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Bgn Digests

Business Law – Business Organization 1


Law on Agency

LAW ON AGENCY  ART. 1884, NCC. (Principal bound by agent)

 ART. 1868, NCC. (Agency, defined) The agent is bound by his acceptance to carry out the agency,
and is liable for the damages which, through his non-
By the contract of agency a person binds himself to render some performance, the principal may suffer.
service or to do something in representation or on behalf of
another, with the consent or authority of the latter. (1709a) He must also finish the business already begun on the death of
the principal, should delay entail any danger. (1718)
 ART. 1869, NCC. (Agency, express or implied)
 ART. 1897, NCC. (Agent’s personal liability)
Agency may be express, or implied from the acts of the
principal, from his silence or lack of action, or his failure to The agent who acts as such is not personally liable to the party
repudiate the agency, knowing that another person is acting on with whom he contracts, unless he expressly binds himself or
his behalf without authority. exceeds the limits of his authority without giving such party
sufficient notice of his powers. (1725)
Agency may be oral, unless the law requires a specific form.
(1710a)  ART. 1898, NCC. (Agent contracts without authority)

 ART. 1874, NCC. (Agent’s authority in writing) If the agent contracts in the name of the principal, exceeding the
scope of his authority, and the principal does not ratify the
When a sale of a piece of land or any interest therein is through contract, it shall be void if the party with whom the agent
an agent, the authority of the latter shall be in writing; otherwise, contracted is aware of the limits of the powers granted by the
the sale shall be void. (n) principal. In this case, however, the agent is liable if he
undertook to secure the principal's ratification. (n)
 ART. 1878, NCC. (SPA, when required)
 ART. 1900, NCC. (Third person in estoppel)
Special powers of attorney are necessary in the following
cases: A third person cannot set up the fact that the agent has
(1) To make such payments as are not usually considered as exceeded his powers, if the principal has ratified, or has signified
acts of administration; his willingness to ratify the agent's acts. (n)
(2) To effect novations which put an end to obligations
already in existence at the time the agency was  ART. 1909, NCC. (Agent’s liability for fraud/negligence)
constituted;
(3) To compromise, to submit questions to arbitration, to The agent is responsible not only for fraud, but also for
renounce the right to appeal from a judgment, to waive negligence, which shall be judged with more or less rigor by the
objections to the venue of an action or to abandon a courts, according to whether the agency was or was not for a
prescription already acquired; compensation. (1726)
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership of an  ART. 1919, NCC. (Extinguishment of agency, grounds)
immovable is transmitted or acquired either gratuitously or
for a valuable consideration; Agency is extinguished:
(6) To make gifts, except customary ones for charity or those (1) By its revocation;
made to employees in the business managed by the (2) By the withdrawal of the agent;
agent; (3) By the death, civil interdiction, insanity or insolvency of the
(7) To loan or borrow money, unless the latter act be urgent principal or of the agent;
and indispensable for the preservation of the things which (4) By the dissolution of the firm or corporation which
are under administration; entrusted or accepted the agency;
(8) To lease any real property to another person for more than (5) By the accomplishment of the object or purpose of the
one year; agency;
(9) To bind the principal to render some service without (6) By the expiration of the period for which the agency was
compensation; constituted. (1732a)
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the
agency;
(15) Any other act of strict dominion. (n)

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Bgn Digests
Business Law – Business Organization 1
Law on Agency

Contents R/T ART. 1868 – AGENT – AUTHORITY OF CORPORATE OFFICER IN DEALING


WITH THIRD PERSONS: (1) ACTUAL AUTHORITY – (a) Express authority,

A1868 – CHEMPHIL EXPORT & IMPORT CORP VS CA measured by the power delegated to him by the corporation; (b) Implied authority,
measured by his prior acts which have been ratified or approved, or their benefits
(1995) .............................................................................. 4
accepted by his principal; (2) APPARENT AUTHORITY, which may be ascertained
R/T ART. 1868 – AGENT – The buyer merely acted as an agent where it paid a
through: (a) the corporation’s holding out of its officer or agent; and (b) its
portion of the purchase price to the seller’s creditor. Since the buyer was only
acquiescence in his acts of a particular nature, with actual or constructive
paying using the seller’s own funds, the buyer is not considered a third party payor
knowledge thereof, within or beyond the scope of his ordinary powers. ............ 8
as to effectuate legal subrogation from the seller of the rights to the attachment lien
of the disputed shares. ............................................................. 4 DOCTRINE OF APPARENT AUTHORITY – the acts and contracts of the agent, as
are within the apparent scope of the authority conferred on him, although no actual
A1868 – FILIPINAS LIFE ASSURANCE VS PEDROSO authority to do so has been conferred, bind the principal. It is determined only by the
(2008) .............................................................................. 5 acts of the principal (in ratifying or acquiescing thereto), and not by the acts of the
R/T ART. 1868 – AGENT – Valle acted as agent of the insurance company when he agent. .............................................................................. 8
collected amounts from the client and remitted the same to the company, using its
AGENT – BRANCH MANAGER – Although a branch manager is the general agent
official receipts. LIABILITY OF PRINCIPAL – GR: LIABLE WITHIN SCOPE OF
of the corporation, the power to modify or nullify corporate contracts remains
AUTHORITY: The principal is liable for the acts of its agent done within the scope of
generally in the board of directors, and his acts shall not bind the corporation
its authority. – EX: NOT LIABLE OUTSIDE SCOPE OF AUTHORITY: The principal
especially where there is a vigorous denial of his acts by his principal. ............ 8
is not liable for the acts of its agent done in excess of its authority – EX TO EX:
LIABLE IF RATIFIED, EVEN IF OUTSIDE SCOPE OF AUTHORITY : The principal A1869 – YUN KWA BYUNG VS PAGCOR (2009) ...... 10
is still liable for the acts of its agent, although done in excess of its authority, when
R/T ART. 1869 – IMPLIED AGENCY – It is derived from: (a) the acts of the principal;
the principal ratifies them. – In this case, Valle’s representation is outside of the scope
(b) his silence or lack of action; or (c) his failure to repudiate the agency, knowing that
of its authority, when he collected investments, despite the fact that the company only
another person is acting on his behalf without authority. – AS ACTUAL AGENCY, it
offers insurance services. However, the company, as principal, is still liable, because
must be proved by deductions or inferences from other facts. – NO IMPLIED
it ratified Valle’s authority upon confirmation thereof by its supervisor and branch
AGENCY – where the alleged principal posted notices to warn the gaming public that
manager. Hence, the company is estopped to deny Valle’s authority. .............. 5
no such agency exists. ........................................................... 10

A1868 – EUROTECH INDUSTRIAL TECHOLOGIES VS VIS-A-VIS APPARENT AUTHORITY – It is based on estoppel which can arise from
CUIZON (2007) ............................................................... 6 two circumstances (see table in digest) - NO RATIFICATION BY THE PRINCIPAL –
R/T ART. 1868 – AGENCY – PRINCIPLE: To accomplish results by using the because the junket agreement is void for being violative of the PAGCOR’s charter
services of others – PURPOSE: To extend the personality of the principal or the party ................................................................................... 10
for whom another acts and from whom he or she derives the authority to act – BASIS:
Representation, i.e. the agent acts for and on behalf of the principal on matters within
A1874 – ESTATE OF LINO OLAGUER VS ONGJOCO
the scope of his authority and said acts have the same legal effect as if they were
(2008) ............................................................................ 12
personally executed by the principal – ELEMENTS: (1) CONSENT, express or R/T ART. 1874 – WRITTEN AUTHORITY, REQUIRED TO SELL IMMOVABLES –

implied, of the parties to establish the relationship; (2) OBJECT is the execution of a Where no power of authority to sell real property was presented in writing, it is as if

juridical act in relation to a third person; (3) AGENT ACTS AS A REPRESENTATIVE, no such authority was given, and the sale is void. Where there is a mere general

and not for himself; (4) AGENT ACTS WITHIN THE SCOPE OF HIS AUTHORITY. power of authority presented, and not a SPA, it is deemed sufficient if the special
authority to sell real property was already incorporated in the general power of
..................................................................................... 6
authority. ......................................................................... 12
AGENT – SALES MANAGER – The powers of an agent are particularly broad in the
case of one acting as a general agent or manager; such a position presupposes a A1874 – MACTAN CEBU INTERNATIONAL AIRPORT
degree of confidence reposed and investiture with liberal powers for the exercise of AUTHORITY VS UNCHUAN (2016) ............................ 13
judgment and discretion in transactions and concerns which are incidental or R/T ART. 1874 – WRITTEN AUTHORITY, REQUIRED TO SELL IMMOVABLES –
appurtenant to the business entrusted to his care and management. In the absence CORRELATE: ART. 1878 – SPA REQUIRED TO TRANSFER OWNERSHIP OF
of an agreement to the contrary, a managing agent may enter into any contracts that IMMOVABLES – Without SPA, the alleged agent could not be legally considered a
he deems reasonably necessary or requisite for the protection of the interest of his representative. And his act of conveying cannot be a valid source of obligation to bind
principal entrusted to his management. ............................................ 6 all the other registered co-owners and their heirs. The other heirs could not have

R/T ART. 1897 – AGENT, PERSONAL LIABILITY – RULES – GR: PRINCIPAL IS given their consent, because there was no meeting of the minds among the other

SOLELY LIABLE FOR ACTS OF AGENT WITHIN BOUNDS OFHIS AUTHORITY – registered co-owners who gave no written authority to Atanacio to transact on their

EX: AGENT IS PERSONALLY LIABLE: (a) when he expressly binds himself, or behalf. – EFFECT OF NO SPA TO THE SALE - VOID, insofar as the other

(b) he exceeds the limits of his authority without giving notice of his powers to supposed represented co-owners are concerned – VALID, insofar as the co-

the third person. – THIRD PERSON CANNOT RECOVER FROM BOTH owner who acted as agent is concerned since he has the right to dispose of his

PRINCIPAL & AGENT. undivided share to others. ....................................................... 13


............................................................ 6
A1868 – BANATE VS PHIL COUNTRYSIDE RURAL A1878 – WOODCHILD HOLDINGS VS ROXAS
BANK (2010)................................................................... 8 ELECTRIC (2004)......................................................... 14
2
Bgn Digests
Business Law – Business Organization 1
Law on Agency

R/T ART. 1878 – SPA ON REAL RIGHTS OVER IMMOVABLE – e.g. conveyance R/T ART. 1878 – SPA IN MORTGAGE – PROPERTY IN MORTGAGE DIFFERENT
of road right-of-way – REQUIRES PUBLIC INSTRUMENT....................... 14 FROM PROPERTY IN SPA, UNENFORCEABLE MORTGAGE – The SPA contains
the exclusive enumeration of the properties with which the agent is authorized to
DOCTRINE OF APPARENT AUTHORITY, BURDEN TO PROVING: (a) the acts of
mortgage. Where the property in the SPA and the property so mortgaged by the agent
the respondent justifying belief in the agency by the petitioner; (b) knowledge thereof
are different, e.g. in TCT numbers and the ROD where these were registered, the
by the respondent which is sought to be held; and (c) reliance thereon by the
REM is unenforceable unless ratified by the principal. - SUBSEQUENT
petitioner consistent with ordinary care and prudence. – RATIFICATION MUST BE
REVOCATION – ACTUAL NOTICE SUPERIOR THAN CONSTRUCTIVE NOTICE
IN WRITING, if writing is required to grant an authority to do a particular act. IF NOT
– Where the ROD was informed of the principal’s intent to revoke the SPA and to
RATIFIED, UNENFORCEABLE.
................................................. 14 require her prior consent before any mortgage or sale may be had, this serves as an
A1878 – SHOPPER’S PARADISE REALTY VS ROQUE actual notice. The fact that it was not annotated at the back of the title is of no moment,
(2004) ............................................................................ 16 since actual notice is superior than constructive notice. Moreover, in the case, there
was even a subsequent constructive notice when the revocation was recorded in the
R/T ART. 1878 – SPA IN LEASE OF REAL PROPERTY FOR MORE THAN 1 YEAR
– Where the supposed agent enters into a 25-year lease contract with a third person, ROD. – MORTGAGEE BANK NOT IN GOOD FAITH FOR FAILURE TO EXERCISE
EXTRAORDINARY DILIGENCE IN DETERMINING AGENT’S LACK OF
the agent is not merely performing an act of administration, but an act of strict
AUTHORITY.
dominion or ownership. Hence, SPA is necessary. ............................... 16 .................................................................... 23

A1878 – DOMINION INSURANCE VS CA (2002) ....... 17 A1878 – MACTAN-CEBU INTERNATIONAL AIRPORT


AUTHORITY VS UNCHUAN (SEEABOVETEXT) ....... 26
R/T ART. 1878 – SPA IN SETTLEMENT OF INSURANCE CLAIMS – The payment
or settlement of insurance claims on behalf of the insurer (principal) is not an act of A1884 – BA FINANCE VS CA (1991).......................... 27
administration, but rather of strict dominion, which requires an SPA. ............. 17 R/T ART. 1884 – PRINCPAL’ S LIABILITY – BA Finance is bound by its acceptance
to carry put the agency, and is liable for damages which, thorugh its non-performance,
R/T ART. 1918 – AGENT’S LIABILITY – UNDER LAW ON AGENCY,
PERSONALLY LIABLE FOR ACTS BEYOND THE SCOPE OF AUTHORITY - BUT the Cuadys (the principal) may suffer. ........................................... 27
UNDER THE GENERAL LAW ON OBLICON, MAY BE REIMBURSED TO THE
A1897 – RUSTAN PULP & PAPER MILLS VS IAC .... 28
EXTENT THAT THE DEBTOR (INSURER) WAS BENEFITED TO PREVENT
UNJUST ENRICHMENT. A1897 – SCHMID & OBERLY INC VS RJL MARTINEZ
........................................................ 17
FISHING CORP ............................................................ 28
A1878 – ADRIANO VS PANGILINAN (2002) .............. 18
A1897 – EUROTECH INDUSTRIAL TECHNOLOGIES
R/T ART. 1878 – SPA IN MORTGAGE LOAN – Petitioner’s act of entrusting his TCT
VS CUIZON (SEEABOVETEXT).................................. 28
to his distant relative was for the purpose of helping him find a money lender. Not
having executed a SPA in her favor, the petitioner clearly did not authorize her to be A1897 – DBP VS CA .................................................... 28
his agent in procuring the mortgage. ............................................. 18 A1898 – SAFIC ALCAN & CIE VS IMPERIAL
A1878 – PP VS CARPO (2001).................................... 19 VEGETABLE OIL ......................................................... 28
R/T ART. 1878 – SPA IN COMPROMISE OF CIVIL LIABILITY IN CRIMINAL CASE A1898 – CERVANTES VS CA ..................................... 28
– An oral compromise to limit civil liability entered into by the defense counsel with
A1900 – SIREDY ENTERPRISES VS CA ................... 28
the public prosecutor is invalid. SPA is necessary. In the absence of SPA, the counsel
can neither bind nor compromise his client’s civil liability. ........................ 19
A1909 – TRAVEL WIDE ASSOCIATED SALES VS CA
...................................................................................... 28
A1878 – ANACLETO VS VAN TWEST (2000) ............ 20
A1909 – MBTC VS CA ................................................. 28
R/T ART. 1878 – SPA IN COMPROMISE, MANDATORY – COMPROMISE
AGREEMENT IS INVALID IF COUNSEL SIGNED, IN REPRESENTATION OF HIS A1919 – BUADO VS LAYAG ....................................... 28
CLIENT, WITHOUT SPA TO COMPROMISE – IF CLIENT IS A CORPORATION, A1919 – ESTATE OF JULIANA DIEZ VDA DE GABRIEL
SPA MUST BE GIVEN BY THE BOARD OF DIRECTORS.
..................... 20 VS CIR .......................................................................... 28
A1878 – LOYOLA SECURITY AND DETECTIVE
AGENCY VS NLRC (1995) ........................................... 22
R/T ART. 1878 – SPA IN NOVATIONS, COMPROMISE, WAIVER OF Notes:
OBLIGATIONS, ANY ACT OF STRICT DOMINION – Where there is no showing that
respondent was duly authorized by co-respondent to waive a part of the award given
to the latter, a compromise agreement entered into by the respondent in his own
behalf and in behalf of his co-respondent shall be void. .......................... 22

A1878 – MERCADO VS ALLIED BANKING CORP


(2007) ............................................................................ 23

3
Bgn Digests
Business Law – Business Organization 1
Law on Agency

A1868 – CHEMPHIL EXPORT & IMPORT CORP VS CA (1995) RTC favored CEIC. CA REVERSED in favor of the consortium.
R/T ART. 1868 – AGENT – The buyer merely acted as an agent where it Hence, the petition.

paid a portion of the purchase price to the seller’s creditor. Since the CEIC’S CONTENTION:
buyer was only paying using the seller’s own funds, the buyer is not
Based on ART. 1302(2), NCC, that there was legal subrogation
when a third person, not interested in the obligation, pay with the
considered a third party payor as to effectuate legal subrogation from express or tacit approval of the debtor. This is when FCI (CEIC’s
predecessor-in-interest) paid SBTC the due obligations of
the seller of the rights to the attachment lien of the disputed shares.
Garcia; thus, FCI, and later CEIC, was subrogated to the rights
++PRINCIPAL: Antonio Garcia – as original owner & seller of the disputed shares of SBTC, particularly to the latter’s attachment lien.
++AGENT: FIC – as buyer of the disputed shares, obliged to pay the part of the purchase price
to seller Garcia’s creditor, SBTC ISSUE:
FACTS: a. Ultimately, who is the rightful owner of the disputed
This involves the disputed 1,717,678 shares of stock of Antonio shares? (THE CONSORTIUM)
Garcia in Chemphil. The controversy arose from 2 complaints b. For purposes of discussion: WON FCI is a third party
for declaratory relief and/or injunction filed by Dynetics & payor under ART. 1302 or a mere agent under ART.
Antonio Garcia: 1868, NCC. (AGENT)
a. 1ST: The consortium case (filed against PISO, BPI,
LBP, PCIB, & RCBC -- respondents) on Sep 25 1984; HELD: The Respondents Consortium has the better right over
b. 2ND: The SBTC case, on Apr 23 1985. the disputed shares. FCI is a mere agent under ART. 1868.

In both cases, the Court dismissed Garcia’s complaint, and Petitioner invoked ART. 1302 (2), which provides that there is a
instead issued writs of attachment in favor of the defendants: presumed legal subrogation when a third person, not interested
a. 1ST: in the SBTC case on Jul 2 1985 in the obligation, pays with the express or tacit approval of the
b. 2ND: in the consortium case on Jul 19 1985 debtor. (LACKS MERIT)
wherein the garnishment of Garcia’s properties included the
disputed shares in Chemphil. ART. 1302(2) is not applicable. When Garcia sold the disputed
shares to FCI (CEIC’s predecessor-in-interest), the latter did
During the appeal of the consortium case, a compromise not by its own paid Garcia’s obligation to SBTC. Thus, FCI
agreement was entered into by the Garcia and the consortium. is not a third party payor.
One of the conditions provided was that Garcia shall be given 2
months to work for the entry and participation of his other Rather, FCI only paid SBTC with Garcia’s money, as it was
creditor, SBTC, into his compromise. supposed to be the portion of the purchase price to be given to
Garcia who directed FCI to pay the same to his creditor SBTC.
Problem is, on Jul 15 1988, Garcia executed a Deed of Sale In effect, it was still Garcia’s own money which paid his own
transferring the disputed shares to FCI. It was agreed that FCI, debt. FCI merely acted as an agent under ART. 1868. FCI was
as vendee, shall pay part of the purchase price directly to merely fulfilling its obligation under the Deed of Sale. FCI
SBTC for judgment credits against Garcia in the SBTC case. merely bound himself under a contract of agency, where he is
Because of this, FCI issued a check to pay SBTC. However, to render some service or to do something in representation or
SBTC refused to accept the check claiming that it was not on behalf of another, with the consent or authority of the latter.
sufficient to discharge the debt. Later however, on Jun 26 1989,
FCI assigned the disputed shares to CEIC (petitioner). Thus, CEIC is not subrogated to the rights of SBTC against
Garcia, since the requisites for legal subrogation under ART.
Meanwhile, on Jul 18 1989, the consortium filed a motion for 1302(2) was not complied with. So, CEIC never acquired
execution, invoking that Garcia failed to comply with the terms SBTC’s attachment lien thereof. CEIC cannot be categorized as
of the compromise agreement. Eventually, the disputed shares an attaching creditor.
of Garcia were levied upon on execution. And finally, the
consortium acquired the disputed shares of stock at the public Moreover, CEIC’s claim is only based on the Deed of Sale,
auction sale. which is still subject to an attachment legally and validly levied
thereon (i.e. the attachment by the consortium).
However, on Sep 26 1989, CEIC filed a motion to intervene in
the consortium case; claiming that it is now the rightful owner Therefore, CEIC’s claim of purchase cannot prevail over that of
of the disputed shares after it was assigned to it on Jun 26 the Consortium. It is the consortium which has better right over
1989 by CEIC, who purchased the same from FCI, who likewise the disputed shares.
purchased the same from Garcia. TC granted CEIC’s motion.
WHEREFORE, premises considered the appealed decision in G.R. Nos. 112438-39 is hereby
AFFIRMED and the appealed decision in G.R. No. 113394, insofar as it adjudged the CEIC the
This was opposed by the consortium, alleging that their
rightful owner of the disputed shares, is hereby REVERSED. Moreover, for wantonly resorting
attachment lien over the disputed shares must prevail over
to forum-shopping, PCIB is hereby REPRIMANDED and WARNED that a repetition of the same
the private sale in favor of CEIC, considering that these were
or similar acts in the future shall be dealt with more severely.
garnished as early as Jul 19 1985.

4
Bgn Digests
Business Law – Business Organization 1
Law on Agency

A1868 – FILIPINAS LIFE ASSURANCE VS PEDROSO (2008) ISSUE:


a. WON Valle, Alcantara, and Apetrior are agents of Filipinas
R/T ART. 1868 – AGENT – Valle acted as agent of the insurance company Life. (YES, AGENTS)
b. If so, WON Filipinas Life, as principal, be held solidarily liable
when he collected amounts from the client and remitted the same to
with its agents. (YES, SOLIDARILY LIABLE)
the company, using its official receipts. LIABILITY OF PRINCIPAL – GR:
HELD: The three of them are agents of Filipinas Life, with whom it is
LIABLE WITHIN SCOPE OF AUTHORITY: The principal is liable for the acts solidarily liable with against petitioners.
of its agent done within the scope of its authority. – EX: NOT LIABLE A. THEY ARE AGENTS OF FILIPINAS LIFE.
OUTSIDE SCOPE OF AUTHORITY: The principal is not liable for the acts of
The ff. are the indicators that Valle, Alcantara, and Apetrior are agents
its agent done in excess of its authority – EX TO EX: LIABLE IF RATIFIED, of Filipinas Life:
a. Respondents’ invested amounts were received by Valle and
EVEN IF OUTSIDE SCOPE OF AUTHORITY : The principal is still liable for remitted to Filipinas Life, using Filipinas Life’s official receipts,
whose authenticity were not disputed.
the acts of its agent, although done in excess of its authority, when the b. Valle’s authority to solicit and receive investments was also
principal ratifies them. – In this case, Valle’s representation is outside established by the parties.
c. When respondents sought confirmation, Alcantara, holding a
of the scope of its authority, when he collected investments, despite the supervisory position, and Apetrior, the branch manager,
confirmed that Valle had authority.
fact that the company only offers insurance services. However, the
B. FILIPINAS LIFE IS SOLIDARILY LIABLE.
company, as principal, is still liable, because it ratified Valle’s authority
upon confirmation thereof by its supervisor and branch manager. Filipinas Life, as the principal, is liable for obligations contracted by
its agent Valle. By the contract of agency, a person binds himself to
Hence, the company is estopped to deny Valle’s authority. render some service or to do something in representation or on behalf
of another, with the consent or authority of the latter.
+PRINCIPAL: Filipinas Life, as insurance company
+AGENT: Valle, as insurance agent, who received the investments of Respondents RULES ON PRINCIPAL’S LIABILITY WITH AGENT:
Pedroso & Palacio, and who refused to return the later amounts to said respondents. a. The general rule is that the principal is responsible for the
FACTS: acts of its agent done within the scope of its authority,
This involves policyholder Teresita Pedroso (respondent) of Filipinas and should bear the damage caused to third persons.
Life (petitioner insurance company). Ever since, she had been b. When the agent exceeds his authority, the agent becomes
transacting with her insurance agent Renato Valle. personally liable for the damage.
c. But even when the agent exceeds his authority, the principal
One day, Valle told her of the company’s promotional investment is still solidarily liable together with the agent if the
program, offering 8% prepaid interest a month. Enticed, Pedroso principal allowed the agent to act as though the agent had
invested and issued a post-dated check. In return, Valle issued his full powers.[15] In other words, the acts of an agent beyond
personal check for the 8% prepaid interest and a Filipinas Life “Agent’s the scope of his authority do not bind the principal, unless the
Receipt”. principal ratifies them, expressly or impliedly.[16]
Ratification in agency is the adoption or confirmation by one
Later, Pedroso called the Filipinas Life Escolta office and talked to person of an act performed on his behalf by another without
administrative assistant Francisco Alcantara, and then to branch authority.[17]
manager Angel Apetrior. Both employees confirmed the promotion.
Filipinas Life cannot profess ignorance of Valle’s acts. Even if
Thus, relying on Valle, Alcantara, and Apetror, Pedroso invested P10K, Valle’s representations were beyond his authority as a
and this was later returned to her. So, she investment a couple more debit/insurance agent, (since investment is not part of the
times. She even told Jennifer Palacio (another respondent) of this insurance policy extended by the company) Filipinas Life thru
investment plan, which influenced the latter to invest too. Alcantara and Apetrior expressly and knowingly ratified
Valle’s acts. It cannot even be denied that Filipinas Life benefited
Problem is, when both Pedroso and Palacio tried to withdraw their from the investments deposited by Valle in the account of Filipinas
investment, Valle refused to return some P17K, and the Filipinas Life. In our considered view, Filipinas Life had clothed Valle with
likewise refused to return their money. After several demands being left apparent authority; hence, it is now estopped to deny said
unheeded and not having seen Valle, respondents Pedroso and Palacio authority. Innocent third persons should not be prejudiced if the
filed an action for recovery of sum of money. principal failed to adopt the needed measures to prevent
misrepresentation, much more so if the principal ratified his agent’s
RTC held Filipinas Life and its co-defendants Valle, Apetrior, and acts beyond the latter’s authority. The act of the agent is
Alcantara jointly and solidarily liable CA AFFIRMED. Hence, the petition. considered that of the principal itself. Qui per alium facit per
seipsum facere videtur. “He who does a thing by an agent is
PETITIONER FILIPINAS LIFE’S CONTENTION: considered as doing it himself.”[18]
Although it recognized Valle as its agent, it claimed that Valle and WHEREFORE, the petition is DENIED for lack of merit. The Decision and Resolution, dated November 29,
Apetrior and Alcantara were acting outside the scope of their authority 2002 and August 5, 2003, respectively, of the Court of Appeals in CA-G.R. CV No. 33568 are AFFIRMED.
as agents. Costs against the petitioner.

RESPONDENTS PEDROSO & PALACIO CONTENDS:


That Filipinas Life authorized Valle, considering that Filipinas Life’s
official documents and facilities were used.

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Bgn Digests
Business Law – Business Organization 1
Law on Agency

A1868 – EUROTECH INDUSTRIAL TECHOLOGIES VS CUIZON (2007) petitioner Eurotech delivered the sludge pump to
R/T ART. 1868 – AGENCY – PRINCIPLE: To accomplish results by using respondents.
the services of others – PURPOSE: To extend the personality of the
Problem is, unbeknown to petitioner-company and
principal or the party for whom another acts and from whom he or she despite the Deed of Assignment, respondent ERWIN still
derives the authority to act – BASIS: Representation, i.e. the agent acts collected from Toledo Power Company its receivables
worth P365,135.29. This prompted petitioner-company to
for and on behalf of the principal on matters within the scope of his
demand payment from respondents. But having failed to
authority and said acts have the same legal effect as if they were fully comply with this obligation, petitioner filed a
personally executed by the principal – ELEMENTS: (1) CONSENT, express Complaint for Sum of Money, damages, etc. against
the respondent-brothers.
or implied, of the parties to establish the relationship; (2) OBJECT is the
execution of a juridical act in relation to a third person; (3) AGENT ACTS However, Respondent EDWIN alleged that he is not a real
party in interest, since he was allegedly acting as mere
AS A REPRESENTATIVE, and not for himself; (4) AGENT ACTS WITHIN THE
agent of the principal, who was Impact Systems. By this,
SCOPE OF HIS AUTHORITY. TC rendered Order dropping EDWIN as party-defendant.
AGENT – SALES MANAGER – The powers of an agent are particularly
CA AFFIRMED. Hence, the petition.

broad in the case of one acting as a general agent or manager; such a PETITIONER EUROTECH’S CONTENTION:
position presupposes a degree of confidence reposed and investiture That ERWIN’s act of collecting the receivables from
Toledo Power Corp., notwithstanding the existence of the
with liberal powers for the exercise of judgment and discretion in
Deed of Assignment signed by EDWIN on behalf of
transactions and concerns which are incidental or appurtenant to the Impact system, repudiated EDWIN’s power to sign the
business entrusted to his care and management. In the absence of an Deed of Assignment. As EDWIN did not sufficiently notify
ERWIN of the extent of his power as agent, as required
agreement to the contrary, a managing agent may enter into any by law, EDWIN should be made personally liable for the
contracts that he deems reasonably necessary or requisite for the obligations of its principal.
protection of the interest of his principal entrusted to his management.
RESPONDENT EDWIN’S CONTENTION:
R/T ART. 1897 – AGENT, PERSONAL LIABILITY – RULES – GR: PRINCIPAL That he is not a party in interest, because he was a mere
IS SOLELY LIABLE FOR ACTS OF AGENT WITHIN BOUNDS OFHIS
agent of Impact Systems owned by ERWIN.

AUTHORITY – EX: AGENT IS PERSONALLY LIABLE: (a) when he expressly ISSUE:


binds himself, or (b) he exceeds the limits of his authority without giving a. WON EDWIN was such an agent. (YES,
AGENT.)
notice of his powers to the third person. – THIRD PERSON CANNOT
b. If so, WON EDWIN, as agent, be personally liable
RECOVER FROM BOTH PRINCIPAL & AGENT. along with ERWIN, as principal. (NO, AGENT
++PRINCIPAL: ERWIN, the owner of Impact Systems, who collected the receivables NOT LIABLE.)
from Toledo Power Corp which was supposedly assigned to assignee Eurotech.
++AGENT: EDWIN, the sales manager of Impact Systems (brother of Erwin), who HELD:
executed the Deed of Assignment, in behalf of Impact Systems, in favor of Eurotech A. EDWIN IS AN AGENT.
FACTS:
In a contract of agency, a person binds himself to render
This involves the Deed of Assignment executed by
some service or to do something in representation or on
EDWIN Cuizon as sales manager as agent of its principal
behalf of another with the latter's consent.[29] The
Impact Systems owned by his brother ERWIN Cuizon
underlying principle of the contract of agency is to
(respondent brothers).
accomplish results by using the services of others —
to do a great variety of things like selling, buying,
This started when Eurotech (petitioner-company) sold to
manufacturing, and transporting.[30] Its purpose is to
Impact Systems, among others, a one unit of sludge
extend the personality of the principal or the party for
pump valued at P250,000. When the sludge pump arrived
whom another acts and from whom he or she derives
from UK, Eurotech refused to deliver it to respondents
the authority to act.[31] It is said that the basis of agency
pending full payment of their debts to petitioner. So,
is representation, that is, the agent acts for and on behalf
respondent EDWIN, in behalf of Impact Sales, executed
of the principal on matters within the scope of his authority
a “Deed of Assignment” of its receivables from Toledo
and said acts have the same legal effect as if they were
Power Corp. in favor of petitioner-company. As a result,
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personally executed by the principal.[32] By this legal sludge pump underscores Impact Systems' perseverance
fiction, the actual or real absence of the principal is to get hold of the said equipment. There is, therefore, no
converted into his legal or juridical presence — qui facit doubt in our mind that respondent EDWIN's
per alium facit per se. participation in the Deed of Assignment was
"reasonably necessary" or was required in order for him
The elements of the contract of agency are: (1) consent, to protect the business of his principal. Had he not
express or implied, of the parties to establish the acted in the way he did, the business of his principal would
relationship; (2) the object is the execution of a juridical have been adversely affected and he would have violated
act in relation to a third person; (3) the agent acts as a his fiduciary relation with his principal.
representative and not for himself; (4) the agent acts
within the scope of his authority. Also, petitioner cannot seek to recover both from
respondents ERWIN, as principal, and EDWIN, as agent.
In this case, the parties do not dispute the existence of
the agency relationship between respondents ERWIN as It is well to state here that Article 1897 of the New Civil
principal and EDWIN as agent. The only cause of the Code upon which petitioner anchors its claim against
present dispute is whether respondent EDWIN respondent EDWIN "does not hold that in case of excess
exceeded his authority when he signed the Deed of of authority, both the agent and the principal are liable to
Assignment thereby binding himself personally to the other contracting party."[39] To reiterate, the first part
pay the obligations to petitioner. of Article 1897 declares that the principal is liable in
cases when the agent acted within the bounds of his
authority. Under this, the agent is completely absolved of
B. EDWIN, AS AGENT, IS NOT PERSONALLY any liability. The second part of the said provision
LIABLE WITH HIS PRINCIPAL. presents the situations when the agent himself becomes
liable to a third party when he expressly binds himself
Article 1897 reinforces the familiar doctrine that an agent, or he exceeds the limits of his authority without
who acts as such, is not personally liable to the party giving notice of his powers to the third person.
with whom he contracts. The same provision, however, However, it must be pointed out that in case of excess of
presents two instances when an agent becomes authority by the agent, like what petitioner claims exists
personally liable to a third person. The first is when here, the law does not say that a third person can
he expressly binds himself to the obligation and the recover from both the principal and the agent.
second is when he exceeds his authority. In the last
instance, the agent can be held liable if he does not Therefore, respondent EDWIN acted within his authority
give the third party sufficient notice of his powers. as agent, and is not a RPII.

We hold that respondent EDWIN does not fall within any WHEREFORE, premises considered, the present petition is DENIED and the Decision
of the exceptions. The Deed of Assignment clearly states dated 10 August 2004 and Resolution dated 17 March 2005 of the Court of Appeals in
that respondent EDWIN signed thereon as the sales CA-G.R. SP No. 71397, affirming the Order dated 29 January 2002 of the Regional Trial
manager of Impact Systems. The position of manager Court, Branch 8, Cebu City, is AFFIRMED.
is unique in that it presupposes the grant of broad Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu
powers with which to conduct the business of the City, for the continuation of the proceedings against respondent Erwin Cuizon.
principal.

Edwin Cuizon acted well-within his authority when he


signed the Deed of Assignment. To recall, petitioner
refused to deliver the one unit of sludge pump unless
it received, in full, the payment for Impact Systems'
indebtedness.[36] We may very well assume that
Impact Systems desperately needed the sludge pump
for its business since after it paid the amount of fifty
thousand pesos (P50,000.00) as down payment on 3
March 1995,[37] it still persisted in negotiating with
petitioner which culminated in the execution of the
Deed of Assignment of its receivables from Toledo
Power Company on 28 June 1995.[38] The significant
amount of time spent on the negotiation for the sale of the
7
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A1868 – BANATE VS PHIL COUNTRYSIDE RURAL BANK (2010) Problem is, the title still carried the mortgage lien in favor of
R/T ART. 1868 – AGENT – AUTHORITY OF CORPORATE OFFICER IN PCRB. This prompted petitioners to request PCRB for the
release of the mortgage, to which PCRB refused. Hence,
DEALING WITH THIRD PERSONS: (1) ACTUAL AUTHORITY – (a) Express petitioners instituted an action for specific performance to
authority, measured by the power delegated to him by the corporation;
compel PCRB to release the mortgage.

(b) Implied authority, measured by his prior acts which have been RESPONDENT PCRB’S CONTENTION:
Based on the “cross-collateral stipulation”, full payment of the
ratified or approved, or their benefits accepted by his principal; (2)
three loans was necessary before the release of any mortgage.
APPARENT AUTHORITY, which may be ascertained through: (a) the
RTC favored petitioners, finding the contract as a contract of
corporation’s holding out of its officer or agent; and (b) its acquiescence
adhesion.
in his acts of a particular nature, with actual or constructive knowledge
CA REVERSED, finding that BM Mondigo cannot orally
thereof, within or beyond the scope of his ordinary powers. amend the mortgage contract between PCRB and petitioner
DOCTRINE OF APPARENT AUTHORITY – the acts and contracts of the spouses. His acts, which constitute a novation of the original
mortgage containing the cross-collateral stiulation, cannot bind
agent, as are within the apparent scope of the authority conferred on PCRB.
him, although no actual authority to do so has been conferred, bind the
PETITIONERS’ CONTENTION:
principal. It is determined only by the acts of the principal (in ratifying That the cross-collateral stipulation should be disregarded,
since it was novated by the subsequent agreement with BM
or acquiescing thereto), and not by the acts of the agent.
Mondigo, who acted as agent of its principal, PCRB. Thus,
AGENT – BRANCH MANAGER – Although a branch manager is the PCRB is bound by the acts of its agent, Mondigo.

general agent of the corporation, the power to modify or nullify ISSUE: WON Branch Manager’s act of verbally agreeing to the
corporate contracts remains generally in the board of directors, and his novation of the mortgage contract binds its principal, PCRB.
(NOT BINDING)
acts shall not bind the corporation especially where there is a vigorous
denial of his acts by his principal. HELD: The Branch Manager’s act of verbally agreeing to the
novation of the mortgage contract does not bind PCRB. There
++PRINCIPAL: PCRB, the bank, who insisted on the cross-collateral stipulation in the was neither such express nor apparent authority granted to him
mortgage contract by the PCRB.
++AGENT: BM Mondigo, the branch manager who verbally agreed on the novation of
the mortgage contract. The “cross-collateral stipulation” in the mortgage contract was a
FACTS: variety of a dragnet clause, where the security covers not only
the first loan, but as well as the 2 loans subsequently obtained
This involves the alleged novation of the cross-collateral
by the petitioners. According to petitioners, this was deemed
stipulation in the mortgage contract.
novated by agreement with Branch Manager Mondigo. (LACKS
Spouses Maglasang (petitioners) obtained a loan of P1,070,000 MERIT)
from PCRB (respondent bank), secured by a real estate
mortgage over the subject property, w/c includes the house For novation to be valid (particularly an extinctive novation,
owned by Spouses Cortel (also petitioners). Aside from the where an old obligation is terminated by the creation of a new
subject loan, two other loans were subsequently obtained by obligation that takes the place of the former; in contrast with a
Spouses Maglasang. modificatory novation, where the old obligations subsists), the ff.
requisites should be complied with:
However, the mortgage contract contained a “cross-collateral (1) a previous valid obligation;
stipulation" which requires the full settlement of all three loans (2) an agreement of all parties concerned to a new
contract;
before the release of any mortgage.
(3) the extinguishment of the old obligation; and
(4) the birth of a valid new obligation.
Later, Spouses Maglasang and Spouses Cortel asked PCRB’s
permission to sell the subject properties. Branch Manager
Pancrasio Mondigo, acting for PCRB, verbally agreed, but In this case, the 2nd requisite is lacking. For the consequent
creation of a new contractual obligation, consent of both parties,
required them the full payment of the first loan (the P1,070,000).
is thus required. Where either or both parties involved are
juridical entities, proof that the second contract was
So, Spouses Maglasang and Spouses Cortel sold the subject
executed by persons with the proper authority to bind their
properties to Violeta Banata (also, petitioner) for P1,750,000,
respective principals is necessary.
and used said amount to pay their first loan with PCRB. As a
result, PCRB gave the owner’s duplicate certificate of title to
Under the Corporation Code, the power and the
Banate.
responsibility to decide whether the corporation should

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Law on Agency

enter into a contract that will bind the corporation are corporation, with apparent authority commensurate with the
lodged in the Board of Directors, who may delegate the ordinary business entrusted him and the usual course and
same to its officers, committees, or agents. conduct thereof,[25] yet the power to modify or nullify
corporate contracts remains generally in the board of
The authority of a corporate officer or agent in dealing with directors.
third persons may be actual or apparent.
1. Actual authority is either express or implied. Being a mere branch manager alone is insufficient to support
a. The extent of an agent's express authority is to the conclusion that Mondigo has been clothed with "apparent
be measured by the power delegated to him by authority" to verbally alter terms of written contracts, especially
the corporation, while when viewed against the telling circumstances of this case:
b. The extent of his implied authority is measured a) the unequivocal provision in the mortgage
by his prior acts which have been ratified or contract;
approved, or their benefits accepted by his b) PCRB's vigorous denial that any agreement to
principal. release the mortgage was ever entered into by it; and,
2. The doctrine of "apparent authority," on the other c) the fact that the purported agreement was not even
hand, with special reference to banks, had long been reduced into writing considering its legal effects on
recognized in this jurisdiction. The existence of the parties' interests.
apparent authority may be ascertained through:
(a) the general manner in which the corporation It is a settled rule that persons dealing with an agent are
holds out an officer or agent as having the bound at their peril, if they would hold the principal liable, to
power to act, or in other words, the apparent ascertain not only the fact of agency but also the nature and
authority to act in general, with which it extent of the agent's authority, and in case either is controverted,
clothes him; or the burden of proof is upon them to establish it.
(b) the acquiescence in his acts of a particular
nature, with actual or constructive knowledge As a result, the purported agreement with BM Mondigo is not
thereof, within or beyond the scope of his binding on the bank for lack of authority of PCRB's branch
ordinary powers. manager. The present action has no basis.

Under the doctrine of apparent authority, acts and contracts WHEREFORE, we DENY the petitioners' petition for review on certiorari for lack of merit, and
of the agent, as are within the apparent scope of the AFFIRM the decision of the Court of Appeals dated December 19, 2003 and its resolution dated
authority conferred on him, although no actual authority to May 5, 2004 in CA-G.R. CV No. 74332. No pronouncement as to costs.
do such acts or to make such contracts has been conferred,
bind the principal.[20] The principal's liability, however, is limited
only to third persons who have been led reasonably to believe
by the conduct of the principal that such actual authority exists,
although none was given. In other words, apparent authority is
determined only by the acts of the principal and not by the
acts of the agent.[21] There can be no apparent authority of an
agent without acts or conduct on the part of the principal; such
acts or conduct must have been known and relied upon in good
faith as a result of the exercise of reasonable prudence by a third
party as claimant, and such acts or conduct must have produced
a change of position to the third party's detriment.

The records and TC’s decision was utterly silent on the manner
by which PCRB, as supposed principal, has "clothed" or
"held out" its branch manager as having the power to enter
into an agreement, as claimed by petitioners:
a) No proof of the course of business, usages and
practices of the bank about, or knowledge that the
board had or is presumed to have of, its responsible
officers' acts regarding bank branch affairs, was
ever adduced to establish the branch manager's
apparent authority to verbally alter the terms of
mortgage contracts.
b) Neither was there any allegation, much less proof, that
PCRB ratified Mondigo's act or is estopped to
make a contrary claim.

Although a branch manager, within his field and as to third


persons, is the general agent and is in general charge of the
9
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Law on Agency

A1869 – YUN KWA BYUNG VS PAGCOR (2009) exchange gambling, conducted by PAGCOR
R/T ART. 1869 – IMPLIED AGENCY – It is derived from: (a) the acts of the dealers using PAGCOR facilities, operated by
principal; (b) his silence or lack of action; or (c) his failure to repudiate PAGCOR employees and using PAGCOR chips
the agency, knowing that another person is acting on his behalf without bearing the PAGCOR logo;[54]
authority. – AS ACTUAL AGENCY, it must be proved by deductions or 3. PAGCOR controlled the release, withdrawal
inferences from other facts. – NO IMPLIED AGENCY – where the alleged and return of all the gambling chips given to
principal posted notices to warn the gaming public that no such agency ABS Corporation in that part of the casino and at
exists. the end of the day, PAGCOR conducted an
inventory of the gambling chips;[55]
VIS-A-VIS APPARENT AUTHORITY – It is based on estoppel which can
4. ABS Corporation accounted for all gambling
arise from two circumstances (see table in digest) - NO RATIFICATION BY
chips with the Commission on Audit (COA),
THE PRINCIPAL – because the junket agreement is void for being
the official auditor of PAGCOR;[56]
violative of the PAGCOR’s charter
5. PAGCOR enforced, through its own
++ALLEGED PRINCIPAL: PAGCOR
++ALLEGED AGENT: ABS CORP.
manager, all the rules and regulations on the
FACTS: operation of the gambling pit used by ABS
This involves Yun Kwa Byung (petitioner) who is a junket Corporation.[
player brought in by Korean-based ABS Corporation in
relation to the Junket Agreement which the latter entered ISSUE: WON an implied agency or agency by estoppel
into with PAGCOR (to allow foreign players to play at the existed as to hold PAGCOR liable as principal for the acts
5 designated gaming tables of the Casino Filipino at of its alleged agent ABS Corp. (NO AGENCY)
Grand Blvd. Hotel, Manila).
HELD: No agency existed, whether implied or by
Petitioner filed a complaint for sum of money against estoppel. Hence, PAGCOR is not liable as principal.
PAGCOR, as the alleged principal of ABS Corp., for the
USD 2.1M worth of gambling chips which were denied Implied Agency Apparent Agency or Agency
encashment by PAGCOR employees. by Estoppel
It is derived from: It is based on estoppel and can
a) the acts of the principal, arise from two instances:
RESPONDENT PAGCOR’S CONTENTION: b) his silence or lack of 1) The principal may
That petitioner is not a PAGCOR player, but a junket action, or knowingly permit the
player of ABS. And that PAGCOR posted a notice written c) his failure to repudiate agent to hold himself out
the agency, knowing that as having such authority,
in English and Korean language that the ABS is solely another person is acting and the principal becomes
accountable for all playing chips wagered on the tables on his behalf without estopped to claim that the
and the any financial agreement shall be binding between authority. (ART. 1869) agent does not have such
the ABS and its players. Hence, PAGCOR disclaimed authority.
2) The principal may clothe
liability. the agent with the indicia
of authority as to lead a
TC favored PAGCOR and dismissed petitioner’s reasonably prudent person
complaint. CA AFFIRMED. to believe that the agent
actually has such authority.[
Being an actual agency, it is a There is no agency at all, but
PETITIONER’S CONTENTION: fact to be proved by deductions the one assuming to act as agent
PAGCOR is liability as a presumed principal on the basis or inferences from other facts. has apparent or ostensible,
of implied agency or agency by estoppel, based on the although not real, authority to
represent another.
ff. acts and conduct of PAGCOR:
1. Three floors of the Grand Boulevard Hotel[52] The law makes no presumption of agency and proving
were leased to PAGCOR for conducting its existence, nature and extent is incumbent upon
gambling operations;[53] the person alleging it.
2. Of the three floors, PAGCOR allowed ABS Acts and conduct of PAGCOR negates the existence
Corporation to use one whole floor for foreign of an implied agency or an agency by estoppel.

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Law on Agency

The basis for agency is representation,[58] that is, the Corporation. The facts that he enjoyed special
agent acts for and on behalf of the principal on matters treatment upon his arrival in Manila and special
within the scope of his authority and said acts have the accommodations in Grand Boulevard Hotel, and that
same legal effect as if they were personally executed by he was playing in special gaming rooms are all
the principal.[59] On the part of the principal, there must indications that petitioner cannot claim good faith that he
be an actual intention to appoint or an intention believed he was dealing with PAGCOR. Petitioner cannot
naturally inferable from his words or actions, while on be considered as an innocent third party and he
the part of the agent, there must be an intention to cannot claim entitlement to equitable relief as well.
accept the appointment and act on it. [60] Absent such
mutual intent, there is generally no agency. Petitioner asserts that PAGCOR ratified the acts of
ABS Corporation. (LACKS MERIT)

A. NO IMPLIED AGENCY The trial court has declared, and we affirm, that the
Junket Agreement is void. A void or inexistent contract
There is no implied agency in this case because is one which has no force and effect from the very
PAGCOR did not hold out to the public as the beginning. Hence, it is as if it has never been entered
principal of ABS Corporation. PAGCOR's actions did into and cannot be validated either by the passage of
not mislead the public into believing that an agency can time or by ratification.
be implied from the arrangement with the junket
WHEREFORE, we DENY the petition. We AFFIRM the Court of Appeals' Decision dated
operators, nor did it hold out ABS Corporation with any
apparent authority to represent it in any capacity. The 27 May 2003 as well as the Resolution dated 7 May 2004 as modified by this Decision.

Junket Agreement was merely a contract of lease of


facilities and services.

The players brought in by ABS Corporation were covered


by a different set of rules in acquiring and encashing
chips. The players used a different kind of chip than what
was used in the regular gaming areas of PAGCOR, and
that such junket players played specifically only in the
third floor area and did not mingle with the regular patrons
of PAGCOR. Furthermore, PAGCOR, in posting notices
stating that the players are playing under special rules,
exercised the necessary precaution to warn the
gaming public that no agency relationship exists.

A. NO AGENCY BY ESTOPPEL

An agency by estoppel, which is similar to the doctrine


of apparent authority requires proof of reliance upon
the representations, and that, in turn, needs proof that
the representations predated the action taken in
reliance.[62]

There can be no apparent authority of an agent


without acts or conduct on the part of the principal
and such acts or conduct of the principal must have been
known and relied upon in good faith and as a result of
the exercise of reasonable prudence by a third person as
claimant, and such must have produced a change of
position to its detriment.

Such proof is lacking in this case. In the entire duration


that petitioner played in Casino Filipino, he was dealing
only with ABS Corporation, and availing of the
privileges extended only to players brought in by ABS
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Law on Agency

A1874 – ESTATE OF LINO OLAGUER VS ONGJOCO (2008) court. Neither was respondent able to explain the
omission. Other than the self-serving statement of respondent,
R/T ART. 1874 – WRITTEN AUTHORITY, REQUIRED TO SELL IMMOVABLES
no evidence was offered at all to prove the alleged written power
– Where no power of authority to sell real property was presented in of attorney. This of course was fatal to his case.
writing, it is as if no such authority was given, and the sale is void. Where
As it stands, there is no written power of attorney to speak
there is a mere general power of authority presented, and not a SPA, it of. The trial court was thus correct in disregarding the claim of
its existence. Accordingly, respondent Ongjoco's claim of good
is deemed sufficient if the special authority to sell real property was faith in the sale of Lots Nos. 1 and 2 has no leg to stand on.
already incorporated in the general power of authority.
B. With respect to Lots No. 76-D,E,F,G
++SUPPOSED PRINCIPAL: VIRGILIO, the son, in whose name the title was issued
++SUPPOSED AGENT: JOSE, the father, who caused the sale to buyer Ongjoco Ongjoco was able to present a general power of attorney that
FACTS: was executed by Virgilio Olaguer. While the law requires a
This involves Lot No. 76, which was later subdivided but originally special power of attorney, the general power of attorney
belonging to the estate of deceased Lino Olaguer. The ff. events was sufficient in this case, as Jose A. Olaguer was expressly
transpired:
empowered to sell any of Virgilio's properties; and to sign,
Initially, the deceased’s wife Olivia Olaguer was appointed as execute, acknowledge and deliver any agreement
administrator, along with Eduardo Olaguer. In the order of the probate therefor.[38] Even if a document is designated as a general
court, some properties of the estate were authorized to be sold to pay power of attorney, the requirement of a special power of attorney
the obligations of the estate. Pursuant to this authority, administrators is met if there is a clear mandate from the principal specifically
Olivia & Eduardo sold 12 parcels of land to Pastor Bacani, who later authorizing the performance of the act.[39] The special power of
resold it back to said administrators. Lot 76 was among the 12 lots. attorney can be included in the general power when the act or
transaction for which the special power is required is specified
Meanwhile, Olivia was remarried to Jose Olaguer. Thereafter, Olivia
therein.[40]
executed a SPA in favor of her Jose (2nd husband), authorizing the latter
to “sell, mortgage, assign, transfer, endorse, and deliver” certain
properties. On its face, the written power of attorney contained the signature
of Virgilio Olaguer and was duly notarized. As such, the same
It appears the Jose (2nd husband) caused the subdivision of Lot 76 into is considered a public document and it has in its favor the
11 lots (A-K). Thereafter, by virtue of the SPA given by Olivia, Jose sold presumption of authenticity and due execution, which can
to his son Virgilio Lots 76-B, C, D, E, F, & G. Lots 76-B & & & 76-C was only be contradicted by clear and convincing evidence.[41]
subdivided anew and designated as Lot No. 1 & 2.
No evidence was presented to overcome the presumption in
Thereafter, Jose, claiming to be the attorney-in-fact of his son Virgilio
under a “general power of attorney” sold Lot Nos. 1 & 2, 76-D, E, F, favor of the duly notarized power of attorney. Neither was there
& G to Emiliano Ongjoco (respondent). a showing of any circumstance involving the said document that
would arouse the suspicion of respondent and spur him to
This prompted the Estate of Lino Olaguer, as represented y the heirs inquire beyond its four corners, in the exercise of that
(petitioner) to file an Action for Annulment of Sales of Real Property reasonable degree of prudence required of a man in a similar
and/or Cancellation of Titles. In an amended complaint, they situation. We therefore rule that respondent Ongjoco had every
impleaded respondent Ongjoco as defendant for the sale of Lot No. 76. right to rely on the power of attorney in entering into the
contracts of sale of Lots Nos. 76-D to 76-G with Jose A. Olaguer.
PETITIONER’S CONTENTION:
That the power of attorney referred to by Jose as his authority for the WHEREFORE, premises considered, the instant petition is hereby PARTIALLY
sale to Ongjoco (respondent) was never presented. Hence, the salee
GRANTED. The assailed Decision of the Court of Appeals dated 27 February 2006 in CA-G.R.
were void.
CV NO. 71710 is MODIFIED in that Paragraph 4 of the Decision dated 13 July 2001 of the

RESPONDENT’S CONTENTION: Regional Trial Court of Legazpi City, Branch 6, and the Order dated 23 July 2001 shall read as
That Jose was duly authorized by a written power of attorney when the follows:
properties were sold to him. This validated the sales of the properties. 4) Lots 1 and 2, Pcs-20015 sold to Emiliano M. Ongjoco are hereby ordered reverted back to
the estate of Lino Olaguer. For this purpose, within ten (10) days from the finality of this decision,
ISSUE: WON there was sufficient authority to sell the lots by defendant Emiliano M. Ongjoco is hereby ordered to execute the necessary deed of
virtue of a power of attorney. (PARTLY YES AND NO) reconveyance, otherwise, the Clerk of Court shall be ordered to execute the said reconveyance
and have the same registered with the Register of Deeds so that new titles shall be issued in
HELD: We distinguish: the name of the estate of Lino Olaguer and the titles of Emiliano Ongjoco cancelled.

A. With respect to Lots No. 1 & 2

When Lots Nos. 1 and 2 were sold to respondent Ongjoco


through Jose A. Olaguer, the Transfer Certificates of Title of
said properties were in Virgilio's name.[37] Unfortunately for
respondent, the power of attorney that was purportedly issued
by Virgilio in favor of Jose Olaguer with respect to the sale of
Lots Nos. 1 and 2 was never presented to the trial
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A1874 – MACTAN CEBU INTERNATIONAL AIRPORT HELD: Atanacio did not validly represented the Heirs in the
absence of the written authority required under Art. 1874 &
AUTHORITY VS UNCHUAN (2016) 1878, NCC, whenever real property is involved. As a result, the
R/T ART. 1874 – WRITTEN AUTHORITY, REQUIRED TO SELL IMMOVABLES sale is void for lack of consent of the heirs, but this is only with
respect to the shares of the co-owner heirs. With respect to
– CORRELATE: ART. 1878 – SPA REQUIRED TO TRANSFER OWNERSHIP
Atanacio’s shares, on the other hand, the sale is valid.
OF IMMOVABLES – Without SPA, the alleged agent could not be legally
A. VOID WITH RESPECT TO THE CO-OWNERS, FOR
considered a representative. And his act of conveying cannot be a valid LACK OF SPA
source of obligation to bind all the other registered co-owners and their
Without a special power of attorney specifying his authority to
heirs. The other heirs could not have given their consent, because there dispose of an immovable, Atanacio could not be legally
was no meeting of the minds among the other registered co-owners considered as the representative of the other registered co-
owners of the properties in question. Atanacio's act of
who gave no written authority to Atanacio to transact on their behalf. conveying Lot No. 4810-A and Lot No. 4810-B cannot be a
– EFFECT OF NO SPA TO THE SALE - VOID, insofar as the other supposed valid source of obligation to bind all the other registered co-
owners and their heirs because he was not clothed with any
represented co-owners are concerned – VALID, insofar as the co-owner authority to enter into a contract with CAA. The other heirs
who acted as agent is concerned since he has the right to dispose of his could not have given their consent as required under Article
147550 of the New Civil Code because there was no meeting
undivided share to others. of the minds among the other registered co-owners who
++ALLEGED PRINCIPAL: HEIRS OF EUGENIO GODINEZ, original registered owners
gave no written authority to Atanacio to transact on their
++ALLEGED AGENT: ATANACIO GODINEZ, the co-owner who, as supposed
behalf. Therefore, no contract was perfected insofar as the
portions or shares of the other registered co-owners or their
representative of the heirs, sold the subject lots to CAA.
heirs were concerned.
FACTS:
This involves Lot No. 4810-A & 4810-B, originally registered HOWEVER: The transaction entered into by Atanacio and CAA,
under the names of the Heirs of Eugenio Godinez. however, was not entirely void because the lack of consent
by the other co-owners in the sale was with respect to their
According to Richard Unchuan (respondent), he was the shares only.
rightful owner of the subject lots through Deeds of Absolute
Sale executed between him and the Heirs on Dec 7 1998. B. VALID WITH RESPECT TO ATANACIO’S SHARE

Problem is, Unchuan discovered that Atanacio Godinez, Although the sale transaction insofar as the other heirs of the
alleging to be the attorney-in-fact of all the Heirs, already sold registered owners was void, the sale insofar as the extent
both lots to Civil Aeronautic Administration (CAA), the of Atanacio's interest is concerned, remains valid.
predecessor of MCIAA, as early as Apr 3 1958.
ART. 493 recognizes the absolute right of a co-owner to
This prompted Unchuan to file a Complaint for Declaration of freely dispose of his pro indiviso share as well as the fruits
Nullity of the Deed of Absolute Sale against MCIAA, alleging and other benefits arising from that share, independently of the
that Atanacio was not authorized by the Heirs to sell their other co-owners. The sale of the subject lots affects only the
undivided shares. seller's share pro indiviso, and the transferee gets only what
corresponds to his grantor's share in the partition of the
PETITIONER MCIAA’S CONTENTION: property owned in common. Since a co-owner is entitled to sell
That Atanacio acted as the representative of the Heirs in his undivided share, a sale of the entire property by one co-
selling the lots to the Republic of the Philippines, as represented owner without the consent of the other co-owners is not null
by CAA. This is corroborated by the Deed of Partition signed on and void; only the rights of the co-owner/seller are
Sep 17 1969 by Atanacio, along with other former registered co- transferred, thereby making the buyer a co-owner of the
owners, attesting to the fact of sale in favor of the government. property.

RTC favored Unchuan; finding that Atanacio was not clothed In the instant case, Atanacio was still one of the registered co-
with a SPA to sell the disputed lots. CA AFFIRMED. Hence, the owners of the subject lots. Thus, he effectively sold his undivided
petition. share to CAA and, as a result, CAA became a co-owner of the
undivided subject lots. Hence, with respect only to Atanacio’s
ISSUE: share, the sale is still valid.
a) WON Atanacio acted validly represented the Heirs.
WHEREFORE, judgment is hereby rendered declaring that:
(NO VALID REPRESENTATITION) a) The Deed of Sale signed by Atanacio Godinez alienating the lands denominated as Lot No. 4810-A and Lot
b) WON the sale executed by Atanacio with CAA is valid. No. 4810-B in favor of MCIAA's predecessor-in-interest is VALID, insofar as his undivided share in the said

(PARTLY VALID) lots is concerned, but VOID, insofar as the undivided shares of the other registered owners, who did not sign
the deed, are concerned; and

b) Plaintiff Richard E. Unchuan is the true and legal owner of portions of Lot No. 4810-A and Lot No. 4810-B
consisting of One Hundred Forty Nine Thousand Nine Hundred Thirty (149,930) Square Meters.

13
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Business Law – Business Organization 1
Law on Agency

A1878 – WOODCHILD HOLDINGS VS ROXAS ELECTRIC (2004) That it never authorized Roberto Roxas to grant the
R/T ART. 1878 – SPA ON REAL RIGHTS OVER IMMOVABLE – e.g. beneficial use, nor to sell, any portion of the 1st lot, since
the resolution only covers the 2nd lot.
conveyance of road right-of-way – REQUIRES PUBLIC INSTRUMENT.

DOCTRINE OF APPARENT AUTHORITY, BURDEN TO PROVING: (a) the acts TC favored WHI; granting the beneficial use of the RROW
and the sale of the 1st lot; that RECCI was estopped from
of the respondent justifying belief in the agency by the petitioner; (b)
disowning the apparent authority of Roberto Roxas,
knowledge thereof by the respondent which is sought to be held; and (c) otherwise it would prejudice WHI which transacted with
reliance thereon by the petitioner consistent with ordinary care and Roberto in good faith.
prudence. – RATIFICATION MUST BE IN WRITING, if writing is required to
CA REVERSED; relying on the resolution of the RECCI-
grant an authority to do a particular act. IF NOT RATIFIED, BOD which merely granted Roberto the authority to sell
UNENFORCEABLE. the 2nd lot only; and it does not cover the grant of RROW
from the 1st lot.
++PRINCIPAL: RECCI, as owner of the 2 parcels of land
++AGENT: ROBERTO ROXAS, the president of RECCI who was authorized under the
ISSUE: WON Roberto Roxas validly acted as agent of
BOD resolution, but has exceeded from his powers.
RECCI when he included the conveyance of the 1st lot,
FACTS: although the BOD resolution covers only the 2 nd lot. (NO,
This involves the 2 parcels of land owned by Roxas NOT AGENT)
Electric and Construction Company, Inc. (RECCI, the
respondent), namely: HELD: Roberto did not validly acted as RECCI’s agent
a) Lot No. 491-A-3-B-1 (1st lot, for brevity), a portion when he included the conveyance of the 1st lot, although
of which was a dirt road (the road right-of-way) the BOD resolution covers only the 2nd lot.
accessing to Sumulong Highway; and
b) Lot No. 491-A-3-B-2 (2nd lot, for brevity), which Generally, the acts of the corporate officers within the
was the original subject of the disputed sale in scope of their authority are binding on the corporation.
this case. However, under Article 1910 of the New Civil Code, acts
done by such officers beyond the scope of their authority
It all started when RECCI’s Board of Directors approved cannot bind the corporation unless it has ratified such
a resolution authorizing Roberto Roxas (its president) to acts expressly or tacitly, or is estopped from denying
sell the 2nd lot. them.

Eventually, acting upon said authority, Roberto sold the A. NO SPECIAL POWER OF ATTORNEY
2nd lot to Woodchild Holdings, Inc. (WHI) through its
president Jonathan Dy. However, among the terms and Roberto was not specifically authorized. Roberto’s
conditions under the Deed of Absolute Sale is that authority under the resolution is limited to the selling of the
Roberto Roxas shall convey 25 sq. m. of the 1st lot for 2nd lot, and it does not include any authority to sell or
purposes of the road right-of-way, as to grant access to convey real rights on the 1st lot.
WHI’s vehicles.
Under paragraph 12, Article 1878 of the New Civil Code,
Later, WHI complained to Roberto that RECCI’s vehicles a special power of attorney is required to convey real
were parked on a portion of the 1st lot over which WHI had rights over immovable property.[26] Article 1358 of the
been granted a ROW. So, Roberto promised to look into New Civil Code requires that contracts which have for
the matter, and it was discussed that WHI would have to their object the creation of real rights over immovable
buy 500 sq.m. portion of the 1st lot. property must appear in a public document.

Problem is, Roberto died in the process. So, WHI B. NO APPARENT AUTHORITY
requested and later demanded from RECCI for the sale
of the 1st lot. But, RECCI rejected. PETITIONER WHI’S CONTENTION: in allowing Roxas
to execute the contract to sell and the deed of
This prompted WHI to file a complaint for specific absolute sale and failing to reject or disapprove the
performance and damages against RECCI. same, the respondent thereby gave him apparent
authority to grant a right of way over Lot No. 491-A-3-
RESPONDENT RECCI’S CONTENTION: B-1 and to grant an option for the respondent to sell a
portion thereof to the petitioner. (LACKS MERIT)
14
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Law on Agency

IN LIGHT OF ALL THE FOREGOING, judgment is hereby rendered AFFIRMING the

Absent estoppel or ratification, apparent authority assailed Decision of the Court of Appeals WITH MODIFICATION. The respondent is

cannot remedy the lack of the written power required ordered to pay to the petitioner the amount of P5,612,980 by way of actual damages and

under the statement of frauds.[31] In addition, the P100,000 by way of attorney’s fees. No costs.

petitioner’s fallacy is its wrong assumption of the


unproved premise that the respondent had full
knowledge of all the terms and conditions contained
in the deed of absolute sale when Roxas executed it.

For the principle of apparent authority to apply, the


petitioner was burdened to prove the following: (a) the
acts of the respondent justifying belief in the agency
by the petitioner; (b) knowledge thereof by the
respondent which is sought to be held; and, (c) reliance
thereon by the petitioner consistent with ordinary care
and prudence.[34] In this case, there is no evidence on
record of specific acts made by the respondent [35]
showing or indicating that it had full knowledge of
any representations made by Roxas to the petitioner
that the respondent had authorized him to grant to the
respondent an option to buy a portion of Lot No. 491-A-3-
B-1 covered by TCT No. 78085, or to create a burden or
lien thereon, or that the respondent allowed him to do so.

C. NO RATIFICATION

PETITIONER WHI’S CONTENTION: that by receiving


and retaining the P5,000,000 purchase price of Lot
No. 491-A-3-B-2, the respondent effectively and
impliedly ratified the grant of a right of way on the
adjacent lot, Lot No. 491-A-3-B-1, and to grant to the
petitioner an option to sell a portion thereof,

It bears stressing that the respondent sold Lot No. 491-A-


3-B-2 to the petitioner, and the latter had taken
possession of the property. As such, the respondent
had the right to retain the P5,000,000, the purchase
price of the property it had sold to the petitioner.

Moreover, if a writing is required to grant an authority


to do a particular act, ratification of that act must also
be in writing.[37] Since the respondent had not ratified
the unauthorized acts of Roxas, the same are
unenforceable.

In sum, Roberto Roxas was not granted a SPA to sell or


convey real rights over an immovable property (i.e.
RROW in 1st lot). There was also no apparent authority as
there was no evidence of specific acts conducted by the
principal (RECCI) showing it had full knowledge of
Roberto’s representations. Finally, there was no
ratification in writing by RECCI. Hence, the alleged sale is
unenforceable.

15
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Business Law – Business Organization 1
Law on Agency

A1878 – SHOPPER’S PARADISE REALTY VS ROQUE (2004) or in behalf of another with the consent of the latter.[9]
R/T ART. 1878 – SPA IN LEASE OF REAL PROPERTY FOR MORE THAN 1 Article 1878 of the Civil Code expresses that a special
power of attorney is necessary to lease any real
YEAR – Where the supposed agent enters into a 25-year lease contract property to another person for more than one
with a third person, the agent is not merely performing an act of year. The lease of real property for more than one year
administration, but an act of strict dominion or ownership. Hence, SPA
is considered not merely an act of administration but an
act of strict dominion or of ownership.
is necessary.
Besides, during their negotiation, petitioner Shoppers, through its representatives, was
++ALLEGED PRINCIPAL: EFREN ROQUE, as owner of the subject lot by way of DIV
apprised of the fact that the subject property actually belonged to the respondent.
++ALLEGED AGENT: DR. FELIPE ROQUE, who entered into a 25 yr lease contract over
the subject lot with Shoppers’
WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals
FACTS:
declaring the contract of lease and memorandum of agreement entered into between Dr.
This involves a parcel of land originally registered in the
Felipe C. Roque and Shopper’s Paradise Realty & Development Corporation not to be
name of late Dr. Felipe Roque which was:
binding on respondent is AFFIRMED. No costs.
a) Donated inter vivos to his son Efren (respondent)
on Dec 26 1978;
b) But subject of the 25-year lease contract ^ MOA
to construct entered into between Dr. Roque and
Shopper’s Paradise (petitioner) on Dec 23 1993.

The dispute arose when petitioner Shopper’s and Dr.


Roque agreed to have the contract of lease and MOA
annotated on the title. But, this was never made because
of the untimely death of Dr. Roque. So, Shopper’s was
constrained to deal with Dr. Roque’s son, Efren
(respondent). Unfortunately, the negotiations broke down
due to some disagreements.

Later, however, Efren (respondent) filed a Case for


Annulment of the COL & MOA, alleging:
a) that he had long been the absolute owner of the
property by virtue of the donation inter vivos
executed by his parents in his favor;
b) that the late Dr. Roque had no authority to enter
into the assailed agreements with Shopper’s;
c) that when Efren left for USA, he merely delegated
to his father the administration of the property.

TC dismissed the complaint, in favor of Shopper’s; finding


that the Deed of Donation was not registered, hence not
binding against third persons, like Shopper’s.

CA REVERSED, in favor of Efren, finding that Shoppers’


was not a lessee in good faith, having prior knowledge of
the donation in favor of Efren.

ISSUE: WON Dr, Felipe Roque validly acted as agent of


his son. (NO, NOT AGENT)

HELD: Dr. Felipe Roque was not an agent of his son.

It was not shown that Dr. Felipe C. Roque had been an


authorized agent of respondent.

In a contract of agency, the agent acts in representation


16
Bgn Digests
Business Law – Business Organization 1
Law on Agency

A1878 – DOMINION INSURANCE VS CA (2002) HELD: Guevarra acted beyond the scope of his authority
R/T ART. 1878 – SPA IN SETTLEMENT OF INSURANCE CLAIMS – The as agent for Dominion. Although under the law on agency,
Guevarra shall be personally liable for it; however, under
payment or settlement of insurance claims on behalf of the insurer the law on contracts, he may still be reimbursed under the
(principal) is not an act of administration, but rather of strict dominion, principle of unjust enrichment.
which requires an SPA.

R/T ART. 1918 – AGENT’S LIABILITY – UNDER LAW ON AGENCY, There is no dispute that Guevarra is Dominion’s agent
based on the SPA. But the SC held that, despite the
PERSONALLY LIABLE FOR ACTS BEYOND THE SCOPE OF AUTHORITY - BUT
word “special” in the title of the document, the contents
UNDER THE GENERAL LAW ON OBLICON, MAY BE REIMBURSED TO THE reveal that what was constituted was actually a
EXTENT THAT THE DEBTOR (INSURER) WAS BENEFITED TO PREVENT “general” agency. It comprises all the business of the
principal, but couched in general terms. It is limited only
UNJUST ENRICHMENT.
to acts of administration.
++PRINCIPAL: DOMINION INSURANCE CORP., as the insurer
++AGENT: RODOLFO GUEVARRA, as the agency manager who settled claims in behalf The questioned act was the “payment/settlement of
of the insurer. claims”. This is not an act of administration, but rather
FACTS: of strict dominion which requires an SPA under ART.
This involves the insurer’s liability being extinguished by 1878 (1) & (15). This was not included in the said SPA.
the settlement of claims done by its agent. Now, the agent
seeks reimbursement, Instead, Guevarra’s authority to settle claims is embodied
in the Memorandum of Management Agreement,
The insurer is Dominion Insurance Corp. (petitioner). It granting authority to settle and dispose of all motor car
appointed Rodolfo Guevarra (respondent) as agency claims, and full authority on TPPI claims settlement.
manager by virtue of the ff: However, this is further limited by the written standard
(1) SPA, granting it authority to perform general authority to pay, which states that the payment shall
business transactions in behalf of the corporation; come from Guevarra’s revolving fund or collection
and (NOT FROM HIS PERSONAL FUNDS).
(2) Memorandum of Management Agreement,
which enumerated Guevarra's duties and The principal’s instruction was to pay using Guevarra’s
responsibilities, particularly the authority to settle revolving funds/collection. But Guevarra instead paid
and dispose of all motor car claims, in the amount using his personal funds.
of P5K with prior approval of the Regional Office,
and full authority on TPPI claims settlement. But Thus, Guevarra, although authorized to settle claims,
this was limited by the written standard deviated from the instructions of the principal. As a result,
authority to pay, which states that the payment under ART. 1918 under the law on agency, Guevarra may
shall come from Guevarra’s revolving fund or not be reimbursed by its principal.
collection.
Nonetheless, Guevarra may still recover under the
Problem is, when insurance claims were being filed by general law on obligations and contracts, but only insofar
insurer Dominion’s clients, respondent Guevarra as the payment has been beneficial to Dominion (under
advanced P156,473.90 in his capacity as manager to ART. 1235, 2nd par., NCC). Otherwise, it would result in
satisfy said claims. However, when he demanded unjust enrichment of Dominion.
reimbursement from the insurance company, Dominion
IN VIEW WHEREOF, we DENY the Petition. However, we MODIFY the decision of the
refused. This prompted Mngr. Guevarra to file the civil
Court of Appeals[28] and that of the Regional Trial Court, Branch 44, San Fernando,
case for sum of money against insurer Dominion.
Pampanga,[29] in that petitioner is ordered to pay respondent Guevarra the amount of
P112,672.11 representing the total amount advanced by the latter in the payment of the
LC favored Guevarra. CA AFFIRMED.
claims of petitioner’s clients.

ISSUE:
a) WON Guevarra acted within his authority as
agent for Dominion. (NOT REALLY)
b) WON Guevarra is entitled to reimbursement of
amounts he paid

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Bgn Digests
Business Law – Business Organization 1
Law on Agency

A1878 – ADRIANO VS PANGILINAN (2002) Xxx (7) To loan or borrow money, unless
R/T ART. 1878 – SPA IN MORTGAGE LOAN – Petitioner’s act of entrusting
the latter act be urgent and
indispensable for the preservation of the
his TCT to his distant relative was for the purpose of helping him find a things which are under administration;
money lender. Not having executed a SPA in her favor, the petitioner
Xxx (12) To create or convey real rights
clearly did not authorize her to be his agent in procuring the mortgage.
over immovable property.”
++ALLEGED PRINCIPAL: GUILLERMO ADRIANO, the registered owner
++ALLEGED AGENT: ANGELINA SALVADOR, the distant relative with whom the
As to other issues:
owner’s TCT was entrusted
1. The REM was void because: (a) the mortgagor’s
FACTS: signature was forged, and (b) an impostor
This involves a parcel of land registered under the name pretended to be the mortgagor when the
of Guillermo Adriano (petitioner). However, he entrusted mortgagee made an ocular inspection of the
the original owner’s copy of the TCT to Angelina subject property.
Salvador, a distant relative, for the purpose of securing a 2. Petitioner cannot be faulted for entrusting his TCT
mortgage loan. to his “distant relative” Angelina for purposes of
securing a mortgage. In fact, Pangilinan was not
Problem is, without Adriano’s knowledge and consent, an innocent mortgagee for value. He failed to
Angelina mortgaged the property to Romulo observe due diligence in the grant of the loan and
Pangilinan (respondent). in the execution of the REM. Since he was
engaged in the real estate business, he is
Knowing this, Adriano demanded for the reconveyance of expected to ascertain the status and condition of
the property from Pangilinan. But the latter refused, hence the properties offered to him as collaterals, as
the complaint. well as to verify the identities of the persons he
transacts business with. (He merely testified that
RESPONDENT’S CONTENTION: he “assumed” the poser of Guillermo Adriano to
That petitioner voluntarily entrusted the TCT to be the owner. Also, he knew that the property was
Angelina for the purpose of securing a loan, thereby being leased, but he never verified from the
creating a principal-agent relationship between lessees whether the claimed owner was indeed
petitioner and Angelina. As a result, the REM was their lessor.) Because Pangilinan failed to verify
executed within the scope of authority granted to whether the mortgagor was really the owner of
Angelina. Hence, valid REM. the property sought to be mortgaged, he must
bear the consequences of his negligence.
RTC favored petitioner Adriano and ordered for
reconveyance. CA REVERSED on the basis of the
entrustment of the title to Angelina. Hence, the petition. WHEREFORE, the Petition is GRANTED and the assailed Decision SET ASIDE. The
November 25, 1993 Decision of the RTC of San Mateo, Rizal (Branch 76) is hereby

ISSUE: WON a contract of agency was created when REINSTATED. No costs.

Adriano entrusted his title to Angelina. (NO AGENCY)

HELD: No contract of agency was created.

Petitioner’s act of entrusting and delivering his TCT and


Residence Certificate to Salvador was only for the
purpose of helping him find a money lender. Not
having executed a power of attorney in her favor, he
clearly did not authorize her to be his agent in
procuring the mortgage. Article 1878 of the Civil
Code provides:

“Art. 1878. Special powers of attorney


are necessary in the following cases:

18
Bgn Digests
Business Law – Business Organization 1
Law on Agency

A1878 – PP VS CARPO (2001) However, insofar as Teresita was concerned, she was
R/T ART. 1878 – SPA IN COMPROMISE OF CIVIL LIABILITY IN CRIMINAL
apprised of the agreement and in fact had signed her
name as instructed by the court, thereby tacitly ratifying
CASE – An oral compromise to limit civil liability entered into by the the same.
defense counsel with the public prosecutor is invalid. SPA is necessary.
As for accused-appellants, the aforecited dialogue
In the absence of SPA, the counsel can neither bind nor compromise his
between the court and counsel does not show that they
client’s civil liability. were ever consulted regarding the proposed
++ALLEGED PRINCIPAL: THE ACCUSED settlement. In the absence of a special power of
++ALLEGED AGENT: THE DEFENSE COUNSEL, by way of oral compromise (invalid) attorney given by accused-appellants to their
FACTS: counsel, the latter can neither bind nor compromise
his clients' civil liability. Consequently, since Atty.
This involves a criminal case for the complex crime of
Sanglay and Atty. Rafael had no specific power to
multiple murder with attempted murder, caused by the
compromise the civil liability of all accused-
hurling of a hand grenade into the bedroom, of the Dulays,
appellants, its approval by the trial court which did not
leading to an explosion and the subsequent death of
Florentino, Norwela, and Nissan Dulay and the wounding take the precautionary measures to ensure the protection
of Noemi Dulay. of the right of accused-appellants not to be deprived of
their property without due process of law, could not
The accused were: Jaime Carpo, Oscar Ibao, Warlito Ibao, and Roche Ibao. legalize it. For being violative of existing law and
jurisprudence, the settlement should not be given force
and effect.
Apparently, during trial, the counsel for the defense
entered into an oral compromise with the public WHEREFORE, the assailed Decision of the trial court finding accused-appellants JAIME
prosecutor, which was subsequently ratified through CARPO, OSCAR IBAO, WARLITO IBAO and ROCHE IBAO GUILTY of the complex
signature by the private complainant (Teresita Dulay), crime of multiple murder with attempted murder and sentencing them to the supreme
limiting that amount of civil liability to P600K (from penalty of death is AFFIRMED with the MODIFICATION that they are ordered to pay the
P1,282,740). heirs of the deceased Florentino, Norwela and Nissan, all surnamed Dulay, P50,000.00
as death indemnity and P50,000.00 as moral damages for each death or an aggregate
ISSUE: WON the oral compromise by the counsel for the amount of P300,00.00. In addition, accused-appellants are ordered to pay Noemi Dulay
defense was valid. (NOT VALID) P30,000.00 as indemnity for her attempted murder. Costs against accused- appellants.

HELD: An oral compromise by the defense counsel was


invalid.

As to the attorney’s power to compromise:


a) ART. 1878, NCC requires a SPA “to compromise,
to submit questions to arbitration, to renounce the
right to appeal from a judgment, to waive
objections to the venue of an action or to abandon
a prescription already required”;
b) SEC. 23, RULE 138, ROC requires special
authority in favor of the attorney to “compromise
their client’s litigation or receive anything in
discharger of their client’s claims but the full
amount in cash”.

The requirements under both provisions are met when


there is a clear mandate expressly given, by the
principal to his lawyer specifically authorizing the
performance of an act.

In this case, counsel for both parties had no special


power of attorney from their clients to enter into a
compromise.

19
Bgn Digests
Business Law – Business Organization 1
Law on Agency

A1878 – ANACLETO VS VAN TWEST (2000) petitioner cannot be held to be in estoppel, since the SPA
R/T ART. 1878 – SPA IN COMPROMISE, MANDATORY – COMPROMISE is a mandatory requirement.

AGREEMENT IS INVALID IF COUNSEL SIGNED, IN REPRESENTATION OF A. ATTY. PEREZ IS WITHOUT SPA TO


HIS CLIENT, WITHOUT SPA TO COMPROMISE – IF CLIENT IS A COMPROMISE
CORPORATION, SPA MUST BE GIVEN BY THE BOARD OF DIRECTORS.
1. With respect to respondent Van Twest:
++Principal: Alexander van Twest and/or Euroceanic, the complainant-respondents
++Agent: Atty. Perez, the one who filed the complaint in behalf of the complainants, and Atty. Perez admitted that his only authority to represent
who entered into the compromise agreement with petitioners. is the retainer agreement he had with Van Twest.
FACTS: However, this did not include a special authority to
This arose from a complaint for reconveyance of title enter into a compromise agreement.
filed by Atty. Ernesto Perez, in the name of Alexander
Van Twest and Euroceanic (respondents), as against Rule 138, Sec. 23 provides that attorneys cannot,
Gloria Anacleto (petitioner) and Isaias Bongar, on Feb 6 without special authority, compromise their client’s
1995. litigation. Furthermore, Article 1878(3), NCC provides
that SPAs are necessary to compromise.
According to Atty. Perez, Van Twest, has been reported
missing since June 16, 1992, but is duly represented by Indeed, a SPA constituting Atty. Perez as attorney-in-fact
said Atty. Perez as his agent/or general counsel. is necessary.

Eventually, a compromise agreement was entered into 2. With respect to respondent Euroceanic:
by petitioner Anacleto and Atty. Perez, in representation
of Van Twest. It was stipulated therein that petitioner It should be noted that the action for reconveyance filed
Anacleto shall pay the debts directly to Atty. Perez. The by Atty. Perez was brought not only in behalf of Van Twest
TC rendered judgment based on the said compromise but also of Euroceanic, a juridical person.
agreement.
As a rule, the power to compromise or settle claims in
However, Petitioner Anacleto, represented by new favor of or against the corporation is vested in the
counsel, filed an urgent omnibus motion asking the board of directors.
Court to order Atty. Perez to submit a SPA, and in the
meantime to defer petitioner’s compliance with her Hence, in the absence of any authorization from the
obligation under the compromise agreement. board of directors of Euroceanic, Atty. Perez could
not file any suit in its behalf, regardless of the fact that
ATTY. PEREZ’ CONTENTION: Van Twest was the former chairman of its board.
Although Atty. Perez admitted that he had no SPA from
Van Twest to enter into a compromise agreement, he B. ESTOPPEL DOES NOT APPLY.
claims that Petitioner Anacleto is estopped from denying
his authority since petitioner’s former counsel (law firm of The CA held that petitioner is estopped to deny Atty.
Salonga, Hernandez, and Allado) was informed of this Perez’ authority to represent respondents because
fact. The TC & CA sustained this argument. petitioner knew from the start of the negotiations for the
compromise agreement that Atty. Perez had no SPA.
ISSUE: (LACKS MERIT)
a. WON a lawyer, in representation of his client,
may enter into a compromise agreement in the Estoppel does not apply. Although petitioner’s former
absence of a SPA. (NO, SPA IS MANDATORY) counsel knew that Atty. Perez had no SPA, said counsel
b. WON petitioner is estopped from denying the nonetheless negotiated with him because of his
absence of the SPA for having been informed of representation that he was the representative of Van
such fact during the negotiations. (NOT Twest and that he could secure an SPA from the heirs
ESTOPPED) of Van Twest. Petitioner was thus well within her right in
relying upon such representation of Atty. Perez.
HELD: A lawyer, in representation of his client
(respondent), cannot enter into a compromise agreement Of importance is paragraph 5 of the compromise
without a SPA. Even if the petitioner was aware of the agreement which provides that “[t]he signatories to this
absence of the SPA from the start of the negotiations, the
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Agreement hereby represent and warrant that they are


duly authorized to execute this Agreement.”

By virtue of this provision, petitioner had the right to


require Atty. Perez to secure the necessary authority from
Van Twest or the latter’s heirs as well as from Euroceanic.
Indeed, petitioner cannot be faulted for treating this
warranty as a condition precedent to her compliance
with the compromise agreement since the requirement
of special authority is mandatory and a lawyer’s
authority to compromise cannot simply be presumed.

C. What injury will result if we sustain the CA’s


decision in affirming the compromise
agreement despite the absence of the SPA?

The risk of sustaining the decision of the Court of Appeals


is that:
a. Of requiring petitioner to pay a debt to a
stranger, we cannot just rely on the guaranty
of Atty. Perez that he would hold any money
he receives in the cases he has filed in trust
for Van Twest and/or Euroceanic.
b. There is no stopping Van Twest and/or
Euroceanic from suing petitioner again for the
same cause of action if they are unable to
recover the money from Atty. Perez.
c. In fact, the law does not even require them to
recognize the trust unilaterally created by
Atty. Perez or first seek to recover from him.

Hence, the absence of the SPA in favor of Atty. Perez is


fatal. The fact that the compromise agreement was
approved by lower court does not make it final and
executory. Since a compromise agreement, is also a
contract, which is considered void for lack of the consent
or special authority from Van Twest and/or Euroceanic.
Hence, the compromise agreement is not enforceable.
WHEREFORE, the decision of the Court of Appeals dismissing petitioner’s action for
certiorari is hereby REVERSED and, consequently, the decision of the Regional Trial
Court, Branch 7, Manila, based on the compromise agreement of the parties, is
ANNULLED and SET ASIDE and the compromise agreement itself is declared without
force and effect.

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A1878 – LOYOLA SECURITY AND DETECTIVE AGENCY VS NLRC (1995) strict dominion. In this case, there was no
R/T ART. 1878 – SPA IN NOVATIONS, COMPROMISE, WAIVER OF showing that respondent Prado was duly
authorized by co-respondent Tuscano to
OBLIGATIONS, ANY ACT OF STRICT DOMINION – Where there is no
waive a part of the award given to her –
showing that respondent was duly authorized by co-respondent to considering that respondent Prado executed the
waive a part of the award given to the latter, a compromise agreement compromise agreement not only on his own
behalf but also on behalf of co-respondent
entered into by the respondent in his own behalf and in behalf of his co-
Tuscano.
respondent shall be void.
++PRINCIPAL: Matilde Tuscano, as co-respondent (co-employee in the labor case) Hence, being violative of existing law and jurisprudence,
++AGENT: Victor Prado Sr., as co-respondent (or co-employee) who agreed with the such settlement cannot be given force and effect.
compromise settlement and who received P5K advance from the employer, in behalf of
WHEREFORE, the petition is DISMISSED and petitioner company is ORDERED to PAY
Tuscano
private respondents the amount of P48,317.93, in addition to the partial payment of
FACTS: P43,000.00, to satisfy the monetary award which has long become final and executory.
This involves a complaint for illegal dismissal, etc. filed
by Victor Prado Sr. and Matilde Tuscano (respondents)
against Loyola Security and Detective Agency and/or GM
Ruperto Acle Jr. (petitioners).

Labor Arbiter ruled in favor of respondents. NLRC


affirmed.

So, respondents subsequently filed a Motion for Issuance


of a Writ of Execution. But thereafter, they filed a Joint
Manifestation acknowledging complete satisfaction
of the award.

However, respondents again filed a Motion for the


Issuance of an Alias Writ of Execution for the
Recovery of the Balance of the Award, claiming that
they received less than the award of LA. This motion was
granted

Petitioner moved for reconsideration, but was denied.


Hence, this petition.

PETITIONERS’ CONTENTION:
That respondent Prado’s acts of entering into a
compromise agreement and in accepting an advance of
P5,000 from petitioner Acle constituted a novation of the
award adjudged by the LA.

ISSUE: WON the compromise agreement is valid and


enforceable. (NOT VALID)

HELD: The compromise agreement is not valid:

a. There is no compliance with the NLRC rules


which requires the assistance of counsel and
approval of the LA in approving the compromise
agreement; and
b. There is no compliance with Article 1878, NCC
which requires that a SPA is necessary to effect
novations, to compromise, to waive any
obligation gratuitously, any in any other act of
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A1878 – MERCADO VS ALLIED BANKING CORP (2007) 23 1996, notifying ROD-Quezon City that any
R/T ART. 1878 – SPA IN MORTGAGE – PROPERTY IN MORTGAGE attempt to mortgage or sell the subject property
must be with her full consent.
DIFFERENT FROM PROPERTY IN SPA, UNENFORCEABLE MORTGAGE –
The SPA contains the exclusive enumeration of the properties with RESPONDENT BANK’S CONTENTION:
which the agent is authorized to mortgage. Where the property in the
That the TCT No. RT-106388 registered with ROD-Pasig
[the property in SPA] was reconstituted as TCT RT-
SPA and the property so mortgaged by the agent are different, e.g. in 18206(106338) registered with ROD-QC [the property in
TCT numbers and the ROD where these were registered, the REM is REM]. Hence, the two are one and the same.
unenforceable unless ratified by the principal. - SUBSEQUENT
RTC nullified the REM, in favor of petitioner-heirs, for
REVOCATION – ACTUAL NOTICE SUPERIOR THAN CONSTRUCTIVE NOTICE Julian’s lack of authority by the terms of the SPA.
– Where the ROD was informed of the principal’s intent to revoke the
CA REVERSED, finding that Perla intended the subject
SPA and to require her prior consent before any mortgage or sale may property to be included in the SPA she executed in favor
be had, this serves as an actual notice. The fact that it was not of Julian, and that her subsequent revocation of the
said SPA, not being contained in a public instrument,
annotated at the back of the title is of no moment, since actual notice
cannot bind third persons.
is superior than constructive notice. Moreover, in the case, there was
even a subsequent constructive notice when the revocation was Hence, the petition.
recorded in the ROD. – MORTGAGEE BANK NOT IN GOOD FAITH FOR
ISSUE:
FAILURE TO EXERCISE EXTRAORDINARY DILIGENCE IN DETERMINING a. WON Perla’s SPA covers the subject property in
AGENT’S LACK OF AUTHORITY. REM. (NOT COVERED)
b. WON Perla’s subsequent revocation of the SPA
++PRINCIPAL: Perla Mercado, the wife, owner of the subject properties
effectively removed Julian’s authority to
++AGENT/MORTGAGOR: Julian Mercado, the husband
mortgage the property. (YES, SPA REVOKED.)
++MORTGAGEE: Allied Banking Corporation
c. WON respondent bank is a mortgagee in good
FACTS: faith. (NO)
This involves the mortgage entered into by Julian d. WON the REM is null and void. (NOT NULL AND
Mercado (the husband), based on the alleged SPA VOID BUT UNENFORCEABLE, WITHOUT
executed in his favor by Perla Mercado (the wife) on May PERLA’S RATIFICATION)
28 1992, under the ff. circumstances:
a. On Dec 12 1996, Julian mortgaged with Allied HELD: Perla’s SPA does not cover the subject property
Banking Corp. (respondent bank) the subject in REM. Julian’s authority was subsequently revoked at
property covered by TCT No. RT-18206 (106338) the time the loan obligation took place, and respondent
registered with the ROD-Quezon City to secure bank as mortgagee should have exercised extraordinary
a loan of P3M, and the additional loan of P5M. diligence to know of such fact. Nonetheless, the REM is
(However, no such property is identified in the not null and void but is unenforceable in the absence of
SPA) Perla’s ratification of the same.
b. Rather, the SPA covers, among others, a
property covered by TCT No. RT-106338 A. PERLA’S SPA DOES NOT COVER THE
registered with the ROD- Pasig. PROPERTY IN REM.

Because Julian defaulted payment, respondent bank 1. Julian was granted a special power of authority by
foreclosed the REM. Perla…

This prompted heirs of deceased Perla (petitioner-heirs) Under Article 1878 of the Civil Code, a special power
to file an action for the annulment of REM constituted of attorney is necessary in cases where real rights
over the subject property on the ground that: over immovable property are created or conveyed. [12]
a. the same was not covered by the SPA, and In the SPA executed by Perla in favor of Julian on 28
b. the said SPA, at the time the loan obligations May 1992, the latter was conferred with the authority to
were contracted, no longer had force and effect "sell, alienate, mortgage, lease and deal otherwise" the
since it was previously revoked by Perla on Mar different pieces of real and personal property registered
10 1993, as evidenced by her Letter dated Jan in Perla's name. The SPA likewise authorized Julian "[t]o
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exercise any or all acts of strict dominion or a. It failed to present any certification from the ROD,
ownership" over the identified properties, and rights and b. Respondent bank did not take the effort of
interest therein. submitting and making part of the records of this
case copies of the two TCTs and closely
There is no question therefore that Julian was vested comparing them.
with the power to mortgage the pieces of property
identified in the SPA. Hence, Julian was not conferred by Perla with the
authority to mortgage the subject property.
2. …however, the subject property was not included in
the SPA.
B. SPA WAS REVOKED.
The SPA contained an exclusive enumeration of the
pieces of property over which Julian had authority. Assuming arguendo that the subject property was indeed
Nowhere is it stated in the SPA that Julian's authority included in the SPA executed by Perla in favor of Julian,
extends to the subject property covered by TCT No. the said SPA was revoked by virtue of a public
RT – 18206 (106338) registered with the Registry of instrument executed by Perla on 10 March 1993. The
Deeds of Quezon City. Consequently, the act of Julian revocation of the agency or SPA is expressed and by a
of constituting a mortgage over the subject property is public document.
unenforceable for having been done without
authority. The Register of Deeds of Quezon City was even
notified that any attempt to mortgage or sell the
3. The two properties are not one and the same. property covered by TCT No. [RT-18206] 106338
located at No. 21 Hillside Drive, Blue Ridge, Quezon City
Respondent bank claims that TCT No. RT-182206 must have the full consent documented in the form of
(property in SPA) is merely a reconstitution of TCT No. a special power of attorney duly authenticated at the
106338 (property in REM), and the property is actually Philippine Consulate General, New York City, N.Y.,
situated in QC, not Pasig. The failure of the instrument to U.S.A.
reflect the recent TCT Number or the exact designation of
the ROD should not defeat Perla’s clear intention. The non-annotation of the revocation of the Special
(LACKS MERIT) Power of Attorney on TCT No. RT-18206 is of no
consequence as far as the revocation's existence and
After an examination of the literal terms of the SPA, we legal effect is concerned since actual notice is always
find that the subject property was not among those superior to constructive notice.
enumerated therein. There was also nothing in the
language of the SPA from which we could deduce the Besides, it developed that at the time the first loan
intention of Perla to include the subject property therein. transaction with defendant Bank was effected on
In cases where the terms of the contract are clear as to December 12, 1996, there was on record at the Office
leave no room for interpretation, resort to circumstantial of the Register of Deeds of Quezon City that the
evidence to ascertain the true intent of the parties, is not special power of attorney granted Julian, Sr. by Perla
countenanced. had been revoked. That notice, works as constructive
notice to third parties of its being filed, effectively
Also, a power of attorney must be strictly construed rendering Julian, Sr. without authority to act for and in
and pursued. The instrument will be held to grant only behalf of Perla as of the date the revocation letter was
those powers which are specified therein, and the received by the Register of Deeds of Quezon City on
agent may neither go beyond nor deviate from the February 7, 1996.
power of attorney. Where powers and duties are
specified and defined in an instrument, all such powers Given that Perla revoked the SPA as early as 10 March
and duties are limited and are confined to those which 1993, and that she informed the Registry of Deeds of
are specified and defined, and all other powers and Quezon City of such revocation in a letter dated 23
duties are excluded. Thus, there must be “strict and January 1996 and received by the latter on 7 February
limited construction of the terms of a SPA”. 1996, then third parties to the SPA are constructively
notified that the same had been revoked and Julian no
Thus, SC is not convince that the two properties are the longer had any authority to mortgage the subject property.
same. There was no supporting proofs to verify
respondent bank’s claim:
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C. RESPONDENT BANK IS NOT A MORTGAGEE ratification of the same, the real estate mortgages
IN GOOD FAITH constituted by Julian over the subject property cannot be
enforced by any action in court against Perla and/or her
Respondent bank cannot now claim to be an innocent successors in interest. Hence, unenforceable.
mortgagee.
WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is GRANTED. The
By principle, while it is true, x x x that a person Decision dated 12 October 2005 and its Resolution dated 15 February 2006 rendered by
dealing with registered lands need not go beyond the the Court of Appeals in CA-G.R. CV No. 82636, are hereby REVERSED. The Decision
certificate of title, it is likewise a well-settled rule that dated 23 September 2003 of the Regional Trial Court of Quezon City, Branch 220, in
a purchaser or mortgagee cannot close his eyes to Civil Case No. Q-99-37145, is hereby REINSTATED and AFFIRMED with modification
facts which should put a reasonable man on his that the real estate mortgages constituted over TCT No. RT – 18206 (106338) are not
guard, and then claim that he acted in good faith null and void but UNENFORCEABLE. No costs.
under the belief that there was no defect in the title of
the vendor or mortgagor.

This principle is applied more strenuously when the


mortgagee is a bank or a banking institution.

Considering that the property mortgaged by Julian was


not his, and there are additional doubts or suspicions as
to the real identity of the same, based on the:
a. Palpable difference between the TCT numbers
referred to in the REM and Julian’s SPA, and
b. The registration in the ROD which is of different
cities,
these should have put respondent bank on guard. IT
should have proceeded with its transactions with Julian
only with utmost caution. Thus, it failed to discharge the
degree of diligence required of it as a banking corporation.

As a banking institution, jurisprudence stringently


requires that respondent should take more precautions
than an ordinary prudent man should, to ascertain the
status and condition of the properties offered as
collateral and to verify the scope of the authority of
the agents dealing with these.

Had respondent acted with the required degree of


diligence, it could have acquired knowledge of the
letter dated 23 January 1996 sent by Perla to the
Registry of Deeds of Quezon City which recorded the
same.

D. REM IS NOT NULL & VOID BUT


UNENFORCEABLE.

Finally, the REM constituted over the subject property are


unenforceable and not null and void. Unenforceable
contracts are those which cannot be enforced by a
proper action in court, unless they are ratified, because
either they are entered into without or in excess of
authority or they do not comply with the statute of frauds
or both of the contracting parties do not possess the
required legal capacity. Thus, without Perla's
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A1878 – MACTAN-CEBU INTERNATIONAL AIRPORT


AUTHORITY VS UNCHUAN (SEEABOVETEXT)

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A1884 – BA FINANCE VS CA (1991)


R/T ART. 1884 – PRINCPAL’ S LIABILITY – BA Finance is bound by its Under the deed of chattel mortgage, BA Finance was
constituted “Attorney-in-fact” with full power and authority
acceptance to carry put the agency, and is liable for damages which, to file, follow-up, prosecute, compromise or settle
thorugh its non-performance, the Cuadys (the principal) may suffer. insurance claims; to sign, execute and deliver the
++PRINCIPAL: CUADY SPOUSES
corresponding papers, receipts and documents to the
++BA FINANCE: as assignee of the rights
Insurance Company as may be necessary to prove
the claim, and to collect from the latter the proceeds
FACTS: of insurance to the extent of its interests, in the event
This involves a Ford Escort sedan obtained by Cuady that the mortgaged car suffers any loss or damage.
spouses (respondents) through credit from Supercars Inc.
This was evidenced by a promissory note, secured by a In granting said powers, the Cuady spouses created in BA
chattel mortgage on the same vehicle. Finance’s favor an agency.
Thereafter, Supercars assigned the PN & CM to BA Thus, under Article 1884 of the Civil Code of the
Finance Corp (petitioner). BA Finance obtained the Philippines, B.A. Finance Corporation is bound by its
renewal of the insurance coverage over the vehicle with acceptance to carry out the agency, and is liable for
Zenith Insurance Corp. Under the terms and conditions of damages which, through its non-performance, the
the said insurance coverage, any loss under the policy Cuadys, the principal in the case at bar, may suffer.
shall be payable to BA Finance.
Since the Cuadys suffered pecuniary loss in the form of
Problem is, the vehicle figured in an accident and was salvage value of the motor vehicle, not to mention the
badly damaged. amount equivalent to the unpaid balance on the
promissory note, when B.A. Finance Corporation
Cuady spouses asked BA Finance to consider the same steadfastly refused and refrained from proceeding
as a total loss and to claim from the insurer the face value against the insurer for the payment of a clearly valid
of the policy and apply the same to their remaining insurance claim, and continued to ignore the yearning
account. of the Cuadys to enforce the total loss provision in the
insurance policy, despite the undeniable fact that Rea
But BA Finance prevailed upon the former to just have the Auto Center, the auto repair shop chosen by the insurer
car repaired. itself to repair the aforementioned motor vehicle,
misrepaired and rendered it completely useless and
Unfortunately, the car booged down. So, Cuady spouses unserviceable.
requested BA Finance to enforce the total loss provision
in the insurance coverage. But still BA Finance refused. PREMISES CONSIDERED, the instant petition is DENIED, and the decision appealed
This prompted Cuady spouses to stop payment for the from is AFFIRMED.
PN.

Because of this, BA Finance sued the spouses for the


recovery of the balance. TC favored the spouses; CA
AFFIRMED.

ISSUE: WON BA Finance waived its right to collect the


unpaid balance of the Cuady spouses on the promissory
note for its failure to enforce the total loss provision. (YES,
BA FINANCE WAIVED, HENCE, RESPONSIBLE)

HELD: BA Finance had waived its right to collect the


unpaid balance.

BA Finance was deemed subrogated to the rights and


obligations of Supercars Inc. Consequently, BA Finance
is bound by the terms and conditions of the chattel
mortgage executed between Cuady spouses and
Supercars.

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A1897 – RUSTAN PULP & PAPER MILLS VS IAC

A1897 – SCHMID & OBERLY INC VS RJL MARTINEZ


FISHING CORP

A1897 – EUROTECH INDUSTRIAL TECHNOLOGIES VS


CUIZON (SEEABOVETEXT)

A1897 – DBP VS CA

A1898 – SAFIC ALCAN & CIE VS IMPERIAL VEGETABLE


OIL

A1898 – CERVANTES VS CA

A1900 – SIREDY ENTERPRISES VS CA

A1909 – TRAVEL WIDE ASSOCIATED SALES VS CA

A1909 – MBTC VS CA

A1919 – BUADO VS LAYAG

A1919 – ESTATE OF JULIANA DIEZ VDA DE GABRIEL VS


CIR

28