PHILPOTTS VS. PHILIPPINE MANUFACTURING CO.
AND BERRY Ordered the issuance of new TCTs to respondent corporation and the estate of
Facts:
W.G. Philpotts (Petitioner) , a stockholder in Philippine Manufacturing Company sought to compel
respondents to permit plaintiff, a person or by some authorized agent or attorney to inspect and
examine the records of the business transacted by said company since January 1, 1918.
Respondent corporation or any of its officials has refused to allow the petitioner himself to
examine anything relating to the affairs of the company, and the petitioner prays for an order
commanding respondents to place records of all business transactions of the company, during a
specific period, at the disposal of the plaintiff or his duly authorized agent or attorney. Petitioner
desires to exercise said right through agent or attorney.
Petition is filed originally in the Supreme Court under authority of Section 515 of Code of Civil
Procedure, which gives SC concurrent jurisdiction with then Court of First Instance in cases where
any corporation or person unlawfully excludes the plaintiff from use and enjoyment and some
right he is entitled.
ISSUE:
Whether the right which the law concedes to a stockholder to inspect the records can be exercised
by a proper agent or attorney of the stockholder as well as by stockholder in person
HELD:
Yes. Right of inspection of records can be exercised by proper agent or attorney of the stockholder
as well as by stockholder in person.
The right of inspection / examination into corporate affairs given to a stockholder in section 51 of
the Corporation Law which states: The records of all business transactions of the corporation and
the minutes of any meeting shall be open to the inspection of any director, member, or
stockholder of the corporation at reasonable hour can be exercised either by himself or by
any duly authorized representative or attorney in fact, and either with or without the
attendance of the stockholder. This is in conformity with the general rule that what a man
may do in person he may do through another.
RALLOS v FELIX GO CHAN & REALTY COPR
Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of
land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer
Certificate of Title No. 11116 of the Registry of Cebu.
They executed a special power of attorney in favor of their brother, Simeon Rallos,
authorizing him to sell such land for and in their behalf.
After Concepcion died, Simeon Rallos sold the undivided shares of his sisters Concepcion
and Gerundia to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90.
New TCTs were issued to the latter.
Petitioner Ramon Rallos, administrator of the Intestate Estate of Concepcion filed a
complaint praying (1) that the sale of the undivided share of the deceased Concepcion
Rallos in lot 5983 be 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" in equal undivided and (3) that plaintiff
be indemnified by way of attorney's fees and payment of costs of suit.
CFI: [Plaintiffs Complaint]
Sale of land was null and void insofar as the one-half pro-indiviso share of Concepcion
Rallos
Concepcion in the proportion of share each pro-indiviso and the payment of
attorneys fees and cost of litigation
[Respondent filed cross claim against Simon Rallos(*Simon and Gerundia died during pendency of
case)]
Juan T. Borromeo, administrator of the Estate of Simeon Rallos was ordered to pay
defendant the price of the share of the land (P5,343.45) plus attorneys fees
[Borromeo filed a third party complaint against Josefina Rallos, special administratrix of the Estate
of Gerundia]
Dismissed without prejudice to filing either a complaint against the regular administrator
of the Estate of Gerundia Rallos or a claim in the Intestate-Estate of Cerundia Rallos,
covering the same subject-matter
CA: CFI Decision reversed, upheld the sale of Concepcions share.
MR: denied.
Issues:
1) WON sale was valid although it was executed after the death of the principal,
Concepcion.
2) WON sale fell within the exception to the general rule that death extinguishes the
authority of the agent
3) WON agents knowledge of the principals death is a material factor.
4) WON petitioner must suffer the consequence of failing to annotate a notice of death in
the title (thus there was good faith on the part of the Respondent vendee)
5) WON good faith on the part of the respondent in this case should be treated parallel to
that of an innocent purchaser for a value of a land.
Held/Ratio:
(Court discussed relevant principles first)
Relationship of Agency (concept arising from principles under Art 1317 and 1403)- one party,
caged the principal (mandante), authorizes another, called the agent (mandatario), to act for and
in his behalf in transactions with third persons.
-derivative in nature, power emanating from principal
-agents acts are acts of the principal
Essential Elements:
(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.
Extinguishment
o Generally: among others, By the death, civil interdiction, insanity or
insolvency of the principal or of the agent
- death of the principal effects instantaneous and absolute
revocation of the authority of the agent
o Exceptions:
(Art. 1930) if it has been constituted in the common interest of
the latter and of the agent, or in the interest of a third person who
has accepted the stipulation in his favor.
(Art. 1931) agent acted without knowledge of the pricipals
death and that the third person was in good faith (both these reqs
should be present)
IN THE CASE AT BAR:

1) Sale was void.
No one may contract in the name of another without being authorized by the latter, or
unless he has by law a right to represent him (Art. 1317 of the Civil Code).
Simons authority as agent was extinguished upon Concolacions death
2) The sale did not fall under the exceptions to the general rule that death ipso jure
extinguishes the authority of the agent
o Art. 1930 inapplicable: SPA in favor of Simon Rallos was not coupled with
interest
o Art. 1931 inapplicable:
Simon Rallos knew (as can be inferred from his pleadings) of
principal Concepcions death
For Art 1931 to apply, both requirements must be present
3) Yes, agents knowledge of principals death is material.
Respondent asserts that: there is no provision in the Code which provides that whatever
is done by an agent having knowledge of the death of his principal is void even with
respect to third persons who may have contracted with him in good faith and without
knowledge of the death of the principal
Court says: this contention ignored the ignores the existence of the general rule
enunciated in Article 1919 that the death of the principal extinguishes the agency.
Article 1931, being an exception to the general rule, is to be strictly construed.
4) NO, the Civil Code does not impose a duty upon the heirs to notify the agent or others
of the death of the principal.
If revocation was by the act of the principal: a general power which does not
specify the persons to whom represents' on should be made, it is the general
opinion that all acts, executed with third persons who contracted in good faith,
Without knowledge of the revocation, are valid.
BUT, if revocation was due to death of the principal: extinguishment, by operation
of law, is instantaneous without the need for notification to the parties concerned.
5) No.
Laws on agency, the terms of which are clear and unmistakable leaving no room
for an interpretation contrary to its tenor, should apply, the law provides that death
of the principal ipso jure extinguishes the authority of the agent to sell rendering
the sale to a third person in good faith unenforceable unless at the agent had no
knowledge of the principals death at that time (exception under Art. 1931)
Dispositive: CA Decision reversed, CFI decision affirmed. Sale was null and void.
ORIENT AIR SERVICES vs. CA
FACTS:
American Airlines and Orient Air Services and Hotel Representatives entered into a
General Sales Agency Agreement whereby American authorized the latter to act as its
exclusive general sales agent within the Philippines for the sale of air passenger
transportation (services: solicit and promote passenger traffic, servicing and supervising
agents etc.)
o It was stipulated that neither Orient nor its sub-agents perform services for
any other air carrier similar to those to be performed hereunder for American
without the prior written consent of American
o Remittances- ticket stock or exchange orders LESS commissions
o American will pay Orient sales agency commission and an overriding
commission 3% of the tariff fares and charges for all sales of transportation
over Americans service by Orient or its sub-agents
o In case of default (remittance) American may terminate the agreement;
otherwise either party may terminate without cause by giving 30 days notice
American alleged that Orient failed to promptly remit the net proceeds of sales
terminated the Agreement filed suit for accounting with preliminary attachment or
garnishment, mandatory injunction and restraining order
Orient denied allegations contending that after the application to the commission due
it , plaintiff in fact still owed Orient a balance in unpaid overriding commissions
TC: in favor of Orient termination was illegal and improper- ORDERED PLAINTIFF TO
REINSTATE DEFENDANT AS ITS GENERAL SALES AGENT
CA: affirmed TC with some modifications with respect to the monetary awards
AMERICAN claims overriding commission should be based only on ticketed sales-to be
entitled to the 3% overriding commission, the sale must be made by Orient Air and the
sale must be done with the use of Americans ticket stocks
ORIENT: contractual stipulation of 3% overriding commission covers the total revenue
of American not merely from the ticketed sales, invoking its designation as the
EXCLUSIVE General sales agent of american
ISSUE: extent of Orient Airs right to the 3% overriding commission
HELD: basis should be TOTAL REVENUE (in favor of Orient)
2 commissions; a) sales agency commission; b) overriding commission of 3% of tariff
fares and charges for all sales of passenger transpo over American air services. The
latter type of commissions would accrue for sales of American made not on its ticket
stock but on the ticket stock of other air carriers sold by such carriers or other
authorized ticketing facilities or travel agents. To rule otherwise would erase any
distinction between the 2 types of commissions
American air was the party responsible for the preparation of the agreement (contract
of adhesion)
Since the American was still obligated to Orient for the said commission, Orient was
justified in refusing to remit the sums demanded. The termination was therefore
WITHOUT cause and basis
(AGENCY PART) Appellate court erred in ordering American air to reinstate the
defendant as its general sales agent
o Compelling American to extend its personality to Orient would be violative of
the principles and essence of AGENCY
o AGENCY- 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
o In an agent-principal relationship, the personality of the principal is extended
through the facility of the agent
o 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
DOLES V. ANGELES
Facts:
Petitioner executed a Deed of Absolute Sale ceding a parcel of land in favor of respondent to
satisfy the alleged indebtedness of the former in the amount of P405,430.00. Since the said land
was mortgaged to the National Home Mortgage Finance Corporation, they further agreed that
respondent assume the remaining balance of the loan. Learning that the petitioner still has
arrearages, respondent demanded that the arrearages be paid first. Petitioner did not heed, thus a
case was filed by the respondent.
In answer, the petitioner alleged that sale was void for lack of consideration and that she was not
indebted to the respondent as she only referred her friends to respondent whom she knew to be
engaged in the business of lending money in exchange for personal checks through her capitalist
Arsenio Pua. Further petitioner contended that since the respondent is also an agent, she does not
have the capacity to sue her.
It is an admitted fact by both petitioner and defendant, based on their testimonies, that
respondent knew that the money will be used by the friends of the petitioner; that the respondent
was merely representing Arsenio Pua; and that before the supposed friends of the petitioner
defaulted in payment, each issued their personal checks in the name of Arsenio Pua for the
payment of their debt.
Issue/s:
Whether or not petitioner and respondent were acting on their personal capacity or as mere
agents.
Ruling:
The question whether an agency has been created is ordinarily a question which may be
established in the same was as any other fact, either by direct or circumstantial evidence. Agency
may be implied from the words and conduct of the parties and the circumstances of the particular
case. Though the fact or extent of authority of the agents may not, as a general rule, be
established from the declarations of the agents alone, if one frofessed to act as agent for another,
she may be stopped to deny her agency both as against the asserted principal and the third
persons interested in the transaction in which he or she is engaged.
In this case, petitioner knew that the financier of the respondent is Pua, and respondent knew
that the borrowers are friends of petitioner. It is sufficient that petitioner disclosed to respondent
that the former was acting in behalf of her principals, her friends. For an agency to arise, it is not
necessary that the principal personally encounter the third person with whom the agent interacts.
Here, both petitioner and respondent have undeniably disclosed to each other that they are
representing someone else and so both of them are estopped to deny the same.
That both parties acted as mere agents is shown by the undisputed fact that the friends of the
petitioner issued checks in payment of the loan in the name of Arsenio Pua.
EUROTECH INDUSTRIAL TECHNOLOGIES, INC. v. CUIZON
FACTS:
From January to April 1995, petitioner sold to Impact Systems various products allegedly
amounting to P91,338.00 pesos. Subsequently, respondents sought to buy from petitioner one
unit of sludge pump valued at P250,000.00 with respondents making a down payment of
P50,000.00. When the sludge pump arrived from the United Kingdom, petitioner refused to
deliver the same to respondents without their having fully settled their indebtedness to petitioner.
Thus, on 28 June 1995, respondent EDWIN and Alberto de Jesus, general manager of petitioner,
executed a Deed of Assignment of receivables in favor of petitioner. Impact systems is owed by
ERWIN Cuizon.
Despite the existence of the Deed of Assignment, respondents proceeded to collect from Toledo
Power Company the amount of P365,135.29. Alarmed by this development, petitioner made
several demands upon respondents to pay their obligations. As a result, respondents were able to
make partial payments to petitioner. On 7 October 1996, petitioner's counsel sent respondents a
final demand letter wherein it was stated that as of 11 June 1996, respondents' total obligations
stood at P295,000.00 excluding interests and attorney's fees. Because of respondents' failure to
abide by said final demand letter, petitioner instituted a complaint for sum of money, damages,
with application for preliminary attachment against herein respondents
By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party
in interest in this case. According to him, he was acting as mere agent of his principal, which was
the Impact Systems, in his transaction with petitioner and the latter was very much aware of this
fact.
ISSUE:
Whether the act of Edwin in signing the Deed of Assignment binds his principal Impact Systems
HELD:
Yes, the act of Edwin in signing the Deed of Assignment binds Impact Systems
The Supreme Court held that in a contract of agency, a person binds himself to render some
service or to do something in representation or on behalf of another with the latter's consent. Its
purpose is to extend the personality of the principal or the party for whom another acts and from
whom he or she derives the authority to act. It is said that the basis of agency is representation,
that is, the agent acts for and on behalf of the principal on matters within the scope of his
authority and said acts have the same legal effect as if they were personally executed by the
principal.
In this case at hand, the parties do not dispute the existence of the agency relationship between
respondents ERWIN as principal and EDWIN as agent.
PHILEX MINING CORP. V. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Philex Mining Corp. entered into an agreement with Baguio Gold Mining Co. for the
former to manage and operate the latters mining claim, known as the Sto. Nino Mine.
The parties agreement was denominated as Power of Attorney which provides inter
alia:
4. Within three (3) years from date thereof, the PRINCIPAL (Baguio Gold) shall make
available to the MANAGERS (Philex Mining) up to ELEVEN MILLION PESOS (P11,000,000.00), in
such amounts as from time to time may be required by the MANAGERS within the said 3-year
period, for use in the MANAGEMENT of the STO. NINO MINE. The said ELEVEN MILLION PESOS
(P11,000,000.00) shall be deemed, for internal audit purposes, as the owners account in the Sto.
Nino PROJECT. Any part of any income of the PRINCIPAL from the STO. NINO MINE, which is left
with the Sto. Nino PROJECT, shall be added to such owners account.
5. Whenever the MANAGERS shall deem it necessary and convenient in connection with the
MANAGEMENT of the STO. NINO MINE, they may transfer their own funds or property to the Sto.
Nino PROJECT, in accordance with the following arrangements:
(a) The properties shall be appraised and, together with the cash, shall be carried by the Sto.
Nino PROJECT as a special fund to be known as the MANAGERS account.
(b) The total of the MANAGERS account shall not exceed P11,000,000.00, except with prior
approval of the PRINCIPAL; provided, however, that if the compensation of the MANAGERS as
herein provided cannot be paid in cash from the Sto. Nino PROJECT, the amount not so paid in
cash shall be added to the MANAGERS account.

(c) The cash and property shall not thereafter be withdrawn from the Sto. Nino PROJECT
until termination of this Agency.
(d) The MANAGERS account shall not accrue interest. Since it is the desire of the PRINCIPAL
to extend to the MANAGERS the benefit of subsequent appreciation of property, upon a projected
termination of this Agency, the ratio which the MANAGERS account has to the owners account
will be determined, and the corresponding proportion of the entire assets of the STO. NINO MINE,
excluding the claims, shall be transferred to the MANAGERS, except that such transferred assets
shall not include mine development, roads, buildings, and similar property which will be valueless,
or of slight value, to the MANAGERS. The MANAGERS can, on the other hand, require at their
option that property originally transferred by them to the Sto. Nino PROJECT be re-transferred to
them. Until such assets are transferred to the MANAGERS, this Agency shall remain subsisting.
xxxx
12. The compensation of the MANAGER shall be fifty per cent (50%) of the net profit of the
Sto. Nino PROJECT before income tax. It is understood that the MANAGERS shall pay income tax
on their compensation, while the PRINCIPAL shall pay income tax on the net profit of the Sto.
Nino PROJECT after deduction therefrom of the MANAGERS compensation.
Philex Mining made advances of cash and property in accordance with paragraph 5 of
the agreement. However, the mine suffered continuing losses over the years which
resulted to Philex Minings withdrawal as manager of the mine and in the eventual
cessation of mine operations.
The parties executed a Compromise with Dation in Payment wherein Baguio Gold
admitted an indebtedness to petitioner in the amount of P179,394,000.00 and agreed to
pay the same in three segments by first assigning Baguio Golds tangible assets to
Philex Mining, transferring to the latter Baguio Golds equitable title in its Philodrill assets
and finally settling the remaining liability through properties that Baguio Gold may
acquire in the future.
The parties executed an Amendment to Compromise with Dation in Payment where
the parties determined that Baguio Golds indebtedness to petitioner actually amounted
to P259,137,245.00, which sum included liabilities of Baguio Gold to other creditors that
petitioner had assumed as guarantor. These liabilities pertained to long-term loans
amounting to US$11,000,000.00 contracted by Baguio Gold from the Bank of America
NT & SA and Citibank N.A. This time, Baguio Gold undertook to pay petitioner in two
segments by first assigning its tangible assets for P127,838,051.00 and then
transferring its equitable title in its Philodrill assets for P16,302,426.00. The parties then
ascertained that Baguio Gold had a remaining outstanding indebtedness to petitioner in
the amount of P114,996,768.00.
Philex Mining wrote off in its 1982 books of account the remaining outstanding
indebtedness of Baguio Gold by charging P112,136,000.00 to allowances and reserves
that were set up in 1981 and P2,860,768.00 to the 1982 operations.
In its 1982 annual income tax return, Philex Mining deducted from its gross income the
amount of P112,136,000.00 as loss on settlement of receivables from Baguio Gold
against reserves and allowances. However, the BIR disallowed the amount as
deduction for bad debt and assessed petitioner a deficiency income tax of
P62,811,161.39. Philex Mining protested before the BIR arguing that the deduction must
be allowed since all requisites for a bad debt deduction were satisfied, to wit: (a) there
was a valid and existing debt; (b) the debt was ascertained to be worthless; and (c) it
was charged off within the taxable year when it was determined to be worthless. BIR
denied petitioners protest. It held that the alleged debt was not ascertained to be
worthless since Baguio Gold remained existing and had not filed a petition for
bankruptcy; and that the deduction did not consist of a valid and subsisting debt
considering that, under the management contract, petitioner was to be paid 50% of the
projects net profit.
ISSUE: WON the parties entered into a contract of agency coupled with an interest which is not
revocable at will
HELD: No. An examination of the Power of Attorney reveals that a partnership or joint venture
was indeed intended by the parties.
In an agency coupled with interest, it is the agency that cannot be revoked or
withdrawn by the principal due to an interest of a third party that depends upon it, or
the mutual interest of both principal and agent. In this case, the non-revocation or non-
withdrawal under paragraph 5(c) applies to the advances made by petitioner who is
supposedly the agent and not the principal under the contract. Thus, it cannot be
inferred from the stipulation that the parties relation under the agreement is one of
agency coupled with an interest and not a partnership.
Neither can paragraph 16 of the agreement be taken as an indication that the
relationship of the parties was one of agency and not a partnership. Although the said
provision states that this Agency shall be irrevocable while any obligation of the
PRINCIPAL in favor of the MANAGERS is outstanding, inclusive of the MANAGERS
account, it does not necessarily follow that the parties entered into an agency contract
coupled with an interest that cannot be withdrawn by Baguio Gold.
The main object of the Power of Attorney was not to confer a power in favor of
petitioner to contract with third persons on behalf of Baguio Gold but to create a
business relationship between petitioner and Baguio Gold, in which the former was to
manage and operate the latters mine through the parties mutual contribution of
material resources and industry. The essence of an agency, even one that is coupled
with interest, is the agents ability to represent his principal and bring about business
relations between the latter and third persons.
The strongest indication that petitioner was a partner in the Sto. Nino Mine is the fact
that it would receive 50% of the net profits as compensation under paragraph 12 of
the agreement. The entirety of the parties contractual stipulations simply leads to no
other conclusion than that petitioners compensation is actually its share in the income
of the joint venture. Article 1769 (4) of the Civil Code explicitly provides that the receipt
by a person of a share in the profits of a business is prima facie evidence that he is a
partner in the business.
BORDADOR vs. LUZ
FACTS: Petitioners Bordador spouses were engaged in the business of purchase and sale of
jewelry, while respondent Brigida Luz was their regular customer. Respondent Narciso Deganos,
Luz's brother, received several pieces of jewelry from the Bordadors amounting to P382,816.00,
which items were indicated in 17 receipts covering the same--11 of the receipts stated that they
were received by Deganos for a certain Evelyn Aquino, while the remaining 6 indicated that they
were received by Deganos for Luz. Deganos was supposed to sell the items at a profit and remit
the proceeds and return the unsold items to the Bordadors. Deganos remitted only P53,207.00.
He neither paid the balance of the sales proceeds, nor did he return any unsold item to the
Bordadors, which led them to file an action for recovery of a sum of money and damages against
Deganos and Luz with the RTC. The Bordadors claimed that Deganos acted as the agent of Luz
when he received the items of jewelry, and because he failed to pay for the same, Luz, as
principal, became solidarily liable with him. Deganos asserted that it was he alone who was
involved in the transaction with the Bordadors; that he neither acted as agent for nor was he
authorized to act as an agent by Luz, notwithstanding the fact that 6 of the receipts indicated that
the items were received by him for Luz. He added that he never delivered any of the items to Luz.
Luz corroborated the claims of Deganos. The RTC found that only Deganos was liable to the
Bordados. It further found that it was petitioner Lydia Bordador who indicated in the receipts that
the items were received by Deganos for Evelyn Aquino and for Luz. It said that it was "persuaded
that Brigida D. Luz was behind Deganos," but because there was no memorandum to this effect,
the agreement between the parties was unenforceable under the Statute of Frauds. Absent the
required memorandum or any written document connecting Luz with the subject receipts or
authorizing Deganos to act on her behalf, the alleged agreement between the Bordadors and Luz
was unenforceable. The Bordadors elevated the case to the CA which affirmed said judgment,
hence the instant petition.
ISSUE: Whether Luz is liable to the Bordadors for the latter's claim for money and damages
despite the fact that Luz did not sign any of the subject receipts or authorized Deganos to receive
the items of jewelry on her behalf
HELD: No, Luz is not liable to the Bordadors.
RATIO: THE BASIS FOR AGENCY IS REPRESENTATION. The basis for agency is representation.
Here, there is no showing that Luz consented to the acts of Deganos or authorized him to act on
her behalf, much less with respect to the particular transactions involved. The Bordadors' attempt
to foist liability on Luz through the supposed agency relation with Deganos is groundless and ill-
advised. A PERSON DEALING WITH AN AGENT IS PUT UPON INQUIRY AND MUST DISCOVER
UPON HIS PERIL THE AUTHORITY OF THE AGENT. Besides, it was grossly and inexcusably
negligent of the Bordadors to entrust to Deganos, not once or twice but on at least 6 occasions as
evidenced by 6 receipts, several pieces of jewelry of substantial value without requiring a written
authorization from his alleged principal. A person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent.
DIZON V. CA
FACTS:
Overland Express Lines, Inc. entered into a Contract of Lease with Option to Buy with
petitioners involving a 1,755.80 square meter parcel of land situated at corner
MacArthur Highway and South H Street, Diliman, Quezon City. The term of the lease
was for 1 year commencing from May 16, 1974 up to May 15, 1975. During this period,
Overland Express Lines was granted an option to purchase for the amount of P3,000.00
per square meter. Thereafter, the lease shall be on a per month basis with a monthly
rental of P3,000.00.
For failure of Overland Express Lines to pay the increased rental of P8,000.00 per
month effective June 1976, petitioners filed an action for ejectment against it. The lower
court rendered judgment ordering Overland Express Lines to vacate the leased premises
and to pay the sum of P624,000.00 representing rentals in arrears and/or as damages in
the form of reasonable compensation for the use and occupation of the premises during
the period of illegal detainer from June 1976 to November 1982 at the monthly rental of
P8,000.00, less payments made, plus 12% interest per annum from November 18,
1976, the date of filing of the complaint, until fully paid, the sum of P8,000.00 a month
starting December 1982, until Overland Express Lines fully vacates the premises, and to
pay P20,000.00 as and by way of attorneys fees.
ISSUE: WON Overland Express Lines actually paid the alleged P300,000.00 to Fidela Dizon, as
representative (agent) of petitioners in consideration of the option
HELD: No.
CA opined that the payment by Overland Express Lines of P300,000.00 as partial
payment for the leased property, which petitioners accepted (through Alice A. Dizon)
and for which an official receipt was issued, was the operative act that gave rise to a
perfected contract of sale, and that for failure of petitioners to deny receipt thereof,
Overland Express Lines can therefore assume that Alice A. Dizon, acting as agent of
petitioners, was authorized by them to receive the money in their behalf. CA went
further by stating that in fact, what was entered into was a conditional contract of sale
wherein ownership over the leased property shall not pass to the Overland Express
Lines until it has fully paid the purchase price. Since Overland Express Lines did not
consign to the court the balance of the purchase price and continued to occupy the
subject premises, it had the obligation to pay the amount of P1,700.00 in monthly
rentals until full payment of the purchase price.
In an attempt to resurrect the lapsed option, Overland Express Lines gave P300,000.00
to petitioners (thru Alice A. Dizon) on the erroneous presumption that the said amount
tendered would constitute a perfected contract of sale pursuant to the contract of lease
with option to buy. There was no valid consent by the petitioners (as co-owners of the
leased premises) on the supposed sale entered into by Alice A. Dizon, as petitioners
alleged agent, and Overland Express Lines. The basis for agency is representation and a
person dealing with an agent is put upon inquiry and must discover upon his peril the
authority of the agent. As provided in Article 1868 of the New Civil Code, there was no
showing that petitioners consented to the act of Alice A. Dizon nor authorized her to act
on their behalf with regard to her transaction with private respondent. The most
prudent thing private respondent should have done was to ascertain the extent of the
authority of Alice A. Dizon. Being negligent in this regard, private respondent cannot
seek relief on the basis of a supposed agency.
Every person dealing with an agent is put upon inquiry and must discover upon his peril
the authority of the agent. If he does not make such inquiry, he is chargeable with
knowledge of the agents authority, and his ignorance of that authority will not be any
excuse. Persons dealing with an assumed agency, 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 also the nature and extent of the authority,
and in case either is controverted, the burden of proof is upon them to establish it.
VICTORIAS MILLING CO. vs. COURT OF APPEALS
FACTS:
St. Therese Merchandising (STM) regularly bought sugar from Victorias Milling Co (VMC).
In the course of their dealings, VMC issued several Shipping List/Delivery Receipts (SLDRs) to STM
as proof of purchases. Among these was SLDR No. 1214M. SLDR No. 1214M, dated October 16,
1989, covers 25,000 bags of sugar. Each bag contained 50 kg and priced at P638.00 per bag. The
transaction covered was a direct sale.
On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation
(CSC) its rights in the same SLDR for P14,750,000.00. CSC issued checks in payment. That same
day, CSC wrote petitioner that it had been authorized by STM to withdraw the sugar covered by
the said SLDR. Enclosed in the letter were a copy of SLDR No. 1214M and a letter of authority
from STM authorizing CSC to withdraw for and in our behalf the refined sugar covered by the
SLDR On Oct. 27, 1989, STM issued checks to VMC as payment for 50,000 bags, covering SLDR
No. 1214M. CSC surrendered the SLDR No. 1214M and to VMCs NAWACO Warehouse and was
allowed to withdraw sugar. But only 2,000 bags had been released because VMC refused to
release the other 23,000 bags.
Therefore, CSC informed VMC that SLDR No. 1214M had been sold and endorsed to it.
But VMC replied that it could not allow any further withdrawals of sugar against SLDR No. 1214M
because STM had already withdrawn all the sugar covered by the cleared checks. VMC also
claimed that CSC was only representing itself as STMs agent as it had withdrawn the 2,000 bags
against SLDR No. 1214M for and in behalf of STM. Hence, CSC filed a complaint for specific
performance against Teresita Ng Sy (doing business under STM's name) and VMC. However, the
suit against Sy was discontinued because later became a witness. RTC ruled in favor of CSC and
ordered VMC to deliver the 23,000 bags left. CA concurred. Hence this appeal.
ISSUES:
W/N CA erred in not ruling that CSC was an agent of STM and hence, estopped to sue upon SLDR
No. 1214M as assignee.
HELD:
NO. CSC was not an agent of STM. VMC heavily relies on STMs letter of authority that said CSC is
authorized to withdraw sugar for and in our behalf. It is clear from Art. 1868 that the: basis of
agency is representation. On the part of the principal, there must be an actual intention to appoint
or an intention naturally inferable from his words or actions, and on the part of the agent, there
must be an intention to accept the appointment and act on it, and in the absence of such intent,
there is generally NO agency. One factor, which most clearly distinguishes agency from other legal
concepts, is control; one person the agent agrees to act under the control or direction of
another the principal. Indeed, the very word agency has come to connote control by the
principal. The control factor, more than any other, has caused the courts to put contracts between
principal and agent in a separate category. Where the relation of agency is dependent upon the
acts of the parties, the law makes no presumption of agency and it is always a fact to be proved,
with the burden of proof resting upon the persons alleging the agency, to show not only the fact
of its existence but also its nature and extent. It appears that CSC was a buyer and not an agent
of STM. CSC was not subject to STMs control. The terms for and in our behalf should not be
eyed as pointing to the existence of an agency relation. Whether or not a contract is one of sale or
agency depends on the intention of the parties as gathered from the whole scope and effect of
the language employed. Ultimately, what is decisive is the intention of the parties. (In fact, CSC
even informed VMC that the SLDR was sold and endorsed to it.)
Agency distinguished from sale.
In an agency to sell, the agent, in dealing with the thing received, is bound to act according to the
instructions of his principal, while in a sale, the buyer can deal with the thing as he pleases, being
the owner. The elementary notion of sale is the transfer of title to a thing from one to another,
while the essence of agency involves the idea of an appointment of one to act for another. Agency
is a relationship which often results in a sale, but the sale is a subsequent step in the transaction.
(Teller, op. cit., p. 26; see Commissioner of Internal Revenue vs. Manila Machinery & Supply Co.,
135 SCRA 8 [1985].) An authorization given to another containing the phrase for and in our
behalf does not necessarily establish an agency, as ultimately what is decisive is the intention of
the parties. Thus, the use of the words sold and endorsed may mean that the parties intended a
contract of sale, and not a contract of agency.
LITONJUA V. ETERNIT
FACTS:
Eternit Corp. is engaged in the manufacture of roofing materials and pipe products. Its
manufacturing operations were conducted on 8 parcels of land located in Mandaluyong
City, covered by TCTs with Far East Bank & Trust Company, as trustee. 90% of the
shares of stocks of Eternit Corp. were owned by Eteroutremer S.A. Corporation (ESAC),
a corporation organized and registered under the laws of Belgium. Jack Glanville, an
Australian citizen, was the General Manager and President of Eternit Corp., while Claude
Frederick Delsaux was the Regional Director for Asia of ESAC.
In 1986, the management of ESAC grew concerned about the political situation in the
Philippines and wanted to stop its operations in the country. The Committee for Asia of
ESAC instructed Michael Adams, a member of Eternit Corp.s Board of Directors, to
dispose of the eight parcels of land. Adams engaged the services of realtor/broker Lauro
G. Marquez so that the properties could be offered for sale to prospective buyers.
Marquez offered the parcels of land and the improvements thereon to Eduardo B.
Litonjua, Jr. of the Litonjua & Company, Inc. Marquez declared that he was authorized
to sell the properties for P27,000,000.00 and that the terms of the sale were subject to
negotiation.
Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo
Litonjua, Jr., and his brother Antonio K. Litonjua. The Litonjua siblings offered to buy
the property for P20,000,000.00 cash. Marquez apprised Glanville of the Litonjua
siblings offer and relayed the same to Delsaux in Belgium, but the latter did not
respond. Glanville telexed Delsaux in Belgium, inquiring on his position/ counterproposal
to the offer of the Litonjua siblings. Delsaux sent a telex to Glanville stating that, based
on the Belgian/Swiss decision, the final offer was US$1,000,000.00 and
P2,500,000.00 to cover all existing obligations prior to final liquidation.
Litonjua, Jr. accepted the counterproposal of Delsaux. Marquez conferred with Glanville,
and confirmed that the Litonjua siblings had accepted the counter-proposal of Delsaux.
He also stated that the Litonjua siblings would confirm full payment within 90 days after
execution and preparation of all documents of sale, together with the necessary
governmental clearances.
The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank
& Trust Company, Ermita Branch, and drafted an Escrow Agreement to expedite the
sale.
With the assumption of Corazon Aquino as President of RP, the political situation in the
Philippines had improved. Marquez received a telephone call from Glanville, advising
that the sale would no longer proceed. Glanville followed it up with a letter, confirming
that he had been instructed by his principal to inform Marquez that the decision has
been taken at a Board Meeting not to sell the properties on which Eternit Corp. is
situated.
 When apprised of this development, the Litonjuas, through counsel, wrote Eternit Corp.,
demanding payment for damages they had suffered on account of the aborted sale. EC,
however, rejected their demand.
ISSUE: WON Marquez, Glanville, and Delsaux were authorized by respondent Eternit Corp. to act
as its agents relative to the sale of the properties of Eternit Corp., and if so, what are the
boundaries of their authority as agents
HELD: No.
A corporation is a juridical person separate and distinct from its members or
stockholders and is not affected by the personal rights, obligations and transactions of
the latter. It may act only through its board of directors or, when authorized either by
its by-laws or by its board resolution, through its officers or agents in the normal course
of business. The general principles of agency govern the relation between the
corporation and its officers or agents, subject to the articles of incorporation, by-laws, or
relevant provisions of law.
The property of a corporation is not the property of the stockholders or members, and
as such, may not be sold without express authority from the board of directors. Physical
acts, like the offering of the properties of the corporation for sale, or the acceptance of
a counter-offer of prospective buyers of such properties and the execution of the deed
of sale covering such property, can be performed by the corporation only by officers or
agents duly authorized for the purpose by corporate by-laws or by specific acts of the
board of directors. Absent such valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs of the corporation, but not in
the course of, or connected with, the performance of authorized duties of such director,
are not binding on the corporation.
While a corporation may appoint agents to negotiate for the sale of its real properties,
the final say will have to be with the board of directors through its officers and agents
as authorized by a board resolution or by its by-laws.30 An unauthorized act of an
officer of the corporation is not binding on it unless the latter ratifies the same expressly
or impliedly by its board of directors. Any sale of real property of a corporation by a
person purporting to be an agent thereof but without written authority from the
corporation is null and void.
An agency may be expressed or implied from the act of the principal, from his silence or
lack of action, or his failure to repudiate the agency knowing that another person is
acting on his behalf without authority. Acceptance by the agent may be expressed, or
implied from his acts which carry out the agency, or from his silence or inaction
according to the circumstances. Agency may be oral unless the law requires a specific
form. However, to create or convey real rights over immovable property, a special
power of attorney is necessary.
The Litonjuas failed to adduce in evidence any resolution of the Board of Directors of
Eternit Corp. empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone
offer for sale, for and in its behalf, the 8 parcels of land owned by Eternit Corp.
including the improvements thereon. The bare fact that Delsaux may have been
authorized to sell to Ruperto Tan the shares of stock of respondent ESAC cannot be
used as basis for Litonjuas claim that he had likewise been authorized by Eternit Corp.
to sell the parcels of land.
While Glanville was the President and General Manager of Eternit Corp., and Adams and
Delsaux were members of its Board of Directors, the three acted for and in behalf of
respondent ESAC, and not as duly authorized agents of Eternit Corp.; a board resolution
evincing the grant of such authority is needed to bind Eternit Corp. to any agreement
regarding the sale of the subject properties. Such board resolution is not a mere
formality but is a condition sine qua non to bind Eternit Corp.
Requisites of an agency by estoppels: (1) the principal manifested a representation of the agents
authority or knowingly allowed the agent to assume such authority; (2) the third person, in good
faith, relied upon such representation; (3) relying upon such representation, such third person has
changed his position to his detriment.
DOMINION INSURANCE V. CA
SUMMARY: Guevarra instituted a civil case for the recovery of a sum of money against Dominion
Insurance. He sought to recover sums he had advanced in his capacity as manager. Dominion
denied any liability to Guevarra. RTC ruled that Dominion was to pay Guevarra. CA affirmed. SC
also ruled that Dominion should pay Guevarra, but not under the law on agency, but the law on
obligations and contracts. This is because Guevarra deviated from the instructions of Dominion
under which he would have had authority to settler the latters claims, i.e. to pay through the
revolving fund. Nevertheless, recovery may be made under Art. 1236.
DOCTRINE: When a special power of attorney is required for the agent to do a certain act, the
agent, in the performance of such act, must comply with the specifications embodied in the
special power of attorney giving him authority to do such.
For example, here, a special power of attorney was needed for Guevarra to settle the claims of
Dominions clients. And for this purpose, there was a memorandum. However, the memorandum
stated that Guevarra was to settle the claims using the money in a revolving fund. Guevarra did
not comply with this, so e expenses Guevarra incurred in the settlement of the claims of the
insured my not be reimbursed from Dominion, at least under the law of agency.
FACTS: Rodolfo Guevarra instituted a civil case for the recovery of a sum of money against
Dominion Insurance. He sought to recover P156,473.90, which he claimed to have advanced in his
capacity as manager of Dominion to satisfy claims filed by Dominions clients. Dominion denied
any liability to Guevarra and asserted a counterclaim for premiums allegedly unremitted by the
latter.
The pre-trial conference never pushed through despite being scheduled and postponed nine times
over the course of six months. Finally, the case was called again for pre-trial and Dominion and
counsel failed to show up. The trial court declared Dominion in default and denied any
reconsideration.
On the merits of the case, the RTC ruled that Dominion was to pay Guevarra the P156,473.90
claimed as the total amount advanced by the latter in the payment of the claims of Dominions
clients. The CA affirmed.
ISSUES + RATIO:
WON Guevarra acted within his authority as agent for Dominion NO
A perusal of the Special Power of Attorney would show that Dominion and Guevarra
intended to enter into a principal-agent relationship. Despite the word special, the contents of
the document reveal that what was constituted was a general agency. The agency comprises all
the business of the principal, but, couched in general terms, is limited only to acts of
administration. A general power permits the agent to do all acts for which the law does not
require a special power.
Art. 1878 enumerates the instances when a special power of attorney is required,
including (1) to make such payments as are not usually considered as acts of administration; (15)
any other act of strict dominion.
The payment of claims is not an act of administration. The settlement of claims is not included
among the acts enumerated in the Special Power of Attorney, neither is it of a character similar to
the acts enumerated therein. A special power of attorney would have been required before
Guevarra could settle the insurance claims of the insured.
Guevarras authority to settle claims is embodied in the Memorandum of Management
Agreement which enumerated the scope of Guevarras duties and responsibilities. However, the
Memorandum showed the instruction of Dominion that payment of claims shall come from a
revolving fund. Having deviated from the instructions of the principal, the expenses that Guevarra
incurred in the settlement of the claims of the insured may not be reimbursed from Dominion.
WON Guevarra is entitled to reimbursement of amounts YES
However, while the law on agency prohibits Guevarra from obtaining reimbursement,
his right to recovery may still be justified under the general law on Obligations and Contracts,
particularly, Art. 1236 .
In this case, when the risk insured against occurred, Dominions liability as insurer
arose. This obligation was extinguished when Guevarra paid such claims. Thus, to the extent that
the obligation of Dominion had been extinguished, Guevarra may demand reimbursement from his
principal. To rule otherwise would result in unjust enrichment of Dominion.
RULING: Dominion is ordered to pay Guevarra P112,6762.11, representing the total amount
advanced by the latter in the payment of the claims of the formers clients, minus the amount in
the revolving fund and the outstanding balance and remittance.
AGUNA V LARENA
Facts
This action is brought to recover the sum of P29,600 on two cause against the administrator. The
plaintiff claims the sum of P9,600, the alleged value of the services rendered by him to said
deceased as his agent in charge of the deceased's houses situated in Manila. From the evidence it
appears undisputed that from February, 1922, to February, 1930, the plaintiff rendered services to
the deceased, consisting in the collection of the rents due from the tenants occupying the
deceased's houses in Manila and attending to the repair of said houses when necessary. The
evidence also shows that during the time the plaintiff rendered his services, he did not receive any
compensation. It is, however, a fact admitted that during said period the plaintiff occupied a
house belonging to the deceased without paying any rent at all.
Issue
W/n Agency is for compensation.
Held
The service rendered by the agent was deemed to be gratuitous
Ratio
The plaintiff-appellant insists that, the services having been rendered, an obligation to
compensate them must necessarily arise. The trial court held that the compensation for the
services of the plaintiff was the gratuitous use and occupation of some of the houses of the
deceased by the plaintiff and his family. This conclusion is correct. if it were true that the plaintiff
and the deceased had an understanding to the effect that the plaintiff was to receive
compensation aside from the use and occupation of the houses of the deceased, it cannot be
explained how the plaintiff could have rendered services as he did for eight years without
receiving and claiming any compensation from the deceased.
URBAN BANK, INC vs. MAGDALENO M. PEA
FACTUAL ANTECEDENTS:
Petitioner-respondent Atty. Magdaleno M. Pea (Pea) is a lawyer by profession and was formerly
a stockholder, director and corporate secretary of Isabel Sugar Company, Inc. (ISCI). The latter
owned a parcel of land located in Pasay City. ISCI leased the Pasay property for a period of 10
years.
Two weeks before the lease over the Pasay property was to expire, ISCI and Urban Bank executed
a Contract to Sell, whereby the latter would pay ISCI the amount of PhP241,612,000 in
installments for the Pasay property. Both parties agreed that the final installment of
PhP25,000,000 would be released by the bank upon ISCIs delivery of full and actual possession of
the land, free from any tenants. In the meantime, the amount of the final installment would be
held by the bank in escrow.
ISCI then instructed Pea, who was its director and corporate secretary, to take over possession
of the Pasay property against the tenants upon the expiration of the lease. ISCIs president, Mr.
Enrique G. Montilla III (Montilla), faxed a letter to Pea, confirming the latters engagement as the
corporations agent to handle the eviction of the tenants from the Pasay property. To prevent the
sub-tenants from further appropriating the Pasay property, Atty. Pea, as director and
representative of ISCI, filed a complaint for injunction. Later, within the four-month period
allegedly agreed upon in the telephone conversation, Pea formally informed Urban Bank that it
could already take possession of the Pasay property. There was however no mention of the
compensation due and owed to him for the services he had rendered.
Pea thereafter made several attempts to contact respondents Borlongan (Union Banks president)
and Bejasa by telephone, but the bank officers would not take any of his calls.After he turned over
possession of the Pasay property, Pea formally demanded from Urban Bank the payment of the
10% compensation and attorneys fees allegedly promised to him during his telephone
conversation with Borlongan for securing and maintaining peaceful possession of the property.
However, Urban Bank refused to pay for his services in connection with the Pasay property, Pea
filed a complaint for recovery of agents compensation and expenses, damages and attorneys
fees.
ISSUES:
1) Whether or not there exists an agency relationship between Atty. Pea and the Union
Bank? 2) If indeed such principal-agent relationship has been established between them, whether
Atty. Pea be entitled to 10%of the market value of the property as compensation and attorneys
fees?
HELD:
1) YES. Agency is presumed to be for compensation. Unless the contrary intent is shown, a
person who acts as an agent does so with the expectation of payment according to the agreement
and to the services rendered or results effected. The court find that the agency of Pea comprised
of services ordinarily performed by a lawyer who is tasked with the job of ensuring clean
possession by the owner of a property. Thus measure what he is entitled to for the legal services
rendered. The Court concludes that Urban Bank constituted Atty. Pea as its agent to secure
possession of the Pasay property. This conclusion, however, is not determinative of the basis of
the amount of payment that must be made to him by the bank. The context in which the agency
was created lays the basis for the amount of compensation Atty. Pea is entitled to.
NO. Lawyering is not a business; it is a profession in which duty to public service, not money, is
the primary consideration. The principle of quantum meruit applies if lawyers are employed
without a price agreed upon for their services, in which case they would be entitled to receive
what they merit for their services, or as much as they have earned. In fixing a reasonable
compensation for the services rendered by a lawyer on the basis of quantum meruit, one may
consider factors such as the time spent and extent of services rendered; novelty and difficulty of
the questions involved; importance of the subject matter; skill demanded; probability of losing
other employment as a result of acceptance of the proffered case; customary charges for similar
services; amount involved in the controversy and the resulting benefits for the client; certainty of
compensation; character of employment; and professional standing of the lawyer.
RULING:
The Petitions for Review on Certiorari filed by petitioners Urban Bank (G.R. No. 145817) and
Benjamin L. de Leon, Delfin Gonzalez, Jr., and Eric L. Lee (G.R. No. 145822) are hereby
GRANTED.
DE CASTRO V. CA
Facts:
De castro were co-owners of four (4) lots. In a letter, Artigo was authorized by
appellants to act as real estate broker in the sale of these properties and five percent(5%) of
which will be given to the agent as commission. It was appellee who first found Times Transit
Corporation, who bought 2 lots. Artigo felt short of his commission. Hence, he sued below to
collect the balance. De castros then moved for the dismissal for failure to implead other co-owners
as indispensable parties. The De Castros claim that Artigo always knew that the two lots were co-
owned with their other siblings and failure to implead such indispensable parties is fatal to the
complaint since Artigo, as agent of all the four co-owners, would be paid with funds co-owned by
the four co-owners.
Issue: WON the complaint merits dismissal for failure to implead other co-owners as
indispensable parties
Ruling: Devoid of merit.
Art. 1915. If two or more persons have appointed an agent for a common transaction
or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency.
The rule in this article applies even when the appointments were made by the principals in
separate acts, provided that they are for the same transaction. The solidarity arises from the
common interest of the principals, and not from the act of constituting the agency. By
virtue of this solidarity, the agent can recover from any principal the whole
compensation and indemnity owing to him by the others. The parties, however, may, by
express agreement, negate this solidary responsibility. The solidarity does not disappear by the
mere partition effected by the principals after the accomplishment of the agency.
When the law expressly provides for solidarity of the obligation, as in the liability of co-
principals in a contract of agency, each obligor may be compelled to pay the entire obligation.The
agent may recover the whole compensation from any one of the co-principals, as in this case.
INLAND REALTY V. CA
FACTS:
Petitioner Inland Realty Investment Service, Inc. (Inland Realty) is a corporation
engaged in the real estate business and brokerages. Respondent Gregorio Araneta Inc., through
its Assistant General Manager J. Armando Eduque, granted Inland Realty the authority to sell on a
first come first served basis the total holdings of Gregorio Araneta, Inc. in Architects' Bldg. Inc.,
equivalent to 98% or 9,800 shares of stock at P1,500 per share for 30 days.
After receiving a proposal letter from Inland Realty, Stanford Microsystems, Inc., a
prospective buyer, counter-proposed to buy 9,800 shares at P1,000 per share or for a total
of P9.8M, P4.9M payable in five years at 12% per annum interest until fully paid. Araneta, Inc.
replied to a letter sent by Inland Realty, saying that the price offered by Stanford was too low and
suggested that Inland Realty negotiate more for a lower price with Standford.
The authority to sell given to Inland Realty by Gregorio Araneta Inc. was extended for
three times, 30 days each, where the last extension of its contract expired on December 2, 1975.
On July 8, 1977, Inland Realty finally sold the 9,800 shares of stock in Architects' Bldg.,
Inc. to Stanford Microsystems, Inc. for P13.5M. Thereafter, Inland Realty sent a demand letter to
Gregorio Araneta Inc., for the payment of their 5% brokers commission (P675,000), which was
declined by respondent, claiming that after their authority to sell expired thirty (30) days from
December 2, 1975, petitioners were no longer privy to the consummation of the sale.
Inland Realty filed a case in RTC for the collection of its brokers commission from
respondent, but the RTC dismissed its case. On its appeal, the CA also dismissed Inland Realtys
petition, since the petitioners agency contract and authority to sell already expired on January 1,
1976, whereas the consummation of the sale to Stanford had only been on July 8, 1977 or more
than 1 year and 5 months after petitioners' agency contract and authority to sell expired.
The petitioner filed this present petition before the Supreme Court, contending that
Inland Realty, as a broker is automatically entitled to the 5% commission merely upon securing
for, and introducing to, the seller, the buyer who ultimately purchases from the former the object
of the sale, regardless of the expiration of the broker's contract of agency and authority to sell.
ISSUE: Whether or not Inland Realty is entitled for the 5% brokers commission.
HELD: NO. The Court ruled that since Inland Realty was not the efficient procuring cause
in bringing about the sale on July 8, 1977, therefore it is not entitled to the 5%
broker's commission. During the subsistence of its authority to sell, Inland Realty had nothing
to show that they performed substantial acts that proximately and causatively led to the
consummation of the sale to Stanford of Araneta, Inc.'s 9,800 shares in Architects'. Inland Realty
failed in selling said shares under the terms and conditions set out by Araneta, Inc.; it did nothing
but submit Stanford's name as prospective buyer.
The lapse of more than one (1) year and five (5) months between the expiration of
petitioners' authority to sell and the consummation of the sale to Stanford shows the petitioners
non-participation in the crucial events leading to the consummation of said sale, i.e., the
negotiations to convince Stanford to sell at Araneta, Inc.'s asking price, the finalization of the
terms and conditions of the sale, the drafting of the deed of sale, the processing of pertinent
documents, and the delivery of the shares of stock to Stanford.

Therefore, the Court dismissed Inland Realtys present petition.
MANOTOK BROS. V. CA
FACTS:
1. The petitioner 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, at M.F. Jhocson Street,
Sampaloc Manila.
2. By means of a letter dated July 5, 1966, petitioner authorized herein private respondent
Salvador Saligumba to negotiate with the City of Manila the sale of the 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.
3. The letter of authority was extended three times. The final one was on Nov. 16, 1967, giving
Saligumba an extension of 180 days to finalize and consummate the sale of the property to the
City of Manila for not less than P410,000.00.
4. 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.
5. 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 P210,816.00.
6. 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, since:
a. the sale was not made within the period given in the letter of authority
b. Saligumba was not the person responsible for the negotiation and consummation of
the sale but it was Filomeno Huelgas, the PTA presidence.
7. Saligumba recounted how he initiated the sale. He recounted that it first began at a meeting
with Rufino Manotok at the office of Fructuoso Ancheta, principal of C.M. Recto High School. Atty.
Dominador Bisbal, then president of the PTA, was also present. The meeting was set precisely to
ask private respondent to negotiate the sale of the school lot and building to the City of Manila.
Private respondent then went to Councilor Mariano Magsalin, the author of the Ordinance which
appropriated the money for the purchase of said property, to present the project. He also went to
the Assessor's Office for appraisal of the value of the property. While these transpired and his
letters of authority expired, Rufino Manotok always renewed the former's authorization until the
last was given, which was to remain in force until May 14, 1968. After securing the report of the
appraisal committee, he went to the City Mayor's Office, which indorsed the matter to the
Superintendent of City Schools of Manila. The latter office approved the report and so private
respondent went back to the City Mayor's Office, which thereafter indorsed the same to the
Municipal Board for appropriation. Subsequently, on April 26, 1968, Ordinance No. 6603 was
passed by the Municipal Board for the appropriation of the sum corresponding to the purchase
price. Petitioner received the full payment of the purchase price, but private respondent did not
receive a single centavo as commission.
8. Atty. Bisbal testified that Huelgas was aware of the fact the Saligumba was working on the sale
but he never offered to help in the acquisition of the property.
9. The CFI remdered judgment in favor of Saligumba. This was affirmed by the CA.
ISSUE: WON Saligumba is entitled to the 5% agents commission
HELD: YES.
1.As enunciated in the case of Prats vs. CA, the court ruled in favor of the claimant-agent,
despite the expiration of his authority.
"In equity, however, the Court notes that petitioner had diligently taken steps to bring
back together respondent Doronila and the SSS,.
xxx xxx xxx
The court has noted on the other hand that Doronila finally sold the property to the Social Security
System at P3.25 per square meter which was the very same price counter-offered by the Social
Security System and accepted by him in July, 1967 when he alone was dealing exclusively with the
said buyer long before Prats came into the picture but that on the other hand Prats' efforts
somehow were instrumental in bringing them together again and finally consummating the
transaction at the same price of P3.25 per square meter, although such finalization was after the
expiration of Prats' extended exclusive authority.
xxx xxx xxx
Under the circumstances, the Court grants in equity the sum of One hundred Thousand Pesos
(P100,000.00) by way of compensation for his efforts and assistance in the transaction, which
however was finalized and consummated after the expiration of his exclusive authority . . ."
From the foregoing, it follows then that private respondent herein, with more reason, should be
paid his commission. While in Prats vs. Court of Appeals, the agent was not even the
efficient procuring cause in bringing about the sale, unlike in the case at bar, it was
still held therein that the agent was entitled to compensation. In the case at bar,
private respondent is the efficient procuring cause for without his efforts, the
municipality would not have anything to pass and the Mayor would not have anything
to approve.
2. 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 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.
3. Contrary to what petitioner advances, the case of Danon vs. Brimo, on which it heavily
anchors its justification for the denial of private respondent's claim, does not apply squarely to the
instant petition. Claimant-agent in said case fully comprehended the possibility that he may not
realize the agent's commission as he was informed that another agent was also negotiating the
sale and thus, compensation will pertain to the one who finds a purchaser and eventually affects
the sale. Such is not the case herein. On the contrary, private respondent pursued with his goal of
seeing that the parties reach an agreement, on the belief that he alone was transacting the
business with the City Government as this was what petitioner made it to appear.
4. 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.
Dispositive: WHEREFORE, in the light of the foregoing and finding no reversible error committed
by respondent Court, the decision of the Court of Appeals is hereby AFFIRMED. The temporary
restraining order issued by this Court in its Resolution dated October 1, 1990 is hereby lifted.
MANILA MEMORIAL PARK CEMETERY, INC., vs. PEDRO L. LINSANGAN
FACTS:
Florencia Baluyot offered Atty. Pedro Linsangan a lot called Garden State at the Holy Cross
Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former owner of a memorial
lot under Contract was no longer interested in acquiring the lot and had opted to sell his rights
subject to reimbursement of the amounts he already paid. The contract was for P95,000.00.
Baluyot reassured Atty. Linsangan that once reimbursement is made to the former buyer, the
contract would be transferred to him. Atty. Linsangan agreed and gave Baluyot P35,295.00
representing the amount to be reimbursed to the original buyer and to complete the down
payment to MMPCI. Baluyot issued handwritten and typewritten receipts for these payments.
Baluyot informed Atty. Linsangan that he would be issued a new contract covering the subject lot.
However, Atty. Linsangan objected to the new contract price, as the same was not the amount
previously agreed upon. To convince Atty. Linsangan, Baluyot executed a document confirming
that while the contract price is P132,250.00, Atty. Linsangan would pay only the original price of
P95,000.00. Later, Baluyot verbally advised Atty. Linsangan that Contract was cancelled for
reasons the latter could not explain, and presented to him another proposal for the purchase of an
equivalent property. He refused the new proposal and insisted that Baluyot and MMPCI honor
their undertaking. As a consequence, Atty. Linsangan filed a Complaint for Breach of Contract and
Damages against the former.
Petitioner (MMPCI)s defense: MMPCI alleged that Contract was cancelled conformably with the
terms of the contract because of non-payment of arrearages. MMPCI stated that Baluyot was not
an agent but an independent contractor, and as such was not authorized to represent MMPCI or
to use its name except as to the extent expressly stated in the Agency Manager Agreement.
Moreover, MMPCI was not aware of the arrangements entered into by Atty. Linsangan and
Baluyot, as it in fact received a down payment and monthly installments as indicated in the
contract. Official receipts showing the application of payment were turned over to Baluyot whom
Atty. Linsangan had from the beginning allowed to receive the same in his behalf. Furthermore,
whatever misimpression that Atty. Linsangan may have had must have been rectified by the
Account Updating Arrangement signed by Atty. Linsangan which states that he expressly admits
that Contract No on account of serious delinquency . . . is now due for cancellation under its
terms and conditions.
Trial Courts decision: The trial court held MMPCI and Baluyot jointly and severally liable. It found
that Baluyot was an agent of MMPCI and that the latter was estopped from denying this agency,
having received and enchased the checks issued by Atty. Linsangan and given to it by Baluyot.
While MMPCI insisted that Baluyot was authorized to receive only the down payment, it allowed
her to continue to receive postdated checks from Atty. Linsangan, which it in turn consistently
encashed.
Petitioner (MMPCI)s defense: MMPCI further alleged that it cannot be held jointly and solidarily
liable with Baluyot as the latter exceeded the terms of her agency, neither did MMPCI ratify
Baluyots acts. It added that it cannot be charged with making any misrepresentation, nor of
having allowed Baluyot to act as though she had full powers as the written contract expressly
stated the terms and conditions which Atty. Linsangan accepted and understood. In canceling the
contract, MMPCI merely enforced the terms and conditions imposed therein.
The Court of Appeals affirmed the decision of the trial court. It upheld the trial courts finding that
Baluyot was an agent of MMPCI at the time the disputed contract was entered into, having
represented MMPCIs interest and acting on its behalf in the dealings with clients and customers.
Hence, MMPCI is considered estopped when it allowed Baluyot to act and represent MMPCI even
beyond her authority.20 The appellate court likewise found that the acts of Baluyot bound MMPCI
when the latter allowed the former to act for and in its behalf and stead. While Baluyots authority
may not have been expressly conferred upon her, the same may have been derived impliedly by
habit or custom, which may have been an accepted practice in the company for a long period of
time.21 Thus, the Court of Appeals noted, innocent third persons such as Atty. Linsangan should
not be prejudiced where the principal failed to adopt the needed measures to prevent
misrepresentation. Furthermore, if an agent misrepresents to a purchaser and the principal
accepts the benefits of such misrepresentation, he cannot at the same time deny responsibility for
such misrepresentation
MMPCI pointed out that under its Agency Manager Agreement that an agency manager such as
Baluyot is considered an independent contractor and not an agent However, in the same contract,
Baluyot as agency manager was authorized to solicit and remit to MMPCI offers to purchase
interment spaces belonging to and sold by the latter.
The trial and appellate courts found MMPCI liable based on ratification and estoppel. For the trial
court, MMPCIs acts of accepting and encashing the checks issued by Atty. Linsangan as well as
allowing Baluyot to receive checks drawn in the name of MMPCI confirm and ratify the contract of
agency. On the other hand, the Court of Appeals faulted MMPCI in failing to adopt measures to
prevent misrepresentation, and declared that in view of MMPCIs acceptance of the benefits of
Baluyots misrepresentation, it can no longer deny responsibility therefor.

ISSUES: (1) Whether or not agent Baluyot acted within the scope of his authority conferred
under Agency Manager Agreement with petitioner MMPCI?
HELD: 1) NO. The acts of an agent beyond the scope of his authority do not bind the principal,
unless he ratifies them, expressly or impliedly. Only the principal can ratify; the agent cannot ratify
his own unauthorized acts. Moreover, the principal must have knowledge of the acts he is to
ratify. As provided under article 1898 (NCC), If the agent contracts in the name of the principal,
exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void
if the party with whom the agent contracted is aware of the limits of the powers granted by the
principal. In this case, however, the agent is liable if he undertook to secure the principals
ratification.
In the instant case, it has not been established that Atty. Linsangan even bothered to inquire
whether Baluyot was authorized to agree to terms contrary to those indicated in the written
contract, much less bind MMPCI by her commitment with respect to such agreements. Even if
Baluyot was Atty. Linsangans friend and known to be an agent of MMPCI, her declarations and
actions alone are not sufficient to establish the fact or extent of her authority.
SEVERINO VS. SEVERINO
Facts:
Melecio Severino owned some 428 hectares of land recorded in his name. During his lifetime, he
appointed defendant Guillermo Severino, his brother, as his administrator for the said land. This
defendant continued to administer and occupy the land even after the death of Melecio.
Subsequently, Guillermo filed for the registration of the land in his name and consequently, the
court decreed the title in his favor. At that time (when the cadastral proceedings were instituted),
petitioner Fabiola Severino, who is the alleged natural daughter and sole heir of Melecio, was a
minor. However, after the incapacity ceased, the petitioner filed a complaint for recovery of the
litigated land on the ground of fraud and that the property has been wrongfully registered in the
name of defendant. The defendant merely denied said allegations. The trial court decided in favor
of petitioner as the acknowledged natural child of Melecio and ordered the defendant to convey
said property to petitioner.
Issue:
Whether the lower court erred in its decision
Decision:
No.
Reason:
Although defendant denied the accusation of fraud and even offered evidence to rebut such
accusation, such attempt is immaterial. It is to be noted that the case is an action in personam
against an agent to compel him to return, or retransfer, to the heirs or the estate of its principal,
the property committed to his custody as such agent, to execute the necessary documents
thereof, to pay damages.
That the defendant came into the possession of the property here in question as the agent of the
deceased Melecio Severino in the administration of the property, cannot be successfully disputed.
His testimony in a previous related case is, in fact, conclusive in this respect. He there stated
under oath that from the year 1902 up to the time the testimony was given, in the year 1913, he
had been continuously in charge and occupation of the land as the encargado or administrator of
Melecio Severino; that he had always known the land as the property of Melecio Severino; and
that the possession of the latter had been peaceful, continuous, and exclusive. In his answer filed
in the same case, the same defendant, through his attorney, disclaimed all personal interest in the
land and averred that it was wholly the property of this brother Melecio.
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 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.
"A receiver, trustee, attorney, agent, or any other person occupying fiduciary relations respecting
property or persons, is 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 the trustee. It is to
avoid the necessity of any such inquiry that the rule takes so general a form. The rule stands on
the moral obligation to refrain from placing one's self in positions which ordinarily excite conflicts
between self-interest and integrity. It seeks to remove the temptation that might arise out of such
a relation to serve one's self-interest at the expense of one's integrity and duty to another, by
making it impossible to profit by yielding to temptation. It applies universally to all who come
within its principle."
INSULAR DRUG COMPANY VS PNB
Facts:
U.E. Foerster was formerly a salesman of the drug company for the island of Panay and Negros.
He also acted as a collector of the company, mainly taking checks from the Iloilo branch of the
drug company and depositing them to the company account with Philippine National Bank.
Upon examination of the checks deposited by Foerster with PNB, there were several indorsements
guaranteed by the PNB manager Angel Padilla for Carmen E. de Foerster, the wife of U.E.
Foerster, which was consequently withdrawn by the couple and a certain V. Bacaldo
(stenographer of Foerster).
When the Manila office of the drug company investigated and discovered the anomalies, Foerster
committed suicide. Although there was no evidence showing that the bank knew that Foerster was
misappropriating the funds of his principal, the Insular Drug Co. claims that it never received the
face value of the 132 checks in question covering a total of Php 18, 285.92.
The drug company saw fit to stand on the proposition that checks drawn in its favor were
improperly and illegally cashed by the bank for Foersters personal account.
Issue:
Whether the bank is liable for the amount indorsed and withdrawn by Foerster using company
checks even if the latter is an agent of the drug company.
Whether the bank is liable for the negligence of its agents when they allowed encashing of the
checks without prior authority from the company.
Ratio:
Yes on both issues.
The bank is liable for the amount withdrawn by Foerster and will have to stand the loss
occasioned by negligence of its agents.
The right of an agent to indorse commercial paper is a very responsible power and will
not be lightly inferred. A salesman with authority to collect money belonging to his
principal does not have the implied authority to indorse checks received in payment.
Any person taking checks made payable to a corporation, which can [be acted upon]
only by agents does so at his peril, and must abide by the consequences if the agent
who indorses the same is without authority.

The fact that the bank acted in good faith does not relieve it from responsibility. The bank could
tell by the checks themselves that the money belonged to the Insular Drug Company and not to
Foerster, his wife or his clerk. When the bank permitted the withdrawals without the authority
from the drug company, the bank made itself responsible to the drug company for the amounts
represented by the checks.
The bank could have relieved itself from the responsibility had it proven that the money withdrawn
by Foerster passed to the drug company but it hasnt done so.
relying upon such agency.
MACKE V CAMPS
Facts:
The plaintiffs in this action, B. H. Macke and W. H. Chandler, partners doing business under the
firm name of Macke, Chandler & Company, allege that during the months of February and March,
1905, they sold to the defendant and delivered at his place of business, known as the
"Washington Cafe," various bills of goods amounting to P351.50; that the defendant has only paid
on account of said accounts the sum of P174.
Before instituting this action they made demand for the payment thereof; and that defendant had
failed and refused to pay the said balance.
B. H. Macke, one of the plaintiffs, testified that on the order of one Ricardo Flores, who
represented himself to be agent of the defendant, he shipped the said goods to the defendants at
the Washington Cafe; that Flores later acknowledged the receipt of said goods and made various
payments.
Flores informed him that he did not have the necessary funds on hand, and that he would have to
wait the return of his principal.
Flores, in the absence of the defendant in the provinces, apparently in charge of the business and
claiming to be the business manager of the defendant, said business being that of a hotel with a
bar and restaurant.
A written contract dated May 25, 1904, was introduced in evidence, from which it appears that
one Galmes, the former owner of the business now know as the "Washington Cafe," subrented
the building wherein the business was conducted, to the defendant for a period of one year, for
the purpose of carrying on that business, the defendant obligating himself not to sublet or subrent
the building or the business without the consent of the said Galmes. This contract was signed by
the defendant and the name of Ricardo Flores appears thereon as a witness, and attached thereto
is an inventory of the furniture and fittings which also is signed by the defendant with the word
"sublessee" (subarrendatario) below the name, and at the foot of this inventory the word
"received" (recibo) followed by the name "Ricardo Flores," with the words "managing agent"
Issue:
W/n Flores was an agent of Washington Caf.
Held:
Flores is an agent of Washington Caf
Ratio:
In the absence of proof of the contrary we think that this evidence is sufficient to sustain a finding
that Flores was the agent of the defendant in the management of the bar of the Washington Cafe
with authority to bind the defendant, his principal, for the payment of the goods mentioned in the
complaint.
The contract introduced in evidence sufficiently establishes the fact that the defendant was the
owner of 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 in
question were made, Flores was apparently in charge of the business, performing the duties
usually entrusted to managing agent, leave little room for doubt that he was there as authorized
agent of the defendant. One who clothes another 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 parties dealing with such person in good faith and in the
following preassumptions or deductions, which the law expressly directs to be made from
particular facts, are deemed conclusive and unless the contrary appears, the authority of an agent
must be presumed to include all the necessary and usual means of carrying his agency into effect.
DELA CRUZ V NORTHERN THEATRICAL ENTERPRISES, INC., ET AL
Northern Theatrical Enterprises Inc. operated a movie house in Laoag, Ilocos Norte. Domingo Dela
Cruz was one of their security guards. He carried a revolver. One day, a Benjamin Martin wanted
to enter without a ticket but dela Cruz refused him entrance. Infuriated, Martin attacked him with
a bolo and in order to save his life, dela Cruz shot and killed Martin. Martin, thereafter, was
charged with homicide which, after re-investigation, was dismissed. A few years later, dela Cruz
again figured in a homicide case related to his work as security guard for the theater. He was
acquitted for the second charge. In both instances, dela Cruz employed a lawyer. He thereafter
demanded reimbursement for his litigation expenses but was refused by the theater. After which,
he filed an action for reimbursement plus damages.
Northern Theater moved for the dismissal of the complaint. The Court found for Northern Theater
and dismissed the complaint saying that dela Cruz had no cause of action. Dela Cruz filed present
appeal (for the reason that only questions of law are involved).
Held: Judgment affirmed.
Agency Doctrine
CFI was correct in rejecting the theory of dela Cruz that he was an agent of the defendants and
that as such agent he was entitled to reimbursement for the expenses incurred by him in
connection with the agency. The relationship between the theater and the plaintiff was not that of
principal and agent because the principle of representation was not involved. He was not
employed to represent defendant corporation in its dealings with third parties. He was merely an
employee hired to guard the cinema.
Issue is primarily one of employer employee. Whether an employee who in line with the
performance of his duty incur expenses caused not directly by his employer or fellow employees
but by a third party or stranger, may recover against his employer. In this case, theres no legal
obligation on the part of the employer, it might yet be regarded as a moral obligation. Since
employer not legally obligated to give legal assistance, plaintiff naturally cannot recover the
amount from defendant.
SC also says that the damage incurred did not flow from the performance of his duties but only
indirectly. Filing of the criminal charges was the efficient, intervening cause. As such, plaintiff
cannot fix civil responsibility to the defendant.
SHELL CO. V. FIREMENS INSURANCE
Facts:
This is an action for recovery of sum of money, based on 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, have
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: WON 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 tradename 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
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.

QUIROGA V. PARSONS
FACTS: Quiroga and Parsons entered into a contract for the exclusive sale of Quiroga beds in the
Visayan Islands. They agreed on the following terms: a) Quiroga shall furnish the beds and shall
give a 25% discount on the invoiced prices as commission sales and Parsons shall order by the
dozen; b) Payment shall be made within 60 days from date of shipment; c) Transportation and
shipment expenses shall be borne by Quiroga while freight, insurance, and cost of unloading by
Parsons; d) If before an invoice falls due, Quiroga should request payment, payment made shall
be prompt payment and a deduction of 2% shall be given; same discount if payment is in cash; e)
Notice from Quiroga shall be given at least 15 days before any change in price; f) Parsons binds
himself not to sell any other kind of bed; and g) Contract is for an unlimited period.
Parsons violated some of the conditions such as not to sell the beds at higher prices, pay for the
advertisement expenses, and to order beds by the dozen. Quiroga alleged that Parsons was his
agent and that the obligations are implied in a commercial agency contract.
ISSUE: w/n Parsons, by reason of the contract, was a purchaser or an agent of Quiroga for the
sale of the latters beds.
HELD: NO, Parsons was not an agent.
In order to classify a contract, due regard must be given to the essential clauses. In this case,
there was an obligation on Quirogas part to supply beds while an obligations on Parsons part to
pay the price. These are essential features of a contract of purchase and sale. None of the
clauses conveys the idea of an agency where an agent received the thing to sell it and
does not pay the price but delivers to the principal the price he obtains from the sale
to a third person, and if he does not sell it, he returns it.
The word agency used in the contract only expresses that Parsons was the only one
who could sell the petitioners beds in the Visayan Islands. A contract is what the law
defines it to be and not what the parties call it.