoring and
arrastre service aboard Compania Maritima vessels docking at Iligan City
port in order to determine their representative for collective bargaining
with the employer, whether these desire to be represented by the
petitioner Allied Free Workers Union or neither; and upon termination of
the said election, the result thereof shall forthwith be submitted to this
court for further consideration. From this ruling, both parties appealed,
AFWU claiming that it should be declared outright as the majority union
while MARITIMA contends that said court could not even have correctly
ordered a certification election considering that there was an absence of
ER-EE relationship between it and said laborers.
ISSUE OF THE CASE: Whether or not the order of a certification
election by the CIR was proper. (WON there was an ER-EE relationship
between AFWU and MARITIMA)
RULING OF THE COURT:
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 10
NO. Before a certification election can be held, there must exist an ER-EE
relationship between the ER and the petitioner union. Ratio The duty to
bargain collectively exists only between the employer and its
employees. Where there is no duty to bargain collectively, it is not
proper to hold certification elections in connection therewith. Reasoning
In its findings, the CIR observed that after the rescission, the AFWU
laborers continued working in accordance with the cabo system, which
was the prevailing custom in the place. Under this system, the union was
an independent contractor. The CIR also made a finding that prior to the
contract between MARITIMA and AFWU, the former had an oral arrastre
and stevedoring agreement with another union, the Iligan Laborers Union
(ILU), which agreement was also based on the cabo system. After
unsatisfactory service, MARITIMA cancelled this oral contract and
entered into a new contract with AFWU, the terms and conditions of
which were similar to the oral contract with ILU. The written contract
between AFWU and MARITIMA was signed under the assurance by AFWU
that the same arrangement previously had with the former union
regarding performance and execution of arrastre and stevedoring
contract be followed in accordance with the custom of such kind of work
in Iligan. Thus, petitioner union operated as a labor contractor under the
so-called cabo system. Now, in its all-out endeavor to make an
"employer" out of MARITIMA, AFWU citing an impressive array of
jurisprudence, even goes to the extent of insisting that it be
considered a mere "agent" of MARITIMA. Suffice it to say on this
point that an agent can not represent two conflicting interests
that are diametrically opposed. And that the cases sought to be
relied upon did not involve representatives of opposing
interests.
From these findings, Insofar as the working agreement was concerned,
there was no real difference between the contract and the prior oral
agreement. Both were based on the cabo system. Hence, since the
parties observed the cabo system after the rescission of the contract,
and since the characteristics of said system show that the contracting
union was an independent contractor, it is reasonable to assume that
AFWU continued being an independent contractor of MARITIMA. And,
being an independent contractor, it could not qualify as an employee.
With more reason would this be true with respect to the laborers.
Moreover, there is no evidence at all regarding the characteristics of the
working arrangement between AFWU and MARITIMA after the
termination of the CONTRACT. All we have to go on is the court a quos
finding that the cabo system was observed-a system that negatives
employment relationship.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
Since the only function of a certification election is to determine, with
judicial sanction, which union shall be the official representative or
spokesman of the employees will be, there being no ER-EE relationship
between the parties disputants, it follows that there is neither a duty to
bargain collectively. Thus, the order for certification election in question
cannot be sustained.
Disposition
Appealed decision of the CIR is AFFIRMED insofar as it dismissed the
charge of ULP, but REVERSED and SET ASIDE insofar as it ordered the
holding of a certification election. The petition for certification election
should be DISMISSED.
11. FAR EASTERN EXPORT & IMPORT CO., vs. LIM TECK SUAN;
G.R. No. L-7144; May 31, 1955
FACTS OF THE CASE:
Sometime in November, 1948, Ignacio Delizalde, an agent of the Far
Eastern Export & Import Company, went to the store of Lim Teck
Suan situated at 267 San Vicente Street, Manila, and offered to
sell textile, showing samples thereof, and having arrived at an
agreement with Bernardo Lim, the General Manager of Lim Teck Suan,
Delizalde returned on November 17 with the buyer's order. plaintiff
established a letter of credit No. 6390 (Exhibit B) in favor of Frenkel
International Corporation through the Hongkong and Shanghai Bangking
Corporation, attached to the agreed statement of facts.
On February 11, 1949, the textile arrived at Manila on board the vessel
M. S. Arnold Maersk. The plaintiff complained to the defendant of the
inferior quality of the textile received by him and had them examined by
Marine Surveyor Del Pan & Company. Upon instructions of the
defendants plaintiff deposited the goods with the United Warehouse
Corporation. As per suggestion of the Far Eastern Export and Import
Company contained in its letter dated June 16, 1949, plaintiff withdrew
from the United Bonded Warehouse, Port Area, Manila, the fifteen cases
of Ashtone Acetate and Rayon Suiting for the purpose of offering them
for sale which netted P11,907.30. Deducting this amount from the sum
of P23,686.96 which included the amount paid by plaintiff for said textile
and the warehouse expenses, a difference of P11,476.66 is left,
representing the net direct loss.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 11
The defense set up is that the Far Eastern Export and Import Company
only acted as a broker in this transaction; that after placing the order the
defendants took no further action and the cargo was taken directly by
the buyer Lim Teck Suan, the shipment having been made to him and all
the documents were also handled by him directly without any
intervention on the part of the defendants; The trial court acquitted
defendants. CA reversed judgement on the case of Jose Velasco, vs.
Universal Trading Co., Inc., 45 Off. Gaz. 4504 where the transaction
therein involved was found by the court to be one of purchase and sale
and not of brokerage or agency.
ISSUE OF THE CASE: Whether or not Far Eastern is liable to the direct
loss and acted as an agent
RULING OF THE COURT:
In the present case, the export company acted as agent for Frenkel
International Corporation, presumably the supplier of the textile sold. In
the Velasco case, the Universal Trading Co., was acting as agent for A. J.
Wilson Company, also the supplier of the whisky sold. In the present
case, Suan according to the first part of the agreement is said merely to
be commissioning the Export Company to procure for him the
merchandise in question, just as in the other case, Velasco was supposed
to be ordering the whisky thru the Universal Trading Co. In the present
case, the price of the merchandise bought was paid for by Suan by
means of an irrevocable letter of credit opened in favor of the supplier,
Frenkel International Corporation. In the Velasco case, Velasco was given
the choice of either opening a similar irrevocable letter of credit in favor
of the supplier A. J. Wilson Company or making a cash deposit.
It is true that in the Velasco case, upon the arrival of the whisky and
because it did not conform to specifications, Velasco refused to received
it; but in the present case although Suan received the merchandise
he immediately protested its poor quality and it was deposited
in the warehouse and later withdrawn and sold for the best price
possible, all at the suggestion of the Export company. The present
case is in our opinion a stronger one than that of Velasco for holding the
transaction as one of purchase and sale because as may be noticed from
the agreement (Exhibit "A"), the same speaks of the items (merchandise)
therein involved as sold, and the sale was even confirmed by the Export
company. In both cases, the agents Universal Trading Co. and the export
company dealt directly with the local merchants Velasco and Suan
without expressly indicating or revealing their principals. In both cases
there was no privity of contract between the buyers Suan and Velasco
and the suppliers Frenkel International Corporation and A. J. Wilson
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
Company, respectively. In both cases no commission or monetary
consideration was paid or agreed to be paid by the buyers to the Export
company and the Universal Trading Co., proof that there was no agency
or brokerage, and that the profit of the latter was undoubtedly the
difference between the price listed to the buyers and the net or special
price quoted to the sellers, by the suppliers. As already stated, it was
held in the Velasco case that the transaction therein entered
into was one of purchase and sale, and for the same reasons
given there, we agreed with the Court of Appeals that the
transaction entered into here is one of purchase and sale.
As was held by this Tribunal in the case of Gonzalo Puyat & Sons
Incorporated vs. Arco Amusement, 72 Phil., 402, where a foreign
company has an agent here selling its goods and merchandise,
that same agent could not very well act as agent for local
buyers, because the interests of his foreign principal and those
of the buyer would be in direct conflict. He could not serve two
masters at the same time. In the present case, the Export
company being an agent of the Frenkel International Corporation
could not, as it claims, have acted as an agent or broker for
Suan.
12. NIELSON&CO VS LEPANTO CONSOLIDATED MINING CO.
FACTS: An operating agreement was executed before World War II (on
30 January 1937) between Nielson & Co. Inc. and the Lepanto
Consolidated Mining Co. whereby the former operated and managed the
mining properties owned by the latter for a management fee of
P2,500.00 a month and a 10% participation in the net profits resulting
from the operation of the mining properties, for a period of 5 years.
In the latter part of 1941, the parties agreed to renew the contract for
another period of 5 years, but in the mean time, the Pacific War broke out
in December 1941.
In January 1942 operation of the mining properties was disrupted on
account of the war. The mill, power plant, supplies on hand, equipment,
concentrates on hand and mines, were destroyed. The Japanese forces
thereafter occupied the mining properties, operated the mines during the
continuance of the war.
After the mining properties were liberated from the Japanese forces,
LEPANTO took possession thereof and embarked in rebuilding and
reconstructing the mines and mill. On 26 June 1948 the mines resumed
operation under the exclusive management of LEPANTO.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 12
Shortly after the mines were liberated from the Japanese invaders in
1945, a disagreement arose between NIELSON and LEPANTO over the
status of the operating contract which as renewed expired in 1947.
Under the terms thereof, the management contract shall remain in
suspense in case fortuitous event or force majeure, such as war or civil
commotion, adversely affects the work of mining and milling.
On 6 February 1958, NIELSON brought an action against LEPANTO to
recover certain sums of money representing damages allegedly suffered
by the former in view of the refusal of the latter to comply with the terms
of a management contract.
The Trial Court dismissed the complaint.
The Supreme Court reversed the decision. It held that the war suspended
the contract by virtue of the force majeure clause. And that the intention
of the parties regarding the meaning and usage concerning the force
majeure clause meant the extension of the same for a period equivalent
to the suspension.
In this motion for reconsideration, LEPANTO advances a new theory. It
now asserts that the management contract in question is a contract of
agency such that it has the right to revoke and terminate the said
contract, as it did terminate the same, under the law of agency, and
particularly pursuant to Article 1733 of the Old Civil Code (Article 1920 of
the New Civil Code).
ISSUE: W/N the management contract is a contract of agency or a
contract of lease of services.
HELD: Contract of lease of services
Contract of Agency v Contract of Lease of Services:
Article 1709 of the Old Civil Code, defining contract of agency, provides
that "By the contract of agency, one person binds himself to render some
service or do something for the account or at the request of another."
Article 1544, defining contract of lease of service, provides that "In a
lease of work or services, one of the parties binds himself to make or
construct something or to render a service to the other for a price
certain."
It is true that the management contract provides that Nielson would also
act as purchasing agent of supplies and enter into contracts regarding
the sale of mineral, but the contract also provides that Nielson could not
make any purchase, or sell the minerals, without the prior approval of
Lepanto. It is clear, therefore, that even in these cases Nielson could not
execute juridical acts which would bind Lepanto without first securing the
approval of Lepanto. Nielson, then, was to act only as an intermediary,
not as an agent.
From the provision of paragraph XI of the management contract, Lepanto
could not terminate the agreement at will. Lepanto could terminate or
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
cancel the agreement by giving notice of termination ninety days in
advance only in the event that Nielson should prosecute in bad faith and
not in accordance with approved mining practice the operation and
development of the mining properties of Lepanto. Lepanto could not
terminate the agreement if Nielson should cease to prosecute the
operation and development of the mining properties by reason of acts of
God, strike and other causes beyond the control of Nielson. The
management contract in question is not revocable at the will of Lepanto.
It is not a contract of agency as defined in Article 1709 of the old Civil
Code, but a contract of lease of services as defined in Article 1544 of the
same Code. This contract can not be unilaterally revoked by Lepanto.
13. SHELL CO OF THE PHIL Ltd VS FIREMENS INSURANCE OF
NEWARK
FACTS: This case is about an action for recovery of sum of money, based
on the alleged negligence of the defendants.
A car was brought to a Shell gasoline station owned by Dela Fuente for
washing and greasing. The car was placed on a hydraulic lifter for
greasing. As some parts of the car couldnt be reached by the
greaseman, the lifter was lowered. Unfortunately, for unknown reasons
(probably due to mechanical failure or human error), while the lifter was
being lowered, the car swung and fell from the platform. Said car was
insured against loss or damage by Firemen's Insurance Company of
Newark, New Jersey, and Commercial Casualty Insurance Company
jointly for the sum of P10,000. The insurance companies after paying the
sum of P1,651.38 for the damage and charging the balance of P100.00 to
Salvador Sison, in accordance with the terms of the insurance contract,
filed this action together with said Salvador Sison for the recovery of the
total amount of the damage from the defendants on the ground of
negligence.
ISSUE: W/N Dela Fuente is merely an agent of Shell Co.
HELD: Yes. De la Fuente was the operator of the station "by grace" of
the Defendant Company which could and did remove him as it pleased;
that all the equipments needed to operate the station was owned by the
Defendant Company which took charge of their proper care and
maintenance, despite the fact that they were loaned to him; that the
Defendant company did not leave the fixing of price for gasoline to De la
Fuente; That the service station belonged to the company and bore its
trade name and the operator sold only the products of the company; that
the equipment used by the operator belonged to the company and were
just loaned to the operator and the company took charge of their repair
and maintenance.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 13
As the act of the agent or his employees acting within the scope of his
authority is the act of the principal, the breach of the undertaking by the
agent is one for which the principal is answerable. The latter was
negligent and the company must answer for the negligent act of its
mechanic which was the cause of the fall of the car from the hydraulic
lifter.
14. SEVILLA VS CA
FACTS: On Oct. 19, 1960, the Tourist World Service, Inc. leased an office
at Mabini St., Manila for the former's use as a branch office. When the
branch office was opened, the same was run by the herein appellant Lina
O. Sevilla payable to Tourist World Service Inc. by any airline for any fare
brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla
and 3% was to be withheld by the Tourist World Service, Inc.
On or about November 24, 1961, the Tourist World Service, Inc. appears
to have been informed that Lina Sevilla was connected with a rival firm,
the Philippine Travel Bureau, and, since the branch office was anyhow
losing, the Tourist World Service considered closing down its office.
This was firmed up by two resolutions of the board of directors of Tourist
World Service, Inc. dated Dec. 2, 1961, the first abolishing the office of
the manager and vice-president of the Tourist World Service, Inc., Ermita
Branch, and the second, authorizing the corporate secretary to receive
the properties of the Tourist World Service then located at the said
branch office. It further appears that on Jan. 3, 1962, the contract with
the appellees for the use of the Branch Office premises was terminated
and while the effectivity thereof was Jan. 31, 1962, the appellees no
longer used it. As a matter of fact appellants used it since Nov. 1961.
Because of this, and to comply with the mandate of the Tourist World
Service, the corporate secretary Gabino Canilao went over to the branch
office, and, finding the premises locked, and, being unable to contact
Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the
interests of the Tourist World Service.
When neither the appellant Lina Sevilla nor any of her employees could
enter the locked premises, a complaint was filed by the herein appellants
against the appellees with a prayer for the issuance of mandatory
preliminary injunction. Both appellees answered with counterclaims. For
apparent lack of interest of the parties therein, the trial court ordered the
dismissal of the case without prejudice.
ISSUE: W/N the act of Tourist World Service in abolishing its Ermita
branch proper
HELD: No. The Supreme Court held that when the petitioner, Lina
Sevilla, agreed to manage Tourist World Service, Inc.'s Ermita office, she
must have done so pursuant to a contract of agency.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
In the case at bar, Sevilla solicited airline fares, but she did so for and on
behalf of her principal, Tourist World Service, Inc. As compensation, she
received 4% of the proceeds in the concept of commissions. And as we
said, Sevilla herself, based on her letter of November 28, 1961,
presumed her principal's authority as owner of the business undertaking.
We are convinced, considering the circumstances and from the
respondent Court's recital of facts, that the parties had contemplated a
principal-agent relationship, rather than a joint management or a
partnership.
But unlike simple grants of a power of attorney, the agency that we
hereby declare to be compatible with the intent of the parties, cannot be
revoked at will. The reason is that it is one coupled with an interest, the
agency having been created for the mutual interest of the agent and the
principal. Accordingly, the revocation complained of should entitle the
petitioner, Lina Sevilla, to damages
15. LIM VS PEOPLE
FACTS: The appellant is a businesswoman. on January 10, 1966, the
appellant went to the house of Maria Ayroso and proposed to sell
Ayroso's tobacco. Ayroso agreed to the proposition of the appellant to sell
her tobacco consisting of 615 kilos at P1.30 a kilo. The appellant was to
receive the overprice for which she could sell the tobacco. This
agreement was made in the presence of plaintiff's sister, Salud G.
Bantug. Salvador Bantug drew the document, Exh. A, dated January 10,
1966, which reads:
'To Whom It May Concern:
This is to certify that I have received from Mrs. Maria de Guzman Vda. de
Ayroso, of Gapan, Nueva Ecija, six hundred fifteen kilos of leaf tobacco to
be sold at P1.30 per kilo. The proceed in the amount of Seven Hundred
Ninety Nine Pesos and 50/100 (P799.50) will be given to her as soon as it
was sold.'
This was signed by the appellant and witnessed by the complainant's
sister, Salud Bantug, and the latter's maid, Genoveva Ruiz. The appellant
at that time was bringing a jeep, and the tobacco was loaded in the jeep
and brought by the appellant. Of the total value of P799.50, the appellant
had paid to Ayroso only P240.00, and this was paid on three different
times. Demands for the payment of the balance of the value of the
tobacco were made upon the appellant by Ayroso, and particularly by her
sister, Salud Bantug. Salud Bantug further testified that she had gone to
the house of the appellant several times, but the appellant often eluded
her; and that the 'camarin' of the appellant was empty. Although the
appellant denied that demands for payment were made upon her, it is a
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 14
fact that on October 19, 1966, she wrote a letter to Salud Bantug which
reads as follows:
'Dear Salud,
'Hindi ako nakapunta dian noon a 17 nitong nakaraan, dahil kokonte pa
ang nasisingil kong pera, magintay ka hanggang dito sa linggo ito at tiak
na ako ay magdadala sa iyo. Gosto ko Salud ay makapagbigay man lang
ako ng marami para hindi masiadong kahiyahiya sa iyo. Ngayon kung
gosto mo ay kahit konte muna ay bibigyan kita. Pupunta lang kami ni
Mina sa Maynila ngayon. Salud kuug talagang kailangan mo ay bukas ay
dadalhan kita ng pera.
'Medio mahirap ang maningil sa palengke ng Cabanatuan dahil
nagsisilipat ang mga suki ko ng puesto. Huwag kang mabahala at tiyak
na babayaran kita.
'Patnubayan tayo ng mahal na panginoon Dios. (Exh. B).
Ludy'
"Pursuant to this letter, the appellant sent a money order for P100.00 on
October 24, 1967, Exh. 4, and another for P50.00 on March 8, 1967; and
she paid P90.00 on April 18, 1967 as evidenced by the receipt Exh. 2,
dated April 18, 1967, or a total of P240.00. As no further amount was
paid, the complainant filed a complaint against the appellant for estafa.
ISSUE: W/N court erred in holding that the transaction is a contract of
agency to sell
HELD: NO. It is clear in the agreement, Exhibit "A", that the proceeds of
the sale of the tobacco should be turned over to the complainant as soon
as the same was sold, or, that the obligation was immediately
demandable as soon as the tobacco was disposed of. Hence, Article 1197
of the New Civil Code, which provides that the courts may fix the
duration of the obligation if it does not fix a period, does not apply.
Anent the argument that petitioner was not an agent because Exhibit "A"
does not say that she would be paid the commission if the goods were
sold, the Court of Appeals correctly resolved the matter as follows: LLpr
" . . . Aside from the fact that Maria Ayroso testified that the appellant
asked her to be her agent in selling Ayroso's tobacco, the appellant
herself admitted that there was an agreement that upon the sale of the
tobacco she would be given something. The appellant is a
businesswoman, and it is unbelievable that she would go to the extent of
going to Ayroso's house and take the tobacco with a jeep which she had
brought if she did not intend to make a profit out of the transaction.
Certainly, if she was doing a favor to Maria Ayroso and it was Ayroso who
had requested her to sell her tobacco, it would not have been the
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
appellant who would have gone to the house of Ayroso, but it would have
been Ayroso who would have gone to the house of the appellant and
deliver the tobacco to the appellant." (p. 19, Rollo)
The fact that appellant received the tobacco to be sold at P1.30 per kilo
and the proceeds to be given to complainant as soon as it was sold,
strongly negates transfer of ownership of the goods to the petitioner. The
agreement (Exhibit "A") constituted her as an agent with the obligation
to return the tobacco if the same was not sold.
ACCORDINGLY, the petition for review on certiorari is dismissed for lack
of merit.
16. SAN DIEGO v NOMBRE (Yap)
Facts: Respondent Adelo Nombre was the duly constituted judicial
administrator. As such, he leased one of the properties of the estatea
fishpondto Pedro Escanlar, the other respondent. The terms of the
lease was for 3 years, with a yearly rental of P3,000. The transaction was
done without previous authority or approval of the Court. A year after,
Nombre was removed as administrator, and was replaced by one
Sofronio Campillanos. Escalanlar was cited for contempt for allegedly
refusing to surrender the fishpond to the newly appointed administrator.
Subsequently, Campillanos filed a motion for authority to execute a lease
contract over the fishpond, in favor of petitioner Moises San Diego, for 5
years with yearly rental of P5,000. Escalanlar was not notified of the said
motion. Nombre, on the other hand, opposed to the motion, pointing out
that the fishpond was leased by him to Escalandar for 3 years. He
alleged that the validity of the lease contract entered into by a judicial
administrator must be recognized unless declared void in a separate
action.
The lower court declared the contract in favor of Escanlar null and void
for want of judicial authority and that San Diego offered better lease
conditions than Escanlar. In light of this, Escanlar agreed to increase the
rental to P5,000 after the termination of his original contract. However,
the trial judge stated that such contract was fraudulent and executed in
bad faith because Nombre was removed as administrator and the rentals
of the property was inadequate.
However, on appeal, the CA ruled:
No such limitation on the power of a judicial administrator to grant lease
of property placed under his custody is provided for in the present law.
Under Art. 1647, it is only when the lease is to be recorded in the
Registry of Property that it cannot be instituted without special authority.
Thus, regardless of the period of lease, there is no need for special
authority unless the contract is to be recorded in the Registry.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 15
Rule 85, Sec. 3 of the ROC authorizes a judicial administrator to
administer the estate of the deceased not disposed by will, for purposes
of liquidation and distribution. He may, therefore, exercise all acts of
administration without special authority of the Court; such as the leasing
the property. And where the lease has been formally entered into, the
court cannot, in the same proceeding, annul the same. The proper
remedy would be a separate action by the administrator or the heirs to
annul the lease.
On appeal to the SC, petitioner contends that Art. 1878(8) limits the right
of a judicial administrator to lease the real property without prior court
authority and approval, if it exceeds 1 year. The lease in favor of
Escalanlar, being 3 years and without court approval, is therefore void.
ISSUE: W/N the provisions on Agency should apply in this case
HELD: No.
The provisions on agency should not apply to a judicial administrator. A
judicial administrator is appointed by the court. He is not only the
representative of said Court, but also the heirs and creditors of the
estate. Before entering into his duties, he is required to file a bond. These
circumstances are not required in agency. The agent is only answerable
to his principal. The protection which law gives the principal in limiting
the powers and rights of an agent stems from the fact that control by the
principal can only be through agreements. Whereas, the acts of a
judicial administrator are subject to specific provisions of law and orders
of the appointing court.
17. DELA PENA VS HIDALGO
Facts:
The defendant, as such agent, collected the rents and income from the
said properties, amounting to P50,244, which sum, collected in partial
amounts and on different dates, he should have deposited, in accordance
with the verbal agreement between the deceased and himself, the
defendant, in the general treasury of the Spanish "government at an
interest of 5 per cent per annum, which interest on accrual was likewise
to be deposited in order that it also might bear interests that the
defendant did not remit or pass to Jose de la Pena y Gomez, during the
latters lifetime, nor to nay representative of the said De la Pena y
Gomez, the sum afore stated nor any part thereof, with the sole
exception of P1,289.03, nor has he deposited the unpaid balance of the
said sum in the treasury, according to agreement, wherefore he has
become liable to his principal and to the defendant administrator for the
said sum, together with its interest, which amounts to P72,548.24 and
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
that, whereas the defendant has not paid over all nor any part of the last
mentioned sum, he is liable for the same, as well as for the interest
thereon at 6% per cent per annum from the time of the filing of the
complaint, and for the costs of the suit.
By virtue of the powers conferred upon him by Pena y Gomez, he took
charge of the administration of the latters property and administered the
same until December 31, 1893, when for reasons of health he ceased to
discharge the duties of said positions that during the years 1889, 1890,
1891, and 1892, the defendant continually by letter requested Pena y
Gomez, his principal, to appoint a person to substitute him in the
administration of the latters property, inasmuch as the defendant, for
reasons of health, was unable to continue in his trusts that, on March 22,
1894, the defendant Federico Hidalgo, because of serious illness, was
absolutely obliged to leave these islands and embarked on the steamer
Isla de Luzon for Spain, on which date the defendant notified his principal
that, for the reason afore stated, he had renounced his powers and
turned over the administration of his property to Antonio Hidalgo, to
whom he should transmit a power of attorney for the fulfillment, in due
form, of the trust that the defendant had been discharging since January
1, 1894, or else execute a power of attorney in favor of such other
person as he might deem proper.
Issue: WON Hidalgo can be liable as an agent/WON there is
implied agency
Held:
From the procedure followed by the agent, Federico Hidalgo, it is logically
inferred that he had definitely renounced his agency was duly
terminated, according to the provisions of article 1732 of the Civil Code,
because, although in the said letter of March 22, 1894, the word
renounced was not employed in connection with the agency or power of
attorney executed in his favor, yet when the agent informs his principal
that for reasons of health and by medical advice he is about to depart
from the place where he is exercising his trust and where the property
subject to his administration is situated, abandons the property, turns it
over a third party, and asks that a power of attorney in due form in due
form be executed and transmitted to another person who substituted him
and took charge of the administration of the principals property, it is
then reasonable and just to conclude that the said agent expressly and
definitely renounced his agency , and it may not be alleged that the
designation of Antonio Hidalgo to take charge of the said administration
was that of a mere proceed lasted for more than fifteen years, for such
an allegation would be in conflict with the nature of the agency.
The proof of the tacit consent of the principal, Jose de la Pena y Gomez',
the owner of the property administered a consent embracing the
essential element of a legitimate agency , Federico Hidalgo, his agent,
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 16
who was giving up his trust, requested him to send a new power of
attorney in favor of the said Antonio Hidalgo, nevertheless he, Jose de la
Pena y Gomez, saw fit not to execute nor transmit any power of attorney
whatever to the new administrator of his property and remained silent
for nearly nine years wherefore, in permitting Antonio Hidalgo to
administer his property in this city during such a number of years, it is
inferred, from the procedure and silence of the owner thereof, that he
consented to have Antonio Hidalgo administer his property, and in fact
created in his favor an implied agency, as the true and legitimate
administrator.
The implied agency is founded on the lack of contradiction or opposition,
which constitutes simultaneous agreement on the part of the presumed
principal to the execution of the contract, while in the management of
another's business there is no simultaneous consent, either express or
implied, but a fiction or presumption of consent because of the benefit
received
In the power of attorney executed by Pea y Gomez in this city on
November 12, 1887, in favor of, among others, Federico Hidalgo, no
authority was conferred upon the latter by his principal to substitute the
power or agency in favor of another person; wherefore the agent could
not, by virtue of the said power of attorney, appoint any person to
substitute or relieve him in the administration of the principal's property,
for the lack of a clause of substitution in the said instrument authorizing
him so to do.
The designation of Antonio Hidalgo was not made as a result of
substitution of the power of attorney executed by Pea in favor of the
defendant, but in order that the principal's property should not be
abandoned, inasmuch as, for the purposes of the discharge of the duties
of administrator of the same, the agent, who was about to absent himself
from this city, requested his principal to send to the party, provisionally
designated by the former, a new power of attorney, for the reason that
the general power of attorney which Federico Hidalgo had left, executed
in favor of his cousin Antonio Hidalgo, was so executed in his own name
and for his own affairs, and not in the name of Pea y Gomiz, as the
latter had not authorized him to take such action.
18. CONDE vs. CA
Facts: On 7 April 1938, Margarita Conde, Bernardo Conde and Dominga
Conde, as heirs of Santiago Conde, sold with right to repurchase, within
10 years from said date, a 1 hectare parcel of agricultural land situated
in Burauen, Leyte to Casimira Pasagui and Pio Altera for P165. Three
years later, Original Certificate of Title No. N-534 covering the land in
question was issued in the name of the Alteras subject to the stipulated
right of repurchase by the Condes. On 28 November 1945, Paciente
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
Cordero, son-in-law of the Alteras and their representative, signed a
document in Bisaya stating that the Memorandum of Repurchase got lost
during World War II despite all diligent searches being made; that the two
parcels of land were inherited by the Condes; that Eusebio Amarille was
authorized by the Condes to repurchase the land; that they received
P165 in consideration of the sale; and that the Condes, by virtue of the
repurchase, shall repossess the said parcels of land. Neither the vendees-
a-retro, Pio Altera nor Casimira Pasagui, were signatories to that
document. Many years later, the pacto de retro document was found. In
June 1965, Pio Altera sold the disputed lot to Ramon and Catalina Conde,
whose relationship to Dominga does not appear on record. Consequently,
in 1969, Dominga filed with the CFI of Leyte a complaint for quieting of
title and declaration of ownership against all the respondents. The trial
court dismissed the complaint and ordered Dominga to vacate the
premises and to deliver the disputed land to respondents. The Court of
Appeals affirmed the decision and ruled that Dominga failed to validly
exercise her right to repurchase because the Memorandum of
Repurchase was not signed by the Alteras but by Paciente, who was not
authorized to sign for the said vendees-a-retro.
ISSUE: Whether or not there was an implied agency when
Cordero signed the Memorandum of Repurchase.
HELD: Yes. Although the contending parties were legally wanting in their
respective actuations, for example Dominga did nothing to formalize her
repurchase while the Alteras did nothing to clear their title of the
encumbrance therein regarding Domingas right to repurchase, the
repurchase by Dominga is supported by her admission that she had been
in possession since 1945, the date of the repurchase, and has been
paying land taxes thereon since then. No new agreement was entered
into by the parties as stipulated in the deed of pacto de retro, if the
vendors-a-retro failed to exercise their right of redemption within 10
years. If, as alleged, Dominga did not exert an effort to procure Pio
Alteras signature after he had recovered from illness, neither did the
Alteras repudiate the deed signed by their son-in-law for 24 years, from
which the Alteras are deemed to have incurred in laches. Thus, an
implied agency must have been held to have been created by their
silence or lack of action, or their failure to repudiate the agency created.
(Art. 1869, New Civil Code). Wherefore, Dominga is declared the owner of
the land in question.
19. HARRY E. KEELER ELECTRIC CO., INC., plaintiff-appellant, vs.
DOMINGO RODRIGUEZ, defendant-appellee.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 17
Facts: The plaintiff is a domestic corporation with its principal office in
the city of Manila and engaged in the electrical business, and among
other things in the sale of what is known as the "Matthews" electric
plant, and the defendant is a resident of Talisay, Occidental Negros, and
A. C. Montelibano was a resident of Iloilo.
Having this information, Montelibano approached plaintiff at its Manila
office, claiming that he was from Iloilo and lived with Governor Yulo; that
he could find purchaser for the "Matthews" plant, and was told by the
plaintiff that for any plant that he could sell or any customer that he
could find he would be paid a commission of 10 per cent for his services,
if the sale was consummated. Among other persons. Montelibano
interviews the defendant, and, through his efforts, one of the "Matthews"
plants was sold by the plaintiff to the defendant, and was shipped from
Manila to Iloilo, and later installed on defendant's premises after which,
without the knowledge of the plaintiff, the defendant paid the purchase
price to Montelibano. As a result, plaintiff commenced this action against
the defendant, alleging that about August 18, 1920, it sold and delivered
to the defendant the electric plant at the agreed price of P2,513.55 no
part of which has been paid, the demands judgment for the amount with
interest from October 20, 1920.
For answer, the defendant admits the corporation of the plaintiff, and
denies all other material allegations of the complaint, and, as an
affirmative defense, alleges "that on or about the 18th of August, 1920,
the plaintiff sold and delivered to the defendant a certain electric plant
and that the defendant paid the plaintiff the value of said electric plant,
to wit: P2,513.55."
Upon such issues the testimony was taken, and the lower court rendered
judgment for the defendant, from which the plaintiff appeals, claiming
that the court erred in holding that the payment to A. C. Montelibano
would discharge the debt of defendant, and in holding that the bill was
given to Montelibano for collection purposes, and that the plaintiff had
held out Montelibano to the defendant as an agent authorized to collect,
and in rendering judgment for the defendant, and in not rendering
judgment for the plaintiff.
Issue: WON MONTELIBANO is authorized to receive payment?
Held: No. There is no evidence that the plaintiff ever delivered any
statements to Montelibano, or that he was authorized to receive or
receipt for the money, and defendant's own telegram shows that the
plaintiff "did not present bill" to defendant. He now claims that at the
very time this telegram was sent, he had the receipt of Montelibano for
the money upon the identical statement of account which it is admitted
the plaintiff did render to the defendant.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
Article 1162 of the Civil Code provides:
Payment must be made to the persons in whose favor the
obligation is constituted, or to another authorized to receive it in
his name.
And article 1727 provides:
The principal shall be liable as to matters with respect to which
the agent has exceeded his authority only when he ratifies the
same expressly or by implication.
Mechem on Agency, volume I, section 743, says:
In approaching the consideration of the inquiry whether an assumed
authority exist in a given case, there are certain fundamental principles
which must not be overlooked. Among these are, as has been seen, (1)
that the law indulges in no bare presumptions that an agency
exists: it must be proved or presumed from facts; (2) that the
agent cannot establish his own authority, either by his
representations or by assuming to exercise it; (3) that an
authority cannot be established by mere rumor or general
reputation; (4)that even a general authority is not an unlimited
one; and (5) that every authority must find its ultimate source in
some act or omission of the principal. An assumption of
authority to act as agent for another of itself challenges inquiry.
Like a railroad crossing, it should be in itself a sign of danger and suggest
the duty to "stop, look, and listen." It is therefore declared to be a
fundamental rule, never to be lost sight of and not easily to be
overestimated, that persons dealing with an assumed agent, whether the
assumed agency be a general or special one, are bound at their peril, if
they would hold the principal, to ascertain not only the fact of the agency
but the nature and extent of the authority, and in case either is
controverted, the burden of proof is upon them to establish it.
. . . It is, moreover, in any case entirely within the power of the person
dealing with the agent to satisfy himself that the agent has the authority
he assumes to exercise, or to decline to enter into relations with him.
(Melchem on Agency, vol. I, sec. 746.)
The person dealing with the agent must also act with ordinary prudence
and reasonable diligence. Obviously, if he knows or has good reason to
believe that the agent is exceeding his authority, he cannot claim
protection. So if the suggestions of probable limitations be of such a clear
and reasonable quality, or if the character assumed by the agent is of
such a suspicious or unreasonable nature, or if the authority which he
seeks to exercise is of such an unusual or improbable character, as would
suffice to put an ordinarily prudent man upon his guard, the party
dealing with him may not shut his eyes to the real state of the case, but
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 18
should either refuse to deal with the agent at all, or should ascertain
from the principal the true condition of affairs. (Mechem on Agency, vol.
I, sec 752.)
And not only must the person dealing with the agent ascertain the
existence of the conditions, but he must also, as in other cases, be able
to trace the source of his reliance to some word or act of the principal
himself if the latter is to be held responsible. As has often been pointed
out, the agent alone cannot enlarge or extend his authority by his own
acts or statements, nor can he alone remove limitations or waive
conditions imposed by his principal. To charge the principal in such a
case, the principal's consent or concurrence must be shown. (Mechem on
Agency, vol. I, section 757.)
20. RALLOS VS. YANGCO
Facts: the plaintiffs proceeded to do a considerable business with the
defendant through the said Collantes, as his factor, sending to him as
agent for the defendant a good deal of produce to be sold on
commission. Later, and in the month of February, 1909, the plaintiffs sent
to the said Collantes, as agent for the defendant, 218 bundles of tobacco
in the leaf to be sold on commission, as had been other produce
previously. The said Collantes received said tobacco and sold it for the
sum of P1,744. The charges for such sale were P206.96. leaving in the
hands of said Collantes the sum of P1,537.08 belonging to the plaintiffs.
This sum was, apparently, converted to his own use by said agent.
It appears, however, that prior to the sending of said tobacco the
defendant had severed his relations with Collantes and that the latter
was no longer acting as his factor. This fact was not known to the
plaintiffs; and it is conceded in the case that no notice of any kind was
given by the defendant to the plaintiffs of the termination of the relations
between the defendant and his agent. The defendant refused to pay the
said sum upon demand of the plaintiffs, placing such refusal upon the
ground that at the time the said tobacco was received and sold by
Collantes he was acting personally and not as agent of the defendant.
This action was brought to recover said sum.
Issue: WON whether or not the plaintiffs, acting in good faith and
without knowledge, having sent produce to sell on commission
to the former agent of the defendant, can recover of the
defendant under the circumstances above set forth
HELD:
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
YES. We are of the opinion that the defendant is liable. Having
advertised the fact that Collantes was his agent and having given them a
special invitation to deal with such agent, it was the duty of the
defendant on the termination of the relationship of principal and agent to
give due and timely notice thereof to the plaintiffs. Failing to do so, he is
responsible to them for whatever goods may have been in good faith and
without negligence sent to the agent without knowledge, actual or
constructive, of the termination of such relationship.
21. B. H. MACKE ET AL V JOSE CAMPS
FACTS: B. H. Macke and W.H. Chandler, partners doing business under
thee firm name of Macke, Chandler And Company, allege that during the
months of February and March 1905, they sold to Jose Camps and
delivered at his place of business, known as the :Washington Caf,
various bills of goods amounting to P351.50; that Camps has only paid on
account of said goods the sum of P174; that there is still due them on
account of said goods the sum of P177.50
Plaintiffs made demand for the payment from defendant and that the
latter failed and refused to pay the said balance or any part of it
Macke, one of the plaintiffs, testified that on the order of one Ricardo
Flores, who represented himself to be the agent of Jose Camps, he
shipped the said goods to the defendant at the Washington Caf; that
Flores (agent) later acknowledged the receipt of the said goods and
made various payments thereon amounting in all to P174; that believes
that Flores is still the agent of Camps; and that when he went to the
Washington Caf for the purpose of collecting his bill he found Flores, in
the absence of Camps, apparently in charge of the business and claiming
to be the business manager of Camps, said business being that of a
hotel with a bar and restaurant annexed.
A written contract was introduced as evidence, from which it appears
that one Galmes, the former of Washington Caf subrented the building
wherein the business was conducted, to Camps for 1 year for the
purpose of carrying on that business, Camps obligating himself not to
sublet or subrent the building or the business without the consent of the
said Galmes. *This contract was signed by Camps and the name of
Ricardo Flores as a witness and attached thereon is an inventory of the
furniture and fittings which also is signed by Camps with the word
sublessee below the name, and at the foot of this inventory the word
received followed by the name Ricardo Flores with the words
managing agent immediately following his name.
ISSUE: WON Ricardol Flores was the agent of Camps
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 19
HELD: Yes
Evidence is sufficient to sustain a finding that Flores is the agent of
Camps in the management of the bar of the Washington Caf with
authority to bind Camps, his principal, for the payment of the goods
The contract sufficiently establishes the fact that Camps was the owner
of the business and of the bar, and the title of managing agent
attached to the signature of Flores which appears on that contract,
together with the fact that at the time the purchases were made, Flores
was apparently in charge of the business performing the duties usually
intrusted to a managing agent leave little room for doubt that he was
there as the authorized agent of Camps.
Agency by Estoppel --- One who clothes another with apparent authority
as his agent, and holds him out to the public as such, can not be
permitted to deny the authority of such person to act as his agent, to the
prejudice of innocent third persons dealing with such person in good faith
and in the honest belief that he is what he appears to be.
Estopple---- Whenever a party has, by his own declaration, act
or omission, intentionally and deliberately led another to believe
a particular thing true, and to act upon such belief, he can not,
in any litigation arising out of such declaration, act, or omission
be permitted to falsify; and unless the contrary appears, the
authority of the agent must be presumed to include all the
necessary and usual means of carrying his agency into effect.
22. LINAN VS PUNO
FACTS: Plaintiff, was the owner of a certain parcel of land
Plaintiff executed the following document, which conferred upon the
defendant Marcos Puno the power, duties, and obligations
Contract provides that: Linan, plaintiff, confers sufficient power upon
Marcos Puno, respondent, to represent him in administering his interest
that the former possess within the municipality of Tarlac, purchase, sell,
as well as sue and be sued before any authority, appear before the
courts of justice and administrative officers in any proceeding or business
concerning the good administration and advancement of my interests
and may, in necessary cases, appoint attorneys at law or attorneys in
fact to represent him
Puno, for the sum of P800 sold and delivered parcel of land to the other
defendants
Plaintiff alleges that the said document did not confer upon Puno the
power to sell the land and prayed that the sale be set aside and that the
land be returned to him and with damages
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
ISSUE: WON Puno is an agent of the plaintiff and the sale made
by the former in favor of other defendants binds the
principal/plaintiff
Held:
Puno is an agent but and has authority to sell the land, binds
principal
The Document presented did not give Puno authority to sell the land;
that the sale was illegal and void; that defendants should return the land
to the plaintiff; and that defendants should pay plaintiff the sum of
P1,000 as damages, P400 of which Puno should be responsible for, and
to pay the costs.
Puno had no authority to sell the land but only to administer the land
Contracts of agency as well as general powers of attorney must be
interpreted in accordance with the language used by the parties. The real
intention of the parties is primarily to be determined from the language
used. The intention is to be gathered from the whole instrument. In case
of doubt, resort must be had to the situation, surroundings and relations
of the parties.
Whenever it is possible, effect is to be given to every word and clause
used by the parties. It is to be presumed that the parties said what they
intended to say and that they used each word or clause with some
purpose and that purpose, if possible to be ascertained and enforced.
The intention of the parties must be sustained rather than defeated.
If the contract be open to two constructions, one of which would uphold
while the other would overthrow it, the former is to be chosen. So, if by
one construction the contract would be illegal, and by another equally
permissible construction it would be lawful, the latter must be adopted.
The acts of the parties in carrying out the contract will presumed to be
done in good faith. The acts of the parties will be presumed to have been
done in conformity with and not contrary to the intent of the contract
Supreme Court: The words administer, sell, purchase etc used in the
contract seem to be used coordinately. Each has equal force with the
other. There seems to be no good reason for saying that Puno had
authority to administer and not to sell when to sell was as
advantageous to the plaintiff in the administration of his affairs as to
administer. To hold that the power was to administer only when the
power to sell was equally conferred would be to give effect to a portion
of the contract only. That would give to special words of the contract a
special and limited meaning to the exclusion of other general words of
equal import
Supreme Court: No proof that Puno acted in bad faith or fraudulently in
selling the land. It will be presumed that he acted in good faith and in
accordance with his power as he understood it. That his interpretation of
his power is tenable cannot be successfully denied.
Supreme Court: defendants should be relieved from liability
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 20
23. JULIO DANON, plaintiff-appellee, vs. ANTONIO A. BRIMO &
CO., defendant-appellant.
Facts:
The plaintiff alleges that in the month of August, 1918, the defendant
company, through its manager, Antonio A. Brimo, employed him to look
for a purchaser of its factory known as "Holland American Oil Co.," for the
sum of P1,200,000, payable in cash; that the defendant promised to pay
the plaintiff, as compensation for his services, a commission of five per
cent on the said sum of P1,200,000, if the sale was consummated, or if
the plaintiff should find a purchaser ready, able and willing to buy said
factory for the said sum of P1,200,000; that subsequently the plaintiff
found such a purchaser, but that the defendant refused to sell the said
factory without any justifiable motive or reason therefor and without
having previously notified the plaintiff of its desistance or variation in the
price and terms of the sale.
To that complaint the defendant interposed a general denial. Upon the
issue thus presented, the Honorable Simplicio del Rosario, judge, after
hearing and considering the evidence adduced during the trial of the
cause, rendered a judgment in favor of the plaintiff and against the
defendant for the sum of P60,000, with costs. From that judgment the
defendant appealed to this court.
The proof with regard to the authority of the plaintiff to sell the factory in
question for the defendant, on commission, is extremely unsatisfactory. It
consists solely of the testimony of the plaintiff, on the one hand, and of
the manager of the defendant company, Antonio A. Brimo, on the other.
From a reading of their testimony we believe that neither of them has
been entirely free from prevarications. However, after giving due weight
to the finding of the trial court in this regard and after carefully
considering the inherent probability or improbability of the testimony of
each of said witnesses, we believe we are approximating the truth in
finding: (1) That Antonio A. Brimo, in a conversation with the plaintiff,
Julio Danon, about the middle of August, 1918, informed the latter that
he (Brimo) desired to sell his factory, the Holland American Oil Co., for
the sum of P1,200,000; (2) that he agreed and promised to pay to the
plaintiff a commission of 5 per cent provided the latter could sell said
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
factory for that amount; and (3) that no definite period of time was fixed
within which the plaintiff should effect the sale. It seems that another
broker, Sellner, was also negotiating the sale, 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. Such, we believe. was the contract
between the plaintiff and the defendant, upon which the present action is
based.
Issue: WON the plaintiff is entitled to the commission?
Held: No. The rule laid down in the foregoing case was adopted and
followed in the cases of Zeimer vs. Antisell (75 Cal. 509), and Ayres vs.
Thomas (116 Cal., 140).
The undertaking to procure a purchaser requires of the party so
undertaking, not simply to name or introduce a person who may be
willing to make any sort of contract in reference to the property, but to
produce a party capable, and who ultimately becomes the purchaser.
(Kimberly vs. Henderson and Lupton, 29 Md., 512, 515, citing: Keener vs.
Harrod and Brooke, 2 Md. 63; McGavock vs. Woodlief, 20 How., 221. See
also Richards, Executor, vs. Jackson, 31 Md., 250.)
The defendant sent a proposal to a broker in these words: If you send or
cause to be sent to me, by advertisement or otherwise, any party with
whom I may see fit and proper to effect a sale or exchange of my real
estate, above described I will pay you the sum of $200. The broker found
a person who proposed to purchase the property, but the sale was not
affected. Held: That the broker was not entitled to compensation. (Walker
vs. Tirrel, 3 Am. Rep., 352.)
It is clear from the foregoing authorities that, although the present
plaintiff could probably have effected the sale of the defendant's factory
had not the defendant sold it to someone else, 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
period was fixed by the defendant within which the plaintiff 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
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 21
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." (Hungerford vs. Hicks, 39
Conn., 259; Wylie vs. Marine National Bank, 61 N.Y., 415, 416.)
Take note: A leading case on the subject is that of Sibbald vs. Bethlehem
Iron Co. (83 N. Y., 378; 38 Am. Rep., 441). In the case, after an
exhaustive review of various cases, the Court of Appeals of New York
stated the rule as follows:
In all the cases, under all and varying forms of expression, the
fundamental and correct doctrine, is, that 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 be made, and until that is
done his right to commissions does not accrue.
24. CONSEJO INFANTE, petitioner, vs. JOSE CUNANAN, JUAN
MIJARES and THE COURT OF APPEALS, Second
Division, respondents.|||
DOCTRINE: Oral evidence is presented to the effect that while the
agents agreed to cancel the written authority given them by their
principal, they did so merely upon the principal's verbal assurance that,
should the property subject of their contract of agency be sold to their
own buyer, they would be given the commission agreed upon. Held:
The cancellation of the written authority being in writing, parole
evidence is not admissible under section 22 of Rule 123.
If there is other evidence which would justify the agents' claim for
commission, even if such parol evidence is disregarded, they are
entitled to such commission.
The principal took advantage of the agents' services consisting in
locating a buyer for the principal's land. The principal, perhaps by
stratagem, advised the agents that she was no longer interested in the
deal and was able to prevail upon them to sign a document agreeing to
the cancellation of the written authority she had originally given the
agents, believing that she could evade payment of their commission.
Then she sold the property to the buyer found by the agents. Held: The
principals act is unfair as would amount to bad faith, and cannot be
sanctioned without according to the agents the reward which is due
them.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
FACTS: Consejo Infante (defendant), was the owner of two parcels of
land, together with a house built thereon. On or before November 30,
1948, she contracted the services of Jose Cunanan and Juan
Mijares(Plaintiffs), to sell the above-mentioned property for a price of
P30,000 subject to the condition that the purchaser would assume the
mortgage existing thereon in favor of the Rehabilitation Finance
Corporation. She agreed to pay them a commission of 5% on the
purchase price plus whatever overprice they may obtain for the property.
Plaintiffs found one Pio S. Noche who was willing to buy the property
under the terms agreed upon with defendant, but when they introduced
him to defendant, the latter informed them that she was no longer
interested in selling the property and succeeded in making them sign a
document stating therein that the written authority she had given them
was already cancelled.However, on December 20, 1948, defendant dealt
directly with Pio S. Noche selling to him the property for P31,000.
Upon learning this transaction, plaintiffs demanded from defendant the
payment of their commission, but she refused and so they brought the
present action
Defendant admitted having contracted the services of the plaintiffs to
sell her property as set forth in the complaint, but stated that she agreed
to pay them a commission of P1,200 only on condition that they buy her
a property somewhere in Taft Avenue to where she might transfer after
selling her property. Consejo avers that while plaintiffs took steps to sell
her property as agreed upon, they sold the property at Taft Avenue to
another party and because of this failure it was agreed that the authority
she had given them be cancelled.
TC & CA: The lower court found that the preponderance of evidence
was in favor of the plaintiffs and rendered judgment sentencing the
defendant to pay the plaintiffs the sum of P2,500 with legal interest
plus the costs of action.
CONTENTION: Petitioner, however, contends that that authority has
already been withdrawn on November 30, 1948 when, by the voluntary
act of respondents, they executed a document stating that said authority
shall be considered cancelled and without any effect, so that when
petitioner sold the property to Pio S. Noche on December 20, 1948, she
was already free from her commitment with respondents and, therefore,
was not in duty bound to pay them any commission for the transaction.
ISSUE: (1) WON the cancellation of the written authority being in writing,
parole evidence is not admissible under section 22 of Rule 123.
(2) WON the principals act is in bad faith
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 22
HELD:
(1) YES, parole evidence is not admissible. If the facts were as claimed
by petitioner, there is indeed no doubt that she would have no obligation
to pay respondents the commission which was promised them under the
original authority because, under the old Civil Code, her right to withdraw
such authority is recognized. A principal may withdraw the authority
given to an agent at will. (Article 1733.) But this fact is disputed. Thus,
respondents claim that while they agreed to cancel the written authority
given to them, they did so merely upon the verbal assurance given by
petitioner that, should the property be sold to their own buyer, Pio S.
Noche, they would be given the commission agreed upon. True, this
verbal assurance does not appear in the written cancellation, Exhibit 1,
and, on the other hand, it is disputed by petitioner, but respondents were
allowed to present oral evidence to prove it, and this is now assigned as
error in this petition for review.
The plea that oral evidence should not have been allowed to prove the
alleged verbal assurance is well taken it appearing that the written
authority given to respondents has been cancelled in a written
statement. The rule on this matter is that "When the terms of an
agreement have been reduced to writing, it is to be considered as
containing all those terms, and, therefore, there can be, between the
parties and their successors in interest, no evidence of the terms of the
agreement other than the contents of the writing." (Section 22, Rule 123,
Rules of Court.) The only exceptions to this rule are: "(a) Where a mistake
or imperfection of the writing, or its failure to express the true intent and
agreement of the parties, or the validity of the agreement is put in issue
by the pleadings"; and "(b) Where there is an intrinsic ambiguity in the
writing." (Ibid.) There is no doubt that the point raised does not come
under any of the cases excepted, for there is nothing therein that has
been put in issue by respondents in their complaint. The terms of the
document, Exhibit 1, seem to be clear and they do not contain any
reservation which may in any way run counter to the clear intention of
the parties
But even disregarding the oral evidence adduced by respondents in
contravention of the parole evidence rule, we are, however, of the
opinion that there is enough justification for the conclusion reached by
the lower court as well as by the Court of Appeals to the effect that
respondents are entitled to the commission originally agreed upon. It is a
fact found by the Court of Appeals that after petitioner had given the
written authority to respondents to sell her land for the sum of P30,000,
respondents found a buyer in the person of one Pio S. Noche who was
willing to buy the property under the terms agreed upon, and this matter
was immediately brought to the knowledge of petitioner. But the latter,
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
perhaps by way of stratagem, advised respondents that she was no
longer interested in the deal and was able to prevail upon them to sign a
document agreeing to the cancellation of the written authority.
(2) yes. The principal took advantage of the agents' services consisting in
locating a buyer for the principal's land. The principal, perhaps by
stratagem, advised the agents that she was no longer interested in the
deal and was able to prevail upon them to sign a document agreeing to
the cancellation of the written authority she had originally given the
agents, believing that she could evade payment of their commission.
Then she sold the property to the buyer found by the agents. Thus, the
principals act is unfair as would amount to bad faith, and cannot be
sanctioned without according to the agents the reward which is due
them.
25. MANOTOK BROTHERS, INC., petitioner, vs. THE HONORABLE
COURT OF APPEALS, THE HONORABLE JUDGE OF THE REGIONAL
TRIAL COURT OF MANILA (Branch VI), and SALVADOR
SALIGUMBA, respondents.
FACTS: Petitioner herein (then defendant-appellant) 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, petitioner authorized herein private respondent Salvador
Saligumba to negotiate with the City of Manila the sale of
aforementioned property for not less than P425,000.00. In the same
writing, petitioner agreed to pay private respondent a five percent (5%)
commission in the event the sale is finally consummated and paid.
Petitioner ,executed another letter extending the authority of private
respondent for 120 days. Thereafter, another extension was granted to
him for 120 more days, as evidenced by another letter. Finally, through
another letter 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 of
P410,816.00 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, one hundred eighty three (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 of
P200,000.00 having been made, the purchase price was fully satisfied
with a second payment on April 8, 1969 by a check in the amount of
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 23
P210,816.00. 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.
COMPLAINT: 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.
ANSWER: Petitioner 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, instead it was Filomeno E. Huelgas, the PTA
president for 1967-1968 of the Claro M. Recto High School.
Huelgas testified to the effect that after being inducted as PTA president
in August, 1967 he followed up the sale from the start with Councilor
Magsalin until after it was approved by the Mayor on May 17, 1968. He.
also said that he came to know Rufino Manotok only in August, 1968, at
which meeting the latter told him that he would be given a "gratification"
in the amount of P20,000.00 if the sale was expedited.
TC & CA: rendered judgment sentencing petitioner and/or Rufino
Manotok to pay unto private respondent the sum of P20,540.00 by way
of his commission fees with legal interest thereon from the date of the
filing of the complaint until payment.
It is petitioner's contention that as a broker, private respondent's job is to
bring together the parties to a transaction. Accordingly, if the broker
does not succeed in bringing the minds of the purchaser and the vendor
to an agreement with respect to the sale, he is not entitled to a
commission.
ISSUE: WON private respondent is entitled to the five percent (5%)
agent's commission.
HELD: YES. In an earlier case, this 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. We agree with respondent Court 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
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
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.|||
While it may be true that Filomeno Huelgas followed up the matter with
Councilor Magsalin, the author of Municipal Ordinance No. 6603 and
Mayor Villegas, his intervention regarding the purchase came only after
the ordinance had already been passed when the buyer has already
agreed to the purchase and to the price for which said property is to be
paid. Without the efforts of private respondent then, Mayor Villegas
would have nothing to approve in the first place. It was actually private
respondent's labor that had set in motion the intervention of the third
party that produced the sale, hence he should be amply
compensated. Cdll
26. VICENTE M. DOMINGO, represented by his heirs, ANTONIA
RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR, AMELIA,
VICENTE JR., SALVADOR, IRENE and JOSELITO, all surnamed
DOMINGO, petitioners-appellants, vs. GREGORIO M.
DOMINGO, intervenor-respondent.
FACTS: In a document executed on June 2, 1956, Vicente M. Domingo
granted Gregorio Domingo, a real estate broker, the exclusive agency to
sell his lot No. 883 of Piedad Estate with an area of about 88,477 square
meters at the rate of P2.00 per square meter (or for P176,954.00) with a
commission of 5% on the total price, if the property is sold by Vicente or
by anyone else during the 30-day duration of the agency or if the
property is sold by Vicente within three months from the termination of
the agency to a purchaser to whom it was submitted by Gregorio during
the continuance of the agency with notice to Vicente. The said agency
contract was in triplicate, one copy was given to Vicente, while the
original and another copy were retained by Gregorio.
On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to
look for a buyer, promising him one-half of the 5% commission.
Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a
prospective buyer.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 24
Oscar de Leon submitted a written offer which was very much lower than
the price of P2.00 per square meter. Vicente directed Gregorio to tell
Oscar de Leon to raise his offer. After several conferences between
Gregorio and Oscar de Leon, the latter raised his offer to P109,000.00 on
June 20, 1956, to which Vicente agreed by signing. Upon demand of
Vicente, Oscar de Leon issued to him a check in the amount of P1,000.00
as earnest money, after which Vicente advanced to Gregorio the sum of
P300.00. Oscar de Leon confirmed his former offer to pay for the
property at P1.20 per square meter in another letter. Subsequently,
Vicente asked for an additional amount of P1,000.00 as earnest money,
which Oscar de Leon promised to deliver to him. Thereafter, was
amended to the effect that Oscar de Leon will vacate on or about
September 15, 1956 his house and lot at Denver Street, Quezon City
which is part of the purchase price. It was again amended to the effect
that Oscar will vacate his house and lot on December 1, 1956, because
his wife was on the family way and Vicente could stay in lot No. 883 of
Piedad Estate until June 1, 1957, in a document dated June 30, 1956 (the
year 1957 therein is a mere typographical error) and marked Exhibit "D".
Pursuant to his promise to Gregorio, Oscar gave him as a gift
or propina the sum of One Thousand Pesos (P1,000.00) for of One
succeeding in persuading Vicente to sell his lot at P1.20 per square
meter or a total in round figure Hundred Nine Thousand Pesos
(P109,000.00). This gift of One Thousand Pesos (P1,000.00) was not
disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the
additional amount of One Thousand Pesos (P1,000.00) by way of earnest
money. When the deed of sale was not executed on August 1, 1956 as
stipulated in Exhibit "C" nor on August 16, 1956 as extended by Vicente,
Oscar told Gregorio that he did not receive his money from his brother in
the United States, for which reason he was giving up the negotiation
including the amount of One Thousand Pesos (P1,000.00) given as
earnest money to Vicente and the One Thousand Pesos (P1,000.00) given
to Gregorio aspropina or gift. When Oscar did not see him after several
weeks, Gregorio sensed something fishy. So, he went to Vicente and read
a portion of Exhibit "A" marked Exhibit "A-1" to the effect that Vicente
was still committed to pay him 5% commission, if the sale is
consummated within three months after the expiration of the 30-day
period of the exclusive agency in his favor from the execution of the
agency contract on June 2, 1956 to a purchaser brought by Gregorio to
Vicente during the said 30-day period. Vicente grabbed the original of
Exhibit "A" and tore it to pieces. Gregorio held his peace, not wanting to
antagonize Vicente further, because he had still the duplicate of Exhibit
"A". From his meeting with Vicente, Gregorio proceeded to the office of
the Register of Deeds of Quezon City, where he discovered Exhibit "G", a
deed of sale executed on September 17, 1956 by Amparo Diaz, wife of
Oscar de Leon, over their house and lot at No. 40 Denver Street, Cubao,
Quezon City, in favor of Vicente as down payment by Oscar de Leon on
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
the purchase price of Vicente's lot No. 883 of Piedad Estate. Upon thus
learning that Vicente sold his property to the same buyer, Oscar de Leon
and his wife, he demanded in writing payment of his commission on the
sale price of One Hundred Nine Thousand Pesos (P109,000.00), Exhibit
"H". He also conferred with Oscar de Leon, who told him that Vicente
went to him and asked him to eliminate Gregorio in the transaction and
that he would sell his property to him for One Hundred Four Thousand
Pesos (P104,000.00). In Vicente's reply to Gregorio's letter, Exhibit "H",
Vicente stated that Gregorio is not entitled to the 5 % commission
because he sold the property not to Gregorio's buyer, Oscar de Leon, but
to another buyer, Amparo Diaz, wife of Oscar de Leon.
The Court of Appeals found from the evidence that Exhibit "A", the
exclusive agency contract, is genuine; that Amparo Diaz, the vendee,
being the wife of Oscar de Leon, the sale by Vicente of his property is
practically a sale to Oscar de Leon since husband and wife have common
or identical interests; that Gregorio and intervenor Teofilo Purisima were
the efficient cause in the consummation of the sale in favor of the
spouses Oscar de Leon and Amparo Diaz; that Oscar de Leon paid
Gregorio the sum of One Thousand Pesos (P1,000.00) as "propina" or gift
and not as additional earnest money to be given to the plaintiff, because
Exhibit "66", Vicente's letter addressed to Oscar de Leon with respect to
the additional earnest money, does not appear to have been answered
by Oscar de Leon and therefore there is no writing or document
supporting Oscar de Leon's testimony that he paid an additional earnest
money of One Thousand Pesos (P1,000.00) to Gregorio for delivery to
Vicente, unlike the first amount of One Thousand Pesos (P1,000.00) paid
by Oscar de Leon to Vicente as earnest money, evidenced by the letter
Exhibit "4"; and that Vicente did not even mention such additional
earnest money in his two replies Exhibits "I" and "J" to Gregorio's letter of
demand of the 5% commission.
ISSUE: (1) whether the failure on the part of Gregorio to disclose to
Vicente the payment to him by Oscar de Leon of the amount of One
Thousand Pesos (P1,000.00) as gift or "propina" for having persuaded
Vicente to reduce the purchase price from P2.00 to P1.20 per square
meter, so constitutes fraud as to cause a forfeiture of his 5% commission
on the sale price;
(2) whether Vicente or Gregorio should be liable directly to the intervenor
Teofilo Purisima for the latter's share in the expected commission of
Gregorio by reason of the sale; and
HELD:
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 25
The duties and liabilities of a broker to his employer are essentially those
which an agent owes to his principal. 1
Consequently, the decisive legal provisions are found in Articles 1891
and 1909 of the New Civil Code.
"Art. 1891. 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, even though it may not be owing to the
principal.
"Every stipulation exempting the agent from the
obligation to render an account shall be void."
xxx xxx xxx
"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."
Article 1891 of the New Civil Code amends Article 1720 of the old
Spanish Civil Code which provides that:
"Art. 1720. Every agent is bound to give an account of
his transaction and to pay to the principal whatever he
may have received by virtue of the agency, even
though what he has received is not due to the
principal."
Consequently, the decisive legal provisions are found in Articles 1891
and 1909 of the New Civil Code. The aforecited provisions demand the
utmost good faith, fidelity, honesty, candor and fairness on the part of
the agent, the real estate broker in this case, to his principal, the vendor.
The law imposes upon the agent the absolute obligation to make a full
disclosure or complete account to his principal of all his transactions and
other material facts relevant to the agency, so much so that the law as
amended does not countenance any stipulation exempting the agent
from such an obligation and considers such an exemption as void. The
duly of an agent is likened to that of a trustee. This is not a technical or
arbitrary rule but a rule founded on the highest and truest principle of
morality as well as of the strictest justice.
(1) An agent who takes a secret profit in the nature of a bonus, gratuity
or personal benefit from the vendee, without revealing the same to his
principal, the vendor, is guilty of a breach of his loyalty to the principal
and forfeits his right to collect the commission from his principal, even if
the principal does not suffer any injury by reason of such breach of
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
fidelity, or that he obtained better results or that the agency is a
gratuitous one, or that usage or custom allows it, because the rule is to
prevent the possibility of any wrong, not to remedy or repair an actual
damage.
By taking such profit or bonus or gift orpropina from the vendee, the
agent thereby assumes a position wholly inconsistent with that of being
an agent for his principal, who has a right to treat him, insofar as his
commission is concerned, as if no agency had existed. The fact that the
principal may have been benefited by the valuable services of the said
agent does not exculpate the agent who has only himself to blame for
such a result by reason of his treachery or perfidy.
Because of his responsibility under the aforecited Article 1720, an agent
is likewise liable for estafa for failure to deliver to his principal the total
amount collected by him in behalf of his principal and cannot retain the
commission pertaining to him by subtracting the same from his
collections.
Where a principal has paid an agent or broker a commission while
ignorant of the fact that the latter has been unfaithful, the principal may
recover back the commission paid, since an agent or broker who has
been unfaithful is not entitled to any compensation. If the agent does not
conduct himself with entire fidelity towards his principal, but is guilty of
taking a secret profit or commission in regard the matter in which he is
employed, he loses his right to compensation on the ground that he has
taken a position wholly inconsistent with that of agent for his employer,
and which gives his employer, upon discovering it, the right to treat him
so far as compensation, at least, is concerned as if no agency had
existed. This may operate to give to the principal the benefit of valuable
services rendered by the agent, but the agent has only himself to blame
for that result.
As a general rule, it is a breach of good faith and loyalty to his principal
for an agent, while the agency exists, so to deal with the subject matter
thereof, or with information acquired during the course of the agency, as
to make a profit out of it for himself in excess of his lawful compensation;
and if he does so he may be held as a trustee and may be compelled to
account to his principal for all profits, advantages, rights, or privileges
acquired by him in such dealings, whether in performance or in violation
of his duties, and be required to transfer them to his principal upon being
reimbursed for his expenditures for the same, unless the principal has
consented to or ratified the transaction knowing that benefit or profit
would accrue, or had accrued, to the agent, or unless with such
knowledge he has allowed the agent so as to change his condition that
he cannot be put in status quo. The application of this rule is not affected
by the fact that the principal did not suffer any injury by reason of the
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 26
agent's dealings, or that he in fact obtained better results; nor is it
affected by the fact that there is a usage or custom to the contrary, or
that the agency is a gratuitous one.
The duty embodied in Article 1891 of the New Civil Code will not apply if
the agent or broker acted only as a middleman with the task of merely
bringing together the vendor and vendee, who themselves thereafter will
negotiate on the terms and conditions of the transaction. Neither would
the rule apply if the agent or broker had informed the principal of the gift
or bonus or profit he received from the purchaser and his principal did
not object thereto. Herein defendant-appellee Gregorio Domingo was not
merely a middleman of the petitioner-appellant Vicente Domingo and the
buyer Oscar de Leon. He was the broker and agent of said petitioner-
appellant only. And herein petitioner-appellant was not aware of the gift
of One Thousand Pesos (P1,000.00) received by Gregorio Domingo form
the prospective buyer; much less did he consent to his agent's accepting
such a gift.
(2) Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover
from Gregorio Domingo his one-half share of whatever amounts Gregorio
Domingo received by virtue of the transaction as his sub-agency contract
was with Gregorio Domingo alone and not with Vicente Domingo, who
was not even aware of such sub-agency. Since Gregorio Domingo
received from Vicente Domingo and Oscar de Leon respectively the
amounts of Three Hundred Pesos (P300.00) and One Thousand Pesos
(P1,000.00) or a total of One Thousand Three Hundred Pesos (P1,300.00),
one-half of the same, which is Six Hundred Fifty Pesos (P650.00), should
be paid by Gregorio Domingo to Teofilo Purisima.
WHEREFORE, the judgment is hereby rendered, reversing the decision of
the Court of Appeals and directing the defendant-appellee Gregorio
Domingo: (1) to pay to the heirs of Vicente Domingo the sum of One
Thousand Pesos (P1,000.00) as moral damages and One Thousand Pesos
(P1,000.00) as attorney's fees; (2) to pay Teofilo Purisima the sum of Six
Hundred Fifty Pesos (P650.00); and (3) to pay the costs.
27. PRIMITIVO SIASAT and MARCELINO
SIASAT, petitioners, vs. INTERMEDIATE APPELLATE COURT and
TERESITA NACIANCENO, respondents.
FACTS: Sometime in 1974, respondent Teresita Nacianceno succeeded in
convincing officials of the then Department of Education and Culture
(Department), to purchase without public bidding, one million pesos
worth of national flags for the use of public schools throughout the
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
country. The respondent was able to expedite the approval of the
purchase by handcarrying the different indorsements from one office to
another, so that by the first week of September, 1974, all the legal
requirements had been complied with, except the release of the
purchase orders. When Nacianceno was informed by the Chief of the
Budget Division of the Department that the purchase orders could not be
released unless a formal offer to deliver the flags in accordance with the
required specifications was first submitted for approval, she contacted
the owners of the United Flag Industry on September 17, 1974. The next
day, after the transaction was discussed, the following document (Exhibit
A) was drawn up:
"Mrs. Tessie Nacianceno,
"This is to formalize our agreement for you to represent
United Flag Industry to deal with any entity or
organization, private or government in connection with
the marketing of our products - flags and all its
accessories.
"For your service, you will be entitled to a commission
of thirty (30%) percent.
Signed
Mr. Primitivo Siasat
Owner and Gen. Manager"
On October 16, 1974, the first delivery of 7,933 flags was made by the
United Flag Industry. The next day, on October 17, 1974, the
respondent's authority to represent the United Flag Industry was revoked
by petitioner Primitivo Siasat.
According to the findings of the courts below, Siasat, after receiving the
payment of P469,980.00 on October 23, 1974 for the first delivery,
tendered the amount of P23,900.00 or five percent (5%) of the amount
received, to the respondent as payment of her commission. The latter
allegedly protested. She refused to accept the said amount insisting on
the 30% commission agreed upon. The respondent was prevailed upon to
accept the same, however, because of the assurance of the petitioners
that they would pay the commission in full after they delivered the other
half of the order. The respondent states that she later on learned that
petitioner Siasat had already received payment for the second delivery of
7,833 flags. When she confronted the petitioners, they vehemently
denied receipt of the payment, at the same time claiming that the
respondent had no participation whatsoever with regard to the second
delivery of flags and that the agency had already been revoked.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 27
She filed an action in CFI to recover the following commissions: 25% as
balance on the first delivery and 30% on the second delivery. LLpr
TC & IAC: decided in favor of the respondent.
In assailing the appellate court's decision, the petition tenders the
following arguments: first, the authorization making the respondent the
petitioner's representative merely states that she could deal with any
entity in connection with the marketing of their products for a
commission of 30%. There was no specific authorization for the sale of
15,666 Philippine flags to the Department
ISSUE: WON respondent has no capacity to represent petitioners in the
transaction with the Department
HELD: We find petitioners' argument regarding respondent's incapacity
to represent them in the transaction with the Department untenable.
There are several kinds of agents. To quote a commentator on the
matter:
"An agent may be (1) universal; (2) general, or (3)
special. A universal agent is one authorized to do all
acts for his principal which can lawfully be delegated to
an agent. So far as such a condition is possible, such
an agent may be said to have universal authority.
"A general agent is one authorized to do all acts
pertaining to a business of a certain kind or at a
particular place, or all acts pertaining to a business of a
particular class or series. He has usually authority
either expressly conferred in general terms or in effect
made general by the usages, customs or nature of the
business which he is authorized to transact.
"An agent, therefore, who is empowered to transact all
the business of his principal of a particular kind or in a
particular place, would, for this reason, be ordinarily
deemed a general agent.
"A special agent is one authorized to do some
particular act or to act upon some particular occasion.
He acts usually in accordance with specific instructions
or under limitations necessarily implied from the nature
of the act to be done."
One does not have to undertake a close scrutiny of the document
embodying the agreement between the petitioners and the respondent
to deduce that the latter was instituted as a general agent. Indeed, it can
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
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 or in the place where it was to be executed.
The power granted to the respondent was so broad that it practically
covers the negotiations leading to, and the execution of, a contract of
sale of petitioners' merchandise with any entity or organization.
28. GERMANN & CO., plaintiffs-appellees, vs. DONALDSON, SIM &
CO., defendants-appellants.
The validity of a power of attorney executed in Germany between
German subjects should considered according to the laws of that
country.
The right to commence action for collection of debts owing to principal
is not an incident of strict ownership, which must be conferred in
express terms.
The power to "legally compel" the payment of debts owing to the
principal is an express grant of the right to bring suit for the collection
of such debts.
FACTS: This is an incident of want of personality of the plaintiffs
attorney. The action is to recover money said to be due for freight under
charter party. It was brought by virtue of general power of suits, executed
in Manila by Fernando Kammerzell, and purports to be a substitution in
favor of several attorneys of power given to Kammerzell in an instrument
executed in Berlin by Max Leonard Tornow, the sole owner of the
business carried on in Berlin and Manila under the name Germann & Co.
The first-named instrument was authenticated by a notary with the
formalities required by the domestic laws. The other was not so
authenticated. Both Tornow and Kammerzell are citizens of Germany.
Tornow is a resident of Berlin and Kammerzell of Manila.
The defendants claim that the original power is invalid under article
1280, No. 5, of the Civil Code, which provides that powers for suits must
be contained in a public instrument. No claim is made that the document
was not executed with the formalities required by the German law in the
case of such an instrument. We see no reason why the general principle
that the formal validity of contracts is to be tested by the laws of the
country where they are executed should not apply.
The defendants also claim that the original power cannot be construed as
conferring upon Kammerzell authority to institute or defend suits, from
which contention, if correct, it would of course follow that the delegated
power is invalid. In support of this contention reliance is placed upon
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 28
article 1713 of the Civil Code, by which it is provided that "an agency
stated in general terms only includes acts of administration," and that "in
order to compromise, alienate, mortgage, or to execute any other act of
strict ownership an express commission is required."
ISSUE: WON the original power cannot be construed as conferring upon
Kammerzell authority to institute or defend suits
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
authority with reference to its conduct which his principal would himself
possess if he were personally directing it. It cannot be reasonably
supposed, in the absence of very clear language to that effect, that it
was the intention of the principal to withhold from his agent a power so
essential to the efficient management of the business entrusted to his
control as that to sue for the collection of debts.

HELD: YES, original power cannot be construed as conferring upon

29. THE MUNICIPAL COUNCIL OF ILOILO, plaintiff-appellee, vs. JOSE
Kammerzell authority to institute or defend suits.
EVANGELISTA ET AL., defendants-appellees. TAN ONG SZE VDA. DE
TAN TOCO, appellant.
By this instrument Tornow constitutes Kammerzell his "true and lawful
attorney with full power to enter the firm name of Germann & Co. in the
FACTS: March 20, 1924: Court of First Instance of Iloilo rendered
Commercial Registry of the city of Manila as a branch of the house of
judgment in civil case No. 3514 thereof, wherein the appellant herein,
Germann & Co. in Berlin, it being the purpose of this power to invest said
Tan Ong Sze Vda. de Tan Toco was the plaintiff, and the municipality of
attorney with full legal powers and authorization to direct and administer
Iloilo the defendant, and the former sought to recover of the latter the
in the city of Manila for us and in our name a branch of our general
value of a strip of land belonging to said plaintiff taken by the defendant
commercial business of importation and exportation, for which purpose
to widen a public street. The judgment entitled the plaintiff to recover
he may make contracts of lease and employ suitable assistants, as well
Php 42,966.40 representing the value of said strip of land from the
as sign every kind of documents, accounts, and obligations connected
municipality of Iloilo. On appeal to the SC, judgment was affirmed. After
with the business which may be necessary, take charge in general of the
the case was remanded to the court of origin and the judgment rendered
receipt and delivery of merchandise connected with the business, sign all
therein had become final and executory. Attorney Jose Evangelista in his
receipts for sums of money and collect them and exact their payment by
own behalf and as counsel for the administratix of Jose Ma. Arroyos
legal means, and in general execute all the acts and things necessary for
intestate estate filed a claim in the said case for professional services
the perfect carrying on of the business committed to his charge in the
rendered by him, which the court acting with the consent of the appellant
same manner as we could do ourselves if we were present in the same
widow, fixed at 15% of the amount of the judgment. At the hearing on
place."
said claim, the claimants appeared, as did also the Philippine National
We should not be inclined to regard the institution of a suit like the Bank, which prayed that the amount of the judgment be turned over to it
present, which appears to be brought to collect a claim accruing in the because the land taken over had been mortgaged to it. Antero Soriano
ordinary course of the plaintiff's business, as properly belonging to the also appeared claiming the amount of the judgment as it had been
class of acts described in article 1713 of the Civil Code as acts "of strict assigned to him, and by him, in turn, assigned to Mauricio Cruz & Co.,
ownership." It seems rather to be something which is necessarily a part Inc. After hearing, all the adverse claims on the amount of the judgment,
of the mere administration of such a business as that described in the the court ordered that the attorneys lien in the amount of 15% of the
instrument in question and only incidentally, if at all, involving a power to judgment be recorded in favor of Attorney Evangelistain his own behalf
dispose of the title to property. and counsel for the administratix of the deceased Jose Ma. Arroyo and
directed the Municipality of Iloilo to file an action of interpleading against
But whether regarded as an act of strict ownership or not, it appears to
the adverse claimants: the PNB,Antero Soriano, Mauricio Cruz & Co., Jose
be expressly and specially authorized by the clause conferring the power
Evangelista and Jose Arroyo. March 29, 1928: with the approval of the
to "exact the payment" of sums of money "by legal means." This must
auditor of the provincial treasurer of Iloilo and with the Executive Bureau
mean the power to exact the payment of debts due the concern by
paid the late Antero Soriano the amount of Php 6,000.00 in part payment
means of the institution of suits for their recovery. If there could be any
of the judgment mentioned above assigned to him by Tan Boon Tiong
doubt as to the meaning of this language taken by itself, it would be
acting as attorney-in-fact of the appellant herein, Tan Ong Sze Vda. de
removed by a consideration of the general scope and purpose of the
Tan Toco. December 18, 1928: the municipal treasurer of Iloilo deposited
instrument in which it occurs. (See Civil Code, art. 1286.) The main
with the clerk of the CFI of Iloilo the amount of Php 6,000.00 on account
object of the instrument is clearly to make Kammerzell the manager of
of the judgment rendered in said civil case.
the Manila branch of the plaintiff's business, with the same general
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 29
In pursuance of the resolution of the court below ordering that the
attorneys lien in the amount of15% of the judgment be recorded in favor
of Attorney Jose Evangelista. In his own behalf and as a counsel for the
late Jose Ma. Arroyo, the said clerk of court delivered on the same date to
said Attorney Evangelista the said amount of Php 6,000.00
With these 2 payments of Php 6,000.00 each making a total of Php
12,000.00 , the judgment forPhp 42,966.44 against the Municipality of
Iloilo was reduced to Php 30,966.40 which was adjudicated by said court
to Maurice Cruz & Co. This appeal, then is confined to the claim of
Mauricio Cruz & Co. as alleged assignee of the rights of the late Soriano
by virtue of the said judgment in payment of professional services
rendered by him to the said widow and her co-heirs
Issue: (1) WON assignment made by Tan Buntiong, as attorney-in-fact
of Tan Ong Sze Vda. deTan Toco to Atty. Soriano, of all the credits, rights
and interests belonging to Tan Ong Sze Vda. de TanToco in the amount
of P42,966.40, plus the costs of court against municipal council of Iloilo,
inconsideration of the professional services rendered by Soriano to the
widow is valid
(2) WON the other attorney-in-facts, Tan Montanos, consent is required
to validate the actsof the other attorney-in-fact, Tan Butiong, who
assigned the amount as payment to Soriano
Held: (1) YES . Tan Boon Tiong is authorized to employ and contract for
the services of lawyers upon such conditions as he may deem
convenient, to take charge of any actions necessary or expedient for the
interests of his principal, and to defend suits brought against her. This
power necessarily implies the authority to pay for the professional
services thus engaged. In the present case, the assignment made by Tan
Boon Tiong, as Attorney-in-fact for the appellant, in favor of
Attorney Antero Soriano for professional services rendered in other cases
in the interests of the appellant and her coheirs, was that credit which
she had against the municipality of Iloilo, and such assignment was
equivalent to the payment of the amount of said credit to Antero Soriano
for professional services
(2) No. With regard to the failure of the other attorney-in-fact of the
appellant, Tan Montano, authorized by Tan Toco, to consent to the deed
of assignment, the latter being also authorized to pay, in the name and
behalf of the principal, all her debts and the liens and encumbrances her
property, the very fact that different letters of attorney were given to
each of these two representatives shows that itwas not the principal's
intention that they should act jointly in order to make their acts valid.
From the syllabus: When two letters of attorney are issued
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
simultaneously to two different attorneys-in-fact, but covering the same
powers shows that it was not the principals intention that they should
act jointly in order to make their acts valid; the separate act of one of the
attorney-in-fact, even when not consented to by the other attorney-in-
fact, is a valid and binding on the principal, especially the principal did
not only repudiate the act done, but continued to retain the said
attorney-in-fact.
30. CABALLERO VS. DEIPARINE, 60 SCRA 136
Facts: Plaintiffs are the children by the first marriage. Vicenta Bucao.
Defendants (Ragas) are the children by Bucao's second marriage.
Vicenta Bucao and Tomas Raga acquired land in Cebu. of this land was
sold to Antonio Caballero (one of the plaintiffs). Land was never
transferred thru title. Vicenta dies, but no partition of her estate was
made between her heirs-Later on, Deiparine acquired the whole lot
through purchase from Tomas Raga. TCT was issued to Deiparine, who
instituted ejectment proceedings against the plaintiff. Plaintiffs assailed
said sale, alleging said land was previously sold to him and is also forms
part of the share inherited from Vicenta.
During pre-trial hearing, parties allegedly executed a stipulation of facts.
The stipulation was only signed by Atty. Guba (for plaintiffs) and Atty.
Hilario Davide (for respondents). From the stipulation of facts, the CFI
rendered decision in favor of the defendants (that Deiparine owns the
whole lot). Plaintiffs filed for reconsideration saying that they were never
made to participate in the preparation and formation of the stipulation of
facts.
Issue: Whether or not the stipulation of facts is valid.
Ratio: No. Court found it puzzling that petitioners signatures were not
affixed in the stipulation of facts even if Atty. Guba required said
stipulation to be verified by the plaintiff (despite the fact that by its
nature/subject matter the complaint did not require verification).
Said stipulation of facts entered into by parties constituted a compromise
agreement (which practically confesses judgement), without the consent
or conformity of his clients Guba, as counsel for plaintiffs, agreed to facts
adverse to his client's interest in the compromise agreement
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 30
i.e. agreeing that Deiparine was a buyer in good faith (despite
plaintiff's claim that they can prove that Deiparine was a
purchaser in bad faith)
that during her lifetime, Vicenta Bucao, with conformity of her
husband, sold her undivided half of said land to Tomas
Raga(despite the fact that no evidence was adduced in support
of this claim)
Admission of such facts prejudicial to his client's interests was beyond
the scope of his authority as counsel and practically gave away the case.
The conduct of Atty. Guba in entering into a compromise agreement
without the knowledge and consent of his clients is not in keeping with
the sworn duty of a lawyer to protect the interest of his clients. It
amounts to fraud. The stipulation of facts which was made the basis of
the decision was null and void as it contained serious unauthorized
admissions against the interest of the plaintiffs who had no hand in its
preparation. Attorneys cannot, without special authority, compromise
their clients litigation. The case is remanded to court of origin for
further proceedings and the amended complaint submitted by plaintiffs
should be accepted.
Note:
No agency related provision was cited in the decision, but Rule
138, Section 23 of the Rules of Court was cited providing
that: Authority of attorneys to bind clients. Attorneys have
authority to bind their clients in any case by any agreement in
relation thereto made in writing, and in taking appeals, and in
all matters of ordinary judicial procedure.
But they cannot, without special authority, compromise their
client's litigation, or receive anything in discharge of a client's
claim but the full amount in cash.
Hence we can infer that the relevant provision may be Art. 1878
(3) which provides that: Art. 1878. Special powers of attorney
are necessary in the following cases:
(3) To compromise, to submit questions to arbitration, to
renounce the right to appeal from a judgment, to waive
objections to the venue of an action or to abandon a prescription
already acquired.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
31. PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. MAXIMO
STA. MARIA, ET AL., VALERIANA, EMETERIA, TEOFILO, QUINTIN,
ROSARIO and LEONILA, all surnamed STA. MARIA,
FACTS: Plaintiff bank filed this action on February 10, 1961 against
defendant Maximo Sta. Maria and his six brothers and sisters,
defendants-appellants, Valeriana, Emeteria, Teofilo, Quintin, Rosario and
Leonila, all surnamed Sta. Maria, and the Associated Insurance & Surety
Co., Inc. as surety, for the collection of certain amounts representing
unpaid balances on two agricultural sugar crop loans due allegedly from
defendants. The said sugar crop loans were obtained by defendant
Maximo Sta. Maria from plaintiff bank under a special power of attorney,
executed in his favor by his six brothers and sisters, defendants-
appellants herein, to mortgage a 16-odd hectare parcel of land, jointly
owned by all of them, in the Municipality of Dinalupihan, Bataan.
In addition, Valeriana Sta. Maria alone also executed in favor of her
brother, Maximo, a special power of attorney to borrow money and
mortgage any real estate owned by her, granting him the following
authority:
For me and in my name to borrow money and make, execute, sign and
deliver mortgages of real estate now owned by me standing in my name
and to make, execute, sign and deliver any and all promissory notes
necessary in the premises.
By virtue of the two above powers, Maximo Sta. Maria applied for two
separate crop loans with the plaintiff bank, one in the amount of
P15,000.00, of which only the sum of P13,216.11 was actually extended
by plaintiff, and the other in the amount of P23,000.00, of which only the
sum of P12,427.57 was actually extended by plaintiff. As security for the
two loans, Maximo Sta. Maria executed in his own name in favor of
plaintiff bank two chattel mortgages on the standing crops, guaranteed
by surety bonds for the full authorized amounts of the loans executed by
the Associated Insurance & Surety Co., Inc. as surety with Maximo Sta.
Maria as principal. The records of the crop loan application further
disclose that among the securities given by Maximo for the loans were a
"2nd mortgage on 25.3023 Has. of sugarland, including sugar quota
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 31
rights therein" including, the parcel of land jointly owned by Maximo and
his six brothers and sisters herein for the 1952-1953 crop loan, with the
notation that the bank already held a first mortgage on the same
properties for the 1951-1952 crop loan of Maximo, 4 and a 3rd mortgage
on the same properties for the 1953-1954 crop loan.
The trial court rendered a judgment declaring Maximo Sta. Maria,
together with Valeriana and the others, jointly and severally liable to the
plaintiff bank. Defendant Maximo Sta. Maria and his surety, defendant
Associated Insurance & Surety Co., Inc. who did not resist the action, did
not appeal the judgment. This appeals been taken by his six brothers
and sisters, defendants-appellants who reiterate in their brief their main
contention in their answer to the complaint that under this special power
of attorney, Exh. E, they had not given their brother, Maximo, the
authority to borrow money but only to mortgage the real estate jointly
owned by them; and that if they are liable at all, their liability should not
go beyond the value of the property which they had authorized to be
given as security for the loans obtained by Maximo. In their answer,
defendants-appellants had further contended that they did not benefit
whatsoever from the loans, and that the plaintiff bank's only recourse
against them is to foreclose on the property which they had authorized
Maximo to mortgage.
ISSUE: Whether or not Maximo Sta. Maria, together with
Valeriana Sta. Maria and the others should be held jointly and
severally liable to the plaintiff bank.
HELD: Plaintiff bank has not made out a cause of action against
defendants-appellants (except Valeriana), so as to hold them
liable for the unpaid balances of the loans obtained by Maximo
under the chattel mortgages executed by him in his own name
alone. The authority granted by defendants-appellants (except
Valeriana) unto their brother, Maximo, was merely to mortgage the
property jointly owned by them. They did not grant Maximo any
authority to contract for any loans in their names and behalf. Maximo
alone, with Valeriana who authorized him to borrow money, must answer
for said loans and the other defendants-appellants' only liability is that
the real estate authorized by them to be mortgaged would be subject to
foreclosure and sale to respond for the obligations contracted by
Maximo. But they cannot be held personally liable for the payment of
such obligations, as erroneously held by the trial court.
The fact that Maximo presented to the plaintiff bank Valeriana's
additional special power of attorney expressly authorizing him to borrow
money, Exh. E-1, aside from the authority to mortgage executed by
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
Valeriana together with the other defendants-appellants also in Maximo's
favor, lends support to our view that the bank was not satisfied with the
authority to mortgage alone. For otherwise, such authority to borrow
would have been deemed unnecessary and a surplusage. And having
failed to require that Maximo submit a similar authority to borrow, from
the other defendants-appellants, plaintiff, which apparently was satisfied
with the surety bond for repayment put up by Maximo, cannot now seek
to hold said defendants-appellants similarly liable for the unpaid loans.
Plaintiff's argument that "a mortgage is simply an accessory contract,
and that to effect the mortgage, a loan has to be secured" 10 falls, far
short of the mark. Maximo had indeed, secured the loan on his own
account and the defendants-appellants had authorized him to mortgage
their respective undivided shares of the real property jointly owned by
them as security for the loan. But that was the extent of their authority
land consequent liability, to have the real property answer for the loan in
case of non-payment. It is not unusual in family and business circles that
one would allow his property or an undivided share in real estate to be
mortgaged by another as security, either as an accommodation or for
valuable consideration, but the grant of such authority does not extend
to assuming personal liability, much less solidary liability, for any loan
secured by the grantee in the absence of express authority so given by
the grantor.
The outcome might be different if there had been an express ratification
of the loans by defendants-appellants or if it had been shown that they
had been benefited by the crop loans so as to put them in estoppel. But
the burden of establishing such ratification or estoppel falls squarely
upon plaintiff bank. It has not only failed to discharge this burden, but
the record stands undisputed that defendant-appellant Quintin Sta. Maria
testified that he and his co-defendants executed the authority to
mortgage "to accommodate (my) brother Dr. Maximo Sta. Maria ... and
because he is my brother, I signed it to accommodate him as security for
whatever he may apply as loan. Only for that land, we gave him as,
security" and that "we brothers did not receive any centavo as benefit."
11
The record further shows plaintiff bank itself admitted during the trial
that defendants-appellants "did not profit from the loan" and that they
"did not receive any money (the loan proceeds) from (Maximo)." 12 No
estoppel, therefore, can be claimed by plaintiff as against defendants-
appellants.
Now, as to the extent of defendant Valeriana Sta. Maria's liability to
plaintiff. As already stated above, Valeriana stands liable not merely on
the mortgage of her share in the property, but also for the loans which
Maximo had obtained from plaintiff bank, since she had expressly
granted Maximo the authority to incur such loans. (Exh. E-1.) Although
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 32
the question has not been raised in appellants' brief, we hold that
Valeriana's liability for the loans secured by Maximo is not joint and
several or solidary as adjudged by the trial court, but only joint, pursuant
to the provisions of Article 1207 of the Civil Code that "the
concurrence ... of two or more debtors in one and the same obligation
does not imply that ... each one of the (debtors) is bound to render entire
compliance with the prestation. There is a solidary liability only when the
obligation expressly so states, or when the law or the nature of the
obligation requires solidarity." It should be noted that in the additional
special power of attorney, Exh. E-1, executed by Valeriana, she did not
grant Maximo the authority to bind her solidarity with him on any loans
he might secure thereunder.
32. BA FINANCE CORPORATION, petitioner, vs.THE HONORABLE
COURT OF APPEALS, AUGUSTO YULO, LILY YULO (doing business
under the name and style of A & L INDUSTRIES), respondents.
FACTS: Private respondent Augusto Yulo secured a loan from the
petitioner in the amount of P591,003.59 as evidenced by a promissory
note he signed in his own behalf and as representative of the A & L
Industries. Respondent Yulo presented an alleged special power of
attorney executed by his wife, respondent Lily Yulo, who manages A & L
Industries and under whose name the said business is registered,
purportedly authorizing Augusto Yulo to procure the loan and sign the
promissory note. About two months prior to the loan, however, Augusto
Yulo had already left Lily Yulo and their children and had abandoned their
conjugal home. When the obligation became due and demandable,
Augusto Yulo failed to pay the same.
On October 7, 1975, the petitioner filed its amended complaint against
the spouses Augusto and Lily Yulo on the basis of the promissory note. It
also prayed for the issuance of a writ of attatchment alleging that the
said spouses were guilty of fraud in contracting the debt upon which the
action was brought and that the fraud consisted of the spouses' inducing
the petitioner to enter into a contract with them by executing a Deed of
Assignment in favor of the petitioner, assigning all their rights, titles and
interests over a construction contract executed by and between the
spouses and A. Soriano Corporation on June 19, 1974 for a consideration
of P615,732.50 when, in truth, the spouses did not have any intention of
remitting the proceeds of the said construction contract to the petitioner
because despite the provisions in the Deed of Assignment that the
spouses shall, without compensation or costs, collect and receive in trust
for the petitioner all payments made upon the construction contract and
shall remit to the petitioner all collections therefrom, the said spouses
failed and refuse to remit the collections and instead, misappropriated
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
the proceeds for their own use and benefit, without the knowledge or
consent of the petitioner. The trial court issued the writ of attachment
prayed for thereby enabling the petitioner to attach the properties of A &
L Industries. Apparently not contented with the order, the petitioner filed
another motion for the examination of attachment debtor, alleging that
the properties attached by the sheriff were not sufficient to secure the
satisfaction of any judgment that may be recovered by it in the case.
This was likewise granted by the court.
Private respondent Lily Yulo filed her answer with counterclaim, alleging
that although Augusta Yulo and she are husband and wife, the former
had abandoned her and their children five (5) months before the filing of
the complaint; that they were already separated when the promissory
note was executed; that her signature in the special power of attorney
was forged because she had never authorized Augusto Yulo in any
capacity to transact any business for and in behalf of A & L Industries,
which is owned by her as a single proprietor, that she never got a single
centavo from the proceeds of the loan mentioned in the promissory note;
and that as a result of the illegal attachment of her properties, which
constituted the assets of the A & L Industries, the latter closed its
business and was taken over by the new owner.
After hearing, the trial court rendered judgment dismissing the
petitioner's complaint against the private respondent Lily Yulo and A & L
Industries and ordering the petitioner to pay the respondent Lily Yulo
P660,000.00 as actual damages; P500,000.00 as unrealized profits;
P300,000.00 as exemplary damages; P30,000.00 as and for attorney's
fees; and to pay the costs. The petitioner appealed. The Court of Appeals
affirmed the trial court's decision except for the exemplary damages
which it reduced from P300,000.00 to P150,000.00 and the attorney's
fees which were reduced from P30,000.00 to P20,000.00.
ISSUE: 1. Whether or not the signature of the private respondent
on the Special Power of Attorney was forged.
2. Whether or not A & L Industries could be held liable for the
obligations contracted by Augusto Yulo, as administrator of the
partnership.
HELD: 1. According to the petitioner, the Court of Appeals disregarded
the direct mandate of Section 23, Rule 132 of the Rules of Court which
states in part that evidence of handwriting by comparison may be made
"with writings admitted or treated as genuine by the party against whom
the evidence is offered, or proved to be genuine to the satisfaction of the
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 33
judge," and that there is no evidence on record which proves or tends to
prove the genuineness of the standards used.
There is no merit in this contention. The records show that the signatures
which were used as "standards" for comparison with the alleged
signature of the private respondent in the Special Power of Attorney were
those from the latter's residence certificates in the years 1973, 1974 and
1975, her income tax returns for the years 1973 and 1975 and from a
document on long bond paper dated May 18, 1977. Not only were the
signatures in the foregoing documents admitted by the private
respondent as hers but most of the said documents were used by the
private respondent in her transactions with the government. As was held
in the case of Plymouth Saving & Loan Assn. No. 2 v. Kassing (125 NE
488, 494):
We believe the true rule deduced from the authorities to be that the
genuineness of a "standard" writing may be established (1) by the
admission of the person sought to be charged with the disputed writing
made at or for the purposes of the trial or by his testimony; (2) by
witnesses who saw the standards written or to whom or in whose hearing
the person sought to be charged acknowledged the writing thereof; (3)
by evidence showing that the reputed writer of the standard has
acquiesced in or recognized the same, or that it has been adopted and
acted upon by him his business transactions or other concerns....
Furthermore, the judge found such signatures to be sufficient as
standards. In the case of Taylor-Wharton Iron & Steel Co. v. Earnshaw
(156 N.E. 855, 856), it was held: When a writing is offered as a standard
of comparison it is for the presiding judge to decide whether it is the
handwriting of the party to be charged. Unless his finding is founded
upon error of law, or upon evidence which is, as matter of law,
insufficient to justify the finding, this court will not revise it upon
exceptions."
2. There is no dispute that A & L Industries was established
during the marriage of Augusta and Lily Yulo and therefore the same is
presumed conjugal and the fact that it was registered in the name of
only one of the spouses does not destroy its conjugal nature (See
Mendoza v. Reyes, 124 SCRA 161, 165). However, for the said property
to be held liable, the obligation contracted by the husband must have
redounded to the benefit of the conjugal partnership under Article 161 of
the Civil Code. In the present case, the obligation which the petitioner is
seeking to enforce against the conjugal property managed by the private
respondent Lily Yulo was undoubtedly contracted by Augusto Yulo for his
own benefit because at the time he incurred the obligation he had
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
already abandoned his family and had left their conjugal home. Worse,
he made it appear that he was duly authorized by his wife in behalf of A
& L Industries, to procure such loan from the petitioner. Clearly, to make
A & L Industries liable now for the said loan would be unjust and contrary
to the express provision of the Civil Code. As we have ruled in Luzon
Surety Co., Inc. v. De Gracia (30 SCRA 111, 115-117):
As explained in the decision now under review: "It is true that the
husband is the administrator of the conjugal property pursuant to the
provisions of Art. 163 of the new Civil Code. However, as such
administrator the only obligations incurred by the husband that are
chargeable against the conjugal property are those incurred in the
legitimate pursuit of his career, profession or business with the honest
belief that he is doing right for the benefit of the family. This is not true in
the case at bar for we believe that the husband in acting as guarantor or
surety for another in an indemnity agreement as that involved in this
case did not act for the benefit of the conjugal partnership. Such
inference is more emphatic in this case, when no proof is presented that
Vicente Garcia in acting as surety or guarantor received consideration
therefore, which may redound to the benefit of the conjugal partnership.
(Ibid, pp. 46-47).
In the most categorical language, a conjugal partnership under that
provision is liable only for such "debts and obligations contracted by the
husband for the benefit of the conjugal partnership." There must be the
requisite showing then of some advantage which clearly accrued to the
welfare of the spouses. There is none in this case.
Moreover, it would negate the plain object of the additional requirement
in the present Civil Code that a debt contracted by the husband to bind a
conjugal partnership must redound to its benefit. That is still another
provision indicative of the solicitude and tender regard that the law
manifests for the family as a unit. Its interest is paramount; its welfare
uppermost in the minds of the codifiers and legislators.
We, therefore, rule that the petitioner cannot enforce the obligation
contracted by Augusto Yulo against his conjugal properties with
respondent Lily Yulo. Thus, it follows that the writ of attachment cannot
issue against the said properties.
33. THE DIRECTOR OF PUBLIC WORKS, plaintiff-appellee, vs.
SING JUCO, ET AL., defendants. SING JUCO, SING BENGCO and
PHILIPPINE NATIONAL BANK, appellants.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 34
Facts: Sing Juco, Sing Bengco, Gonzales Tanboontien, and Mariano de la
Rama (Sing Juco et al.) are co-owners of a parcel of land located at the
mouth of Iloilo river. Said land is so low that it is frequently flooded. In
1920 the co-owners conveyed the property by way of mortgage to the
Philippine National Bank to secure a credit of Php170,000. In 1921, the
government was planning extensive harbor improvements in the vicinity
which required dredging to be carried out by the Bureau of Public Work
(the Bureau). The dredging activity made it necessary to secure an area
where the dirt and mud from the areas dredged could be deposited. The
aforementioned land was a prime candidate, being accessible and low.
The Bureau contracted with the co-owners Sing Juco et al. for this
purpose, where the co-owners would pay the Bureau 20 to 75 centavos
per cubic meter of material deposited on the property. It was
contemplated in the contract that the Bureau would furnish only the
material dredged from the river as a result of the government
improvements, which was expected to be 250,000 cubic meters.
In connection with the contract mentioned, the Bureau required that the
co-owners provide a bond in the amount of Php150,000, approximately
twice the estimated cost of the filling, conditioned for the payment of the
amount due from the owners. This bond was executed
contemporaneously with the main contract. One of the names appearing
upon said contract was that of Casa Viuda de Tan Toco, purporting to be
signed by M. de la Rama x x x as the formers attorney-in-fact. The
Bureau, having completed the dredging, demanded payment for the
dredged material. The coowners failed to pay, prompting the Director of
the Burea to file an action to recover the amount due from the parties of
the suretyship and to enforce the obligation as a lien upon the property.
The PNB was impleaded as having an interest in the property under its
prior mortgage. Tan Ong Sze, the widow (viuda) of Tan Toco was also
impleaded by reason of her supposed liability derived from the act of De
la Rama in signing the firm Casa Viuda de Tan Toco as a surety on
bond. In its complaint, the government conceded to the primacy of
PNBs encumbrance. In their defense, the co-owners averred that the
land had not been benefited, since the Bureau had not appreciably
raised the level of the land above high water. Tan Ong Sze avers that she
should be released from the bond since de la Rama signed Casa Viuda
de Tan Toco on the surety without authority. PNB asserts that the
mortgage was superior to governments lien.
The trial court ordered: (1) the co-owners to pay the government
Php70,938; (2) that the governments lien was superior to PNBs
mortgage; and (3) that Tan Ong Sze was personally liable in case the
coowners fail to satisfy their debt to the government. The defendants
appeal as follows: (1) The co-owners and sureties argue to be released
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
from their respective obligations on the basis of the Bureaus breach of
contract; (2) Tan Ong Sze reasserts the same argument of want of
authority of de la Rama to bind her in the suretyship; and (3) PNB
reasserts that its mortgage had be constituted first is therefore superior
to the governments lien.
Issue: 1. Is the Bureau in breach of its contract with the co-
owners?
2. Is Tan Ong Sze bound as a surety by virtue of de la
Ramas act of signing as her attorney-in-fact?
3. Is PNBs mortgage superior to the governments lien?
Held: 1. No. The government is not in breach. The Bureau is not
obligated to raise the co-owners land to any specified level. The
obligation is merely to furnish only the material dredged from the river
as a result of the proposed improvements. The mention of 250,000 cubic
meters of material in the contract, although not binding on the
government as it was merely an estimate of the amount of material to be
deposited, was duly satisfied. In fact, the Bureau deposited more than
the mentioned 250,000 cubic meters.
2. No. Tan Ong Sze is not bound as surety. The powerof-attorney
conferred to de la Rama relate more specifically to the execution of
contracts relating to property x x x. Power to execute a contract so
exceptional a nature as a contract of suretyship or guaranty cannot be
inferred from the general words contained in these powers.
In article 1827 of the Civil Code it is declared that guaranty shall not be
presumed; it must be expressed and cannot be extended beyond its
specified limits. By analogy a power of attorney to execute a contract of
guaranty should not be inferred from vague or general words, especially
when such words have their origin and explanation in particular powers
of a wholly different nature. It results that the trial court was in error in
giving personal judgment against Tan Ong Sze upon the bond upon
which she was sued in this case.
3. Yes. PNBs mortgage is superior to the governments lien. The
mortgage was created by the lawful owners at a time when no other
competing interest existed in the property. The lien of the mortgage
therefore attached to the fee, or unlimited interest of the owners in the
property. On the other hand, the lien created by the filling contract was
created after the mortgage had been made and registered, and
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 35
therefore, after the owners of the property had parted with the interest
created by the mortgage. The Government's lien owes its origin to the
contract, and derives its efficacy from the volition of the contracting
parties. But no party can by contract create a right in another
intrinsically greater than that which he himself possess. The owners, at
the time this contract was made, were owners of the equity of
redemption only and not of the entire interest in the property, and the
lien created by the contract could only operate upon the equity of
redemption.
34. THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD.,
INC., plaintiff-appellee, vs. JUAN M. POIZAT, ET AL., defendants.
GABRIELA ANDREA DE COSTER, appellant.
FACTS: August 25, 1905, the appellant, with his consent executed to
and in favor of her husband, Juan M. Poizat, a general power of attorney,
which among other things, authorized him to do in her name, place and
stead, and making use of her rights and actions, the following things: To
loan or borrow any amount in cash or fungible conditions he may deem
convenient collecting or paying the principal or interest, for the time, and
under the principal of the interest, when they respectively should or
private documents, and making there transactions with or without
mortgage, pledge or personal securities.
November 2, 1912, Juan M. Poizat applied for and obtained from the
plaintiff a credit for the sum of 10,000 Pounds Sterling to be drawn on
the" Banco Espanol del Rio de la Plata" in London not later than January,
1913. Later, to secure the payment of the loan, he executed a mortgage
upon the real property of his wife. For failure to pay the loan, on
November 12, 1923, the plaintiff brought an action against the
defendants to foreclose the mortgage. In this action, the summons was
served upon the defendant Juan M. Poizat only, who employed the
services of Antonio A. Sanz to represent the defendants. The attorneys
filed a general appearance for all of them, and later an answer in the
nature of a general denial.
February 18, 1924, when the case was called for trial, Jose Galan y
Blanco in open court admitted all of the allegations made in the
compliant, and consented that judgment should be rendered as prayed
for . Later, Juan M. Poizat personally, for himself and his codefendants,
file an exception to the judgment and moved for a new trial, which was
denied March 31, 1924. August 22, 1924, execution was issued directing
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
the sale of the mortgaged property to satisfy the judgment. September
18, 1924, the property, which had an assessed value of P342,685, was
sold to the plaintiff for the sum of P100,000. September 23, 1924, and
for the first time, the appellant personally appeared by her present
attorney, and objected to the confirmation of the sale, among other
things, upon illegally executed, and is null and void, because the agent
of this defendant was not authorized to execute it. That there was no
consideration. That the plaintiff, with full knowledge that J. M. Poizat was
acting beyond the scope of his authority, filed this action to subject the
property of this defendant to the payment of the debt which, as to
appellant, was not a valid contract. That the judgment was rendered by
confession when the plaintiff and J. M. Poizat knew that Poizat was not
authorized to confess judgment, and that the proceeding was a
constructive fraud. That at the time the action was filed and the
judgment rendered, this defendant was absent from the Philippine
Islands, and had no knowledge of the execution of the mortgage. That
after the judgment of foreclosure became final and order of the sale of
the property was made, that this defendant for the first time learned that
he mortgage contract was tainted with fraud, and that she first knew and
learned of such things on the 11th of September, 1924. That J. M. Poizat
was not authorized to bind her property to secure the payment of his
personal debts. That the plaintiff knew that the agent of the defendant
was not authorized to bind her or her property. That the mortgage was
executed to secure a loan of 10,000 Pounds which was not made to this
defendant or for her benefit, but was made to him personally and for the
personal use and benefit of J. M. Poizat.
ISSUE: Whether or not Juan M. Poizat acted in behalf of his
principal and binds the latter (which is his wife).
HELD: Under his power of attorney, Juan M. Poizat may have had
authority to borrow money and mortgage the real property of his wife,
but the law specifies how and in what manner it must be done, and the
stubborn fact remains that, as to the transaction in question, that power
was never exercised. The mortgage in question was executed by him and
him only, and for such reason, it is not binding upon the wife, and as to
her, it is null and void.
It follows that the whole decree against her and her paraphernal property
and the sale of that property to satisfy the mortgage are null and void,
and that any title she may have had in or to her paraphernal property
remains and is now vested in the wife as fully and as absolutely as if the
mortgage had never been executed, the decree rendered or the property
sold. As to Don Juan M. Poizat, the decree is valid and binding, and
remains in full force and effect. It is an undisputed fact, which appears in
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 36
the mortgage itself, that the land in question was the paraphernal
property of the wife, but after the marriage the old buildings on the
property were torn down and a new building constructed and, in the
absence of evidence to the contrary, it must be presumed that the new
building is conjugal property of the husband and wife. As such, it is
subject of the debts of the conjugal partnership for the payment or
security of which the husband has the power to mortgage or otherwise
encumber the property .
It is very probable that his particular question was not fully presented to
or considered by the lower court. The mortgage as to the paraphernal
property of the wife is declared null and void ab initio, and as to her
personally, the decree is declared null and void, and as to her
paraphernal property, the sale is set aside and vacated, and held for
naught, leaving it free and clear from the mortgage, decree and sale,
and in the same condition as if the mortgage had never been executed,
with costs in favor of the appellant. So ordered.
35. RURAL BANK OF BOMBON (CAMARINES SUR), INC., petitioner,
vs. HON. COURT OF APPEALS, EDERLINDA M. GALLARDO, DANIEL
MANZO and RUFINO S. AQUINO, respondents.
FACTS: Ederlinda M. Gallardo, married to Daniel Manzo, executed a
special power of attorney in favor of Rufina S. Aquino authorizing him: 1.
To secure a loan from any bank or lending institution for any amount or
otherwise mortgage the property covered by Transfer Certificate of Title
No. S-79238 situated at Las Pias, Rizal, the same being my paraphernal
property, and in that connection, to sign, or execute any deed of
mortgage and sign other document requisite and necessary in securing
said loan and to receive the proceeds thereof in cash or in check and to
sign the receipt therefor and thereafter endorse the check representing
the proceeds of loan. Thereupon, Gallardo delivered to Aquino both the
special power of attorney and her owner's copy of Transfer Certificate of
Title No. S-79238. On August 26, 1981, a Deed of Real Estate Mortgage
was executed by Rufino S. Aquino in favor of the Rural Bank of Bombon
(Camarines Sur), Inc. (hereafter, defendant Rural Bank) over the three
parcels of land covered by TCT No. S-79238. The deed stated that the
property was being given as security for the payment of "certain loans,
advances, or other accommodations obtained by the mortgagor from the
mortgagee in the total sum of Three Hundred Fifty Thousand Pesos only
(P350,000.00), plus interest at the rate of fourteen (14%) per annum.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
Ederlinda Gallardo and Daniel Manzo filed an action against Rufino
Aquino and the Bank because Aquino allegedly left his residence at San
Pascual, Hagonoy, Bulacan, and transferred to an unknown place in Bicol.
She discovered that Aquino first resided at Sta. Isabel, Calabanga,
Camarines Sur, and then later, at San Vicente, Calabanga, Camarines
Sur, and that they (plaintiffs) were allegedly surprised to discover that
the property was mortgaged to pay personal loans obtained by Aquino
from the Bank solely for personal use and benefit of Aquino; that the
mortgagor in the deed was defendant Aquino instead of plaintiff Gallardo
whose address up to now is Manuyo, Las Pias, M.M., per the title (TCT
No. S-79238) and in the deed vesting power of attorney to Aquino; that
correspondence relative to the mortgage was sent to Aquino's address at
"Sta. Isabel, Calabanga, Camarines Sur" instead of Gallardo's postal
address at Las Pias, Metro Manila; and that defendant Aquino, in the
real estate mortgage, appointed defendant Rural Bank as attorney in
fact, and in case of judicial foreclosure as receiver with corresponding
power to sell and that although without any express authority from
Gallardo, defendant Aquino waived Gallardo's rights under Section 12,
Rule 39, of the Rules of Court and the proper venue of the foreclosure
suit.
On January 23, 1984, the trial court, thru the Honorable Fernando P.
Agdamag, temporarily restrained the Rural Bank "from enforcing the real
estate mortgage and from foreclosing it either judicially or extrajudicially
until further orders from the court" (p.36, Rollo). Rufino S. Aquino in his
answer said that the plaintiff authorized him to mortgage her property to
a bank so that he could use the proceeds to liquidate her obligation of
P350,000 to him. The obligation to pay the Rural Bank devolved on
Gallardo. Of late, however, she asked him to pay the Bank but defendant
Aquino set terms and conditions which plaintiff did not agree to. Aquino
asked for payment to him of moral damages in the sum of P50,000 and
lawyer's fees of P35,000. The Bank moved to dismiss the complaint and
filed counter-claims for litigation expenses, exemplary damages, and
attorney's fees. It also filed a crossclaim against Aquino for P350,000
with interest, other bank charges and damages if the mortgage be
declared unauthorized. Meanwhile, on August 30, 1984, the Bank filed a
complaint against Ederlinda Gallardo and Rufino Aquino for "Foreclosure
of Mortgage". The trial court rendered a summary judgment in Civil Case
No. 6062, dismissing the complaint for annulment of mortgage and
declaring the Rural Bank entitled to damages the amount of which will be
determined in appropriate proceedings. The court lifted the writ of
preliminary injunction it previously issued. Plaintiff appealed to CA.
Hence, this petition for review.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 37
ISSUE: Whether or not the Deed of Real Estate Mortgage is valid
which was executed by Rufino S. Aquino, as attorney-in-fact of
Ederlinda Gallardo, in favor of the Rural Bank of Bombon (Cam.
Sur), Inc.
HELD: The Rural Bank contends that the real estate mortgage executed
by respondent Aquino is valid because he was expressly authorized by
Gallardo to mortgage her property under the special power of attorney
she made in his favor which was duly registered and annotated on
Gallardo's title. Since the Special Power of Attorney did not specify or
indicate that the loan would be for Gallardo's benefit, then it could be for
the use and benefit of the attorney-in-fact, Aquino. However, the Court of
Appeals ruled otherwise. It held:
The Special Power of Attorney above quoted shows the extent of
authority given by the plaintiff to defendant Aquino. But defendant
Aquino in executing the deed of Real Estate Mortgage in favor of the
rural bank over the three parcels of land covered by Gallardo's title
named himself as the mortgagor without stating that his signature on
the deed was for and in behalf of Ederlinda Gallardo in his capacity as
her attorney-in-fact. At the beginning of the deed mention was made of
"attorney-in-fact of Ederlinda H. Gallardo," thus: " (T)his MORTGAGE
executed by Rufino S. Aquino attorney in fact of Ederlinda H. Gallardo, of
legal age, Filipino, married to Bibiana Panganiban with postal address at
Sta. Isabel . . .," but which of itself, was merely descriptive of the person
of defendant Aquino. Defendant Aquino even signed it plainly as
mortgagor with the marital consent yet of his wife Bibiana P. Aquino who
signed the deed as "wife of mortgagor."
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
intended user and beneficiary of the loans and not the plaintiff. And the
special power of attorney could not be stretched to include the authority
to obtain a loan in said defendant Aquino's own benefit.
It is a general rule in the law of agency that, in order to bind the principal
by a mortgage on real property executed by an agent, it must upon its
face purport to be made, signed and sealed in the name of the principal,
otherwise, it will bind the agent only. It is not enough merely that the
agent was in fact authorized to make the mortgage, if he has not acted
in the name of the principal. Neither is it ordinarily sufficient that in the
mortgage the agent describes himself as acting by virtue of a power of
attorney, if in fact the agent has acted in his own name and has set his
own hand and seal to the mortgage. This is especially true where the
agent himself is a party to the instrument. However clearly the body of
the mortgage may show and intend that it shall be the act of the
principal, yet, unless in fact it is executed by the agent for and on behalf
of his principal and as the act and deed of the principal, it is not valid as
to the principal. In view of this rule, Aquino's act of signing the Deed of
Real Estate Mortgage in his name alone as mortgagor, without any
indication that he was signing for and in behalf of the property owner,
Ederlinda Gallardo, bound himself alone in his personal capacity as a
debtor of the petitioner Bank and not as the agent or attorney-in-fact of
Gallardo.
36. COMMERCIAL BANK & TRUST CO. OF THE PHIL. VS. REPUBLIC
ARMORED CAR SERVICE CORP., 9 SCRA 142

The three (3) promissory notes respectively dated August 31, 1981,
September 23, 1981 and October 26, 1981, were each signed by Rufino
Aquino on top of a line beneath which is written "signature of mortgagor"
and by Bibiana P. Aquino on top of a line under which is written
"signature of spouse," without any mention that execution thereof was
for and in behalf of the plaintiff as mortgagor. It results, borne out from
what were written on the deed, that the amounts were the personal
loans of defendant Aquino. As pointed out by the appellant, Aquino's wife
has not been appointed co-agent of defendant Aquino and her signature
on the deed and on the promissory notes can only mean that the 37. LIM TIU VS. RUIZ Y REMENTERIA, 15 PHIL. 367
obligation was personally incurred by them and for their own personal
account. The deed of mortgage stipulated that the amount obtained
from the loans shall be used or applied only for "fishpond (bangus and
sugpo production)." As pointed out by the plaintiff, the defendant Rural
Bank in its Answer had not categorically denied the allegation in the
complaint that defendant Aquino in the deed of mortgage was the
AGENCY CASE DIGEST | A. General Articles 1868 to 1883 DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
ALCAZAREN 38
2216 and 1148, respectively, issued in the name of Paz Agudelo y
Gonzaga, and on lot No. 878 of the cadastral survey of Murcia, described
in transfer certificate of title No. 2415, issued in the name of Amparo A.
Garrucho.

In connection of the credits, loans, and commercial overdrafts amounting

to P21,000 which had been granted him, Mauro A. Garrucho, on the said
date July 15, 1922, executed the promissory note, Exhibit B, for P21,000
as a novation of the former promissory notes for P6,000 and P16,000,
38. THE PHILIPPINE NATIONAL BANK vs. PAZ AGUDELO Y respectively.
GONZAGA, ET AL., defendants. PAZ AGUDELO Y GONZAGA,
On November 25, 1925, Amparo A. Garrucho sold lot No. 878 described
appellant.
in certificate of title No. 2415, to Paz Agudelo y Gonzaga (Exhibit M).
FACTS: On November 9, 1920, the defendant-appellant Paz Agudelo y
ISSUE: Whether or not Paz Agudelo y Gonzaga is liable for the
Gonzaga executed in favor of her nephew, Mauro A. Garrucho, the
payment of the loans obtained by Mauro A. Garrucho from the
document Exhibit K conferring upon him a special power of attorney
Philippine National Bank for the security of which he constituted
sufficiently broad in scope to enable him to sell, alienate and mortgage in
a mortgage on the aforesaid real estate belonging to the
the manner and form he might deem convenient, all her real estate
defendant-appellant Paz Agudelo y Gonzaga.
situated in the municipalities of Murcia and Bacolod, Occidental Negros,
consisting in lots Nos. 61 and 207 of the cadastral survey of Bacolod,
HELD: No.
Occidental Negros, together with the improvement thereon.
ART. 1709. By the contract of agency, one person binds himself to render
Amparo A. Garrucho executed the document Exhibit H whereby she
some service, or to do something for the account or at the request of
conferred upon her brother Mauro A Garrucho a special power of attorney
another.
sufficiently broad in scope to enable him to sell, alienate, mortgage or
otherwise encumber, in the manner and form he might deem convenient,
ART. 1717. When an agent acts in his own name, the principal shall have
all her real estate situated in the municipalities of Murcia and Bago,
no right of action against the persons with whom the agent has
Occidental Negros.
contracted, or such persons against the principal. In such case, the agent
is directly liable to the person with whom he has contracted, as if the
Mauro A. Garrucho executed in the favor of the plaintiff entity, the
transaction were his own. Cases involving things belonging to the
Philippine National bank, the document Exhibit G, whereby he
principal are excepted.
constituted a mortgage on lot No. 878 of the cadastral survey of Murcia,
Occidental Negros, with all the improvements thereon.
The provisions of this article shall be understood to be without prejudice
to actions between principal and agent.
The mortgage deeds Exhibit G and J as well as the corresponding
promissory notes for P6,000 and P16,000, respectively, were executed in
Aside from the phrases "attorney in fact of his sister, Amparo A.
Mauro A. Garrucho's own name and signed by him in his personal
Garrucho, as evidenced by the power of attorney attached hereto" and
capacity, authorizing the mortgage creditor, the Philippine National Bank,
"attorney in fact of Paz Agudelo y Gonzaga" written after the name of
to take possession of the mortgaged properties, by means of force if
Mauro A. Garrucho in the mortgage deeds, Exhibits G. and J, respectively,
necessary, in case he failed to comply with any of the conditions
there is nothing in the said mortgage deeds to show that Mauro A.
stipulated therein.
Garrucho is attorney in fact of Amparo A. Garrucho and of Paz Agudelo y
Gonzaga, and that he obtained the loans mentioned in the aforesaid
On July 15, 1922, Mauro A. Garrucho, executed in favor of the plaintiff
mortgage deeds and constituted said mortgages as security for the
entity the deed Exhibit C whereby he constituted a mortgage on lots Nos.
payment of said loans, for the account and at the request of said Amparo
61 and 207 of the cadastral survey of Bacolod, together with the
A. Garrucho and Paz Agudelo y Gonzaga. The above-quoted phrases
improvements thereon, described in transfer certificates of title Nos.
which simply described his legal personality, did not mean that Mauro A.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 39
Garrucho obtained the said loans and constituted the mortgages in
question for the account, and at the request, of his principals.
Furthermore, the promissory notes executed by Mauro A. Garrucho in
favor of the Philippine National Bank, evidencing loans of P6,000 and
P16,000 have been novated by the promissory notes for P21,000 (Exhibit
B) executed by Mauro A. Garrucho, not only without express authority
from his principal Paz Agudelo y Gonzaga but also under his own
signature.
Furthermore, the records do not show that the loan obtained by Mauro A.
Garrucho, evidenced by the promissory note, Exhibit B, was for his
principal Paz Agudelo y Gonzaga. The special power of attorney, Exhibit
K, does not authorize Mauro A. Garrucho to constitute a mortgage on the
real estate of his principal to secure his personal obligations. Therefore,
in doing so by virtue of the document, Exhibit C, he exceeded the scope
if his authority and his principal is not liable for his acts. (2 Corpus Juris,
p. 651; article 1714, Civil Code.)
It is further claimed that inasmuch as the properties mortgaged by Mauro
A. Garrucho belong to Paz Agudelo y Gonzaga, the latter is responsible
for the acts of the former although he acted in his own name, in
accordance with the exception contained in article 1717 of the Civil
Code. It would be an exception with the properties of his own name in
connection with the properties of his principal, does so within the scope
of his authority. It is noted that Mauro A. Garrucho was not authorized to
execute promissory notes even in the name of his principal Paz Agudelo y
Gonzaga, nor to constitute a mortgage on her real properties to secure
such promissory notes. Wherefore, it is hereby held that the liability
constructed by the aforesaid defendant-appellant Paz Agudelo y Gonzaga
is merely subsidiary to that of Mauro A. Garrucho, limited lot No. 878 of
the cadastral survey of Murcia, Occidental Negros, described in Torrens
title No. 2415. However, inasmuch as the principal obligator, Mauro A.
Garrucho, has been absolved from the complaint and the plaintiff-
appellee has not appealed from the judgment absolving him, the law
does not afford any remedy whereby Paz Agudelo y Gonzaga may be
required to comply with the said subsidiary obligation in view of the legal
maxim that the accessory follows the principal. Wherefore, the defendant
herein should also be absolved from the complaint which is hereby
dismissed, with the costs against the appellee. So ordered.
39. SY-JUCO and VIARDO v. SY-JUCO
DOCTRINE: When an agency acts in his own name, the principal shall
have no right of action against the person with whom the agent has
contracted, cases involving things belonging to the principal are
excepted. According to this exception (when things belonging to the
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
principal are dealt with) the agent is bound to the principal although he
does not assume the character of such agent and appears acting in his
own name. This means that in the case of this exception the agent's
apparent representation yields to the principal's true representation and
that, in reality and in effect, the contract must be considered as entered
into between the principal and the third person; and, consequently, if the
obligations belong to the former, to him alone must also belong the
rights arising from the contract.
FACTS:
In 1902, Defendant Santiago Sy-juco was appointed by plaintiffs
Vicente and Cipriana as administrator of their property, and acted as
such until June 30, 1916, when his authority was cancelled. Santiago is
the son of Vicente and Cipriana. Vicente and Cipriana allege that during
Santiagos administration, Santiago acquired the property claimed in the
complaint in his capacity as the plaintiffs administrator with their money
and for their benefit. Trial Court Ordered Santiago to return to the
plaintiffs: the launch Malabon, two cascos , an automobile, a typewriting
machine, the house occupied by Santiago, and the price of the piano.
Both parties appealed from this judgment.
ISSUE: WON the properties bought by Santiago in his own name, as an
administrator, belong to him. (NO, except the second casco.)
HELD: Judgment appealed from affirmed except in so far as casco no.
2545 is concerned.
As to the launch Malabon:
Santiago bought it in his own name from the Pacific Commercial
Co., and afterwards registered it at the Custom House. But this does not
necessarily show that he bought it for himself and with his own money.
This transaction was within the agency which he had received from the
plaintiffs. The fact that he has acted in his own name may be only, as we
believe it was, a violation of the agency on his part. The question is not in
whose favor the document of sale of the launch is executed nor in whose
name same was registered, but with whose money was said launch
bought. The plaintiffs' testimony that it was bought with their money and
for them is supported by the fact that, immediately after its purchase,
the launch had to be repaired at their expense, although said expense
was collected from the defendant. Santiago invoked the case of Martinez
v. Martinez:
Martinez, Jr., bought a vessel in his own name and in his name
registered it at the Custom House. This court then said that although the
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 40
funds with which the vessel was bought belonged to Martinez Sr.,
Martinez Jr. is its sole and exclusive owner.
But the Court ruled that this is not applicable to the case at bar. In said
case the relation of principal and agent, which exists between the
plaintiffs and the defendant in the present case, did not exist between
Martinez, Sr., and Martinez, Jr. By this agency the plaintiffs herein clothed
the defendant with their representation in order to purchase the launch
in question. However, the defendant acted without this representation
and bought the launch in his own name thereby violating the agency. If
the result of this transaction should be that the defendant has acquired
for himself the ownership of the launch, it would be equivalent to
sanctioning this violation and accepting its consequences. But not only
must the consequences of the violation of this agency not be accepted,
but the effects of the agency itself must be sought. If the defendant
contracted the obligation to but the launch for the plaintiffs and in their
representation, but virtue of the agency, notwithstanding the fact that he
bought it in his own name, he is obliged to transfer to the plaintiffs the
rights he received from the vendor, and the plaintiffs are entitled to be
subrogated in these rights.
From the rule established in Article 1717 of the Civil Code that,
when an agency acts in his own name, the principal shall have no right of
action against the person with whom the agent has contracted, cases
involving things belonging to the principal are excepted. According to this
exception (when things belonging to the principal are dealt with), the
agent is bound to the principal although he does not assume the
character of such agent and appears acting in his own name. This means
that in the case of this exception the agent's apparent representation
yields to the principal's true representation and that, in reality and in
effect, the contract must be considered as entered into between the
principal and the third person; and, consequently, if the obligations
belong to the former, to him alone must also belong the rights arising
from the contract. The money with which the launch was bough having
come from the plaintiff, the exception established in article 1717 is
applicable to the instant case.
As to Casco no. 2584:
Santiagos allegation that it was constructed at his instance and
with his money is not supported by the evidence. In fact the only proof
presented to support this allegation is his own testimony contradicted, on
the on hand, by the plaintiffs' testimony and, on the other hand, rebutted
by the fact that, on the date this casco was constructed, he did not have
sufficient money with which to pay the expense of this construction.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
As to the automobile:
There is sufficient evidence to show that its prices was paid with
plaintiffs' money. Defendant's adverse allegation that it was paid with his
own money is not supported by the evidence.
As to Casco no. 2545:
Upon examination of the evidence relative to this casco, it was
found that it belonged to the plaintiffs but sold it afterwards to the
defendant by means of a public instrument. The plaintiffs have not
adduced sufficient proof of such deceit (on the part of Santiago, when
they signed) which would destroy the presumption of truth which a public
document carries with it. Attorney Sevilla, who acted as the notary in the
execution of this instrument, testifying as a witness in the case, said that
he never verified any document without first inquiring whether the
parties knew its content. Our conclusion is that this casco was lawfully
sold to the defendant by the plaintiffs. (Fun fact: This casco had been
leased and was sunk while in the lessees hands before the complaint in
this case was filed. As such, the issue of ownership is determinative of
who may enforce the responsibility of damages for losses on the lessee.)
40. NATIONAL FOOD AUTHORITY VS. IAC
Facts: Medalla, as a commission agent of plaintiff Superior Shipping
Corporation, entered into a contract for hireof ship (MV Sea Runner) with
defendant NFA. The contract obligated Medalla to transport on the MV
Sea Runner 8,550 sacks of rice belonging to NFA from Occidental Mindoro
to Malabon, Metro Manila. Upon completion of the delivery, plaintiff wrote
a letter around October 1979,requesting NFA that it be allowed to collect
the amount for freightage and other charges. Plaintiff wrote again around
November 1979, this time specifically requesting that payment be made
to it and not to Medalla because plaintiff was the owner of the vessel. On
November 16, 1979, NFA informed plaintiff that it could not grant its
request because the contract to transport the rice was entered into by
NFA and defendant Medalla who did not disclose that he was acting as a
mere agent of plaintiff. Thereupon on November 19, 1979, defendant
NGA paid defendant Medalla the sum of P25,974.90, for freight services.
On December 4, 1979, plaintiff wrote defendant Medalla demanding that
he turn over to plaintiff the amount of P27,000.00 paid to him by
defendant NFA. Defendant Medalla, however, "ignored the demand."
Issue: Whether NFA is jointly and severally liable with defendant
Medalla.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ALCAZAREN 41
Held: Yes, NFA is solidarily liable with defendant Medalla. It is an
undisputed fact that Gil Medalla was a commission agent of respondent
Superior Shipping Corporation which owned the vessel "MV Sea Runner"
that transported the sacks of rice belonging to petitioner NFA. The
context of the law is clear. Art. 1883, which is the applicable law in the
case at bar provides:
Art. 1883. If an agent acts in his own name, the principal has no right of
action against the persons with whom the agent has contracted; neither
have such persons against the principal. In such case the agent is the
one directly bound in favor of the person with whom he has contracted,
as if the transaction were his own, except when the contract involves
things belonging to the principal.
The provision of this article shall be understood to be without prejudice
to the actions between the principal and agent. Consequently, when
things belonging to the principal (in this case, Superior Shipping
Corporation) are dealt with, the agent is bound to the principal although
he does not assume the character of such agent and appears acting in
his own name. In other words, the agent's apparent representation yields
to the principal's true representation and that, in reality and in effect, the
contract must be considered as entered into between the principal and
the third person. Corollarily, if the principal can be obliged to perform his
duties under the contract, then it can also demand the enforcement of its
rights arising from the contract.
41. E. AWAD, vs. FILMA MERCANTILE CO., INC.,
FACTS: the plaintiff, doing business in the Philippine Islands under the
name of E. Awad & Co., delivered certain merchandise of the invoice
value of P11,140 to Chua Lioc, a merchant operating under the name of
Hang Chua Co. in Manila, said merchandise to be sold on commission by
Chua Lioc. Representing himself as being the owner of the merchandise,
Chua Lioc, on September 8, 1924, sold it to the defendant for the sum of
P12,155.60. He owed the Philippine Manufacturing Co., the sum of
P3,480, which the defendant agreed to pay, and was also indebted to the
defendant itself in the sum of P2,017.98. The total amount of the two
debts, P5,497.98, was deducted from the purchase price, leaving a
balance of P6,657.52 which the defendant promised to pay to Chua Lioc
on or before October 9, 1924. The merchandise so purchased on
September 9, was delivered to the defendant, who immediately offered it
for sale. Three days later D. J. Awad, the representative of the plaintiff in
the Philippine Islands; having ascertained that the goods entrusted to
Chua Lioc was being offered for sale by the defendant, obtained
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
authorization from Chua Lioc to collect the sum of P11,707 from said
defendant and informed the latter's treasurer of the facts above set forth.
On September 15, D. J. Awad, in behalf of E. Awad & Co., wrote a letter to
the defendant corporation advising it that, inasmuch as the merchandise
belonged to E. Awad & Co., the purchase price should be paid to them.
September 18, 1924, the Philippine Trust Company, brought an action,
civil case No. 26934, against Chua Lioc for the recovery of the sum of
P1,036.36 and under a writ of attachment garnished the balance due
Chua Lioc from the defendant. On October 7, E. Awad also brought an
action, civil case No. 27016, against Chua Lioc for the recovery of the
sum of P11,140, the invoice value of the merchandise above-mentioned
and also obtained a writ of attachment under which notice of
garnishment of the said aforesaid balance we served upon the herein
defendant.
The complaint in the present action was filed on November 26, 1924, the
plaintiff demanding payment of the same sum of P11,140 for which
action had already been brought against Chua Lioc. The defendant, its
answer, set up as special defense that it brought the merchandise in
good faith and without any knowledge whether of the person from whom
or the condition under which the said merchandise had been acquired by
Chua Lioc or Hang Chuan Co.; that the defendant therefore had acquired
title to the merchandise purchased; that the balance of P6,657.52, now in
the hands of the defendant had been attached in the two actions brought
on September 18, and October 7, respectively, and garnishment served
upon the defendant, who therefore, holds the money subject to the
orders of the court in the cases above-mentioned, but which sum the
defendant is able and willing to pay at any time when the court decides
to whom the money lawfully pertains.
HELD: The law applicable to the case is well settled. Article 246 of the
Code of Commerce reads as follows: When the agent transacts business
in his own name, it shall not be necessary for him to state who is the
principal and he shall be directly liable, as if the business were for his
own account, to the persons with whom he transacts the same, said
persons not having any right of action against the principal, nor the latter
against the former, the liabilities of the principal and of the agent to each
other always being reserved.
The rule laid down in the article quoted is contrary to the general rule in
the United States as to purchases of merchandise from agents with
undisclosed principal, but it has been followed in a number of cases and
is the law in its jurisdiction. But the appellant points out several
circumstances which, in his opinion, indicate that the defendant-appellee
was aware of the condition under which the merchandise was entrusted
AGENCY CASE DIGEST | A. General Articles 1868 to 1883 DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-
ALCAZAREN 42
to the agent Chua Lioc and therefore did not purchase the goods in good
faith. This, if true, would, of course, lead to a decision of the case in favor
of the plaintiff, but there is, in our opinion, nothing conclusive about the
circumstances referred to and they are not sufficient to overcome the
presumption of good faith. The appealed judgment is in accordance with
the law and the facts and is affirmed with the costs against the appellant.
So ordered.