From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y.

2017-2018)

September 22, 2017 one is acting for and in behalf of another fiduciary relationship in Partnership,
Transcriber: KC Confesor (2-A Words and Phrases 436.); and Trust, and in Agency.
2. Agent estopped from asserting interest Agency to Sell Contract of Sale
TITLE X (2) Agent. — one who acts for and adverse to the principal
AGENCY represents another; he is the person 3. Agent must not act as an adverse party Agent receives the goods Buyer receives the
acting in a representative capacity. The 4. Agent must not act for the adverse party as the goods of the goods as owner
agent has derivative authority in carrying 5. Agent must not use or disclose secret principal
out the principal’s business. He may information Agent delivers the Buyer pays the price
CHAPTER 1 employ his own agent in which case he 6. Agent must give notice of material facts2 proceeds of the sale
Nature, Form and Kinds of Agency becomes a principal with respect to the Agent can return the The buyer, as general
latter. (see Art. 1892.) If an act done by object in case he is unable rule, cannot return the
Article 1868. By the contract of agency a person one person in behalf of another is, in its to sell the same to 3rd object sold
binds himself to render some service or to do essential nature, one of “agency,” the Agency Lease Service person
something in representation or on behalf of another, former is “agent” of the latter The agent, in dealing with The buyer can deal with
with the consent or authority of the latter. Based on Representation Based on Employment
notwithstanding that he is not so called. the thing received, is the thing as he pleases,
(2-A Words and Phrases 436.) Agent exercises The lessor (like a bound to act according to being the owner
.. Agency is a fiduciary relationship which implies a discretionary powers servant) ordinarily the instructions of the
power in an agent to contract with a third person on performs only principal
behalf of a principal. So, because of limitations of Elements of Agency ministerial functions
space, there’s a contract of agency… it’s as if the (1) There is consent, express or implied, of 3 persons are involved: 2 persons are involved:
agent is the extension of the principal. Having said the parties to establish the relationship; principal, agent, and the the lessor (master or
that, agency is a preparatory contract. Meaning, it’s a (2) The object is the execution of a juridical third person with whom employer) and the Agent Independent Contractor
a contract entered into as a means to an end. act in relation to third persons; the agent has contracted lessee (servant or (IC)
(3) The agent acts as a representative and not employee); and Agent appointed by the Employed by the
Characteristics of a contract of Agency for himself; and Relates to commercial or (like in case of master principal Employer (ER)
(1) consensual, because it is based on the (4) The agent acts within the scope of his business transactions and servant) relates the agent is subject to In a contract for a piece of
agreement of the parties which is authority. (Rallos vs. Felix Go Chan & more to matters of mere the control and work, the IC, without
perfected by mere consent; Sons Realty Corp. and Court of Appeals, manual or mechanical direction of the being subject to the
(2) principal, because it can stand by itself 81 SCRA 251 [1978]; Tuazon vs. Heirs execution, in which the principal whom he control of the ER except
without need of another contract; of B. Ramos, 463 SCRA 408 [2005].) servant acts under the represents with respect only as to the result of the
(3) nominate, because it has its own name; direction and control of to the matters entrusted work, exercises his
(4) unilateral, if it is gratuitous because it Acts that may be/not be delegated the master to him employment
creates obligations for only one of the to agents. independently, and not in
parties, i.e., the agent; or bilateral, if it is The general rule is that what a man may do in person, representation of the ER
for compensation because it gives rise to he may do thru another. Some acts, however, cannot Agency Guardianship Principal is liable for ER is not liable for the
reciprocal rights and obligations; and be done through an agent. the torts committed by torts or injury inflicted by
(5) preparatory, because it is entered into as 1. Personal acts - If personal performance agent derives his although he acts for and the agent within the the IC upon 3rd persons or
a means to an end, i.e., the creation of is required by law or public policy or the authority from his on behalf of his ward, scope of his authority by the EEs of such
other transactions or contracts.1 agreement of the parties, the doing of the principal does not derive his contractor.
act by a person on behalf of another does authority so to act from
Please take note that the basis of agency is always not constitute performance by the latter. the ward
representation. The act of the agent in behalf of the Ex: The right to vote during election relation of principal and may be created
principal within the scope of its authority produces the cannot be done by an agent agent is founded upon irrespective of the consent We have a few cases. What happened in the case of
same legal and binding effect as if the principal consent of the parties or capacity of the ward ChemPhil Export vs CA?
personally made them. 2. Criminal acts or acts not allowed by law. thereto
Chemphil Export & Import Corp vs. Court of
— An attempt to delegate to another Agents are subject to Guardians are not subject Appeals
Distinguishing Features authority to do an act which, if done by the control of their to the direction of their (Digest by: Ana Lapu)
1. representative character the principal would be illegal, is void. principals wards NOTE: The case is very long with so many issues.
2. preparatory There can be no agency in the Agent is the appointee A legal guardian is Highlight and underscore supplied.
perpetration of a crime or an unlawful of the principal and his substituted by law FACTS:
Parties to a contract of Agency act. power may at anytime Before us is a legal tug-of-war between the Chemphil
(1) Principal. — one whom the agent be abrogated or Export and Import Corporation (hereinafter
represents and from whom he derives his modified by the referred to as CEIC), on one side, and the PISO and
authority (2 C.J.S. 1024.); he is the Nature of relations between principal principal Jaime Gonzales as assignee of the Bank of the
person represented. Agency imports the and agent Agent represents one Guardian represents one Philippine Islands (BPI), Rizal Commercial
contemporaneous existence of a 1. Relations is fiduciary in character - who has capacity to who has no such capacity Banking Corporation (RCBC), Land Bank of the
principal, and there is no agency unless based on trust and confidence. We have contract for himself Philippines (LBP) and Philippine Commercial
discussed since the start of the semester International Bank (PCIB), on the other (hereinafter
that this particular subject mainly dwells 2
Others not enumerated by the professor is supplied referred to as the consortium), over 1,717,678 shares
1
De Leon’s Book on Agency on fiduciary relationship. We have from book of de Leon of stock (hereinafter referred to as the "disputed
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
shares") in the Chemical Industries of the Philippines
(Chemphil/CIP).
Dynetics, Inc. and Antonio M. Garcia filed a
complaint for declaratory relief and/or injunction
against the PISO, BPI, LBP, PCIB and RCBC or the
consortium with the Regional Trial Court seeking
judicial declaration, construction and interpretation of
the validity of the surety agreement that Dynetics and
Garcia had entered into with the consortium and to
perpetually enjoin the latter from claiming, collecting
and enforcing any purported obligations which
Dynetics and Garcia might have undertaken in said
agreement. The consortium filed their respective
answers with counterclaims alleging that the surety
agreement in question was valid and binding and that
Dynetics and Garcia were liable under the terms of the
said agreement. A notice of garnishment covering
Garcia's shares in CIP/Chemphil (including the
disputed shares) was served on Chemphil through
its then President.The notice of garnishment was
duly annotated in the stock and transfer books of
Chemphil on the same date. The trial court denied the
application of Dynetics and Garcia for preliminary
injunction and instead granted the consortium's prayer
for a consolidated writ of preliminary attachment.
Hence, after the consortium had filed the required
bond, a writ of attachment was issued and various
real and personal properties of Dynetics and
Garcia were garnished, including the disputed
shares.
This garnishment, however, was not annotated in
Chemphil's stock and transfer book. The Court
holds that the CONSORTIUM has admitted that the
writ of attachment/garnishment issued on the shares of
stock belonging to plaintiff Antonio M. Garcia was
not annotated and registered in the stock and transfer
books of CHEMPHIL. On the other hand, the prior
attachment issued in favor of SBTC against the
same CHEMPHIL shares of Antonio M. Garcia,
was duly registered and annotated in the stock and
transfer books of CHEMPHILCEIC vigorously
argues that the consortium's writ of attachment
over the disputed shares of Chemphil is null and
void, insisting as it does, that the notice of
garnishment was not validly served on the
designated officers on 19 July 1985.
To support its contention, CEIC presented the sheriff's
notice of garnishment dated 19 July 1985 which
showed on its face that said notice was received by
one Thelly Ruiz who was neither the president nor
managing agent of Chemphil. It makes no
difference, CEIC further avers, thatThelly Ruiz was
the secretary of the President of Chemphil, for under
the above-quoted provision she is not among the
officers so authorized or designated to be served with
the notice of garnishment.
ISSUE:
Who has a better right to the shares of stocks?
HELD: The Consortium.
The Court of Appeals agreed with the
consortium's position that the attachment of shares
of stock in a corporation need not be recorded in
the corporation's stock and transfer book in order
to bind third persons. Section 7(d), Rule 57 of the
Rules of Court was complied with by the consortium
(through the Sheriff of the trial court) when the
notice of garnishment over the Chemphil shares of
Garcia was served on the president of Chemphil.
Indeed, to bind third persons, no law requires that an
attachment of shares of stock be recorded in the stock
and transfer book of a corporation.
Therefore, ruled the Court of Appeals, the attachment
made over the Chemphil shares in the name of Garcia
was made in accordance with law and the lien created
thereby remained valid and subsisting at the time
Garcia sold those shares to FCI (predecessor-in-
interest of appellee CEIC) in 1988. A secretary's
major function is to assist his or her superior.
He/she is in effect an extension of the latter.
Obviously, as such, one of her duties is to receive
letters and notices for and in behalf of her
superior, as in the case at bench. The notice of
garnishment was addressed to and was actually
received by Chemphil's president through his
secretary who formally received it for him.Thus, in
one case, we ruled that the secretary of the
president may be considered an "agent" of the
corporation and held that service of summons on
him is binding on the corporation. Moreover, the
service and receipt of the notice of garnishment was
duly acknowledged and confirmed by the corporate
secretary of Chemphil, Rolando Navarro and his
successor Avelino Cruz through their respective
certifications. We rule, therefore, that there was
substantial compliance with Sec. 7 (d), Rule 57 of the
Rules of Court.
Discussion: What was the issue on subrogation? So
the question here is, kasi sinettle to diba, there was a
compromise agreement, sinettle, binayaran yung
utang, tapos ngayon, ang nagbayad, may binenta na
property pero part ng stipulation was the purchase
price should be.. instead of bayaran siya, ibayad
nalang dun [huh? Sir?], ngayon ang question, sabi
nung sa part ng Bank, I was subrogated kasi ako yung
nagbayad, pero sabi ng SC, No. that was the money of
Garcia, there was an agency. In this case, the
provisions on subrogation cannot apply since wala
naming 3rd party, in effect yung nagbayad, si 3rd party,
is acting for his principal who is Mr. Garcia.
From FT of the case: When FCI issued the BA check
to SBTC in the amount of P35,462,869.62 to pay
Garcia's indebtedness to the said bank, it was in effect
paying with Garcia's money, no longer with its own,
because said amount was part of the purchase price
which FCI owed Garcia in payment for the sale of the
disputed shares by the latter to the former. The money
"paid" by FCI to SBTC, thus properly belonged to
Garcia. It is as if Garcia himself paid his own debt to
SBTC but through a third party — FCI. Since the
money used to discharge Garcia's debt rightfully
belonged to him, FCI cannot be considered a third
party payor under Art. 1302 (2). It was but a conduit,
or as aptly categorized by respondents, merely an
agent as defined in Art. 1868 of the Civil Code. In
sum, CEIC, for its failure to fulfill the requirements of
Art. 1302 (2), was not subrogated to the rights of
SBTC against Antonio Garcia and did not acquire
SBTC's attachment lien over the disputed shares
which, in turn, had already been lifted or discharged
upon satisfaction by Garcia, through FCI, of his debt
to the said bank.
Filipinas Life vsPedroso G.R. No. 159489;
February 4, 2008 (Digest by: Ana Lapu)
FACTS:
Respondent Teresita O. Pedroso is a policyholder of a
20-year endowment life insurance issued by petitioner
Filipinas Life Assurance Company (Filipinas Life).
Pedroso claims Renato Valle was her insurance agent
since 1972 and Valle collected her monthly
premiums. In the first week of January 1977, Valle
told her that the Filipinas Life Escolta Office was
holding a promotional investment program for
policyholders. It was offering 8% prepaid interest a
month for certain amounts deposited on a monthly
basis. Enticed, she initially invested and issued a post-
dated check dated January 7, 1977 for P10,000. In
return, Valle issued Pedroso his personal check for
P800 for the 8% prepaid interest and an agents
receipt.
Subsequently, she called the Escolta office and talked
to the branch manager, Angel Apetrior. Pedroso
inquired about the promotional investment and
Apetrior confirmed that there was such a promotion.
She was even told she could "push through with the
check" she issued. From the records, the check, with
the endorsement of Alcantara at the back, was
deposited in the account of Filipinas Life with the
Commercial Bank and Trust Company (CBTC),
Escolta Branch.
Pedroso waited for the maturity of her initial
investment. A month after, her investment of P10,000
was returned to her after she made a written request
for its refund. The formal written request, dated
February 3, 1977, was written on an inter-office
memorandum form of Filipinas Life prepared by
Alcantara. To collect the amount, Pedroso personally
went to the Escolta branch where Alcantara gave her
the P10,000 in cash. After a second investment, she
made 7 to 8 more investments in varying amounts,
totaling P37,000 but at a lower rate of 5% prepaid
interest a month. Upon maturity of Pedroso's
subsequent investments, Valle would take back from
Pedroso the corresponding yellow-colored agent's
receipt he issued to the latter.
Pedroso told respondent Jennifer N. Palacio, also a
Filipinas Life insurance policyholder, about the
investment plan. Palacio made a total investment of
P49,550 but at only 5% prepaid interest. However,
when Pedroso tried to withdraw her investment, Valle
did not want to return some P17,000 worth of it.
Palacio also tried to withdraw hers, but Filipinas Life,
despite demands, refused to return her money. With
the assistance of their lawyer, they went to Filipinas
Life Escolta Office to collect their respective
investments, and to inquire why they had not seen
Valle for quite some time. But their attempts were
futile. Hence, respondents filed an action for the
recovery of a sum of money. Filipinas Life contends
that that the investment scheme offered to respondents
by Valle, Apetrior and Alcantara was outside the
scope of their authority as agents of Filipinas Life.
ISSUE:
Whether the agents of Filipinas Life exceeded the
scope of their authority
HELD:
No, the agents of Filipinas Life did not exceed the
scope of their authority. The Supreme Court ruled that
the general rule is that the principal is responsible for
the acts of its agent done within the scope of its
authority, and should bear the damage caused to third
persons. When the agent exceeds his authority, the
agent becomes personally liable for the damage. But
even when the agent exceeds his authority, the
principal is still solidarily liable together with the
agent if the principal allowed the agent to act as
though the agent had full powers. In other words, the
acts of an agent beyond the scope of his authority do
not bind the principal, unless the principal ratifies
them, expressly or impliedly. Ratification in agency
is the adoption or confirmation by one person of an
act performed on his behalf by another without
authority.
Filipinas Life cannot profess ignorance of Valle's acts.
Even if Valle's representations were beyond his
authority as a debit/insurance agent, Filipinas Life
thru Alcantara and Apetrior expressly and knowingly
ratified Valle's acts. It cannot even be denied that
Filipinas Life benefited from the investments
deposited by Valle in the account of Filipinas Life. In
our considered view, Filipinas Life had clothed Valle
with apparent authority; hence, it is now estopped to
deny said authority. Innocent third persons should not
be prejudiced if the principal failed to adopt the
needed measures to prevent misrepresentation, much
more so if the principal ratified his agent's acts
beyond the latter's authority.
Discussion: Ano lang ba ang ino-offer ni Filipinas?
Sabi ni Filipinas, it is only offering life insurance,
yung binenta ni Agent Valle is investment. Sabi niya
that’s outside of the scope, di naming yan business.
What Filipinas is saying that while we acknowledge
that Agent Valle is our agent, still the act was made
outside the scope of his authority. Ano ang sabi ng
SC? In a contract of agency, it is the principal that is
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
bound if the agent acted within the scope of his
authority. So kung mag-exceed si agent sa kanyang
authority, he will be personally bound. However, if it
was ratified by the principal, then pareho silang
solidarily liable.
Eurotech Industrial Technologies Inc. vs Cuizon
G.R. No. 167552; April 23, 2007
(Digest by: Ana Lapu)
FACTS: From January to April 1995, petitioner sold
to Impact Systems various products allegedly
amounting to P91,338.00 pesos. Subsequently,
respondents sought to buy from petitioner one unit of
sludge pump valued at P250,000.00 with respondents
making a down payment of P50,000.00. When the
sludge pump arrived from the United Kingdom,
petitioner refused to deliver the same to respondents
without their having fully settled their indebtedness to
petitioner. Thus, on 28 June 1995, respondent
EDWIN and Alberto de Jesus, general manager of
petitioner, executed a Deed of Assignment of
receivables in favor of petitioner. Impact systems is
owed by ERWIN Cuizon.
Despite the existence of the Deed of Assignment,
respondents proceeded to collect from Toledo Power
Company the amount of P365,135.29. Alarmed by
this development, petitioner made several demands
upon respondents to pay their obligations. As a result,
respondents were able to make partial payments to
petitioner. On 7 October 1996, petitioner's counsel
sent respondents a final demand letter wherein it was
stated that as of 11 June 1996, respondents' total
obligations stood at P295,000.00 excluding interests
and attorney's fees. Because of respondents' failure to
abide by said final demand letter, petitioner instituted
a complaint for sum of money, damages, with
application for preliminary attachment against herein
respondents
By way of special and affirmative defenses,
respondent EDWIN alleged that he is not a real party
in interest in this case. According to him, he was
acting as mere agent of his principal, which was the
Impact Systems, in his transaction with petitioner and
the latter was very much aware of this fact.
ISSUE:
Whether the act of Edwin in signing the Deed of
Assignment binds his principal Impact Systems
HELD:
Yes, the act of Edwin in signing the Deed of
Assignment binds Impact Systems
The Supreme Court held that in a contract of agency,
a person binds himself to render some service or to do
something in representation or on behalf of another
with the latter's consent. Its purpose is to extend the
personality of the principal or the party for whom
another acts and from whom he or she derives the
authority to act. It is said that the basis of agency is
representation, that is, the agent acts for and on behalf
of the principal on matters within the scope of his
authority and said acts have the same legal effect as if
they were personally executed by the principal.
In this case at hand, the parties do not dispute the
existence of the agency relationship between
respondents ERWIN as principal and EDWIN as
agent.
Discussion: so the issue here, is di sila makabayad so
nag execute ng deed of assignment ang manager, so
ngayon yung owner, sabi ng owner, dapat hindi ako
liable kay it was not within the scope of the authority
ng manager. Ano sabi ng SC? In this particular case,
the SC said that 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 degree of confidence reposed and
investiture with liberal powers for the exercise of
judgment and discretion in transactions and concerns
which are incidental or appurtenant to the business
entrusted to his care and management. In the absence
of an agreement to the contrary, a managing agent
may enter into any contracts that he deems
reasonably necessary or requisite for the protection
of the interests of his principal entrusted to his
management.
So what the SC is trying to say: may business ka, may
principal, tapos meron din kayong manager. Hindi
naman sa lahat kailangan meron siyang SPA, pwede
naman general power lang, if it involves acts
reasonably necessary or requisite for the protection of
the interests of his principal entrusted to his
management. In this particular case, hindi sila
makabayad. Wala silang choice, but to execute a deed
of assignment. So in this particular case, sabi ng SC,
that is included in the power of the manager.
VioletaBanateet. al. vs. Philippine Countryside
Rural Bank
GR 16382513 July 2010
(Digest by: April Pareno)
FACTS: Sometime in November 1997 the spouses
Maglasang and the spouses Cortel asked PCRB’s
permission to sell the properties which they
mortgaged with the bank. They likewise requested
that the said properties be released from the mortgage
since the two other loans were adequately secured by
the other mortgages. The spouses Maglasang and the
spouses Cortel claimed that the PCRB, acting through
its Branch Manager, PancrasioMondigo, verbally
agreed to their request but required first the full
payment ofthe subject loan. They thereafter sold to
petitioner VioletaBanate the subject properties for
P1,750,000.00 and used the amount to pay the subject
loan with PCRB.
After settling the subject loan, PCRB gave the
owner’s duplicate certificate of title of Lot 12868-H-
3-C to Banate, who was able to secure a new title in
her name. It, however, carried the mortgage lien in
favor of PCRB, prompting the petitioners to request
from PCRB a Deed of Release of Mortgage. As
PCRB refused to comply with the petitioners’ request,
the petitioners instituted an action for specific
performance before the RTC to compel PCRB to
execute the release deed.
Accordingly, PCRB claimed that full payment of the
three loans, obtained by the spouses Maglasang, was
necessary before any of the mortgages could be
released; the settlement of the subject loan merely
constituted partial payment of the total obligation.
Thus, the payment does not authorize the release of
the subject properties from the mortgage lien.
ISSUE: Whether or not Mondigo, as branch manager
of PCRB, has the authority to modify the original
mortgage contract on behalf of the company.
RULING: NO. He is not authorized to modify the
mortgage contract that would in effect cause novation.
Under the doctrine of apparent authority, acts and
contracts of the agent, as are within the apparent
scope of the authority conferred on him, although no
actual authority to do such acts or to make such
contracts has been conferred, bind the principal. 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. There
can be no apparent authority of an agent without tacts
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.
In the present case, the decision of the trial court 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. 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. Neither was there
any allegation, much less proof, that PCRB ratified
Mondigo’s act or is estopped to make a contrary
claim.
Discussion: in effect, what did the manager do?
Nakamortgage pa diba? Tapos nirelease niya from
mortgage. Let’s compare this to the previous case,
kasi diba sabi don it is included within the scope of
the agent’s authority if it’s reasonably necessary.
Now, is this reasonably necessary dun sa kanyang job
as the manager of the bank? In the words of the SC,
Although a branch manager, within his field and as to
third persons, is the general agent and is in general
charge of the corporation, with apparent authority
commensurate with the ordinary business entrusted
him and the usual course and conduct thereof, yet the
power to modify or nullify corporate contracts
remains generally in the board of directors. So in this
particular case, by saying verbally, by allowing the
title to be released as lien, the manager is actually
modifying the contract. So it’s not part of the
manager’s obligation.
October 3, 2017
Transcriber: Zarah Domingo
Article 1869.  Agency may be express, or implied
from the acts of the principal, from his silence or lack
of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf
without authority.
Agency may be oral, unless the law requires a specific
form.
As you can see in the provision, it is the act of the
principal.
Classification of Agency as to Manner of
Execution:
(1) Express
(2) Implied
If Express, there is actually an authority in ___ or
writing. It can be Implied, from the acts of the
principal, or his silence, or lack of action or failure to
repudiate the agency, knowing that another person is
acting on his behalf without authority.
An agency can be gratuitous or onerous.
The extent of business covered:
(1) General – covers all the business of the
principal;
(2) Special – it covers only one or more
specific transactions
The authority may be couched in general terms which
is deemed to comprise only acts of administration or it
can be couched in specific terms which authorize only
the performance of specific acts.
Nature and Effects: You have representative –the
agent acts in the name of the principal.
Can an agency be presumed?
As a general rule, no, because the relationship
between the principal and agent, must exist as a fact.
The only exceptions to this rule are:
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
(1) When the agency arises by operation or
law; or
(2) The agency is presumed to prevent unjust
enrichment.
Are there formal requirements for an agency?
As a general rule, none, except in particular
provisions which we will discuss later.
Yun Kwan Byung vs. Philippine Amusement and
Gaming Corporation
G.R. No. 163553 December 11, 2009
(Digest by: April Pareno)
FACTS: PAGCOR launched its Foreign Highroller
Marketing Program. The Program aims to invite
patrons from foreign countries to play at the dollar pit
of designated PAGCOR-operated casinos under
specified terms and conditions and in accordance with
industry practice.
Petitioner, a Korean national, alleges that he came to
the Philippines four times to play for high stakes at
the Casino Filipino; that in the course of the games, he
was able to accumulate gambling chips worth US$2.1
million. Petitioner contends that when he presented
the gambling chips for encashment with PAGCORs
employees or agents, PAGCOR refused to redeem
them.
PAGCOR claims that petitioner, who was brought
into the Philippines by ABS Corporation, is a junket
player who played in the dollar pit exclusively leased
by ABS Corporation for its junket players. PAGCOR
alleges that it provided ABS Corporation with distinct
junket chips. ABS Corporation distributed these chips
to its junket players. At the end of each playing
period, the junket players would surrender the chips to
ABS Corporation. Only ABS Corporation would
make an accounting of these chips to PAGCORs
casino treasury.
ISSUE: Whether the CA erred in holding that
PAGCOR is not liable to petitioner, disregarding the
doctrine of implied agency, or agency by estoppel
RULING: Acts and conduct of PAGCOR negates the
existence of an implied agency or an agency by
estoppels. Petitioner alleges that there is an implied
agency. Petitioners argument is clearly misplaced.
The basis for agency is representation, that is, the
agent acts for and on behalf of the principal on
matters within the scope of his authority and said acts
have the same legal effect as if they were personally
executed by the principal.
On the part of the principal, there must be an actual
intention to appoint or an intention naturally inferable
from his words or actions, while on the part of the
agent, there must be an intention to accept the
appointment and act on it. Absent such mutual intent,
there is generally no agency.
There is no implied agency in this case because
PAGCOR did not hold out to the public as the
principal of ABS Corporation. PAGCORs actions did
not mislead the public into believing that an agency
can be implied from the arrangement with the junket
operators, nor did it hold out ABS Corporation with
any apparent authority to represent it in any capacity.
The Junket Agreement was merely a contract of lease
of facilities and services.
The SC held that the Court of Appeals correctly used
the intent of the contracting parties in determining
whether an agency by estoppel existed in this case. 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.
Is an implied agency and an estoppel by agency the
same? How do you distinguish an implied agency
from an agency by estoppel?
So in implied agency, there is actually an agency,
implied nga lang, hindi express. In agency by
estoppel, there is no actual agency but because of the
actions of an agent or the principal, there is an
apparent or ostensible agency, for purposes of equity
and to protect third persons.
Article 1870. Acceptance by the agent may also be
express, or implied from his acts which carry out the
agency, or from his silence or inaction according to
the circumstances.
Acceptance may be express or implied. Of course it is
express when it oral or written, and it is implied which
can be inferred from the acts of the agent which
carried out the agency or from his silence or inaction
according to the circumstances. Relate this to Article
1884.
Article 1884: The agent is bound by his acceptance to
carry out the agency and is liable for the damages
which, through his non-performance, the principal
may suffer.
He must also finish the business already begun on the
death of the principal, should delay entail any danger.
So the rule is acceptance of an agent is necessary for it
to be bound. It is necessary but not compulsory. Thus
if the agent wants to decline appointment, he must
react immediately so that his supposed principal will
take notice.
Article 1871: Between persons who are present, the
acceptance of the agency may also be implied if the
principal delivers his power of attorney to the agent
and the latter receives it without any objection.
Is this presumption conclusive? No, it is only
disputable. You can actually rebut it with contrary
proof.
So a power of attorney is an instrument in writing by
which one person is principal points another as his
agent and confers upon him the authority to confirm
certain specified acts or kinds of acts on behalf of the
principal. Its primary purpose is to evidence the
authority of agents to third parties with whom the
agent deals. Notarization is not necessary unless
required by law.
So the construction of a power of attorney must be
strictly construed and strictly pursued. Kaya nga
bawal yan na magpa-SPA ka tapos magpa-notarize ka
sa city hall. Nakakatakot yan. Pag-SPA, dapat proper
talaga siya. Paano what if ang ibebenta lupa, kawawa.
It must be strictly construed. Kung ano yung powers
granted in an SPA, yun lang ang granted to the agent
as regards the principal.
The instrument will be held to grant only those
powers which are specified. The agent may neither go
beyond nor __ from the ___. The only exception is
when strict construction will destroy the very purpose
of the power.
If you try to look at an SPA, meron din siya on the
later paragraph, meron yan general powers,
necessarily implied. Yun siya, yung actions na yun
must be related doon sa main purpose of the power of
attorney, otherwise, the power is not deemed to be
granted.
The meaning of “present” in Article 1871, this is not
limited to face-to-face encounters. Pwede by phone, it
can also be considered as present ka.
How about for persons who are absent?
Article 1872: Between persons who are absent, the
acceptance of the agency cannot be implied from the
silence of the agent, except:
(1) When the principal transmits his power
of attorney to the agent, who receives it
without any objection;
(2) When the principal entrusts to him by
letter or telegram a power of attorney
with respect to the business in which he
is habitually engaged as an agent, and he
did not reply to the letter or telegram.
So kung absent ang mga tao, instead of face-to-face,
there is no implied acceptance, except:
(1) When the principal transmits his power
of attorney to the agent, who receives it
without any objection; or
(2) When the principal entrusts to him by
letter or telegram a power of attorney
with respect to the business in which he
is habitually engaged as an agent, and he
did not reply to the letter or telegram.
So for that business, if that agent is habitually
engaged, tapos binigyan ng letter or telegram tapos
walang reply, that is deemed an implied acceptance.
Article 1873: If a person specially informs another or
states by public advertisement that he has given a
power of attorney to a third person, the latter thereby
becomes a duly authorized agent, in the former case
with respect to the person who received the special
information, and in the latter case with regard to any
person.
The power shall continue to be in full force until the
notice is rescinded in the same manner in which it was
given.
So kung sinabi ko sayo na binigyan ko ng power of
attorney si PERSON A, kung specifically sinabi ko
sayo, then he becomes my agent as to you. Pero
paginadvertise ko na siya yung agent, he becomes an
agent as to anyone na nakabasa ng advertisement.
In the 2nd Paragraph, if it given specially, it shall be
revoked specially. If it is given by public
advertisement, it shall be revoked by public
advertisement.
Article 1874: When a sale of a piece of land or any
interest therein is through an agent, the authority of
the latter shall be in writing; otherwise, the sale shall
be void.
So, this is one of the instances wherein the authority
shall be in writing.
Estate of Lino Olaguer v. Ongjoco
G.R. No. 173312 August 26, 2008
(Digest by: April Pareno)
FACTS: Lino Olaguer died on October 3, 1957 so
Special probate of will was filed in the then Court of
First Instance of Albay. Defendant Olivia P. Olaguer
was appointed as administrator pursuant to the will.
Later, defendant Eduardo Olaguer was appointed as
co-administrator. In the order of the probate court
dated April 4, 1961, some properties of the estate
were authorized to be sold to pay obligations of the
estate.
Relying upon the order, but without prior notice or
permission from the Probate Court, defendants Olivia
P. Olaguer and Eduardo Olaguer on November 1,
1965 sold to Estanislao Olaguer 10 parcels of land.
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
The sale to was approved by the Probate Court.
On July 7, 1966, defendant Olivia P. Olaguer
executed a Special Power of Attorney in favor of
defendant Jose A. Olaguer, authorizing the latter to
"sell, mortgage, assign, transfer, endorse and deliver"
of 6 properties. Estanislao Olaguer executed a Special
Power of Attorney in favor of Jose A. Olaguer
authorizing the latter to "sell, mortgage, assign,
transfer, endorse and deliver" the 9 properties.
By virtue of this Special Power of Attorney, on March
1, 1967, Jose A. Olaguer as Attorney-in-Fact of
Estanislao Olaguer mortgaged Lots 7589, 7593 and
7396 to defendant PNB as security for a loan of
10,000 Pesos. The mortgage was later foreclosed by
the PNB and the properties mortgage were sold at
public auction to PNB. Then, PNB transferred the
properties to the Republic of the Philippines for
agrarian reform purposes.
On October 29, 1966, Estanislao Olaguer executed a
General Power of Attorney in favor of Jose A.
Olaguer, authorizing the latter to exercise general
control and supervision over all of his business and
properties, and among others, to sell or mortgage any
of his properties.
On December 29, 1966, Estanislao Olaguer sold to
Jose A. Olaguer for 15,000 the 10 parcels of land he
bought from Olivia P. Olaguer and Eduardo
Olaguer.On March 16, 1968, Estanislao Olaguer sold
to Jose A. Olaguer for 1 Peso and other valuable
consideration 2 parcels of land which have a total area
of 2.5 hectares.
On June 5, 1968, Estanislao Olaguer sold another 2
lots to Jose A. Olaguer for 1 Peso and other valuable
consideration.
On May 13, 1971, Jose A. Olaguer in his capacity as
Attorney in-Fact of Estanislao Olaguer sold to his son
Virgilio Olaguer for 1 Peso and other valuable
consideration. On July 15, 1974, Jose A. Olaguer sold
to his son Virgilio Olaguer Lot No. 4521 and Lot No.
4522 for 1,000 Pesos.
On September 16, 1978 Virgilio Olaguer executed a
General Power of Attorney in favor of Jose A.
Olaguer authorizing the latter to exercise general
control and supervision over all of his business and
properties and among others, to sell or mortgage the
same.
Olivia P. Olaguer and Eduardo Olaguer were removed
as administrators of the estate and on February 12,
1980, plaintiff Ma. Linda Olaguer Montayre was
appointed administrator by the Probate Court.
The decedent Lino Olaguer have had three marriages.
He was first married to Margarita Ofemaria who died
April 6, 1925. His second wife was Gloria
Buenaventura who died on July 2, 1937. The third
wife was the defendant Olivia P. Olaguer.Jose
Olaguer acting upon the general power of attorney
sold 8 parcels of land to Emilio Ongjoco.
On 28 January 1980, the Estate of Lino Olaguer filed
an action for the Annulment of Sales of Real Property
and/or Cancellation of Titles in the then Court of First
Instance of Albay. The plaintiffs therein alleged that
the sales of the following properties belonging to the
Estate of Lino Olaguer to Estanislao Olaguer were
absolutely simulated or fictitious, the plaintiffs
likewise prayed that the resulting Transfer Certificates
of Title issued to Jose Olaguer, Virgilio Olaguer,
Cipriano Duran and the PNB be annulled.
Respondent Ongjoco, on the other hand, invokes that
he was an innocent purchaser for value. His adamant
stance is that, when he acquired the subject properties,
the same were already owned by Virgilio Olaguer.
Respondent insists that Jose A. Olaguer was duly
authorized by a written power of attorney when the
properties were sold to him (Ongjoco). He posits that
this fact alone validated the sales of the properties and
foreclosed the need for any inquiry beyond the title to
the principal. All the law requires, respondent
concludes, is that the agents authority be in writing in
order for the agents transactions to be considered
valid.
ISSUE: Whether or not, under the facts and
circumstances of this case, respondent Ongjoco can be
considered an innocent purchaser for value.
HELD: As regards some of the lots, YES. He merely
relied on the general power of attorney which was
presented to him.
In sum, we hold that respondent Emiliano M. Ongjoco
was in bad faith when he bought Lots Nos. 1 and 2
from Jose A. Olaguer, as the latter was not proven to
be duly authorized to sell the said properties.
However, respondent Ongjoco was an innocent
purchaser for value with regard to Lots Nos. 76-D,
76-E, 76-F and 76-G since it was entirely proper for
him to rely on the duly notarized written power of
attorney executed in favor of Jose A. Olaguer.
According to the provisions of Article 1874 of the
Civil Code on Agency, when the sale of a piece of
land or any interest therein is made through an agent,
the authority of the latter shall be in writing. Absent
this requirement, the sale shall be void. Also, under
Article 1878, a special power of attorney is necessary
in order for an agent to enter into a contract by which
the ownership of an immovable property is
transmitted or acquired, either gratuitously or for a
valuable consideration.
When Lots Nos. 1 and 2 were sold to respondent
Ongjoco through Jose A. Olaguer, the Transfer
Certificates of Title of said propertieswere in
Virgilio’s name.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 court. Neither was respondent able to explain the
omission. Other than the self-serving statement of
respondent, no evidence was offered at all to prove
the alleged written power of attorney.This of course
was fatal to his case. As it stands, there is no written
power of attorney to speak of.
The trial court was thus correct in disregarding the
claim of itsexistence. Accordingly, respondent
Ongjoco’s claim of good faith in the sale of Lots Nos. of Eugenio Godinez,
1 and 2 has no leg to stand on. As regards Lots Nos. specifically, Teodora
76-D, 76-E, 76-F and 76-G, Ongjoco was able to Tampus, Fernanda Godinez
present a general power of attorney that was executed (the wife of Iscolastico
by Virgilio Olaguer. While the law requires a special Epe), Tomasa Godinez (the
power of attorney , the general power of attorney was wife of Mateo Ibañez),
sufficient in this case, as Jose A. Olaguer was Sotera Godinez (the wife of
expressly empowered to sell any of Virgilio’s Guillermo Pino), Atanasio
properties; and to sign, execute, acknowledge and Godinez (married to
deliver any agreement therefor. Florencia Pino), Juana
Even if a document is designated as a general power Godinez (the wife of
of attorney, the requirement of a special power of Catalino Cuison), and
attorney is met if there is a clear mandate from the Ambrosio Godinez (married
principal specifically authorizing the performance of to Mamerta Inot); and that
the act. The special power of attorney can be included he bought the two lots from
in the general power when the act or transaction for the surviving heirs of the
which the special power is required is specified registered owners through
therein. several deeds of absolute
On its face, the written power of attorney contained sale, all dated December 7,
the signature of Virgilio Olaguer and was duly 1998.
notarized. As such, the same is considered a public
document and it has in its favor the presumption of
authenticity and due execution, which can only be Unchuan further alleged that he came to know that
contradicted by clear and convincing evidence. No Atanacio Godinez (Atanacio), the supposed attorney-
evidence was presented to overcome the presumption in-fact of all the registered owners and their heirs,
in favor of the duly notarized power of attorney. already sold both lots to Civil Aeronautics
Neither was there a showing of any circumstance Administration (CAA), the predecessor of MCIAA;
involving the said document that would arouse the that the sale covered by the Deed of Absolute Sale,
suspicion of respondent and spur him to inquire dated April 3, 1958, was null and void because the
beyond its four corners, in the exercise of that registered owners and their heirs did not authorize
reasonable degree of prudence required of a man in a Atanacio to sell their undivided shares in the subject
similar situation. We therefore rule that respondent lots in favor of CAA;
Ongjoco had every right to rely on the power of o that no actual consideration
attorney in entering into the contracts of sale of Lots was paid to the said
Nos. 76-D to 76-G with Jose A. Olaguer. registered owners or their
heirs, despite promises that
Kahit nakalagay siya sa ‘general power’, if that act is they would be paid;
particularly specified in the general power, it is
sufficient. o that the deed of absolute
sale did not bear the
Mactan-Cebu International Airport Authority signature of the CAA
vs Richard E. Unchuan representative; that there
(Digest by: Cyndall Jardinel) was no proof that the
FACTS: On March 5, 2004, respondent Richard Secretary of the Department
Unchuan (Unchuan) filed a complaint for Partial of Public Works and
Declaration of Nullity of the Deed of Absolute Sale Highways approved the
with Plea for Partition, Damages and Attorney's Fees sale; and that his
before the RTC against MCIAA. Unchuan later filed predecessors-in-interest
an Amended Complaint for Declaration of Nullity of merely tolerated the
Deed of Absolute Sale, Quieting of Title and/or possession by CAA and,
Payment of Just Compensation, Rental and Damages later, by MCIAA.
and Attorney's Fees. In its Answer, MCIAA averred that on April 3,
In his complaint, Unchuan alleged, among others, that 1958, Atanacio, acting as the representative of the
he was the legal and rightful owner of Lot No. 4810- heirs of Eugenio Godinez, who were the registered
A, with an area of 177,176 square meters, and Lot owners, sold Lot No. 4810-A and Lot No. 4810-B to
No. 4810-B, with an area of 2,740 square meters, both the Republic of the Philippines, represented by
located in Barrio Buaya, Lapu-Lapu City, and covered CAA. Thereafter, CAA took possession of the said
by Original Certificate of Title (OCT) No. R0-1173; property upon payment of the purchase price.
o that the title was registered o To corroborate the said
under the names of the heirs transaction, on September
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
17, 1969, Atanacio, along
with other former registered
co-owners, signed a deed of
partition attesting to the fact
of sale of the two lots in
favor of the government and
admitted its absolute right
over the same.
Since then, the said lots had been in the possession of
the Republic in the concept of an owner. The said real
properties were declared by the Republic for taxation
purposes under Tax Declaration No. 00078 and Tax
Declaration No. 00092. In fact, by virtue of Republic
Act (R.A.) No. 6958, otherwise known as "The
Charter of Mactan-Cebu International Airport
Authority," the Republic officially turned over the
management of the said lots to MCIAA.
On March 3, 2006, the RTC rendered judgment in
favor of Unchuan.
The RTC held that Atanacio was not legally
authorized to act as the attorney-in-fact of his
brothers and sisters and to transact on their behalf
because he was not clothed with a special power of
attorney granting him authority to sell the
disputed lots. CA affirmed the RTC decision.
ISSUE: WON the sale by Anstacio bound all the heirs
entitling the MCIAA to the whole portion of lot.
HELD: The Court finds that the sale transaction
executed between Atanacio, acting as an agent of his
fellow registered owners, and the CAA was indeed
void insofar as the other registered owners were
concerned. They were represented without a written
authority from them clearly in violation of the
requirement under Articles 1874 and 1878 of the Civil
Code, which provide:
Art. 1874. When a sale of a piece of land or any
interest therein is through an agent, the authority of
the latter shall be in writing; otherwise, the sale shall
be void.
Art. 1878. Special powers of attorney are necessary in
the following cases:
(5) To enter into any contract by which
the ownership of an immovable is
transmitted or acquired either
gratuitously or for a valuable
consideration;
The significance of requiring the authority of an agent
to be put into writing was amplified in Dizon v. Court
of Appeals:
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.
Without a special power of attorney specifying his
authority to dispose of an immovable, Atanacio could
not be legally considered as the representative of the
other registered co-owners of the properties in
question. Atanacio's act of conveying Lot No. 4810-A
and Lot No. 4810-B cannot be a valid source of
obligation to bind all the other registered co-owners
and their heirs because he was not clothed with any
authority to enter into a contract with CAA. The other
heirs could not have given their consent as required
under Article 1475 of the New Civil Code because
there was no meeting of the minds among the other
registered co-owners who gave no written authority to
Atanacio to transact on their behalf. Therefore, no
contract was perfected insofar as the portions or
shares of the other registered co-owners or their heirs
were concerned.
The rule is that a void contract produces no effect
either against or in favor of anyone and cannot be
ratified. Similarly, laches will not set in against a void
transaction, as in this case, where the agent did not
have a special power of attorney to dispose of the lots
co-owned by the other registered owners.
In fact, Article 1410 of the Civil Code specifically
provides that an action to declare the inexistence of a
void contract does not prescribe.
The transaction entered into by Atanacio and
CAA, however, was not entirely void because the
lack of consent by the other co-owners in the sale
was with respect to their shares only pursuant to
Article 493 of the New Civil Code.
The quoted provision recognizes the absolute right of
a co-owner to freely dispose of his pro indiviso share
as well as the fruits and other benefits arising from
that share, independently of the other co-owners. The
sale of the subject lots affects only the seller's
share pro indiviso, and the transferee gets only what
corresponds to his grantor's share in the partition of
the property owned in common. Since a co-owner is
entitled to sell his undivided share, a sale of the entire
property by one co-owner without the consent of the
other co-owners is not null and void; only the rights of
the co-owner/seller are transferred, thereby making
the buyer a co-owner of the property.
In the case at bench, although the sale transaction directly. (Medrano and Ibaan Rural Bank vs CA,
insofar as the other heirs of the registered owners February 18, 2005, G.R. No. 150678)
was void, the sale insofar as the extent of
Atanacio's interest is concerned, remains valid. Minsan, ang ginagawa lang ng broker is to meet the
Atanacio was one of the registered co-owners of buyer and the seller para mag-negotiate, parang
the subject lots, but he was not clothed with middleman ka lang. If it becomes successful, through
authority to transact for the other co-owners. By your efforts, you are the efficient procuring cause
signing the deed of sale with the CAA, Atanacio wherein the buyer and the seller met, that they
effectively sold his undivided share in the lots in negotiated and successful in the sale, that is the only
question. Thus, CAA became a co-owner of the time you are entitled to a commission.
undivided subject lots. Accordingly, Atanacio's heirs
could no longer alienate anything in favor of Unchuan Can the buyer file an action for collection of sum of
because he already conveyed his pro indiviso share to money based on the premise that he is entitled to
CAA. compensation? So you have to look if he is the
efficient procuring cause where the seller met the
Consequently, the Court deems it just and fair to buyer then started the negotiation and then the sale is
modify the disposition of the subject lots to perfected, then you can actually demand
Unchuan. Unchuan is not entitled to the whole compensation. If not, you cannot demand. That is the
179,916 square meters of the property, as Doctrine of Efficient Procuring Cause.
originally awarded by the RTC and affirmed by
the CA. How do you distinguish a broker and an agent?
Atanacio's share should be excluded from the Broker Agent
computation as his heirs were already precluded from A negotiator between Represents only one
further conveying what he, their predecessor-in- parties; he does not act party who is the
interest, had previously sold to CAA. Thus, Unchuan in his own name; he is principal
is only legally entitled to an unidentified 149,930 mainly a middleman or
square meters of the property after excluding agent of both parties.
Atanacio's unidentified share of 29,986 square
meters. Article 1876: An agency is either general or special.
Article 1875: Agency is presumed to be for a The former comprises all the business of the principal.
compensation, unless there is proof to the contrary. The latter, one or more specific transactions.
General Rule: In the absent of a special agreement, he What is the difference between attorney-in-fact and
is only entitled to compensation only after he has attorney-at-law? Attorney-in-fact is the person who is
completely or substantially completed his obligation given authority by his principal to do a particular act.
as agent. His compensation is based on quantum You and I can be an attorney-in-fact. But an attorney-
meruit. at –law is one whose business is to represent clients in
legal proceedings. If what you are going to do is not
How about a broker? Is a broker an agent? This is in legal proceeding, you cannot be an attorney-at-law,
actually a usual question in agency: Distinguish a attorney-in-fact ka lang.
broker from an agent.
General Agent Special Agent
Broker – only a middleman; one who, in behalf of Scope of All acts connected Only one or more specif
others and for compensation or fee, negotiate Authority with the business pursuance of
contracts relative to a property; he is a negotiator for which he is instructions or with ins
between the parties never acting in his own name but engaged necessarily implied from
in the name of those who employed him; he is strictly to be carried out.
a middleman and for some purposes the agent of both Nature of Series of Single transaction only
Service transaction
Doctrine of Efficient Procuring Cause Authorized involving
The broker is only entitled to compensation only continuity of
when he is an effective procuring cause. His efforts service
are the foundation on which the negotiation that
resulted on the sale begun. A broker is entitled to
commission whenever he brings to his principal, a Article 1877: An agency couched in general terms
party who is able and willing to take the property and comprises only acts of administration, even if the
enter into a valid contract, although the particulars principal should state that he withholds no power or
may be arranged and the matter negotiated and that the agent may execute such acts as he may
completed between the principal and the purchaser
6
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
consider appropriate, or even though the agency
should authorize a general and unlimited
management.
Please take note that if the SPA is couched in general
terms, it does not involve acts of strict dominion.
This (provision) gives you the idea that the power of
attorney or the authority of an agent, is strictly
construed. So even if nilagay diyan na the principal
withholds no power, still the power that is deemed to
be authorized pertains only to acts of administration
not to acts of strict dominion.
Example of acts of mere administration:
1.) To sue for collection of debts;
2.) To employ workers and employees
needed for the conduct of business;
3.) To engage legal counsel to preserve the
ownership and possession of the
principal property; and
4.) To lease real property to another person
for one year or less, provided that the
lease is not registered;
5.) To make customary gifts for charity or
employees in the business managed by
the agent;
6.) To borrow money if be urgent and
indispensable for the preservation of the
things which are under administration
In Goquiolay vs Sycip, with regard to the
power of compromise to sell, mortgage and
other acts of strict dominion, an express power
of attorney is required.
Article 1878 gives you the acts for which
special power of attorney is required. Please
memorize this provision. If there is one article
you have to memorize in Agency, ito yun.
Article 1878: Special powers of attorney are
necessary in the following cases:
(1) To make such payments as are not
usually considered as acts of
administration; xxx
There is transmission of ownership. Let’s say
may negosyo pero payment sa pagbayad mo ng
inventory or pagbayad mo ng electricity or
pagbayad mo ng rent. General power lang yan
kasi day-to-day business pero if it is not usually
considered as acts of administration, you
require such a power of attorney.
xxx
(2) To effect novations which put an
end to obligations already in
existence at the time the agency
was constituted; xxx
If you try to look at the list, basically the
premise now is because these are onerous to the
principal that is why it has to be expressly
authorized through a special power of attorney.
Woodchild Holding, Inc. vs Roxas Electric
and Construction Company, Inc.
(Digest by: Cyndall Jardinel)
FACTS: Roxas Electric and Construction
Company, Inc. (RECCI) authorized its
President Roberto B. Roxas through a
resolution to sell a parcel of land owned by the
corporation, and to execute, sign and deliver for
and on behalf of the company.
Petitioner Woodchild Holdings, Inc. (WHI)
through its President Jonathan Y. Dy, offered to
buy the land from RECCI.The offer to purchase
stated that it is made on the representation and
warranty of the OWNER/SELLER, that he
holds a good and registrable title to the
property, which shall be conveyed CLEAR and
FREE of all liens and encumbrances, and that
in the event tha tthe right of way is insufficient
for the buyer’s purpose, the seller agrees to sell
additional square meter from his current
adjacent property to allow the buyer full access
and full use of the property.
Roxas accepted the offer and indicated his
acceptance on Page 2 of the Deed. The sale was
consummated.WHI subsequently entered into a
construction agreement with Wimbeco
Builder’s Inc.(WBI) for the construction of a
warehouse, and a lease agreement with
Poderosa Leather Goods Company, Inc. with a
condition that the warehouse be ready by April
1, 1992. The building was finished and
Poderosa became the lessee. - WHI complained
to Roberto Roxas that the vehicles of RECCI
were parked on a portion of the property over
which WHI had been granted a right of way.
Roxas promised to look into the matter.
Dy and Roxas discussed the need of the WHI to
buy a 500-square-meter portion the adjacent lot
as provided for in the deed of absolute sale.
However, Roxas died soon thereafter. WHI
wrote the RECCI, reiterating its verbal requests
to purchase a portion of the said lot as provided
for in the deed of absolute sale, and complained
about the latter’s failure to eject the squatters
within the three-month period agreed upon in
the said deed.
RECCI rejected the demand of WHI, so WHI
filed a case for Specific Performance and
Damages in the RTC of Makati.
RTC ruled in favor of WHI. CA reversed the
RTC decision and dismissed the complaint. The
CA ruled that, under the resolution of the Board
of Directors of the RECCI, Roxas was merely
authorized to sell the first lot, but not to grant
right of way in favor of the WHI over a portion
of the second lot, or to grant an option to the
petitioner to buy a portion thereof.
ISSUE: WON Roxas has authority to sell the
subject lot.
RULING: Roxas was not authorized.
SC ruled in favor of the respondent. Judgment
of CA affirmed with modification.
A corporation is a juridical person separate and
distinct from its stockholders or members.
Indubitably, a corporation may act only through
its board of directors or, when authorized either
by its by-laws or by its board resolution,
through its officers or agents in the normal
course of business. The general principles of
agency govern the relation between the
corporation and its officers or agents, subject to
the articles of incorporation, by-laws, or
relevant provisions of law.
In this case, the respondent denied authorizing
its then president Roberto B. Roxas to sell a
portion of Lot No. 491-A-3-B-1 covered by
TCT No. 78085, and to create a lien or burden
thereon. The petitioner was thus burdened to
prove that the respondent so authorized Roxas
to sell the same and to create a lien thereon.
Evidently, Roxas was not specifically
authorized under the said resolution to grant a
right of way in favor of the petitioner on a
portion of the second lot or to agree to sell to
the petitioner a portion thereof. The authority of
Roxas, under the resolution, to sell Lot No.
491-A-3-B-2 covered by TCT No. 78086 did
not include the authority to sell a portion of the
adjacent lot, Lot No. 491-A-3-B-1, or to create
or convey real rights thereon. Neither may such
authority be implied from the authority granted
to Roxas to sell Lot No. 491-A-3-B-2 to the
petitioner on such terms and conditions which
he deems most reasonable and advantageous.
Under paragraph 12, Article 1878 of the New
Civil Code, a special power of attorney is
required to convey real rights over immovable
property.
Powers of attorney are generally construed
strictly and courts will not infer or presume
broad powers from deeds which do not
sufficiently include property or subject under
which the agent is to deal. The general rule is
that the power of attorney must be pursued
within legal strictures, and the agent can neither
go beyond it; nor beside it. The act done must
be legally identical with that authorized to be
done. In sum, then, the consent of the
respondent to the assailed provisions in the
deed of absolute sale was not obtained; hence,
the assailed provisions are not binding on it.
We reject the petitioners submission that, in
allowing Roxas to execute the contract to sell
and the deed of absolute sale and failing to
reject or disapprove the same, the respondent
thereby gave him apparent authority to grant a
right of way over Lot No. 491-A-3-B-1 and to
grant an option for the respondent to sell a
portion thereof to the petitioner. Absent
estoppel or ratification, apparent authority
cannot remedy the lack of the written power
required under the statement of frauds. In
addition, the petitioners 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.
In this case, there is no evidence on record of
specific acts made by the respondent 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.
October 6, 2017
Transcriber: Shats Tagtagan and Jeniffer
Mortejo
Shopper’s Paradise Realty & Development Corp.
vs Roque G.R. No. 148775. January 13, 2004
(Digest by: Cyndall Jardinel)
FACTS: Petitioner Shopper’s Paradise Realty &
Development Corporation, represented by its
president, Veredigno Atienza, entered into a twenty-
five year lease with Dr. Felipe C. Roque, now
deceased, over a parcel of land in the name of Roque.
Petitioner issued to Dr. Roque a check for
P250,000.00 by way of “reservation payment.”
Simultaneously, petitioner and Dr. Roque likewise
entered into a memorandum of agreement for the
construction, development and operation of a
commercial building complex on the property.
Conformably with the agreement, petitioner issued a
check for another P250,000.00 “downpayment” to Dr.
Roque. The contract of lease and the memorandum of
agreement, both notarized, were never annotated on
the Certificate of title because of the untimely demise
of Roque.
Roque’s death constrained petitioner to deal with
7
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
respondent Efren P. Roque, one of the surviving
children of the late Dr. Roque, but the negotiations
broke down due to some disagreements. In a letter,
respondent advised petitioner “to desist from any
attempt to enforce the aforementioned contract of
lease and memorandum of agreement”.
On 15 February 1995, respondent filed a case for
annulment of the contract of lease and the
memorandum of agreement, with a prayer for the
issuance of a preliminary injunction before the RTC
alleging that he had long been the absolute owner of
the subject property by virtue of a deed of donation
inter vivos executed in his favor by his parents, Dr.
Felipe Roque and Elisa Roque, and that the late Dr.
Felipe Roque had no authority to enter into the
assailed agreements with petitioner.
The donation was made in a public instrument duly
acknowledged by the donor-spouses before a notary
public and duly accepted on the same day by
respondent before the notary public in the same
instrument of donation. The title to the property,
however, remained in the name of Dr. Felipe C.
Roque, and it was only transferred to and in the name
of respondent sixteen years later.
Respondent, while he resided in the United States of
America, delegated to his father the mere
administration of the property. Respondent came to
know of the assailed contracts with petitioner only
after retiring to the Philippines upon the death of his
father.
The trial court dismissed the complaint of respondent.
On appeal, the CA reversed the decision of the trial
court and held to be invalid the Contract of Lease and
Memorandum of Agreement.
ISSUE: W/N Dr. Felipe Roque was an authorized
agent of the respondent.
HELD: NO. In a contract of agency, the agent acts in
representation or in behalf of another with the consent
of the latter.
Article 1878 of the Civil Code expresses that a special
power of attorney is necessary to lease any real
property to another person for more than one year.
The lease of real property for more than one year is
considered not merely an act of administration but an
act of strict dominion or of ownership. A special
power of attorney isthus necessary for its execution
through an agent.
The Court cannot accept petitioner's argument that
respondent is guilty of laches. Laches, in its real
sense, is the failure or neglect, for an unreasonable
and unexplained length of time, to do that which, by
exercising due diligence, could or should have been
done earlier; it is negligence or omission to assert a
right within a reasonable time, warranting a
presumption that the party entitled to assert it either
has abandoned or declined to assert it. Respondent
learned of the contracts only in February 1994 after
the death of his father, and in the same year, during
November, he assailed the validity of the agreements.
Hardly, could respondent then be said to have
neglected to assert his case for an unreasonable length
of time. Neither is respondent estopped from
repudiating the contracts.
Dominion Insurance Corporation vs. CA (2002)
(Digest by: Jennifer Lim)
FACTS:
In 1991, Rodolfo Guevarra (Guevarra) filed a civil
case for sum of money against Dominion Insurance
Corp. (Dominion) for the amount
advanced( P156,473.90) by Guevarra in his capacity
as manager of defendant to satisfy certain claims filed
by defendant’s client.
Dominion, however, stated that they are not liable to
pay respondent because he had not acted within his
authority as an agent for Dominion. They have
instructed the respondent that the payment for the
claims of the insured should be taken from the
revolving fund, not from respondents’ personal money
The pre-trial was always postponed. During one of the
pre-trial conferences, Dominion failed to arrive and
the court declared them to be in default. Dominion
filed a Motion to Lift Order of Default but was denied
by the court. The RTC rendered its decision making
Dominion liable to repay Guevarra for the sum
advanced, other damages and attorney’s fees.
Dominion appealed but CA affirmed the decision of
RTC and denied the appeal of Dominion.
ISSUE/S:
(a) Whether or not Guevarra acted within his
authority as agent of petitioner.
(b) Whether or not Guevarra must be reimbursed for
the amount advanced.
HELD:
(a) 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.
Even though the contact entered into by Guevarra and
Dominion was with the word “special” the contents of
the document was actually a general agency. A
general power permits the agent to do all acts for
which the law does not require a special power and
the contents in the document did not require a special
power of attorney. Art 1878 provides for instances
when a special power of attorney is required:
1) To make such payment as are not
usually considered as acts of
administration.
XXXXXX
15) any other act of dominion
The payment of claims is not an act of administration
which requires a special   power of attorney before
Guevarra could settle the insurance claims of the
insured.
(b) YES. Guevarra was instructed that the payment
for the insured must come from the revolving fund or
collection in his possession, Gueverra should not have
paid the insured through his own capacity. An agent
who acted in contravention of the principal’s
instruction the principal will not be liable for the
expenses incurred by the agent. This conclusion is in
accord with Article 1918, Civil Code, which states
that:
The principal is not liable for the
expenses incurred by the agent in the
following cases:
(1) If the agent acted in contravention of
the principals instructions, unless the
latter should wish to avail himself of the
benefits derived from the contract;
xxx xxx xxx
However, While the law on agency prohibits
respondent Guevarra from obtaining reimbursement,
his right to recover may still be justified under the
general law on obligations and contracts.
Article 1236, second paragraph,
Civil Code, provides:
Whoever pays for another may demand
from the debtor what he has paid, except
that if he paid without the knowledge or
against the will of the debtor, he can
recover only insofar as the payment has
been beneficial to the debtor.
In this case, when the risk insured against occurred,
petitioners liability as insurer arose. This obligation
was extinguished when respondent Guevarra paid the
claims and obtained Release of Claim Loss and
Subrogation Receipts from the insured who were paid.
Thus, to the extent that the obligation of the petitioner
has been extinguished, respondent Guevarra may
demand for reimbursement from his principal. To rule
otherwise would result in unjust enrichment of
petitioner.
Q: The money should be taken from the revolving
fund. But what he did was he used his personal
money. Did he exceed his authority?
A: Yes. In this case, meron silang Special Power of
Attorney. However, the specific acts indicated in the
SPA are of general nature. SC said you cannot
construe it as SPA. SPAs are strictly construed.
Adriano vs. Pangilinan (2002)
(Digest by: Jennifer Lim)
FACTS:
The petitioner Adriano is the registered owner of a
parcel of land covered by Transfer Certificate of Title
No. 337942. Sometime on 1990, petitioner entrusted
the original owner's copy of the TCT to Salvador, a
distant relative, for the purpose of securing a
mortgage loan.
Thereafter without the knowledge and consent of
petitioner, Salvador mortgaged the property to
Respondent Pangilinan. Subsequently when petitioner
verified the status of his title with the RD of Marikina,
he was surprised to discover that there was already
annotation for REM in the title, purportedly executed
by one Adriano, in favor of the Respondent, in
consideration of P60,000.00, petitioner then denied
that he executed deed.
After repeated demand by the petitioner that
respondent return or reconvey to him his title to the
said property and when these demands were ignored
or disregarded, he instituted the present suit.
Respondent claimed that petitioner voluntarily
entrusted his title Salvador for the purpose of securing
a loan, thereby creating a principal-agent relationship
between the plaintiff and Salvador for the aforesaid
purpose. Thus, according to respondent, the execution
of the REM was within the scope of the authority
granted to Salvador; that in any event that since the
said TCT has remained with petitioner, the latter has
no cause of action for reconveyance against him." The
trial court ruled in favor of the petitioner, and the CA
reversed the said decision.
ISSUE: Whether or not Salvador was acted as an
agent of petitioner (to excuse the purchaser from
concurrent neglience).
HELD: No. Since he knew that the property was
being leased, respondent should have made inquiries
about the rights of the actual possessors. He could
have easily verified from the lessees whether the
claimed owner was, indeed, their lessor.
Petitioners act of entrusting and delivering his TCT
8
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
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. He only asked her to look for
possible money lenders. Article 1878 of the Civil
Code provides:
Art. 1878. Special powers of attorney are
necessary in the following cases:
x x x x x x x x x
(7) To loan or borrow money, unless the
latter act be urgent and indispensable for
the preservation of the things which are
under administration;
x x x x x x x x x
(12) To create or convey real rights over
immovable property;
x x x x x x x x x.
As between petitioner and respondent, the court ruled
that the failure of the latter to verify essential facts
was the immediate cause of his predicament. Thus,
assuming that both parties were negligent, the Court
opines that respondent should bear the loss. His
superior knowledge of the matter should have made
him more cautious before releasing the loan and
accepting the identity of the mortgagor.
Given the particular circumstances of this case, the SC
believed that the negligence of petitioner is not
enough to offset the fault of respondent himself in
granting the loan. The former should not be made to
suffer for respondent’s failure to verify the identity of
the mortgagor and the actual status of the subject
property before agreeing to the real estate mortgage.
While we commiserate with respondent -- who in the
end appears to have been the victim of scoundrels --
his own negligence was the primary, immediate and
overriding reason that put him in his present
predicament.
To summarize, SC ruled that both law and equity
favor petitioner. First, the relevant legal provision,
Article 2085 of the Civil Code, requires that the
mortgagor be the absolute owner of the thing x x
x mortgaged. Here, the mortgagor was an impostor
who executed the contract without the knowledge and
consent of the owner. Second, equity dictates that a
loss brought about by the concurrent negligence of
two persons shall be borne by one who was in the
immediate, primary and overriding position to prevent
it. Herein respondent who, we repeat, is engaged in
the business of lending money secured by real estate
mortgages could have easily avoided the loss by
simply exercising due diligence in ascertaining the
identity of the impostor who claimed to be the owner
of the property being mortgaged. Finally, equity
merely supplements, not supplants, the law. The
, your Honor.
former cannot contravene or take the place of the COURT: Do you agree Fiscal? into a compromise. However, insofar as Teresita was
latter. PROS. CORPUZ: Yes, your concerned, she was apprised of the agreement and in
Honor. fact had signed her name as instructed by the court,
COURT: All right so thereby tacitly ratifying the same. 
P600,000.00 is the agreed
People vs. Carpo (2001) (more on Evidence and liquidated amount in case As for accused-appellants, the aforecited dialogue
Crim Pro na case) of conviction without between the court and counsel does not show that they
(Digest by: Jennifer Lim) necessarily having to were ever consulted regarding the proposed
interpret this stipulation settlement. In the absence of a special power of
Facts: as admission of guilt on attorney given by accused-appellants to their counsel,
the part of any of the the latter can neither bind nor compromise his clients'
The accused Jaime Carpo impute error to the trial accused. All right so we civil liability. 
court for relying on the testimony of a single witness will dispense with the
in convicting them of multiple murder complexed testimony on the civil Consequently, since Atty. Sanglay and Atty. Rafael
with attempted murder for the death of Florentino aspect x x x x had no specific power to compromise the civil
Dulay, Norwela Dulay and Nissan Dulay, and the COURT: x x x x Are you the liability of all accused-appellants, its approval by the
wounding of Noemi Dulay. private complainant in trial court which did not take the precautionary
this case? measures to ensure the protection of the right of
Since the three (3) murders and attempted murder TERESITA DULAY: Yes, sir. accused-appellants not to be deprived of their property
were produced by a single act, namely, the explosion COURT: If the accused get without due process of law, could not legalize it. For
caused by the hurling of a grenade into the bedroom convicted and I will hold being violative of existing law and jurisprudence, the
of the Dulays, the case comes under Art. 48 of The them severally liable for settlement should not be given force and effect.
Revised Penal Code on complex crimes.  you of damages in the
liquidated sum of
The court a quo's award of damages was in the P600,000.00 as agreed
"negotiated amount of P600,00.00." It appears that Gloria Anacleto vs Alexander Van Twest
upon by the counsel, will
under the auspices of the trial court counsel for the August 29, 2000
you be satisfied? x x x x
defense entered into an oral compromise with the (Digest by: Lilybeth Petallo)
TERESITA: Yes, sir.
public prosecutor, which was subsequently ratified by COURT: So let that be of
the private complainant, limiting the amount of civil FACTS:
record. Will you sign the
liability to P600,000.00. This arose from a complaint for reconveyance of title
note so that there will be
evidence.” filed by Atty. Ernesto Perez, in the name of
“From TSN of the case (just in Alexander Van Twest and Euroceanic (respondents),
case, it would be asked in as against Gloria Anacleto (petitioner) and Isaias
ISSUE: whether or not the exercise of attys power to
the recits) Bongar, on Feb 6 1995.
compromise bound the accused Jaime
PROS. CORPUZ: x x x x (W)e According to Atty. Perez, Van Twest, has been
would like to enter into reported missing since June 16, 1992, but is duly
HELD: No. Article 1878 of the Civil Code and Sec.
stipulation the civil aspect represented by said Atty. Perez as his agent/or
23 of Rule 138 of the Rules of Court set forth the
of the case. general counsel.
attorney's power to compromise. Under Art. 1878 of
COURT: Are the accused Eventually, a compromise agreement was entered
the Civil Code, a special power of attorney is
confident that they could into by petitioner and Atty. Perez, in representation of
necessary "to compromise, to submit questions to
be acquitted in this Van Twest. It was stipulated therein that petitioner
arbitration, to renounce the right to appeal from a
case? Atty Sanglay? shall pay the debts directly to Atty. Perez. The TC
judgment, to waive objections to the venue of an
ATTY. SANGLAY: I think so, rendered judgment based on the said compromise
action or to abandon a prescription already
your Honor. agreement.
acquired." On the other hand, Sec. 23, Rule 138 of the
COURT: What about Atty. However, petitioner, represented by new counsel,
Rules of Court provides, "(a)ttorneys have authority to
Rafael? filed an urgent omnibus motion asking the Court to
bind their clients in any case by any agreement in
ATTY. RAFAEL: We are order Atty. Perez to submit a SPA, and in the
relation thereto made in writing, and in taking appeal,
confident, your Honor. meantime to defer petitioner’s compliance with her
and in all matters of ordinary judicial procedure, but
COURT: All right. So you can obligation under the compromise agreement.
they cannot, without special authority, compromise
easily stipulate. First of ATTY. PEREZ’ CONTENTION:
their clients' litigation or receive anything in discharge
all, how much do you Although Atty. Perez admitted that he had no SPA
of their clients' claims but the full amount in cash."
want Fiscal? from Van Twest to enter into a compromise
PROS. CORPUZ: P1,282,740.00, agreement, he claims that petitioner is estopped from
The requirements under both provisions are met when
your Honor x x x x denying his authority since petitioner’s former
there is a clear mandate expressly given, by the
COURT: x x x x Agree counsel (law firm of Salonga, Hernandez, and Allado)
principal to his lawyer specifically authorizing the
gentlemen of the defense? was informed of this fact. The TC & CA sustained
performance of an act. It has not escaped our attention
ATTY. this argument.
that in the present case counsel for both parties had no
SANGLAY: P600,000.00 ISSUE:
special power of attorney from their clients to enter
9
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
a. WON a lawyer, in representation of his
client, may enter into a compromise
agreement in the absence of a SPA. (NO.
SPA IS REQUIRED.)
b. WON petitioner is estopped from
denying the absence of the SPA for
having been informed of such fact during
the negotiations. (NOT ESTOPPED)
HELD: A lawyer, in representation of his client
(respondents), cannot enter into a compromise
agreement without a SPA. Even if the petitioner was
aware of the absence of the SPA from the start, the
petitioner cannot be held to be in estoppel, since the
SPA is a mandatory requirement.
A. ATTY. PEREZ IS WITHOUT SPA
TO COMPROMISE
1. With respect to respondent Van Twest:
Atty. Perez admitted that his only authority to
represent is the retainer agreement he had with Van
Twest. However, this did not include a special
authority to enter into a compromise agreement.
Rule 138, Sec. 23 provides that attorneys cannot,
without special authority, compromise their
client’s litigation. Further, Article 1878(3), NCC
provides that SPAs are necessary in cases of a
compromise.
Indeed, a SPA constituting Atty. Perez as attorney-in-
fact is necessary.
2. With respect to respondent Euroceanic:
It should be noted that the action for reconveyance
filed by Atty. Perez was brought not only in behalf of
Van Twest but also of Euroceanic, a juridical person.
As a rule, the power to compromise or settle claims
in favor of or against the corporation is vested in
the board of directors.
Hence, in the absence of any authorization from
the board of directors of Euroceanic, Atty. Perez
could not file any suit in its behalf, regardless of the
fact that Van Twest was the former chairman of its
board.
B. ESTOPPEL DOES NOT APPLY.
The CA held that petitioner is estopped to deny Atty.
Perez’ authority to represent respondents because
petitioner knew from the start of the negotiations for
the compromise agreement that Atty. Perez had no
SPA. (LACKS MERIT)
Estoppel does not apply. Although petitioner’s former
counsel knew that Atty. Perez had no SPA, said
counsel nonetheless negotiated with him because of
his representation that he was the representative of
Van Twest and that he could secure an SPA from
the heirs of Van Twest. Petitioner was thus well
within her right in relying upon such representation of
Atty. Perez.
Of importance is paragraph 5 of the compromise
agreement which provides that “[t]he signatories to This involves a complaint for illegal dismissal, etc. executed in his favor by Perla Mercado (the wife) on
this Agreement hereby represent and warrant that filed by Victor Prado Sr. and Matilde Tuscano May 28 1992, under the ff. circumstances:
they are duly authorized to execute this Agreement.” (respondents) against Loyola Security and Detective a. On Dec 12 1996, Julian mortgaged with
By virtue of this provision, petitioner had the right to Agency and/or GM Ruperto Acle Jr. (petitioners). Allied Banking Corp. (respondent bank)
require Atty. Perez to secure the necessary authority Labor Arbiter ruled in favor of respondents. NLRC the subject property covered by TCT No.
from Van Twest or the latter’s heirs as well as from affirmed. RT-18206 (106338) registered with the
Euroceanic. Indeed, petitioner cannot be faulted for So, respondents subsequently filed a Motion for ROD-Quezon City to secure a loan of
treating this warranty as a condition precedent to Issuance of a Writ of Execution. But thereafter, they P3M, and the additional loan of P5M.
her compliance with the compromise agreement since filed a Joint Manifestation acknowledging complete (However, no such property is identified
the requirement of special authority is mandatory satisfaction of the award. in the SPA)
and a lawyer’s authority to compromise cannot However, respondents again filed a Motion for the b. Rather, the SPA covers, among others, a
simply be presumed. Issuance of an Alias Writ of Execution for the property covered by TCT No. RT-
C. What injury will result if we sustain Recovery of the Balance of the Award, claiming that 106338 registered with the ROD- Pasig.
the CA’s decision in affirming the they received less than the award of LA. This motion
compromise agreement despite the was granted Because Julian defaulted payment, respondent bank
absence of the SPA? Petitioner moved for reconsideration, but was denied. foreclosed the REM.
The risk of sustaining the decision of the Court of Hence, this petition.
Appeals is that: PETITIONERS’ CONTENTION: This prompted heirs of deceased Perla (petitioner-
a. In requiring petitioner to pay a debt to a That respondent Prado’s acts of entering into a heirs) to file an action for the annulment of REM
stranger, we cannot just rely on the compromise agreement and in accepting an advance constituted over the subject property on the ground
guaranty of Atty. Perez that he would of P5,000 from petitioner Acle constituted a novation that:
hold any money he receives in the cases of the award adjudged by the LA. a. the subject property was not covered by
he has filed in trust for Van Twest and/or ISSUE: WON the compromise agreement is valid and the SPA, and
Euroceanic. enforceable. (NOT VALID) b. the said SPA, at the time the loan
b. There is no stopping Van Twest and/or HELD: The compromise agreement is not valid: obligations were contracted, no longer
Euroceanic from suing petitioner a. There is no compliance with the NLRC had force and effect since it was
again for the same cause of action if they rules which requires the assistance of previously revoked by Perla on Mar 10
are unable to recover the money from counsel and approval of the LA in 1993, as evidenced by her Letter dated
Atty. Perez. approving the compromise agreement; Jan 23 1996, notifying ROD-Quezon
c. In fact, the law does not even require and City that any attempt to mortgage or sell
them to recognize the trust unilaterally b. There is no compliance with Article the subject property must be with her full
created by Atty. Perez or first seek to 1878, NCC which requires that a SPA is consent.
recover from him. necessary to effect novations, to
compromise, to waive any obligation RESPONDENT BANK’S CONTENTION:
Hence, the absence of the SPA in favor of Atty. Perez gratuitously, any in any other act of strict That the TCT No. RT-106388 registered with ROD-
is fatal. The fact that the compromise agreement was dominion. In this case, there was no Pasig [the property in SPA] was reconstituted as TCT
approved by the lower court does not make it final showing that respondent Prado was RT-18206(106338) registered with ROD-QC [the
and executory. Since a compromise agreement is also duly authorized by co-respondent property in REM]. Hence, the two are one and the
a contract, it is considered void for lack of the consent Tuscano to waive a part of the award same.
or special authority from Van Twest and/or given to her – considering that
Euroceanic. Hence, the compromise agreement is not respondent Prado executed the RTC nullified the REM, in favor of petitioner-heirs,
enforceable in the absence of the lawyer’s SPA. compromise agreement not only on his for Julian’s lack of authority by the terms of the
WHEREFORE, the decision of the Court of Appeals dismissing petitioner’s action for
own behalf but also on behalf of co- SPA.
certiorari is hereby REVERSED and, consequently, the decision of the Regional Trial Court,
respondent Tuscano.
Branch 7, Manila, based on the compromise agreement of the parties, is ANNULLED and
CA REVERSED, finding that Perla intended the
SET ASIDE and the compromise agreement itself is declared without force and effect.
Hence, being violative of existing law and subject property to be included in the SPA she
jurisprudence, such settlement cannot be given force executed in favor of Julian, and that her subsequent
and effect. revocation of the said SPA, not being contained in
WHEREFORE, the petition is DISMISSED and petitioner company is ORDERED to PAY
Q: Was the regular (?) agreement sufficient? a public instrument, cannot bind third persons.
private respondents the amount of P48,317.93, in addition to the partial payment of
Hence, the petition.
P43,000.00, to satisfy the monetary award which has long become final and executory.
A: No. There must be SPA providing for such ISSUE:
authority. a. WON Perla’s SPA covers the subject property
in REM. (NOT COVERED)
Loyola Security and Detective Agency vs National Lilian Mercado vs Allied Banking Corp b. WON Perla’s subsequent revocation of the SPA
Labor Relations Commission July 27, 2007 effectively removed Julian’s authority to
May 9, 1995 (Digest by: Lilybeth Petallo) mortgage the property. (YES, SPA
(Digest by: Lilybeth Petallo) REVOKED.)
FACTS: c. WON respondent bank is a mortgagee in good
FACTS: This involves the mortgage entered into by Julian faith. (NO)
Mercado (the husband), based on the alleged SPA d. WON the REM is null and void. (NOT NULL
10
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
AND VOID BUT UNENFORCEABLE,
WITHOUT PERLA’S RATIFICATION)
HELD: Perla’s SPA does not cover the subject
property in REM. Julian’s authority was subsequently
revoked at the time the loan obligation took place, and
respondent bank as mortgagee should have exercised
extraordinary diligence to know of such fact.
Nonetheless, the REM is not null and void but is
unenforceable in the absence of Perla’s ratification of
the same.
A. PERLA’S SPA DOES NOT COVER
THE PROPERTY IN REM.
1. Julian was granted a special power of
authority by Perla…
Under Article 1878 of the Civil Code, a special
power of attorney is necessary in cases where real
rights over immovable property are created or
conveyed. In the SPA executed by Perla in favor of
Julian on 28 May 1992, the latter was conferred with
the authority to "sell, alienate, mortgage, lease and
deal otherwise" the different pieces of real and
personal property registered in Perla's name. The SPA
likewise authorized Julian "[t]o exercise any or all
acts of strict dominion or ownership" over the
identified properties, and rights and interest therein.
There is no question therefore that Julian was vested
with the power to mortgage the pieces of property
identified in the SPA.
2. …however, the SPA does not cover the subject
property…
The SPA contained an exclusive enumeration of the
pieces of property over which Julian had authority.
Nowhere is it stated in the SPA that Julian's
authority extends to the subject property covered
by TCT No. RT – 18206 (106338) registered with the
Registry of Deeds of Quezon City.
3. … and the two properties are not one and the
same.
Respondent bank claims that TCT No. RT-182206
(property in SPA) is merely a reconstitution of TCT
No. 106338 (property in REM), and the property is
actually situated in QC, not Pasig. The failure of the
instrument to reflect the recent TCT Number or the
exact designation of the ROD should not defeat
Perla’s clear intention. (LACKS MERIT)
After an examination of the literal terms of the SPA,
we find that the subject property was not among those
enumerated therein. There was also nothing in the
language of the SPA from which we could deduce the
intention of Perla to include the subject property
therein. In cases where the terms of the contract are
clear as to leave no room for interpretation, resort to
circumstantial evidence to ascertain the true intent of
the parties, is not countenanced.
Also, 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
confined to those which are specified and defined,
and all other powers and duties are excluded. Thus,
there must be “strict and limited construction of the
terms of a SPA”.
Thus, SC is not convinced that the two properties are
the same. There was no supporting proofs to verify
respondent bank’s claim:
a. It failed to present any certification from
the ROD,
b. Respondent bank did not take the effort
of submitting and making part of the
records of this case copies of the two
TCTs and closely comparing them.
Hence, Julian was not conferred by Perla with the
authority to mortgage the subject property.
B. SPA WAS REVOKED.
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 revocation of the agency or SPA is
expressed and by a public document.
The Register of Deeds of Quezon City was even
notified that any attempt to mortgage or sell the
property covered by TCT No. [RT-18206] 106338
located at No. 21 Hillside Drive, Blue Ridge, Quezon
City must have the full consent documented in the
form of a special power of attorney duly
authenticated at the Philippine Consulate General,
New York City, N.Y., U.S.A.
The non-annotation of the revocation of the Special
Power of Attorney on TCT No. RT-18206 is of no
consequence as far as the revocation's existence and
legal effect is concerned since actual notice is always
superior to constructive notice.
Besides, it developed that at the time the first loan
transaction with defendant Bank was effected on
December 12, 1996, there was on record at the
Office of the Register of Deeds of Quezon City that
the special power of attorney granted Julian, Sr.
by Perla had been revoked. That notice, works as
constructive notice to third parties of its being filed,
effectively rendering Julian, Sr. without authority
to act for and in behalf of Perla as of the date the
revocation letter was received by the Register of
Deeds of Quezon City on February 7, 1996.
Given that Perla revoked the SPA as early as 10
March 1993, and that she informed the Registry of
Deeds of Quezon City of such revocation in a letter
dated 23 January 1996 and received by the latter on 7
February 1996, then third parties to the SPA are
constructively notified that the same had been revoked same, the real estate mortgages constituted by Julian
and Julian no longer had any authority to mortgage over the subject property cannot be enforced by any
the subject property. action in court against Perla and/or her successors in
C. RESPONDENT BANK IS NOT A interest. Hence, unenforceable.
MORTGAGEE IN GOOD FAITH
WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is GRANTED. The
Decision dated 12 October 2005 and its Resolution dated 15 February 2006 rendered by the
Respondent bank cannot now claim to be an innocent
Court of Appeals in CA-G.R. CV No. 82636, are hereby REVERSED. The Decision dated 23
mortgagee.
September 2003 of the Regional Trial Court of Quezon City, Branch 220, in Civil Case No.
By principle, while it is true, x x x that a person
Q-99-37145, is hereby REINSTATED and AFFIRMED with modification that the real
dealing with registered lands need not go beyond
estate mortgages constituted over TCT No. RT – 18206 (106338) are not null and void but
the certificate of title, it is likewise a well-settled
UNENFORCEABLE. No costs.
rule that a purchaser or mortgagee cannot close
his eyes to facts which should put a reasonable
man on his guard, and then claim that he acted in
good faith under the belief that there was no defect Art 1879. A special power to sell excludes the power
in the title of the vendor or mortgagor. to mortgage; and a special power to mortgage does
not include the power to sell.
This principle is applied more strenuously when the
mortgagee is a bank or a banking institution.
What powers are included in power to sell? Hindi
Considering that the property mortgaged by Julian naman pwedeng “You have to power to sell”, yun
was not his, and there are additional doubts or
lang.
suspicions as to the real identity of the same, based on
the:
POWER TO SELL INCLUDES:
a. Palpable difference between the TCT
numbers referred to in the REM and
Julian’s SPA, and 1) To find a purchaser or to sell directly;
b. The registration in the ROD which is of
different cities, 2) To deliver the property;
these should have put respondent bank on guard. It
should have proceeded with its transactions with 3) To make the usual representation and warranty;
Julian only with utmost caution. Thus, it failed to
discharge the degree of diligence required of it as a - Extra representation of warranty means
banking corporation. it’s onerous to the principal, so you need another SPA
for that.
As a banking institution, jurisprudence stringently
requires that respondent should take more 4) To execute the necessary transfer documents;
precautions than an ordinary prudent man should, to
ascertain the status and condition of the properties 5) To fix the terms of the sale, unless there be set
offered as collateral and to verify the scope of the conditions stipulated by the principal
authority of the agents dealing with these.
6) To sell only for cash;
Had respondent acted with the required degree of
diligence, it could have acquired knowledge of the - If you want to sell for credit, that is not
letter dated 23 January 1996 sent by Perla to the included in the power to sell. You have to have
Registry of Deeds of Quezon City which recorded the
special instruction or order from the principal.
same.
7) To receive the prices, unless he was authorized
D. REM IS NOT NULL & VOID BUT
UNENFORCEABLE. only to solicit orders.
Finally, the REM constituted over the subject property
are unenforceable and not null and void.
Unenforceable contracts are those which cannot be THE FOLLOWING ARE NOT INCLUDED IN A
enforced by a proper action in court, unless they are POWER TO MORTGAGE
ratified, because either they are entered into The power to:
without or in excess of authority or they do not 1.) Sell;
comply with the statute of frauds or both of the 2.) Execute a 2nd mortgage;
contracting parties do not possess the required legal
capacity. Thus, without Perla's ratification of the
11
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
3.) Mortgage for the agent’s personal benefit or
for the benefit of any 3rd person, unless
the contrary has been clearly indicated.
Does a principal have to power to revoke the contract
given the agent’s exclusive authority to sell? Of
course, they have the right to use such power and
exercise it within a certain period. Kasi that will
constitute bad faith. Bigyan mo si agent ng authority
to sell for 10 days, tapos ika 5th day palang, nirevoke
mo na yun.
Art. 1880. A special power to compromise does not
authorize submission to arbitration.
Rationale: The principal authorizes his agent to
compromise because of absolute confidence in the
latter’s judgment and discretion to protect the
principal’s right and to obtain for him his bargain in
the transaction. If the transaction is left in the hands of
an arbitrator, then necessarily baka ang principal hindi
sya confident sa arbitrator. Pls. take note that in power
to comprise, the agent sets the terms. Mag negotiate
sya. To submit it to arbitration is to put the negotiation
to ___ results. So magkaiba sila.when it comes to
relief (?) of the principal, you need SPA for that.
Art. 1881. The agent must act within the scope of his
authority. He may do such acts as may be conducive
to the accomplishment of the purpose of the agency.
Art. 1882. The limits of the agent’s authority shall not
be considered exceeded should it have been
performed in a manner more advantageous to the
principal than that specified by him.
The measure if the authority of the agent generally if
it becomes __ to the principal, he needs SPA for that.
If it is advantageous to the principal, then ok lang.
remember, you are representing the principal. You are
as if the principal.
Art. 1883. If an agent acts in his own name, the
principal has no right of action against the persons
with whom the agent has contracted; neither have
such persons against the principal.
In such case, the agent is the one directly bound in
favor of the person with whom he contracted, as if the
transaction were his own, except when the contract
involves things belonging to the principal.
The provisions of this article shall be understood to be
without prejudice to the actions between the principal
and the agent.
If agent contracted in his own name, sya yung liable,
kasi si third person malamang hindi nya alam na agent
lang yun, unless it involves things belonging to the
principal. The agent has no right against the things of
the principal.
OBLIGATIONS OF THE AGENT
Art. 1884. The agent is bound by his acceptance to
carry out the agency and is liable for the damages
which through his non-performance the principal may
suffer.
He must also finish the business already begun on the
death of the principal should delay entail any danger.
GENERAL OBLIGATIONS OF THE AGENT
1) He must act in utmost good faith and loyalty in the
advancement and furtherance of the interest of the
principal;
2) He must obey the principal’s instructions;
3) He must exercise reasonable care.
SPECIFIC OBLIGATIONS OF THE AGENT
1) To carry out the agency as accepted;
2) To answer for damages which, through his
nonperformance, the principal may suffer;
3) To finish the business already begun on the death
of the principal, should delay entail any danger;
4) To observe the diligence of a good father of a
family in the custody and preservation of the goods
forwarded to him by the owner until the latter should
appoint an agent;
5) To advance the necessary funds if there’s
obligation to do so;
6) To act in accordance with the instruction of the
principal. In default thereof, he shall do all that a good
father of a family would do;
7) To not carry out the agency if its execution would
manifestly result in loss or damage to the principal;
8) To answer for damages when there is conflict
between his interests and those of the principal,
should he prefer his own;
9) To not borrow money if he has been authorized to
lend money and interest;
Why? Kasi conflict of interest. The
interest of the agent may not be necessarily the same
with the interest of the principal.
10) To render an account of his transactions and to
deliver to the principal whatever he may have
received by virtue of the agency;
11) To be responsible for the acts of the substitutes
appointed by him;
12) To pay interests on funds he has applied to his
own use.
Art. 1885. In case a person declines an agency, he is
bound to observe the diligence of a good father of a
family in the custody and preservation of the goods
forwarded to him by the owner until the latter should
appoint an agent. The owner shall as soon as
practicable either appoint an agent or take charge of
the goods.
Art. 1886. Should there be a stipulation that the agent
shall advance the necessary funds, he shall be bound
to do so except when the principal is insolvent.
Art. 1887. In the execution of the agency, the agent
shall act in accordance with the instructions of the
principal.
In default thereof, he shall do all that a good father of
a family would do, as required by the nature of the
business.
Art. 1888. An agent shall not carry out an agency if
its execution would manifestly result in loss or
damage to the principal.
Art. 1889. The agent shall be liable for damages if,
there being a conflict between his interests and those
of the principal, he should prefer his own.
Art. 1890. If the agent has been empowered to borrow
money, he may himself be the lender at the current
rate of interest. If he has been authorized to lend
money at interest, he cannot borrow it without the
consent of the principal.
Art. 1891. Every agent is bound to render an account
of his transactions and to deliver to the principal
whatever he may have received by virtue of the
agency, even though it may not be owing to the
principal.
Every stipulation exempting the agent from the
obligation to render an account shall be void.
Art. 1892. The agent may appoint a substitute if the
principal has not prohibited him from doing so; but he
shall be responsible for the acts of the substitute:
1.) When he was not given the power to appoint one;
2.) When he was given such power, but without
designating the person, and the person appointed was
notoriously incompetent or insolvent.
All acts of the substitute appointed against the
prohibition of the principal shall be void.
12
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
BA Finance Corporation vs. Court of AppealsG.R.
No. 82040 August 27, 1991
(Digest by: Earvin Alparaque)
Facts:
On July 15, 1977, respondents Manuel and Lilia
Cuady obtained from Supercars, Inc. a credit of
P39,574.80 which covered the cost of one unit of Ford
Escort 1300, a four-door sedan. It was evidenced by a
promissory note. The respondents was obligated to
pay the amount in installments of P1,098. There was
also a stipulated penalty of P10 for every month of
late installment payment. As a security, the spouses
constituted a chattel mortgage on the subject vehicle.
On July 25, 1977, Supercars, Inc. assigned the
promissory note, together with the chattel mortgage,
to BA Finance Corporation. The spouses paid a total
of P36,730.15, leaving an unpaid balance of
P2,344.65 and an additional P460 representing
penalties and surcharges.
BA Finance Corporation thereafter, as the assignee of
the mortgage lien, obtained the renewal of the
insurance coverage over the subject vehicle with
Zenith Insurance Corporation. Under its terms, any
loss under the policy shall be payable to BA Finance
Corp.
On April 18, 1980, the vehicle figured in an accident
and was badly damaged. The spouses asked BA
Finance Corp. to consider the same as total loss and to
claim from the insurer the face value of the car
insurance policy and apply the same as payment to the
remaining balance of P2,344.65. Plaintiff corporation
did not heed such request and prevailed upon the
spouses to just have the car repaired. Not long
thereafter, the car bogged down. The spouses once
again requested plaintiff to enforce the total loss
provision in the insurance coverage. BA Finance
Corp. did not respond favorably such request and
thus, the spouses stopped paying their monthly
installments which prompted the former the sue them
for the recovery of the unpaid balance.
Issue: Whether or not BA Finance Corp. has waived
its right to collect the unpaid balance for failure to
enforce the total loss provision in the insurance
coverage- YES
Ruling:
B.A. Finance Corporation was deemed subrogated to
the rights and obligations of Supercars, Inc. when the
latter assigned the promissory note, together with the
chattel mortgage constituted on the motor vehicle in
question in favor of the former. Consequently, B.A.
Finance Corporation is bound by the terms and
conditions of the chattel mortgage executed between
the Cuadys and Supercars, Inc. Under the deed of
chattel mortgage, B.A. Finance Corporation was
constituted attorney-in-fact with full power and
authority to file, follow-up, prosecute, compromise or
settle insurance claims; to sign execute and deliver the
corresponding papers, receipts and documents to the
Insurance Company as may be necessary to prove the
claim, and to collect from the latter the proceeds of
insurance to the extent of its interests, in the event that
the mortgaged car suffers any loss or damage. In
granting B.A. Finance Corporation the
aforementioned powers and prerogatives, the Cuady
spouses created in the former's favor an agency.
Thus, under Article 1884 of the Civil Code of the
Philippines, B.A. Finance Corporation is bound by
its acceptance to carry out the agency, and is liable
for damages which, through its non-performance,
the Cuadys, the principal in the case at bar, may
suffer.
Unquestionably, the Cuadys suffered pecuniary loss in
the form of salvage value of the motor vehicle in
question, not to mention the amount equivalent to the
unpaid balance on the promissory note, when B.A.
Finance Corporation steadfastly refused and refrained
from proceeding against the insurer for the payment
of a clearly valid insurance claim, and continued to
ignore the yearning of the Cuadys to enforce the total
loss provision in the insurance policy, despite the
undeniable fact that Rea Auto Center, the auto repair
shop chosen by the insurer itself to repair the
aforementioned motor vehicle, misrepaired and
rendered it completely useless and unserviceable
Accordingly, there is no reason to depart from the
ruling set down by the respondent appellate court. In
this connection, the Court of Appeals said:
... Under the established facts and circumstances, it is
unjust, unfair and inequitable to require the chattel
mortgagors, appellees herein, to still pay the unpaid
balance of their mortgage debt on the said car, the
non-payment of which account was due to the
stubborn refusal and failure of appellant mortgagee to
avail of the insurance money which became due and
demandable after the insured motor vehicle was badly
damaged in a vehicular accident covered by the
insurance risk. ... (Ibid.)
This is an example of Art. 1884.
What if the agent declines the agency? *Sir reads Art.
1885*
What is the difference between authority and
instruction? In a power to sell, what would be the
instruction? Should an instruction be included in a Art. 1893. In the cases mentioned in Nos. 1 and 2 of
Special Power of Attorney? Is it necessary for the the preceding article, the principal may furthermore
third person to know the instruction? bring an action against the substitute with respect to
the obligations which the latter has contracted under
*Sir reads Art. 1889.* the substitution.
Art. 1894. The responsibility of two or more agents,
The rule of strict fidelity requires that the agent should even though they have been appointed
choose the professional interest of his principal rather simultaneously, is not solidary, if solidarity has not
than his own, otherwise he will be liable for damages. been expressly stipulated.
*Sir reads Art. 1890.*
This is in accordance with your ObliCon. So
Rationale: The agent can lend money to the principal
generally, pag dalawa sila, joint, unless stipulated na
using the agent’s own funds at the current rate of
solidary.
interest and NOT at a higher interest rate because the
agent is supposed to act for the principal’s benefit. If
Art. 1895. If solidarity has been agreed upon, each of
the agent is authorized to lend the principal’s money, the agents is responsible for the non-fulfillment of the
with interest, to 3rd persons, the agent can’t be the agency, and for the fault or negligence of his fellow
borrower without the consent of the principal because agents, except in the latter case when the fellow
agents acted beyond the scope of their authority.
the agent may not be a good borrower or he may be
Art. 1896. The agent owes interest on the sums he has
insolvent or he may not be a good risk. There is a
applied to his own use from the day on which he did
danger here that the interest of the principal would be
so, and on those which he still owes after the
jeopardized.
extinguishment of the agency.
Art. 1897. The agent who acts as such is not
This would also seem to be the case if the agent is personally liable to the party with whom he contracts,
authorized to lend money w/o interest because of the unless he expressly binds himself or exceeds the
same reason. limits of his authority without giving such party
sufficient notice of his powers.
*Sir reads Art. 1891.*
This Article requires full transparency because the
agent owes fiduciary __ to the principal. Kahit may There are two instances when agent can be liable:
stipulation na hindi magrerender ng accounting, that is
void. 1.) When the agent binds himself; or
2.) When he exceeds the limits of his authority
*Sir reads Art. 1892.* without giving the third party sufficient
notice of his powers.
This is what we call SUB-AGENT. We have four
Rustan Pulp & Paper Mills Inc., Bienvenido
instances where sub-agents are appointed and their
Tantoco Sr., and Romeo S. Vergara vs.
effects:
Intermediate Appellate Court and Iligan
Diversified Products Inc., Rome Lluch and
INSTANCE EFFECTS
Roberto Borromeo
No prohibition Agent responsible for all
G.R. No. 70789 October 19,1992
the acts of sub-agent.
(Digest by: Earvin Alparaque)
Prohibition Sub-agent’s acts are Facts:
VOID as to the principal. On April 1968, a contract of sale was entered into by
Romeo Lluch and Rustan Pulp and Paper Mill Inc.,
Authority to appoint but Agent liable for acts of whereby the former agreed to sell pulp wood
not designated by sub-agent if the sub-agent materials to the latter at a price of P30 per cubic
principal is notoriously meter. The contract contained the following
incompetent or insolvent. stipulations which became an issue in the present
controversy:
Authority to appoint and Agent is released from
designated by principal any liability from the acts 3. That BUYER shall have the option to
of the sub-agent. buy from other SELLERS who are equally qualified
and holders of appropriate government authority or
13
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
license to sell or dispose, that BUYER shall not buy
from any other seller whose pulp woods being sold
shall have been established to have emanated from the
SELLER'S lumber and/or firewood concession. . . .
And that SELLER has the priority to supply the pulp
wood materials requirement of the BUYER;
xxx xxx xxx
7. That the BUYER shall have the right to
stop delivery of the said raw materials by the seller
covered by this contract when supply of the same
shall become sufficient until such time when need for
said raw materials shall have become necessarily
provided, however, that the SELLER is given
sufficient notice.
In the installation of the plant facilities, the technical
staff of Rustan Pulp and Paper Mills, Inc.
recommended the acceptance of deliveries from other
suppliers of the pulp wood materials for which the
corresponding deliveries were made. But during the
test run of the pulp mill, the machinery line thereat
had major defects while deliveries of the raw
materials piled up, which prompted the Japanese
supplier of the machinery to recommend the stoppage
of the deliveries. The suppliers were informed to stop
deliveries and the letter of similar advice sent by
petitioners to private respondents reads:
September 30, 1968
Iligan Diversified Projects, Inc.
Iligan City
Attention: Mr. Romeo A. Lluch
Dear Mr. Lluch:
This is to inform you that the supply of raw materials
to us has become sufficient and we will not be
needing further delivery from you. As per the terms of
our contract, please stop delivery thirty (30) days from
today.
On January 23, 1969, a complaint for contractual
breach was filed. The court of origin dismissed the
complaint but at the same time enjoined petitioners to
respect the contract of sale and to continue accepting
and paying for the deliveries of pulp wood products.
The IAC affirmed the lower court's decision with a
modification by ordering the petitioners to pay the
respondents P30,000 as moral damages and P15,000
as attorney's fees.
Issue: Whether or not Tantoco and Vergara should be
held liable for the payment of moral damages and
attorney's fees- NO
Ruling:
Petitioners argue that Tantoco and Vergara should not
have been adjudged to pay moral damages and
attorney's fees because Tantoco merely represented
the interest of Rustan Pulp and Paper Mills, Inc. while
Romeo S. Vergara was not privy to the contract of
sale. On this score, We have to agree with petitioners'
citation of authority to the effect that the President and
Manager of a corporation who entered into and signed
a contract in his official capacity, cannot be made
liable thereunder in his individual capacity in the
absence of stipulation to that effect due to the
personality of the corporation being separate and
distinct from the person composing it (Bangued
Generale Belge vs. Walter Bull and Co., Inc., 84 Phil.
164). And because of this precept, Vergara's supposed
non-participation in the contract of sale although he
signed the letter dated September 30, 1968 is
completely immaterial. The two exceptions
contemplated by Article 1897 of the New Civil
Code where agents are directly responsible are
absent and wanting.
WHEREFORE, the decision appealed from is hereby
MODIFIED in the sense that only petitioner Rustan
Pulp and Paper Mills is ordered to pay moral
damages and attorney's fees as awarded by
respondent Court.
SCHMID & OBERLY, INC v. RJL MARTINEZ
FISHING CORP.
(Digest by: Eliza Devilleres)
SUMMARY OF THE RULING:
AGENT MAY UNDERTAKE THE OBLIGATIONS
OF HIS PRINCIPAL; CASE AT BAR. — However,
even as SCHMID was merely an indentor, there was
nothing to prevent it from voluntarily warranting that
twelve (12) generators subject of the second
transaction are free from any hidden defects. In other
words, SCHMID may be held answerable for some
other contractual obligation, if indeed it had so bound
itself. As stated above, an indentor is to some extent
an agent of both the vendor and the vendee. As such
agent, therefore, he may expressly obligate himself to
undertake the obligations of his principal [See Art.
1897, Civil Code.]
FACTS:
1.) RJL MARTINEZ is engaged in the business of
deep-sea fishing.
2.) As RJL MARTINEZ needed electric generators
for some of its boats and SCHMID sold electric
generators of different brands, negotiations between
them for the acquisition thereof took place.
3.) The parties had two separate transactions over
"Nagata"-brand generators. The first transaction was
the sale of three (3) generators. In this transaction, it is
not disputed that SCHMID was the vendor of the
generators.
4.) The company supplied the generators from its
stockroom; it was also SCHMID which invoiced the
sale.
5.) The second transaction, which gave rise to the
present controversy, involves twelve (12) "Nagata"-
brand generators. These are the facts surrounding this
particular transaction:
a) As RJL MARTINEZ was canvassing
for generators, SCHMID gave RJL
MARTINEZ its Quotation dated
August 19, 1975 [Exhibit "A"] for
twelve (12) "Nagatan-brand generators
b) NAGATA CO. a commission of
$1,752.00 for the sale of the twelve
generators to RJL MARTINEZ.
c) All fifteen (15) generators subject of
the two transactions burned out after
continuous use. RJL MARTINEZ
informed SCHMID about this
development. In turn, SCHMID
brought the matter to the attention of
NAGATA CO. In July 1976,
NAGATA CO. sent two technical
representatives who made an ocular
inspection and conducted tests on some
of the burned-out generators, which by
then had been delivered to the premises
of SCHMID.
d) The tests revealed that the generators
were overrated.
6.) Initially, SCHMID replaced the three (3)
generators subject of the first sale with generators of a
different brand.
7.) CONTENTION OF RJL MARTINEZ: Refund
It asks for a refund of the cost of the generators and
also the payment of damages as not all of the
generators were replaced or repaired.
8.) CONTENTION OF SCHMID: It maintained that
it was not the seller of the twelve (12) generators and
thus refused to refund the purchase price therefor.
9.) Hence, RJL MARTINEZ brought suit against
SCHMID on the theory that the latter was the
vendor of the twelve (12) generators and, as such
vendor, was liable under its warranty against
hidden defects.
ISSUE: W/N SCHMID can be held liable under the
contract.
HELD: Yes, it can be held liable. However, even as
SCHMID was merely an indentor, there was nothing
to prevent it from voluntarily warranting that twelve
(12) generators subject of the second transaction are
free from any hidden defects. In other words,
SCHMID may be held answerable for some other
contractual obligation, if indeed it had so bound itself.
As stated above, an indentor is to some extent an
agent of both the vendor and the vendee. As such
agent, therefore, he may expressly obligate himself to
undertake the obligations of his principal [See Art.
1897, Civil Code.]
Q: What was the primary defense of Schmid in this
case?
A: That he is only an indentor, Sir.
Q: What is an indentor?
A: An indentor is a middlemen in the same class as
commercial brokers and commission merchants.
Q: What will happen if it is proven that indeed
Schmid is only an indentor?
A: He will not be liable.
Recit: DBP vs CA
Q: Did DBP exceed its authority?
A: Yes Sir. DBP exceeded in its authority when it
accepted the application of Juan Dans despite
knowledge that he is no longer qualified to obtain
mortgage redemption insurance (MRI).
Art. 1898. If the agent contracts in the name of the
principal, exceeding the scope of his authority, and
the principal does not ratify the contract, it shall
be void if the party with whom the agent
contracted is aware of the limits of the powers
granted by the principal. In this case, however, the
agent is liable if he undertook to secure the
principal's ratification.
So if the agent promised to secure the principal’s
ratification, the agent would be liable.
SALFIC ALCAN Inc. vs. IMPERIAL
VEGETABLE OIL, Inc.
(Digest by: Jordan Berguia)
FACTS:
(This is a question of whether the act of the agent
which is the president binds the principal which is the
corporation against third party which is Salfic)
14
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
Salfic is a French corporation engaged in international
purchase, sale and trading of coconut oil. So
apparently IVO sells coconut oil. Safic then placed
purchase orders with IVO for 2,000 tons of crude
coconut oil, valued at US$222.50 per ton
IVO however failed to deliver and, instead, offered a
"wash out" settlement. (Washout settlement meaning
the coconut oil subject of the purchase contracts were
to be "sold back" to IVO). Yet IVO wanted it to be
sold at the prevailing price in the international market
at the time of wash out. And IVO bound itself to pay
to Safic the difference between the said prevailing
price and the contract price of the 2,000 tons which
amounted to US$293,500.00.
IVO however failed to pay this amount despite
repeated oral and written demands. Salfic then goes to
court and alleged that on eight occasions, it placed
purchase orders with IVO for a total of 4,750 tons and
prayed to collect from IVO an aggregate amount of
US$391,593.62 and the US$293,500.00 difference
between the contract price and the international
market value, plus attorney's fees and litigation
expenses.
IVO’s defense: “Salfic has no legal capacity to sue
since it is doing business in the Philippines without
the required licenses”. And when pushed further
IVO reveals that the subject contracts were
speculative contracts entered into by IVO's President
in contravention of the prohibition by the Board of
Directors against engaging in speculative paper
trading.
Evidence shows the board is actually oblivious,
clueless about the said contract. And even truth to the
matter is IVO doesn’t even have license from the
Central Bank to engage in speculative contracts. (And
why didn’t they know? Because the president who
was signatory to the contract never even submitted it
to the board hence never recorded into the company’s
books of corporation)
ISSUE:
So the question is can the corporation be held liable
for the losses sustained on such contracts or would it
be the president that should be held solidarily liable?
NO.
RULING:
1. It is the Board and not the Officer that exercises
corporate power. So the officer is merely an agent
who acted beyond the scope of his authority.
The By-laws of IVO specifically stated that the
president would have direct and active management of
the business. A provision in the by-laws stated
“conducting the same according to the orders,
resolutions and instructions of the Board of Directors
and according to his own discretion whenever and
wherever the same is not expressly limited by such
orders, resolutions and instructions”
But regarding this the court said that IVO president
had no blanket authority to bind IVO to any contract.
He must act according to the instructions of the Board
of Directors. Even in instances when he was
authorized to act according to his discretion, that
discretion must not conflict with prior Board orders,
resolutions and instructions.
2. There is no evidence that the board ratified the
contracts.
Under Art. 1898 of the Civil Code:
“Acts of an agent beyond the scope of his authority do
not bind the principal unless the latter ratifies the
same expressly or impliedly.”
BTW TAKE NOTE: The Doctrine of Apparent
Authority favors only those who deal in good faith.
Meaning, if the third person knows that the agent was
acting beyond his power or authority, the principal
cannot be held liable for the acts of the agent. If the
said third person is aware of such limits of authority,
he is to blame, and is not entitled to recover damages
from the agent, unless the latter undertook to secure
the principal's ratification.
(Here, the court deemed Salfic has knowledge of the
IVO president’s act of ultra vires since there were
much ample time for Salfic to have obtained from the
president prior authorization from the IVO board yet
it didn’t do so)
Q: Was there ratification in this case?
A: There was none Sir. When Monteverde entered
into the speculative contracts with Safic, he did not
secure the Board’s approval. He also did not submit
the contracts to the Board after their consummation so
there was, in fact, no occasion at all for ratification.
Q: What is the effect then?
A: Monteverde, as agent, becomes solely liable for
not securing the ratification of the principal.
CERVANTES V. CA
(Digest by: Jordan Berguia)
FACTS:
Cervantes was issued a round ticket for Manila-
Honolulu-Los Angeles-Honolulu-Manila, which ticket
expressly providedan expiry date of March 27, 1990.
He was issued the said ticket following a
compromises agreement between the twoparties from
previous lawsuits. On March 23, four days before its
expiration, he used the ticket and went to Los
Angeles. Hebooked a return ticket for the April 2
flight which was confirmed by PAL personnel. On the
day of his supposed return, hewas not allowed to
board because it was already expired.
ISSUE: WON the PAL agents (personnel), upon
confirmation of Cervantes’ return ticket, extended the
validity of theticket.NO.
RULING:
PAL agents’ confirmation did not extend the validity
of the ticket. They did not have authority.
Ratio:
Since the PAL agents are not privy to the said
agreement and petitioner knew that a written request
to the legal counsel of PAL was necessary, he cannot
use what the PAL agents did to his advantage. The
said agents acted without authority whenthey
confirmed the flights of the petitioner. If the said third
person is aware of such limits of authority, he is to
blame.
Q: What was the contention of Cervantes?
A: Petitioner contended that the confirmation by the
PAL’s agents in Los Angeles and San Francisco
changed the compromise agreement between the
parties.
Q: What did the SC say?
A: The SC said that the confirmation did not extend
the validity of the tickets. The PAL agents are not
privy to the Agreement and petitioner knew that a
written request to the legal counsel of PAL was
necessary, he cannot use what the PAL agents did to
his advantage. The said agents acted without authority
when they confirmed the flights of the petitioner. If
the third person is aware of the limits of authority of
the agent, he is to blame, and is not entitled to recover
damages from the agent, unless the latter undertook to
secure the principal’s ratification.
Art. 1899. If a duly authorized agent acts in
accordance with the orders of the principal, the latter
cannot set up the ignorance of the agent as to
circumstances whereof he himself was, or ought to
have been, aware.
So what happens if the principal appoints an agent
who is ignorant? Kasalanan niya yun. Equity
demands that the principal should be bound by the
acts of the agent if the latter acts within the scope of
his authority and in accordance with the instructions
of the former.
Art. 1900. So far as third persons are concerned, an
act is deemed to have been performed within the
scope of the agent's authority, if such act is within the
terms of the power of attorney, as written, even if the
agent has in fact exceeded the limits of his authority
according to an understanding between the principal
and the agent.
Does the 3rd person have to inquire further as to the
power of attorney? Is it sufficient for him to just rely
on the power of attorney as written? The answer is no.
He is not required to inquire further other than the
terms of the written power of attorney.
If there’s a secret mutual understanding between the
principal and the agent and such is not expressed in
the written power of attorney, does the 3rd person
have to inquire?
No. Whatever their mutual understanding, iba na yun.
For as long as the authority is written, it is sufficient.
Ways/Methods by which the agent’s authority may
be broaden or restricted:
1. By implication
Agent’s authority extends not only to express
requests but also to those acts and transactions
incidental thereto.
2. By usage and customs
Some of the cases say that if the agent’s acts are
normal and customary, baka pwede pang i-
allow kasi incidental naman sya.
3. By necessity
4. By certain doctrines
a. Doctrine of Apparent Authority
b. Doctrine of Liability by Estoppel
c. Doctrine of Ratification
5. By the rule of ejusdem generis
Where an instrument of any kind, an
enumeration of specific matters is followed by
a general phrase, the general phrase is held to
be limited in scope by the specific matters.
The concept of Agent by necessity
An agent by necessity is an agent which arises from
the existence of an emergency or other unusual
conditions which may operate to invest in an agent
authority to meet the emergency.
15
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
SIREDY ENTERPRISES, INC. petitioner, vs.
HON. COURT OF APPEALS and CONRADO DE
GUZMAN, respondents.
(Digest by: Jordan Berguia)
QUISUMBING, J.:
FACTS:
Conrado De Guzman is an architect-contractor doing
business under the name and style of Jigscon
Construction. SiredyEnterprises, Inc. (hereafter
Siredy) is the owner and developer of Ysmael Village,
a subdivision in Sta. Cruz, Marilao,Bulacan. The
president of Siredy is Ismael E. Yanga.
As stated in its Articles of Incorporation, the primary
corporate purpose of Siredy is to acquire lands,
subdivide and developthem, erect buildings and
houses thereon, and sell, lease or otherwise dispose of
said properties to interested buyers.
Sometime before October 1978, Yanga executed an
undated Letter of Authority duly signed by Yanga
which constitutedHermogenes Santos as Siredys
agent, whose authority included entering into a
contract for the building of housing units at
Ysmael Village.
Thereafter, Santos entered into a Deed of Agreement
with De Guzman.
From October 1978 to April 1990, De Guzman
constructed 26 residential units at Ysmael Village.
Thirteen (13) of thesewere fully paid but the other 13
remained unpaid. The total contractual price of these
13 unpaid houses is P412,154.93which was verified
and confirmed to be correct by Santos, per an
Accomplishment Billing that the latter signed. Yanga
is nota signatory to the said contact.
De Guzman tried but failed to collect the unpaid
account from petitioner. Thus, he instituted the action
below for specificperformance against Siredy, Yanga,
and Santos who all denied liability.
During the trial, Santos disappeared and his
whereabouts remain unknown.
ISSUE:
WONHermogenes B. Santos was a duly constituted
agent of Siredy, with authority to enter into contracts
for theconstruction of residential units in Ysmael
Village and thus the capacity to bind Siredy to the
Deed of Agreement.YES
RULING:
Siredy Enterprises, Inc. is ordered to pay Conrado de
Guzman actual damages with legal interest.
Ratio:
By the relationship of agency, one party called the
principal authorizes another called the agent to act for
and in his behalf intransactions with third persons.
The authority of the agent to act emanates from the
powers granted to him by his principal;his act is the
act of the principal if done within the scope of the
authority. He who acts through another acts himself.
On its face, the Letter of Authority executed by Yanga
clearly and unequivocally constituted Santos to do and
execute,among other things, the act of negotiating and
entering into contract or contracts to build Housing
Units on the subdivisionlots in Ysmael Village, Sta.
Rosa, Marilao, Bulacan. Nothing could be more
express than the written stipulations containetherein.
It was upon the authority of this document that De
Guzman transacted business with Santos that resulted
in the constructioncontract denominated as the Deed
of Agreement.
In this particular case, the SC said that the scope of
the agent’s authority is what appears in the written
terms of the power of attorney. While third persons
are bound to inquire into the extent or scope of the
agent’s authority, they are not required to go beyond
the terms of the written power of attorney. Third
persons cannot be adversely affected by an
understanding between the principal and his agent as
to the limits of the latter’s authority. In the same way,
third persons need not concern themselves with
instructions given by the principal to his agent outside
of the written power of attorney.
Art. 1901. A third person cannot set up the fact that
the agent has exceeded his powers, if the principal has
ratified, or has signified his willingness to ratify the
agent's acts.
The effect of ratification by the principal is that it
gives the same effect as if the principal originally
authorized such act.
Who must ratify the contract?
It is only the principal.
Art. 1902. A third person with whom the agent
wishes to contract on behalf of the principal may
require the presentation of the power of attorney, or
the instructions as regards the agency. Private or
secret orders and instructions of the principal do not
prejudice third persons who have relied upon the
power of attorney or instructions shown them.
Art. 1903. The commission agent shall be responsible
for the goods received by him in the terms and
conditions and as described in the consignment,
unless upon receiving them he should make a written
statement of the damage and deterioration suffered by
the same.
So you have a commission agent.
RECIT!
Q: What is the difference between an ordinary
agent and a commission agent?
A: (Please refer to De Leon)
A factor or commission agent is one
whose business is to receive and sell goods for a
commission and who is entrusted by the principal
with the possession of the goods to be sold, and
usually selling in his own name. He may act in his
own name or in that of the principal.
An ordinary agent need not have
possession of the goods of his principal, while the
commission agent must be in possession.
Art. 1904. The commission agent who handles goods
of the same kind and mark, which belong to different
owners, shall distinguish them by countermarks, and
designate the merchandise respectively belonging to
each principal.
Art. 1905. The commission agent cannot, without the
express or implied consent of the principal, sell on
credit. Should he do so, the principal may demand
from him payment in cash, but the commission agent
shall be entitled to any interest or benefit, which may
result from such sale.
If you are a commission agent, without the consent of
the principal, you can only sell on cash. But if you sell
it on credit, the principal cannot demand the interest
or benefit from the commission agent. He can only
demand the payment in cash.
So technically, if you are a commission agent, you are
not acting exclusively for the benefit of the principal.
Art. 1906. Should the commission agent, with
authority of the principal, sell on credit, he shall so
inform the principal, with a statement of the names of
the buyers. Should he fail to do so, the sale shall be
deemed to have been made for cash insofar as the
principal is concerned.
Art. 1907. Should the commission agent receive on a
sale, in addition to the ordinary commission, another
called a guarantee commission, he shall bear the risk
of collection and shall pay the principal the proceeds
of the sale on the same terms agreed upon with the
purchaser.
That is the purpose of the guarantee commission. It is
a commission paid in addition to the ordinary
commission agreed upon for purposes of guaranteeing
to the principal the payment of debts arising through
his agency.
An agent receiving a guarantee commission cannot
put up the defense that the debtor possesses no
property since this is precisely the risk that the
guarantee commission assumes. (Libog kaayo ang
ingun ni Sir, rapper na kaayo sya  please refer
nalang sa De Leon or Villanueva about this one)
Art. 1908. The commission agent who does not
collect the credits of his principal at the time when
they become due and demandable shall be liable for
damages, unless he proves that he exercised due
diligence for that purpose.
Art. 1909. The agent is responsible not only for fraud,
but also for negligence, which shall be judged with
more or less rigor by the courts, according to whether
the agency was or was not for a compensation.
Is the agent liable for fraud?
Yes.
For negligence?
Yes, but the liability can be mitigated by the court.
The court will consider whether the agency is or is not
gratuitous in fixing the liability of the agent for
negligence (not fraud).
Recit: Travel Wide Associated Sales vs CA
TRAVEL WIDE ASSOCIATED SALES (PHILS.),
INC., and TRANS WORLD AIRLINES,
INC., petitioners, vs.COURT OF APPEALS,
DECISION SYSTEMS CORPORATION and
MANUEL A. ALCUAZ, JR., respondents.
(Digest by: Queene Resurreccion)
FACTS:
Decision Systems Corporation and its President,
Manuel A. Alcuaz, Jr., bought a Travel Pass '73
U.S.A. package deal consisting of a TWA ticket to
Los Angeles, New York and Boston, in the United
States, and hotel accommodations from Travel Wide
Associated Sales (Phils.), Inc. for which the plaintiffs
had made the corresponding payment in Manila.
Sometime in March 1975 however, Decision System
and Alcuaz filed a complaint against Travel Wide
Associated Sales (Phils.), Inc..alleging that the latter
had failed to comply with their obligations under
Travel Pass '73 U.S.A. After hearing, the court held
that complaint still did not state a cause of action
because Travel Wide was only the general agent of
TWA and that the latter was only an agent of a
disclosed principal, namely, Tour Services, Inc. As
neither of the defendants was a real party-in-interest,
there could be no cause of action against them.
16
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
The complaint was later on amended and Trans World
Airlines, Inc was impleaded. In disclaiming liability,
the petitioners point to the stipulation on
Responsibility in the Travel Pass '73 Plan brochure
that "Tour Services, Inc. and/or their agents" are
acting "as agents for the passengers." They stress
further that the Miscellaneous Charge Order issued to
Alcuaz indicated that the amount of $218.00 was
payable to Tour Services, Inc. and not to either of
them. This would mean that, if at all, they were acting
as agents of Tour Services, Inc. and not as principal
obligors.
ISSUE/S:
WON TWA SALES IS AN AGENT OF THE
PASSENGERS
RULING/S:
No. Without arriving at any factual conclusion, the
Court believes it would be useful to make a careful
appraisal of the evidence, particularly the terms and
conditions of the brochure distributed by the
petitioners and the significance of the Miscellaneous
Charges Order which was issued by TWA. We note
that even the trial court observed the active
participation of TWA in the promotion of the travel
pass plan as an additional source of revenue for its
airline business.
It is also worth noting that if the petitioners were
indeed acting as agents of the passengers, as the
brochure stipulates, they could still be held liable
under Article 1909 of the Civil Code, which provides:
The agent is responsible not only for
fraud, but also for negligence, which
shall be judged with more or less rigor by
the courts, according to whether the
agency was or was not for a
compensation.
The private respondent is entitled to prove that the
petitioners did not provide adequately for the pre-paid
hotel accommodations of Alcuaz, who had to incur
additional expenses and was compelled to cut short
his business trip because of his depleted dollar
allocation. It was not established that the petitioners
received any confirmation of the hotel reservations
they sent and yet they did not follow up their request
nor did they inform Alcuaz that they had not received
confirmation. This procedure should have been
followed by the petitioners as so provided in the
Travel Pass '73 USA.
Hence, even granting that they are mere agents of the
passengers, they are still liable under Article 1919.
Q: Was there a cause of action against Travel Wide?
A: According to them, there was no cause of action
against them because they were merely acting as
agents for the passengers.
Q: What did the SC say?
A: The SC said that if the petitioners were indeed
acting as agents of the passengers, as the brochure
stipulates, they could still be held liable under Article
1909 of the Civil Code. Even if Travel Wide was
merely an agent, it actively participated in the
promotion of the travel pass plan as an additional
source of revenue for its airline business.
METROPOLITAN BANK & TRUST
COMPANY, petitioner, vs.COURT OF APPEALS,
GOLDEN SAVINGS & LOAN ASSOCIATION,
INC., LUCIA CASTILLO, MAGNO CASTILLO
and GLORIA CASTILLO, respondents.
(Digest by: Queene Resurreccion)
FACTS:
In January 1979, a certain Eduardo Gomez opened an
account with Golden Savings and deposited over a
period of two months 38 treasury warrants with a total
value of P1,755,228.37. They were all drawn by the
Philippine Fish Marketing Authority and purportedly
signed by its General Manager and countersigned by
its Auditor. Six of these were directly payable to
Gomez while the others appeared to have been
indorsed by their respective payees, followed by
Gomez as second indorser.
On various dates between June 25 and July 16, 1979,
all these warrants were subsequently indorsed by
Gloria Castillo as Cashier of Golden Savings and
deposited to its Savings Account No. 2498 in the
Metrobank branch in Calapan, Mindoro. They were
then sent for clearing by the branch office to the
principal office of Metrobank, which forwarded them
to the Bureau of Treasury for special clearing.
More than two weeks after the deposits, Gloria
Castillo went to the Calapan branch several times to
ask whether the warrants had been cleared. She was
told to wait. Accordingly, Gomez was meanwhile not
allowed to withdraw from his account. The first
withdrawal was made on July 9, 1979, in the amount
of P508,000.00, the second on July 13, 1979, in the
amount of P310,000.00, and the third on July 16,
1979, in the amount of P150,000.00. The total
withdrawal was P968.000.00.
In turn, Golden Savings subsequently allowed Gomez
to make withdrawals from his own account,
eventually collecting the total amount of
P1,167,500.00 from the proceeds of the apparently
cleared warrants. The last withdrawal was made on
July 16, 1979.]
On July 21, 1979, Metrobank informed Golden
Savings that 32 of the warrants had been dishonored
by the Bureau of Treasury on July 19, 1979, and
demanded the refund by Golden Savings of the
amount it had previously withdrawn, to make up the
deficit in its account.
Hence this case.
ISSUE/S: 1.WON golden savings is liable to refund
the amounts to Metrobank
2. WON Metrobank is a mere
collecting agent of Golden Savings
RULING/S:
1. No. From the facts above, Metrobank was indeed
negligent in giving Golden Savings the impression
that the treasury warrants had been cleared and that,
consequently, it was safe to allow Gomez to withdraw
the proceeds thereof from his account with it. Without
such assurance, Golden Savings would not have
allowed the withdrawals; with such assurance, there
was no reason not to allow the withdrawal. Golden
Savings had no clearing facilities of its own. It relied
on Metrobank to determine the validity of the
warrants through its own services.
2. No.
The conditions read as follows:
Kindly note that in receiving items on
deposit, the bank obligates itself only as
the depositor's collecting agent,
assuming no responsibility beyond care
in selecting correspondents, and until
such time as actual payment shall have
come into possession of this bank, the
right is reserved to charge back to the
depositor's account any amount
previously credited, whether or not such
item is returned. This also applies to
checks drawn on local banks and bankers
and their branches as well as on this
bank, which are unpaid due
to insufficiency of funds, forgery,
unauthorized overdraft or any other
reason. (Emphasis supplied.)
In stressing that it was acting only as a collecting
agent for Golden Savings, Metrobank seems to be
suggesting that as a mere agent it cannot be liable
to the principal. This is not exactly true. On the
contrary, Article 1909 of the Civil Code clearly
provides that —
Art. 1909. — The agent is responsible
not only for fraud, but also for
negligence, which shall be judged 'with
more or less rigor by the courts,
according to whether the agency was or
was not for a compensation.
The negligence of Metrobank has been sufficiently
established. To repeat for emphasis, it was the
clearance given by it that assured Golden Savings it
was already safe to allow Gomez to withdraw the
proceeds of the treasury warrants he had deposited
Metrobank misled Golden Savings. There may have
been no express clearance, as Metrobank insists
(although this is refuted by Golden Savings) but in
any case that clearance could be implied from its
allowing Golden Savings to withdraw from its
account not only once or even twice but three times.
The total withdrawal was in excess of its original
balance before the treasury warrants were deposited,
which only added to its belief that the treasury
warrants had indeed been cleared.
The belated notification aggravated the petitioner's
earlier negligence in giving express or at least implied
clearance to the treasury warrants and allowing
payments therefrom to Golden Savings. But that is not
all. On top of this, the supposed reason for the
dishonor, to wit, the forgery of the signatures of the
general manager and the auditor of the drawer
corporation, has not been established.
Q: Why did Metrobank contend that it was merely an
agent?
A: In stressing that it was acting only as a collecting
agent for Golden Savings, Metrobank seems to be
suggesting that as a mere agent it cannot be liable to
the principal.
Q: What did the SC say?
A: The SC cited Article 1909 of the Civil Code. The
negligence of Metrobank has been sufficiently
established in this case.
17
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
October 21, 2017 (First Half)
Transcriber: Miles Buhay
CHAPTER 3
OBLIGATIONS OF THE PRINCIPAL
Art. 1910. The principal must comply with all the
obligations which the agent may have contracted
within the scope of his authority.
As for any obligation wherein the agent has exceeded
his power, the principal is not bound except when he
ratifies it expressly or tacitly.
So what you have to remember here is that whatever
the agent has been authorized to do, as long as it is
within the scope of his authority or as long as it is
authorized by the principal, it is binding upon the
principal. Conversely, the principal is NOT bound if
the agent acted without or outside the scope of his
authority.
Q: So what is the contract if the agent acts outside of
his authority?
A: Unenforceable.
So when a contract is unenforceable, the principal is
not bound by such contract unless he ratifies it
expressly or impliedly.
So where can the specific obligations and duties of the
principal to the agent be found? Usually in the
contract creating the agency. In the absence of such
agreement, that is when you go over your Civil Code.
So what are these obligations?
1. To comply with all the obligations which the agent
may have contracted within the scope of his authority;
2. To advance to the agent, should the latter so
request, the sums necessary for the execution of the
agency;
3. To reimburse the agent for all the advances made
by him, provided the agent is free from fault;
4. To indemnify the agent for all the damages which
the execution of the agency may have caused the latter
without fault or negligence on his part; and
5. To pay the agent the compensation agreed upon or
the reasonable value of the agent’s services.
When the agent mismanages the business of the
principal, the principal is liable.
Ex. Principal: Agent, bayaran mo yung utang ko kay
Judy Ann. Eto ang P5,000. Ibigay mon a kasi ayaw ko
nang may utang.
So binayaran ni agent yung utang ko. Ako yung
principal. Kaso yung binayad niya P3,000 lang; ‘yung
P2,000 binulsa niya kasi ipinambili niya ng makeup.
So ngayon, may utang ka pang P2,000 na naiwan kay
Judy Ann.
Si Judy Ann, medyo engot pud [harsh], nagfile siya
ng small claims for the P2,000.
Q: So is the principal liable?
A: Yes, the principal is liable because the principal is
not excused when the agent mismanages his business.
You have to remember the principle enunciated by the
Supreme Court in the case of Cuison v. CA (G.R. No.
88539 October 26, 1993). The SC said that as
between two innocent parties, the one who made it
possible for the wrong to be done should be the one
to bear the resulting loss.
So as between two persons, in my example they are
the principal and Juday Ann (the third person), who
made it possible for the wrong to occur? The
principal.
Q: Is the principal liable for a tort committed by the
agent?
A: Yes. The principal is liable to third persons for the
torts which the agent committed at the principal’s
direction or enforced within the agent’s authority.
Ex. The security guard (agent) of the principal in one
of the latter’s stores shot Judy Ann because he
suspected her to have stolen something from the store
and place it in her pocket. It turns out na nangatol ra
diay si Juday. So wala siya nangawat.
Q: Is the principal liable for the agent’s katangahan?
A: Yes. Binaril ng guard si Juday in the course and
within the scope of his employment as security guard.
Another point to remember is that the principal cannot
escape liability whether the tort is committed willfully
or negligently so long as the tort is committed by
the agent while performing his duties in the
furtherance of the principal’s business.
Ex. A delivery boy inutusan mong magdeliver ng
Cheetos sa store ni Juday. Pero ayaw ni Juday
magbayad kay huyos daw. But since nakalabas lang
yung pera na pambayad sana, kinuha ni delivery boy.
Is the principal liable?
Yes. He acted in furtherance of the principal’s
business.
Q: What is the meaning of “ratification” in the second
paragraph [of 1910]?
A: It is the adoption or affirmance by a person of a
prior act which did not bind him, but which was done
or professed to be done on his account thus giving
effect to the acts as if originally authorized.
The doctrine specifically applies to the ratification of
the act of an agent in excess of his authority. So
ratification is done by the principal whether expressly
or impliedly but the principal accepts the benefits of
the agency.
Ex. The principal instructed the agent to sell the
principal’s lot only to his mayaman friends. But the
agent disobeyed this instruction and sold it doon sa
insolvent pa. So if the principal accepts the
promissory notes and when the debt falls due, pag-
encash niya sa check at ginamit niya yung pera, there
is implied ratification.
You have to note also that the ratification __ the
contract from all its effects from the moment it was
constituted; in effect, ratification is retroactive.
So what are the conditions for ratification? ICPEC
1. There must be intent to ratify on the part of the
principal;
2. The principal must have capacity and power to
ratify;
So insane persons and persons under
civil interdiction cannot ratify. The latter
is prohibited from disposing his property
inter vivos.
3. He must have knowledge or had reason to know of
material facts about the transaction;
Ex. My agent is in possession of my
iPad. He sold it to Juday who paid in
check. Ako naman (principal), tinanggap
ko at pinaencash yung check kasi akala
ko bayad yun sa akin ni agent kasi may
utang rin siya sa akin. So in this case,
was there ratification? Wala, because I
had no knowledge of the material facts
involved in the sale of my iPad.
4. The act must be done in behalf of the principal;
Ex. Agent enters into a contract with
Juday without disclosing the fact na
agent siya ni principal. He is not
authorized to enter into such contract. So
in that case the principal cannot ratify
because the agent entered into the
contract in his personal capacity.
5. The principal must ratify the act of the agent in its
entirety; and
The principal cannot accept the benefits
of the transaction and refuse to accept the
obligation.
Ex. Same sa example ko kanina. Yung
agent, binigay niya yung check sa akin.
Sabi niya, ay binenta ko pala yung iPad
mo kasi di mo na kailangan kasi abogada
ka na [haha]. Pero tinanggap ko yung
bayad. So there is ratification of the sale
in its entirety and also because there is
ratification of the sale, I am also liable
with the warranties that goes with the
selling of the iPad. So we have
warranties against hidden defects.
6. The act must be capable of ratification.
Example of acts that are NOT capable of
ratification:
a. Those acts which are
absolutely void;
b. Unauthorized contracts
revoked by third person
before ratification by the
principal
Q: What is the effect of ratification with respect to the
agent?
- It relieves the agent from liability to the
third party to the unauthorized
transaction.
- It relieves the agent from liability to his
principal for acting without authority.
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
- The agent may recover compensation due
for performing the act which has been
ratified.
Q: What is the effect of ratification with respect to the
principal?
- He assumes responsibility for the
unauthorized act because he ratified it.
- He is NOT liable for acts outside the
authority approved by his ratification.
Q: What is the effect of ratification with respect to the
third person?
- He is bound by a ratification to the same
extent as he would have been bound if
the ratified act had been authorized in the
first instance.
- He cannot raise the question of the
agent’s authority to do the ratified act.
Where the third person is liable to a principal
under an unauthorized act of his agent, di
pwedeng sabihin ng third person na, ay wala
mang authority si agent. (De Leon: Where the
third person is liable to a principal under an
unauthorized act of his agent, the third person
may not be relieved of his liability on the
theory that the principal ratified the agent’s acts
merely because the principal made an
unsuccessful effort to collect from the agent.
Art. 1911. Even when the agent has exceeded his
authority, the principal is solidarily liable with the
agent if the former allowed the latter to act as though
he had full powers.
So the agent’s act arising in this provision is known as
apparent authority. In this case estoppel operates
because there is an authorization from the part of the
principal that the agent is in fact coated with the full
authority.
Q: So what is the effect if the agent exceeded his
authority?
A: The principal is not bound and the contract is
unenforceable unless the principal ratifies it impliedly
or expressly.
However, the principal is bound when knowing the
act is beyond the agent’s powers, he held out the agent
to act as if he is in full powers.
Q: So what is the meaning of “estoppel”?
A: It is a bar which precludes a person from denying
or asserting anything contrary to that which has been
established as the truth by his own deed or
representation either express or implied.
Let us distinguish apparent authority from
authority by estoppel.
Apparent Authority Authority by Estoppel
That which though not Arises in those cases
actually granted, the where the principal, by
principal knowingly or his negligence, permits
consciously permits the his agent to exercise
agent to exercise or powers not granted to
holds him out as him [even though the
possessing principal may have no
notice or knowledge of
the conduct of the agent.
~De Leon]
Ex. Principal authorizes A (Agent) to sell the
principal’s iPad to Juday, the purchase price payable
to the principal in 12 monthly installments.
Principal: A, ikaw na lang yung magcollect tapos
itago mo lang yung pera kasi marami tayo niyan.
So here, A has apparent authority kasi the principal
knowingly permits A to collect even when the original
authority was only to sell the iPad.
But if A collects from Juday without informing the
principal, but under such circumstances he permits
such collection, example: Hala, 11th month na, di pa
rin nagbayad si Juday.
So here, there is authority by estoppel because I
negligently permitted A to collect from Juday kasi 11
months na doon pa ako nagcollect. Dapat nung 3 rd
month pa lang.
In the case of Manila Remnant v. CA (G.R. No.
82978. November 22, 1990), the SC said that Article
1911 is intended to protect the rights of innocent
third persons. In such a situation, both the
principal and the agent may be considered as joint
tortfeasors whose liability is joint and solidary.
Art. 1912. The principal must advance to the agent,
should the latter so request, the sums necessary for the
execution of the agency.
Should the agent have advanced them, the principal
must reimburse him therefor, even if the business or
undertaking was not successful, provided the agent is
free from all fault.
The reimbursement shall include interest on the sums
advanced, from the day on which the advance was
made.
The principles to remember here:
- The agent has a right to reimbursement.
His right to be reimbursed does not
depend on the success of the transaction
unless he is a broker.
- Reimbursement also includes interest and
the sums advanced. The legal interest
prevailing now is 6%.
Q: Should the principal reimburse the agent for the
advances made by the latter even when the agency
was unsuccessful?
A: It depends. Yes, if the agent is free from fault. No,
if the agent was with fault.
Q: Is the broker always entitled to a commission?
A: A broker is entitled to commission if the sale is
effected. If the sale is not effected, then the broker is
not entitled.
Art. 1913. The principal must also indemnify the
agent for all the damages which the execution of the
agency may have caused the latter, without fault or
negligence on his part.
The basis of this rule is equity since the principal
receives benefits from the agency, then he should
answer for the damages which the agent might have
incurred.
Art. 1914. The agent may retain in pledge the things
which are the object of the agency until the principal
effects the reimbursement and pays the indemnity set
forth in the two preceding articles.
This provision provides for the pledge created by law.
Q: What is the nature of the agent’s right to lien under
this provision?
1. The right is limited only to the subject matter of the
agency.
2. The right requires possession, whether actual or
constructive, by the agent of the subject matter of the
agency.
3. The right is generally only in favor of the agent.
Art. 1915. If two or more persons have appointed an
agent for a common transaction or undertaking, they
shall be solidarily liable to the agent for all the
consequences of the agency.
Requisites for the application of the article:
1. There are two (2) or more principals;
2. The principals have all concurred in
the appointment of the same agent; and
3. There is a common transaction or
undertaking.
Q: Why is the rule solidary?
A: Because of the common transaction.
Art. 1916. When two persons contract with regard to
the same thing, one of them with the agent and the
other with the principal, and the two contracts are
incompatible with each other, that of prior date shall
be preferred, without prejudice to the provisions of
Article 1544.
The rule here is that the contract of prior date shall
prevail and the rule on double sales is applicable when
the provisions on double sale shall apply.
Remember your provisions on double sales?
If the sale involves immovable property, it is the
buyer who first registered the same shall prevail. And
if it is a movable property, it is the one who first took
possession of the same.
Art. 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred
to the person who may have first taken possession
thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good
faith. (1473)
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
Ex. #1. I (principal) authorized A to contract for the
repair of my iPad. Without A’s knowledge, I
contracted with Juday for the repair of my iPad. Sabi
ko kay Juday siya na lang magrepair kasi friend ko
siya. The next day, si A pinarepair niya kay Ryan.
So under Art.1516, my contract with Juday is
preferred because it is on a prior date.
#2. I authorized A to sell my property in Woodridge.
Without A’s knowledge, I sold it to Juday who did not
register it in good faith. Later, A sold the property to
Ryan who, in good faith, registered the same.
Here, the rule on double sales applies. The subsequent
sale shall prevail not the one with the prior date.
Art. 1917. In the case referred to in the preceding
article, if the agent has acted in good faith, the
principal shall be liable in damages to the third person
whose contract must be rejected. If the agent acted in
bad faith, he alone shall be responsible.
Whether the principal or the agent will be the one
liable for damages to the third person who has been
prejudiced depends on whether the agent acted in bad
faith or in good faith.
If the agent acted in good faith, and within the scope
of his authority, then the principal is liable.
Meaning of good faith: hindi niya alam
na nagdeal ako with a third person.
If the agent acted in bad faith, he alone shall be
responsible to such third person. Alam niya na he is
personally liable.
I am going back to the previous example (#1 above).
Since I (principal) contracted with Juday before the
agent transacted with Ryan, Ryan’s contract has been
rejected.
Now, my contract will prevail because it is on a prior
date. For liability for damages, however, we have to
note if the agent contracted with Ryan in good faith or
in bad faith.
If he contracted with Ryan knowing that
I have previously contracted with Juday,
the agent is in bad faith and will be
personally liable to Ryan.
If he contracted with Ryan in good faith,
then I (principal) will be liable to Ryan
for damages.
Art. 1918. The principal is not liable for the expenses
incurred by the agent in the following cases:
(1) If the agent acted in contravention of the
principal's instructions, unless the latter should wish
to avail himself of the benefits derived from the
contract;
(2) When the expenses were due to the fault of the
agent;
(3) When the agent incurred them with knowledge
that an unfavorable result would ensue, if the principal
was not aware thereof;
(4) When it was stipulated that the expenses would be
borne by the agent, or that the latter would be allowed
only a certain sum.
The mnemonics here is F.U.C.S.
(1) If the agent acted in contravention of the
principal's instructions, unless the latter should
wish to avail himself of the benefits derived from
the contract;
This is to punish the agent. But when the
principal has availed of the benefits then
there is an implied ratification.
(2) When the expenses were due to the fault of the
agent;
So hindi liable si principal kasi kasalanan
ni agent.
(3) When the agent incurred them with knowledge
that an unfavorable result would ensue, if the
principal was not aware thereof;
The agent here is guilty of bad faith so he
is personally liable.
(4) When it was stipulated that the expenses would
be borne by the agent, or that the latter would be
allowed only a certain sum.
We know that when the stipulation is not
contrary to law, good morals, public order or public
policy, it is binding between the parties.
CHAPTER 4
MODES OF EXTINGUISHMENT OF AGENCY
Remember that an agency, like love, does not last
forever.
Mnemonics: W.R.D.E.A.D.
Art. 1919. Agency is extinguished: If it is the agent who renounces the agency, it is called
(1) By its revocation; a withdrawal. If it is the principal, it is called
(2) By the withdrawal of the agent; revocation.
(3) By the death, civil interdiction, insanity or
insolvency of the principal or of the agent; The principal’s ability or power to terminate the
(4) By the dissolution of the firm or corporation which agency is an exception to the general rule that the
entrusted or accepted the agency; validity or compliance of a contract cannot be left to
(5) By the accomplishment of the object or purpose of the will of one of the parties under Article 1308 of the
the agency;
Civil Code. To be effective is must not be done in bad
(6) By the expiration of the period for which the
faith.
agency was constituted.
Withdrawal of the agent
Under the law, we have this presumption of
This is done by giving due
continuance of agency. When agency is shown to
notice to the principal under Article
have once existed, an agency relation will be
1922. And although the agent withdrawal
presumed to have continued, in the absence of
is provided the agent continues to act
anything to show its extinguishment.
until the principal has the opportunity to
take the necessary measures for the
Q: Who has the burden of proving that the agency has
situation. (Guys, I’m not sure if this
been extinguished?
paragraph makes sense. Pero lisod jud
kaayo idecipher ang gina-ingon ni
A: The person asserting that it has been extinguished.
ma’am. Sorry.)
Note also that even if the reason for the
Death of the principal or the agent
extinguishment of the agency is not proved, the agent
cannot insist on reinstatement. The agent can only
You have to take note of the
claim damages against the principal.
three (3) essential characteristics of the
Q: What are the modes of extinguishing an agency? parties for the continuance of the agency:
P.S.C.
Generally:
1. Presence
1. by agreement (Nos. 5,6); or
2. Solvency
2. by the subsequent acts of the parties
3. Capacity
which may either be:
Kung wala yan, ma-extinguish yung
a. by the act of both parties
or by mutual consent; or agency.
GR: Death of either of the parties extinguishes the
b. by the unilateral act of
agency by operation of law. What is absent in the
one of them (Nos. 1,2); or
death of a party? Presence.
Such as when the agent dies
Except: Under Article 1930; if the agency is coupled
or the principal dies or by
with interest. It will not result to the extinguishment
the revocation (unilateral act
of the agency upon the death of any of the parties.
of principal) or withdrawal
(unilateral act of agent).
Art. 1931. Anything done by the agent, without
knowledge of the death of the principal or of any
3. by operation of law. (Nos. 3,4)
other cause which extinguishes the agency, is valid
and shall be fully effective with respect to third
When there is death of a
persons who may have contracted with him in good
natural person or the
faith.
dissolution of a corporation.
We will discuss more of this later.
Let’s go to revocation.
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
However, in the case when you have several
principals or several agents, the death of one of the
agents or of one of the principals will not
automatically extinguish the agency. It depends on the
intention of the parties.
Ex. Attorney-client relationship.
Agent – Attorney
Principal – Client
When the principal dies, the
lawyer can no longer represent the client.
Insanity/Incapacity/Civil Interdiction
It is a mode of extinguishing
agency because here there is loss of
capacity (P.C.S.).
In cases of civil interdiction,
if the term is still rendered during the
effectivity of his sentence, the right to
manage his property and to dispose of
such property by an act inter vivos. As a
result, the principal loses control of the
subject matter of the agency and the
authority of the agent to act for his
principal stops by operation of law __.
Dissolution of a Corporation
What is lacking here?
Dissolution is like the death of a natural
person. So what is lacking is presence.
Accomplishment of the purpose of the agency
The fulfillment of the
purpose for which the agency was
created ipso facto terminates the agency.
Ex. The purpose of the
agency is to sell my iPad. If the iPad is
already been sold, then the agency is
terminated kasi wala na yung ibebenta.
Yung purpose ng agency na ibenta yung
iPad mo, na-fulfill na.
What if the agency is
subject to a term? Well, if the agency is
created for a fixed period, the expiration
of such period terminates the agency
even though the purpose for which the
agency has been created has not been
accomplished.
Ex. Agency to sell my iPad
on or before October 31, 2017. So
pagdating ng October 31, 2017, hindi pa
rin nabenta yung iPad ko. Diba ang
purpose nung agency is ibenta yung iPad.
Tapos ngayon hindi pa nabenta pero
yung agency is subject to a term, then the
agency is still extinguished kahit hindi
na-serve yung purpose ng agency.
Q: What happens if no time is specified?
A: The agency terminates at the end of a reasonable
period of time.
Loss or destruction of the subject matter of the
agency
Q: What happens if the subject matter of the agency is
lost or destroyed?
A: It terminates the agent’s authority to deal with
reference to it.
Exceptions:
1. If it is possible of substitution;
2. If the destroyed subject matter was not
essential to the contract; and
3. In case of a partial loss.
Ex. Juday wants to sell her 3 iPads, because she
doesn’t need them anymore, since she has 3
iMacs. Then nawala yung isang iPad. In this
case, there is only partial loss. Yung agency
magcontinue pa rin with respect to the 2 iPads.
Q: Are the modes of extinguishment of agency
exclusive?
A: No. Article 1919 gives only those causes of
extinguishment particular to agency. This is not
exclusive. The general rule actually is that an agency
may be extinguished by modes of extinguishment like
novation, or loss of the thing and also during
existence of war, the agency is ineffective if the agent
is a citizen of the enemy state. And also when the
agency becomes unlawful.
Ex. Attorney-client relationship. I was engaged
by my client to represent him in an estafa case.
Now, during the course of the proceedings, I
was appointed as RTC judge. So in that case
there is a legal impossibility to perform the
agency. So the agency is extinguished in that
case.
The occurrence of a specified event
I authorize you as my agent to manage
my convenience store while I am on vacation
(parang si Atty. Ong. Haha). My return from
vacation will terminate the agency.
Art.1920. The principal may revoke the agency at
will, and compel the agent to return the document
evidencing the agency. Such revocation may be
express or implied.
GR: The agency may be revoked by will because it is
based on trust and confidence.
The reason is that since the authority of the agent
emanates from the principal, and if the principal
wishes to revoke the agency, then he may do so.
Confidence also, being a cardinal basis of the relation,
stands to reason that it should cease when no such
confidence exists.
The principal-agent relationship is also personal and
consensual in nature. In fact, kung yung agent ayaw
na niyang maging agent sa iyo, the principal cannot
sue him for specific performance because it will
amount to involuntary servitude.
Exceptions:
1. The agency cannot be terminated at will
if the agency is coupled with an interest;
2. When the revocation is done in bad faith;
3. When there is waiver made by the
principal of his right to revoke;
4. Under Article 1927: when a bilateral
contract depends on the agency;
5. When it is a means of fulfilling an
obligation;
6. When a partner’s appointed manager in a
contract of partnership and his removal
from the partnership is unjustifiable.
Q: What is the reason for requiring that an agent must
return the document evidencing the agency?
A: Para hindi niya na magamit, siyempre; to prevent
the agent from making use of the power of attorney
and to protect innocent third persons.
What are the kinds of revocation?
1. Express
2. Implied
When the principal appoints a new agent for the same
business or transaction or the principal directly
manages the business entrusted to the agent.
Q: Is notice to the agent of the revocation necessary?
A: Yes. The revocation without notice to the agent
will not render the invalid the act done pursuant to the
authority as long as the agent acted in good faith.
Q: Is notice to third persons of the revocation
necessary?
A: As to former customers, actual notice must be
given to them because they always assume the
continuance of agency relationship. As to other third
persons, notice by publication is enough.
Q: May the agent renounce the agency again?
A: Yes because you cannot compel him (Involuntary
servitude). Kung ayaw niya, eh ‘di wag.
Hindi ko na i-discuss yung hindi naman lumalabas sa
Bar. Sayang lang ang time. 
Q: Do violations of the instructions of the principal
amount to renunciation?
A: No. The mere fact that the agent violates the
instructions of the principal does not amount to
renunciation.
Art. 1921. If the agency has been entrusted for the
purpose of contracting with specified persons, its
revocation shall not prejudice the latter if they were
not given notice thereof.
The reason for this is because third persons were
made to believe by the principal that the agent is
authorized to act. So if wala silang notice na yung
agent wala na palang authority, then pwede pa rin
silang makipag-contract sa agent. In that case, the
principal will still be bound.
Ex. Ako si principal. I authorized my agent to buy
Juday’s iPad. Notice of the such authorization was
given to Juday. Eto yun; 1921 ka if yung agency has
been entrusted for the purpose of contracting with
specified persons. Yung agent nag-contract with
Juday. After negotiations, I revoked the authority of
my agent without notifying Juday.
If later on, binili pa rin ng agent yung iPad, am I liable
to Juday for the purchase price? Yes. The agent here
contracted with a specific person (Juday). And in
order for the revocation to be valid, Juday should be
notified of such revocation.
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
Art. 1922. If the agent had general powers, revocation
of the agency does not prejudice third persons who
acted in good faith and without knowledge of the
revocation. Notice of the revocation in a newspaper of
general circulation is a sufficient warning to third
persons.
Ex. Owner ako ng small convenience store and
authorized A to be the general manager of the same.
Part of his duties is to receive payments from
customers in general. The agent is given general
powers.
Later, I revoked the authority of A to receive
payments and appointed Juday as cashier. Ngayon,
itong mga customers, nasanay na magbayad kay A. So
ang ginawa ni A, tumanggap lang siya ng mga bayad
at tinago niya yung pera sa akin. Pwede ba ako
maningil sa mga customers? Hindi, as long as the
customers acted in good faith and without knowledge
of the revocation.
Here, if the agency is revoked by the principal, and
the third person is not aware of the revocation, the
transaction concluded by the agent with the third
person shall be binding with the principal even if the
agent acted in bad faith.
What if yung revocation na-advertise sa newspaper of
general circulation? Pwede ako maningil? Paano kung
di niya (customer/third person) nabasa? Hindi
material whether or not the 3rd person read the
revocation in the newspaper.
Let us distinguish the notice required in Article 1921
from that of Article 1922.
1921 1922
The agent is authorized The agent is given
to deal with specified general powers.
persons.
Notice of revocation Notice here may not be
must be PERSONAL. personal.
Revocation must be Even if the 3rd person
known to the 3rd person. does not know, as long
as there is publication in
the newspaper of general
circulation.
Art. 1923. The appointment of a new agent for the
same business or transaction revokes the previous
agency from the day on which notice thereof was
given to the former agent, without prejudice to the
provisions of the two preceding articles.
Remember that notice here must be given to the 1 st
agent for the revocation to be valid. If walang notice
and the agent entered into a transaction with a 3rd
person, the principal is still liable.
If there is no notice given to the 1st agent, and he
continued the agency in good faith, the contract he
entered into is binding upon the principal.
The 2nd power of attorney revoking the 1st one
operates only after notice has been given to the 1 st
agent.
In order for 1920 to apply, also you have to remember
that the two (2) agencies must be incompatible with
each other. If they are compatible with each other,
then the 2 agencies may co-exist and there will only
be a revision of the agency.
Ex. I authorize A to sell my iPad (baboy na pud daw
ma’am). The next day, I gave the same authority to B.
So here, there is no implied revocation. There is no
incompatibility. Ang intention lang ng principal dito
is to authorize A and B to sell the baboy. So, unahan.
But if the principal gave B the exclusive authority to
sell the baboy, there is implied revocation because
now there is exclusive authority.
Notice of appointment in this case must be given to A,
the prior agent, in order to terminate his authority.
Art. 1924. The agency is revoked if the principal
directly manages the business entrusted to the agent,
dealing directly with third persons.
Generally, it revokes the agency because there will no
longer be any basis for the representation previously
conferred.
Exception: When the only desire of the principal is for
him and the agent to manage the business together.
Ex. P appoints A as manager of the convenience store.
Tapos wala lang, gusto lang ni principal magbenta
benta. His only desire is for him and the agent to
manage the convenience store together.
October 22, 2017 (Second Half)
Transcriber: Janice Molina
Article 1925. When two or more principals have
granted a power of attorney for a common transaction,
anyone of them may revoke the same without the
consent of the others.
The appointment of an agent by two or more
principals for a common transaction makes them
solidarily liable. In a solidary obligation, the act of
one is the act of all. So, any of the principals may
revoke the agency.
Article 1926. A general power of attorney is revoked
by a special one granted to other agent, as regards the
special matter involved in the latter.
So how many agents are involved in this article? Two,
there are two agents: one to whom a general power is
previously granted and the other, where the special
power of appointment is subsequently granted. So
what is the effect of the issuance of the special power
as regards to general power? The general power is
impliedly revoked as to matters covered by the special
power because the special power of attorney naturally
prevails over a general power.
Example:
P appoints A as general manager of his small
convenience store. The authority to manage the
business includes the authority to hire personnel kasi
small lang to, small convenience store so ikaw general
manager lahat na sayo, ikaw cashier, lahat. Ngayon
lumaki na yong convenience store ksi yon mayaman
na sya, gihire nya si Juday, granting her special power
to hire personnel. So,may special power si Juday to
hire personnel. Si A general power being the general
manager. So as to hiring of employees, the general
powers of A is revoked but only to that matter, sa
hiring lang ng employees. Sa other obligations nya as
agent like for example naging cashier sya or anoba
hindi yon revoke. As to other matters not covered by
special power, the general power granted to A remains
valid.
Article 1927. An agency cannot be revoked if a
bilateral contract depends upon it, or if it is the means
of fulfilling an obligation already contracted, or if a
partner is appointed manager of partnership in the
contract of partnership and his removal from the
management is unjustifiable.
The general rule is that the principal may revoke an
agency at will because the essence of agency is the
agent’s duty of obedience to the principal. The
exceptions:
1. If a bilateral contract depends on the
agency.
2. If the agency is the means of fulfilling an
obligation already contracted
3. If a partner is appointed manager of a
partnership in the contract of partnership
and his removal from the management is
unjustifiable.
So let’s discuss the first exception, when the bilateral
contract depends on the agency. This is what is known
as the agency coupled with an interest.
Example:
P sold his convenience store to Juday for 1Million.
Juday only paid 500thousand. So may balance pa na
500T. Ngayon yong parties nag stipulate na yong
ownership ng convenience store will be transferred to
Juday upon full payment of the purchase price. So
they agreed na itong si P, iyong seller, he will appoint
A to manage the convenience store in the meantime
and the profits of the convenience store will be
applied on the purchase price, iyong balance. So P
here cannot revoke the agency because the sale which
is a bilateral contract depends upon it. Gets nyo? Ulit
ha ulit 
Binenta ni P iyong convenience store niya kay Juday
for 1Million. So ang binayaran ni Juday 500T lang. It
was stipulated na iyong ownership ng convenience
store will be transferred only pag nabayaran na lahat.
So mayron 500T na balance si Juday. Ngayon nag
agree si Juday saka yong seller, yong principal na
e.appoint ni principal si A para e.manage nya yong
convenience store in the meantime na hindi pa
nabayaran iyong buo, iyong remaining 500T and then
iyong profits ng convenience store, yun ibabayad
paunti-unti dun sa 500T. So ngayon ang mangyayari
nito kasi yong sale bilateral contract and naka depend
sya dun sa agency hindi sya marerevoke, hindi sya
marerevoke at will ng principal kasi pag ni revoke mo
yun hindi na mababayan yong purchase price na
500T, so hindi maco.consumate yung sale. Hindi ma
ta-transfer yong ownership. Okay?
For an agency coupled with an interest to be
irrevocable the interest of the agent must be in the
subject matter of the power conferred and not merely
an interest in the exercise of the power.
Example:
P borrows from A 1Million and he mortgages his
convenience store to A as a security for the debt and
gives A the power to dispose of it if hindi sya
nakabayad ng utang nya. Si P nangutang kay A ng
1Million tapos sabi nya ito yong property ko sa
Tibungco, mortgage ko sayo tapos pde mo syang
e.dispose if hindi ako nakabayad ng utang ko. The
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
agency here is irrevocable because the interest of the
agent is in the subject matter of the power conferred.
What is the subject matter of the agency? Katong
property sa Tibungco. So hindi sya marevoke. Iba
naman if:
P appoints A to sell his iPad on commission. P gives
A power of attorney to secure his commission from
the proceeds of the sale. Itong ipad ko ibenta mo to
tapos yung commission mo kunin mo na sa bayad ng
kon sino man nakabili, sa purchase price. The agency
here is not coupled with an interest. It is revocable
because the interest of A is not in the subject matter of
the agency. What is the subject matter of the agency
here? Ipad, tapos yung kanyang interest nasa
commission lang. So agency here is revocable.
Number 2 exception, when the agency is a means of
fulfilling an obligation already contracted.
Example:
P is the owner of a condo for rent. P borrows 1Million
from Juday. As a security for the debt, P gives A a
power of attorney to collect rents due from the tenants
occupying the condo owned by P to apply the rents to
the utang of P to Juday. Gets? May-ari akong condo
ngayon nag borrow ako kay Juday tapos nag agree
kami na mag execute ako ng power of attorney in
favor of A, sabi ko kay A ikaw mag collect ng renta
ng condo, yung renta ibayad mo kay Juday kasi may
utang ako dun. Here P cannot revoke the contract
without justifiable cause because it is a means of
fulfilling a contract of obligation that is the debt of P
to Juday. So hindi nya pdeng e.revoke yung agency
kasi pag na revoke yung agency wala nang mag
collect ng pera sa condo at magbabayad kay Juday.
Number 3 exception, when a partner is appointed
manager of a partnership in the contract of partnership
and his removal from the management is unjustifiable.
A, B, and C are partners. They appointed A as
manager in the articles of partnership. The
appointment of A here cannot be revoke unless there
is just and lawful cause. Only upon the vote of
partners representing controlling interest, you know
that already.
If the contract of agency stipulates that the contract
will be irrevocable, is such terminology controlling?
Whether an interest which will make an agency
irrevocable exists in a particular case is to be
determined from the entire agreement between the
parties and from the facts and circumstances. The
terminology is not controlling.
So it is said that an “agency” coupled with an interest
is not a true agency. Why is that so? One of hallmarks
of an agency relation is the control of the principal
over the agent and if there is an agency coupled with
an interest the principal is now divested with that
power of control.
Article 1928. The agent may withdraw from
the agency by giving due notice to the
principal. If the latter should suffer any damage
by reason of the withdrawal, the agent must
indemnify him therefor, unless the agent should
base his withdrawal upon the impossibility of
continuing the performance of the agency
without grave detriment to himself.
So the agent has the right to renounce or withdraw at
any time just like the principal and the basis of this is
the constitutional prohibition against involuntary
servitude.
If the agent withdraws from the agency without just
cause, he should notify the principal and he should
indemnify the principal should the latter suffer any
damages by reason of such withdrawal. If the agent
withdraws for just cause, he cannot be held liable for
damages, if his withdrawal is based on the
impossibility of continuing with the agency without
grave detriment to himself or if by reason of fortuitous
event.
Article 1929. The agent, even if he should
withdraw from the agency for a valid reason,
must continue to act until the principal has had
reasonable opportunity to take the necessary
steps to meet the situation.
This is to prevent damage or prejudice to the
principal.
Article 1930. The agency shall remain in full
force and effect even after the death of the
principal, if it has been constituted in the
common interest of the latter and of the agent,
or in the interest of a third person who has
accepted the stipulation in his favor.
General rule, agency is terminated automatically upon
the death of the principal because, what is lacking?
PRESENCE. Exceptions:
1. If the agency has been constituted for the
common interest of the principal and of
the agent.
Example: A repaired the old iPad of P. P offers A to
sell his iPad for a certain amount and pay himself for
the services rendered out of the proceeds of the sale.
Before the iPad is sold, P dies. Now here the agency
to sell is not extinguished by the death of the principal
because it is for the common interest of the principal
and the agent. In this case, hindi sya ma-extinguished
because the agency to sell is constituted for the
common interest of the principal and the agent.
Kailangan mabenta nya ang iPad para mabayaran ang
services na ni.render nya.
2. If the agency has been constituted in the
interest of a third person who has
accepted the stipulation in his favor.
Example: P borrows from Juday 10T payable in 6
months. On the third month, P sold his iPad to A and
authorized A to pay P’s debt to Juday out of the iPad’s
purchase price. Juday accepts the agency of A. If P
dies on the fifth month, the agency is not extinguished
and Juday is still entitled to receive payment from A.
Generally, dapat marevoke na yong agency kasi
walanayong presence but dito the agency is not
extinguished and Juday is still entitled to receive
payment from A because the agency is for the interest
of Juday, the third person.
Article 1931. Anything done by the
agent, without knowledge of the death of
the principal or of any other cause which
extinguishes the agency, is valid and
shall be fully effective with respect to
third persons who may have contracted
with him in good faith.
This talks about the knowledge by the agent of the
fact of the death of the principal. If he executed the
act without knowledge then the act is valid, effective
and enforceable. The principal is bound. You have to
take note that both the agent and the third person must
be in good faith here. So, both of them must have no
knowledge of the death of the principal.
Article 1932. If the agent dies, his heirs
must notify the principal thereof, and in
the meantime adopt such measures as the
circumstances may demand in the
interest of the latter.
So if the agent dies, you have to remember that the
heirs of the agent have the duty to notify the principal.
But if the principal dies, the principal’s heirs do not
have such obligation. In case of death, the heirs must
first notify the principal to enable the latter reasonable
opportunity to take such steps as may be necessary to
meet the situation and adopt such measures as the
circumstances may demand in the interest of the
principal.
Can the heirs continue the agency? No, because an
agency calls for personal services on the part of the
agent except if the agency is created by operation of
law or if there is a presumed and tacit agency like in
this case, or when the agency is coupled with an
interest in the subject matter of the agency.
Estate of the Late Juliana DiezVda. De
Gabriel vs CIR (January 27, 2004)
(Digest by: Zarah Domingo)
(Note: This is a Tax 2 –related Case. The
Court held that the effect of improper
service of the demand letter and
assessment notice was that there was
never any valid notice of this assessment.
In effect, the notice could not have
become final and executory. Also, since
there was failure to make the assessment
within the 5 year period provided in
NIRC, CIR’s claim against the Estate is
barred. The issue on Agency is only
relevant because it was to Phitrust that
the assessment notice was served but
Philtrust is found to be not the agent of
the decedent. Since there was no proper
service, the assessment cannot bind the
Estate of the decedent.)
FACTS:
1.) During the lifetime of the
decedent, Juliana Vda. De Gabriel, her
business affairs were managed by the
Philippine Trust Company (Philtrust).
The decedent died on April 3, 1979. 2
days later, Philtrustfied her Income Tax
Return for 1978. The return did not
indicate that the decedent died.
2.) Philtrust filed a verified
petition for appointment as Special
Administrator but it was denied by the
probate court. The appointed
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
administrator was relieved, another one
was appointed, and was subsequently
replaced by another. In all these
instances, Philtrust was never appointed
administrator.
3.) The Bureau of Internal
Revenue conducted an administrative
investigation on the decedent’ s tax
liability and found a deficiency income
tax. BIR sent a demand letter and
assessment notice to Philtrust.
4.) CIR issued warrants of
distraint and levy to enforce collection of
the deficiency income tax liability which
were served upon the heir, Francisco
Gabriel.
5.) A protest was filed by the
Estate with the Litigation Division of the
BIR but was not acted upon because the
assessment notice had allegedly become
final, executor and inconstestable.
ISSUE:
What is the legal relationship between
Philtrust and the decedent, and, by
extension, between Philtrust and
petitioner Estate?
Upon the death of the Principal (the
decedent), there is no more agency.
Hence, the notice to Philtrust (former
agent of decedent) no longer binds the
Estate of the decedent.
(In case asked in class: Under this
primary issue is the sub-issue of WON
service of the demand letter and
assessment notice was valid service ; and
WON Philtrust’s inaction could bind the
Estate)
HELD:
The relationship between the decedent
and Philtrust was one of agency, which is
a personal relationship between agent
and principal.
Under Article 1919 (3) of the Civil Code,
death of the decedent automatically
severed the legal relationship between
her and Philtrust, and such could not be
revived by the mere fact that Philtrust
continued to act as her agent when it
filed the decedent’s income tax return
after her death.
Since the relationship between Philtrust
and the decedent was automatically
severed at the moment of the Taxpayer’s
death, none of Phitrust’s acts or
omissions could bind the estate of the
Taxpayer.
Consequently, the service on Philtrust of
the demand letter and assessment notice
was improperly done. (It must be noted
the Philtrust was never appointed as the
administrator of the Estate of the
decedent, and indeed, that the court a quo
twice rejected Phitrust’s motion to be
thus appointed. As of the date of the
demand letter and assessment notice, the
legal relationship between the decedent
and Philtrust had already been non-
existent for 3 years.
So who is the principal in this case? Vda de Gabriel
Agent? Philtrust
So we have here Article 1919 which provides that the
death of the principal automatically terminates the
agency since the relationship of Philtrust and the
decedent is automatically severed at the moment of
the taxpayer’s death. None of Philtrust acts or
omission could bind the estate of the taxpayer.
Manuela S. Catan/ M.S. Catan
Placement Agency vs NLRC, POEA
and Francisco D. Reyes (April 15,
1988)
(Digest by: Zarah Domingo)
FACTS:
1.) M.S. Catan Placement
Agency is a duly licensed recruitment
agency. It is an agent of Ali and Fahd
Shabokshi Group, a Saudi Arabian firm.
2.) M.S. Catan Placement
Agency recruited Francisco Reyes to
work in Saudi Arabia as a steelman.
3.) The term of the contract was
for one year, from May 15, 1981 to May
14, 1982. However, the contract provided
for its automatic renewal if neither of the
parties notifies the other party of his
wishes to terminate the contract by at
least 1 month prior to the expiration of
the contractual period.
4.) The contract was
automatically renewed when Reyes was
not repatriated by his Saudi employer but
instead was assigned to work as a crusher
plant operator.
5.) While he was working as a
crusher plant operator, his right ankle
was crushed under the machine he was
operating.
6.) After the expiration of the
renewed term, he returned to the
Philippines. His ankle was operated on
for which he incurred expenses.
7.) He again returned to Saudi.
He was repatriated and upon his return,
he had his ankle treated for which he
incurred further expenses.
8.) On the basis of the provision
in the employment contract that the
employer shall compensate the employee
if he is injured or permanently disabled
in the course of employment, Reyes filed
claim with POEA.
9.) POEA rendered judgment in
favor of Reyes. NLRC affirmed.
10.) The Placement Agency
instituted a special civil action for
certiorari. The Agency contended that it
was not liable for disability benefits since
at the time he was injured, his original
employment contract, which it facilitated,
has already expired and that its agency
agreement with the Saudi principal had
already expired when the injury was
sustained.
ISSUE:
(1)What is the liability of a private
employment agency when sued with its
foreign principal for violations of the
recruitment agreement and the contracts
of employment: JOINT AND
SOLIDARY
(2)Is a Placement Agency free from any
liability to a recruited employee if the
latter sustained an injury after the agency
agreement between the former and the
principal employer already expired: NO
(Note: The Court found that the contract
of employment cannot be said to have
expired when the injury was incurred
because the contract was automatically
renewed since no notice of its
termination was given by either or both
parties. Thus, the injury was sustained
during the lifetime of the contract.)
HELD:
(1) Section 10(a) (2) Rule V, Book I,
Rules to Implement the Labor Code
provides for the power of the agency to
sue and be sued jointly and solidarily
with the principal or foreign-based
employer for any of the violations of the
recruitment agreement and the contracts
of employment.
(2) Even if indeed the agency and the
Saudi principal had already severed their
agency agreement at the time Reyes was
injured, the Agency may still be sued for
a violation of the employment contract
because no notice of the agency
agreement’s termination was given to
Reyes.
Article 1921: If the agency has been
entrusted for the purpose of contracting
with specified persons, its revocation
shall not prejudice the latter if they were
not given notice thereof.
Albeit the Agency was at the time of the
accident resulting in his permanent
partial disability no longer the accredited
agent of its foreign principal, the
Agency’s responsibility over the proper
implementation of complainant’s
employment/service contract and the
welfare of complainant himself in the
foreign job site still existed, the contract
of employment in question not having
expired yet. This must be so, because the
obligations covenanted in the
recruitment agreement entered into by
and between the local agent and its
foreign principal are not coterminous
with the term of such agreement so that if
either or both of the parties decide to end
the agreement, the responsibilities of
such parties towards the contracted
employees under the agreement do not at
all end, but the same extend up to and
until the expiration of the employment
contracts of the employees recruited and
employed pursuant to the said
recruitment agreement. Otherwise, it will
render nugatory the very purpose for
24
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
which the law governing the employment
of workers for foreign jobs abroad was
enacted.
Adoracion Lustanvs CA, Nicolas
Parangan and Soledad Parangan, PNB
(January 27, 1997)
(Digest by: Zarah Domingo)
FACTS:
1.) Petitioner Adoracion Lustan
is the registered owner of a parcel of land
otherwise known as Lot 8069 of the
Cadastral Survey of Calinog, Iloilo
containing an area of 10.0057 hectares.
2.) Petitioner leased the
property to private respondent Nicolas
Parangan for a term of 10 years and an
annual rent of P1,000.00.
3.) During the period of lease,
Parangan was regularly extending loans
in small amounts to petitioner to defray
her daily expenses and to finance her
daughter's education
4.) Petitioner executed
Special Power of Attorney in favor of
Parangan to secure an agricultural loan
from private respondent Philippine
National Bank (PNB) with the aforesaid
lot as collateral
5.) A second Special Power of
Attorney was executed by petitioner, by
virtue of which, Parangan was able to
secure four (4) additional loans: The last
three loans were without the knowledge
of herein petitioner and all the proceeds
therefrom were used by Parangan for his
own benefit. These encumbrances were
duly annotated on the certificate of title.
6.) Petitioner signed a Deed of
Pacto de Retro Sale in favor of Parangan
which was superseded by the Deed of
Definite Sale which petitioner signed
upon Parangan's representation that the
same merely evidences the loans
extended by him unto the former.
7.) For fear that her property
might be prejudiced by the continued
borrowing of Parangan, petitioner
demanded the return of her certificate of
title.
8.) Instead of complying with
the request, Parangan asserted his rights
over the property which allegedly had
become his by virtue of the
aforementioned Deed of Definite Sale.
Under said document, petitioner
conveyed the subject property and all the
improvements thereon unto Parangan
absolutely for and in consideration of the
sum of P75,000.00.
9.) Petitioner filed an action for
cancellation of liens, quieting of title,
recovery of possession and damages
against Parangan and PNB
ISSUES:
(1) WON the Deed of Definite
Sale is in reality an equitable mortgage:
YES
(2) WON petitioner's property
is liable to PNB for the loans contracted
by Parangan by virtue of the special
power of attorney: YES
HELD:
(1) The Deed of Definite Sale is
in reality an equitable mortgage as it was
shown beyond doubt that the intention of
a the parties was one of a loan secured by
petitioner's land.
In the case at bench, the evidence is
sufficient to warrant a finding that
petitioner and Parangan merely intended
to consolidate the former's indebtedness
to the latter in a single instrument and to
secure the same with the subject
property. Even when a document appears
on its face to be a sale, the owner of the
property may prove that the contract is
really a loan with mortgage by raising as
an issue the fact that the document does
not express the true intent of the parties.
Petitioner had no knowledge that the
contract she signed is a deed of sale. The
contents of the same were not read nor
explained to her so that she may
intelligibly formulate in her mind the
consequences of her conduct and the
nature of the rights she was ceding in
favor of Parangan. Petitioner is illiterate
and her condition constrained her to
merely rely on Parangan's assurance that
the contract only evidences her
indebtedness to the latter.
(2) Third persons who are not parties to a
loan may secure the latter by pledging or
mortgaging their own property. So long
as valid consent was given, the fact that
the loans were solely for the benefit of
Parangan would not invalidate the
mortgage with respect to petitioner's
property. In consenting thereto, even
granting that petitioner may not be
assuming personal liability for the debt,
her property shall nevertheless secure
and respond for the performance of the
principal obligation. It is admitted that
petitioner is the owner of the parcel of
land mortgaged to PNB on five (5)
occasions by virtue of the Special Powers
of Attorney executed by petitioner in
favor of Parangan. Petitioner argues that
the last three mortgages were void for
lack of authority. She totally failed to
consider that said Special Powers of
Attorney are a continuing one and absent
a valid revocation duly furnished to the
mortgagee, the same continues to have
force and effect as against third persons
who had no knowledge of such lack of
authority. Article 1921 of the Civil Code
provides:
Art. 1921. If the agency has been
entrusted for the purpose of contracting
with specified persons, its revocation
shall not prejudice the latter if they were
not given notice thereof.
The Special Power of Attorney executed
by petitioner in favor of Parangan duly
authorized the latter to represent and act
on behalf of the former. Having done so,
petitioner clothed Parangan with
authority to deal with PNB on her behalf
and in the absence of any proof that the
bank had knowledge that the last three
loans were without the express authority
of petitioner, it cannot be prejudiced
thereby.
As far as third persons are concerned, an
act is deemed to have been performed
within the scope of the agent's authority
if such is within the terms of the power
of attorney as written even if the agent
has in fact exceeded the limits of his
authority according to the understanding
between the principal and the agent.
The Special Power of Attorney
particularly provides that the same is
good not only for the principal loan but
also for subsequent commercial,
industrial, agricultural loan or credit
accommodation that the attorney-in-fact
may obtain and until the power of
attorney is revoked in a public instrument
and a copy of which is furnished to PNB.
Even when the agent has exceeded his
authority, the principal is solidarily liable
with the agent if the former allowed the
latter to act as though he had full powers
(Article 1911, Civil Code).
The mortgage directly and immediately
subjects the property upon which it is
imposed. The property of third persons
which has been expressly mortgaged to
guarantee an obligation to which the said
persons are foreign, is directly and jointly
liable for the fulfillment thereof; it is
therefore subject to execution and sale
for the purpose of paying the amount of
the debt for which it is liable. However,
petitioner has an unquestionable right to
demand proportional indemnification
from Parangan with respect to the sum
paid to PNB from the proceeds of the
sale of her property in case the same is
sold to satisfy the unpaid debts.
Who is the principal here? Adoracion Lustan. Agent?
Parangan
Was there a valid revocation in this case? No, because
there was no notice.
ChoithramJethmalRamnani and/or
Nirmla V. Ramnani and Moti G.
Ramnanivs CA, Spouses
IshwarJethmalRamnani, Sonya
JethmalRamnani and Overseas
Holding Co., Ltd. (May 7, 1991)(Digest
by: Zarah Domingo)
(Note: This is a very long case. The
Court probed into factual circumstances
and even made its own interpretations of
facts and an analysis of their probability.
Nonetheless, it seems that the issue
relevant to our topic is the notice and
publication of revocation.)
FACTS:
1.) Ishwar,
Choithram and Navalrai, all surnamed
JethmalRamnani, are brothers of the full
blood. Ishwar and his spouse Sonya had
their main business based in New York.
25
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
2.) Realizing the difficulty of managing
their investments in the Philippines they
executed a general power of attorney on
January 24, 1966 appointing Navalrai
and Choithram as attorneys-in-fact,
empowering them to manage and
conduct their business concern in the
Philippines.
3.) In 1966, Choithram, in his capacity as
aforesaid attorney-in-fact of Ishwar,
entered into two agreements for the
purchase of two parcels of land located in
Barrio Ugong, Pasig, Rizal, from
Ortigas& Company, Ltd. Partnership.
4.) Choithram alleged that he paid the
downpayment and installments on the lot
with his personal checks. A building was
constructed thereon by Choithram in
1966 and this was occupied and rented
by Jethmal Industries and a wardrobe
shop called Eppie's Creation. Three other
buildings were built thereon by
Choithramallegedly through a loan of
P100,000.00 obtained from the
Merchants Bank as well as the income
derived from the first building. The
buildings were leased out by Choithram
as attorney-in-fact of Ishwar. Two of
these buildings were later burned.
5.) Sometime in 1970 Ishwar asked
Choithram to account for the income and
expenses relative to these properties
during the period 1967 to 1970.
Choithram failed and refused to render
such accounting. As a consequence, on
February 4, 1971, Ishwar revoked the
general power of attorney.
6.) Choithram and Ortigas were duly
notified of such revocation on April 1,
1971 and May 24, 1971, respectively.
Said notice was also registered with the
Securities and Exchange Commission on
March 29, 1971 and was published in the
April 2, 1971 issue of The Manila Times
for the information of the general public.
7.) Nevertheless, Choithram as such
attorney-in-fact of Ishwar, transferred all
rights and interests of Ishwar and Sonya
in favor of his daughter-in-law,
NirmlaRamnani, on February 19, 1973.
Her husband is Moti, son of Choithram.
Upon complete payment of the lots,
Ortigas executed the corresponding
deeds of sale in favor of Nirmla.
8.) Ishwar and Sonya (spouses Ishwar for
short) filed a complaint in the Court of
First Instance of Rizal against Choithram
and/or spouses Nirmla and Moti
(Choithram et al. for brevity) and Ortigas
for:
a.) reconveyance of said properties; or
b.) payment of its value and
damages.
9.) The trial court dismissed the case.
The appellate court promulgated an
amended decision granting the motion
for reconsideration of Ortigas by
affirming the dismissal of the case by the
lower court as against Ortigas but
denying the motion for reconsideration of
Choithram, et al.
ISSUES:
(1) WON Ishwar remitted the
amount of $150,000 to Choithram:
(Factual finding: YES)
(2) WON CA erred in holding
that at any rate no one ever testified that
Ortigas was a subscriber to the Manila
Times Publication or that any of its
officers read the notice as published in
the Manila Times, thereby erroneously
concluding that for Ortigas to be
constructively bound by the published
notice of revocation, Ortigas and/or any
of its officers must be a subscriber and/or
any of its officer should read the notice
as actually published: YES
HELD:The problem is compounded in
that respondent Ortigas is caught in the
web of this bitter fight. It had all the time
been dealing with Choithram as attorney-
in-fact of Ishwar. However, evidence had
been adduced that notice in writing had
been served not only on Choithram, but
also on Ortigas, of the revocation of
Choithram's power of attorney by
Ishwar's lawyer, on May 24, 1971. A
publication of said notice was made in
the April 2, 1971 issue of The Manila
Times for the information of the general
public. Such notice of revocation in a
newspaper of general circulation is
sufficient warning to third persons
including Ortigas. A notice of revocation
was also registered with the Securities
and Exchange Commission on March 29,
1971.
Indeed in the letter of Choithram to
Ishwar of June 25, 1971, Choithram was
pleading that Ishwar execute another
power of attorney to be shown to Ortigas
who apparently learned of the revocation
of Choithram's power of attorney.
Despite said notices, Ortigas nevertheless
acceded to the representation of
Choithram, as alleged attorney-in-fact of
Ishwar, to assign the rights of petitioner
Ishwar to Nirmla. While the primary
blame should be laid at the doorstep of
Choithram, Ortigas is not entirely
without fault. It should have required
Choithram to secure another power of
attorney from Ishwar. For recklessly
believing the pretension of Choithram
that his power of attorney was still good,
it must, therefore, share in the latter's
liability to Ishwar.
So what is the power granted to the agent here, is it
general or special? General
Who is the principal? Ishwar and his spouse
The Agents are? The two brothers
Central Surety and Insurance
Company vs C.N. Hodges and CA
(Digest by: Zarah Domingo)
FACTS:
1.) Prior to January 15, 1954,
lots Nos. 1226 and 1182 of the Cadastral
Survey of Talisay, Negros Occidental,
had been sold by C. N. Hodges to
Vicente M. Layson, for the sum of
P43,000.90, payable on installments.
2.) As of January 15, 1954, the
outstanding balance of Layson's debt,
after deducting the installments paid by
him prior thereto, amounted to
P15,516.00.
3.) In order that he could use
said lots as security for a loan he
intended to apply from a bank, Layson
persuaded Hodges to execute in his
(Layson's) favor a deed of absolute sale
over the properties, with the
understanding that he would put up a
surety bond to guarantee the payment of
said balance.
4.) Layson executed, in favor of
Hodges, a promissory note for
P15,516.00, with interest thereon at the
rate of 1% per month, and the sum of
P1,551.60, for attorney's fees and costs,
in case of default in the payment of the
principal or interest of said note.
5.) To guarantee the same, on
January 23, 1954, the Central Surety and
Insurance Company — hereinafter
referred to as petitioner — through the
manager of its branch office in Iloilo,
Mrs. Rosita Mesa, executed in favor of
Hodges the surety bond Annex B, which
was good for twelve (12) months from
the date thereof.
6.) When Layson defaulted in
the discharge of his aforesaid obligation,
Hodges demanded payment from the
petitioner, which, despite repeated
extensions of time granted thereto, at its
request, failed to honor its commitments
under the surety bond. On October 24,
1955, Hodges commenced, therefore. the
present action, in the Court of First
Instance of Iloilo, against Layson and
petitioner herein, to recover from them,
jointly and severally, the sums of
P17,826.08, representing the principal
and interest due up to said date, and
P1,551.60, as attorney's fees.
7.) In its answer, petitioner
disclaimed liability under the surety bond
in question, upon the ground (a) that the
same is null and void, it having been
issued by Mrs. Rosita Mesa after her
authority therefor had been withdrawn on
March 15, 1952; (b) that even under her
original authority Mrs. Mesa could not
issue surety bonds in excess of P8,000.00
without the approval of petitioner's main
office which was not given to the surety
bond in favor of Hodges; and (c) that the
present action is barred by the provision
in the surety bond to the effect that all
claims and actions thereon should be
filed within three (3) months from the
date of its expiration on January 23,
1955.
ISSUE:
WON CA erred in finding that petitioner
was liable on a bond issued by an agent
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
whose authority ... had already been
withdrawn and revoked: NO
HELD:
The assignment of error is predicated
upon the fact that prior to January 23,
1954, when the surety bond involved in
this case was executed, or on March 15,
1952, petitioner herein had withdrawn
the authority of its branch manager in the
City of Iloilo, Mrs. Rosita Mesa, to issue
surety bonds and that, accordingly, the
surety bond, is null and void.
Article 1922: If the agent had general
powers, revocation of the agency does
not prejudice third persons who acted in
good faith and without knowledge of the
revocation. Notice of the revocation in a
newspaper of general circulation is a
sufficient warning to third persons.
It is not disputed that petitioner has not
caused to be published any notice of the
revocation of Mrs. Mesa's authority to
issue surety bonds on its behalf,
notwithstanding the fact that the powers
of Mrs. Mesa, as its branch manager in
Iloilo, were of a general nature, for she
had exclusive authority, in the City of
Iloilo, to represent petitioner herein, not
with a particular person, but with the
public in general, "in all the negotiations,
transactions, and business in wherein the
Company may lawfully transact or
engage on subject only to the restrictions
specified in their agreement.”
Contrary to petitioner's claim, Article
1922 applies whenever an agent has
general powers, not merely when the
principal has published the same, apart
from the fact that the opening of
petitioner's branch office amounted to a
publication of the grant of powers to the
manager of said office. Then, again, by
honoring several surety bonds issued in
its behalf by Mrs. Mesa subsequently to
March 15, 1952, petitioner induced the
public to believe that she had authority to
issue such bonds. As a consequence,
petitioner is now estopped from pleading,
particularly against a regular customer
thereof, like Hodges, the absence of said
authority.
Note: As to other allegations of error (not
related to Topic, in case asked in class):
a.) The second assignment of error
assails the finding of the CA to the effect
that the petitioner is liable for the full
amount of surety bond — despite the fact
that it exceeded the sum of P8,000.00
and hence, required, for its validity and
binding effect as against petitioner
herein, the express approval and
confirmation of its Manila office, which
were not secured — in view of
petitioner's failure to deny under oath the
genuineness and due execution of said
bond.
We have however, held that: “... where a
case has been tried in complete disregard
of the rule and the plaintiff having
pleaded a document by copy, presents
oral evidence to prove the due execution
of the document as well as the agent's
authority and no objections are made to
the defendant's evidence in refutation, the
rule will be considered waived.”
In the case at bar, the parties acted in
complete disregard of or wholly
overlooked the rule above-quoted.
Hodges had neither objected to the
evidence introduced by petitioner herein
in order to prove that Mrs. Mesa had no
authority to issue a surety bond, much
less one in excess of P8,000.00, and took
no exception to the admission of said
evidence. Hence, Hodges must be
deemed to have waived the benefits of
said rule and petitioner herein cannot be
held liable in excess of the sum of
P8,000.00.
b.) Under the third assignment of error,
petitioner maintains that, having been
instituted on October 24, 1955 — or nine
(9) months after the expiration of
petitioner's surety bond on January 23,
1955 — the present action is barred by
the provision in said bond to the effect
that it:
...will not be liable for any claim not
discovered and presented to the
Company within three (3) months from
the expiration of this bond and that the
obligee hereby waives his right to file
any court action against the surety after
the termination of the period of three
months above-mentioned.
Court has, however, held (in an identical
case) "that the three-month period"
prescribed therein "established only a
condition precedent, — not a limitation
of action," and that, when a claim has
been presented within said period, the
action to enforce the claim may be "filed
within the statutory time of prescription."
SANCHEZ vs.MEDICARD
PHILIPPINES, INC.
G.R. No. 141525
September 2, 2005
(Digest by: Lizette Estillore)
FACTS:
MEDICARD Philippines, Inc.
(MEDICARD) appointed SANCHEZ as
its special corporate agent with a
commission based on the "cash brought
in” by the latter.
Through SANCHEZ’ efforts,
MEDICARD and United Laboratories
Group of Companies (UNILAB)
executed a Health Care Program Contract
where UNILAB shall pay MEDICARD a
fixed monthly premium for the health
insurance of its personnel. UNILAB paid
MEDICARD ₱4,148,005 as premium for
one (1) year. MEDICARD then handed
SANCHEZ 18% of said amount as
commission. The contract was
subsequently renewed incorporating an
increase. SANCHEZ was also paid his
commission.
Prior to the expiration of the renewed
contract, MEDICARD proposed to
UNILAB, through SANCHEZ, an
increase of the premium for the next
year. However, UNILAB rejected the
proposal "for the reason that it was too
high," prompting DR. MONTOYA
(MEDICARD’s president and general
manager) to request SANCHEZ to
reduce his commission, but the latter
refused.
At first UNILAB decided not to renew
the contract. It nonetheless negotiated
with DR. MONTOYA, through
EJERCITO, and entered into a new
scheme to continue the insurance
coverage of those personnel.
SANCHEZ demanded from
MEDICARD payment of ₱338,000 as his
commission plus damages. The latter
refused. This prompted SANCHEZ to
file a complaint for sum of money
against MEDICARD, DR. MONTOYA
and EJERCITO.
ISSUE:
WON THE CONTRACT OF AGENCY
HAS BEEN REVOKED BY
MEDICARD. Yes
WON SANCHEZ IS ENTITLED TO A
COMMISSION. No
HELD:
An agent receives his commission only
upon the successful conclusion of a sale.
Thus, it follows that where his efforts are
unsuccessful, or there was no effort on
his part, he is not entitled to a
commission.
However, for the purpose of equity, an
agent who is not the efficient procuring
cause is nonetheless entitled to his
commission, where said agent,
notwithstanding the expiration of his
authority, nonetheless, took diligent steps
to bring back together the parties, such
that a sale was finalized and
consummated between them. The
proximate, close, and causal connection
between the agent’s efforts and the
principal’s sale of his property cannot be
ignored.
In the case at bar, it was through
SANCHEZ that MEDICARD was able to
enter into a one-year Health Care
Program Contract with UNILAB. As a
result, MEDICARD paid him his
commission. Again, through his efforts,
the contract was renewed and once more,
he received his commission. Before the
expiration of the renewed contract,
MEDICARD, through SANCHEZ,
proposed an increase in premium, but
UNILAB rejected this proposal.
MEDICARD then requested SANCHEZ
to reduce his commission should the
contract be renewed on its third year, but
he was obstinate. Meantime, on October
3, 1990, UNILAB informed
MEDICARD it was no longer renewing
the Health Care Program contract.
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
In order not to prejudice its personnel,
UNILAB, through EJERCITO,
negotiated with respondent DR.
MONTOYA, in order to find mutually
beneficial ways of continuing the Health
Care Program. The negotiations resulted
in a new contract wherein UNILAB shall
pay MEDICARD the hospitalization
expenses actually incurred by each
employees, plus a service fee. Under the
"cost plus" system which replaced the
premium scheme, SANCHEZ was not
given a commission.
It is clear that since SANCHEZ refused
to reduce his commission, MEDICARD
directly negotiated with UNILAB, thus
revoking its agency contract with
SANCHEZ. We hold that such
revocation is authorized by Article 1924
of the Civil Code which provides:
Art. 1924. The agency is revoked if the
principal directly manages the business
entrusted to the agent, dealing directly
with third persons.
Moreover, SANCHEZ DID NOT
RENDER SERVICES TO MEDICARD,
HIS PRINCIPAL, TO ENTITLE HIM
TO A COMMISSION. There is no
indication from the records that he
exerted any effort in order that UNILAB
and MEDICARD, after the expiration of
the Health Care Program Contract, can
renew it for the third time. In fact, his
refusal to reduce his commission
constrained MEDICARD to negotiate
directly with UNILAB. We find no
reason in law or in equity to rule that he
is entitled to a commission. Obviously,
he was not the agent or the "procuring
cause" of the third Health Care Program
Contract between MEDICARD and
UNILAB.
The principal in this case is? Medicard
The agent is? Sanchez
CMS LOGGING vs. CA
G.R. No. L-41420
July 10, 1992
(Digest by: Lizette Estillore)
FACTS:
Through a contract of agency, CMS
(forest concessionaire engaged in the
logging business) appointed DRACOR
(engaged in the business of exporting and
selling logs and lumber) as its exclusive
export and sales agent for all logs that
CMS may produce, for a period of five
(5) years.
CMS was able to sell through DRACOR
a total of 77,264,672 board feet of logs in
Japan. About six months prior to the
expiration of the agreement, while on a
trip to Japan, Atty. Sison (CMS's
president), and Atty. Dominguez (general
manager and legal counsel), discovered
that DRACOR had used Shinko Trading
as agent, representative or liaison officer
in selling CMS's logs in Japan for which
Shinko earned a commission of U.S.
$1.00 per 1,000 board feet from the
buyer of the logs. Shinko was able to
collect a total of U.S. $77,264.67.
CMS claimed that this commission paid
to Shinko was in violation of the
agreement. and that the amount is part of
the proceeds of the sale of the logs. It
also contended that since DRACOR had
been paid the 5% commission under the
agreement, it is no longer entitled to the
additional commission paid to Shinko as
this tantamount to DRACOR receiving
double compensation for the services it
rendered.
After this discovery, CMS sold and
shipped logs valued at U.S. $739,321.13
or P2,883,351.90, directly to several
firms in Japan without the aid or
intervention of DRACOR.
CMS sued DRACOR for the commission
received by Shinko and for moral and
exemplary damages, while DRACOR
counterclaimed for its commission from
the sales made by CMS of logs to
Japanese firms. CMS averred as a
defense to the counterclaim that
DRACOR had retained the sum of
P101,167.59 as part of its commission
for the sales made by CMS. Thus, as its
counterclaim to DRACOR's
counterclaim, CMS demanded DRACOR
return the amount it unlawfully retained.
DRACOR later filed an amended
counterclaim, alleging that the balance of
its commission on the sales made by
CMS was P42,630.82, thus impliedly
admitting that it retained the amount
alleged by CMS.
ISSUE:
WON DRACOR IS ENTITLED TO ITS
5% COMMISSION ARISING FROM
THE DIRECT SALES MADE BY CMS
TO BUYERS IN JAPAN. No.
HELD:
***While it is true that the evidence
adduced establishes the fact that Shinko
is DRACOR's agent or liaison in Japan,
there is no evidence which established
the fact that Shinko did receive the
amount of U.S. $77,264.67 as
commission arising from the sale of
CMS's logs to various Japanese firms.
Also, the testimonies of the witnesses
presented constitute as hearsay for not
being presented in court for cross-
examination.
***The statements made in the
memorandum of Atty. Ciocon to
DRACOR dated, the letter of the
president of DRACOR, and the reply-
letter by DRACOR's counsel to CMS's
demand letter cannot be categorized as
admissions that Shinko did receive the
commissions in question. This is not
supported by evidence.
Even if it was shown that Shinko did in
fact receive the commissions in question,
CMS is not entitled thereto since these
were apparently paid by the buyers to
Shinko for arranging the sale. This is
therefore not part of the gross sales of
CMS's logs.
CMS: DRACOR is not entitled to its
commission from the sales made by
CMS to Japanese firms.
Meritorious. The principal may revoke a
contract of agency at will, and such
revocation may be express, or implied,
and may be availed of even if the period
fixed in the contract of agency as not yet
expired. As the principal has this
absolute right to revoke the agency, the
agent can not object thereto; neither may
he claim damages arising from such
revocation, unless it is shown that such
was done in order to evade the payment
of agent's commission.
In the case at bar, CMS appointed
DRACOR as its agent for the sale of its
logs to Japanese firms. Yet, during the
existence of the contract of agency,
DRACOR admitted that CMS sold its
logs directly to several Japanese firms.
This act constituted an implied
revocation of the contract of agency
under Article 1924 of the Civil Code,
which provides:
Art. 1924 The agency is revoked if the
principal directly manages the business
entrusted to the agent, dealing directly
with third persons.
Since the contract of agency was revoked
by CMS when it sold its logs to Japanese
firms without the intervention of
DRACOR, the latter is no longer entitled
to its commission from the proceeds of
such sale and is not entitled to retain
whatever moneys it may have received as
its commission for said transactions.
Neither would DRACOR be entitled to
collect damages from CMS, since
damages are generally not awarded to the
agent for the revocation of the agency,
and the case at bar is not one falling
under the exception mentioned, which is
to evade the payment of the agent's
commission.
CMS: DRACOR had committed acts of
fraud and bad faith.
Unmeritorious. Findings of the CA on
the matter were based on its appreciation
of the evidence, and these findings are
binding on this Court.
In fine, there is no evidence to support
CMS's contention that Shinko earned a
separate commission of U.S. $1.00 for
every 1,000 board feet of logs from the
buyer of CMS's logs.
However, the SC reversed the decision of
CA with regard to DRACOR's right to
retain the amount of P101,536.77 as part
28
From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
of its commission from the sale of logs
by CMS, and hold that DRACOR has no
right to its commission. Consequently,
DRACOR is hereby ordered to remit to
CMS the amount of P101,536.77.
Geneivieve Lim vs Saban
(Digest by: Rafael Rivas)
FACTS:
Eduardo Ybaez , the owner of a 1,000-
square meter lot in Cebu City (the lot),
entered into an Agreement and Authority
to Negotiate and Sell (Agency
Agreement) with Florencio Saban
(Saban). Under the Agency Agreement,
Ybaez authorized Saban to look for a
buyer of the lot for Two Hundred
Thousand Pesos (P200,000.00) and to
mark up the selling price to include the
amounts needed for payment of taxes,
transfer of title and other expenses
incident to the sale, as well as Sabans
commission for the sale.
Through Sabans efforts, Ybaez and his
wife were able to sell the lot to
Genevieve Lim (Lim) and the spouses
Benjamin and Lourdes Lim (the Spouses
Lim) on March 10, 1994. The price of
the lot as indicated in the Deed of
Absolute Sale is Two Hundred Thousand
Pesos (P200,000.00). It appears,
however, that the vendees agreed to
purchase the lot at the price of Six
Hundred Thousand Pesos (P600,000.00),
inclusive of taxes and other incidental
expenses of the sale. After the sale, Lim
remitted to Saban the amounts.
Subsequently, Ybaez sent a letter
addressed to Lim. In the letter, Ybaez
asked Lim to cancel all the checks issued
by her in Sabans favor and to extend
another partial payment for the lot in his
(Ybaez) favor. After the four checks in
his favor were dishonored, Saban filed a
Complaint for collection of sum of
money and damages against Ybaez and
Lim. Saban alleged that Ybaez told Lim
that he (Saban) was not entitled to any
commission for the sale since he
concealed the actual selling price of the
lot from Ybaez and because he was not a
licensed real estate broker. Ybaez was
able to convince Lim to cancel all four
checks.
In his Answer, Ybaez claimed that Saban
was not entitled to any commission
because he concealed the actual selling
price from him and because he was not a
licensed real estate broker.
ISSUE:
Whether or not Saban is entitled to
receive his commissions from the sale?
Ruling: Yes, Saban is entitled.
The agency was not revoked since Ybaez
requested that Lim make stop payment
orders for the checks payable to Saban
only after the consummation of the sale.
At that time, Saban had already
performed his obligation as Ybaezs agent
when, through his (Sabans) efforts,
Ybaez executed the Deed of Absolute
Sale of the lot with Lim and the Spouses
Lim. To deprive Saban of his
commission subsequent to the sale which
was consummated through his efforts
would be a breach of his contract of
agency.
However, the Court posits that Saban’s
agency is not coupled with an interest.
Under Article 1927 of the Civil Code, an
agency cannot be revoked if a bilateral
contract depends upon it, or if it is the
means of fulfilling an obligation already
contracted, or if a partner is appointed
manager of a partnership in the contract
of partnership and his removal from the
management is unjustifiable. Stated
differently, an agency is deemed as one
coupled with an interest where it is
established for the mutual benefit of the
principal and of the agent, or for the
interest of the principal and of third
persons, and it cannot be revoked by the
principal so long as the interest of the
agent or of a third person subsists. In an
agency coupled with an interest, the
agents interest must be in the subject
matter of the power conferred and not
merely an interest in the exercise of the
power because it entitles him to
compensation. When an agents interest is
confined to earning his agreed
compensation, the agency is not one
coupled with an interest, since an agents
interest in obtaining his compensation as
such agent is an ordinary incident of the
agency relationship.
With Sabah’s entitlement being settled,
Ybaez and Lim are liable to Sabah for
conniving the latter of what is due to
him.
Is the agency here coupled with interest?
No, since an agents interest in obtaining
his compensation as such agent is an
ordinary incident of the agency
relationship
RAMON RALLOS, Administrator of
the Estate of CONCEPCION
RALLOS v.FELIX GO CHAN &
SONS REALTY CORPORATION
and COURT OF APPEALS, G.R. No.
L-24332, January 31, 1978
(Digest by: Lilybeth Petallo)
FACTS:
This involves the attorney-in-
fact(Simeon Rallos), who, after the death
of his principal(Concepcion Rallos), sold
the latter’s undivided share in a parcel of
land pursuant to a SPA which the
principal had executed in his favor.
Notably, on Apr 21 1954, the SPA was
executed by the sisters and registered co-
owners, Concepcion and Gerundia, in
favor of their brother, Simeon,
authorizing him to sell for and in their
behalf Lot 5983.
However, on Mar 3 1955, Concepcion
died. Nevertheless, on Sep 12 1955,
Simeon sold Lot 5983 to Felix Go Chan
& Sons Realty Corp. (respondent).
This prompted Ramon Rallos, as
administrator of the Intestate Estate of
Concepcion, (petitioner) to file a
Complaint praying that the sale of
undivided share of the deceased
Concepcion in Lot 5983 be declared
unenforceable, and be reconveyed to her
estate, among others.
TC granted petitioner’s relief; declaring
the deed of sale null and void insofar as
Concepcion’s share is concerned.
CA REVERSED and ruled in favor of
respondent-corporation; sustaining the
validity of the sale.
Hence, the petition.
ISSUE: WON the sale of the undivided
share of Concepcion in Lot 5983 valid
although it was executed by the agent
after the death of his principal, (NO)
HELD: The sale of the undivided share
of Concepcion is unenforceable, as it was
executed by the agent after the death of
his principal (and with knowledge of
such death at the time of the transaction).
COURT’S DISCUSSION:
1. The basic axiom in civil law
is that: “no one may contract in the name
of another without being authorized by
the latter, or unless he has by law a right
to represent him”. ART. 1403 provides
that contracts entered into in the name of
another person by one who has been
given no authority or legal representation
or who has acted beyond his powers are
unenforceable unless ratified. This
principle is the basis of the “relationship
of agency”, whereby one party (the
principal/mandante) authorizes another
(the agent/mandatorio) to act for and in
his behalf in transactions with third
persons. Such agency is basically
personal, representative, and derivative
in nature. The authority of the agent to
act emanates from the powers granted to
him by his principal; his act is the act of
the principal if done within the scope of
the authority. Qui facit per aliumfacit per
se. (He who acts through another acts
himself.)
2. There are various ways of
extinguishing agency, e.g. death of the
principal/agent (PAR. 3, ART. 1919).
According to Manresa, the rationale is
found in the juridical basis of agency
which is “representation”. Laurent says
that the juridical tie between the principal
and the agent is severed ipso jure upon
the death of either without necessity for
the heirs of the principal to notify the
agent of the fact of death of the former.
The same rule prevails at common law –
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From the Lectures of: Atty. Raymund Christian S. Ong Abrantes, CPA (S.Y. 2017-2018)
that the death of the principal effects
instantaneous and absolute revocation of
the authority of the agent unless the
power be coupled with an interest.
3. The general rule is that the
death of the principal/agent extinguishes
agency. The exceptions are:
a. ART. 1930 – if the agency
is coupled with interest; and
b. ART. 1931 – If (a) the agent
acted without knowledge of the death of
the principal, and (b) the 3rd person who
contracted with the agent acted also in
good faith. These two
conditions/requisites must concur, the
absence of one will render the act of the
agent invalid and unenforceable.
IN THE CASE AT BAR: Art. 1930 does
not apply because the SPA was not
coupled with interest.
On the other hand, Art. 1931 would have
been the more applicable law. However,
there was no concurrence of the two
requirements, rendering ART. 1931 also
inapplicable because:
a. Although respondent-
corporation claimed that it acted in good
faith in buying the property (thereby
establishing the 2nd requisite);
b. Still the 1st requisite is
lacking since it cannot be questioned that
Simeon (agent) knew of the death of his
principal at the time of the sale. This
knowledge of death can be inferred from
the pleadings filed by Simeon himself.
4. RESPONDENT-
CORPORATION’S DEFENSE: That no
provision in the Code provides that
whatever is done by an agent having
knowledge of the death of his principal is
void, even with respect to third persons
who may have contracted with him in
good faith. (LACKS MERIT)
ART. 1931, being an exception to the
general rule, should be strictly construed.
The two requisites should concur.
5. RESPONDENT-
CORPORATION’S CONTENTION:
That it, as vendee acting in good faith, 7. RESPONDENT-
relied on the SPA duly registered on the CORPORATION’S CONTENTION:
original certificate of title; and since That in Cassiday vs McKenzie, payments
there was no notice of death ever made to an agent after the death of the
annotated on said OCT by the heirs of principal were held to be “good”, “the
the principal, said heirs should suffer the parties being ignorant of the death”.
consequences of such omission. (LACKS (LACKS MERIT)
MERIT)
Again, the SC stressed that the exception
Respondent-corporation’s argument in ART. 1931 requires concurrence of the
refers to the “revocation by an act of the 2 requisites. Thus, it is an indispensable
principal” as a mode of terminating an requirement that the agent acted without
agency, which should bedistinguished knowledge or notice of the death of the
from“revocation by operation of law”, principal. However, in this case, the
such as the death of the principal as in agent executed the sale notwithstanding
this case. Although a revocation of a notice of the death of his principal.
power of attorney to be effective must be Accordingly, the agent’s act is
communicated to the parties concerned, unenforceable against the estate of his
yet a revocation by operation of law (e.g. principal.
death of principal) is instantaneously
effective inasmuch as “by legal fiction, IN VIEW OF ALL THE FOREGOING,
the agent’s exercise of authority is We set aside the decision of respondent
regarded as an execution of the appellate court, and We affirm entoto the
principal’s continuing will”. With death, judgment rendered by then Hon. Amador
the principal’s will ceases or is E. Gomez of the Court of First Instance
terminated; the source of authority is of Cebu, quoted in pages 2 and 3 of this
extinguished. Opinion, with costs against respondent
realty corporation at all instances.
The Civil Code does not impose a duty
on the heirs to notify the agent of the
death of the principal. What the Code
provides in ART. 1932 is that, if the
agent dies, his heirs must notify the
principal thereof. Hence, the fact that no
notice of the death of the principal was
registered on the OCT is not fatal to the
cause of the estate of the principal.
6. RESPONDENT-
CORPORATION’S CONTENTION:
That the instant case is “parallel” to that
of an innocent purchaser for value of a
registered land – that the registered
owner has no recourse against such IPV
but only against the forger, citing
Blondeau doctrine. (LACKS MERIT)
Blondeau doctrine is inapplicable as it
finds basis in Sec. 5 of the Land
Registration Law. Since the parties
admitted that Simeon was an agent, the
situation is covered by the law on
agency.
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