1sT Batch of Cases - THE CONCEPT OF AGENCY
In this case, the Deed of Assignment clearly states
1. G.R. No. 167552 April 23, 2007 EUROTECH
INDUSTRIAL TECHNOLOGIES, INC., Petitioner, vs.
EDWIN CUIZON and ERWIN CUIZON, Respondents.
Principle – An agent, who acts as such, is not personally
liable to the party with whom he contracts, except when he
expressly binds himself to the obligation or when he exceeds
the limits of his authority such party sufficient notice of his
powers.
However, in case of excess of authority by the agent,
the law does not say that a third person can recover from both
the principal and the agent.
FACTS: EUROTECH INDUSTRIAL TECHNOLOGIES, INC.,
the petitioner, is engaged in the business of importation and
distribution of various European industrial equipment for
customers here in the Philippines. One of its customers is
Impact Systems Sales, which is a sole proprietorship owned
by respondent ERWIN Cuizon, and the manager thereof is
respondent EDWIN Cuizon. Both Respondents are full-
blooded brothers.
Respondents urgently sought to buy from petitioner 1-unit of
sludge pump valued at ₱250,000. However, petitioner refused
to deliver the sludge pump to respondents without their
having fully settled their indebtedness to petitioner. Thus,
EDWIN, as manager of Impact Systems Sales, and ALBERTO,
as general manager of petitioner, executed a Deed of
Assignment of receivables in favor of petitioner.
The Deed of Assignment states, among others, that
said ASSIGNOR does hereby ASSIGN, TRANSFER, and
CONVEY unto the ASSIGNEE his receivables from Toledo
Power Corporation in the amount of ₱365,000, as payment
for the purchase of one unit of Selwood Spate Sludge Pump.
Subsequently, petitioner delivered to respondents the sludge
pump.
Despite the existence of the Deed of Assignment, the
respondent-ERWIN proceeded to collect from Toledo Power
Company the amount of ₱365,135.29. Alarmed by this
development, petitioner’s counsel sent respondents a final
demand letter which the respondents failed to abide.
Consequently, petitioner instituted a complaint for sum of
money and damages with application for preliminary
attachment against the respondents before the Regional Trial
Court. Petitioner alleged therein, that while said collection did
not revoke the agency relations of respondents, ERWIN’s
action repudiated EDWIN’s power to sign the Deed of
Assignment. As EDWIN did not sufficiently notify petitioner of
the extent of his powers as an agent, petitioner claims that he
should be made personally liable for the obligations of his
principal.
EDWIN filed his Answer in which he alleged that he is not a
real party in interest in this case because he was acting as a
mere agent of Impact Systems Sales in his transaction with
the petitioner, and the latter was aware of such fact.
Subsequently, the RTC issued an Order dropping EDWIN as
a party defendant in this case.
Aggrieved by the trial court’s Order, petitioner brought the
matter to the Court of Appeals which, however, affirmed in its
Decision the Order of the trial court. Petitioner’s motion for
reconsideration was denied by the appellate court. Hence,
petitioner filed a petition for review by certiorari before the
Supreme Court, assailing said Decision of the Court of
Appeals.
ISSUE: Did EDWIN exceed his authority when he signed the
Deed of Assignment and thereby making him personally liable
to petitioner.
RULING: No. According to the Supreme Court, in the absence
of an agreement to the contrary, a managing agent may enter
into any contracts that he deems reasonably necessary or
require for the protection of the interests of his principal
entrusted to his management.
that respondent EDWIN signed thereon as the manager of
Impact Systems. EDWIN entered into an Assignment of
Contract with petitioner because he deems it reasonably
necessary so that the latter would then deliver the sludge
pump to respondents, without which, the business of
EDWIN’s principal (ERWIN) would have been adversely
affected and in such case, EDWIN would have violated his
fiduciary relation with his principal-ERWIN.
Therefore, respondent EDWIN acted within his
authority as an agent, who did not acquire any right nor incur
any liability arising from the Deed of Assignment. It follows
that he is not a real party in interest who should be impleaded
in this case.
3. FABIOLA SEVERINO, plaintiff and appellee,
vs. GUILLERMO SEVERINO, defendant and appellant.
FELICITAS VILLANUEVA, intervenor and appellee.
G.R. No. 18058, January 16, 1923
Principle: The relations of an agent to his principal are
fiduciary and in regard to the property
forming the subject-matter of the agency, he is estopped from
acquiring or asserting a title
adverse to that of the principal.
An action in personam will lie against an agent to compel him
to return or retransfer to
his principal, or the latter's estate, the real property
committed to his custody as such agent and
also to execute the necessary documents of conveyance to
effect such retransfer.
Facts: Defendant Guillermo Severino, after the death of his
brother (Melecio Severino), was the
latter’s administrator and as such, continued to occupy the
land owned by Melecio. Eventually,
cadastral proceedings were instituted for the registration of
the land titles. Guillermo claimed
such land and since no opposition was presented, the court
decreed the title in his favor.
Melecio’s daughter and sole heir, plaintiff Fabiola Severino,
compelled Guillermo to
convey to her the land. It bears noting that Fabiola was a
minor during the time of the cadastral
proceedings. Felicitas Villanueva, in her capacity as
administratrix of the estate of Melecio
Severino, has filed a complaint in intervention claiming the
same relief as the original plaintiff,
except in so far as she prays that the conveyance be made, or
damages paid, to the estate
instead of to the plaintiff Fabiola Severino.
Issue: Whether or not Guillermo can be compelled to convey
the land to Fabiola even if there is
already a title in Guillermo’s name.
Ruling: Yes. The relations of an agent to his principal are
fiduciary. Guillermo’s position as agent
is analogous to that of a trustee and he cannot consistently,
with the principles of good faith, be
allowed to create in himself an interest in opposition to that
of his principal or cestui que trust.
Whatever a trustee does for the advantage of the trust estate
inures to the benefit of the cestui
que trust.
A receiver, trustee, attorney, agent, or any other person
occupying fiduciary relations
respecting property or persons, is utterly disabled from
acquiring for his own benefit the property
committed to his custody for management. This rule is
entirely independent of the fact whether
any fraud has intervened. No fraud in fact need be shown,
and no excuse will be heard from the
trustee. It is to avoid the necessity of any such inquiry that
the rule takes so general a form. The
rule stands on the moral obligation to refrain from placing
one’s self in positions which ordinarily
excite conflicts between self-interest and integrity. It seeks to
remove the temptation that might
arise out of such a relation to serve one’s self-interest at the
expense of one’s integrity and duty
to another, by making it impossible to profit by yielding to
temptation. It applies universally to all
who come within its principle.
4. Rallos vs. Felix Go Chan
G.R. No. L-24332, January 31, 1978
PRINCIPLE: "ART. 1919 of the Civil Code - Agency is
extinguished:
1. By the death, civil interdiction, insanity or insolvency
of the principal or of the agent; ..."
FACTS: On April 21, 1954, a Special Power of Attorney was
executed by sisters Concepcion and Gerundia in favor of their
brother Simeon for the sale of a parcel of land co-owned by
the two. On September 12, 1955, 6 months after Conception
died, Simeon sold the undivided shares of his sisters to herein
respondent Felix Go Chan & Realty Corp. Petitioner Ramon
Rallos, administrator of the late Concepcion’s estate, prayed
that the sale of the undivided share of the deceased be
invalidated and a new certificate be issued in the name of
respondent corporation and Concepcion’s intestate estate,
plus damages. CFI ruled in favor of petitioner and granted
the payers but CA reversed the decision. Respondent’s MR
was further denied.
ISSUE: Whether the sale entered into by an agent is valid
although executed after death of the principal.
RULING: No, the sale is void because Simeon’s authority as
an agent of Concepcion was extinguished upon her death.
Article 1317 provides that no one may contract in the name
of another without being authorized or unless he has, by law,
a right to represent him. Article 1919 furthers that the death
of the principal terminates the agency.
The case at bar is also not among the exceptions whereby an
agent’s acts bind the principal even after the latter’s death
because of Simeon’s knowledge of Concepcion’s death is
material. Hence, the sale was null and void.
5. ORIENT AIR SERVICES v. CA
Principles:
In an agent-principal relationship, the personality of the
principal is extended through the facility of the agent. Such
a relationship can only be effected with the consent of the
principal, which must not, in any way, be compelled by law
or by any court.
Facts:
American Airlines, Inc. and Orient Air Services entered into a
General Sales Agency Agreement, whereby the former
authorized the latter to act as its exclusive general sales agent
within the Philippines for the sale of air passenger
transportation.
American Airlines terminated the Agreement alleging that
Orient Air failed to promptly remit net proceeds of sales from
January to March 1981.
American Air instituted a suit against Orient Air with CFI
Manila for Accounting with
Preliminary Attachment/Garnishment, Mandatory
Injunction and Restraining Order.
Orient Air answered with counterclaim denying the material
allegation and contends the following: American Air still owed
Orient Air a balance in unpaid overriding commission. Orient
Air contends American Air’s precipitous conduct had
occasioned prejudice to its business interests.
Trial Court ruled in favor of Orient Air ordering American Air
to reinstate defendant as its general sales agent for passenger
transportation in the Philippines in accordance with the said
GSA Agreement.
Court of Appeals affirmed the decision of the Trial Court.
Issue:
Whether the respondent appellate court correctly ruled that
Orient Air be reinstated again as sales agent of American Air
Ruling:
SC affirmed the decision of the CA however, set aside the
portion of the ruling by the appellate court reinstating Orient
Air as agent of American air.
Such would be violative of the principles and essence of
agency, defined by law as a contract whereby "a person binds
himself to render some service or to do something in
representation or on behalf of another, WITH THE CONSENT
OR AUTHORITY OF THE LATTER."
Such a relationship can only be effected with the consent of
the principal, which must not, in any way, be compelled by
law or by any court.
6. Bordador v. Luz
G.R. No. 130148
December 15, 1997
Principle: “In contract of agency, there must be a consent
or authority of the principal whom represented by the agent
in rendering his service or doing something on behalf of said
principal.” – Mura ra nag MU, ayaw sa pag-assume,
siguradua sa kay masakitan lang niya ka.
Facts: The Bordador’s were in the business of purchase and
sale of jewelry, and Brigida Luz was their regular customer.
Deganos, the brother of Luz, received pieces of jewelry worth
P382, 816.00, covered by seventeen receipts, eleven of them
indicating that they were received on behalf a certain Evelyn
Aquino, and six indicated that they were received on behalf of
Luz.
Deganos was supposed to sell the items, remit the
proceeds, and return the unsold ones to the Bordadors.
However, he was only able to remit P53, 207.00, failing to pay
the balance of the sales proceeds and returning any unsold
items. The Bordadors filed a complaint before the barangay
court, where Deganos along with the Bordador Luz signed a
compromise agreement promising to pay the unpaid account
of P765, 463.98. Deganos, however, failed to comply.
A civil case for the recovery of sum of money was instituted
against Deganos and Brigida Luz in the Malolos RTC.
Brigida’s husband, Ernesto was impleaded as well. Four
years later in 1994, a criminal case for estafa was filed, which
was still pending when this decision was promulgated.
Petitioners claimed that Deganos was acting as the agent
of Luz and because he failed to pay for the pieces of jewelry,
the sps. Luz, as principals, are solidarily liable. The
respondents countered that only Deganos was liable, that
Brigida never authorized him to receive jewelry on her behalf,
neither did she receive the articles in question.
The RTC ruled that there was no agency between Luz and
Deganos. It was Bordador who indicated that the items were
received on behalf of Luz. Even if there was a contract of
agency, there was no memorandum to this effect and was
therefore unenforceable. CA affirmed the judgment.
Issue: Whether or not the sps. Luz are liable for Bordador’s
claim of money and damages.
Ruling: No. Evidence doesn’t support Bordador’s claim that
Deganos was an agent of Luz and that the latter should be
consequently be held solidarily liable with Deganos of his
obligation to the petitioners.
The basis for agency is representation. Here, there is no
showing that Luz consented to the acts of Deganos and
authorized him to act on her behalf, much less with respect
to the particular transactions involved.
It was grossly and inexcusably negligent of the petitioners
to entrust Deganos, not once or twice but at least on 6
occasions, evidenced by 6 receipts, of several pieces of
jewelries of substantial value without requiring a written
authorization from the alleged principal.
A person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent.
 Records show that neither an expressed nor an implied
agency was proven to have existed between Deganos and Luz.
Evidently, Bordadors who were negligent in their transactions
with Deganos cannot seek relief of the effects of their
negligence by conjuring supposed agency relation since they
have no evidence to support the claim.
The Court also found that it was petitioner Lydia Bordador
who indicated in the receipts that the items were received by
Deganos for Evelyn Aquino and Brigida Luz. Said Court was
persuaded that Luz was behind Deganos, but because there
was no memorandum to this effect, the agreement between
the parties is unenforceable under the Statutes of Fraud.
7. APEX MINING CO., INC. vs. SOUTHEAST MINDANAO
GOLD MINING CORP., G.R. Nos. 152613 & 152628 June
23, 2006
Topic: Concept of Agency
Principle: For a contract of agency to exist, it is essential
that the principal consents that the other party, the
agent, shall act on its behalf, and the agent consents so
as to act.
Facts: Marcopper Mining Corporation (MMC) filed mining
claims for areas adjacent to the area covered by the mining
claims of Banad and his group.
MMC filed Exploration Permit Application with the Bureau of
Mines and Geo-Sciences (BMG), and the BMG issued to MCC
Exploration Permit No. 133 (EP 133). MMC filed a petition for
cancellation of mining claims of Apex and Small Scale Mining
permits. BMG dismissed MMC’s petition on the ground that
the area covered by the Apex mining claims and MMC’s
permit to explore was not a forest reservation. It further
declared null and void MMC’s EP 133 and sustained the
validity of Apex mining claims over the disputed area.
On appeal, the DENR reversed the decision of BMG and
declared MMC’s EP 133 valid and subsisting.
MMC assigned EP 133 to Southeast Mindanao Gold Mining
Corporation (SEM), a domestic corporation which is alleged
to be a 100% -owned subsidiary of MMC.
SME filed an MPSA application under EP 133. BMG accepted
and registered SEM’s MPSA application and the Deed of
Assignment over EP 133 executed in its favor by MMC. Apex
questions the validity of MMC’s EP 133 and its subsequent
transfer to SME asserting that MMC failed to comply with the
terms and conditions in its exploration permit, thus, MMC
and its successor-in-interest SEM lost their rights in the
Diwalwal Gold Rush Area. Apex pointed out that MMC
violated four conditions in its permit.
Similarly, the Mines Adjudication Board (MAB) underscores
that SEM did not acquire any right from MMC by virtue of the
transfer of EP 133 because the transfer directly violates the
express condition of the exploration permit stating that "it
shall be for the exclusive use and benefit of the permittee or
his duly authorized agents." According to the MAB, the
assignment by MMC of EP 133 in favor of SEM did not make
the latter the duly authorized agent of MMC since the concept
of an agent under EP 133 is not equivalent to the concept of
assignee.
Issue:Whether or not the assignment of EP 133 was valid.
Ruling: No. Condition number 6 of EP 133 categorically
states that the permit shall be for the exclusive use and
benefit of MMC or its duly authorized agents. While it may be
true that SEM, the assignee of EP 133, is a 100% subsidiary
corporation of MMC, records are bereft of any evidence
showing that the former is the duly authorized agent of the
latter. For a contract of agency to exist, it is essential that the
principal consents that the other party, the agent, shall act
on its behalf, and the agent consents so as to act.
It is incumbent upon either MMC or SEM to prove that a
contract of agency actually exists between them so as to allow
SEM to use and benefit from EP 133 as the agent of MMC.
SEM did not claim nor submit proof that it is the designated
agent of MMC to represent the latter in its business dealings
or undertakings.
SEM cannot, therefore, be considered as an agent of MMC
which can use EP 133 and benefit from it. Since SEM is not
an authorized agent of MMC, it goes without saying that the
assignment or transfer of the permit in favor of SEM is null
and void as it directly contravenes the terms and conditions
of the grant of EP 133.
Furthermore, the concept of agency is distinct from
assignment. In agency, the agent acts not on his own behalf
but on behalf of his principal. While in assignment, there is
total transfer or relinquishment of right by the assignor to the
assignee The assignee takes the place of the assignor and is
no longer bound to the latter.
The Court did not lend recognition to the Court of Appeals’
theory that SEM, being a 100% subsidiary of MMC, is
automatically an agent of MMC. A corporation is an artificial
being created by operation of law, having the right of
succession and the powers, attributes, and properties
expressly authorized by law or incident to its existence.36 It
is an artificial being invested by law with a personality
separate and distinct from those of the persons composing it
as well as from that of any other legal entity to which it may
be related. Resultantly, absent any clear proof to the contrary,
SEM is a separate and distinct entity from MMC.
8. Domingo De La Cruz vs. Northern Theatrical Enterprise
Incorporation
G.R. No. L7089
Date: August 31, 1954
PRINCIPLE: ARTICLE 1886: By the contract of agency a
person binds himself to render service or to do something in
representation or on behalf of another, with the consent or
authority of the latter.
Facts: Domingo De La Cruz hired as a special guard by
Northern theatrical Enterprise Incorporation whose duties
were to guard the main entrance of the theater. In time of his
duty, Domingo carries with him a revolver. One afternoon,
Benjamin Martin wanted to crash the main entrance of the
theater but then Domingo refused to let him in without fist
presenting his ticket. Angered by the refusal of Domingo,
Benjamin attacked him with a bolo. By ways of defending
himself, Domingo shot Benjamin resulting to his death.
Domingo was charged with two homicide cases and was later
on acquitted. Upon his acquittal, Domingo demanded that
Northern Theatrical to reimburse him of his expenses, a total
of P15,000. His contention was that he was an agent of
Northern and being an agent he is entitled to reimbursement
incurred by him in connection with the agency.
Issue: Whether or not the relationship between Domingo and
Northern is that of a principal and agent.
Ruling: No, the relationship between the movie corporation
and Domingo was not that of a principal and an agent
because the principle of representation was in no way
involved. Under Article 1886, by the contract of agency a
person binds himself to render service or to do something in
representation or on behalf of another, with the consent or
authority of the latter. In the case at bar, Domingo was not
employed to represent the corporation in its dealings with a
third party. He was merely an employee hired to perform a
specific duty which is to guard the main entrance of the Cine.
Clearly Article 1886 is not applicable in this case.
9. Tuazon v Heirs of Ramos
G.R No. 156262
July 14, 2005
Principle: The basis of agency is representation. There must
be, on the part of the principal, an actual intention to appoint,
an intention naturally inferable from the principal’s words or
actions. Likewise, there must be an intention on the part of
the agent to accept the appointment and act upon it. Absent
such mutual intent, there is generally no agency.
Facts:This case involves a collection of a sum of money which
results from the bouncing check issued by Evangeline
Santos, indorsed by the spouse Leonilo and Maria Tuazon in
payment of the remaining unpaid cavans of rice. Despite
repeated demands from the heirs of Ramos, spouses Tuazon
failed to pay and instead claimed that they are merely acting
as agents and should not be held liable.
Issue: WON spouses Tuazon are considered agents of Ramos?
Held: NO. The declarations of agents alone are generally
insufficient the fact of their authority as agents. The law
makes no presumption of agency. The person alleging must
prove of the existence, nature and extent of the authority
given. In the case at bar, petitioner failed to prove its
existence.
10. VICTORIAS MILLING CO., INC v. CAG.R. No. 117356
June 19, 2000
PRINCIPLE: Article 1868: By the contract of agency a person
binds himself to render some service or to do something in
representation or on behalf of another, with the consent or
authority of the latter.
The question of whether a contract is one of sale or agency
depends on the intention of the parties as gathered from the
whole scope and effect of the language employed.
FACTS: Petitioner Victorias Milling is in to regular dealings
with St. Therese Merchandising (STM) in the latter’s purchase
of sugar. Petitioner issues a Shipping List/Delivery Receipts
(SLDRs) as proof of purchase. The subject in this instant case
is SLDR No. 1214M whom STM sold to private respondent
Consolidated Sugar Corporation (CSC). CSC wrote petitioner
that it had been authorized by STM to withdraw the sugar
covered by SLDR No. 1214M. Enclosed in the letter was a
letter of authority from STM authorizing CSC to “withdraw for
and in our behalf the refined sugar covered by SLDR No.
1214.”
ISSUE: Whether or not private respondent CSC was an agent
of STM.
RULING: NO.Petitioner heavily relies upon STM’s letter of
authority allowing CSC to withdraw sugar against SLDR No.
1214M to show that the latter was STM’s agent. The pertinent
portion of said letter reads:
“This is to authorize Consolidated Sugar Corporation or its
representative to withdraw for and in our behalf the refined
sugar covered by Shipping List/Deliver Receipt = Refined
Sugar (SDR) No. 1214 dated October 16, 1989 in the total
quantity of 25,000 bags.”
It is clear from Article 1868 that the basis of agency is
representation. On the part of the principal, there must be an
actual intention to appoint or an intention naturally inferable
from his words and actions; and on the part of the agent,
there must be an intention to accept the appointment and act
on it, and in the absence of such intent, there is generally no
agency. One factor which most clearly distinguishes agency
from other legal concepts is control; one person – the agent –
agrees to act under the control or direction of another – the
principal. Indeed, the very word “agency” has come to connote
control by the principal. The control factor, more than any
other, has caused the courts to put contracts between
principal and agent in separate category.
In the instant case, it appears plain to us that private
responded CSC was a buyer of the SLDR form, and not an
agent of STM. Private respondent CSC was not subject to
STM’s control. The question of whether a contract is one of
sale or agency depends on the intention of the parties as
gathered from the whole scope and effect of the language
employed. That the authorization given to CSC contained the
phrase “for and in our (STM’s) behalf” did not establish an
agency. Ultimately, what is decisive is the intention of the
parties. That no agency was meant to be established by the
CSC and STM is clearly shown by CSC’s communication to
petitioner that SLDR No. 1214M had been “sold and
endorsed” to it. The use of the words “sold and endorsed”
means that STM and CSC intended a contract of sale, and not
of agency. Hence, on this score, no error was committed by
CA when it held that CSC was not STM’s agent and could
independently sue petitioner.
12. WILLIAM UY and RODEL ROXAS, vs.COURT OF
APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING
AUTHORITY,
G.R. No. 120465. September 9, 1999
Principle:
Article 1311. Contracts take effect only between the parties,
their assigns and heirs, except in case where the rights and
obligations arising from the contract are not transmissible by
their nature, or by stipulation or by provision of law. The heir
is not liable beyond the value of the property he received from
the decedent.
If a contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is
not sufficient. The contracting parties must have clearly and
deliberately conferred a favor upon a third person.
Article 1868. By the contract of agency a person binds
himself to render some service or to do something in
representation or on behalf of another, with the consent or
authority of the latter.
Facts: William Uy and Rodel Roxas are agents authorized to
sell 8 parcels of land in Benguet. Uy and Roxas offered to sell
the parcels of land to NHA for a housing project. NHA passed
a resolution approving the acquisition of lands and they
executed Deed of Absolute Sale. However, only 5 of the 8
parcels of land were paid by NHA because of the report
received by Land Geosciences Bureau of DENR that the
remaining areas are prone to landslide and therefore not
suitable for developing a housing project.NHA offered to pay
danos perjuicios to the land owners. Uy and Roxas filed a
complaint for damages to NHA. They filed the complaint not
in behalf of their principals but in their own name as agents
directly damages by the termination of the contract. The
damages consist mainly of “unearned income” and advances.
Issue:WON Uy and Roxas, as agents, can file a complaint for
damages in their own name and in their own behalf.
Ruling: No, they are mere agents of the owners of the land
subject for sale. As agents, they only render some service or
do something in representation or on behalf of their
principals. They are not parties to the contract of sale
between their principals and NHA. They are not the real party
in interest. The petitioners have not also shown that they are
assignees of their principals to the subject contracts.
13. Laureano T. Angeles vs. Philippine National Railways
(PNR) and Rodolfo Flores, August 31, 2006 G.R. No.
150128
Facts: Respondent Philippine National Railways (PNR)
informed a certain GaudencioRomualdez (Romualdez,
hereinafter) that it has accepted the latter’s offer to buythe
PNR’s scrap/unserviceable rails located in Del Carmen and
Lubao, Pampanga at P1,300.00 and P2,100.00 per metric
ton, respectively, for the total amount of P96,600.00.
Romualdez paid the purchase price and addressed a letter to
Atty. CiprianoDizon, PNR’s Acting Purchasing Agent. The
letter authorized LIZETTE R. WIJANCOto be his (Romualdez)
lawful representative in the withdrawal of the
scrap/unserviceable rails awarded to him. Furthermore, the
original copy of the award which indicates the waiver of
rights, interest and participation in favor of Lizetter R.
Wijanco was also given.
The Lizette R. Wijanco was petitioner's now deceased wife.
That very same day, Lizette requested the PNR to transfer the
location of withdrawal for the reason that the
scrap/unserviceable rails located in Del Carmen and Lubao,
Pampanga were not ready for hauling.The PNR granted said
request and allowed Lizette to withdraw scrap/unserviceable
rails in Murcia, Capas and San Miguel, Tarlac instead.
However, PNR subsequently suspended the withdrawal in
view of what it considered as documentary discrepancies
coupled by reported pilferages of over P500,000.00 worth of
PNR scrap properties in Tarlac.Consequently, the spouses
Angeles demanded the refund of the amount of P96,000.00.
The PNR, however, refused to pay, alleging that as per delivery
receipt duly signed by Lizette, 54.658 metric tons of
unserviceable rails had already been withdrawn. The spouses
Angeles filed suit against the PNR for specific performance
and damages before the Regional Trial Court. Lizette W.
Angeles passed away and was substituted by her heirs,
among whom is her husband, herein petitioner Laureno T.
Angeles.
The trial court, on the postulate that the spouses Angeles are
not the real parties-in-interest, rendered judgment
dismissing their complaint for lack of cause of action. As held
by the court, Lizette was merely a representative of
Romualdez in the withdrawal of scrap or unserviceable rails
awarded to him and not an assignee to the latter's rights with
respect to the award. Petitioner appealed with the Court of
Appeals which dismissed the appeal and affirmed that of the
trial court.
Issue: Whether or not the CA erred in affirming the trial
court's holding that petitioner and his spouse, as plaintiffs a
quo, had no cause of action as they were not the real parties-
in-interest in this case.
Held: No.The CA’s conclusion, affirmatory of that of the trial
court, is that Lizette was not an assignee, but merely an agent
whose authority was limited to the withdrawal of the scrap
rails, hence, without personality to sue.Where agency
exists, the third party's (in this case, PNR's) liability on a
contract is to the principal and not to the agent and the
relationship of the third party to the principal is the same as
that in a contract in which there is no agent. Normally, the
agent has neither rights nor liabilities as against the third
party. He cannot thus sue or be sued on the contract. Since
a contract may be violated only by the parties thereto as
against each other, the real party-in-interest, either as
plaintiff or defendant in an action upon that contract must,
generally, be a contracting party.
The legal situation is, however, different where an agent is
constituted as an assignee. In such a case, the agent may, in
his own behalf, sue on a contract made for his principal, as
an assignee of such contract. The rulerequiring every action
to be prosecuted in the name of the real party-in-interest
recognizes the assignment of rights of action and also
recognizesthat when one has a right assigned to him, he is
then the real party-in-interest and may maintain an action
upon such claim or right.
WHEREFORE, the petition is DENIED and the assailed
decision of the CA is AFFIRMED.Costs against the petitioner.
14. ONG v. CA
G.R. No. 119858; April 29, 2003
FACTS: That on or about July 23, 1990, Benito Ong,
representing ARMAGRI International Corporation, conspiring
and confederating together did then and there willfully,
unlawfully and feloniously defraud the SOLIDBANK
Corporation represented by its Accountant, DEMETRIO
LAZARO, in the following manner, to wit: the said accused
received in trust from said SOLIDBANK Corporation, 10,000
bags of urea valued at P, 2,050,000 specified in a Trust
Receipt Agreement and covered by a Letter of Credit No. DOM
GD 90-009 in favor of the Fertiphil Corporation.
Under the express obligation on the part of the said accused
to account for said goods to Solidbank Corporation and/or
remit the proceeds of the sale thereof within the period
specified in the Agreement or return the goods, if unsold
immediately or upon demand.
However, Ong, once in possession of said goods, far from
complying with the aforesaid obligation failed and refused
and still fails and refuses to do so despite repeated demands
made upon him to that effect and with intent to defraud,
willfully, unlawfully and feloniously misapplied,
misappropriated and converted the same or the value thereof
to his own personal use and benefit, to the damage and
prejudice of the said Solidbank Corporation in the aforesaid
amount of P2,050,000.00 Philippine Currency.
Petitioner contends that in signing the trust receipts, he
merely acted as an agent of ARMAGRI. Petitioner asserts that
nowhere in the trust receipts did he assume personal
responsibility for the undertakings of ARMAGRI which was
the entrustee.
ISSUE: WON PETITIONER WAS NECESSARILY THE ONE
RESPONSIBLE FOR THE OFFENSE, BY THE MERE
CIRCUMSTANCE THAT PETITIONER ACTED AS AGENT AND
SIGNED FOR THE ENTRUSTEE CORPORATION
HELD: No, ARMGAGRI Corp. did not violate the Trust
Receipts Law
The Supreme Court held that the Trust Receipts Law
recognizes the impossibility of imposing the penalty of
imprisonment on a corporation. Hence, if the entrustee is a
corporation, the law makes the officers or employees or other
persons responsible for the offense liable to suffer the penalty
of imprisonment. The reason is obvious: corporations,
partnerships, associations and other juridical entities cannot
be put to jail. Hence, the criminal liability falls on the human
agent responsible for the violation of the Trust Receipts Law.
In the instant case, the Bank was the entruster while
ARMAGRI was the entrustee. Being the entrustee, ARMAGRI
was the one responsible to account for the goods or its
proceeds in case of sale. However, the criminal liability for
violation of the Trust Receipts Law falls on the human agent
responsible for the violation.
Petitioner, who admits being the agent of ARMAGRI, is the
person responsible for the offense for two reasons. First,
petitioner is the signatory to the trust receipts, the loan
applications and the letters of credit. Second, despite being
the signatory to the trust receipts and the other documents,
petitioner did not explain or show why he is not responsible
for the failure to turn over the proceeds of the sale or account
for the goods covered by the trust receipts.
15. PNB v. Ritratto – G.R. No. 142616 – 362 SCRA 216
Principle: The Doctrine of Piercing the Corporate veil is an
equitable doctrine developed to address situations where the
separate corporate personality of a corporation is abused or
used for wrongful purposes. It applies when the corporate
fiction is used to defeat public convenience, justify wrong,
protect fraud or defend crime, or when it is made a shield to
confuse the legitimate issues, or where a corporation is the
mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are
so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation.
Facts: PNB-IFL, a subsidiary company of PNB extended credit
to Ritratto and secured by the real estate mortgages on four
parcels of land. Since there was default, PNB-IFL thru PNB,
foreclosed the property and were subject to public auction.
Ritratto Group filed a complaint for injunction. PNB filed a
motion to dismiss on the grounds of failure to state a cause
of action and the absence of any privity between respondents
and petitioner.
Issue: WON PNB privy to the loan contracts entered into by
respondent & PNB-IFL being that PNB-IFL is owned by PNB?
Ruling: No. The contract questioned is one entered into
between Ritratto and PNB-IFL. PNB was admittedly an agent
of the latter who acted as an agent with limited authority and
specific duties under a special power of attorney incorporated
in the real estate mortgage.
The mere fact that a corporation owns all of the stocks of
another corporation, taken alone is not sufficient to justify
their being treated as one entity. If used to perform legitimate
functions, a subsidiary’s separate existence may be
respected, and the liability of the parent corporation as well
as the subsidiary will be confined to those arising in their
respective business. The courts may, in the exercise of
judicial discretion, step in to prevent the abuses of separate
entity privilege and pierce the veil of corporate entity.
The Doctrine of Piercing the Corporate veil is an equitable
doctrine developed to address situations where the separate
corporate personality of a corporation is abused or used for
wrongful purposes. It applies when the corporate fiction is
used to defeat public convenience, justify wrong, protect
fraud or defend crime, or when it is made a shield to confuse
the legitimate issues, or where a corporation is the mere alter
ego or business conduit of a person, or where the corporation
is so organized and controlled and its affairs are so conducted
as to make it merely an instrumentality, agency, conduit or
adjunct of another corporation.
Test in determining the applicability of the doctrine of
piercing the veil:
1. Control, not mere majority or complete control, but
complete domination, not only of finances but of policy and
business practice.
2. Such control must have been used by the defendant to
commit fraud or wrong
3. The aforesaid control and breach of duty must proximately
cause the injury or unjust loss complained of.
The absence of any one of these elements prevents piercing
the corporate veil. In applying the “instrumentality” or “alter
ego” doctrine, the courts are concerned with reality and not
form, with how the corporation operated and the individual
defendant’s relationship to the operation.
Doctrine of piercing the veil based on alter ego or
instrumentality finds no application in this case for the
following reasons:
1. PNB-IFL is a wholly owned subsidiary of petitioner PNB.
2. There is no showing of the indicative factors that the former
corporation is a mere instrumentality of the latter.
3. There is no demonstration that any of the evils sought to
be prevented by the doctrine of piercing the corporate veil
exists.
16. Case: FERNANDO vs GSIS GR. No. L-18287
Principle: Authority of a corporation to its officers and
agents
FACTS: The plaintiff, Trinidad J. Francisco, in consideration
of a loan mortgaged in favor of the defendant, Government
Service Insurance System a parcel of land known as Vic-Mari
Compound, located at Baesa, Quezon City. The System
extrajudicially foreclosed the mortgage on the ground that up
to that date the plaintiff-mortgagor was in arrears on her
monthly instalments. The System itself was the buyer of the
property in the foreclosure sale. The plaintiff’s father, Atty.
Vicente J. Francisco, sent a letter to the general manager of
the defendant corporation, Mr. Rodolfo P. Andal. And latter
the System approved the request of Francisco to redeem the
land through a telegram. Defendant received the payment
and it did not, however, take over the administration of the
compound. The System then sent a letter to Francisco
informing of his indebtedness and the 1 year period of
redemption has been expired. And the System argued that
the telegram sent to Francisco saying that the System has
approved the request in redeeming the property is incorrect
due to clerical problems.
ISSUE/S: Whether or not the System is liable for the acts of
its employees regarding the telegram?
RULING: Yes. There was nothing in the telegram that hinted
at any anomaly, or gave ground to suspect its veracity, and
the plaintiff, therefore, can not be blamed for relying upon it.
There is no denying that the telegram was within Andal’s
apparent authority. Hence, even if it were the board secretary
who sent the telegram, the corporation could not evade the
binding effect produced by the telegram. Knowledge of facts
acquired or possessed by an officer or agent of a corporation
in the course of his employment, and in relation to matters
within the scope of his authority, is notice to the corporation,
whether he communicates such knowledge or not. Yet,
notwithstanding this notice, the defendant System pocketed
the amount, and kept silent about the telegram not being in
accordance with the true facts, as it now alleges. This silence,
taken together with the unconditional acceptance of three
other subsequent remittances from plaintiff, constitutes in
itself a binding ratification of the original agreement.
17. SUNACE INTERNATIONAL MANAGEMENT SERVICES,
INC. v. NLRC
SUNACE INTERNATIONAL MANAGEMENT SERVICES,
INC. v. NLRC
G.R. No. 161757; January 25, 2006
Ponente: J. Carpio-Morales
Principle: The agency is revoked if the principal directly
manages the business entrusted to the agent, dealing directly
with third persons.
FACTS: Petitioner, Sunace International Management
Services (Sunace), deployed to Taiwan Divina A.
Montehermozo (Divina) as a domestic helper under a 12-
month contract effective February 1, 1997. The deployment
was with the assistance of a Taiwanese broker, Edmund
Wang, President of Jet Crown International Co., Ltd.
After her 12-month contract expired on February 1, 1998,
Divina continued working for her Taiwanese employer, Hang
Rui Xiong, for two more years, after which she returned to the
Philippines on February 4, 2000.
Shortly after her return or ona February 14, 2000, Divina
filed a complaint before the National Labor Relations
Commission (NLRC) against Sunace, one Adelaide Perez, the
Taiwanese broker, and the employer-foreign principal alleging
that she was jailed for three months and that she was
underpaid
Reacting to Divina's Position Paper, Sunace filed on April 25,
2000 an ". . . ANSWER TO COMPLAINANT'S POSITION
PAPER" alleging that Divina's 2-year extension of her contract
was without its knowledge and consent, hence, it had no
liability attaching to any claim arising therefrom, and Divina
in fact executed a Waiver/Quitclaim and Release of
Responsibility and an Affidavit of Desistance, copy of each
document was annexed to said
The Labor Arbiter, rejected Sunace's claim that the extension
of Divina's contract for two more years was without its
knowledge and consent.
ISSUE: Whether the act of the foreigner-principal in
renewing the contract of Divina be attributable to Sunace
HELD: No, the act of the foreigner-principal in renewing the
contract of Divina is not attributable to Sunace.
There being no substantial proof that Sunace knew of and
consented to be bound under the 2-year employment contract
extension, it cannot be said to be privy thereto. As such, it
and its "owner" cannot be held solidarily liable for any of
Divina's claims arising from the 2-year employment
extension.
Furthermore, as Sunace correctly points out, there was an
implied revocation of its agency relationship with its foreign
principal when, after the termination of the original
employment contract, the foreign principal directly negotiated
with Divina and entered into a new and separate employment
contract in Taiwan.
19. G.R. No. 94071 March 31, 1992
NEW LIFE ENTERPRISES and JULIAN SY, petitioners,
vs.
HON. COURT OF APPEALS, EQUITABLE INSURANCE
CORPORATION, RELIANCE SURETY AND INSURANCE
CO., INC. and WESTERN GUARANTY CORPORATION,
respondents.
Principle: Knowledge of the agent of the existence thereof, not
knowledge of the insurance company. The theory of imputed
knowledge, that the knowledge of the agent is presumed to be
known by the principal is not enough.
Facts:
Julian Sy, owner of New Life Enterprises, insured his building
in 3 different insurance agencies for 350,000, 1,000,000, and
200,000. When his building and the goods inside burned
down, he claimed for insurance indemnities, but these were
rejected by the three companies for violation of policy
conditions.
Sy filed for 3 different suits in the trial court, where he won
all suits against the insurance companies. The court of
appeals reversed the decision of the trial court.
Julian Sy owner of New Life Enterprises, the partnership
engaged in the sale of construction materials insured the
stocks in trade of New Life Enterprises with Western
Guaranty Corporation, Reliance Surety and Insurance Co.,
Inc., and Equitable Insurance Corporation.
When his building occupied by the New Life Enterprises was
gutted by fire. , he claimed for insurance indemnities, but
these were rejected by the three companies for breach of
policy conditions which requires the insured to give notice of
any insurance or insurances already effected covering the
stocks in trade.
Petitioners admit that the respective insurance policies
issued by private respondents did not state or endorse
thereon the other insurance coverage obtained or
subsequently effected on the same stocks in trade for the loss
of which compensation is claimed by petitioners. The
coverage by other insurance or co-insurance effected or
subsequently arranged by petitioners were neither stated nor
endorsed in the policies of the three (3) private respondents.
Petitioners contend that they are not to be blamed for the
omissions, alleging that insurance agents knew about the
existence of the additional insurance coverage and that they
were not informed about the requirement that such other or
additional insurance should be stated in the policy, as they
have not even read policies.
Issue: W/N the petitioner was not to be blamed for the
omissions alleging that the insurance agents knew about the
existence of the additional insurance coverage.
Ruling: NO.
The terms of the contract are clear and unambiguous. The
insured is specifically required to disclose to the insurer any
other insurance and its particulars which he may have
effected on the same subject matter. The knowledge of such
insurance by the insurer’s agents, even assuming the
acquisition thereof by the former, is not the "notice" that
would estop the insurers from denying the claim. Besides, the
so-called theory of imputed knowledge, that is, knowledge of
the agent is knowledge of the principal, aside from being of
dubious applicability here has likewise been roundly refuted
by respondent court whose factual findings we find
acceptable. Thus, it points out that while petitioner Julian Sy
claimed that he had informed insurance agent Alvarez
regarding the co-insurance on the property, he contradicted
himself by inexplicably claiming that he had not read the
terms of the policies; that Yap Dam Chuan could not likewise
have obtained such knowledge for the same reason, aside
from the fact that the insurance with Western was obtained
before those of Reliance and Equitable; and that the
conclusion of the trial court that Reliance and Equitable are
"sister companies" is an unfounded conjecture drawn from
the mere fact that Yap Kam Chuan was an agent for both
companies which also had the same insurance claims
adjuster. Availment of the services of the same agents and
adjusters by different companies is a common practice in the
insurance business and such facts do not warrant the
speculative conclusion of the trial court.
20. Caram vs Laureta
Principle: Applying the principle of agency, Caram as
principal, should also be deemed to have acted in bad faith.
Facts: On June 10, 1945, Marcos Mata conveyed a large tract
of agricultural land in favor of Laureta. The deed of absolute
sale was not registered because it was not acknowledged
before a notary public or any other authorized officer . At the
time the sale was executed, there was no authorized officer
before whom the sale could be acknowledged inasmuch as
the civil government in Tagum, Davao was not as yet
organized. However, Marcos Mata delivered to Laureta the
peaceful and lawful possession of the premises of the land
together with the pertinent papers thereof such as the
Owner's Duplicate OCT, sketch plan, tax declaration, tax
receipts and other papers related thereto. Since the time of
conveyance, Laureta had been in continuous, adverse and
notorious occupation of said land, without being molested,
disturbed or stopped by any of the defendants or their
representatives.
On May 5, 1947, the same land was sold by Marcos Mata to
Fermin Caram, Jr. The deed of sale in favor of Caram was
acknowledged before Atty. Abelardo Aportadera.
Laureta filed in CFI Davao an action for nullity, recovery of
ownership and/or reconveyance against Mata, Caram and
the Register of Deeds of Davao City. Mata answered by
alleging that Marcos was subjected to duress, threat and
intimidation into selling his only property to Laureta. Caram,
on the other hand, alleged that he has no knowledge or
information about the previous encumbrances, transactions,
and alienations until the filing of the complaints.
Trial Court ruled in favor of Laureta, which the Court of
Appeals also affirmed.
Issue:
1. Whether or not, Irespe and Aportadera were attorneys-in-
fact of Caram for the purpose of buying the property in
question.
2. Whether or not, Irespe and Atty. Aportadera acted in Bad
Faith.
3. Whether or not Caram can be considered to have acted in
bad faith because of his agents.
Ruling:
1. YES.
The facts of record show that Mata, the vendor, and Caram,
the second vendee had never met. During the trial, Marcos
testified that he knows Atty. Aportadera but did not know
Caram. Thus, the sale of the property could have only been
through Caram's representatives, Irespe and Aportadera. The
petitioner, in his answer, admitted that Atty. Aportadera
acted as his notary public and attorney-in-fact at the same
time in the purchase of the property.
2. YES.
The SC agreed with the Trial Court’s finding that Irespe and
Aportadera, acting as agents of Caram, purchased the
property of Mata in bad faith. Even if Irespe and Aportadera
did not have actual knowledge of the first sale, still their
actions have not satisfied the requirement of good faith.
Irespe and Aportadera had knowledge of circumstances
which ought to have put them on inquiry. Both of them knew
that Mata's certificate of title together with other papers
pertaining to the land was taken by soldiers under the
command of Col. Laureta. Added to this is the fact that at the
time of the second sale Laureta was already in possession of
the land. The rule of caveat emptor requires the purchaser to
be aware of the supposed title of the vendor and one who buys
without checking the vendor's title takes all the risks and
losses consequent to such failure.
3. YES.
Applying the principle of agency, Caram as principal, should
also be deemed to have acted in bad faith.
22. DOMINION INSURANCE VS. CA
GR # 129919
February 6, 2002
Principle: When a special power of attorney is required for the
agent to do a certain act, the agent, in the performance of
such act, must comply with the specifications embodied in
the special power of attorney giving him authority to do such.
Facts: Guevarra (plaintiff) instituted a claim for sum of money
against Dominion Insurance Corporation. He sought to
recover the sum of P156,473.90 which he claimed to have
advanced in his capacity as manager of defendant to satisfy
certain claims filed by defendant’s clients. Dominion denied
any liability to Guevarra and instituted a counterclaim for
premium allegedly unremitted by Guevarra.
Pre-trial conferences was scheduled but never pushed
through over the course of six months. When the case was
again called for pre-trial, only Guevarra and counsel were
present. The trial court declared Dominion in default and
denied any consideration. RTC ruled that Dominion was to
pay Guevarra in the amount of P156,473.90 claimed as the
total amount advanced as payment of the claims of
Dominion’s client which was also affirmed by the CA.

Issue: Whether or not Guevarra acted within his authority as
agent of Dominion?
Ruling: No. By the contract of agency, a person binds himself
to render some service or to do something in representation
or on behalf of another, with the consent or authority of the
latter. The basis for agency is representation. On the part of
the principal, there must be an actual intention to appoint or
an intention naturally inferrable from his words or actions;
and on the part of the agent, there must be an intention to
accept the appointment and act on it, and in the absence of
such intent, there is generally no agency.
A perusal of the “Special Power of Attorney” would show that
Dominion and Guevarra intended to enter into a principal-
agent relationship. Despite the word “special,” the contents of
the document reveal that what was constituted was a general
agency. The agency comprises all the business of the
principal, but, couched in general terms, is limited only to
acts of administration. A general power permits the agent to
do all acts for which the law does not require a special power.
Art. 1878 enumerates the instances when a special power of
attorney is required, including (1) to make such payments as
are not usually considered as acts of administration; (15) any
other act of strict dominion. The payment of claims is not an
act of administration. The settlement of claims is not included
among the acts enumerated in the Special Power of Attorney,
neither is it of a character similar to the acts enumerated
therein. A special power of attorney would have been required
before Guevarra could settle the insurance claims of the
insured. Guevarra’s authority to settle claims is embodied in
the Memorandum of Management Agreement which
enumerated the scope of Guevarra’s duties and
responsibilities. However, the Memorandum showed the
instruction of Dominion that payment of claims shall come
from a revolving fund. Having deviated from the instructions
of the principal, the expenses that Guevarra incurred in the
settlement of the claims of the insured may not be reimbursed
from Dominion.
However, while the law on agency prohibits Guevarra from
obtaining reimbursement, his right to recovery may still be
justified under the general law on Obligations and Contracts,
particularly, Art. 1236.
25. Duñgo v. Lopena G.R. No. L-18377 December 29, 1962
PRINCIPLE: A third person cannot bind another to a
compromise agreement unless he, the third person, has
obtained a special power of attorney for that purpose from the
party intended to be bound.
FACTS: Anastacio Duñgo and Rodrigo S. Gonzales purchased
3 parcels of land from Adriano Lopena and Rosa Ramos with
the remaining balance payable on installment secured by
mortgage over the same property. The vendees defaulted on
the first installment. A compromise agreement was submitted
to the lower court for approval. It was signed by Adriano
Lopena and Rosa Ramos on one hand, and Rodrigo S.
Gonzales, on the other. However, Rodrigo S. Gonzales
represented that his signature was for both himself and the
herein petitioner. Anastacio Duñgo's counsel was present at
the preparation of the compromise agreement and this
counsel affixed his signature thereto. When Anastacio Duñgo
and Rodrigo S. Gonzales failed to pay the balance of their
indebtedness the mortgage was foreclosed. Anastacio Duñgo
filed a motion to set aside all the proceedings on the ground
that the compromise agreement was void ab initio with
respect to him because he did not sign the same.
Consequently, he argued, all subsequent proceedings under
and by virtue of the compromise agreement, including the
foreclosure sale were void and null as regards him.
ISSUE: Was the compromise agreement of January 15, 1960,
the Order of the same date approving the same, and, all the
proceedings subsequent thereto, valid or void insofar as the
petitioner herein is concerned?
HELD:The compromise agreement was valid and enforceable.
Art. 1878 of the Civil Code, a third person cannot bind
another to a compromise agreement unless he, the third
person, has obtained a special power of attorney for that
purpose from the party intended to be bound. Although the
Civil Code expressly requires a special power of attorney in
order that one may compromise an interest of another, it is
neither accurate nor correct to conclude that its absence
renders the compromise agreement void. In such a case, the
compromise is merely unenforceable. Contracts are
unenforceable, unless they are ratified. Here, Anastacio
Duñgo ratified the compromise agreement conclusively
established by the Tri-Party Agreement. Also, when it appears
that the client, on becoming aware the compromise and the
judgment thereon, fails to repudiate promptly the action of
his attorney, he will not afterwards be heard to contest its
validity. Also, compromise agreement, the principal provision
of the said instrument was for his benefit.
26. Vicente v. Geraldez
In 1967, HI Cement Corporation was granted authority to
operate mining facilities in Bulacan. However, the areas
allowed for it to explore cover areas which were also being
explored by Ignacio Vicente, Juan Bernabe, and Moises
Angeles. And so a dispute arose between the three and HI
Cement as neither side wanted to give up their mining claims
over the disputed areas. Eventually, HI Cement filed a civil
case against the three. During pre-trial, the possibility of an
amicable settlement was explored where HI Cement offered to
purchase the areas of claims of Vicente et al at the rate of
P0.90 per square meter. Vicente et al however wanted P10.00
per square meter.
In 1969, the lawyers of HI Cement agreed to enter into a
compromise agreement with the three whereby
commissioners shall be assigned by the court for the purpose
of assessing the value of the disputed areas of claim. An
assessment was subsequently made pursuant to the
compromise agreement and the commissioners
recommended a price rate of P15.00 per square meter. One of
the lawyers of HI Cement, Atty. Francisco Ventura, then
notified the Board of Directors of HI Cement for the approval
of the compromise agreement. But the Board disapproved the
compromise agreement hence Atty. Ventura filed a motion
with the court to disregard the compromise agreement.
Vicente et al naturally assailed the motion. Vicente et al
insisted that the compromise agreement is binding because
prior to entering into the compromise agreement, the three
lawyers of HI Cement declared in open court that they are
authorized to enter into a compromise agreement for HI
Cement; that one of the lawyers of HI Cement, Atty.
Florentino Cardenas, is an executive official of HI Cement;
that Cardenas even nominated one of the commissioners;
that such act ratified the compromise agreement even if it was
not approved by the Board. HI Cement, in its defense, averred
that the lawyers were not authorized and that in fact there
was no special power of attorney executed in their favor for
the purpose of entering into a compromise agreement. Judge
Ambrosio Geraldez ruled in favor of HI Cement.
ISSUE: Whether or not a compromise agreement entered into
by a lawyer purportedly in behalf of the corporation is valid
without a written authority.
HELD: No. Corporations may compromise only in the form
and with the requisites which may be necessary to alienate
their property. Under the corporation law the power to
compromise or settle claims in favor of or against the
corporation is ordinarily and primarily committed to the
Board of Directors but such power may be delegated. The
delegation must be clearly shown for as a general rule an
officer or agent of the corporation has no power to
compromise or settle a claim by or against the corporation,
except to the extent that such power is given to him either
expressly or by reasonable implication from the
circumstances. In the case at bar, there was no special power
of attorney authorizing the three lawyers to enter into a
compromise agreement. This is even if the lawyers declared
in open court that they are authorized to do so by the
corporation (in this case, the transcript of stenographic notes
does not show that the lawyers indeed declare such in open
court). The fact that Cardenas, an officer of HI Cement, acted
in effecting the compromise agreement, i.e. nominating a
commissioner, does not ratify the compromise agreement.
There is no showing that Cardenas’ act binds HI Cement; no
proof that he is authorized by the Board; no proof that there
is a provision in the articles of incorporation of HI Cement
that he can bind the corporation.
27. COSMIC LUMBER CORPORATION, Petitioner, v.
COURT OF APPEAL and ISIDRO PEREZ, Respondents.
G.R. No. 114311 November 29, 1996
First Division
PRINCIPLES: No conferment of the power to sell can be validly
inferred from the specific authority "to enter into a
compromise agreement" because of the explicit limitation
fixed by the grantor that the compromise entered into shall
only be so far as it shall protect the rights and interest of the
corporation to physically possess the lots.
FACTS: COSMIC LUMBER CORPORATION thru its General
Manager executed on a Special Power of Attorney appointing
Paz G. Villamil-Estrada as attorney-in-fact to initiate,
institute and file any court action for the ejectment of third
persons and/or squatters of 443, for the said squatters to
remove their houses and vacate the premises in order that
the corporation may take material possession of the entire lot,
and for this purpose, to appear at the pre-trial conference and
enter into any stipulation of facts and/or compromise
agreement so far as it shall protect the rights and interest of
the corporation in the aforementioned lots.
In March 1985 Villamil-Estrada instituted an action for the
ejectment of Perez from Lot No. 443 before the RTC of
Dagupan, docketed as Civil Case No. D-7750.
In November 1985, Villamil-Estrada entered into a
Compromise Agreement with respondent Perez selling the
333 square meters portion of Lot 443 to Perez for a price of
P80.00 per square meter. The Compromise Agreement was
approved by the trial court.
Although the decision became final and executory it was not
executed within the 5-year period from date of its finality
allegedly due to the failure of Petitioner to produce the
owner's duplicate copy of the title. Thus in January 1993,
Perez filed a complaint to revive the judgment, docketed as
Civil Case No. D-10459.
Petitioner asserts that it was only when the summons in Civil
Case No. D-10459 for the revival of judgment was served
upon it that it came to know of the compromise agreement
entered into between Paz G. Villamil-Estrada and respondent
Isidro Perez upon which the trial court based its decision of
26 July 1993 in Civil Case No. D-7750.
Petitioner sought annulment of the decision before the CA on
the ground that the compromise agreement was void because:
(a) the attorney-in-fact did not have the authority to sell the
property (b) the authority of the attorney-in-fact was confined
to the institution and filing of an ejectment case, the eviction
of third persons/squatters from the lot; and (c) while the
special power of attorney made mention of an authority to
enter into a compromise agreement, such authority was in
connection with, and limited to, the eviction of third
persons/squatters thereat, in order that the corporation may
take material possession of the entire lot.
The CA dismissed the complaint on the basis of its finding
that lack of authority to sell the subject property is not as a
ground for annulment of judgment because it does not affect
the jurisdiction of the trial court over the action nor does it
amount to extrinsic fraud.
ISSUE/S:Whether an authority to sell can be inferred from
the authority to enter into a compromise agreement when
such authority to compromise is with explicit limitation that
it be entered only in so far as it shall protect the rights and
interest of the grantor to physically possess lots.
RULING: We agree with petitioner. The authority granted
Villamil-Estrada under the special power of attorney was
explicit and exclusionary: for her to institute any action in
court to eject all persons foundo on Lot 443 so that petitioner
could take material possession thereof, and for this purpose,
to appear at the pre-trial and enter into any stipulation of
facts and/or compromise agreement but only insofar as this
was protective of the rights and interests of petitioner in the
property. Nowhere in this authorization was Villamil-Estrada
granted expressly or impliedly any power to sell the subject
property nor a portion thereof. Neither can a conferment of
the power to sell be validly inferred from the specific authority
"to enter into a compromise agreement" because of the
explicit limitation fixed by the grantor that the compromise
entered into shall only be "so far as it shall protect the rights
and interest of the corporation in the aforementioned lots." In
the context of the specific investiture of powers to Villamil-
Estrada, alienation by sale of an immovable certainly cannot
be deemed protective of the right of petitioner to physically
possess the same, more so when the land was being sold for
a price of P80.00 per square meter, very much less than its
assessed value of P250.00 per square meter, and considering
further that petitioner never received the proceeds of the sale.
When the sale of a piece of land or any interest thereon is
through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void. Thus the authority
of an agent to execute a contract for the sale of real estate
must be conferred in writing and must give him specific
authority, either to conduct the general business of the
principal or to execute a binding contract containing terms
and conditions which are in the contract he did execute. A
special power of attorney is necessary to enter into any
contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable
consideration. The express mandate required by law to enable
an appointee of an agency (couched) in general terms to sell
must be one that expressly mentions a sale or that includes
a sale as a necessary ingredient of the act mentioned. For the
principal to confer the right upon an agent to sell real estate,
a power of attorney must so express the powers of the agent
in clear and unmistakable language. When there is any
reasonable doubt that the language so used conveys such
power, no such construction shall be given the document.
It is therefore clear that by selling to respondent Perez a
portion of petitioner's land through a compromise agreement,
Villamil-Estrada acted without or in obvious authority. The
sale ipso jure is consequently void. So is the compromise
agreement. This being the case, the judgment based thereon
is necessarily void.
28. Lilian Mercado, et al. v. Allied Banking Corporation
G.R. No. 171460, 27 July 2007
PRINCIPLE: A special power of attorney must be strictly
construed and pursued. The instrument will be held to grant
only those powers which are specified therein, and the agent
may neither go beyond nor deviate from the power of
attorney. Where powers and duties are specified and defined
in an instrument, all such powers and duties are limited and
are confined to those which are specified and defined, and all
other powers and duties are excluded.
FACTS: A certain Perla Mercado, during her lifetime, owned
several properties in the Philippines. On 28 May 1992, she
executed a Special Power of Attorney in favor of her husband,
Julian, over several pieces of property under her name.
Among those powers vested upon him was the authority to
mortgage Perla’s parcel of land covered by TCT NO. RT-
106338 with an area of 805 square meters and registered
with the Registry of Deeds of Pasig (now Makati).
By virtue of the said SPA, Julian obtained a loan twice from
respondent Allied Banking, secured by the same real estate
mortgage constituted on TCT No. RT-18206 (106338) which
covers a parcel of land with an area of 805 square meters,
registered with the Registry of Deeds of Quezon City.
However, it appears that there was no property identified in
the SPA as TCT No. RT-18206 (106338) and registered with
the Registry of Deeds of Quezon City. What was identified in
the SPA instead was the property covered by TCT No. RT-
106338 registered with the Registry of Deeds of Pasig.
Subsequently, Julian defaulted payment of his loan
obligation. Thus, respondent initiated extra-judicial
foreclosure proceedings over the subject property which was
subsequently sold at public auction wherein the respondent
was declared as the highest bidder. A year later, petitioners
initiated with the RTC an action for the annulment of REM
constituted over the subject property on the ground that the
same was not covered by the SPA and that the said SPA, at
the time the loan obligations were contracted, no longer had
force and effect since it was previously revoked by Perla on 10
March 1993, as evidenced by the Revocation of SPA signedi
by the latter.
The RTC declared the real estate mortgage constituted over
the subject property null and void. On appeal, the CA
reversed the lower court’s decision and upheld the validity of
the REM constituted over the subject property on the strength
of the SPA. Hence, this petition.
ISSUE: Whether or not the property subject to real estate
mortgage was covered under the SPA executed by Perla in
favor of Julian.
RULING: NO. The Court is convinced that the property
covered by TCT No. 106338 registered with the Registry of
Deeds of Pasig (now Makati) is the same as the subject
property covered by TCT No. RT-18206 (106338) registered
with the Registry of Deeds of Quezon City. The records of the
case are stripped of supporting proofs to verify the
respondent's claim that the two titles cover the same
property. It failed to present any certification from the
Registries of Deeds concerned to support its assertion.
Neither did respondent take the effort of submitting and
making part of the records of this case copies of TCTs No. RT-
106338 of the Registry of Deeds of Pasig (now Makati) and
RT18206 (106338) of the Registry of Deeds of Quezon City,
and closely comparing the technical descriptions of the
properties covered by the said TCTs.
Having arrived at the conclusion that Julian was not
conferred by Perla with the authority to mortgage the subject
property under the terms of the SPA, the real estate
mortgages Julian executed over the said property are
therefore unenforceable. Assuming arguendo that the subject
property was indeed included in the SPA executed by Perla in
favor of Julian, the said SPA was revoked by virtue of a public
instrument executed by Perla on 10 March 1993.
--------------------
The subject property was not among those enumerated
therein. There was nothing in the language of the SPA from
which the Court could deduce the intention of Perla to include
the subject property therein. The further explained that they
cannot attribute such intention to Perla who executed the
SPA when the language of the instrument is bare of any
indication suggestive of such intention. Otherwise, it would
run afoul of the express tenor of the SPA and thus defeat
Perla’s true intention.
Equally relevant is the rule that a power of attorney must be
strictly construed and pursued. The instrument will be held
to grant only those powers which are specified therein, and
the agent may neither go beyond nor deviate from the power
of attorney. Where powers and duties are specified and
defined in an instrument, all such powers and duties are
limited and are conned to those which are specified and
defined, and all other
powers and duties are excluded.
29. BPI vs De Coster GR NO. 23181
Principle: A power of attorney “to loan and borrow money”
and to mortgage the principal’s property does not carry with
it or imply that the agent has a legal right to make the
principal liable for the personal debts of the agent.
Facts: While the de Coster is residing in Paris, France, Jean
Poizat her husband executed a promissory note for
P292,000.00 for a loan and a real mortgage on her behalf,
making her liable jointly and severally along with her
husband and his firm, by virtue of a power of attorney that
she left with her husband. In addition, a chattel mortgage was
also executed by Jean Poizat and J.M. Poizat & Co. on two
steamships belonging to the Poizat Vegetable Oil Mills. The
note in question became long past due and owing
The lower court ruled that the defendants are liable to BPI.
Wife returned to the Philippines to question the validity of the
service of the summons (since she has been residing in Paris
for 16 years now), the validity of the promissory note and the
validity of the real mortgage.
Issue: WON the principal wife is liable for the mortgage
executed by her agent husband.
Ruling: No. The note and mortgage show upon their face that
at the time they were executed, the agent-husband was
attorney-in-fact for the defendant wife, and the bank knew or
should have known the nature and extent of his authority
and the limitations upon his power.
Par. 5 of the power of attorney authorizes the agent husband
for and in the name of his wife to “loan or borrow any sums
of money or fungible things etc”. This is taken to mean that
he only had the power to loan his wife’s money and to borrow
money for or on account of his wife as her agent and attorney-
in-fact, it does not carry with it or imply that he had the legal
right to make his wife liable as a surety for the preexisting
debt of a third person.
The note which binds the wife and upon which the mortgage
was executed was found to be for a preexisting debt of the
husband and of his firm. The wife was not a party to this
original debt and the power of attorney does not authorize the
husband to make the wife liable as a surety to the debt of a
third person.
The fact that an agent failed and neglected to perform his
duties and to represent the interests of his principal is not a
bar to the principal obtaining legal relief for the negligence of
her agent, provided that the application for such a relief is
duly and properly made under the provisions of section 113
(Code of Civil Procedure).
When the note which a real mortgage is supposed to secure
is found to be VOID as to the principal, then it follows that
the mortgageis also VOID as to the principal
30. PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs.
MAXIMO STA. MARIA, ET AL., defendant,
VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO
and LEONILA, all surnamed STA. MARIA,defendants-
appellants.
PRINCIPLE: a special power of attorney to mortgage real
estate is limited to such authority to mortgage and does not
bind the grantor personally to other obligations contracted by
the grantee, in the absence of any ratification or other similar
act that would estop the grantor from questioning or
disowning such other obligations contracted by the grantee.
FACTS: Philippine National Bank (PNB) filed this action on
February 10, 1961 against defendant Maximo Sta. Maria and
his six brothers and sisters, defendants-appellants,
Valeriana, Emeteria, Teofilo, Quintin, Rosario and Leonila, all
surnamed Sta. Maria ( the Sta. Marias’ ), and the Associated
Insurance & Surety Co., Inc. as surety, for the collection of
certain amounts representing unpaid balances on two
agricultural sugar crop loans due allegedly from defendants.
The said sugar crop loans were obtained by defendant
Maximo Sta. Maria from PNB under a special power of
attorney, executed in his favor by his six brothers and sisters,
defendants-appellants herein, to mortgage a 16-odd hectare
parcel of land, jointly owned by all of them, In addition,
Valeriana Sta. Maria alone also executed in favor of her
brother, Maximo, a special power of attorney to borrow money
and mortgage any real estate owned by her. By virtue of the
two above powers, Maximo Sta. Maria applied for two
separate crop loans.
ISSUE: W/O Maximo Sta. Maria acted within the powers
granted by the SPA.
HELD: No. Maximo Sta. Maria went beyond the powers
granted to him by the SPA.
The authority granted by the Sta. Marias’ (except Valeriana)
unto their brother, Maximo, was merely to mortgage the
property jointly owned by them. They did not grant Maximo
any authority to contract for any loans in their names and
behalf. Maximo alone, with Valeriana who authorized him to
borrow money, must answer for said loans and the other
defendants-appellants' only liability is that the real estate
authorized by them to be mortgaged would be subject to
foreclosure and sale to respond for the obligations contracted
by Maximo. But they cannot be held personally liable for the
payment of such obligations, as erroneously held by the trial
court.
31. INSULAR DRUG CO. V. PHILIPPINE NATION BANK,
G.R. NO. L-38816, NOVEMBER 3, 1933
Principle: “Any person taking checks made payable to a
corporation, which can act only by agent does so at his peril,
and must same by the consequences if the agent who
indorses the same is without authority.”
Facts: One hundred thirty-two (132) checks made out in the
name of the Insular Drug Co., Inc., covering a total of
₱18,285.92 were brought to the branch office of the Philippine
National Bank (PNB) in Iloilo by Foerster, a salesman of
Insular Drug. Co., Foerster’s wife, and Foerster’s clerk. The
checks placed in the personal account of Foerster. After the
indorsement on the checks was written by the Manager of
PNB, the amounts stated were subsequently withdrawn by
U.E., Foerster, and Carmen E. de Foerster. However, upon
the discovery of the anomalies by the Manila Office of the drug
company through its investigation of the transaction made by
Foerster, the latter committed suicide. There is no evidence
showing that the bank knew that Foerster was
misappropriating the funds of his principal.
Issue: Whether or not the bank incurred the liability to pay
Insular Drug Co..
Held:Yes. A salesman (agent) who was given authority to
collect money that belonged to his principal do not have the
implied authority to indorse checks received in payment.
Further, “any person taking checks made payable to a
corporation, which can act only by agent does so at his peril,
and must same by the consequences if the agent who
indorses the same is without authority.”
In this case, the bank could not be relieved of its
responsibility by relying to the effect that Foerster had
implied authority to indorse all checks made out in the name
of the Insular Drug Co. Not only did the bank permit Foerster
to indorse checks and then place them to his personal
account, but it went farther and permitted Foerster's wife and
clerk to indorse the checks. The right of an agent to indorse
commercial paper is a very responsible power and will not be
lightly inferred.
32.:C.N. HODGES vs. CARLOTA SALAS and PAZ SALAS
(GR No. G.R. No. L-42958. October 21, 1936)
Facts: The defendants, Salas and Salas, executed a Power of
Attorney in favor of their brother-in law Felix S. Yulo to enable
him to obtain a loan and secure it with a mortgage on the real
property described in transfer certificate of title No. 3335.
Under the said Power of Attorney, Yulo obtained a loan, hence
binding his principals jointly and severally to pay it within 10
years subject to interest. In effect he signed a promissory note
for the amount borrowed and executed a deed of mortgage of
the real property.
However, the amount loaned was not delivered to Yulo but
rather the plaintiff and the agent, Yulo had an agreement that
the amount be used to pay the personal debts of the agent.
The defendants failed to pay at maturity the interest
stipulated which should have been paid one year in advance.
Thus, plaintiff, Hodges therefore brought an action for
foreclosure of the mortgage. The defendants then counters
such action that Yulo acted in excess of his authority.
Issue:
Whether or not, Felix Yulo, being the agent, was authorized
to borrow money and use it as he wished for his personal gain
by virtue of the authority conferred by the defendants.
Ruling:
In the case of Manila Trading & Supply Co. vs. Uy Tiepo, the
court held that an agent who used the borrowed money for
his personal gain or benefit is deemed to have exceeded the
authority conferred upon him under the power of attorney in
which case should have been specific and limited to a certain
extent.
As substantially provided under Article 1881 of the Civil Code
that an agent must act within the scope of his authority and
may do such acts as may be conducive to the accomplishment
of the purpose of the agency.
In the case at bar, Yulo exceeded the authority provided
under the Power of Attorney by using the loaned money for
his personal benefit.
34. BRAVO-GUERRERO v. BRAVO
G.R. NO. 152658
July 29, 2005
Principle: There is no need to execute a separate and special
power of attorney if the act or transaction specified can be
included in the general power
Facts: Grandparents-spouses Bravo owned two parcel of
lands in Makati, the wife executed GPA in favor of her
husband. These properties were subsequently sold by the
grandfather to their grandchildren. Such properties were
mortgaged to PNB and DBP and the grandchildren-heirs
assumed the payment. Later on, one of the grandchildren
moved for the partition of the properties as co-owners but the
buyers refused. The grandchildren contested the sale for lack
of consideration. The trial court upheld the validity of the sale
which was reversed by CA for lack of consent on the part of
the grandmother.
Issue: WON the GPA granted by grandmother was valid
Held: Yes. Sale of conjugal property by husband is only
voidable if without wife’s consent. The sale can only be
contested by the wife, and this is not the case. The
grandmother executed a GPA specifying the authority of his
husband, thus, meeting the requirement of authorization
specified in Art. 1878. There was no need to execute a
separate and special power of attorney as it can be included
in the general power when it is specified therein the act or
transaction for which the special power is required.