AF REALTY & DEVELOPMENT, INC. vs. DIESELMAN FREIGHT SERVICES, CO.

,
G.R. No. 111448 | 2002-01-16

Dieselman Freight Service Co. (Dieselman for brevity) is a domestic corporation and a registered owner
of a parcel of commercial lot consisting of 2,094 square meters, located at 104 E. Rodriguez Avenue,
Barrio Ugong, Pasig City, Metro Manila. The property is covered by Transfer Certificate of Title No.
39849 issued by the Registry of Deeds of the Province of Rizal.

On May 10, 1988, Manuel C. Cruz, Jr., a member of the board of directors of Dieselman, issued a letter
denominated as "Authority To Sell Real Estate" to Cristeta N. Polintan, a real estate broker of the CNP
Real Estate Brokerage. Cruz, Jr. authorized Polintan "to look for a buyer/buyers and negotiate the sale" of
the lot at P3,000.00 per square meter, or a total of P6,282,000.00. Cruz, Jr. has no written authority from
Dieselman to sell the lot.

In turn, Cristeta Polintan, through a letter dated May 19, 1988, authorized Felicisima ("Mimi") Noble to
sell the same lot.

Felicisima Noble then offered for sale the property to AF Realty & Development, Inc. (AF Realty) at
P2,500.00 per square meter. Zenaida Ranullo, board member and vice-president of AF Realty, accepted
the offer and issued a check in the amount of P300,000.00 payable to the order of Dieselman. Polintan
received the check and signed an "Acknowledgement Receipt" indicating that the amount of P300,000.00
represents the partial payment of the property but refundable within two weeks should AF Realty
disapprove Ranullo's action on the matter.

On June 29, 1988, AF Realty confirmed its intention to buy the lot. Hence, Ranullo asked Polintan for the
board resolution of Dieselman authorizing the sale of the property. However, Polintan could only give
Ranullo the original copy of TCT No. 39849, the tax declaration and tax receipt for the lot, and a
photocopy of the Articles of Incorporation of Dieselman.

On August 2, 1988, Manuel F. Cruz, Sr., president of Dieselman, acknowledged receipt of the said
P300,000.00 as "earnest money" but required AF Realty to finalize the sale at P4,000.00 per square meter.
AF Realty replied that it has paid an initial down payment of P300,000.00 and is willing to pay the
balance.

However, on August 13, 1988, Mr. Cruz, Sr. terminated the offer and demanded from AF Realty the
return of the title of the lot earlier delivered by Polintan.

Meanwhile, on July 30, 1988, Dieselman and Midas Development Corporation (Midas) executed a Deed
of Absolute Sale of the same property. The agreed price was P2,800.00 per square meter. Midas delivered
to Dieselman P500,000.00 as down payment and deposited the balance of P5,300,000.00 in escrow
account with the PCIBank.

Ruling:

Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall
be exercised by the board of directors. Just as a natural person may authorize another to do certain acts in
his behalf, so may the board of directors of a corporation validly delegate some of its functions to
individual officers or agents appointed by it. Thus, contracts or acts of a corporation must be made either
by the board of directors or by a corporate agent duly authorized by the board.[20] Absent such valid
delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of
the corporation, but not in the course of, or connected with, the performance of authorized duties of such
director, are held not binding on the corporation.

In the instant case, it is undisputed that respondent Cruz, Jr. has no written authority from the board of
directors of respondent Dieselman to sell or to negotiate the sale of the lot, much less to appoint other
persons for the same purpose. Respondent Cruz, Jr.'s lack of such authority precludes him from
conferring any authority to Polintan involving the subject realty. Necessarily, neither could Polintan
authorize Felicisima Noble. Clearly, the collective acts of respondent Cruz, Jr., Polintan and Noble cannot
bind Dieselman in the purported contract of sale.

Petitioner AF Realty maintains that the sale of land by an unauthorized agent may be ratified where, as
here, there is acceptance of the benefits involved. In this case the receipt by respondent Cruz, Jr. from AF
Realty of the P300,000.00 as partial payment of the lot effectively binds respondent Dieselman.

We are not persuaded.

Involved in this case is a sale of land through an agent. Thus, the law on agency under the Civil Code
takes precedence. This is well stressed in Yao Ka Sin Trading vs. Court of Appeals:

"Since a corporation, such as the private respondent, can act only through its officers
and agents, all acts within the powers of said corporation may be performed by agents of
its selection; and, except so far as limitations or restrictions may be imposed by special
charter, by-law, or statutory provisions, the same general principles of law which govern
the relation of agency for a natural person govern the officer or agent of a corporation,
of whatever status or rank, in respect to his power to act for the corporation; and agents
when once appointed, or members acting in their stead, are subject to the same rules,
liabilities, and incapacities as are agents of individuals and private persons." (Emphasis
supplied)

Pertinently, Article 1874 of the same Code provides:

"ART. 1874. When a sale of 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." (Emphasis
supplied)

Considering that respondent Cruz, Jr., Cristeta Polintan and Felicisima Ranullo were not authorized by
respondent Dieselman to sell its lot, the supposed contract is void. Being a void contract, it is not
susceptible of ratification by clear mandate of Article 1409 of the Civil Code, thus:

"ART. 1409. The following contracts are inexistent and void from the very beginning:

xxx
 (7) Those expressly prohibited or declared void by law.

"These contracts cannot be ratified. Neither can the right to set up the defense of
illegality be waived." (Emphasis supplied)

Upon the other hand, the validity of the sale of the subject lot to respondent Midas is unquestionable. As
aptly noted by the Court of Appeals, the sale was authorized by a board resolution of respondent
Dieselman dated May 27, 1988.

XXXXXXXXXXXXXXXXXXXXXXXX

BA FINANCE CORPORATION vs. HON. COURT OF APPEALS . . . MANUEL CUADY and

LILIA CUADY
G.R. No. 82040 | 1991-08-27

On July 15, 1977, private respondents Manuel Cuady and Lilia Cuady obtained from Supercars, Inc. a
credit of P39,574.80, which amount covered the cost of one unit of Ford Escort 1300, four-door sedan.
Said obligation was evidenced by a promissory note executed by private respondents in favor of
Supercars, Inc. To secure the faithful and prompt compliance of the obligation under the said promissory
note, the Cuady spouses constituted a chattel mortgage on the aforementioned motor vehicle.

On July 25, 1977, Supercars, Inc. assigned the promissory note, together with the chattel mortgage, to
B.A. Finance Corporation. The B.A. Finance Corporation, as the assignee of the mortgage lien, obtained
the renewal of the insurance coverage over the aforementioned motor vehicle for the year 1980 with
Zenith Insurance Corporation, when the Cuadys failed to renew said insurance coverage themselves.
Under the terms and conditions of the said insurance coverage, any loss under the policy shall be payable
to the B.A. Finance Corporation.

On April 18, 1980, the aforementioned motor vehicle figured in an accident and was badly damaged. The
unfortunate happening was reported to the B.A. Finance Corporation and to the insurer, Zenith Insurance
Corporation. The Cuadys asked the B.A. Finance Corporation to consider the same as a total loss, and to
claim from the insurer the face value of the car insurance policy and apply the same to the payment of
their remaining account and give them the surplus thereof, if any. But instead of heeding the request of
the Cuadys, B.A. Finance Corporation prevailed upon the former to just have the car repaired. Not long
thereafter, however, the car bogged down. The Cuadys wrote B.A. Finance Corporation requesting the
latter to pursue their prior instruction of enforcing the total loss provision in the insurance coverage.
When B.A. Finance Corporation did not respond favorably to their request, the Cuadys stopped paying
their monthly installments on the promissory note.

Ruling:

The real issue to be resolved in the case at bar is whether or not B.A. Finance Corporation has waived its
right to collect the unpaid balance of the Cuady spouses on the promissory note for failure of the former
to enforce the total loss provision in the insurance coverage of the motor vehicle subject of the chattel
mortgage.
It is the contention of B.A. Finance Corporation that even if it failed to enforce the total loss provision in
the insurance policy of the motor vehicle subject of the chattel mortgage, said failure does not operate to
extinguish the unpaid balance on the promissory note, considering that the circumstances obtaining in the
case at bar do not fall under Article 1231 of the Civil Code relative to the modes of extinguishment of
obligations.

On the other hand, the Cuadys insist that owing to its failure to enforce the total loss provision in the
insurance policy, B.A. Finance Corporation lost not only its opportunity to collect the insurance proceeds
on the mortgaged motor vehicle in its capacity as the assignee of the said insurance proceeds pursuant to
the memorandum in the insurance policy which states that the "LOSS: IF ANY, under this policy shall be
payable to BA FINANCE CORP., as their respective rights and interest may appear." (Rollo, p. 91) but
also the remaining balance on the promissory note (Memorandum for the Respondents, pp. 16-17).

Ruling:

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 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.)

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BICOL SAVINGS AND LOAN ASSOCIATION vs. HON. COURT OF APPEALS,

Juan de Jesus was the owner of a parcel of land, containing an area of 6,870 sq. ms., more or less, situated
in Naga City. On 31 March 1976, he executed a Special Power of Attorney in favor of his son, Jose de
Jesus, "To negotiate, mortgage my real property in any bank either private or public entity preferably in
the Bicol Savings Bank, Naga City, in any amount that may be agreed upon between the bank and my
attorney-in-fact."

By virtue thereof, Jose de Jesus obtained a loan of twenty thousand pesos (P20,000.00) from petitioner
bank on 13 April 1976. To secure payment, Jose de Jesus executed a deed of mortgage on the real
property referred to in the Special Power of Attorney, which mortgage contract carried, inter alia, the
following stipulation:

"b) If at any time the Mortgagor shall refuse to pay the obligations herein secured, or any
of the amortizations of such indebtedness when due, or to comply with any of the
conditions and stipulations herein agreed . . . . then all the obligations of the Mortgagor
secured by this Mortgage, all the amortizations thereof shall immediately become due,
payable and defaulted and the Mortgagee may immediately foreclose this mortgage in
accordance with the Rules of Court, or extrajudicially in accordance with Act No. 3135,
as amended, or Act No. 1508. For the purpose of extrajudicial foreclosure, the Mortgagor
hereby appoints the Mortgagee his attorney-in-fact to sell the property mortgaged . . . ."

Due to the failure to pay the loan, Bicol Savings caused the mortgage to be extrajudicially foreclosed on
16 November 1978.

In the subsequent public auction, the mortgaged property was sold to the bank as the highest bidder to
whom a Provisional Certificate of Sale was issued. Private respondents herein, including Jose de Jesus,
who are all the heirs of the late Juan de Jesus, failed to redeem the property within one year from the date
of the registration of the Provisional Certificate of Sale on 21 November 1980. Hence, a Definite
Certificate of Sale was issued in favor of the bank on 7 September 1982.

Notwithstanding, private respondents still negotiated with the bank for the repurchase of the property.
Offers and counter-offers were made, but no agreement was reached, as a consequence of which, the bank
sold the property instead to other parties in installments. Conditional deeds of sale were executed between
the bank and these parties. A Writ of Possession prayed for by the bank was granted by the Regional Trial
Court.

On 31 January 1983 private respondents herein filed a Complaint. The Appellate Court applied Article
1879 of the Civil Code and stated that since the special power to mortgage granted to Jose de Jesus did
not include the power to sell, it was error for the lower Court not to have declared the foreclosure
proceedings and auction sale held in 1978 null and void because the Special Power of Attorney given by
Juan de Jesus to Jose de Jesus was merely to mortgage his property, and not to extrajudicially foreclose
the mortgage and sell the mortgaged property in the said extrajudicial foreclosure. The Appellate Court
was also of the opinion that petitioner bank should have resorted to judicial foreclosure.

Ruling:
 "Art. 1879. A special power to sell excludes the power to mortgage; and a special power
to mortgage does not include the power to sell."

The sale proscribed by a special power to mortgage under Article 1879 is a voluntary and independent
contract, and not an auction sale resulting from extrajudicial foreclosure, which is precipitated by the
default of a mortgagor. Absent that default, no foreclosure results. The stipulation granting an authority to
extrajudicially foreclose a mortgage is an ancillary stipulation supported by the same cause or
consideration for the mortgage and forms an essential or inseparable part of that bilateral agreement
(Perez v. Philippine National Bank, No. L-21813, July 30, 1966, 17 SCRA 833, 839).

The power to foreclose is not an ordinary agency that contemplates exclusively the representation of the
principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own
protection. That power survives the death of the mortgagor (Perez vs. PNB, supra). In fact, the right of the
mortgagee bank to extrajudicially foreclose the mortgage after the death of the mortgagor Juan de Jesus,
acting through his attorney-in-fact, Jose de Jesus, did not depend on the authorization in the deed of
mortgage executed by the latter. That right existed independently of said stipulation and is clearly
recognized in Section 7, Rule 86 of the Rules of Court, which grants to a mortgagee three remedies that
can be alternatively pursued in case the mortgagor dies, to wit: (1) to waive the mortgage and claim the
entire debt from the estate of the mortgagor as an ordinary claim; (2) to foreclose the mortgage judicially
and prove any deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively, foreclosing
the same at any time before it is barred by prescription, without right to file a claim for any deficiency. It
is this right of extrajudicial foreclosure that petitioner bank had availed of, a right that was expressly
upheld in the same case of Perez v. Philippine National Bank (supra), which explicitly reversed the
decision in Pasno v. Ravina (54 Phil. 382) requiring a judicial foreclosure in the same factual situation.
The Court in the aforesaid PNB case pointed out that the ruling in the Pasno case virtually wiped out the
third alternative, which precisely includes extrajudicial foreclosure, a result not warranted by the text of
the Rule.

JOSE BORDADOR and LYDIA BORDADOR v. BRIGIDA LUZ, ERNESTO LUZ

and NARCISO DEGANOS
G.R. No. 130148, December 15, 1997
FACTS:
Petitioners were engaged in the business of purchase and sale of jewelry. Respondent Brigida Luz was
their regular customer. On several occasions, Brigida’s brother, Narciso Deganos, received several pieces
of gold and jewelry amounting to P382,816. The 17 receipts covering the various items indicated that 11
were received for a certain Evelyn Aquino, while the remaining 6 receipts indicated that they were
received for Brigida.
Narciso was supposed to sell the items at a profit and then remit the proceeds and return the unsold items
to petitioners. However, he only remitted P53,207. The balance remained unpaid and his account reached
the sum of P725,463, including interest. In the barangay proceedings, Brigida, her husband and Deganos
signed a compromise agreement with petitioners for payment of the balance. However, Deganos failed to
comply with his undertaking therein.
Petitioners thus instituted a civil case for recovery of a sum of money and damages, and four years after
that, a criminal case for estafa was filed. The criminal case is still pending.
Ruling:
The conclusion and ruling of the Court of Appeals categorically stated that, "(Brigida Luz) never
authorized her brother (Deganos) to act for and in her behalf in any transaction with Petitioners." It is
clear, therefore, that even assuming arguendo that Deganos acted as an agent of Brigida, the latter never
authorized him to act on her behalf with regard to the transactions subject of this case.
The Civil Code provides:
Art. 1868. By the contract of agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter.
The basis for agency is representation. Here, there is no showing that Brigida consented to the acts of
Deganos or authorized him to act on her behalf, much less with respect to the particular transactions
involved. Petitioners' attempt to foist liability on respondent spouses through the supposed agency
relation with Deganos is groundless and ill-advised.
Besides, it was grossly and inexcusably negligent of petitioners to entrust to Deganos, not once or twice
but on at least six occasions as evidenced by six receipts, several pieces of jewelry of substantial value
without requiring a written authorization from his alleged principal.
A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the
agent.
The records show that neither an express nor an implied agency was proven to have existed between
Deganos and Brigida D. Luz. Evidently, petitioners, who were negligent in their transactions with
Deganos, cannot seek relief from the effects of their negligence by conjuring a supposed agency relation
between the two respondents where no evidence supports such claim.

MANUEL BUASON and LOLITA REYES v. MARIANO PANUYAS

G.R. No. L-11415, May 25, 1959
J. Padilla
FACTS:
Spouses Buenaventura Dayao and Eugenia Vega acquired by homestead patent a parcel of land in Muñoz,
Nueva Ecija. In 1930, they executed a special power of attorney authorizing Eustaquio Bayuga to engage
the services of a lawyer to prosecute their case against Leonardo Gambito for annulment of a contract of
sale of the parcel of land, and after the termination of the case to sell it, and from the proceeds of the sale
to deduct whatever expenses he incurred in the litigation.
In 1934, Buenaventura Dayao died. His four children then executed a deed of sale conveying 12.8413
hectares of the land to appellants, the spouses Manuel Buason and Lolita Reyes. Their mother, Eugenia,
affixed her thumbmark as a witness to the sale.
On the other hand, in 1944, Bayuga sold 8 hectares of the same parcel of land to the spouses Mariano
Panuyas and Sotera Cruz. Bayuga then passed away two years later in 1946, while Dayao children’s
mother, Eugenia Vega, died in 1954.
The Spouses Buason and the Spouses Panuyas now both lay claim to the same parcel of land.
RULING:
It appears that the Spouses Buason did not register the sale of the 12.8413 hectares of land executed in
their favor by the Dayao children. On the other hand, the power of attorney authorizing Bayuga to sell
was annotated on the back of the original certificate of title, as was the sale executed in favor of the
appellee.
In the absence of knowledge of the previous sale, they had a right to rely on the face of the certificate of
title of the registered owners and of the authority conferred by them on Bayuga. As this is a case of
double sale of land registered under the Land Registration Act, he who recorded the sale in the Register of
Deeds has a better right.
As to the contention of the appellant that the death of the principal in 1934 ended the authority of the
agent, it has not been shown that Bayuga knew of his principal’s demise, and for that reason Article 1738
of the old Civil Code of 1931 of the new Civil Code applies:
“Article 1931. Anything done by the agent, without knowledge of the death of the principal or of
any other cause which extinguishes the agence, is valid and shall be fully effective with respect to third
persons who may have contracted with him in good faith.”

NICANORA G. BUCTON (deceased), substituted by REQUILDA B. YRAY, petitioner, v. RURAL

BANK OF EL SALVADOR, INC., MISAMIS ORIENTAL, and REYNALDO CUYONG
G.R. No. 179625, February 24, 2014
J. Del Castillo
FACTS:
In 1988, petitioner Nicanora Bucton filed with the RTC of Cagayan De Oro a case for Annulment of
Mortgage, Foreclosure and Special Power of Attorney against Erlinda Concepcion and respondents.
Bucton is the owner of a parcel of land located in Cagayan De Oro City. In 1982, Concepcion borrowed
the title to the land on the pretext that she was going to show it to an interested buyer. Petitioner testified
that a representative of the respondent Rural Bank of El Salvador went to her house to inform her that the
loan secured by her house and lot was long overdue. Since she did not mortgage any of her properties nor
did she obtain a loan from respondent bank, she decided to go to the bank to inquire about the matter.
It was only then that she learned that Concepcion had obtained a loan in the amount of P30,000 from
Rural Bank, and mortgaged Bucton’s house and lot using a Special Power of Attorney allegedly executed
by petitioner. Concepcion failed to pay the loan, and petitioner’s house and lot were foreclosed and sold
in an action sale in favor of respondent bank.
The RTC ruled in favor of petitioner, sustaining her claim that the SPA presented by Concepcion had
been forged. It ruled that the respondent bank should have conducted a thorough inquiry on the
authenticity of the SPA.The CA, however, reversed the trial court’s ruling, stating that petitioner was
estopped from denying liability since it was negligence on her part to hand over the title.
RULING:
As early as the case of Philippine Sugar Estates Development Co. v. Poizat, the Court already ruled that
"in order to bind the principal by a deed executed by an agent, the deed must upon its face purport to be
made, signed and sealed in the name of the principal."
In other words, the mere fact that the agent was authorized to mortgage the property is not sufficient to
bind the principal, unless the deed was executed and signed by the agent for and on behalf of his
principal. This ruling was adhered to and reiterated with consistency in the cases of Rural Bank of
Bombon (Camarines Sur), Inc. v. Court of Appeals, Gozun v. Mercado, and Far East Bank and Trust
Company (Now Bank of the Philippine Island) v. Cayetano.
In Philippine Sugar Estates Development Co., the wife authorized her husband to obtain a loan and to
secure it with mortgage on her property. Unfortunately, although the real estate mortgage stated that it
was executed by the husband in his capacity as attorney-in-fact of his wife, the husband signed the
contract in his own name without indicating that he also signed it as the attorney-in-fact of his wife.
In Rural Bank of Bombon, the agent contracted a loan from the bank and executed a real estate mortgage.
However, he did not indicate that he was acting on behalf of his principal.
In Gozun, the agent obtained a cash advance but signed the receipt in her name alone, without any
indication that she was acting for and on behalf of her principal.
In Far East Bank and Trust Company, the mother executed an SPA authorizing her daughter to contract a
loan from the bank and to mortgage her properties. The mortgage, however, was signed by the daughter
and her husband as mortgagors in their individual capacities, without stating that the daughter was
executing the mortgage for and on behalf of her mother.
Similarly, in this case, the authorized agent failed to indicate in the mortgage that she was acting for and
on behalf of her principal. The Real Estate Mortgage, explicitly shows on its face, that it was signed by
Concepcion in her own name and in her own personal capacity. In fact, there is nothing in the document
to show that she was acting or signing as an agent of petitioner. Thus, consistent with the law on agency
and established jurisprudence, petitioner cannot be bound by the acts of Concepcion.
The Real Estate Mortgage is therefore void and unforceable against petitioner. It would not bind her as it
was signed by Concepcion in her personal capacity and not as the agent of Bucton.
We need not belabor that the words "as attorney-in-fact of," "as agent of," or "for and on behalf of," are
vital in order for the principal to be bound by the acts of his agent. Without these words, any mortgage,
although signed by the agent, cannot bind the principal as it is considered to have been signed by the
agent in his personal capacity.

CENTRAL SURETY & INSURANCE COMPANY v. C.N. HODGES and the COURT OF
APPEALS
G.R. No. L- 28633, March 30, 1971
FACTS:
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 P43,000, payable in installments. As
of January 15, 1954, the outstanding balance of the debt amounted to P15,516. In order that he could use
the lots as security for a loan, Layson persuaded Hodges to execute in his 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 the said balance.
When Layson later defaulted in the discharge of his obligation, Hodges demanded payment from the
petitioner Central Surety and Insurance Company, which, despite repeated extensions of time, failed to
honor its commitments under the surety bond.
Hodges was therefore prompted to commence an action against Layson and Central Surety to recover the
sums of P17,826.08 representing the principal amount and interest thereon, as well as P1,551.60 as
attorneys fees.
Central Surety disclaimed liability under the surety bond, claiming that the same is null and void since it
was issued by one Rosita Mesa after her authority had been withdrawn, and that even under her original
authority, Mrs. Mesa could not issue surety bonds in excess of P8,000 without the approval of petitioner’s
main office.
Ruling:
Article 1922 of the Civil Code provides:
“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 authority since she had exclusive authority in the
City of Iloilo to represent petitioner with the public in general in all transactions.
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 subsequent 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.

CMS LOGGING, INC., vs. THE COURT OF APPEALS and D.R. AGUINALDO
CORPORATION.
G.R. No. 41420. July 10, 1992

Facts:

CMS is a forest concessionaire engaged in the logging business, while private respondent DRACOR is
engaged in the business of exporting and selling logs and lumber.
On August 28, 1957, CMS and DRACOR entered into a contract of agency whereby the CMS appointed
the DRACOR as its exclusive export and sales agent for all logs that CMS may produce for a period of
five (5) years.

About six months prior to the expiration of the agreement, while on a trip to Tokyo, Japan, CMS's
president, Atty. Carlos Moran Sison, and general manager and legal counsel, Atty. Teodoro R.
Dominguez, discovered that DRACOR had used Shinko Trading Co., Ltd. (Shinko for brevity) 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. Under this arrangement, Shinko was able to
collect a total of U.S. $77,264.67. 3

CMS claimed that this commission paid to Shinko was in violation of the agreement and that it (CMS) is
entitled to this amount as part of the proceeds of the sale of the logs. CMS 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 is 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, 4 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, amounting to P144,167.59, from the sales made by
CMS of logs to Japanese firms.
With regard to CMS's arguments concerning whether or not Shinko received the commission in question.

Ruling:

The fact that Shinko received the commissions in question was not established by the testimony of Atty.
Teodoro R. Dominguez to the effect that Shinko's president and director told him that Shinko received a
commission of U.S. $1.00 for every 1,000 board feet of logs sold, since the same is hearsay. Similarly, the
letter of Mr. K. Shibata of Toyo Menka Kaisha, Ltd. is also hearsay since Mr. Shibata was not presented
to testify on his letter.
CMS's other evidence have little or no probative value at all

Moreover, 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.

However, We find merit in CMS's contention that the appellate court erred in holding that DRACOR was
entitled to its commission from the sales made by CMS to Japanese firms.

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."

In New Manila Lumber Company, Inc. vs. Republic of the Philippines, this Court ruled that the act of a
contractor, who, after executing powers of attorney in favor of another empowering the latter to collect
whatever amounts may be due to him from the Government, and thereafter demanded and collected from
the government the money the collection of which he entrusted to his attorney-in-fact, constituted
revocation of the agency in favor of the attorney-in-fact.

Since the contract of agency was revoked by CMS when its 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.

COSMIC LUMBER CORPORATION v. COURT OF APPEALS and ISIDRO PEREZ

G.R. No. 114311, November 29, 1996

FACTS:
On January 28, 1985, the Cosmic Lumber Corporation through its General Manager executed a Special
Power of Attorney appointing Paz Villamil-Estrada as attorney in fact. On March 11, 1985, by virtue of
her power of attorney, Villamil-Estrada instituted an action for ejectment of Isidro Perez and to recover
the possession of the property before the RTC of Dagupan.
She then entered into a Compromise Agreement with Perez on November 25, 1985, whereby the latter
paid the sum of P26,640 for the portion of the lot where his house is located. The petitioner, by virtue of
the agreement, recognized his ownership and possession over the same.
The Compromise Agreement was approved and judgment was rendered in accordance therewith.
However, it was not executed within five years from the date of its finality allegedly due to the failure of
petitioner to produce the duplicate copy of the title covering the land. Thus, Perez filed a complaint to
revive the judgment.
Petitioner sought the annulment of the judgment, claiming that it was only when summons was served
that it came to know of the compromise agreement entered into between Villamil-Estrada and Perez and
that the agreement should be considered void. However, the same was dismissed for lack of grounds for
annulment.
RULING:
The authority granted Villamil-Estrada under the special power of attorney was explicit and exclusionary:
for her to institute any action in court to eject all persons found on Lots Nos. 9127 and 443 so that
petitioner could take material possession thereof, and for this purpose to appear at the pre-trial and enter
into any stipulation of facts and/or compromise agreement but only insofar as this was protective of the
rights and interests of petitioner in the property.
Nowhere in this authorization was Villamil-Estrada granted expressly or impliedly any power to sell the
subject property nor a portion thereof. Neither can a conferment of the power to sell be validly inferred
from the specific authority "to enter into a compromise agreement" because of the explicit limitation fixed
by the grantor that the compromise entered into shall only be "so far as it shall protect the rights and
interest of the corporation in the aforementioned lots."
The alienation by sale of an immovable cannot be deemed protective of the rights of petitioner to
physically possess the same, more so when the land was sold for a price of P80 per square meter, far less
than its assessed value of P250 per square meter, and especially considering that petitioner never received
the proceeds of the sale.
When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract
for the sale of real estate must be conferred in writing and must give him specific authority, either to
conduct the general business of the principal or to execute a binding contract containing terms and
conditions which are in the contract he did execute. A special power of attorney is necessary to enter into
any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for
a valuable consideration.
For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express
the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the
language so used conveys such power, no such construction shall be given the document.
It is therefore clear that by selling to respondent Perez a portion of petitioner's land through a compromise
agreement, Villamil-Estrada acted without or in obvious authority. The sale ipso jure is consequently
void.
It may be argued that petitioner knew of the compromise agreement since the principal is
chargeable with and bound by the knowledge of or notice to his agent received while the agent was
acting as such. But the general rule is intended to protect those who exercise good faith and not as a
shield for unfair dealing. Hence there is a well-established exception to the general rule as where
the conduct and dealings of the agent are such as to raise a clear presumption that he will not
communicate to the principal the facts in controversy.
The logical reason for this exception is that where the agent is committing a fraud, it would be contrary to
common sense to presume or to except that he would communicate the facts to the principal. Verily, when
an agent is engaged in the perpetration of a fraud upon his principal for his own exclusive benefit, he is
not really acting for the principal but is really acting for himself, entirely outside the scope of his agency.
Indeed, the basic tenets of agency rest on the highest considerations of justice, equity and fair play, and an
agent will not be permitted to pervert his authority to his own personal advantage, and his act in secret
hostility to the interests of his principal transcends the power afforded him.
 COUNTRY BANKERS INSURANCE CORPORATION v. KEPPEL CEBU SHIPYARD,
UNIMARINE SHIPPING LINES, INC.,
G.R. No. 166044, June 18, 2012

In 1992, Unimarine Shipping Lines contracted the services of Keppel Cebu Shipyard for dry docking and
ship repair works on its vessel, the MV Pacific Fortune. Cebu Shipyard issued a bill to Unimarine for its
services. In compliance with the executed agreement, Unimarine, through Paul Rodriguez, secured from
Country Bankers Insurance Corp., through the latter’s agent, Bethoven Quinain, a surety bond in the
amount of P3,000,000.
After several demands and the failure of Unimarine to comply with its obligations, Cebu Shipyard filed a
Complaint against Unimarine, Country Bankers and surety Plaridel. Country Bankers alleged that the
surety bond issued by its agent, Quinain, was in excess of his authority.
RULING:
The fact that Quinain was an agent of CBIC was never put in issue. What has always been debated by the
parties is the extent of authority or, at the very least, apparent authority, extended to Quinain by CBIC
to transact insurance business for and in its behalf.
In a contract of agency, a person, the agent, binds himself to represent another, the principal, with
the latter's consent or authority. Thus, agency is based on representation, where the agent acts for and
in behalf of the principal on matters within the scope of the authority conferred upon him.
Such "acts have the same legal effect as if they were personally done by the principal. By this legal fiction
of representation, the actual or legal absence of the principal is converted into his legal or juridical
presence."
Our law mandates an agent to act within the scope of his authority. The scope of an agent's authority
is what appears in the written terms of the power of attorney granted upon him. Under Article 1878 of
the Civil Code, a special power of attorney is necessary to obligate the principal as a guarantor or
surety. In the case at bar, CBIC could be held liable even if Quinain exceeded the scope of his
authority only if Quinain's act of issuing Surety Bond No. G (16) 29419 is deemed to have been
performed within the written terms of the power of attorney he was granted.
However, the Special Power of Attorney accorded to Quinain clearly states the limits of his
authority and particularly provides that in case of surety bonds, it can only be issued in favor of
the Department of Public Works and Highways, the National Power Corporation, and other government
agencies; furthermore, the amount of the surety bond is limited to P500,000.00.
This Court finds that the terms of the foregoing contract specifically provided for the extent and
scope of Quinain's authority, and Quinain has indeed exceeded them. In light of the foregoing, this
Court is constrained to release CBIC from its liability on Surety Bond No. G (16) 29419 and
Endorsement No. 33152.
Xxxxxxxxxxxxxxxxxxxxxxxxxx

De Castro v. Court of Appeals

G.R. No. 115838, July 18, 2002
1. Constante, Corazon, Jose and Carmela de Castro owned four lots located in Cubao, Quezon City.
In a letter dated January 24, 1984, Constante representing his co-owners authorized Artigo to act as real
estate broker in the sale of these properties for the amount of P23,000,000.00 at a 5% commission. It was
Artigo who first found Times Transit Corporation as a prospective buyer of two lots.
2. The sale was consummated and Artigo received P48,893.76 as commission in lieu of
P352,500.00 which is 5% of the agreed price of P7,050,000. Thus, he sued Constante and Corazon.
3. Constant and Corazon argued that Artigo was selfishly asking more than what he truly deserved
as commission to the prejudice of other agents who were more instrumental in the consummation of the
sale.
4. They also claimed that Artigo failed to implead Jose and Carmela as indispensable parties and
therefore the case should have been dismissed..
RULING:
1. An indispensable party is one whose interest will be affected by the court's action in the litigation,
and without whom no final determination of the case can be had. The joinder of indispensable parties is
mandatory and courts cannot proceed without their presence. Whenever it appears to the court in the
course of a proceeding that an indispensable party has not been joined, it is the duty of the court to stop
the trial and order the inclusion of such party.
However, the rule on mandatory joinder of indispensable parties is not applicable to the instant
case.
Constante signed the note as owner and as representative of the other co-owners. Under this note, a
contract of agency was clearly constituted between Constante and Artigo. The De Castros admit that the
other co-owners are solidarily liable under the contract of agency, citing Article 1915 of the Civil Code,
which reads:
Art. 1915. If two or more persons have appointed an agent for a common transaction or
undertaking, they shall be solidarily liable to the agent for all the consequences of the
agency.
The solidary liability of the four co-owners, however, militates against the De Castros' theory that
the other co-owners should be impleaded as indispensable parties. A noted commentator explained
Article 1915 thus —
"The rule in this article applies even when the appointments were made by the principals in
separate acts, provided that they are for the same transaction. The solidarity arises from the
common interest of the principals, and not from the act of constituting the agency. By virtue
of this solidarity, the agent can recover from any principal the whole compensation and
indemnity owing to him by the others. The parties, however, may, by express agreement,
negate this solidary responsibility. The solidarity does not disappear by the mere partition
effected by the principals after the accomplishment of the agency.
If the undertaking is one in which several are interested, but only some create the agency,
only the latter are solidarily liable, without prejudice to the effects of negotiorum gestio with
 respect to the others. And if the power granted includes various transactions some of which
are common and others are not, only those interested in each transaction shall be liable for it."
When the law expressly provides for solidarity of the obligation, as in the liability of co-
principals in a contract of agency, each obligor may be compelled to pay the entire obligation.
The agent may recover the whole compensation from any one of the co-principals, as in this
case.
Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary
debtors.
2. A contract of agency which is not contrary to law, public order, public policy, morals or good
custom is a valid contract, and constitutes the law between the parties. The contract of agency entered into
by Constante with Artigo is the law between them and both are bound to comply with its terms and
conditions in good faith.
The mere fact that "other agents" intervened in the consummation of the sale and were paid their
respective commissions cannot vary the terms of the contract of agency granting Artigo a 5% percent
commission based on the selling price.

REGINA P. DIZON, ET. AL. vs. COURT OF APPEALS and OVERLAND EXPRESS LINES, INC.
G.R. No. 122544 | 1999-01-28

On May 23, 1974, private respondent Overland Express Lines, Inc. (lessee) entered into a Contract of
Lease with Option to Buy with Dizons (lessors) involving a 1,755.80 square meter parcel of land situated
at corner MacArthur Highway and South "H" Street, Diliman, Quezon City. The term of the lease was
for one (1) year commencing from May 16, 1974 up to May 15, 1975. During this period, Overland was
granted an option to purchase for the amount of P3,000.00 per square meter. Thereafter, the lease shall be
on a per month basis with a monthly rental of P3,000.00.

For failure of Overland to pay the increased rental of P8,000.00 per month effective June 1976, Dizons
filed an action for ejectment (Civil Case No. VIII-29155) on November 10, 1976.

On September 26, 1984, the then Intermediate Appellate Court (now Court of Appeals) rendered a
decision[4]stating that:

"x x x, the alleged question of whether petitioner was granted an extension of the option
to buy the property; whether such option, if any, extended the lease or whether petitioner
actually paid the alleged P300,000.00 to Fidela Dizon, as representative of private
respondents in consideration of the option and, whether petitioner thereafter offered to
pay the balance of the supposed purchase price, are all merely incidental and do not
remove the unlawful detainer case from the jurisdiction of respondent court. In
consonance with the ruling in the case of Teodoro, Jr. vs. Mirasol (supra), the above
matters may be raised and decided in the unlawful detainer suit as, to rule otherwise,
 would be a violation of the principle prohibiting multiplicity of suits. (Original Records,
pp. 38-39)."

On October 7, 1985, private respondent filed before the Regional Trial Court (RTC) of Quezon City
(Civil Case No. Q-45541) an action for Specific Performance and Fixing of Period for Obligation with
prayer for the issuance of a restraining order pending hearing on the prayer for a writ of preliminary
injunction. It sought to compel the execution of a deed of sale pursuant to the option to purchase and the
receipt of the partial payment, and to fix the period to pay the balance. In an Order dated October 25,
1985, the trial court denied the issuance of a writ of preliminary injunction on the ground that the decision
of the then City Court for the ejectment of the private respondent, having been affirmed by the then
Intermediate Appellate Court and the Supreme Court, has become final and executory.

RULING:

There was no perfected contract of sale between Dizons and Overland. Overland argues that it delivered
the check of P300,000.00 to Alice A. Dizon who acted as agent of the Dizons pursuant to the supposed
authority given by petitioner Fidela Dizon, the payee thereof. Private respondent further contended that
petitioners’ filing of the ejectment case against it based on the contract of lease with option to buy holds
petitioners in estoppel to question the authority of petitioner Fidela Dizon. It insisted that the payment of
P300,000.00 as partial payment of the purchase price constituted a valid exercise of the option to buy.

Under Article 1475 of the New Civil Code, “the contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and upon the price. From that
moment, the parties may reciprocally demand performance, subject to the provisions of the law governing
the form of contracts.” Thus, the elements of a contract of sale are consent, object, and price in money or
its equivalent. It bears stressing that the absence of any of these essential elements negates the existence
of a perfected contract of sale. Sale is a consensual contract and he who alleges it must show its existence
by competent proof.

In an attempt to resurrect the lapsed option, Overland gave P300,000.00 to Dizons (thru Alice A. Dizon)
on the erroneous presumption that the said amount tendered would constitute a perfected contract of sale
pursuant to the contract of lease with option to buy. There was no valid consent by the DIzons (as co-
owners of the leased premises) on the supposed sale entered into by Alice A. Dizon, as Dizon’s alleged
agent, and Overland. The basis for agency is representation and a person dealing with an agent is put
upon inquiry and must discover upon his peril the authority of the agent. As provided in Article 1868 of
the New Civil Code, there was no showing that petitioners consented to the act of Alice A. Dizon nor
authorized her to act on their behalf with regard to her transaction with private respondent. The most
prudent thing private respondent should have done was to ascertain the extent of the authority of Alice A.
Dizon. Being negligent in this regard, private respondent cannot seek relief on the basis of a supposed
agency.

In Bacaltos Coal Mines vs. Court of Appeals,[28] we explained the rule in dealing with an agent:

“Every person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent. If he does not make such inquiry, he
is chargeable with knowledge of the agent’s authority, and his ignorance of
that authority will not be any excuse. Persons dealing with an assumed agent,
 whether the assumed agency be a general or special one, are bound at their
peril, if they would hold the principal, to ascertain not only the fact of the
agency but also the nature and extent of the authority, and in case either is
controverted, the burden of proof is upon them to establish it.”

xxxxxx

DIZON vs. COURT OF APPEALS and OVERLAND EXPRESS LINES, INC.,

G.R. No. 122544 | 2003-01-28 (Reconsideration)

RULING:

The acceptance of the amount of P300,000.00, purportedly as partial payment of the purchase price of the
land, was an act integral to the sale of the land. As a matter of fact, private respondent invokes such
receipt of payment as giving rise to a perfected contract of sale. In this connection, Article 1874 of the
Civil Code is explicit that: "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."

When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract
for the sale of real estate must be conferred in writing and must give him specific authority, either to
conduct the general business of the principal or to execute a binding contract containing terms and
conditions which are in the contract he did execute. A special power of attorney is necessary to enter into
any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for
a valuable consideration. The express mandate required by law to enable an appointee of an agency
(couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a
necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real
estate, a power of attorney must so express the powers of the agent in clear and unmistakable language.
When there is any reasonable doubt that the language so used conveys such power, no such construction
shall be given the document.

It necessarily follows, therefore, that petitioners cannot be deemed to have received partial payment of the
supposed purchase price for the land through Alice Dizon. It cannot even be said that Alice Dizon's
acceptance of the money bound at least the share of Fidela Dizon, in the absence of a written power of
attorney from the latter. It should be borne in mind that the Receipt dated June 20, 1975, while made out
in the name of Fidela Dizon, was signed by Alice Dizon alone.
xxxxxxxxxxxxxxxxxxxxxxx

JOCELYN B. DOLES v. MA AURA TINA ANGELES

G.R. No. 149353, June 26, 2006

In 1997, Ma. Aura Tina Angeles filed with the RTC a complaint for Specific Performance with Damages
against Jocelyn B. Doles alleging that Doles was indebted to the former in the concept of a personal loan
amounting to P405,430.00 representing the principal amount and interest. 
Doles denied that she borrowed money from Angeles and averred that from June to September 1995, she
referred her friends to Angeles whom she knew to be engaged in the business of lending money in
exchange for personal checks through her capitalist Arsenio Pua. She alleged that her friends borrowed
money from Angeles and issued personal checks in the name of Pua. These checks bounced.

To settle the matter, Doles first issued checks in favor of Angeles amounting to P350,000.00 which also
bounced and to eventually settle the matter, Doles executed as Deed of Sale over her Bacoor property.
Dole’s failure to pay the outstanding loan obligations on the Bacor property brought about the suit.

RULING:

The question of whether an agency has been created is ordinarily a question which may be established in
the same way as any other fact, either by direct or circumstantial evidence. The question is ultimately one
of intention. Agency may even be implied from the words and conduct of the parties and the
circumstances of the particular case.

Though the fact or extent of authority of the agents may not, as a general rule, be established from the
declarations of the agents alone, if one professes to act as agent for another, she may be estopped to deny
her agency both as against the asserted principal and the third persons interested in the transaction in
which he or she is engaged.

In this case, Doles knew that the financier of Angeles is Pua; and Angeles knew that the borrowers are
friends of Doles. The CA is incorrect when it considered the fact that the "supposed friends of Doles, the
actual borrowers, did not present themselves to Angeles" as evidence that negates the agency relationship
— it is sufficient that Doles disclosed to Angeles that the former was acting in behalf of her principals,
her friends whom she referred to Angeles.

For an agency to arise, it is not necessary that the principal personally encounter the third person with
whom the agent interacts. The law in fact contemplates, and to a great degree, impersonal dealings where
the principal need not personally know or meet the third person with whom her agent transacts: precisely,
the purpose of agency is to extend the personality of the principal through the facility of the agent.

In the case at bar, both Doles and Angeles have undeniably disclosed to each other that they are
representing someone else, and so both of them are estopped to deny the same. Angles being the agent of
Pua and Doles of her friends.

With respect to the admission of Doles that she is "re-lending" the money loaned from Angles to other
individuals for profit, it must be stressed that the manner in which the parties designate the relationship is
not controlling. If an act done by one person in behalf of another is in its essential nature one of agency,
the former is the agent of the latter notwithstanding he or she is not so called. The question is to be
determined by the fact that one represents and is acting for another, and if relations exist which
will constitute an agency, it will be an agency whether the parties understood the exact nature of
the relation or not.

In view of the two agency relationships, Doles and Angeles are not privy to the contract of loan between
their principals.
 xxxxxxxxxxxxxxxxxxxxx

DOMINGO vs. DOMINGO

G.R. No. L-30573 | 1971-10-29

In a document executed on June 2, 1956, Vicente M. Domingo granted Gregorio Domingo, a real estate
broker, the exclusive agency to sell his lot No. 883 of Piedad Estate with an area of about 88,477 square
meters at the rate of P2.00 per square meter (or for P176,954.00) with a commission of 5% on the total
price, if the property is sold by Vicente or by anyone else during the 30-day duration of the agency or if
the property is sold by Vicente within three months from the termination of the agency to a purchaser to
whom it was submitted by Gregorio during the continuance of the agency with notice to Vicente. The said
agency contract was in triplicate, one copy was given to Vicente, while the original and another copy
were retained by Gregorio.

Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per square
meter. Vicente directed Gregorio to tell Oscar de Leon to raise his offer. After several conferences
between Gregorio and Oscar de Leon, the latter raised his offer to P109,000.00 on June 20, 1956, to
which Vicente agreed.

Upon demand of Vicente, Oscar de Leon issued to him a check in the amount of P1,000.00 as earnest
money, after which Vicente advanced to Gregorio the sum of P300.00.

Thereafter, pursuant to his promise to Gregorio, Oscar de Leon gave him as a gift or propina the sum of
One Thousand Pesos (P1,000.00) for succeeding in persuading Vicente to sell his lot at P1.20 per square
meter or a total in round figure of One Hundred Nine Thousand Pesos (P109,000.00). This gift of One
Thousand Pesos (P1,000.00) was not disclosed by Gregorio to Vicente. Neither did Oscar de Leon pay
Vicente the additional amount of One Thousand Pesos (P1,000.00) by way of earnest money.

RULING:

The duties and liabilities of a broker to his employer are essentially those which an agent owes to his
principal.

Consequently, the decisive legal provisions are found in Articles 1891 and 1909 of the New Civil Code.

"Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal
whatever he may have received by virtue of the agency, even though it may not be owing to the
principal. 

"Every stipulation exempting the agent from the obligation to render an account shall be void." 
xxx xxx xxx

"Art. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged
with more or less rigor by the courts, according to whether the agency was or was not for a
compensation." 
Article 1891 of the New Civil Code amends Article 1720 of the old Spanish Civil Code which provides
that: 

"Art. 1720. Every agent is bound to give an account of his transaction and to pay to the principal whatever
he may have received by virtue of the agency, even though what he has received is not due to the
principal." 

The modification contained in the first paragraph of Article 1891 consists in changing the phrase "to pay"
to "to deliver", which latter term is more comprehensive than the former. 

Paragraph 2 of Article 1891 is a new addition designed to stress the highest loyalty that is required to an
agent condemning as void any stipulation exempting the agent from the duty and liability imposed on him
in paragraph one thereof. 

Article 1909 of the New Civil Code is essentially a reinstatement of Article 1726 of the old Spanish Civil
Code which reads thus: 

"Art. 1726. The agent is liable not only for fraud, but also for negligence, which shall be judged with
more or less severity by the courts, according to whether the agency was gratuitous or for a price or
reward." 

The aforecited provisions demand the utmost good faith, fidelity, honesty, candor and fairness on the part
of the agent, the real estate broker in this case, to his principal, the vendor. The law imposes upon the
agent the absolute obligation to make a full disclosure or complete account to his principal of all his
transactions and other material facts relevant to the agency, so much so that the law as amended does not
countenance any stipulation exempting the agent from such an obligation and considers such an
exemption as void. The duty of an agent is likened to that of a trustee. This is not a technical or arbitrary
rule but a rule founded on the highest and truest principle of morality as well as of the strictest  
justice.

Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the
vendee, without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty to the
principal and forfeits his right to collect the commission from his principal, even if the principal does not
suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency
is a gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of any
wrong, not to remedy or repair an actual damage. By taking such profit or bonus or gift or propina from
the vendee, the agent thereby assumes a position wholly inconsistent with that of being an agent for his
principal, who has a right to treat him, insofar as his Commission is concerned, as if no agency had
existed. 

The fact that the principal may have been benefited by the valuable services of the said agent does not
exculpate the agent who has only himself to blame for such a result by reason of his treachery or perfidy. 

This Court has been consistent in the rigorous application of Article 1720 of the old Spanish Civil Code
(Article 1909 of the New Civil Code). Thus, for failure to deliver sums of money paid to him as an
insurance agent for the account of his employer as required by said Article 1720, said insurance agent was
convicted of estafa. An administrator of an estate was likewise liable under the same Article 1720 (Article
1909 of the New Civil Code)for failure to render an account of his administration to the heirs unless the
heirs consented thereto or are estopped by having accepted the correctness of his account previously
rendered.
Because of his responsibility under the aforecited Article 1720 (Article 1909 of the New Civil Code), an
agent is likewise liable for estafa for failure to deliver to his principal the total amount collected by him in
behalf of his principal and cannot retain the commission pertaining to him by subtracting the same from
his collections.
 
A lawyer is equally liable under said Article 1720 (Article 1909 of the New Civil Code) if he fails to
deliver to his client all the money and property received by him for his client despite his attorney's lien.
The duty of a commission agent to render a full account of his operations to his principal was reiterated in
Duhart, etc. vs. Macias.

The American jurisprudence on this score is well-nigh unanimous. 

"Where a principal has paid an agent or broker a commission while ignorant of the fact
that the latter has been unfaithful, the principal may recover back the commission paid,
since an agent or broker who has been unfaithful is not entitled to any compensation. 

xxx xxx xxx 

"In discussing the right of the principal to recover commissions retained by an unfaithful
agent, the court in Little vs. Phipps (1911) 208 Mass. 33l, 94 NE 260, 34 LRA (NS)
1046, said: 'It is well settled that the agent is bound to exercise the utmost good faith in
his dealings with his principal. As Lord Cairns said, this rule "is not a technical or
arbitrary rule. It is a rule founded on the highest and truest principles of morality." Parker
vs. McKenna (1874) LR 10 Ch (Eng) 96, 118.. If the agent does not conduct himself with
entire fidelity towards his principal, but is guilty of taking a secret profit or commission
in regard the matter in which he is employed, he loses his right to compensation on the
ground that he has taken a position wholly inconsistent with that of agent for his
employer, and which gives his employer, upon discovering it, the right to treat him so far
as compensation, at least, is concerned as if no agency had existed. This may operate to
give to the principal the benefit of valuable services rendered by the agent, but the agent
has only himself to blame for that result.' 

xxx xxx xxx

"The intent with which the agent took a secret profit has been held immaterial where the
agent has in fact entered into a relationship inconsistent with his agency, since the law
condemns the corrupting tendency of the inconsistent relationship. Little vs. Phipps (1911)
94 NE 260."

"As a general rule, it is a breach of good faith and loyalty to his principal for an agent,
while the agency exists, so to deal with the subject matter thereof, or with information
acquired during the course of the agency, as to make a profit out of it for himself in excess
of his lawful compensation: and if he does so he may be held as a trustee and may be
compelled to account to his principal for all profits, advantages, rights, or privileges
acquired, by him in such dealings, whether in performance or in violation of his duties,
and be required to transfer them to his principal upon being reimbursed for his
expenditures for the same, unless the principal has consented to or ratified the transaction
knowing that benefit or profit would accrue, or had accrued, to the agent, or unless with
such knowledge he has allowed the agent so as to change his condition that he cannot be
 put in status quo. The application of this rule is not affected by the fact that the principal
did not suffer any injury by reason of the agent's dealings, or that he in fact obtained better
results; nor is it affected by the fact that there is a usage or custom to the contrary, or that
the agency is a gratuitous one."

In the case at bar, defendant-appellee Gregorio Domingo as the broker, received a gift or propina in the
amount of One Thousand Pesos (P1,000.00) from the prospective buyer Oscar de Leon, without the
knowledge and consent of his principal, herein petitioner-appellant Vicente Domingo. His acceptance of
said substantial monetary gift corrupted his duty to serve the interests only of his principal and
undermined his loyalty to his principal, who gave him a partial advance of Three Hundred Pesos
(P300.00) on his commission. As a consequence, instead of exerting his best to persuade his prospective
buyer to purchase the property on the most advantageous terms desired by his principal, the broker, herein
defendant-appellee Gregorio Domingo, succeeded in persuading his principal to accept the counter-offer
of the prospective buyer to purchase the property at P1.20 per square meter or One Hundred Nine
Thousand Pesos (P109,000.00) in round figure for the lot of 88,477 square meters, which is very much
lower than the price of P2.00 per square meter or One Hundred Seventy-Six Thousand Nine Hundred
Fifty-Four Pesos (P176,954.00) for said lot originally offered by his principal. 

The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or broker acted
only as a middleman with the task of merely bringing together the vendor and vendee, who
themselves thereafter will negotiate on the terms and conditions of the transaction. Neither would
the rule apply if the agent or broker had informed the principal of the gift or bonus or profit he
received from the purchaser and his principal did not object thereto. Herein defendant appellee
Gregorio Domingo was not merely a middleman of the petitioner-appellant Vicente Domingo and the
buyer Oscar de Leon. He was the broker and agent of said petitioner-appellant only. And therein
petitioner-appellant was not aware of the gift of One Thousand Pesos (P1,000.00) received by Gregorio
Domingo from the prospective buyer; much less did he consent to his agent's accepting such a gift. Xxx

As a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo must forfeit
his right to the commission and must return the part of the commission he received from his principal. 

xxxxxxxxxxxxxx

DOMINION INSURANCE CORPORATION vs. COURT OF APPEALS

G.R. No. 129919, February 6, 2002.

Acting as agent for petitioner Dominion, Guevarra paid P156,473.90 in settling the claims of several
insured clients of petitioner out of his personal money. Guevarra thereafter filed a civil case for sum of
money to recover said amount.

Dominion claims that Guevarra is not entitled to reimbursement because he did not act within his
authority as agent for Dominion. Based on their agreement, Guevarra was instructed to pay for the claims
of the insured from the revolving fund, not from Guevarra's personal money.

RULING:

By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. The basis for agency is
representation. On the part of the principal, there must be an actual intention to appoint or an intention
naturally inferrable from his words or actions; and on the part of the agent, there must be an intention to
accept the appointment and act on it, and in the absence of such intent, there is generally no agency.

A perusal of the Special Power of Attorney would show that petitioner (represented by third-party
defendant Austria) and respondent Guevarra intended to enter into a principal-agent relationship. Despite
the word "special" in the title of the document, the contents reveal that what was constituted was actually
a general agency. The terms of the agreement read:

"That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC., a corporation duly

organized and existing under and by virtue of the laws of the Republic of the Philippines, . . .
represented by the undersigned as Regional Manager, . . . do hereby appoint RSG Guevarra
Insurance Services represented by Mr. Rodolfo Guevarra . . . to be our Agency Manager in
San Fdo., for our place and instead, to do and perform the following acts and things:

"1. To conduct, sign, manager (sic), carry on and transact Bonding and Insurance business as
usually pertain to a Agency Office, or FIRE, MARINE, MOTOR CAR, PERSONAL
ACCIDENT, and BONDING with the right, upon our prior written consent, to appoint
agents and sub-agents.

"2. To accept, underwrite and subscribed (sic) cover notes or Policies of Insurance and
Bonds for and on our behalf.

"3. To demand, sue, for (sic) collect, deposit, enforce payment, deliver and transfer for and
receive and give effectual receipts and discharge for all money to which the FIRST
CONTINENTAL ASSURANCE COMPANY, INC., may hereafter become due, owing
payable or transferable to said Corporation by reason of or in connection with the above-
mentioned appointment.

"4. To receive notices, summons, and legal processes for and in behalf of the FIRST
CONTINENTAL ASSURANCE COMPANY, INC., in connection with actions and all legal
proceedings against the said Corporation."

The agency comprises all the business of the principal, but, couched in general terms, it is limited only to
acts of administration.

A general power permits the agent to do all acts for which the law does not require a special power. Thus,
the acts enumerated in or similar to those enumerated in the Special Power of Attorney do not require a
special power of attorney.

Article 1878, Civil Code, enumerates the instances when a special power of attorney is required. The
pertinent portion that applies to this case provides that:

"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 xxx xxx

"(15) Any other act of strict dominion."

The payment of claims is not an act of administration. The settlement of claims is not included among the
acts enumerated in the Special Power of Attorney, neither is it of a character similar to the acts
enumerated therein. A special power of attorney is required before respondent Guevarra could settle the
insurance claims of the insured.

Respondent Guevarra's authority to settle claims is embodied in the Memorandum of Management

Agreement 23 dated February 18, 1987 which enumerates the scope of respondent Guevarra's duties and
responsibilities as agency manager for San Fernando, Pampanga, as follows:

"xxx xxx xxx

"1. You are hereby given authority to settle and dispose of all motor car claims in the
amount of P5,000.00 with prior approval of the Regional Office.

"2. Full authority is given you on TPPI claims settlement.

"xxx xxx xxx"

In settling the claims mentioned above, respondent Guevarra's authority is further limited by the written
standard authority to pay, which states that the payment shall come from respondent Guevarra's revolving
fund or collection.

The instruction of petitioner as the principal could not be any clearer. Respondent Guevarra was
authorized to pay the claim of the insured, but the payment shall come from the revolving fund or
collection in his possession.

Having deviated from the instructions of the principal, the expenses that respondent Guevarra incurred in
the settlement of the claims of the insured may not be reimbursed from petitioner Dominion. 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 principal's 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.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxx

DRA. MERCEDES OLIVER VS. PHILIPPINE SAVINGS BANK AND LILIA CASTRO,
G.R. No. 214567 | 2016-04-04

Petitioner Mercedes Oliver (Oliver) was a depositor of respondent Philippine Savings Bank (PSBank)
with account number 2812-07991-6. Respondent Lilia Castro (Castro) was the Assistant Vice President
of PSBank and the Acting Branch Manager of PSBank San Pedro, Laguna.

In her Complaint, dated October 5, 1999, Oliver alleged that sometime in 1997, she made an initial
deposit of P12 million into her PSBank account. During that time, Castro convinced her to loan out her
deposit as interim or bridge financing for the approved loans of bank borrowers who were waiting for the
actual release of their loan proceeds.

Under this arrangement, Castro would first show the approved loan documents to Oliver. Thereafter,
Castro would withdraw the amount needed from Oliver's account. Upon the actual release of the loan by
PSBank to the borrower, Castro would then charge the rate of 4% a month from the loan proceeds as
interim or bridge financing interest. Together with the interest income, the principal amount previously
withdrawn from Oliver's bank account would be. deposited back to her account. Meanwhile, Castro
would earn a commission of 10% from the interest.

Their arrangement went on smoothly for months. Due to the frequency of bank transactions, Oliver even
entrusted her passbook to Castro. Because Oliver earned substantial profit, she was further convinced by
Castro to avail of an additional credit line in the amount of P10 million. The said credit line was secured
by a real estate mortgage on her house and lot in Ayala Alabang covered by Transfer Certificate of Title
(TCT) No. 137796.

Oliver instructed Castro to pay P2 million monthly to PSBank starting on September 3, 1998 so that her
credit line for P10 million would be fully, paid by January 3, 1999.

Beginning September 1998, Castro stopped rendering an accounting for Oliver. The latter then demanded
the return of her passbook. When Castro showed her the passbook sometime in late January or early
February 1999, she noticed several erasures and superimpositions therein. She became very suspicious of
the many erasures pertaining to the December 1998 entries so she requested a copy of her transaction
history register from PSBank.

When her transaction history register was shown to her, Oliver was surprised to discover that the amount
of P4,491,250.00 (estimated at P4.5 million) was entered into her account on December 21, 1998. While a
total of P7 million was withdrawn from her account on the same day, Oliver asserted that she neither
applied for an additional loan of P4.5 million nor authorized the withdrawal of P7 million. She also
discovered another loan for P1,396,310.45, acquired on January 5, 1999 and allegedly issued in
connection with the P10 million credit line.

In Oliver's passbook, there were no entries from December 17, 1998 to December 27, 1998. The
transaction history register, however, showed several transactions on these very same dates including the
crediting of P4.5 million and the debiting of P7 million on December 21, 1998. Oliver then learned that
the additional P4.5 million and P1,396,310.45 loans were also secured by the real estate mortgage, dated
January 8, 1998, covering the same property in Ayala Alabang.

Oliver received two collection letters, dated May 13, 1999 and June 18, 1999, from PSBank referring to
the non-payment of unpaid loans, to wit: (1) P4,491,250.00 from the additional loan and (2)
P1,396,310.45 from the P10 million credit line. In response, Oliver protested that she neither availed of
the said loans nor authorized the withdrawal of P7 million from her account. She also claimed that the
P10 million loan from her credit line was already paid in full.

RULING:
There was an implied agency between Oliver and Castro; the loans were properly acquired

A contract of agency may be inferred from all the dealings between Oliver and Castro. Agency can 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. The question
of whether an agency has been created is ordinarily a question which may be established in the same way
as any other fact, either by direct or circumstantial evidence. The question is ultimately one of intention.

In this case, Oliver and Castro had a business agreement wherein Oliver would obtain loans from the
bank, through the help of Castro as its branch manager; and after acquiring the loan proceeds, Castro
would lend the acquired amount to prospective borrowers who were waiting for the actual release of their
loan proceeds. Oliver would gain 4% to 5% interest per month from the loan proceeds of her borrowers,
while Castro would earn a commission of 10% from the interests. Clearly, an agency was formed because
Castro bound herself to render some service in representation or on behalf of Oliver, in the furtherance of
their business pursuit.

For months, the agency between Oliver and Castro benefited both parties. Oliver, through Castro's
representations, was able to obtain loans, relend them to borrowers, and earn interests; while Castro
acquired commissions from the transactions. Oliver even gave Castro her passbook to facilitate the
transactions.

Accordingly, the laws on, agency apply to their relationship. Article 1881 of the New Civil Code provides
that 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. Thus, as long as the agent acts within the scope of the
authority given by his principal, the actions of the former shall bind the latter.

xxx

P7 million was improperly withdrawn; agent acted beyond her scope of authority

Although it was proven that Oliver authorized the loans, in the aggregate amount of P5,888,149.33, there
was nothing in the records which proved that she also allowed the withdrawal of P7 million from her
bank account. Oliver vehemently denied that she gave any authority whatsoever to either Castro or
PSBank to withdraw the said amount.
xxx
Verily, Castro, as agent of Oliver and as branch manager of PS Bank, utterly failed to secure the
authorization of Oliver to withdraw such substantial amount. As a standard banking practice intended
precisely to prevent unauthorized and fraudulent withdrawals, a bank manager must verify with the client
depositor to authenticate and confirm that he or she has validly authorized such withdrawal.

XXX

The Court is convinced that Castro went beyond the scope of her authority in withdrawing the P7 million
from Oliver's bank account. Her flimsy excuse that the said amount was transferred to the account of a
certain Lim deserves scant consideration. Hence, Castro must be held liable for prejudicing Oliver.
 XXXXXXXXXXXXXXXXXXXXXXXXXXXX

EQUITABLE PCI BANK v. ROSITA KU

G.R. No. 142950, March 26, 2001

An ejectment case was filed by the petitioner against Rosita Ku’s father, Ku Giok Heng. The MeTC ruled
against the Kus, prompting Rosita to file an action before the RTC to nullify the decision of the MeTC.
However, the RTC dismissed the complaint and ordered execution of the MeTC decision.

Rosita then filed a special civil action for certiorari assailing the decision of the RTC. The CA then
rendered a decision enjoining the eviction.

Equitable PCI Bank then filed a motion for extension to file its petition for review of the CA Decision,
alleging that it received the CA decision on April 25, 2000.

A Certification issued by the Manila Central Post Office, however, revealed that the copy was received by
a Joel Rosales on April 24, 2000. Thus, respondent alleges that the motion was defective for being filed
one day after the reglementary period.

RULING:

The Affidavit of Joel Rosales states that he is "not the constituted agent of 'Curato Divina Mabilog Nedo
Magturo Pagaduan Law Office."' An agency may be express but it may also be 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.
Likewise, acceptance by the agent may also be express, although it may also be implied from his acts
which carry out the agency, or from his silence or inaction according to the circumstances.

In this case, Joel Rosales averred that "[o]n occasions when I receive mail matters for said law office, it
is only to help them receive their letters promptly," implying that counsel had allowed the practice of
Rosales receiving mail in behalf of the former. There is no showing that counsel had objected to this
practice or took steps to put a stop to it. Rosales is therefore an implied agent of the Law Office.

Xxxxxxxxxxxxxxxxxxxxxxx

GREEN VALLEY POULTRY & ALLIED PRODUCTS, INC., petitioner, vs. THE
INTEMEDIATE APPELLATE COURT and E.R. SQUIBB & SONS PHILIPPINE
CORPORATION, respondents.
G.R. No. L-49395 | 1984-12-26

On November 3, 1969, Squibb and Green Valley entered into a letter agreement the text of which reads as
follows: 

"E.R. Squibb & Sons Philippine Corporation is pleased to appoint Green Valley Poultry & Allied
Products, Inc. as a non-exclusive distributor for Squibb Veterinary Products, as recommended by Dr.
Leoncio D. Rebong, Jr. and Dr. J.G. Cruz, Animal Health Division Sales Supervisor. 

"As a distributor; Green Valley Poultry & Allied Products, Inc. will be entitled to a discount as follows: 

Feed Store Price (Catalogue) 

Less 10% 
============= 
Wholesale Price 
Less10% 
============ 
Distributor Price 

"There are exceptions to the above price structure. At present, these are: 
1. Afsillin Improved - 40 lbs. bag. 
The distributor commission for this product size is 8% off P120.00. 
2. Narrow-Spectrum Injectible Antibiotics 
These products are subject to price fluctuations. Therefore, they are invoiced at net price per vial. 
3. Deals and Special Offers are not subject to the above distributor price structure. A 5% distributor
commission is allowed when the distributor furnishes copies for each sale of a complete deal or special
offer to a feedstore, drugstore or other type of account. 

"Deals and Special Offers purchased for resale at regular price invoiced at net deal or special offer price. 

"Prices are subject to change without notice, Squibb will endeavor to advise you promptly of any price
changes. However, prices in effect at the time orders are received by Squibb Order Department will apply
in all instances. 

"Green Valley Poultry & Allied Products, Inc. will distribute only for the Central Luzon and Northern
Luzon including Cagayan Valley areas. We will not allow any transfer or stocks from Central Luzon and
Northern Luzon including Cagayan Valley to other parts of Luzon, Visayas or Mindanao which are
covered by our other appointed Distributors. In line with this, you will follow strictly our stipulations that
the maximum discount you can give to your direct and turnover accounts will not go beyond 10%. 

"It is understood that Green Valley Poultry and Allied Products, Inc. will accept turn-over orders from
Squibb representatives for delivery to customers in your area. If for credit or other valid reasons a turn-
over order is not served, the Squibb representative will be notified within 48 hours and hold why the order
will not be served. 

"It is understood that Green Valley Poultry & Allied Products, Inc. will put up a bond of P20,000.00 from
a mutually acceptable bonding company. 

"Payment for Purchases of Squibb Products will be due 60 days from date of invoice or the nearest
business day thereto. No payment will be accepted in the form of post-dated checks. Payment by check
must be on current dating. 

"It is mutually agreed that this non-exclusive distribution agreement can be terminated by either Green
Valley Poultry & Allied Products, Inc. or Squibb Philippines on 30 days notice. 
"I trust that the above terms and conditions will be met with your approval and that the distributor
arrangement will be one of mutual satisfaction. 

"If you are agreeable, please sign the enclosed three (3) extra copies of this letter and return them to this
Office at your earliest convenience. 

"Thank you for your interest and support of the products of E.R. Squibb & Sons Philippines Corporation."

RULING:
Green Valley claimed that the contract with Squibb was a mere agency to sell; that it never purchased
goods from Squibb; that the goods received were on consignment only with the obligation to turn over the
proceeds, less its commission, or to return the goods if not sold, and since it had sold the goods but had
not been able to collect from the purchasers thereof, the action was premature. 
Upon the other hand. Squibb claimed that the contract was one of sale so that Green Valley was obligated
to pay for the goods received upon the expiration of the 60-day credit period. 
We do not have to categorize the contract. Whether viewed as an agency to sell or as a contract of sale,
the liability of Green Valley is indubitable. Adopting Green Valley's theory that the contract is an agency
to sell, it is liable because it sold on credit without authority from its principal. The Civil Code has a
provision exactly in point. It reads: 
"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."
XXXXXXXXXXXXXXX 

GUZMAN vs. THE HONORABLE COURT OF APPEALS

G.R. No. L-9572. July 31, 1956

Joaquin Guzman was a travelling sales agent of the New Life Commercial of Aparri, Cagayan. On March
2, 1953, Guzman left Manila with 45 cases of different assortments of La Tondeña wine, in a truck driven
by Andres Buenaventura, with Federico Cabacungan as washing (helper), on their return trip to Aparri, by
way of Ilocos Norte.

Along the route, Guzman accused made various cash sales of wine and when they reached Ballesteros,
Cagayan, at about 3 o'clock in the afternoon of March 5, 1953, Guzman had in his possession the amount
of P4,873.62.

In the morning of March 6, 1953, Guzman told the driver that he lost the amount of P2,840.50, and his
firearm license.
On March 10, 1953, the Guzan wrote to owner Go, requesting him to defer the filing of the criminal
complaint until March 16, 1953, on which date he promised to refund the amount lost. On April 1, 1953,
Guzman was prosecuted for theft for the shortage of P804.70."

Guzman claims, first, that under the above findings of fact, he had committed only the crime of estafa;
and second, as the crimes of estafa and theft are essentially different offenses, he should be acquitted of
the present charge for qualified theft, although proceedings may be filed anew against him for the proper
offense.

RULING:

While it is true that Guzman received the proceeds of his wine sales as travelling salesman for the
complainant, for and in behalf of the latter as his principal, and that possession of the agent is possession
of the principal, an agent, unlike a servant or messenger, has both the physical and juridical possession of
the goods received in agency, or the proceeds thereof, which takes the place of the goods after their sale
by the agent. His duty to turn over the proceeds of the agency depends upon his discharge, as well as the
result of the accounting between him and the principal; and he may set up his right of possession as
against that of the principal until the agency is terminated.

The case cited by the Court of Appeals (People vs. Locson, 57 Phil., 325), in support of its theory that
appellant only had the material possession of the merchandise he was selling for his principal, or their
proceeds, is not in point. In said case, the receiving teller of a bank who misappropriated money received
by him for the bank, was held guilty of qualified theft on the theory that the possession of the teller is the
possession of the bank. There is an essential distinction between the possession by a receiving teller of
funds received from third persons paid to the bank, and an agent who receives the proceeds of sales of
merchandise delivered to him in agency by his principal. In the former case, payment by third persons to
the teller is payment to the bank itself; the teller is a mere custodian or keeper of the funds received, and
has no independent right or title to retain or possess the same as against the bank. An agent, on the other
hand, can even assert, as against his own principal, an independent, autonomous, right to retain the money
or goods received in consequence of the agency; as when the principal fails to reimburse him for
advances he has made, and indemnify him for damages suffered without his fault (Article 1915, new Civil
Code; Article 1730, old).

As Guzman converted to his own use proceeds of sales of merchandise delivered to him as agent, which
he received in trust for and under obligation to deliver and turn over to his principal, he is guilty of the
crime of estafa as defined by Article 315, paragraph 1, subparagraph (c), of the Revised Penal Code. This
has been the consistent ruling of this Court in cases where a sales agent misappropriates or fails to turn
over to his principal proceeds of things or goods he was commissioned or authorized to sell for the latter.
(U. S. vs. Reyes, 36 Phil., 791; U. S. vs. Lim, 36 Phil., 682; People vs. Leachon, 56 Phil., 737).

Xxxxx

DENNIS L. LAO vs. HON. COURT OF APPEALS

G.R. No. 82808, [July 11, 1991], 276 PHIL 63-70)
Petitioner Dennis Lao was an employee of the New St. Joseph Lumber & Hardware Supply, hereinafter
called St. Joseph Lumber, owned by the private respondent, Chan Tong. In January 1981, St. Joseph
Lumber filed a collection suit against a customer, the private respondent, Benjamin Espiritu, for unpaid
purchases of construction materials from St. Joseph Lumber.

In November 1981, upon the advice of its lawyer, St. Joseph Lumber filed a criminal complaint for estafa
against Espiritu, based on the same transaction. Since the petitioner was the employee who transacted
business with Espiritu, he was directed by his employer, the firm's owner, Chan Tong, to sign the affidavit
or complaint prepared by the firm's lawyer, Attorney Manuel Querubin.

Finding probable cause after conducting a preliminary investigation of the charge, the investigating fiscal
filed an information for estafa in the Court of First Instance of Quezon City against Espiritu. The case was
however later dismissed because the court believed that Espiritu's liability was only civil, not criminal.

On April 12, 1984, Espiritu filed a complaint for malicious prosecution against the petitioner and St.
Joseph Lumber, praying that the defendants be ordered to pay him P500,000 as moral damages, P10,000
as actual damages, and P100,000 as attorney's fees.

In his answer to the complaint, the petitioner alleged that he acted only as agent or employee of St. Joseph
Lumber when he executed the affidavit which his employer submitted to the investigating fiscal who
conducted the preliminary investigation of his employer's estafa charge against Espiritu.

Ruling:

Lao had a valid defense to the action for malicious prosecution (Civil Case No. 84-M) because it was his
employer, St. Joseph Lumber, not himself, that was the complainant in the estafa case against Espiritu. It
was Chan Tong, the owner of the St. Joseph Lumber, who, upon advice of his counsel, filed the criminal
complaint against Espiritu. Lao was only a witness in the case. He had no personal interest in the
prosecution of Espiritu for he was not the party defrauded by Espiritu. He executed the affidavit which
was used as basis of the criminal charge against Espiritu because he was the salesman who sold the
construction materials to Espiritu. He was only an agent of St. Joseph Lumber, hence, not personally
liable to the party with whom he contracted (Art. 1897, Civil Code; Philippine Products Co. vs.
Primateria Societe Anonyme, 122 Phil. 698).

"To maintain an action for damages based on malicious prosecution, three elements must be present:
First, the fact of the prosecution and the further fact that the defendant was himself the prosecutor, and
that the action was finally terminated with an acquittal; second, that in bringing the action, the prosecutor
acted without probable cause; and third, the prosecutor was actuated or impelled by legal malice" (Ferrer
vs. Vergara, 52 O.G. 291).

Lao was only a witness, not the prosecutor in the estafa case. The prosecutor was his employer, Chan
Tong or the St. Joseph Lumber.

EDUARDO LITONJUA, JR. and ANTONIO LITONJUA v. ETERNIT CORPORATION

G.R. No. 144805, June 8, 2006
The Eternit Corporation is engaged in manufacturing roofing materials and pipeproducts. Ninety (90%)
percent of the shares of stocks of EC were owned by Eteroutremer S.A. Corporation (ESAC), a
corporation registered under the laws of Belgium. Glanville was the General Manager and President of
EC, while Delsaux was the Regional Director for Asia of ESAC.

In 1986, because of the political situation in the Philippines the management of ESAC wanted to stop its
operations and to dispose the land in Mandaluyong City. They engaged the services of realtor/broker
Lauro G. Marquez.

Marquez thereafter offered the land to Eduardo B. Litonjua, Jr. forP27,000,000.00. Litonjua counter
offered P20,000,000.00 cash. Marquez apprised Glanville & Delsaux of the offer. Delsaux sent a telex
stating that, based on the "Belgian/Swiss decision," the final offer was "US$1,000,000.00 and
P2,500,000.00. The Litonjua brothers deposited US$1,000,000.00 with the Security Bank & Trust
Company, and drafted an Escrow Agreement to expeditethe sale.

Meanwhile, with the assumption of Corazon C. Aquino as President, the political situation improved.
Marquez received a letter from Delsaux that the ESAC Regional Office decided not to proceed with the
sale. When informed of this, the Litonjuas, filed a complaint for specific performance and payment for
damages on account of the aborted sale. Both the trial court and appellate court rendered  judgment in
favor of defendants and dismissed the complaint. 

RULING:

It must be stressed that when specific performance is sought of a contract made with an agent, the
agency must be established by clear, certain and specific proof.

Eternit, as 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.

Agency may be oral unless the law requires a specific form. However, to create or convey real rights
over immovable property, a special power of attorney is necessary. Thus, when a sale of a piece of land or
any portion thereof is through an agent, the authority of the latter shall be in writing, otherwise, the
sale shall be void.

The Court agrees with the appellate court’s ruling that Marquez had no authority to bind respondent
EC to sell the subject properties. As a real estate broker, his business, generally speaking, is only to
find a purchaser who is willing to buy the land upon terms fixed by the owner. He has no authority to
bind the principal by signing a contract of sale. Indeed, an authority to find a purchaser of real
property does not include an authority to sell.

xxxxxxxxxxxxxxxxxxxxxxxxx

MANILA MEMORIAL PARK CEMETERY, INC. v. LINSANGAN

G.R. No. 151319, November 22, 2004
Florencia Baluyot had an Agency Manager Agreement with Manila Memorial Park Cemetery Inc.
(MMCPI) . Baluyot offered Linsangan a lot called Garden State at the Holy Cross Memorial Park.
According to Baluyot, a former owner of a memorial lot under Contract No. 25012 was no longer
interested in acquiring the lot and had opted to sell his rights subject to reimbursement of the amounts he
already paid.

The contract was for P95,000.00. Baluyot reassured Linsangan that once reimbursement is made to the
former buyer, the contract would be transferred to him. Linsangan agreed and gave Baluyot P35,295.00
representing the amount to be reimbursed to the original buyer and to complete the down payment to
MMPCI.

Subsequently, Baluyot informed Linsangan that he would be issued Contract No. 28660, a new contract
covering the subject lot in the name of the latter instead of old Contract No. 25012. Atty. Linsangan
protested, but Baluyot assured him that he would still be paying the old price of P95,000.00 with
P19,838.00 credited as full down payment leaving a balance of about P75,000.00.

Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase Lot No. A11 (15), Block 83,
Garden Estate I denominated as Contract No. 28660 and the Official Receipt No. 118912 dated 6 April
1985 for the amount of P19,838.00. Contract No. 28660 has a listed price of P132,250.00. Linsangan
objected to the new contract price, as the same was not the amount previously agreed upon. To convince
Atty. Linsangan, Baluyot executed a document confirming that while the contract price is P132,250.00,
Atty. Linsangan would pay only the original price of P95,000.00.

For the alleged failure of MMPCI and Baluyot to conform to their agreement, Linsangan filed a
Complaint for Breach of Contract and Damages against the former. For its part, MMPCI alleged that
Baluyot was not an agent but an independent contractor, and as such was not authorized to represent
MMPCI or to use its name except as to the extent expressly stated in the Agency Manager Agreement.

RULING:

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. Thus, the elements of
agency are (i) consent, express or implied, of the parties to establish the relationship; (ii) the object is the
execution of a juridical act in relation to a third person; (iii) the agent acts as a representative and not for
himself; and (iv) the agent acts within the scope of his authority.

Notwithstanding the claim of MMPCI that Baluyot was an independent contractor, the fact remains that
she was authorized to solicit solely for and in behalf of MMPCI. As properly found both by the trial court
and the Court of Appeals, Baluyot was an agent of MMPCI, having represented the interest of the latter,
and having been allowed by MMPCI to represent it in her dealings with its clients/prospective buyers.

Nevertheless, MMPCI cannot be bound by the contract procured by Linsangan and solicited by Baluyot.

Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces obtained on
forms provided by MMPCI. The terms of the offer to purchase, therefore, are contained in such forms
and, when signed by the buyer and an authorized officer of MMPCI, becomes binding on both parties.

By signing the Offer to Purchase, Linsangan signified that he understood its contents. That he and
Baluyot had an agreement different from that contained in the Offer to Purchase is of no moment, and
should not affect MMPCI, as it was obviously made outside Baluyot's authority. To repeat, Baluyot's
authority was limited only to soliciting purchasers. She had no authority to alter the terms of the written
contract provided by MMPCI. The document/letter "confirming" the agreement that Atty. Linsangan
would have to pay the old price was executed by Baluyot alone. Nowhere is there any indication that the
same came from MMPCI or any of its officers.

It is a settled rule that persons dealing with an agent are bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in
case either is controverted, the burden of proof is upon them to establish it. The basis for agency is
representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the
authority of the agent. If he does not make such an inquiry, he is chargeable with knowledge of the agent's
authority and his ignorance of that authority will not be any excuse.

As noted by one author, the ignorance of a person dealing with an agent as to the scope of the latter's
authority is no excuse to such person and the fault cannot be thrown upon the principal. A person dealing
with an agent assumes the risk of lack of authority in the agent. He cannot charge the principal by relying
upon the agent's assumption of authority that proves to be unfounded. The principal, on the other hand,
may act on the presumption that third persons dealing with his agent will not be negligent in failing to
ascertain the extent of his authority as well as the existence of his agency.

The trial and appellate courts found MMPCI liable based on ratification and estoppel. The Court does not
agree. Pertinent to this case are the following provisions of the Civil Code:

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.

Art. 1910. The principal must comply with all the obligations that 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.

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.

Thus, the acts of an agent beyond the scope of his authority do not bind the principal, unless he ratifies
them, expressly or impliedly. Only the principal can ratify; the agent cannot ratify his own unauthorized
acts. Moreover, the principal must have knowledge of the acts he is to ratify.

Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by
another without authority. The substance of the doctrine is confirmation after conduct, amounting to a
substitute for a prior authority. Ordinarily, the principal must have full knowledge at the time of
ratification of all the material facts and circumstances relating to the unauthorized act of the person who
assumed to act as agent. Thus, if material facts were suppressed or unknown, there can be no valid
ratification and this regardless of the purpose or lack thereof in concealing such facts and regardless of the
parties between whom the question of ratification may arise. Nevertheless, this principle does not apply
if the principal's ignorance of the material facts and circumstances was willful, or that the principal
chooses to act in ignorance of the facts. However, in the absence of circumstances putting a reasonably
prudent man on inquiry, ratification cannot be implied as against the principal who is ignorant of the
facts.
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. 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

MANOTOK BROTHERS, INC. v. CA and SALIGUMBA

FACTS:
Petitioner Manotok Brothers, Inc. is the owner of a parcel of land and building which were formerly
leased by the City of Manila and used by the Claro M. Recto High School, in Jhocson Street, Sampaloc,
Manila.
By means of a letter dated July 5, 1966, petitioner authorized private respondent Salvador Saligumba to
negotiate with the City of Manila for the sale of the aforementioned property for not less than P425,000.
Petitioner agreed to pay Saligumba a five (5%) commission in the event the sale is finally consummated
and paid.
Saligumba’s authority was thereafter extended twice, for 120 days each, as evidenced by letters dated
March 4, 1976 and June 26, 1967. Finally, through a letter dated November 16, 1967, the corporation
through its President, Rufino Manotok, authorized Saligumba to finalize the sale of the property to the
City of Manila for P410,000. Saligumba’s authority was also extended for another 180 days.
The ordinance appropriating the sum for the purchase of the property, however, was only signed by the
City Mayor one hundred and eighty three (183) days after the last letter of authorization.
Despite the realizatoin of the sale and the purchase price having been fully satisfied, petitioner refused to
pay Saligumba his commission amounting to P20,554.50. Consquently, Saligumba was prompted to file a
complaint against petitioner.
The RTC ruled in favor of Saligumba, and its ruling was affirmed by the CA on appeal. Aggrieved,
petitioner then elevated its case on Petition for Review on Certiorari. The Supreme Court issued a Minute
Resolution dated August 31, 1987, requiring Saligumba to comment on the petition. However, the Minute
Resolution was returned unserved, and petitioner was unsuccessful in its efforts to locate Saligumba,
opting instead to place as address the last address which the Minute Resolution was forwarded. The Court
then issued a Resolution dismissing the case. Thus, the ruling in favor of Saligumba became final and
executory.
Saligumba thereafter filed a Motion to Execute the judgment. Upon discovery of this development, the
petitioner verified with the court of origin the circumstances by which Saligumba obtained knowledge of
the Resolution. Sensing a fraudulent scheme, petitioner instituted a Petition for Relief which was later
amended to include, in the alternative, its petition to refile the Petition for Certiorari.
RULING:
At first sight, it would seem that Saligumba is not entitled to any commission as he was not successful in
consummating the sale, since when the Deed of Sale was finally executed, his authority had already
lapsed. As a general rule, an agent is not entitled to any commission until he has successfully done the job
given to him.
However, the exception is enunciated in Prats v. Court of Appeals where the Court held that while the
agent’s authority in that case had lapsed, he was still entitled to a sum by way of compensation for his
efforts which were somehow instrumental in finally consummating the transaction.
In Pratz, the Court held that the agent was still entitled to compensation for his efforts even though the
agent in that case was not the efficient procuring cause for the sale. In the case at bar, Saligumba is the
efficient procuring cause for the consummation of the sale. With more reason, therefore, Saligumba
should be paid his commission.
When there is a close, proximate and causal connection between the agent’s efforts and labor and the
principal’s sale of his property, the agent is entitled to a commission.
It should be noted that while the ordinance was signed after the lapse of Saligumba’s authority, the same
was approved when the authorization was still in force. Morever, the approval of the Mayor came only
three days after the expiration of the authority. It is also worth emphasizing that the only party given
written authority to negotiate this sale from 1966 to 1968 was private respondent Saligumba.

MERCADO vs. ALLIED BANKING CORPORATION

G.R. No. 171460. July 27, 2007

On 28 May 1992, Perla executed a Special Power of Attorney (SPA) in favor of her husband, Julian D.
Mercado (Julian) over several pieces of real property registered under her name, authorizing the latter to
perform the following acts:

1. To act in my behalf, to sell, alienate, mortgage, lease and deal otherwise over the
different parcels of land described hereinafter, to wit:
a) Calapan, Oriental Mindoro Properties covered by Transfer Certificates of Title
Nos. T-53618 — 3,522 Square Meters, T-46810 — 3,953 Square Meters, T-53140
— 177 Square Meters, T-21403 — 263 Square Meters, T-46807 — 39 Square
Meters of the Registry of Deeds of Oriental Mindoro;
b) Susana Heights, Muntinlupa covered by Transfer Certificates of Title Nos. T-
108954 — 600 Square Meters and RT-106338 — 805 Square Meters of the
Registry of Deeds of Pasig (now Makati);
c) Personal property — 1983 Car with Vehicle Registration No. R-16381; Model
1983; Make — Toyota; Engine No. T-2464.
 2. To sign for and in my behalf any act of strict dominion or ownership any sale,
disposition, mortgage, lease or any other transactions including quit-claims, waiver and
relinquishment of rights in and over the parcels of land situated in General Trias, Cavite,
covered by Transfer Certificates of Title Nos. T-112254 and T-112255 of the Registry of
Deeds of Cavite, in conjunction with his co-owner and in the person ATTY. AUGUSTO
F. DEL ROSARIO;

3. To exercise any or all acts of strict dominion or ownership over the above-mentioned
properties, rights and interest therein. (Emphasis supplied.)

On the strength of the aforesaid SPA, Julian, on 12 December 1996, obtained a loan from the respondent
in the amount of P3,000,000.00, secured by real estate mortgage constituted on TCT No. RT-18206
(106338) which covers a parcel of land with an area of 805 square meters, registered with the Registry of
Deeds of Quezon City. Still using the subject property as security, Julian obtained an additional loan from
the respondent in the sum of P5,000,000.00, evidenced by a Promissory Note he executed on 5 February
1997 as another real estate mortgage (REM).

It appears, however, that there was no property identified in the SPA as TCT No. RT-18206 (106338) and
registered with the Registry of Deeds of Quezon City. What was identified in the SPA instead was the
property covered by TCT No. RT-106338 registered with the Registry of Deeds of Pasig.

RULING:

In the case at bar, it was Julian who obtained the loan obligations from respondent which he secured with
the mortgage of the subject property. The property mortgaged was owned by his wife, Perla, considered a
third party to the loan obligations between Julian and respondent. It was, thus, a situation recognized by
the last paragraph of Article 2085 of the Civil Code afore-quoted. However, since it was not Perla who
personally mortgaged her own property to secure Julian's loan obligations with respondent, we proceed to
determining if she duly authorized Julian to do so on her behalf.

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. The existence and due execution of this SPA by Perla was not
denied or challenged by petitioners.

There is no question therefore that Julian was vested with the power to mortgage the pieces of property
identified in the SPA. However, as to whether the subject property was among those identified in the
SPA, so as to render Julian's mortgage of the same valid, is a question we still must resolve. xxx

After an examination of the literal terms of the SPA, we find that the subject property was not among
those enumerated therein. There is no obvious reference to the subject property covered by TCT No. RT-
18206 (106338) registered with the Registry of Deeds of Quezon City.
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. We cannot attribute such alleged intention to Perla who executed the
SPA when the language of the instrument is bare of any indication suggestive of such intention.
Contrariwise, to adopt the intent theory advanced by the respondent, in the absence of clear and
convincing evidence to that effect, would run afoul of the express tenor of the SPA and thus defeat Perla's
true intention.

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. xxx

Equally relevant is the rule that a power of attorney must be strictly construed and pursued. The
instrument will be held to grant only those powers which are specified therein, and the agent may neither
go beyond nor deviate from the power of attorney. Where powers and duties are specified and defined in
an instrument, all such powers and duties are limited and are confined to those which are specified and
defined, and all other powers and duties are excluded. This is but in accord with the disinclination of
courts to enlarge the authority granted beyond the powers expressly given and those which incidentally
flow or derive therefrom as being usual and reasonably necessary and proper for the performance of such
express powers.

Even the commentaries of renowned Civilist Manresa supports a strict and limited construction of the
terms of a power of attorney:

The law, which must look after the interests of all, cannot permit a man to express
himself in a vague and general way with reference to the right he confers upon another
for the purpose of alienation or hypothecation, whereby he might be despoiled of all he
possessed and be brought to ruin, such excessive authority must be set down in the most
formal and explicit terms, and when this is not done, the law reasonably presumes that
the principal did not mean to confer it.

In this case, we are not convinced that the property covered by TCT No. 106338 registered with the
Registry of Deeds of Pasig (now Makati) is the same as the subject property covered by TCT No. RT-
18206 (106338) registered with the Registry of Deeds of Quezon City. xxx
Having arrived at the conclusion that Julian was not conferred by Perla with the authority to mortgage the
subject property under the terms of the SPA, the real estate mortgages Julian executed over the said
property are therefore unenforceable.

xxxxxxxxxxxxxxxxxxxxxxx

PABLITO MURAO and NELIO HUERTAZUELA v. PEOPLE OF THE PHILIPPINES

G.R. No. 141485, June 30, 2005

Petitioner Pablito Murao is the sole owner of Loma Murao Industrial Commercial Enterprises (LMICE), a
company engaged in the business of selling and refilling fire extinguishers. Huertazuela is Branch
Manager of LMICE in Puerto Princesa City, Palawan.
In 1994, Murao and Chito Federico entered into a Dealership Agreement, where Federico could obtain
fire extinguishers at a 50% discount, subject to stipulated conditions. Federico was unable to comply with
these conditions, but was still allowed to act as a part time sales agent for LMICE entitled to a
commission. There was no clear agreement on the commissions Federico was entitled to as an agent.

Federico, on behalf of LMICE, subsequently facilitated a transaction with the City Government of Puerto
Princesa for the refill of 202 fire extinguishers. On 16 June 1994, the City Government of Puerto Princesa
issued Check No. 611437 to LMICE to pay for Purchase Order No. GSO-856, in the amount of
P300,572.73, net of the 3% withholding tax. Within the same day, petitioner Huertazuela claimed Check
No. 611437 from the City Government of Puerto Princesa and deposited it under the current account of
LMICE with PCIBank.

On 17 June 1994, private complainant Federico went to see petitioner Huertazuela at the LMICE branch
office in Puerto Princesa City to demand for the amount of P154,500.00 as his commission from the
payment of Purchase Order No. GSO-856 by the City Government of Puerto Princesa. Petitioner
Huertazuela, however, refused to pay private complainant Federico his commission since the two of them
could not agree on the proper amount thereof.

Murao and Huertazuela were subsequently found guilty of Estafa.

RULING:

It is unequivocal that an agency existed between LMICE and private complainant Federico. Article 1868
of the Civil Code defines agency as a special contract whereby "a person binds himself to render some
service or to do something in representation or on behalf of another, with the consent or authority of the
latter."

Although private complainant Federico never had the opportunity to operate as a dealer for LMICE under
the terms of the Dealership Agreement, he was allowed to act as a sales agent for LMICE. He can
negotiate for and on behalf of LMICE for the refill and delivery of fire extinguishers, which he, in fact,
did on two occasions — with Landbank and with the City Government of Puerto Princesa.

Unlike the Dealership Agreement, however, the agreement that private complainant Federico may act as
sales agent of LMICE was based on an oral agreement.

All profits made and any advantage gained by an agent in the execution of his agency should belong to
the principal. In the instant case, whether the transactions negotiated by the sales agent were for the sale
of brand new fire extinguishers or for the refill of empty tanks, evidently, the business belonged to
LMICE. Consequently, payments made by clients for the fire extinguishers pertained to LMICE.

Private complainant Federico may claim commission, allegedly equivalent to 50% of the payment
received by LMICE from the City Government of Puerto Princesa, based on his right to just
compensation under his agency contract with LMICE, but not as the automatic owner of the 50% portion
of the said payment.

Since LMICE is the lawful owner of the entire proceeds of the check payment from the City Government
of Puerto Princesa, then the petitioners who collected the payment on behalf of LMICE did not receive
the same or any part thereof in trust, or on commission, or for administration, or under any other
obligation involving the duty to make delivery of, or to return, the same to Federico.

The obligation of LMICE to pay private complainant Federico his commission does not arise from any
duty to deliver or return the money to its supposed owner, but rather from the duty of a principal to give
just compensation to its agent for the services rendered by the latter.

Nario v. Philippine American Life Insurance Co.,

G.R. No. L-22796, June 26, 1967.

Children as insurance irrevocable beneficiaries, parents wanted to loan on insurance and/or secure cash
surrender values. Parents should seek court approval.
Ruling:
The parent's authority over the estate of the ward as a legal guardian would not extend to acts of
encumbrance or disposition, as distinguished from acts of management or administration. The distinction
between one and the other kind of power is too basic in our law to be ignored. Thus, under Article 1877
of the Civil Code of the Philippines, an agency in general terms does not include power to encumber or
dispose of the property of the principal; and the Code explicitly requires aspecial power or authority for
the agent "to loan or borrow money, unless the latter act be urgent or indispensable for the preservation of
the thing under administration" (Art. 1878, no. 7). Similarly, special powers are required to effect
novations, to waive any obligation gratuitously or obligate the principal as a guarantor or surety (Do., nos.
2, 4 and 11). By analogy, since the law merely constitutes the parent as legal administrator of the child's
property (which is a general power), the parent requires special authority for the acts above specified, and
this authority can be given only by a court. This restricted interpretation of the parent's authority becomes
all the more necessary where as in the case before us, there is no bond to guarantee the ward against
eventual losses.

xxxxxxxxxxxxxxxxxxxxxxx

National Food Authority vs. IAC, Superior Shipping Corporation

G.R. No. 75640. April 5, 1990

On September 6, 1979 Gil Medalla, as commission agent of the Superior Shipping Corporation, entered
into a contract for hire of a ship known as "MV Sea Runner" with National Grains Authority (NGA).
Under the said contract Medalla obligated to transport on the "MV Sea Runner" 8,550 sacks of rice
belonging to NGA from the port of San Jose, Occidental Mindoro, to Malabon, Metro Manila.

Upon completion of the delivery of rice at its destination, Superior wrote a letter requesting NGA that it
be allowed to collect the amount stated in its statement of account which included not only a claim for
freightage but also claims for demurrage and stevedoring charges amounting to P93,538.70.

On November 5, 1979, Superior again wrote NGA, this time specifically requesting that the payment for
freightage and other charges be made to it and not to Medalla because Superior was the owner of the
vessel "MV Sea Runner". In reply, NGA informed Superior that it could not grant its request because the
contract to transport the rice was entered into by NGA and Medalla who did not disclose that he was
acting as a mere agent of Superior. Thereupon, NGA paid Medalla the sum of P25,974.90, for freight
services in connection with the shipment of 8,550 sacks of rice.

On December 4, 1979, Superior wrote Medalla demanding that he turn over to plaintiff the amount of
P27,000.00 paid to him by NFA (formerly NGA). Medalla ignored the demand.

RULING:

It is contended by NFA that it is not liable under the exception to the rule (Art. 1883) since it had no
knowledge of the fact of agency between respondent Superior Shipping and Medalla at the time when the
contract was entered into between them (NFA and Medalla). NFA submits that "(A)n undisclosed
principal cannot maintain an action upon a contract made by his agent unless such principal was disclosed
in such contract. One who deals with an agent acquires no right against the undisclosed principal."

Petitioner NFA's contention holds no water. It is an undisputed fact that Gil Medalla was a commission
agent of respondent Superior Shipping Corporation which owned the vessel "MV Sea Runner" that
transported the sacks of rice belonging to petitioner NFA. The context of the law is clear. Art. 1883,
which is the applicable law in the case at bar provides:

"Art. 1883. If an agent acts in his own name, the principal has no right of action against
the persons with whom the agent has contracted; neither have such persons against the
principal.

"In such case the agent is the one directly bound in favor of the person with whom he
has contracted, as if the transaction were his own, except when the contract involves
things belonging to the principal.

"The provision of this article shall be understood to be without prejudice to the actions
between the principal and agent."

Consequently, when things belonging to the principal (in this case, Superior Shipping Corporation) are
dealt with, the agent is bound to the principal although he does not assume the character of such agent and
appears acting in his own name. In other words, the agent's apparent representation yields to the
principal's true representation and that, in reality and in effect, the contract must be considered as entered
into between the principal and the third person (Sy Juco and Viardo v. Sy Juco, 40 Phil. 634). Corollarily,
if the principal can be obliged to perform his duties under the contract, then it can also demand the
enforcement of its rights arising from the contract.

NEW MANILA LUMBER COMPANY, INC., v. REPUBLIC OF THE PHILIPPINES

G.R. No. L-14248, April 28, 1960

In 1958, New Manila Lumber Company filed a complaint against the Republic of the Philippines. The
complaint alleges that the defendant, through the Director of Schools, entered into a contract with one
Alfonso Mendoza to build two school houses. New Manila Lumber supplied the lumber materials for this
construction. Prior to payment to the contractor, the latter executed powers of attorney in favor of New
Manila Lumber granting it the authority to collect any and all amounts due to said contractor in
connection with the construction of the school buildings.
The defendant received the originals of the powers of attorney and promised to pay New Manila Lumber,
however, it paid the contractor several amounts on different occasions without first making payment to
the plaintiff.
This complaint therefore, prays that defendant be ordered to pay plaintiff the sum of P18, 327.15, the
unpaid balance of the cost of lumber supplied and used in the construction.
RULING:
Briefly stated, plaintiff's complaint seeks to enforce against the Republic of the Philippines a money claim
for the payment of materials it furnished for the construction of two public school buildings undertaken
by contractor Alfonso Mendoza, on the basis of powers of attorney executed by the latter authorizing said
plaintiff to collect and receive from defendant Republic any amount due or may be due to said contractor
as contract price for the payment of the materials so supplied.
The defendant has already instituted a suit against the contractor for the forfeiture of the latter’s bond to
secure the faithful performance of stipulations in the construction contract with regard to one of the two
school buildings. The contractor has a similar bond with respect to the other building. These actions are in
accordance with the requirements of Act No. 3688, or “An Act for the Protection of Persons Furnishing
Material and Labor for the Construction of Public Works.”
Pursuant to Act No. 3688, plaintiff’s legal remedy is not to bring suit against the Government, there being
no privity of contract between them, but to intervene in the civil case as an unpaid supplier of materials to
the contractor, or file and action in the name of the Republic against said contractor on the latter’s other
bond.
While the plaintiff argues that an implied contract arose when the defendant promised to make payment
to the former after receiving the original powers of attorney, it should be observed that defendant was not
a party to the execution of the powers of attorney. Besides, the Director of Public Schools did not have
the authority to bind defendant on the payment under the contract. The payment is not within his
exclusive control but is subject to approval under existing laws.
Under the facts alleged in the complaint, the powers of attorney made plaintiff the contractor’s agent in
collection of the amounts due. And since it is also alleged that, after the execution of the powers of
attorney, the principal demanded and collected from defendant the money the collection of which he had
previously entrusted to plaintiff, the agency apparently has already been revoked.
Even supposing that the powers of attorney are irrevocable as alleged by the plaintiff, their alleged
irrevocability cannot affect the defendant who is not a party thereto. They are only obligatory on the
principal who executed the agency.
xxxxxxxxxxxxxxxxxxxxxxxxxxx

INTERNATIONAL EXCHANGE BANK NOW UNION BANK vs. SPOUSES BRIONES.

G.R. No. 205657 | 2017-03-29
On July 2, 2003, spouses Jerome and Quinnie Briones (Spouses Briones) took out a loan of
P3,789,216.00 from iBank to purchase a BMW Z4 Roadster. The monthly amortization for two (2) years
was P78,942.00.[7]

The Spouses Briones executed a promissory note with chattel mortgage that required them to take out an
insurance policy on the vehicle. The promissory note also gave iBank, as the Spouses Briones' attorney-
in-fact, irrevocable authority to file an insurance claim in case of loss or damage to the vehicle. The
insurance proceeds were to be made payable to iBank.

On November 5, 2003, at about 10:50 p.m., the mortgaged BMW Z4 Roadster was carnapped by three (3)
armed men in front of Metrobank Banlat Branch in Tandang Sora, Quezon City.[11] Jerome Briones
(Jerome) immediately reported the incident to the Philippine National Police Traffic Management Group.
[12]

The Spouses Briones declared the loss to iBank, which instructed them to continue paying the next three
(3) monthly installments "as a sign of good faith," a directive they complied with. On March 26, 2004, or
after the Spouses Briones finished paying the three (3)-month installment, iBank sent them a letter
demanding full payment of the lost vehicle.

On April 30, 2004, the Spouses Briones submitted a notice of claim with their insurance company, which
denied the claim on June 29, 2004 due to the delayed reporting of the lost vehicle.

RULING:

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 consent or authority of the latter." Furthermore, Article
1884 of the Civil Code provides that "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."

Rallos v. Felix Go Chan & Sons Realty Corporation lays down the elements of agency:

Out of the above given principles, sprung the creation an acceptance of the relationship of
agency whereby one party, called the principal (mandante), authorizes another, called the
agent (mandatario), to act for and in his behalf in transactions with third persons. The
essential elements of agency are:

(1) there is consent, express or implied, of the parties to establish the relationship;

(2) the object is the execution of a juridical act in relation to a third person;

(3) the agent acts as a representative and not for himself; and

(4) the agent acts within the scope of his authority.[47](Emphasis in the original, citation
omitted)
All the elements of agency exist in this case. Under the promissory note with chattel mortgage, Spouses
Briones appointed iBank as their attorney-in-fact, authorizing it to file a claim with the insurance
company if the mortgaged vehicle was lost or damaged. Petitioner was also authorized to collect the
insurance proceeds as the beneficiary of the insurance policy.
XXX

The determination of agency is ultimately factual in nature and this Court sees no reason to reverse the
findings of the Regional Trial Court and the Court of Appeals. They both found the existence of an
agency relationship between the Spouses Briones and iBank, based on the clear wording of Sections 6 and
22 of the promissory note with chattel mortgage, which petitioner prepared and respondents signed.

Petitioner asserts that the Spouses Briones effectively revoked the agency granted under the promissory
note when they filed a claim with the insurance company.

Petitioner is mistaken.

Revocation as a form of extinguishing an agency under Article 1924 of the Civil Code only applies in
cases of incompatibility, such as when the principal disregards or bypasses the agent in order to deal with
a third person in a way that excludes the agent.

In the case at bar, the mortgaged vehicle was carnapped on November 5, 2003 and the Spouses Briones
immediately informed petitioner about the loss. The Spouses Briones continued paying the monthly
installment for the next three (3) months following the vehicle's loss to show their good faith.

However, on March 26, 2004, petitioner demanded full payment from Spouses Briones for the lost
vehicle. The Spouses Briones were thus constrained to file a claim for loss with the insurance company
on April 30, 2004, precisely because petitioner failed to do so despite being their agent and being
authorized to file a claim under the insurance policy. Not surprisingly, the insurance company declined
the claim for belated filing.

The Spouses Briones' claim for loss cannot be seen as an implied revocation of the agency or their way of
excluding petitioner. They did not disregard or bypass petitioner when they made an insurance claim;
rather, they had no choice but to personally do it because of their agent's negligence. This is not the
implied termination or revocation of an agency provided for under Article 1924 of the Civil Code.

While a contract of agency is generally revocable at will as it is primarily based on trust and confidence,
Article 1927 of the Civil Code provides the instances when an agency becomes irrevocable:

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 a partnership in the contract of partnership and his removal from the
management is unjustifiable.

A bilateral contract that depends upon the agency is considered an agency coupled with an interest,
making it an exception to the general rule of revocability at will. Lim v. Saban emphasizes that when an
agency is established for both the principal and the agent, an agency coupled with an interest is created
and the principal cannot revoke the agency at will.

In the promissory note with chattel mortgage, the Spouses Briones authorized petitioner to claim, collect,
and apply the insurance proceeds towards the full satisfaction of their loan if the mortgaged vehicle were
lost or damaged. Clearly, a bilateral contract existed between the parties, making the agency irrevocable.
Petitioner was also aware of the bilateral contract; thus, it included the designation of an irrevocable
agency in the promissory note with chattel mortgage that it prepared for the Spouses Briones to sign.

Petitioner asserts that the insurance coverage is only an alternative available to the Spouses Briones; and
with the denial of the insurance claim, the Spouses Briones are obligated to pay the remaining balance
plus interest of the mortgaged vehicle.

The petitioner is again mistaken.

As the agent, petitioner was mandated to look after the interests of the Spouses Briones. However, instead
of going after the insurance proceeds, as expected of it as the agent, petitioner opted to claim the full
amount from the Spouses Briones, disregard the established principal-agency relationship, and put its own
interests before those of its principal.

The facts show that the insurance policy was valid when the vehicle was lost, and that the insurance claim
was only denied because of the belated filing.

Having been negligent in its duties as the duly constituted agent, petitioner must be held liable for the
damages suffered by the Spouses Briones because of non-performance of its obligation as the agent, and
because it prioritized its interests over that of its principal.

Furthermore, petitioner's bad faith was evident when it advised the Spouses Briones to continue paying
three (3) monthly installments after the loss, purportedly to show their good faith. A principal and an
agent enjoy a fiduciary relationship marked with trust and confidence, therefore, the agent has the duty
"to act in good faith [to advance] the interests of [its] principal."

If petitioner was indeed acting in good faith, it could have timely informed the Spouses Briones that it
was terminating the agency and its right to file an insurance claim, and could have advised them to
facilitate the insurance proceeds themselves. Petitioner's failure to do so only compounds its negligence
and underscores its bad faith. Thus, it will be inequitable now to compel the Spouses Briones to pay the
full amount of the lost property.

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES vs. COURT OF APPEALS and
AMERICAN AIRLINES INCORPORATED
G.R. No. 76931. May 29, 1991.
On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air), an air carrier
offering passenger and air cargo transportation in the Philippines, and Orient Air Services and Hotel
Representatives (hereinafter referred to as Orient Air), entered into a General Sales Agency Agreement
(hereinafter referred to as the Agreement), whereby the former authorized the latter to act as its exclusive
general sales agent within the Philippines for the sale of air passenger transportation. Pertinent provisions
of the agreement are reproduced, to wit:
On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by failing
to promptly remit the net proceeds of sales for the months of January to March 1981 in the amount of US
$254,400.40, American Air by itself undertook the collection of the proceeds of tickets sold originally by
Orient Air and terminated forthwith the Agreement in accordance with Paragraph 13 thereof
(Termination). Four (4) days later, or on 15 May 1981, American Air instituted suit against Orient Air
with the Court of First Instance of Manila, Branch 24, for Accounting with Preliminary Attachment or
Garnishment, Mandatory Injunction and Restraining Order, averring the aforesaid basis for the
termination of the Agreement as well as therein defendant's previous record of failures "to promptly settle
past outstanding refunds of which there were available funds in the possession of the defendant, . . . to the
damage and prejudice of plaintiff."
In its Answer with counterclaim dated 9 July 1981, defendant Orient Air denied the material allegations
of the complaint with respect to plaintiff's entitlement to alleged unremitted amounts, contending that
after application thereof to the commissions due it under the Agreement, plaintiff in fact still owed Orient
Air a balance in unpaid overriding commissions. Further, the defendant contended that the actions taken
by American Air in the course of terminating the Agreement as well as the termination itself were
untenable, Orient Air claiming that American Air's precipitous conduct had occasioned prejudice to its
business interests.
Ruling:
The principal issue for resolution by the Court is the extent of Orient Air's right to the 3% overriding
commission. It is the stand of American Air that such commission is based only on sales of its services
actually negotiated or transacted by Orient Air, otherwise referred to as "ticketed sales." As basis thereof,
primary reliance is placed upon paragraph 5(b) of the Agreement which, in reiteration, is quoted as
follows:

"5. Commissions

a) . . .

b) Overriding Commission

In addition to the above commission, American will pay Orient Air Services an
overriding commission of 3% of the tariff fees and charges for all sales of
transportation over American's services by Orient Air Services or its sub-agents."
(emphasis supplied).
Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having
opted to appoint any sub-agents, it is American Air's contention that Orient Air can claim entitlement to
the disputed overriding commission based only on ticketed sales. This is supposed to be the clear meaning
of the underscored portion of the above provision. Thus, to be entitled to the 3% overriding commission,
the sale must be made by Orient Air and the sale must be done with the use of American Air's ticket
stocks.
On the other hand, Orient Air contends that the contractual stipulation of a 3% overriding commission
covers the total revenue of American Air and not merely that derived from ticketed sales undertaken by
Orient Air. The latter, in justification of its submission, invokes its designation as the exclusive General
Sales Agent of American Air, with the corresponding obligations arising from such agency, such as, the
promotion and solicitation for the services of its principal. In effect, by virtue of such exclusivity, "all
sales of transportation over American Air's services are necessarily by Orient Air."
It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be taken
into consideration to ascertain the meaning of its provisions. The various stipulations in the contract must
be read together to give effect to all. After a careful examination of the records, the Court finds merit in
the contention of Orient Air that the Agreement, when interpreted in accordance with the foregoing
principles, entitles it to the 3% overriding commission based on total revenue, or as referred to by the
parties, "total flown revenue."
As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the
promotion and marketing of American Air's services for air passenger transportation, and the solicitation
of sales therefor. In return for such efforts and services, Orient Air was to be paid commissions of two (2)
kinds: first, a sales agency commission, ranging from 7-8% of tariff fares and charges from sales by
Orient Air when made on American Air ticket stock; and second, an overriding commission of 3% of
tariff fares and charges for all sales of passenger transportation over American Air services. It is
immediately observed that the precondition attached to the first type of commission does not obtain for
the second type of commissions. The latter type of commissions would accrue for sales of American Air
services made not on its ticket stock but on the ticket stock of other air carriers sold by such carriers or
other authorized ticketing facilities or travel agents. To rule otherwise, i.e., to limit the basis of such
overriding commissions to sales from American Air ticket stock would erase any distinction between the
two (2) types of commissions and would lead to the absurd conclusion that the parties had entered into a
contract with meaningless provisions. Such an interpretation must at all times be avoided with every
effort exerted to harmonize the entire Agreement.
XXX

It is believed, however, that respondent appellate court erred in affirming the rest of the decision of the
trial court. We refer particularly to the lower court's decision ordering American Air to "reinstate
defendant as its general sales agent for passenger transportation in the Philippines in accordance with said
GSA Agreement."
By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to
extend its personality to Orient Air. Such would be violative of the principles and essence of agency,
defined by law as a contract whereby "a person binds himself to render some service or to do something
in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER."
17 (emphasis supplied) In an agent-principal relationship, the personality of the principal is extended
through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized
to perform all acts which the latter would have him do. Such a relationship can only be effected with the
consent of the principal, which must not, in any way, be compelled by law or by any court. The
Agreement itself between the parties states that "either party may terminate the Agreement without cause
by giving the other 30 days' notice by letter, telegram or cable." (emphasis supplied) We, therefore, set
aside the portion of the ruling of the respondent appellate court reinstating Orient Air as general sales
agent of American Air.

PHILIPPINE NATIONAL BANK vs. STA. MARIA, ET AL.,

G.R. No. L-24765. August 29, 1969.

Maximo Sta. Maria secured from PNB sugar crop loans under a special power of attorney, executed in his
favor by his six brothers and sisters to mortgage a 16-odd hectare parcel of land, jointly owned by all of
them, the pertinent portion of which reads as follows:

"That we, VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO and

LEONILA all surnamed STA. MARIA, sole heirs of our deceased parents CANDIDO
STA. MARIA and FRANCISCA DE LOS REYES, all of legal age, Filipinos, and
residents of Dinalupihan, Bataan, do hereby name, constitute and appoint Dr. MAXIMO
STA. MARIA, of legal age, married, and residing at Dinalupihan, Bataan to be our true
and lawful attorney of and in our place, name and stead to mortgage, or convey as
security to any bank, company or to any natural or juridical person, our undivided shares
over a certain parcel of land together with the improvements thereon . . .

In addition, Valeriana Sta. Maria alone also executed in favor of her brother, Maximo, a special power of
attorney to borrow money and mortgage any real estate owned by her, granting him the following
authority:

"For me and in my name to borrow money and make, execute, sign and deliver
mortgages of real estate now owned by me standing in my name and to make, execute,
sign and deliver any and all promissory notes necessary in the premises."

By virtue of the two above powers, Maximo Sta. Maria applied for two separate crop loans, for the 1952-
1953 and 1953-1954 crop years, with PNB, one in the amount of P15,000.00, of which only the sum of
P13,216.11 was actually extended by PNB, and the other in the amount of P23,000.00, of which only the
sum of P12,427.57 was actually extended by PNB. As security for the two loans, Maximo Sta. Maria
executed in his own name in favor of plaintiff bank two chattel mortgages on the standing crops,
guaranteed by surety bonds for the full authorized amounts of the loans executed by the Associated
Insurance & Surety Co., Inc. as surety with Maximo Sta. Maria as principal. The records of the crop loan
application further disclose that among the securities given by Maximo for the loans were a "2nd
mortgage on 25,3023 Has. of sugarland, including sugar quota rights therein" including the parcel of land
jointly owned by Maximo and his six brothers and sisters herein for the 1952-1953 crop loan, with the
notation that the bank already held a first mortgage on the same properties for the 1951-1952 crop loan of
Maximo and a 3rd mortgage on the same properties for the 1953-1954 crop loan.
This appeal has been taken by his six brothers and sisters, defendants-appellants who reiterate in their
brief their main contention in their Answer to the complaint that under the special power of attorney, Exh.
E, they had not given their brother, Maximo, the authority to borrow money but only to mortgage the real
estate jointly owned by them; and that if they are liable at all, their liability should not go beyond the
value of the property which they had authorized to be given as security for the loans obtained by Maximo.
In their answer, defendants-appellants had further contended that they did not benefit whatsoever from the
loans, and that the plaintiff bank's only recourse against them is to foreclose on the property which they
had authorized Maximo to mortgage

RULING:

1. PNB has not made out a cause of action against defendants-appellants (except Valeriana), so as to hold
them liable for the unpaid balances of the loans obtained by Maximo under the chattel mortgages
executed by him in his own name alone. In the early case of Bank of P. I. vs. de Coster, this Court, in
holding that the broad power of attorney given by the wife to the husband to look after and protect the
wife's interests and to transact her business did not authorize him to make her liable as a surety for the
payment of the pre-existing debt of a third person, cited the fundamental construction rule that "where in
an instrument powers and duties are specified and defined, that all of such powers and duties are limited
and confined to those which are specified and defined, and that all other powers and duties are excluded."
This is but in accord with the disinclination of courts to enlarge an authority granted beyond the powers
expressly given and those which incidentally flow or derive therefrom as being usual or reasonably
necessary and proper for the performance of such express powers. Even before the filing of the present
action this Court in the similar case of De Villa vs. Fabricantes had already ruled that where the power of
attorney given to the husband by the wife was limited to a grant of authority to mortgage a parcel of land
titled in the wife's name, the wife may not be held liable for the payment of the mortgage debt contracted
by the husband, as the authority to mortgage does not carry with it the authority to contract obligation.
This Court thus held in the said case:

"Appellant claims that the trial court erred in holding that only Cesario A. Fabricante is
liable to pay the mortgage debt and not his wife who is exempt from liability. The trial
court said: 'Only the defendant. Cesario A. Fabricante is liable for the payment of this
amount because it does not appear that the other defendant Maria G. de Fabricante had
authorized Cesario A. Fabricante to contract the debt also in her name. The power of
attorney was not presented and it is to be presumed that the power (of attorney) was
limited to a grant of authority to Cesario A. Fabricante to mortgage the parcel of land
covered by Transfer Certificate of Title in the name of Maria G. de Fabricante.'

"We went over the contents of the deed of mortgage executed by Cesario Fabricante in
favor of Appellant on April 18, 1944, and there is really nothing therein from which we
may infer that Cesario was authorized by his wife to contract the obligation in her name.
The deed shows that the authority was limited to the execution of the mortgage insofar as
the property of the wife is concerned. There is a difference between authority to mortgage
and authority to contract obligation. Since the power of attorney was not presented as
evidence, the trial court was correct in presuming that power was merely limited to a
grant of authority to mortgage unless the contrary is shown. "
2. The authority granted by defendants-appellants (except Valeriana) unto their brother, Maximo, was
merely to mortgage the property jointly owned by them. They did not grant Maximo any authority to
contract for any loans in their names and behalf. Maximo alone, with Valeriana who authorized him-to
borrow money, must answer for said loans and the other defendants- appellants' only liability is that the
real estate authorized by them to be mortgaged would be subject to foreclosure and sale to respond for the
obligations contracted by Maximo. But they cannot be held personally liable for the payment of such
obligations, as erroneously held by the trial court.

ANTONIO E. PRATS vs. COURT OF APPEALS, ALFONSO DORONILA and PNB

G.R. No. L-39822. January 31, 1978

Doronila offered to sell his 300-hectare land to the Social Security System at P4.00 per square meter. He
received and accepted a counter-offer of P3.25 per square meter. But since the System did not take
definite action on the transaction, Doronila granted Prats an exclusive 60-day option and authority to sell
the property on condition that if no written offer was made to Doronila until the last day of the
authorization, the authority shall expire and become null and avoid. The option should have expired on
April 18, 1968, but this was extended by Doronilato May 18, 1968.

During the period of his authorization, Prats diligently took steps to bring back together Doronila and the
Social Security System. On March 16, 1968, he wrote the System inviting the chairman to discuss the
officer of the sale of the property. On May 16, 1968, he made a formal written offer to sell the property at
P6.00 per square meter. Thereafter, Doronila respondent received a telegram dated May 17, 1968 from
the System informing him that it was considering the purchase of his property. However, since Doronila
did not receive a written offer for the purchase of the property during Prats 's period of authorization
(except a latter dated May 18, 1968 coming from Prats himself on behalf of an undisclosed buyer who
was willing to buy at P4.50 per square meter), Doronila informed Prats in a lot or that pursuant to their
agreement the latter's authority was deemed terminated.

Thereafter, on June 19, 1968, Doronila renewed his offer to sell his 300-hectare land to the System. The
transaction was finalized on July 30, 1968, with the System buying at its original counter offer of P3.25
per square meter.

Prats presented his statement of account to Doronila for professional services as real estate broker in the
amount of P1,380,000. Doronila refused to pay.

RULING:

In equity, however, the Court notes that Prats had diligently taken steps to bring back together Doronila
and the SSS, among which may be mentioned the following:

In July, 1967, prior to February 14, 1968, Doronila had offered to sell the land in question to the Social
Security System. Direct negotiations were made by Doronila with the SSS. The SSS did not then accept
the offer of Doronila. Thereafter, Doronila executed the exclusive authority in favor of Prats on February
14, 1968.
Prats communicated with the Office of the Presidential Housing Commission on February 23, 1968
offering the Doronila property. Prats wrote a follow-up letter on April 18, 1968 which was answered by
the Commission with the suggestion that the property be offered directly to the SSS. Prats wrote the SSS
on March 16, 1968, inviting Chairman Ramon Gaviola, Jr. to discuss the offer of the sale of the property
in question to the SSS. On May 6, 1968, Prats made a formal written offer to the Social Security System
to sell the 300-hectare land of Doronila at the price of P6.00 per square meter. Doronila received on May
17, 1968 from the SSS Administrator a telegram that the SSS was considering the purchase of Doronila's
property for its housing project. Prats and his witness Raagas testified that Prats had several dinner and
lunch meetings with Doronila and/or his nephew, Atty. Manuel D. Asencio, regarding the progress of the
negotiations with the SSS.

Atty. Asencio had declared that he and his uncle, Alfonso Doronila, were invited several times by Prats,
sometimes to luncheons and sometimes to dinner. On a Sunday, June 2, 1968, Prats and Raagas had
luncheon in Sulu Hotel in Quezon City and they were joined later by Chairman Gaviola of the SSS.

The Court has noted on the other hand that Doronila finally sold the property to the Social Security
System at P3.25 per square meter which was the very same price counter-offered by the Social Security
System and accepted by him in July, 1967 when he alone was dealing exclusively with the said buyer
long before Prats came into the picture but that on the other hand Prats' efforts somehow were
instrumental in bringing them together again and finally consummating the transaction the same price of
P3.25 square meter, although such finalization was after the expiration of Prats' extended exclusive
authority. Still, such price was higher than that stipulated in the exclusive authority granted by Doronila
to Prats.

Under the circumstances, the Court grants in equity the sum of One Hundred Thousand Pesos
(P100,000.00) by compensation for his efforts and assistance in the transaction, which however was
finalized and consummated after the expiration of his exclusive authority and sets aside the P10,000.00-
attorneys' fees award adjudged against him by Doronila court.

xxxxxxxxxxxxxxxxxxxxxxx

ANDRES QUIROGA vs. PARSONS HARDWARE CO.

1. On January 24, 1911, in this city of Manila, a contract in the following tenor was entered into by
and between the plaintiff, as party of the first part, and J. Parsons (to whose rights and obligations the
present defendant later subrogated itself), as party of the second part:
CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS,
BOTH MERCHANTS ESTABLISHED IN MANILA FOR THE EXCLUSIVE SALE OF
QUIROGA BEDS IN THE VISAYAN ISLANDS.
"ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands
to J. Parsons under the following conditions:
"(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment
in Iloilo, and shall invoice them at the same price he has fixed for sales, in Manila, and, in the
 invoices, shall make an allowance of a discount of 25 per cent of the invoiced prices, as
commission on the sales; and Mr. Parsons shall order the beds by the dozen, whether of the same or
of different styles.
"(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of sixty
days from the date of their shipment.
"(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and the freight,
insurance, and cost of unloading from the vessel at the point where the beds are received, shall be
paid by Mr. Parsons.
"(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when
made shall be considered as a prompt payment, and as such a deduction of 2 per cent shall be made
from the amount of the invoice.
"The same discount shall be made on the amount of any invoice which Mr. Parsons may deem
convenient to pay in cash.
"(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in
price which he may plan to make in respect to his beds, and agrees that if on the date when such
alteration takes effect he should have any order pending to be served to Mr. Parsons, such order
shall enjoy the advantage of the alteration if the price thereby be lowered, but shall not be affected
by said alteration if the price thereby be increased, for, in this latter case, Mr. Quiroga assumed the
obligation to invoice the beds at the price at which the order was given.
"(F) Mr. Parsons binds himself not to sell any other kind except the 'Quiroga' beds.
"ART. 2. In compensation for the expenses of advertisement which, for the benefit of both
contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the
obligation to offer and give the preference to Mr. Parsons in case anyone should apply for the
exclusive agency for any island not comprised within the Visayan group.
"ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of 'Quiroga' beds in
all the towns of the Archipelago where there are no exclusive agents, and shall immediately report
such action to Mr. Quiroga for his approval.
"ART. 4. This contract is made for an unlimited period, and may be terminated by either of the
contracting parties on a previous notice of ninety days to the other party "
In order to classify a contract, due regard must be given to its essential clauses. In the contract in
question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to
furnish the defendant with the beds which the latter might order, at the price stipulated) and that the
defendant was to pay the price in the manner stipulated. The price agreed upon was the one determined by
the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to
their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in
cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed
for prompt payment. These are precisely the essential features of a contract of purchase and sale. There
was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay
their price. These features exclude the legal conception of an agency or order to sell whereby the
mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the
price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he
returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the
beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and
regardless as to whether he had or had not sold the beds.
It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff is
one of purchase and sale, in order to show that it was not one made on the basis of a commission on sales,
as the plaintiff claims it was, for these contracts are incompatible with each other. But, besides,
examining the clauses of this contract, none of them is found that substantially supports the plaintiff's
contention. Not a single one of these clauses necessarily conveys the idea of an agency. The words
commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than
a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that
the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to
the remaining clauses, the least that can be said is that they are not incompatible with the contract of
purchase and sale.
XXXXXXX

REPUBLIC OF THE PHILIPPINES represented by the PRIVATIZATION AND

MANAGEMENT OFFICE (PMO) v. ANTONIO V. BAÑEZ, LUISITA BAÑEZ VALERA, NENA
BAÑEZ HOJILLA, and EDGARDO B. HOJILLA, JR.
G.R. No. 169442, October 15, 2015

FACTS:
The Banez’s offered for sale a parcel of land with an area of 20,000 sq m in Bangued, Abra to Cellophil
Resources Corporation (CRC). On Dec. 1981, they entered into a contact and based on the stipulation in
the Contract, the parties agreed that full payment shall be made only upon presentation of the title and
other documents of the subject property to CRC.
After paying cash advances to respondents, CRC constructed staff houses and introduced improvements
on the subject property. As the Banez’s would be staying abroad for a time, they executed a Special
Power of Attorney (SPA) in favor of Edgardo B. Hojilla to undertake the required titling.
Meanwhile, CRC stopped its operations, and is now represented through the Privatization and
Management Office (PMO). The Banez’s thereafter declared the subject property as Urbano Bañez
property, rented out to third parties the staff houses petitioner constructed, and ordered its guards to
prohibit the petitioner from entering the compound. It is their contention that CRC no longer has any right
over the property as their contract rights has prescribed after 10 years.
CRC contends that their letters to Hojilla has effectively interrupted the running of the prescriptive
period.
HELD/RATIO:
We refer to the SPA, which granted the authority of Hojilla.
When respondents went abroad pending the performance of their obligations in the Contract, they
authorized Hojilla to register the subject property— a single obligation in the whole range of obligations
in the Contract. The SPA appeared to have left no representative to fulfill respondents' obligations in the
Contract on their behalf except for Hojilla's authority to register the subject property. The pertinent
portion of the SPA reads:
1. To take all steps necessary to cause a portion of the lot covered by Tax Declaration
No. 40185 in the name of Urbano Baflez which is the subject of our "Offer to Sell" to
Cellophil Resources Corporation containing an area xxx to be brought under the
operation of Republic Act No. 496, as amended, and to cause the issuance in our name of
the corresponding original certificate of title.
2. To do all acts and things and to execute all papers and documents of whatever nature
or kind required for the accomplishments of the aforesaid purpose.
HEREBY GRANTING AND GIVING unto our said attorney full power and authority
whatsoever requisite or necessary or proper to be done in or about the premises as fully
to all intents and purposes as we might or could lawfully do if personally present (with
power of substitution and revocation), and hereby ratifying and confirming all that our
said attorney shall do or cause to be done under and by virtue of these
presents.18(Emphasis and underscoring ours)
This was read simply by the lower courts as limiting Hojilla's authority to the registration of the subject
property under the name of his principal, and all the necessary acts for such purpose. It observed that
nowhere in the SPA was Hojilla authorized as administrator or agent of respondents with respect to the
execution of the Contract.
In the case at bar, the reliefs prayed for by petitioner include the execution of the Contract such as
delivery of the subject title, recovery of possession of the subject property, execution of the deed of sale
or transfer of absolute ownership upon full payment of the balance, and damages for alleged violation of
respondents of the Contract for non-delivery of the title and refusal to vacate the subject property. Indeed,
following the reading of the lower courts of the scope of Hojilla's authority, Hojilla is neither the proper
party to execute the Contract nor the proper party to receive the demand letters on behalf of respondents.
This strict construction of the tenor of the SPA will render the obligatory force of the Contract ineffective.
Construction is not a tool to prejudice or commit fraud or to obstruct, but to attain justice. Ea Est
Accipienda Interpretatio Quae Vitio Caret. To favor the lower court's interpretation of the scope of
Hojilla's power is to defeat the juridical tie of the Contract—the vinculum juris of the parties. As no one
was authorized to represent respondents in the Contract, then petitioner cannot enforce the Contract, as it
were. This is an absurd interpretation of the SPA. It renders the Contract ineffective for lack of a party to
execute the Contract.
Contrary to the findings of the lower court, the present case is a case of an express agency, where, Hojilla,
the agent, binds himself to represent another, the principal, who are herein respondents, with the latter's
express consent or authority. In a contract of agency, the agent acts for and in behalf of the principal on
matters within the scope of the authority conferred upon him, such that, the acts of the agent have the
same legal effect as if they were personally done by the principal. Because there is an express authority
granted upon Hojilla to represent the respondents as evidenced by the SPA, Hojilla's actions bind the
respondents.
As agent, the representations and guarantees of Hojilla are considered representations and guarantees of
the principal. This is the principle of agency by promissory estoppel.
Also, one glaring fact that cannot escape us is Hojilla's representation and guarantee that petitioner's
obligation will only arise upon presentation of a clean title and execution of a Deed of Sale signed by the
respondents' heirs, which reads, "[t]he Bañez heirs will only claim for the full payment of the property
upon presentation of a clean title and execution of a Deed of Sale signed by the heirs."
If Hojilla knew that he had no authority to execute the Contract and receive the letters on behalf of
respondents, he should have opposed petitioner's demand letters. However, having received the several
demand letters from petitioner, Hojilla continuously represented himself as the duly authorized agent of
respondents, authorized not only to administer and/or manage the subject property, but also authorized to
register the subject property and represent the respondents with regard to the latter's obligations in the
Contract. Hojilla also assured petitioner that petitioner's obligation to pay will arise only upon
presentation of the title.
Clearly, the respondents are estopped by the acts and representations of their agent. Falling squarely in
the case at bar is our pronouncement in Philippine National Bank v. IAC (First Civil Cases Div.),
"[h]aving given that assurance, [Hojilla] may not turn around and do the exact opposite of what [he] said
[he] would do. One may not take inconsistent positions. A party may not go back on his own acts and
representations to the prejudice of the other party who relied upon them."
Assuming further that Hojilla exceeded his authority, the respondents are still solidarity liable because
they allowed Hojilla to act as though he had full powers by impliedly ratifying Hojilia's actions—through
action by omission. This is the import of the principle of agency by estoppel or the doctrine of apparent
authority.
In an agency by estoppel or apparent authority, "[t]he principal is bound by the acts of his agent with the
apparent authority which he knowingly permits the agent to assume, or which he holds the agent out to
the public as possessing."
The respondents' acquiescence of Hojilla's acts was made when they failed to repudiate the latter's acts.
They knowingly permitted Hojilla to represent them and petitioners were clearly misled into believing
Hojilla's authority. Thus, the respondents are now estopped from repudiating Hojilla's authority, and
Hojilla's actions are binding upon the respondents.
xxxxxxxxxxxxxxxxxxxxxxxxxxxx

REPUBLIC OF THE PHILIPPINES, represented by LT. GEN. JOSE M. CALIMLIM, in his

capacity as former Chief of the Intelligence Service, Armed Forces of the Philippines (ISAFP), and
former Commanding General, Presidential Security Group (PSG), and MAJ. DAVID B.
DICIANO, in his capacity as an Officer of ISAFP and former member of the PSG, v.
HON.VICTORINO EVANGELISTA, in his capacity as PresidingJudge,
Regional Trial Court, Branch 223, Quezon City, and DANTE LEGASPI, represented by his
attorney-in-fact, Paul Gutierrez
G.R. No. 156015, August 11, 2005

FACTS:
Dante Legaspi is the owner of a parcel of land in Bigte, Norzagaray, Bulacan. In November 1999, Lt.
Gen. Jose Calimlim, representing the Republic of the Philippines, entered into a Memorandum of
Agreement with one Ciriaco Reyes. The MOA granted Reyes a permit to hunt for treasure in a land in
Bigte, Norzagaray, Bulacan. Calimlim assigned about 80 military personnel to guard the area and encamp
thereon, allegedly to intimidate Legaspi and other occupants of the area from going near the subject land.
In 2000, Legaspi executed a special power of attorney giving his nephew, Paul Gutierrez, the power to
deal with the treasure hunting activities on Legaspi’s land and to file charges against those who may enter
it without the latter’s authority. Legaspi agreed to give Gutierrez 40% of the treasure that may be found in
the land.
Fourteen (14) days later, Gutierrez filed a case for damages and injunction against petitioner for illegally
entering Legaspi’s land. For this purpose, he hired the legal services of Atty. Homobono Adaza. Their
contract provided that Adaza would be entitled to 30% of Legaspi’s share in whatever treasure may be
found in the land. Upon filing of the complaint, a temporary restraining order was issued against
petitioners.
In their motion to dismiss, the petitioners alleged that there is no real party-in-interest since the SPA of
Gutierrez to bring the suit had already been revoked, and that Gutierrez failed to establish that the alleged
armed men guarding the area were acting on orders of the petitioners.
RULING:
A contract of agency is generally revocable as it is a personal contract of representation based on
trust and confidence reposed by the principal on his agent. As the power of the agent to act depends
on the will and license of the principal he represents, the power of the agent ceases when the will or
permission is withdrawn by the principal. Thus, generally, the agency may be revoked by the principal at
will.
On the first issue, petitioners claim that the special power of attorney of Gutierrez to represent Legaspi
has already been revoked by the latter. Private respondent Gutierrez, however, contends that the unilateral
revocation is invalid as his agency is coupled with interest. We agree with private respondent.
Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to render some
service or do something in representation or on behalf of another, known as the principal, with the
consent or authority of the latter.

A contract of agency is generally revocable as it is a personal contract of representation based on trust and
confidence reposed by the principal on his agent. As the power of the agent to act depends on the will and
license of the principal he represents, the power of the agent ceases when the will or permission is
withdrawn by the principal. Thus, generally, the agency may be revoked by the principal at will.
However, an exception to the revocability of a contract of agency is when it is coupled with interest, i.e.,
if a bilateral contract depends upon the agency. The reason for its irrevocability is because the agency
becomes part of another obligation or agreement. It is not solely the rights of the principal but also that of
the agent and third persons which are affected. Hence, the law provides that in such cases, the agency
cannot be revoked at the sole will of the principal.
In the case at bar, we agree with the finding of the trial and appellate courts that the agency granted by
Legaspi to Gutierrez is coupled with interest as a bilateral contract depends on it. It is clear from the
records that Gutierrez was given by Legaspi, inter alia, the power to manage the treasure hunting
activities in the subject land; to file any case against anyone who enters the land without authority from
Legaspi; to engage the services of lawyers to carry out the agency; and, to dig for any treasure within the
land and enter into agreements relative thereto. It was likewise agreed upon that Gutierrez shall be
entitled to 40% of whatever treasure may be found in the land. Pursuant to this authority and to protect
Legaspi's land from the alleged illegal entry of petitioners, agent Gutierrez hired the services of Atty.
Adaza to prosecute the case for damages and injunction against petitioners. As payment for legal services,
Gutierrez agreed to assign to Atty. Adaza 30% of Legaspi's share in whatever treasure may be recovered
in the subject land. It is clear that the treasure that may be found in the land is the subject matter of the
agency; that under the SPA, Gutierrez can enter into contract for the legal services of Atty. Adaza; and,
thus Gutierrez and Atty. Adaza have an interest in the subject matter of the agency, i.e., in the treasures
that may be found in the land. This bilateral contract depends on the agency and thus renders it as one
coupled with interest, irrevocable at the sole will of the principal Legaspi.[16] When an agency is
constituted as a clause in a bilateral contract, that is, when the agency is inserted in another agreement, the
agency ceases to be revocable at the pleasure of the principal as the agency shall now follow the condition
of the bilateral agreement.[17] Consequently, the Deed of Revocation executed by Legaspi has no effect.
The authority of Gutierrez to file and continue with the prosecution of the case at bar is unaffected.

ROYALE HOMES MARKETING CORPORATION vs. FIDEL P. ALCANTARA

G.R. No. 195190. July 28, 2014.

Not every form of control that a hiring party imposes on the hired party is indicative of employee-
employer relationship. Rules and regulations that merely serve as guidelines towards the achievement of a
mutually desired result without dictating the means and methods of accomplishing it do not establish
employer-employee relationship.

In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara as its
Marketing Director for a fixed period of one year. His work consisted mainly of marketing Royale
Homes' real estate inventories on an exclusive basis. Royale Homes reappointed him for several
consecutive years, the last of which covered the period January 1 to December 31, 2003 where he held the
position of Division 5 Vice-President-Sales. 

On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal alleging that he is a regular
employee of Royale Homes since he is performing tasks that are necessary and desirable to its business.

Ruling of the Labor Arbiter

On September 7, 2005, the Labor Arbiter rendered a Decision  holding that Alcantara is an employee of
Royale Homes with a fixed-term employment period from January 1 to December 31, 2003 and that the
pre-termination of his contract was against the law.

RULING:

The determination of whether a party who renders services to another is an employee or an independent
contractor involves an evaluation of factual matters which, ordinarily, is not within the province of this
Court. In view of the conflicting findings of the tribunals below, however, this Court is constrained to go
over the factual matters involved in this case. Xxx

The juridical relationship of the partiesbased on Control Test

In determining the existence of an employer-employee relationship, this Court has generally relied on the
four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the employer's power to control the employee with respect to the means and
methods by which the work is to be accomplished. Among the four, the most determinative factor in
ascertaining the existence of employer- employee relationship is the "right of control test".  "It is deemed
to be such an important factor that the other requisites may even be disregarded."  This holds true where
the issues to be resolved is whether a person who performs work for another is the latter's employee or is
an independent contractor,  as in this case. For where the person for whom the services are performed
reserves the right to control not only the end to be achieved, but also the means by which such end is
reached, employer-employee relationship is deemed to exist. Xxx

Not every form of control is indicative of employer-employee relationship. A person who performs work
for another and is subjected to its rules, regulations, and code of ethics does not necessarily become an
employee.  As long as the level of control does not interfere with the means and methods of
accomplishing the assigned tasks, the rules imposed by the hiring party on the hired party do not amount
to the labor law concept of control that is indicative of employer-employee relationship. In  Insular Life
Assurance Co., Ltd. v. National Labor Relations Commission  it was pronounced that:

Logically, the line should be drawn between rules that merely serve as guidelines towards
the achievement of the mutually desired result without dictating the means or methods to
be employed in attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim only to promote the
result, create no employer-employee relationship unlike the second, which address both
the result and the means used to achieve it. . . . 

In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and periodic
evaluation alluded to by Alcantara do not involve control over the means and methods by which he was to
perform his job. Understandably, Royale Homes has to fix the price, impose requirements on prospective
buyers, and lay down the terms and conditions of the sale, including the mode of payment, which the
independent contractors must follow. It is also necessary for Royale Homes to allocate its inventories
among its independent contractors, determine who has priority in selling the same, grant commission or
allowance based on predetermined criteria, and regularly monitor the result of their marketing and sales
efforts. But to the mind of this Court, these do not pertain to the means and methods of how Alcantara
was to perform and accomplish his task of soliciting sales. They do not dictate upon him the details of
how he would solicit sales or the manner as to how he would transact business with prospective clients.
InTongko, this Court held that guidelines or rules and regulations that do not pertain to the means or
methods to be employed in attaining the result are not indicative of control as understood in labor law
Thus:
From jurisprudence, an important lesson that the first Insular Life case teaches us is that a commitment to
abide by the rules and regulations of an insurance company does not ipso facto make the insurance agent
an employee. Neither do guidelines somehow restrictive of the insurance agent's conduct necessarily
indicate "control" as this term is defined in jurisprudence. Guidelines indicative of labor law "control," as
the first Insular Life case tells us, should not merely relate to the mutually desirable result intended by the
contractual relationship; they must have the nature of dictating the means or methods to be employed in
attaining the result, or of fixing the methodology and of binding or restricting the party hired to the use of
these means. In fact, results-wise, the principal can impose production quotas and can determine how
many agents, with specific territories, ought to be employed to achieve the company's objectives. These
are management policy decisions that the labor law element of control cannot reach. Our ruling in these
respects in the first Insular Life case was practically reiterated in Carungcong. Thus, as will be shown
more fully below, Manulife's codes of conduct, all of which do not intrude into the insurance agents'
means and manner of conducting their sales and only control them as to the desired results and Insurance
Code norms, cannot be used as basis for a finding that the labor law concept of control existed between
Manulife and Tongko. 

As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to
prove the elements thereof, particularly Royale Homes' power of control over the means and methods of
accomplishing the work. He, however, failed to cite specific rules, regulations or codes of ethics that
supposedly imposed control on his means and methods of soliciting sales and dealing with prospective
clients. On the other hand, this case is replete with instances that negate the element of control and the
existence of employer-employee relationship. Notably, Alcantara was not required to observe definite
working hours.  Except for soliciting sales, Royale Homes did not assign other tasks to him. He had full
control over the means and methods of accomplishing his tasks as he can "solicit sales at any time and by
any manner which [he may] deem appropriate and necessary." He performed his tasks on his own account
free from the control and direction of Royale Homes in all matters connected therewith, except as to the
results thereof. 

Neither does the repeated hiring of Alcantara prove the existence of employer-employee relationship.  As
discussed above, the absence of control over the means and methods disproves employer-employee
relationship. The continuous rehiring of Alcantara simply signifies the renewal of his contract with
Royale Homes, and highlights his satisfactory services warranting the renewal of such contract. Nor does
the exclusivity clause of contract establish the existence of the labor law concept of control. In Consulta
v. Court of Appeals,  it was held that exclusivity of contract does not necessarily result in employer-
employee relationship, viz.:

. . . However, the fact that the appointment required Consulta to solicit business
exclusively for Pamana did not mean that Pamana exercised control over the means
and methods of Consulta's work as the term control is understood in labor
jurisprudence. Neither did it make Consulta an employee of Pamana. Pamana did not
prohibit Consulta from engaging in any other business, or from being connected with
any other company, for as long as the business [of the] company did not compete with
Pamana's business.
The same scenario obtains in this case. Alcantara was not prohibited from engaging in any other business
as long as he does not sell projects of Royale Homes' competitors. He can engage in selling various other
products or engage in unrelated businesses.

RURAL BANK OF BOMBON (CAMARINES SUR), INC., v. HON. COURT OF APPEALS,

EDERLINDA M. GALLARDO, DANIEL MANZO and RUFINO S. AQUINO
G.R. No. 95703, August 3, 1992

FACTS:
On January 12, 1981, Ederlinda Gallardo, married to Daniel Manzo, executed a special power of attorney
in favor of respondent Rufino Aquino authorizing him to secure a loan for any amount or otherwise
mortgage her paraphernal property in Las Piñas, Rizal, and to sign any document necessary in securing
the loan. Aquino was also authorized to receive the proceeds of the loan.
On August 26, 1981, a Deed of Real Estate Mortgage was executed by Aquino in favor of the Rural Bank
of Bombon over three parcels of land covered by Gallardo’s Transfer Certificate of Title. The properties
were given as security for the loan in the amount of P350,000 plus interest at the rate of fourteen (14%)
per annum.
In 1984, the spouses filed an action against Aquino and the Rural Bank as Aquino allegedly left his
residence and transferred to an unknown place in Bicol. They were allegedly surprised to learn that the
property was mortgaged to pay personal loans obtained by Aquino from the Bank solely for personal his
use, that the mortgagor in the deed was Aquino and not Gallardo, and that without express authority from
Gallardo, that he appointed Rural Bank as attorney in fact and as receiver in case of judicial foreclosure,
and that he had waived Gallardo’s rights under Section 12, Rule 39 of the Rules of Court and the proper
venue of the foreclosure suit.
RULING:
In the case of Philippine Sugar Estates Development Co. v. Poizat, the Court applied the general rule in
the law of agency as follows:
“It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real
property executed by an agent, it must upon its face purport to be made, signed and sealed in the
name of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent
was in fact authorized to make the mortgage, if he has not acted in the name of the principal.
Neither is it ordinarily sufficient that in the mortgage the agent describes himself as acting by
virtue of a power of attorney, if in fact the agent has acted in his own name and has set his own
hand and seal to the mortgage. This is especially true where the agent himself is a party to the
instrument. However clearly the body of the mortgage may show and intend that it shall be the
act of the principal, yet, unless in fact it is executed by the agent for and on behalf of his principal
and as the act and deed of the principal, it is not valid as to the principal."
Thus, Aquino’s act of signing the Deed of Real Estate Mortgage in his name alone as mortgagor, without
any indication that he was signing for and in behalf of the property owner, Gallardo, bound himself alone
in his personal capacity as a debtor and not as the agent of Gallardo.
Rural Bank claims that the Deed is enforceable in light of Article 1883 which provides:
“Art. 1883. If an agent acts in his own name, the principal has no right of action against the
persons with whom the agent has contracted: neither have such persons against the principal.
“In such case the agent is the one directly bound in favor of the person with whom he has
contracted, as if the transaction were his own, except when the contract involves things belonging
to the principal.”
This provision is not applicable to the case at bar. Aquino purportedly acted as an agent of Gallardo, but
actually acted in his personal capacity. Under these circumstances, the Court holds as it did in Philippine
Sugar Estates Development case, that Gallardo’s property is not liable on the real estate mortgage:
"There is no principle of law by which a person can become liable on a real mortgage which she
never executed either in person or by attorney in fact. It should be noted that this is a mortgage
upon real property, the title to which cannot be divested except by sale on execution or the
formalities of a will or deed. For such reasons, the law requires that a power of attorney to
mortgage or sell real property should be executed with all of the formalities required in a deed.
For the same reason that the personal signature of Poizat, standing alone, would not convey the
title of his wife in her own real property, such a signature would not bind her as a mortgagor in
real property, the title to which was in her name."
 COSMIC LUMBER CORPORATION v. COURT OF APPEALS and ISIDRO PEREZ
G.R. No. 114311, November 29, 1996
J. Belosillo
FACTS:
On January 28, 1985, the Cosmic Lumber Corporation through its General Manager executed a Special
Power of Attorney appointing Paz Villamil-Estrada as attorney in fact. On March 11, 1985, by virtue of
her power of attorney, Villamil-Estrada instituted an action for ejectment of Isidro Perez and to recover
the possession of the property before the RTC of Dagupan.
She then entered into a Compromise Agreement with Perez on November 25, 1985, whereby the latter
paid the sum of P26,640 for the portion of the lot where his house is located. The petitioner, by virtue of
the agreement, recognized his ownership and possession over the same.
The Compromise Agreement was approved and judgment was rendered in accordance therewith.
However, it was not executed within five years from the date of its finality allegedly due to the failure of
petitioner to produce the duplicate copy of the title covering the land. Thus, Perez filed a complaint to
revive the judgment.
Petitioner sought the annulment of the judgment, claiming that it was only when summons was served
that it came to know of the compromise agreement entered into between Villamil-Estrada and Perez and
that the agreement should be considered void. However, the same was dismissed for lack of grounds for
annulment.
ISSUE:
Whether or not the compromise agreement between Villamil-Estrada and Perez is void
HELD/RATIO:
YES. The authority granted Villamil-Estrada under the special power of attorney was explicit and
exclusionary: for her to institute any action in court to eject all persons found on Lots Nos. 9127 and 443
so that petitioner could take material possession thereof, and for this purpose to appear at the pre-trial and
enter into any stipulation of facts and/or compromise agreement but only insofar as this was protective of
the rights and interests of petitioner in the property.
Nowhere in this authorization was Villamil-Estrada granted expressly or impliedly any power to sell the
subject property nor a portion thereof. Neither can a conferment of the power to sell be validly inferred
from the specific authority "to enter into a compromise agreement" because of the explicit limitation fixed
by the grantor that the compromise entered into shall only be "so far as it shall protect the rights and
interest of the corporation in the aforementioned lots."
The alienation by sale of an immovable cannot be deemed protective of the rights of petitioner to
physically possess the same, more so when the land was sold for a price of P80 per square meter, far less
than its assessed value of P250 per square meter, and especially considering that petitioner never received
the proceeds of the sale.
When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract
for the sale of real estate must be conferred in writing and must give him specific authority, either to
conduct the general business of the principal or to execute a binding contract containing terms and
conditions which are in the contract he did execute. A special power of attorney is necessary to enter into
any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for
a valuable consideration.
For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express
the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the
language so used conveys such power, no such construction shall be given the document.
It is therefore clear that by selling to respondent Perez a portion of petitioner's land through a compromise
agreement, Villamil-Estrada acted without or in obvious authority. The sale ipso jure is consequently
void.
It may be argued that petitioner knew of the compromise agreement since the principal is chargeable with
and bound by the knowledge of or notice to his agent received while the agent was acting as such. But the
general rule is intended to protect those who exercise good faith and not as a shield for unfair dealing.
Hence there is a well-established exception to the general rule as where the conduct and dealings of the
agent are such as to raise a clear presumption that he will not communicate to the principal the facts in
controversy.
The logical reason for this exception is that where the agent is committing a fraud, it would be contrary to
common sense to presume or to except that he would communicate the facts to the principal. Verily, when
an agent is engaged in the perpetration of a fraud upon his principal for his own exclusive benefit, he is
not really acting for the principal but is really acting for himself, entirely outside the scope of his agency.
Indeed, the basic tenets of agency rest on the highest considerations of justice, equity and fair play, and an
agent will not be permitted to pervert his authority to his own personal advantage, and his act in secret
hostility to the interests of his principal transcends the power afforded him.

CARLOS SANCHEZ v. MEDICARD PHILIPPINES, INC., DR. NICANOR MONTOYA and

CARLOS EJERCITO
G.R. No. 141525, September 2, 2005
J. Sandoval-Gutierrez
FACTS:
In 1987, Medicard Philippines Inc., appointed Carlos Sanchez as its special corporate agent. As such
agent, Medicard gave him a commission based on the “cash brought in.” In 1988, through Sanchez’s
efforts, Medicard and Unilab executed a Health Care Program Contract where, pursuant to the contract,
Unilab paid Medicard P4,148,005 as premium for one year for the health insurance of its personnel.
Accordingly, Medicard gave Sanchez 18% of the amount or P746,640 representing his commission.
Again through Sanchez’s initiative, the contract between Medicard and Unilab was renewed for another
year, with an increase of premium to P7,456, 896. Medicard paid Sanchez P1,342,241 as his commission.
Thereafter, however, the contract was no longer renewed since the proposed increase in premium was
allegedly too high. In order not to prejudice its personnel by the termination of their health insurance,
Unliab, through Carlos Ejercito, underwent negotiations with Dr. Nicanor Montoya and other officers of
Medicard to find ways to address the situation.
However, under the new scheme which the parties agreed upon, Medicard did not give petitioner any
commission.
Thus, petitioner filed a complaint with the RTC for sum of money, which was dismissed by the lower
court and affirmed by the Court of Appeals. The CA in affirming the trial court’s ruling held that the
contract was effectively revoked; and hence the agent is no longer entitled to a commission.
ISSUE:
Whether or not the contract of agency had been revoked by Medicard
HELD/RATIO:
YES. In order for an agent to be entitled to a commission, he must be the procuring cause of the sale,
which means that the measures employed by him should result in a sale. Conversely, it follows that where
his efforts are unsuccessful, or there was no effort on his part, he is not entitled to a commission.
In Pratz v. Court of Appeals, this Court held that for purposes of equity, the agent who is not the efficient
procuring cause is nonetheless entitled to his commission where, notwithstanding the expiration of his
authority, he took diligent steps to bring back together the parties to bring about the consummation of the
sale. In Manotok Brothers v. Court of Appeals, applying the Pratz ruling, the Court held that the agent is
entitled to a commission since he was the efficient procuring cause of the sale, notwithstanding that the
sale took place after his authority had lapsed.
In this case, when Unilab negotiated with Medicard after the premium increase was deemed too high for
the company, Medicard requested petitioner to reduce his commission should the contract be renewed on
its third year. However, Sanchez was obstinate. Later, the contract was not renewed.
It is clear that since petitioner refused to reduce his commission, Medicard directly negotiated with
Unilab, thus revoking the agency contract. Such revocation is authorized by Article 1924 of the Civil
Code which provides:
“Article 1924. The agency is revoked if the principal direcyly manages the business entrusted to
the agent, dealing directly with third persons.”
Moreover, there is no showing that petitioner exerted any effort in order that Unilab can renew their
contract for the third time. He was not the agent or the “procuring cause” of the third Health Care
Program Contract between Medicard and Unilab.
 REPUBLIC OF THE PHILIPPINES, represented by LT. GEN. JOSE M. CALIMLIM, in his
capacity as former Chief of the Intelligence Service, Armed Forces of the Philippines (ISAFP), and
former Commanding General, Presidential Security Group (PSG), and MAJ. DAVID B.
DICIANO, in his capacity as an Officer of ISAFP and former member of the PSG, v.
HON.VICTORINO EVANGELISTA, in his capacity as PresidingJudge,
Regional Trial Court, Branch 223, Quezon City, and DANTE LEGASPI, represented by his
attorney-in-fact, Paul Gutierrez
G.R. No. 156015, August 11, 2005
J. Puno
FACTS:
Dante Legaspi is the owner of a parcel of land in Bigte, Norzagaray, Bulacan. In November 1999, Lt.
Gen. Jose Calimlim, representing the Republic of the Philippines, entered into a Memorandum of
Agreement with one Ciriaco Reyes. The MOA granted Reyes a permit to hunt for treasure in a land in
Bigte, Norzagaray, Bulacan. Calimlim assigned about 80 military personnel to guard the area and encamp
thereon, allegedly to intimidate Legaspi and other occupants of the area from going near the subject land.
In 2000, Legaspi executed a special power of attorney giving his nephew, Paul Gutierrez, the power to
deal with the treasure hunting activities on Legaspi’s land and to file charges against those who may enter
it without the latter’s authority. Legaspi agreed to give Gutierrez 40% of the treasure that may be found in
the land.
Fourteen (14) days later, Gutierrez filed a case for damages and injunction against petitioner for illegally
entering Legaspi’s land. For this purpose, he hired the legal services of Atty. Homobono Adaza. Their
contract provided that Adaza would be entitled to 30% of Legaspi’s share in whatever treasure may be
found in the land. Upon filing of the complaint, a temporary restraining order was issued against
petitioners.
In their motion to dismiss, the petitioners alleged that there is no real party-in-interest since the SPA of
Gutierrez to bring the suit had already been revoked, and that Gutierrez failed to establish that the alleged
armed men guarding the area were acting on orders of the petitioners.
ISSUE:
Whether or not the special power of attorney in favor of Gutierrez has already been revoked
HELD/RATIO:
NO. A contract of agency is generally revocable as it is a personal contract of representation based on
trust and confidence reposed by the principal on his agent. As the power of the agent to act depends on
the will and license of the principal he represents, the power of the agent ceases when the will or
permission is withdrawn by the principal. Thus, generally, the agency may be revoked by the principal at
will.
However, an exception to the revocability of a contract of agency is when it is coupled with interest, i.e.,
if a bilateral contract depends upon the agency. The reason for its irrevocability is because the agency
becomes part of another obligation or agreement. It is not solely the rights of the principal but also that of
the agent and third persons which are affected. Hence, the law provides that in such cases, the agency
cannot be revoked at the sole will of the principal.
In the case at bar, Gutierrez engaged the services of Atty. Adaza to prosecute the case for damages and
injunction against petitioners, an act which was pursuant to the authority granted to him in the interest of
protecting Legaspi’s land from the alleged illegal entry of petitioners. As payment for legal services,
Gutierrez agreed to assign to Atty. Adaza 30% of Legaspi’s share in whatever treasure may be recovered
in the subject land.
This bilateral contract depends on the agency and thus renders it as one coupled with interest, irrevocable
at the sole will of the principal Legaspi. When the agency is inserted into another agreement, the agency
ceases to be revocable at the pleasure of the principal as the agency shall now follow the condition of the
bilateral agreement. The authority of Gutierrez to file and continue with the prosecution of the case is
therefore unaffected by the Deed of Revocation executed by Legaspi.

NICANORA G. BUCTON (deceased), substituted by REQUILDA B. YRAY, petitioner, v. RURAL

BANK OF EL SALVADOR, INC., MISAMIS ORIENTAL, and REYNALDO CUYONG
G.R. No. 179625, February 24, 2014
J. Del Castillo
FACTS:
In 1988, petitioner Nicanora Bucton filed with the RTC of Cagayan De Oro a case for Annulment of
Mortgage, Foreclosure and Special Power of Attorney against Erlinda Concepcion and respondents.
Bucton is the owner of a parcel of land located in Cagayan De Oro City. In 1982, Concepcion borrowed
the title to the land on the pretext that she was going to show it to an interested buyer. Petitioner testified
that a representative of the respondent Rural Bank of El Salvador went to her house to inform her that the
loan secured by her house and lot was long overdue. Since she did not mortgage any of her properties nor
did she obtain a loan from respondent bank, she decided to go to the bank to inquire about the matter.
It was only then that she learned that Concepcion had obtained a loan in the amount of P30,000 from
Rural Bank, and mortgaged Bucton’s house and lot using a Special Power of Attorney allegedly executed
by petitioner. Concepcion failed to pay the loan, and petitioner’s house and lot were foreclosed and sold
in an action sale in favor of respondent bank.
The RTC ruled in favor of petitioner, sustaining her claim that the SPA presented by Concepcion had
been forged. It ruled that the respondent bank should have conducted a thorough inquiry on the
authenticity of the SPA.The CA, however, reversed the trial court’s ruling, stating that petitioner was
estopped from denying liability since it was negligence on her part to hand over the title.
ISSUE:
Whether or not Bucton should be held liable for the loan and mortgage
HELD/RATIO:
NO. As early as the case of Philippine Sugar Estates Development Co. v. Poizat, the Court already ruled
that "in order to bind the principal by a deed executed by an agent, the deed must upon its face purport to
be made, signed and sealed in the name of the principal."
In other words, the mere fact that the agent was authorized to mortgage the property is not sufficient to
bind the principal, unless the deed was executed and signed by the agent for and on behalf of his
principal. This ruling was adhered to and reiterated with consistency in the cases of Rural Bank of
Bombon (Camarines Sur), Inc. v. Court of Appeals, Gozun v. Mercado, and Far East Bank and Trust
Company (Now Bank of the Philippine Island) v. Cayetano.
In Philippine Sugar Estates Development Co., the wife authorized her husband to obtain a loan and to
secure it with mortgage on her property. Unfortunately, although the real estate mortgage stated that it
was executed by the husband in his capacity as attorney-in-fact of his wife, the husband signed the
contract in his own name without indicating that he also signed it as the attorney-in-fact of his wife.
In Rural Bank of Bombon, the agent contracted a loan from the bank and executed a real estate mortgage.
However, he did not indicate that he was acting on behalf of his principal.
In Gozun, the agent obtained a cash advance but signed the receipt in her name alone, without any
indication that she was acting for and on behalf of her principal.
In Far East Bank and Trust Company, the mother executed an SPA authorizing her daughter to contract a
loan from the bank and to mortgage her properties. The mortgage, however, was signed by the daughter
and her husband as mortgagors in their individual capacities, without stating that the daughter was
executing the mortgage for and on behalf of her mother.
Similarly, in this case, the authorized agent failed to indicate in the mortgage that she was acting for and
on behalf of her principal. The Real Estate Mortgage, explicitly shows on its face, that it was signed by
Concepcion in her own name and in her own personal capacity. In fact, there is nothing in the document
to show that she was acting or signing as an agent of petitioner. Thus, consistent with the law on agency
and established jurisprudence, petitioner cannot be bound by the acts of Concepcion.
The Real Estate Mortgage is therefore void and unforceable against petitioner. It would not bind her as it
was signed by Concepcion in her personal capacity and not as the agent of Bucton.
We need not belabor that the words "as attorney-in-fact of," "as agent of," or "for and on behalf of," are
vital in order for the principal to be bound by the acts of his agent. Without these words, any mortgage,
although signed by the agent, cannot bind the principal as it is considered to have been signed by the
agent in his personal capacity.

MANUEL BUASON and LOLITA REYES v. MARIANO PANUYAS

G.R. No. L-11415, May 25, 1959
J. Padilla
FACTS:
Spouses Buenaventura Dayao and Eugenia Vega acquired by homestead patent a parcel of land in Muñoz,
Nueva Ecija. In 1930, they executed a special power of attorney authorizing Eustaquio Bayuga to engage
the services of a lawyer to prosecute their case against Leonardo Gambito for annulment of a contract of
sale of the parcel of land, and after the the termination of the case to sell it, and from the proceeds of the
sale to deduct whatever expenses he incurred in the litigation.
In 1934, Buenaventura Dayao died. His four children then executed a deed of sale conveying 12.8413
hectares of the land to appellants, the spouses Manuel Buason and Lolita Reyes. Their mother, Eugenia,
affixed her thumbmark as a witness to the sale.
On the other hand, in 1944, Bayuga sold 8 hectares of the same parcel of land to the spouses Mariano
Panuyas and Sotera Cruz. Bayuga then passed away two years later in 1946, while Dayao children’s
mother, Eugenia Vega, died in 1954.
The Spouses Buason and the Spouses Panuyas now both lay claim to the same parcel of land.
ISSUE:
Whether or not the deed of sale of the parcel of land to the Spouses Panuya is void
HELD/RATIO:
NO. It appears that the Spouses Buason did not register the sale of the 12.8413 hectares of land executed
in their favor by the Dayao children. On the other hand, the power of attorney authorizing Bayuga to sell
was annotated on the back of the original certificate of title, as was the sale executed in favor of the
appellee.
In the absence of knowledge of the previous sale, they had a right to rely on the face of the certificate of
title of the registered owners and of the authority conferred by them on Bayuga. As this is a case of
double sale of land registered under the Land Registration Act, he who recorded the sale in the Register of
Deeds has a better right.
As to the contention of the appellant that the death of the principal in 1934 ended the authority of the
agent, it has not been shown that Bayuga knew of his principal’s demise, and for that reason Article 1738
of the old Civil Code of 1931 of the new Civil Code applies:
“Article 1931. Anything done by the agent, without knowledge of the death of the principal or of
any other cause which extinguishes the agence, is valid and shall be fully effective with respect to third
persons who may have contracted with him in good faith.”

NEW MANILA LUMBER COMPANY, INC., v. REPUBLIC OF THE PHILIPPINES

G.R. No. L-14248, April 28, 1960
J. Gutierrez David
FACTS:
In 1958, New Manila Lumber Company filed a complaint against the Republic of the Philippines. The
complaint alleges that the defendant, through the Director of Schools, entered into a contract with one
Alfonso Mendoza to build two school houses. New Manila Lumber supplied the lumber materials for this
construction. Prior to payment to the contractor, the latter executed powers of attorney in favor of New
Manila Lumber granting it the authority to collect any and all amounts due to said contractor in
connection with the construction of the school buildings.
The defendant received the originals of the powers of attorney and promised to pay New Manila Lumber,
however, it paid the contractor several amounts on different occasions without first making payment to
the plaintiff.
This complaint therefore, prays that defendant be ordered to pay plaintiff the sum of P18, 327.15, the
unpaid balance of the cost of lumber supplied and used in the construction.
ISSUE:
Whether or not Manila Lumber can enforce the money claim against the defendant
HELD/RATIO:
NO. The defendant has already instituted a suit against the contractor for the forfeiture of the latter’s bond
to secure the faithful performance of stipulations in the construction contract with regard to one of the two
school buildings. The contractor has a similar bond with respect to the other building. These actions are in
accordance with the requirements of Act No. 3688, or “An Act for the Protection of Persons Furnishing
Material and Labor for the Construction of Public Works.”
Pursuant to Act No. 3688, plaintiff’s legal remedy is not to bring suit against the Government, there being
no privity of contract between them, but to intervene in the civil case as an unpaid supplier of materials to
the contractor, or file and action in the name of the Republic against said contractor on the latter’s other
bond.
While the plaintiff argues that an implied contract arose when the defendant promised to make payment
to the former after receiving the original powers of attorney, it should be observed that defendant was not
a party to the execution of the powers of attorney. Besides, the Director of Public Schools did not have
the authority to bind defendant on the payment under the contract. The payment is not within his
exclusive control but is subject to approval under existing laws.
Under the facts alleged in the complaint, the powers of attorney made plaintiff the contractor’s agent in
collection of the amounts due. And since it is also alleged that, after the execution of the powers of
attorney, the principal demanded and collected from defendant the money the collection of which he had
previously entrusted to plaintiff, the agency apparently has already been revoked.
Even supposing that the powers of attorney are irrevocable as alleged by the plaintiff, their alleged
irrevocability cannot affect the defendant who is not a party thereto. They are only obligatory on the
principal who executed the agency.

CENTRAL SURETY & INSURANCE COMPANY v. C.N. HODGES and the COURT OF
APPEALS
G.R. No. L- 28633, March 30, 1971
C.J. Concepcion
FACTS:
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 P43,000, payable in installments. As
of January 15, 1954, the outstanding balance of the debt amounted to P15, 516. In order that he could use
the lots as security for a loan, Layson persuaded Hodges to execute in his 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 the said balance.
When Layson later defaulted in the discharge of his obligation, Hodges demanded payment from the
petitioner Central Surety and Insurance Company, which, despite repeated extensions of time, failed to
honor its commitments under the surety bond.
Hodges was therefore prompted to commence an action against Layson and Central Surety to recover the
sums of P17,826.08 representing the principal amount and interest thereon, as well as P1,551.60 as
attorneys fees.
Central Surety disclaimed liability under the surety bond, claiming that the same is null and void since it
was issued by one Rosita Mesa after her authority had been withdrawn, and that even under her original
authority, Mrs. Mesa could not issue surety bonds in excess of P8,000 without the approval of petitioner’s
main office.
ISSUE:
Whether or not the surety bond is null and void
HELD/RATIO:
NO. Article 1922 of the Civil Code provides:
“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 been 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 authority since she had exclusive authority in the
City of Iloilo to represent petitioner with the public in general in all transactions.
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 subsequent 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.

MARIANO DIOLOSA and ALEGRIA VILLANUEVA-DIOLOSA v. THE HON. COURT OF

APPEALS, and QUIRINO BATERNA (As owner and proprietor of QUIN BATERNA REALTY)
G.R. No. L-36585, July 16, 1984
J. Relova
FACTS:
Quirino Baterna is a licensed real estate broker, and as such, he entered into an agreement with the
Spouses Diolosa on June 20, 1968 whereby Baterna would be the exclusive sales agent to sell lots in the
Villa Alegre subdivision until all the property is fully disposed.
On September 27, 1968, the spouses terminated the services of Baterna on the ground that they needed
the undisposed lots for the use of the family. The spouses wishes were that the twenty seven (27) lots
which remained unsold would be reserved for their six (6) grandchildren.
Baterna claims that he had been seriously damaged by the action of the defendants in rescinding the
contract, for which he claims moral and exemplary damages and attorneys fees. He also alleges that he is
entitled to a commission of the lots unsold in light of the rescission of the contract.
ISSUE:
Whether or not the petitioners may terminate the agency agreement without paying damages
HELD/RATIO:
NO. Under the contract, the petitioners allowed Baterna to dispose of, sell, cede, transfer and convey the
lots until all the subject property as subdivided is fully disposed of. In other words, the authority to sell is
not extinguished until all the lots have been sold. When, therefore, the petitioners revoked the contract in
a letter, they became liable to Baterna for breach of contract.
It should also be noted that since the agency agreement is a valid contract, the same may only be
rescinded on the grounds specified in Articles 1381 and 1382 of the Civil Code, to wit:
"ART. 1381. The following contracts are rescissible:
(1) Those which are entered into by guardians whenever the wards whom they represent suffer
lesion by more than one-fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the
preceding number;
(3) Those undertaken in fraud of creditors when the later cannot in any other manner collect the
claims due them;
(4) Those which refer to things under litigation if they have been entered into by the defendant
without the knowledge and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission.
"ART. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the
debtor could not be compelled at the time they were effected, are also rescissible."
In the case at bar, not one of the grounds mentioned is present. Thus, the petition is dismissed.

CARLOS SANCHEZ v. MEDICARD PHILIPPINES, INC., DR. NICANOR MONTOYA and

CARLOS EJERCITO
G.R. No. 141525, September 2, 2005
FACTS:
In 1987, Medicard Philippines Inc., appointed Carlos Sanchez as its special corporate agent. As such
agent, Medicard gave him a commission based on the “cash brought in.” In 1988, through Sanchez’s
efforts, Medicard and Unilab executed a Health Care Program Contract where, pursuant to the contract,
Unilab paid Medicard P4,148,005 as premium for one year for the health insurance of its personnel.
Accordingly, Medicard gave Sanchez 18% of the amount or P746,640 representing his commission.
Again through Sanchez’s initiative, the contract between Medicard and Unilab was renewed for another
year, with an increase of premium to P7,456, 896. Medicard paid Sanchez P1,342,241 as his commission.
Thereafter, however, the contract was no longer renewed since the proposed increase in premium was
allegedly too high. In order not to prejudice its personnel by the termination of their health insurance,
Unliab, through Carlos Ejercito, underwent negotiations with Dr. Nicanor Montoya and other officers of
Medicard to find ways to address the situation.
However, under the new scheme which the parties agreed upon, Medicard did not give petitioner any
commission.
Thus, petitioner filed a complaint with the RTC for sum of money, which was dismissed by the lower
court and affirmed by the Court of Appeals. The CA in affirming the trial court’s ruling held that the
contract was effectively revoked; and hence the agent is no longer entitled to a commission.
RULING: In order for an agent to be entitled to a commission, he must be the procuring cause of the
sale, which means that the measures employed by him should result in a sale. Conversely, it follows that
where his efforts are unsuccessful, or there was no effort on his part, he is not entitled to a commission.
In Pratz v. Court of Appeals, this Court held that for purposes of equity, the agent who is not the efficient
procuring cause is nonetheless entitled to his commission where, notwithstanding the expiration of his
authority, he took diligent steps to bring back together the parties to bring about the consummation of the
sale. In Manotok Brothers v. Court of Appeals, applying the Pratz ruling, the Court held that the agent is
entitled to a commission since he was the efficient procuring cause of the sale, notwithstanding that the
sale took place after his authority had lapsed.
In this case, when Unilab negotiated with Medicard after the premium increase was deemed too high for
the company, Medicard requested petitioner to reduce his commission should the contract be renewed on
its third year. However, Sanchez was obstinate. Later, the contract was not renewed.
It is clear that since petitioner refused to reduce his commission, Medicard directly negotiated with
Unilab, thus revoking the agency contract. Such revocation is authorized by Article 1924 of the Civil
Code which provides:
“Article 1924. The agency is revoked if the principal direcyly manages the business entrusted to
the agent, dealing directly with third persons.”
Moreover, there is no showing that petitioner exerted any effort in order that Unilab can renew their
contract for the third time. He was not the agent or the “procuring cause” of the third Health Care
Program Contract between Medicard and Unilab.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

SIASAT vs. IAC, NACIANCENO

G.R. No. L-67889. October 10, 1985

1. Sometime in 1974, respondent Teresita Nacianceno succeeded in convincing officials of the then
Department of Education and Culture, hereinafter called Department, to purchase without public bidding,
one million pesos worth of national flags for the use of public schools throughout the country. The
respondent was able to expedite the approval of the purchase by handcarrying the different indorsements
from one office to another, so that by the first week of September, 1974, all the legal requirements had
been complied with, except the release of the purchase orders. When Nacianceno was informed by the
Chief of the Budget Division of the Department that the purchase orders could not be released unless a
formal offer to deliver the flags in accordance with the required specifications was first submitted for
approval, she contacted the owners of the United Flag Industry on September 17, 1974. The next day,
after the transaction was discussed, the following document was drawn up:

"Mrs. Tessie Nacianceno,

"This is to formalize our agreement for you to represent United Flag Industry to deal with
any entity or organization, private or government in connection with the marketing of our
products - flags and all its accessories.

"For your service, you will be entitled to a commission of thirty (30%) percent.

Signed
Mr. Primitivo Siasat
Owner and Gen. Manager"

2. On October 16, 1974, the first delivery of 7,933 flags was made by the United Flag Industry. The
next day, on October 17, 1974, the respondent's authority to represent the United Flag Industry was
revoked by petitioner Primitivo Siasat.

RULING:

"An agent may be (1) universal; (2) general, or (3) special. A universal agent is one authorized to do all
acts for his principal which can lawfully be delegated to an agent. So far as such a condition is possible,
such an agent may be said to have universal authority. (Mec. Sec. 58).

"A general agent is one authorized to do all acts pertaining to a business of a certain kind or at a particular
place, or all acts pertaining to a business of a particular class or series. He has usually authority either
expressly conferred in general terms or in effect made general by the usages, customs or nature of the
business which he is authorized to transact.

"An agent, therefore, who is empowered to transact all the business of his principal of a particular kind or
in a particular place, would, for this reason, be ordinarily deemed a general agent. (Mec. Sec. 60).

"A special agent is one authorized to do some particular act or to act upon some particular occasion. He
acts usually in accordance with specific instructions or under limitations necessarily implied from the
nature of the act to be done." (Mec. Sec. 61) (Padilla, Civil Law, The Civil Code Annotated, Vol. VI,
1969 Edition, p. 204).

One does not have to undertake a close scrutiny of the document embodying the agreement between the
petitioners and the respondent to deduce that the latter was instituted as a general agent. Indeed, it can
easily be seen by the way general words were employed in the agreement that no restrictions were
intended as to the manner the agency was to be carried out or in the place where it was to be executed.
The power granted to the respondent was so broad that it practically covers the negotiations leading to,
and the execution of, a contract of sale of petitioners' merchandise with any entity or organization.
There is no merit in petitioners' allegations that the contract of agency between the parties was entered
into under fraudulent representation because respondent "would not disclose the agency with which she
was supposed to transact and made the petitioner believe that she would be dealing with the Visayas", and
that "the petitioner had known of the transactions and/or project for the said purchase of the Philippine
flags by the Department of Education and Culture and precisely it was the one being followed up also by
petitioner."

If the circumstances were as claimed by the petitioners, they would have exerted efforts to protect their
interests by limiting the respondent's authority. There was nothing to prevent the petitioners from stating
in the contract of agency that the respondent could represent them only in the Visayas. Or to state that the
Department of Education and Culture and the Department of National Defense, which alone would need a
million pesos worth of flags, are outside the scope of the agency. As the trial court opined, it is incredible
that they could be so careless after being in the business for fifteen years.

A cardinal rule of evidence embodied in Section 7 Rule 130 of our Revised Rules of Court states that
"when the terms of an agreement have been reduced to writing, it is to be considered as containing all
such terms, and, therefore, there can be between the parties and their successors-in-interest, no evidence
of the terms of the agreement other than the contents of the writing", except in cases specifically
mentioned in the same rule. Petitioners have failed to show that their agreement falls under any of these
exceptions. The respondent was given ample authority to transact with the Department in behalf of the
petitioners. Equally without merit is the petitioners' proposition that the transaction involved two separate
contracts because there were two purchase orders and two deliveries. The petitioners' evidence is
overcome by other pieces of evidence proving that there was only one transaction.

Xxx

In Macondray & Co. v. Sellner (33 Phil. 370, 377), a case analogous to this one in principle, this Court
held:

"We do not mean to question the general doctrine as to the power of a principal to revoke
the authority of his agent at will, in the absence of a contract fixing the duration of the
agency (subject, however, to some well defined exceptions). Our ruling is that at the time
fixed by the manager of the plaintiff company for the termination of the negotiations, the
defendant real estate agent had already earned the commissions agreed upon, and could
not be deprived thereof by the arbitrary action of the plaintiff company in declining to
execute the contract of sale for some reason personal to itself.".

The principal cannot deprive his agent of the commission agreed upon by cancelling the agency and,
thereafter, dealing directly with the buyer. (Infante v. Cunanan, 93 Phil. 691).

The appellate court's citation of its previous ruling in Heimbrod et al. v. Ledesma (C.A. 49 O.G. 1507) is
correct:

"The appellee is entitled to recovery. No citation is necessary to show that the general
law of contracts the equitable principle of estoppel, and the expense of another, uphold
payment of compensation for services rendered."
Xxx

We cannot close this case without commenting adversely on the inexplicably strange procurement
policies of the Department of Education and Culture in its purchase of Philippine flags. There is no
reason why a shocking 30% of the taxpayers' money should go to an agent or facilitator who had no
flags to sell and whose only work was to secure and handcarry the indorsements of education and
budget officials. There are only a few manufacturers of flags in our country with the petitioners
claiming to have supplied flags for our public schools on earlier occasions. If public bidding was
deemed unnecessary, the Department should have negotiated directly with flag manufacturers.
Considering the sad plight of underpaid and overworked classroom teachers whose pitiful salaries
and allowances cannot sometimes be paid on time, a P300,000.00 fee for a P1,000,000.00 purchase
of flags is not only clearly unnecessary but a scandalous waste of public funds as well.

SIREDY ENTERPRISES, INC. v. HONORABLE COURT OF APPEALS

G.R. No. 129039, September 17, 2002

Sometime before October 1978, Ismael Yanga, the president of Siredy Enterprises, Inc., executed an
undated Letter of Authority in favor of Hermogenes Santos. By virtue of this authorization, Santos
entered into a Deed of Agreement with Conrado De Guzman, an architect and contractor of Jigscon
Construction. The deed expressly stated that Santos was representing Siredy, with De Guzman being
referred to as “contractor” and Siredy cited as “principal.”

De Guzman then proceeded with the construction of 26 residential units in Ysmael Village, a
development of Siredy Enterprises. Thirteen (13) of these units were fully paid, but the other thirteen (13)
remained unpaid. De Guzman tried but failed to collect payment from Siredy, as the latter denied liability.
Thus, De Guzman instituted an action for specific performance.

RULING:

The Letter of Authority 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
our subdivision lots in Ysmael Village, Sta. Rosa, Marilao, Bulacan." Nothing could be more
express than the written stipulations contained therein.

Siredy denies liability by stating that the nature of its business did not involve the construction of housing
units since it merely sold empty lots, and that Santos exceeded his authority. However, this is negated by
the documentary evidence. Aside from the Letters of Authority, Siredy’s Articles of Incorporation shows
that Siredy may also undertake to erect buildings and houses on the lots and sell, lease, or otherwise
dispose of said properties to interested buyers.

Such Articles, coupled with the Letter of Authority, is sufficient to have given De Guzman reason to
believe that Santos was duly authorized to represent Siredy for the purpose stated in the Deed of
Agreement.
The Court finds that a valid agency had been created between Siredy and Santos, and the authority
conferred includes the power to enter into a construction contract to build houses such as the Deed of
Agreement in this case. Hence, Siredy is bound by the contract through the representation of its agent,
Santos.

Moreover, even if arguendo Santos' mandate was only to sell subdivision lots as Siredy asserts, the latter
is still bound to pay De Guzman. De Guzman is considered a third party to the agency agreement who
had no knowledge of the specific instructions or agreements between Siredy and its agent. What De
Guzman only saw was the written Letter of Authority where Santos appears to be duly authorized.

In accordance with Article 1900 of the Civil Code, 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.
Xxxxxxxxxxxxxxxxxxx

SPS. DIOLOSA vs. CA and QUIRINO BATERNA

G.R. No. L-36585. July 16, 1984

Baterna is a licensed real estate broker and June 20, 1968, an agreement was entered into between him
and Sps. Diolosa for him to dispose of, sell, cede, transfer and convey the lots included in VILLA
ALEGRE SUBDIVISION owned by the Sps. Diolosa as follows:

"That the PARTY OF THE FIRST PART is the lawful and absolute owner in fee simple
of VILLA ALEGRE SUBDIVISION situated in the District of Mandurriao, Iloilo City,
which parcel of land is more particularly described as follows, to wit:
"A parcel of land, Lot No. 2110-b-2-C, PSD 74002, Transfer Certificate of Title No. T-
situated in the District of Mandurriao, Iloilo, Philippines, containing an area of 39016
square meters, more or less, with improvements thereon.
"That the PARTY OF THE FIRST PART by virtue of these presents, to enhance the sale
of the lots of the above-described subdivision, is engaging as their EXCLUSIVE SALES
AGENT the PARTY OF THE SECOND PART, its successors, heirs and assigns to
dispose of, sell, cede, transfer and convey the above-described property in whatever
manner and nature the PARTY OF THE SECOND PART, with the concurrence of the
PARTY OF THE FIRST PART, may deem wise and proper under the premises, whether
it be in cash or installment basis, until all the subject property as subdivided is fully
disposed of . (p. 7 of Petitioner's brief. Italics supplied).
RULING:
Under the contract, Exhibit "A", herein petitioners allowed the private respondent "to dispose of, sell,
cede, transfer and convey . . . until all the subject property as subdivided is fully disposed of." The
authority to sell is not extinguished until all the lots have been disposed of. When, therefore, the
petitioners revoked the contract with private respondent in a letter, Exhibit "B" —
"Dear Mr. Baterna:
Please be informed that we have finally decided to reserve the remaining unsold lots, as
of this date of our VILLA ALEGRE Subdivision for our grandchildren.
In view thereof, notice is hereby served upon you to the effect that our agreement dated
June 20, 1968 giving you the authority to sell as exclusive sales agent of our subdivision
is hereby rescinded.
Please be duly guided.
Very truly yours,
(SGD) ALEGRIA V. DIOLOSA
Subdivision Owner"
they become liable to the private respondent for damages for breach of contract.
And, it may be added that since the agency agreement, Exhibit "A", is a valid contract, the same may be
rescinded only on grounds specified in Articles 1381 and 1382 of the Civil Code, as follows:
"ART. 1381. The following contracts are rescissible:
"(1) Those which are entered into by guardians whenever the wards whom they
represent suffer lesion by more than one-fourth of the value of the things which are the
object thereof;
"(2) Those agreed upon in representation of absentees, if the latter suffer the lesion
stated in the preceding number;
"(3) Those undertaken in fraud of creditors when the later cannot in any other manner
collect the claims due them;
"(4) Those which refer to things under litigation if they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent judicial
authority;
"(5) All other contracts specially declared by law to be subject to rescission.
"ART. 1382. Payments made in a state of insolvency for obligations to whose
fulfillment the debtor could not be compelled at the time they were effected, are also
rescissible."
In the case at bar, not one of the grounds mentioned above is present which may be the subject of an
action of rescission, much less can petitioners say that the private respondent violated the terms of their
agreement — such as failure to deliver to them (Subdivision owners) the proceeds of the purchase price
of the lots.
 xxxxxxxxxxxxxxxxxxxxx

SPOUSES ROLANDO and HERMINIA SALVADOR v. SPOUSES ROGELIO AND ELIZABETH

RABAJA and ROSARIO GONZALES
G.R. No. 199990, February 4, 2015

In 1998, the Spouses Rabaja learned that the Spouses Salvador were looking for a buyer of the subject
property. Herminia Salvador personally introduced Rosario Gonzales, their agent, to them as the
administrator of the property. The Spouses Salvador even gave Gonzales the owner’s duplicate certificate
of title. Gonzales also presented a Special Power of Attorney executed by Rolando Salvador when the
Spouses Rabaja made payments.
Sometime in 1999, however, the Spouses Salvador complained that they did not receive payment from
Gonzales. This prompted the Spouses Rabaja to suspend payment, which in turn prompted the Spouses
Salvador to send a notice to vacate.
RULING:
Even on the substantial aspect, the petition does not warrant consideration. The Court agrees with the
courts below in finding that the contract entered into by the parties was essentially a contract of sale
which could be validly rescinded. Spouses Salvador insist that they did not receive the payments made by
Spouses Rabaja from Gonzales which totalled P950,000.00 and that Gonzales was not their duly
authorized agent. These contentions, however, must fail in light of the applicable provisions of the New
Civil Code which state:
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.
xxx xxx xxx
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.
xxx xxx xxx
Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.
Persons dealing with an agent must ascertain not only the fact of agency, but also the nature and extent of
the agent's authority. 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. The basis
for agency is representation and a person dealing with an agent is put upon inquiry and must discover on
his own peril the authority of the agent.
According to Article 1990 of the New Civil Code, insofar 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. In this case, Spouses Rabaja did not recklessly enter into a contract to
sell with Gonzales. They required her presentation of the power of attorney before they transacted with
her principal. And when Gonzales presented the SPA to Spouses Rabaja, the latter had no reason not to
rely on it.
The law mandates an agent to act within the scope of his authority which what appears in the written
terms of the power of attorney granted upon him.  The Court holds that, indeed, Gonzales acted within the
scope of her authority. The SPA precisely stated that she could administer the property, negotiate the sale
and collect any document and all payments related to the subject property.  As the agent acted within the
scope of his authority, the principal must comply with all the obligations.  As correctly held by the CA,
considering that it was not shown that Gonzales exceeded her authority or that she expressly bound
herself to be liable, then she could not be considered personally and solidarily liable with the principal,
Spouses Salvador. 
Perhaps the most significant point which defeats the petition would be the fact that it was Herminia
herself who personally introduced Gonzalez to Spouses Rabaja as the administrator of the subject
property. By their own ostensible acts, Spouses Salvador made third persons believe that Gonzales was
duly authorized to administer, negotiate and sell the subject property. This fact was even affirmed by
Spouses Salvador themselves in their petition where they stated that they had authorized Gonzales to look
for a buyer of their property.  It is already too late in the day for Spouses Salvador to retract the
representation to unjustifiably escape their principal obligation.
As correctly held by the CA and the RTC, considering that there was a valid SPA, then Spouses Rabaja
properly made payments to Gonzales, as agent of Spouses Salvador; and it was as if they paid to Spouses
Salvador. It is of no moment, insofar as Spouses Rabaja are concerned, whether or not the payments were
actually remitted to Spouses Salvador. Any internal matter, arrangement, grievance or strife between the
principal and the agent is theirs alone and should not affect third persons. If Spouses Salvador did not
receive the payments or they wish to specifically revoke the SPA, then their recourse is to institute a
separate action against Gonzales. Such action, however, is not any more covered by the present
proceeding.

SPOUSES VILLALUZ v. LAND BANK OF THE PHILIPPINES

G.R. No. 192602, January 18, 2017

In 1996, Paula Agbisit, the mother of May Villaluz, requested the latter to provide her with a collateral for
a loan for the expansion of her backyard cut flowers business. May convinced her husband to allow
Agbisit to use their land in Davao City for the purpose. The spouses executed a Special Power of
Attorney in favor of Agbisit authorizing her to negotiate for the disposition a parcel of land and "sign in
their behalf. However, the one-page power of attorney neither specified the conditions under which
the special powers may be exercised nor stated the amounts for which the subject land may be sold or
mortgaged.
Agbisit then executed her own Special Power of Attorney in favor of Miliflores Cooperative in obtaining
the loan. Unfortunately, Miliflores Cooperative was unable to comply with its obligations to Land Bank
and the latter filed a petition for extra-judicial foreclosure. Land Bank won as the sole bidder.
RULING:
YES. The law creates a presumption that an agent has the power to appoint a substitute. The
consequence of the presumption is that, upon valid appointment of a substitute by the agent,
there ipso jure arises an agency relationship between the principal and the substitute, i.e., the
substitute becomes the agent of the principal. As a result, the principal is bound by the acts of the
substitute as if these acts had been performed by the principal's appointed agent. Concomitantly, the
substitute assumes an agent's obligations to act within the scope of authority, to act in accordance
with the principal's instructions, and to carry out the agency, among others.
Although the law presumes that the agent is authorized to appoint a substitute, it also imposes an
obligation upon the agent to exercise this power conscientiously. To protect the principal, Article
1892 allocates responsibility to the agent for the acts of the substitute when the agent was not expressly
authorized by the principal to appoint a substitute; and, if so authorized but a specific person is not
designated, the agent appoints a substitute who is notoriously incompetent or insolvent. In these
instances, the principal has a right of action against both the agent and the substitute if the latter commits
acts prejudicial to the principal.
In the present case, the Special Power of Attorney executed by the Spouses Villaluz contains no
restrictive language indicative of an intention to prohibit Agbisit from appointing a substitute or sub-
agent. Thus, we agree with the findings of the CA and the RTC that Agbisit's appointment of
Milflores Cooperative was valid.

SPOUSES VILORIA v. CONTINENTAL AIRLINES

G.R. No. 188288, January 16, 2012

In 1997, while the spouses Viloria were in the United States, they approached Holiday Travel, a travel
agency working for Continental Airlines, to purchase tickets from Newark to San Diego. The travel agent,
Margaret Mager, advised the couple that they cannot travel by train because it was already fully booked;
that they must purchase plane tickets for Continental Airlines; that if they won’t purchase plane tickets;
they’ll never reach their destination in time. The couple believed Mager’s representations and so they
purchased two plane tickets worth $800.00.
Later however, the spouses found out that the train trip was not fully booked and so they purchased train
tickets and went to their destination by train instead. Then they called up Mager to request for a refund for
the plane tickets. Mager referred the couple to Continental Airlines. As the couple were now in the
Philippines, they filed their request with Continental Airline’s office in Ayala. The spouses Viloria
alleged that Mager misled them into believing that the only way to travel was by plane and so they were
fooled into buying expensive plane tickets.
Continental Airlines refused to refund the amount of the tickets and so the spouses sued the airline
company. In its defense, Continental Airlines claimed that the tickets sold to them by Mager were non-
refundable; that, if any, they were not bound by the misrepresentations of Mager because there is no
contract of agency existing between Continental Airlines and Mager.
RULING:
All the elements of agency are present, to wit:
1. there is consent, express or implied of the parties to establish the relationship;
2. the object is the execution of a juridical act in relation to a third person;
3. the agent acts as a representative and not for himself, and
4. the agent acts within the scope of his authority.

The first and second elements are present as Continental Airlines does not deny that it concluded an
agreement with Holiday Travel to which Mager is part of, whereby Holiday Travel would enter into
contracts of carriage with third persons on the airlines’ behalf. The third element is also present as it is
undisputed that Holiday Travel merely acted in a representative capacity and it is Continental Airlines and
not Holiday Travel who is bound by the contracts of carriage entered into by Holiday Travel on its behalf.
The fourth element is also present considering that Continental Airlines has not made any allegation that
Holiday Travel exceeded the authority that was granted to it.
Continental Airlines also never questioned the validity of the transaction between Mager and the spouses.
Continental Airlines is therefore in estoppel. Continental Airlines cannot be allowed to take an altogether
different position and deny that Holiday Travel is its agent without condoning or giving imprimatur to
whatever damage or prejudice that may result from such denial or retraction to Spouses Viloria, who
relied on good faith on Continental Airlines’ acts in recognition of Holiday Travel’s authority. Estoppel is
primarily based on the doctrine of good faith and the avoidance of harm that will befall an innocent party
due to its injurious reliance, the failure to apply it in this case would result in gross travesty of justice.
As to the liability of Continental for the acts of its agents - - - -
Considering that Holiday Travel is CAI's agent, does it necessarily follow that CAI is liable for the fault
or negligence of Holiday Travel's employees? Citing China Air Lines, Ltd. v. Court of Appeals, et al.,
CAI argues that it cannot be held liable for the actions of the employee of its ticketing agent in the
absence of an employer-employee relationship.
An examination of this Court's pronouncements in China Air Lines will reveal that an airline company is
not completely exonerated from any liability for the tort committed by its agent's employees. A prior
determination of the nature of the passenger's cause of action is necessary. If the passenger's cause of
action against the airline company is premised on culpa aquiliana or quasi-delict for a tort committed by
the employee of the airline company's agent, there must be an independent showing that the airline
company was at fault or negligent or has contributed to the negligence or tortuous conduct committed by
the employee of its agent. The mere fact that the employee of the airline company's agent has committed a
tort is not sufficient to hold the airline company liable. There is no vinculum juris between the airline
company and its agent's employees and the contractual relationship between the airline company and its
agent does not operate to create a juridical tie between the airline company and its agent's employees.
Article 2180 of the Civil Code does not make the principal vicariously liable for the tort committed by its
agent's employees and the principal-agency relationship per se does not make the principal a party to such
tort; hence, the need to prove the principal's own fault or negligence.
On the other hand, if the passenger's cause of action for damages against the airline company is based on
contractual breach or culpa contractual, it is not necessary that there be evidence of the airline company's
fault or negligence. As this Court previously stated in China Air Lines and reiterated in Air France vs.
Gillego, "in an action based on a breach of contract of carriage, the aggrieved party does not have to
prove that the common carrier was at fault or was negligent. All that he has to prove is the existence of
the contract and the fact of its non-performance by the carrier."
Spouses Viloria's cause of action on the basis of Mager's alleged fraudulent misrepresentation is clearly
one of tort or quasi-delict, there being no pre-existing contractual relationship between them. Therefore, it
was incumbent upon Spouses Viloria to prove that CAI was equally at fault or negligent or has
contributed to the negligence or tortuous conduct committed by Mager, the employee of its agent.

THE MANILA REMNANT CO., INC., vs. CA and OSCAR VENTANILLA, JR.
82978. November 22, 1990

Manila Remnant Co., Inc. is the owner of the parcels of land situated in Quezon City covered by Transfer
Certificates of Title Nos. 26400, 26401, 30783 and 31986 and constituting the subdivision known as
Capital Homes Subdivision Nos. I and II.

On March 3, 1970, Manila Remnant thru A.U. Valencia and Co. executed two "contracts to sell" covering
Lots 1 and 2 of Block 17 in favor of Oscar C. Ventanilla and Carmen Gloria Diaz for the combined
contract price of P66,571.00 payable monthly for ten years.

Ten (10) days after the signing of the contracts with the Ventanillas or on March 13, 1970, Artemio U.
Valencia, as President of Manila Remnant, and without the knowledge of the Ventanilla couple, sold Lots
1 and 2 of Block 17 again, this time in favor of Carlos Crisostomo, one of his sales agents without any
consideration. Artemio Valencia then transmitted the fictitious Crisostomo contracts to Manila Remnant
while he kept in his files the contracts to sell in favor of the Ventanillas. All the amounts paid by the
Ventanillas were deposited in Valencia's bank account.

Beginning March 13, 1970, upon orders of Artemio Valencia, the monthly payments of the Ventanillas
were remitted to Manila Remnant as payments of Crisostomo for which the former issued receipts in
favor of Crisostomo. Since Valencia kept the receipts in his files and never transmitted the same to
Crisostomo, the latter and the Ventanillas remained ignorant of Valencia's scheme. Thus, the Ventanillas
continued paying their monthly installments.

On July 25, 1972, Manila Remnant and A.U. Valencia & Co. Inc. entered into a written agreement
entitled "Confirmation of Land Development and Sales Contract" to formalize an earlier verbal agreement
whereby for a consideration of 17 and 1/2% fee, including sales commission and management fee, A.U.
Valencia and Co., Inc. was to develop the aforesaid subdivision with authority to manage the sales
thereof, execute contracts to sell to lot buyers and issue official receipts.

At that time the President of both A.U. Valencia and Co. Inc. and Manila Remnant Co., Inc. was Artemio
U. Valencia.

On May 30, 1973, Manila Remnant, through its General Manager Karl Landahl, wrote Artemio Valencia
informing him that Manila Remnant was terminating its existing collection agreement with his firm on
account of the considerable amount of discrepancies and irregularities discovered in its collections and
remittances by virtue of confirmations received from lot buyers.

On June 6, 1973, Artemio Valencia was removed as President by the Board of Directors of Manila
Remnant.
The Ventanillas later on learned of the scheme and sued.

RULING:

There is no question that the contracts to sell in favor of the Ventanilla spouses are valid and subsisting.
The only issue remaining is whether or not petitioner Manila Remnant should be held solidarily liable
together with A.U. Valencia and Co. and Carlos Crisostomo for the payment of moral, exemplary
damages and attorney's fees in favor of the Ventanillas.

While petitioner Manila Remnant has not refuted the legality of the award of damages per se, it believes
that it cannot be made jointly and severally liable with its agent A.U. Valencia and Co. since it was not
aware of the illegal acts perpetrated nor did it consent or ratify said acts of its agent.

The argument is devoid of merit.

In the case at bar, the Valencia realty firm had clearly overstepped the bounds of its authority as agent —
and for that matter, even the law — when it undertook the double sale of the disputed lots. Such being the
case, the principal, Manila Remnant, would have been in the clear pursuant to Article 1897 of the Civil
Code which states that "(t)he agent who acts as such is not personally liable to that party with whom he
contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such
party sufficient notice of his powers."

However, the unique relationship existing between the principal and the agent at the time of the dual sale
must be underscored. Bear in mind that the president then of both firms was Artemio U. Valencia, the
individual directly responsible for the sale scam. Hence, despite the fact that the double sale was beyond
the power of the agent, Manila Remnant as principal was chargeable with the knowledge or constructive
notice of that fact and not having done anything to correct such an irregularity was deemed to have
ratified the same.

More in point, we find that by the principle of estoppel, Manila Remnant is deemed to have allowed its
agent to act as though it had plenary powers. Article 1911 of the Civil Code provides:

"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." (Emphasis
supplied)

The above-quoted article is new. It is intended to protect the rights of innocent persons. In such a
situation, both the principal and the agent may be considered as joint feasors whose liability is joint and
solidary.

Authority by estoppel has arisen in the instant case because by its negligence, the principal, Manila
Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it. That the
principal might not have had actual knowledge of the agent's misdeed is of no moment. Consider the
following circumstances:

Firstly, Manila Remnant literally gave carte blanche to its agent A.U. Valencia and Co. Secondly, it is
evident from the records that Manila Remnant was less than prudent in the conduct of its business as a
subdivision owner. Moreover, Manila Remnant also failed to check the records of its agent immediately
after the revocation of the agency contract despite the fact that such revocation was due to reported
anomalies in Valencia's collections. Even assuming that Manila Remnant was as much a victim as the
other innocent lot buyers, it cannot be gainsaid that it was precisely its negligence and laxity in the day to
day operations of the real estate business which made it possible for the agent to deceive unsuspecting
vendees like the Ventanillas.

In essence, therefore, the basis for Manila Remnant's solidary liability is estoppel which, in turn, is rooted
in the principal's neglectfulness in failing to properly supervise and control the affairs of its agent and to
adopt the needed measures to prevent further misrepresentation. As a consequence, Manila Remnant is
considered estopped from pleading the truth that it had no direct hand in the deception employed by its
agent.

Uniland Resources v. Development Bank of the Phils.,

G.R. No. 95909, August 16, 1991

1. Uniland is a private corporation engaged in real estate brokerage and licensed as such while DBP is a
government corporation engaged in finance and banking in a proprietary capacity.
2. Marinduque Mining obtained a loan from the DBP and as security therefor, mortgaged two lots
located in Makati, M.M., identified as the office building lot the warehouse lot. Caltex was the first
mortgagee while DBP was the second mortgagee. The account of the Marinduque Mining with the
DBP was later transferred to the Assets Privatization Trust (APT).
3. Marinduque Mining failed to pay its obligations to Caltex hence it foreclosed on the aforesaid two
lots. APT offered for sale to the public through DBP its right of redemption on said two lots by public
bidding provided that any bid to purchase either of the two lots would be considered only should
there be two bids or a bid for the two items which, when combined, would fully cover the sale of the
two lots.
4. Counsel Realty Corp., an affiliate of Glaxo, Philippines, the client of Uniland, offered a bid only for
the warehouse lot in the amount of P23,900,000.00 which was rejected by DBP.
5. DBP retrieved the account from APT and exercised its right of redemption.
6. DBP then conducted a public bidding for the sale of the two lots was held and again, there was only
one bidder, the Charges Realty Corp., another affiliate of Glaxo, Philippines, for only the warehouse
lot. DBP approved the sale of the warehouse lot to Charges Realty Corp. The DBP admittedly paid
the (five percent) broker's fee on this sale to the DBP Management Corporation, which acted as
broker for said negotiated sale.
7. After the aforesaid sale, Uniland wrote two letters to DBP, asking for the payment of its broker's fee
in instrumenting the sale of its (DBP's) warehouse lot to Charges Realty Corp. The claim was denied.
8. Uniland asserts that it previously sent letters to respondent DBP's higher officers sent prior to the
bidding and sale, wherein petitioner requested accreditation as a broker and, in the process of
informing that it had offered the DBP properties for sale, also volunteered the name of its client,
Glaxo, Philippines, as an interested prospective buyer.

It is obvious that Uniland was never able to secure the required accreditation from respondent DBP to
transact business on behalf of the latter. The letters sent by Uniland are merely indicative of its desire to
secure such accreditation. There was no express reply from the DBP or the APT as to the accreditation
sought by petitioner. From the very beginning, Uniland was aware that it had no express authority from
DBP to find buyers of its properties.
Uniland also invokes Article 1869 of the new Civil Code in contending that an implied agency existed.
Petitioner argues that it "should have been stopped, disauthorized and outrightly prevented from dealing
the warehouse lot by the DBP from the inception."

On the contrary, these steps were never necessary. In the course of petitioner's dealings with the DBP, it
was always made clear to petitioner that only accredited brokers may look for buyers on behalf of DBP.
This is not a situation wherein a third party was prejudiced by the refusal of DBP to recognize Uniland as
its broker. The controversy is only between the DBP and petitioner, to whom it was emphasized in no
uncertain terms that the arrangement sought did not exist. Article 1869, therefore, has no room for
operation in this case.

More importantly, petitioner's stance goes against the basic axiom in Civil Law that no one may contract
in the name of another without being authorized by the latter, unless the former has by law a right to
represent him. From this principle, among others, springs the relationship of agency which, as with other
contracts, is one founded on mutual consent: the principal agrees to be bound by the acts of the agent and
the latter in turn consents to render service on behalf or in representation of the principal.

Uniland, however, also invokes equity considerations. While purely circumstantial, there is sufficient
reason to believe that the DBP became more confident to venture and redeem the properties from the APT
due to the presence of a ready and willing buyer, as communicated and assured by Uniland.

URBAN BANK INC v. MAGDALENO M. PEÑA

G.R. No. 145817, October 19, 2011

Peña, a lawyer, was formerly a stockholder, director and corporate secretary of Isabel Sugar Company,
Inc. (ISCI). ISCI owned a parcel of land, which it leased. Before the expiration of the lease contract, ISCI
informed the lessee and his tenants that the lease would no longer be renewed because the land will be
sold. ISCI and Urban Bank executed a Contract to Sell, and they agreed that the final installment released
by the bank upon ISCI’s delivery of full and actual possession of the land, free from any tenants.
ISCI then instructed Peña, to act as its agent and handle the eviction of the tenants. The lessee left, but the
unauthorized sub-tenants refused to leave. Peña had the gates of the property closed and he also posted
security guards—services for which he advanced payments. Despite the closure of the gates and the
posting of the guards, the sub-tenants would force open the gates, and proceed to carry on with their
businesses.
Peña made efforts to settle the issue of possession of the with the sub-tenants. During the negotiations, he
was exposed to several civil and criminal cases and received several threats against his life.
The sub-tenants eventually agreed to stay off the property for a total consideration of  PhP1.5M. Peña
advanced the payment for the full and final settlement of their claims against Urban Bank.
Peña formally informed Urban Bank that it could already take possession of the Pasay property. There
was however no mention of the compensation due and owed to him for the services he had rendered. The
bank subsequently took actual possession of the property and installed its own guards atthe premises.
Peña thereafter made several attempts to contact Urban Bank, but the bank officers would not take any of
his calls. Peña formally demanded from Urban Bank the payment of the 10% compensation and
attorney’s fees allegedly promised to him during his telephone conversation with Urban Bank’s President
for securing and maintaining peaceful possession of the property.Urban Bank and individual bank officers
and directors argued that it was ISCI, the original owners of the Pasay property, that had engaged the
services of Peña insecuring the premises; and, consequently, they could not be held liable for theexpenses
Peña had incurred.
RULING:
In a contract of agency, agents bind themselves to render some service or to do something in
representation or on behalf of the principal, with the consent or authority of the latter.
The basis of the civil law relationship of agency is representation, the elements of which include the
following: (a) the relationship is established by the parties' consent, express or implied; (b) the object is
the execution of a juridical act in relation to a third person; (c) agents act as representatives and not for
themselves; and (d) agents act within the scope of their authority.
Based on the evidence on records and the proceedings below, the Court concludes that Urban Bank
constituted Atty. Peña as its agent to secure possession of the Pasay property. This conclusion,
however, is not determinative of the basis of the amount of payment that must be made to him by the
bank. The context in which the agency was created lays the basis for the amount of compensation Atty.
Peña is entitled to.
It should be noted that Urban Bank's letter dated 19 December 1994 confirmed in no uncertain terms
Peña's designation as its authorized representative to secure and maintain possession of the Pasay
property against the tenants.
Under the terms of the letter, petitioner-respondent bank confirmed his engagement (a) "to hold and
maintain possession" of the Pasay property; (b) "to protect the same from former tenants, occupants or
any other person who are threatening to return to the said property and/or interfere with your possession
of the said property for and in our behalf"; and (c) to represent the bank in any instituted court action
intended to prevent any intruder from entering or staying in the premises.
These three express directives of petitioner-respondent bank's letter admits of no other construction than
that a specific and special authority was given to Peña to act on behalf of the bank with respect to
the latter's claims of ownership over the property against the tenants.
In any case, the subsequent actions of Urban Bank resulted in the ratification of Peña's authority as an
agent acting on its behalf with respect to the Pasay property. By ratification, even an unauthorized act
of an agent becomes an authorized act of the principal.
Its tacit acquiescence to his dealings with respect to the Pasay property and the tenants spoke of its
intent to ratify his actions, as if these were its own. Even assuming arguendo that it issued no written
authority, and that the oral contract was not substantially established, the bank duly ratified his
acts as its agent by its acquiescence and acceptance of the benefits, namely, the peaceful turnover of
possession of the property free from sub-tenants.
Even if, however, Peña was constituted as the agent of Urban Bank, it does not necessarily preclude
that a third party would be liable for the payment of the agency fee of Peña. Nor does it preclude the
legal fact that Peña while an agent of Urban Bank, was also an agent of ISCI, and that his agency from the
latter never terminated.
This is because the authority given to Peña by both ISCI and Urban Bank was common — to secure the
clean possession of the property so that it may be turned over to Urban Bank. This is an ordinary
phenomenon — that an agent would be an agent for the purpose of pursuing a shared goal so that the
common objective of a transferor and a new transferee would be met.
Indeed, the Civil Code expressly acknowledged instances when two or more principals have granted a
power of attorney to an agent for a common transaction. The agency relationship between an agent
and two principals may even be considered extinguished if the object or the purpose of the agency
is accomplished.
In this case, Peña's services as an agent of both ISCI and Urban Bank were engaged for one shared
purpose or transaction, which was to deliver the property free from unauthorized sub-tenants to the
new owner — a task that Peña was able to achieve and is entitled to receive payment for.
Agency is presumed to be for compensation. But because in this case we find no evidence that Urban
Bank agreed to pay Peña a specific amount or percentage of amount for his services, we turn to the
principle against unjust enrichment and on the basis of quantum meruit.
Since there was no written agreement with respect to the compensation due and owed to Atty. Peña
under the letter dated 19 December 1994, the Court will resort to determining the amount based on
the well-established rules on quantum meruit.