Special Contract of AGENCY

NATURE, FORM AND KINDS OF AGENCY

DEFINED.

Article 1868. By the contract of agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter.

Rallos v. Felix Go Chan & Sons Realty Corp.,

G.R. No. L-24332, January 31, 1978

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 agents acts as a REPRESENTATIVE and not for himself; and
(4) the agent acts within the SCOPE of his authority.

Agency is basically personal, representative, and derivative in nature. The authority of the agent to act
emanates from the powers granted to him by his principal; his act is the act of the principal if done within
the scope of the authority. Qui facit per alium facit per se. "He who acts through another acts himself."

Bordador vs. Luz

G.R. No. 130148. December 15, 1997

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.

Doles vs. Angeles

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

This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is representation.
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.

For an agency to arise, it is not necessary that the principal personally encounter the third person with
whom the agent interacts. he 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.

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.

Orient Air Services vs CA and American Air-Lines

G.R. No. 76931, May 29, 1991

To compel an agency 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." (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

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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.
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Agency vs. Sale

Sps. Viloria vs. Continental Airlines

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

Article 1466. In construing a contract containing provisions characteristic of both the

contract of sale and of the contract of agency to sell, the essential clauses of the whole
instrument shall be considered.

The distinctions between a sale and an agency are not difficult to discern and this Court, as early as 1970,
had already formulated the guidelines that would aid in differentiating the two (2) contracts. In
Commissioner of Internal Revenue v. Constantino, this Court extrapolated that the primordial
differentiating consideration between the two (2) contracts is the transfer of ownership or title over the
property subject of the contract. In an agency, the principal retains ownership and control over the property
and the agent merely acts on the principal’s behalf and under his instructions in furtherance of the
objectives for which the agency was established. On the other hand, the contract is clearly a sale if the
parties intended that the delivery of the property will effect a relinquishment of title, control and ownership
in such a way that the recipient may do with the property as he pleases.

Quiroga v. Parsons Hardware Co.,

G.R. No. 11491, August 23, 1918

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.

Agency vs. Employment

De la Cruz v. Northern Theatrical Enterprises, Inc.,

G.R. No. L-7089, August 31, 1954

We agree with the trial court that the relationship between the movie corporation and the plaintiff was not
that of principal and agent because the principle of representation was in no way involved. Plaintiff was not
employed to represent the defendant corporation in its dealings with third parties. He was a mere employee
hired to perform a certain specific duty or task, that of acting as special guard and staying at the main
entrance of the movie house to stop gate crashers and to maintain peace and order within the premises.

Royale Homes Marketing Corporation Vs. Alcantara

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

While the existence of employer-employee relationship is a matter of law, the characterization made by the
parties in their contract as to the nature of their juridical relationship cannot be simply ignored, particularly
in this case where the parties’ written contractunequivocally states their intention at the time they entered
into it. In Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc., it was held that:

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 To be sure, the Agreement’s legal characterization of the nature of the relationship cannot
be conclusive and binding on the courts; x x x the characterization of the juridical
relationship the Agreement embodied is a matter of law that is for the courts to determine.
At the same time, though, the characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it embodies their intent at the time they
entered the Agreement, and they were governed by this understanding throughout their
relationship. At the very least, the provision on the absence of employer- employee
relationship between the parties can be an aid in considering the Agreement and its
implementation, and in appreciating the other evidence on record.

In this case, the contract, duly signed and not disputed by the parties, conspicuously provides that "no
employer-employee relationship exists between" Royale Homes and Alcantara, as well as his sales agents.
It is clear that they did not want to be bound by employer-employee relationship at the time of the signing
of the contract. xxx

Since "the terms of the contract are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of its stipulations should control." No construction is even needed as they already
expressly state their intention. xxx

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 employeremployee relationship unlike the second,
which address both the result and the means used to achieve it. x x x

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 Lifecase 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.

Article 1869. Agency may be express, or implied from the acts of the principal, from his silence or
lack of action, or his failure to repudiate the agency, knowing that another person is acting on his
behalf without authority.

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 Agency may be oral, unless the law requires a specific form.

Dra. Mercedes Oliver vs. Philippine Savings Bank And Lilia Castro,
G.R. No. 214567 | 2016-04-04

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.

Article 1870. Acceptance by the agent may also be express, or implied from his acts which carry out
the agency, or from his silence or inaction according to the circumstances.

Litonjua vs. Eternit

G.R. No. 144805 June 23, 2006

By the contract of agency, a person binds himself to render some service or to do something in
representation on behalf of another, with the consent or authority of the latter. Consent of both principal and
agent is necessary to create an agency. The principal must intend that the agent shall act for him; the agent
must intend to accept the authority and act on it, and the intention of the parties must find expression either
in words or conduct between them.

An agency may be expressed or implied from the act of the principal, from his silence or lack of action, or
his failure to repudiate the agency knowing that another person is acting on his behalf without authority.
Acceptance by the agent may be expressed, or implied from his acts which carry out the agency, or from his
silence or inaction according to the circumstances. Agency may be oral unless the law requires a specific
form. However, to create or convey real rights over immovable property, a special power of attorney is
necessary. 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.

For an agency by estoppel to exist, the following must be established:

(1) the principal manifested a representation of the agent's authority or knowingly allowed the agent to
assume such authority;

(2) the third person, in good faith, relied upon such representation;

(3) relying upon such representation, such third person has changed his position to his detriment.

An agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance
upon the representations, and that, in turn, needs proof that the representations predated the action taken in
reliance.

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Uniland Resources v. Development Bank of the Phils.,
G.R. No. 95909, August 16, 1991

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.

Murao v. People,
G.R. No. 141485, June 30, 2005

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."

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.

Equitable PCI Bank v. Ku

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

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. CS

Republic vs. Antonio V. Bañez, et. al.

G.R. No. 169442, October 15, 2015

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.

Article 1871. Between persons who are present, the acceptance of the agency may also be implied if
the principal delivers his power of attorney to the agent and the latter receives it without any
objection.

Article 1872. Between persons who are absent, the acceptance of the agency cannot be implied from
the silence of the agent, except:

(1) When the principal transmits his power of attorney to the agent, who receives it without
any objection;

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 (2) When the principal entrusts to him by letter or telegram a power of attorney with respect
to the business in which he is habitually engaged as an agent, and he did not reply to the letter
or telegram.

Article 1873. If a person specially informs another or states by public advertisement that he has given
a power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the
former case with respect to the person who received the special information, and in the latter case
with regard to any person.

The power shall continue to be in full force until the notice is rescinded in the same manner in
which it was given. (n)

Urban Bank vs. Magdaleno M. Peña

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

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.

Article 1874. When a sale of a piece of land or any interest therein is through an agent, the authority
of the latter shall be in writing; otherwise, the sale shall be void.

Dizon v. Court of Appeals

G.R. No. 122544, 124741, January 28, 2003.

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."

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.

AF Realty & Development, Inc. v. Dieselman Freight Services Co.

G.R. No. 111448, January 16, 2002

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, of
members acting in their stead, are subject to the same rules, liabilities, and incapacities as are agents of
individuals and private persons."

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." 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:

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

Article 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. (n)

Article 1876. An agency is either general or special.

The former comprises all the business of the principal. The latter, one or more specific
transactions. (1712)

Siasat vs. IAC

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

There are several kinds of agents. To quote a commentator on the matter:

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. ,30).

A special agent is one authorized to do some particular act or to act upon some particular
occasion. lie 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.

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:

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 "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."

Article 1877. An agency couched in general terms comprises only acts of administration, even if the
principal should state that he withholds no power or that the agent may execute such acts as he may
consider appropriate, or even though the agency should authorize a general and unlimited
management. (n)

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;

(2) To effect novations which put an end to obligations already in existence at the time the
agency was constituted;

(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a
judgment, to waive objections to the venue of an action or to abandon a prescription already
acquired;

(4) To waive any obligation gratuitously;

(5) To enter into any contract by which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration;

(6) To make gifts, except customary ones for charity or those made to employees in the
business managed by the agent;

(7) To loan or borrow money, unless the latter act be urgent and indispensable for the
preservation of the things which are under administration; (See Urban Bank vs. Pena)

(8) To lease any real property to another person for more than one year;

(9) To bind the principal to render some service without compensation;

(10) To bind the principal in a contract of partnership;

(11) To obligate the principal as a guarantor or surety;

(12) To create or convey real rights over immovable property;

(13) To accept or repudiate an inheritance;

(14) To ratify or recognize obligations contracted before the agency;

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

Philippine National Bank v. Sta. Maria

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

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

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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. "
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.

Cosmic Lumber Corporation vs. CA

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

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. cdaisa

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 be "so far as it
shall protect the rights and interest of the corporation in the aforementioned lots." In the context of the
specific investiture of powers to Villamil-Estrada, alienation by sale of an immovable certainly cannot be
deemed protective of the right of petitioner to physically possess the same, more so when the land was
being sold for a price of P80.00 per square meter, very much less than its assessed value of P250.00 per
square meter, and considering further that petitioner never received the proceeds of the sale. It is therefore
clear that by selling to respondent Perez a portion of petitioner's land through a compromise agreement,
Villamil-Estrada acted without or in obvious authority. The sale ipso jure is consequently void. So is the
compromise agreement. This being the case, the judgment based thereon is necessarily void. Antipodal to
the opinion expressed by respondent court in resolving petitioner's motion for reconsideration, the nullity of
the settlement between Villamil-Estrada and Perez impaired the jurisdiction of the trial court to render its
decision based on the compromise agreement. (Alviar v. Court of First Instance of La Union).

Page 9 of 30
This ruling was adopted in Jacinto v. Montesa, by Mr. Justice J.B.L. Reyes, a much-respected authority on
civil law, where the Court declared that a judgment based on a compromise entered into by an attorney
without specific authority from the client is void. Such judgment may be impugned and its execution
restrained in any proceeding by the party against whom it is sought to be enforced. The Court also observed
that a defendant against whom a judgment based on a compromise is sought to be enforced may file a
petition for certiorari to quash the execution. He could not move to have the compromise set aside and then
appeal from the order of denial since he was not a party to the compromise. Thus it would appear that the
obiter of the appellate court that the alleged nullity of the compromise agreement should be raised as a
defense against its enforcement is not legally feasible. Petitioner could not be in a position to question the
compromise agreement in the action to revive the compromise judgment since it was never privy to such
agreement. Villamil-Estrada who signed the compromise agreement may have been the attorney-in-fact but
she could not legally bind petitioner thereto as she was not entrusted with a special authority to sell the land,
as required in Art. 1878, par. (5), of the Civil Code.
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 expect 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.

Nario v. Philippine American Life Insurance Co.,

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

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.

Mercado vs. Allied Banking Corporation

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

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:

Page 10 of 30
 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.

Article 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage
does not include the power to sell. (n)

Bucton Vs. Rural Bank Of El Salvador, Inc.,

G.R. No. 179625. February 24, 2014.

A mortgage executed by an authorized agent who signed in his own name without indicating that he acted
for and on behalf of his principal binds only the agent and not the principal.

As early as the case of Philippine Sugar Estates Development Co. v. Poizat, we 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. IASCTD

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.

In light of the foregoing, there is no need to delve on the issues of forgery of the SPA and the nullity of the
foreclosure sale. For even if the SPA was valid, the Real Estate Mortgage would still not bind petitioner as
it was signed by Concepcion in her personal capacity and not as an agent of petitioner. Simply put, the Real
Estate Mortgage is void and unenforceable against petitioner.

Bicol Savings and Loan Association v. Court of Appeals,

G.R. No. 85302, March 31, 1989.

"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

Page 11 of 30
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).

Article 1880. A special power to compromise does not authorize submission to arbitration. (1713a)

Article 1881. The agent must act within the scope of his authority. He may do such acts as may be
conducive to the accomplishment of the purpose of the agency. (1714a)

Severino vs. Severino

G.R. No. 18058. January 16, 1923.

The relations of an agent to his principal are fiduciary and it is an elementary and very old rule that in
regard to property forming the subject-matter of the agency, he is estopped from acquiring or asserting a
title adverse to that of the principal. His position is analogous to that of a trustee and he cannot consistently,
with the principles of good faith, be allowed to create in himself an interest in opposition to that of his
principal or cestui que trust. Upon this ground, and substantially in harmony with the principles of the Civil
Law (see sentence of the supreme court of Spain of May 1, 1900), the English Chancellors held that in
general whatever a trustee does for the advantage of the trust estate inures to the benefit of the cestui que
trust. (Greenlaw vs. King, 5 Jur., 18; Ex parte Burnell, 7 Jur., 116; Ex parte Hughes, 6 Ves., 617; Ex parte
James, 8 Ves., 337; Oliver vs. Court, 8 Price, 127.) The same principle has been consistently adhered to in
so many American cases and is so well established that exhaustive citations of authorities are superfluous
and we shall therefore limit ourselves to quoting a few of the numerous judicial expressions upon the
subject.

Country Bankers Insurance Corporation v. Keppel Cebu Shipyard.

G.R. No. 166044, June 18, 2012

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.

Article 1882. The limits of the agent's authority shall not be considered exceeded should it have been
performed in a manner more advantageous to the principal than that specified by him. (1715)

Article 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 provisions of this article shall be understood to be without prejudice to the actions
between the principal and agent. (1717)

Manila Memorial Park Cemetery, Inc. v. Linsangan

G.R. No. 151319, November 22, 2004

Page 12 of 30
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.

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.

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.

Page 13 of 30
National Food Authority, (NFA) vs. IAC, Superior (Sg) Shipping
G.R. No. 75640. April 5, 1990.

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: cdll
"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.
Rural Bank Of Bombon Vs. Court Of Appeals,
G.R. No. 95703. August 3, 1992

The decision of the Court of Appeals is correct. This case is governed by the general rule in the law
of agency which this Court applied in "Philippine Sugar Estates Development Co. vs. Poizat," 48 Phil. 536,
538:
"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."

In view of this rule, 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, Ederlinda
Gallardo, bound himself alone in his personal capacity as a debtor of the petitioner Bank and not as the
agent or attorney-in-fact of Gallardo.
Petitioner claims that the Deed of Real Estate Mortgage is enforceable against Gallardo since it was
executed in accordance with 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."

Page 14 of 30
The above provision of the Civil Code relied upon by the petitioner Bank, is not applicable to the case at
bar. Herein respondent Aquino acted purportedly as an agent of Gallardo, but actually acted in his personal
capacity. Involved herein are properties titled in the name of respondent Gallardo against which the Bank
proposes to foreclose the mortgage constituted by an agent (Aquino) acting in his personal capacity. Under
these circumstances, we hold as we did in Philippine Sugar Estates Development Co. vs. Poizat, supra, 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."

Obligations of the Agent

Article 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the
damages which, through his non-performance, the principal may suffer.

He must also finish the business already begun on the death of the principal, should delay
entail any danger.

BA Finance Corp. v. Court of Appeals

G.R. No. 82040, August 27, 1991

Under the deed of chattel mortgage, B.A. Finance Corporation was constituted attorney-in-fact with full
power and authority to file, follow-up, prosecute, compromise or settle insurance claims; to sign, execute
and deliver the corresponding papers, receipts and documents to the Insurance Company as may be
necessary to prove the claim, and to collect from the latter the proceeds of insurance to the extent of its
interests, in the event that the mortgaged car suffers any loss or damage. In granting B.A. Finance
Corporation the aforementioned powers and prerogatives, the Cuady spouses created in the former's favor
an agency. Thus, under Article 1884 of the Civil Code of the Philippines, B.A. Finance Corporation is
bound by its acceptance to carry out the agency, and is liable for damages which, through its non-
performance, the Cuadys, the principal in the case at bar, may suffer.

International Exchange Bank v. Spouses Briones

G.R. No. 205657, March 29, 2017

Upon accepting an agency, the agent becomes bound to carry out the agency and shall be held liable for the
damages, which the principal may incur due to the agent's non-performance.

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.

Article 1885. In case a person declines an agency, he is bound to observe the diligence of a good father
of a family in the custody and preservation of the goods forwarded to him by the owner until the
latter should appoint an agent or take charge of the goods.

Article 1886. Should there be a stipulation that the agent shall advance the necessary funds, he shall
be bound to do so except when the principal is insolvent.

Page 15 of 30
Article 1887. In the execution of the agency, the agent shall act in accordance with the instructions of
the principal.

In default thereof, he shall do all that a good father of a family would do, as required by the
nature of the business.

Article 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or
damage to the principal.

Article 1889. The agent shall be liable for damages if, there being a conflict between his interests and
those of the principal, he should prefer his own. (n)

Article 1890. If the agent has been empowered to borrow money, he may himself be the lender at the
current rate of interest. If he has been authorized to lend money at interest, he cannot borrow it
without the consent of the principal.

Article 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.

Domingo v. Domingo
G.R. No. L-30573, October 29, 1971

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.

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.

Article 1892. The agent may appoint a substitute if the principal has not prohibited him from doing
so; but he shall be responsible for the acts of the substitute:

(1) When he was not given the power to appoint one;

(2) When he was given such power, but without designating the person, and the person appointed
was notoriously incompetent or insolvent.

All acts of the substitute appointed against the prohibition of the principal shall be void.

Spouses Villaluz vs. Land Bank Of The Philippines

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

Page 16 of 30
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.

Article 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may
furthermore bring an action against the substitute with respect to the obligations which the latter has
contracted under the substitution.

Article 1894. The responsibility of two or more agents, even though they have been appointed
simultaneously, is not solidary, if solidarity has not been expressly stipulated.

Article 1895. If solidarity has been agreed upon, each of the agents is responsible for the non-
fulfillment of agency, and for the fault or negligence of his fellows agents, except in the latter case
when the fellow agents acted beyond the scope of their authority.

Article 1896. The agent owes interest on the sums he has applied to his own use from the day on
which he did so, and on those which he still owes after the extinguishment of the agency.

Article 1897. The agent who acts as such is not personally liable to the 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.

Lao v. Court of Appeals

G.R. No. 82808, July 11, 1991

Lao has a valid defense to the action for malicious prosecution 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

Article 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.

Article 1899. If a duly authorized agent acts in accordance with the orders of the principal, the latter
cannot set up the ignorance of the agent as to circumstances whereof he himself was, or ought to have
been, aware.

Article 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.

Siredy Enterprises, Inc. v. Court of Appeals

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

Page 17 of 30
By the relationship of agency, one party called the principal authorizes another called the agent to act for
and in his behalf in transactions with third persons. The authority of the agent to act emanates from the
powers granted to him by his principal; his act is the act of the principal if done within the scope of the
authority. "He who acts through another acts himself."

The basis of agency is representation, that is, the agent acts for and in behalf of the principal on matters
within the scope of his authority (Art. 1881) and said 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. 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.

Article 1900 of the Civil Code provides: 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. 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.

Spouses Salvador vs. Spouses Rabaja and Rosario Gonzales

G.R. No. 199990, February 4, 2015

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.

Page 18 of 30
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.

Article 1901. A third person cannot set up the fact that the agent has exceeded his powers, if the
principal has ratified, or has signified his willingness to ratify the agent's acts.

Article 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.

Bacaltos Coal Mines v. Court of Appeals

G.R. No. 114091, June 29, 1995.

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. Person 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 the proof is upon them to establish it. American jurisprudence summarizes the
rule in dealing with an agent as follows:

A third person dealing with a known agent may not act negligently with regard to the
extent of the agent's authority or blindly trust the agent's statements in such respect. Rather, he
must use reasonable diligence and prudence to ascertain whether the agent is acting and dealing
with him within the scope of his powers. The mere opinion of an agent as to the extent of his
powers. The mere opinion of an agent as to the extent of his powers, or his mere
assumption of authority without the foundation, will not bind the principal; and a third person
dealing with a known agent must bear the burden of determining for himself, by the
exercise of reasonable diligence and prudence, the existence or non-existence of the agent's

Page 19 of 30
 authority to act in the premises. In other words, whether the agency is general or special, the third
person is bound to ascertain not only the fact of agency, but the nature and extent of the authority
. 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.

Or, as stated in Harry E. Keller Electric Co. vs. Rodriguez, quoting Mechem on Agency:

The person dealing with the agent must also act with ordinary prudence and reasonable diligence.
Obviously, if he knows or has good reason to believe that the agent is exceeding his authority, he
cannot claim protection. So if the suggestions of probable limitations be of such a clear and
reasonable quality, or if the character assumed by the agent is of such a suspicious or unreasonable
nature, or if the authority which he seeks to exercise is of such an unusual or improbable character,
as would suffice to put an ordinarily prudent man upon his guard, the party dealing with him may
not be shut his eyes to the real state of the case, but should either refuse to deal with the agent at
all, or should ascertain from the principal the true conditions of affairs. [emphasis supplied]

Article 1903. The commission agent shall be responsible for the goods received by him in the terms
and conditions and as described in the consignment, unless upon receiving them he should make a
written statement of the damage and deterioration suffered by the same.

Article 1904. The commission agent who handles goods of the same kind and mark, which belong to
different owners, shall distinguish them by countermarks, and designate the merchandise
respectively belonging to each principal.

Article 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.

Green Valley Poultry & Allied Products, Inc. v. IAC,

G.R. No. L-49395, December 26, 1984

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."|||

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.

Article 1906. Should the commission agent, with authority of the principal, sell on credit, he shall so
inform the principal, with a statement of the names of the buyers. Should he fail to do so, the sale
shall be deemed to have been made for cash insofar as the principal is concerned.

Article 1907. Should the commission agent receive on a sale, in addition to the ordinary commission,
another called a guarantee commission, he shall bear the risk of collection and shall pay the principal
the proceeds of the sale on the same terms agreed upon with the purchaser. (n)

Article 1908. The commission agent who does not collect the credits of his principal at the time when
they become due and demandable shall be liable for damages, unless he proves that he exercised due
diligence for that purpose. (n)

Manotok Brothers, Inc., vs. Ca

G.R. No. 94753. April 7, 1993

In an earlier case, this Court ruled that when there is a close, proximate and causal connection between the
agent's efforts and labor and the principal's sale of his property, the agent is entitled to a commission. We
agree with respondent Court that the City of Manila ultimately became the purchaser of petitioner's property
mainly through the efforts of private respondent. Without discounting the fact that when Municipal

Page 20 of 30
Ordinance No. 6603 was signed by the City Mayor on May 17, 1968, private respondent's authority had
already expired, it is to be noted that the ordinance was approved on April 26, 1968 when private
respondent's authorization was still in force. Moreover, the approval by the City Mayor came only three
days after the expiration of private respondent's authority. It is also worth emphasizing that from the
records, the only party given a written authority by petitioner to negotiate the sale from July 5, 1966 to May
14, 1968 was private respondent. xxx

At first sight, it would seem that private respondent is not entitled to any commission as he was not
successful in consummating the sale between the parties, for the sole reason that when the Deed of Sale was
finally executed, his extended authority had already expired. By this alone, one might be misled to believe
that this case squarely falls within the ambit of the established principle that a broker or agent is not entitled
to any commission until he has successfully done the job given to him.

Going deeper however into the case would reveal that it is within the coverage of the exception rather than
of the general rule, the exception being that enunciated in the case of Prats vs. Court of Appeals. In the said
case, this Court ruled in favor of claimant-agent, despite the expiration of his authority, when a sale was
finally consummated.

In its decision in the abovecited case, this Court said, that while it was respondent court's (referring to the
Court of Appeals) factual findings that petitioner Prats (claimant-agent) was not the efficient procuring
cause in bringing about the sale (prescinding from the fact of expiration of his exclusive authority), still
petitioner was awarded compensation for his services.

Article 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.

Travel Wide Associated Sales (Phils.), Inc. v. Court of Appeals

G.R. No. 77356, July 15, 1991.

It is also worth noting that if the petitioners were indeed acting as agents of the passengers, as the brochure
stipulates, they could still be held liable under Article 1909 of the Civil Code, which provides:

The agent is responsible not only for fraud, but also for negligence, which shall be judged
with more or less rigor by the courts, according to whether the agency was or was not for
a compensation.

Obligations of the Principal

Article 1910. The principal must comply with all the obligations which the agent may have contracted
within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is not bound
except when he ratifies it expressly or tacitly. (1727)

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.
Article 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. (n)

The Manila Remnant Co., Inc., vs. CA.

G.R. No. 82978. November 22, 1990

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.

Page 21 of 30
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.
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. in the sale and
disposition of the subdivision lots. As a disclosed principal in the contracts to sell in favor of the Ventanilla
couple, there was no doubt that they were in fact contracting with the principal.
Secondly, it is evident from the records that Manila Remnant was less than prudent in the conduct of its
business as a subdivision owner. For instance, Manila Remnant failed to take immediate steps to avert any
damage that might be incurred by the lot buyers as a result of its unilateral abrogation of
the agency contract. The publication of the cancelled contracts to sell in the Times Journal came three years
after Manila Remnant had revoked its agreement with A.U. Valencia and Co.
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. Altogether, as pointed out by the counsel for the Ventanillas, Manila Remnant could and should
have devised a system whereby it could monitor and require a regular accounting from A.U. Valencia and
Co., its agent. Not having done so, Manila Remnant has made itself liable to those who have relied on its
agent and the representation that such agent was clothed with sufficient powers to act on behalf of
the principal.
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.

Article 1912. The principal must advance to the agent, should the latter so request, the sums
necessary for the execution of the agency.

Should the agent have advanced them, the principal must reimburse him therefor, even if the
business or undertaking was not successful, provided the agent is free from all fault.

The reimbursement shall include interest on the sums advanced, from the day on which the
advance was made. (1728)

Article 1913. The principal must also indemnify the agent for all the damages which the execution of
the agency may have caused the latter, without fault or negligence on his part. (1729)

Page 22 of 30
Article 1914. The agent may retain in pledge the things which are the object of the agency until the
principal effects the reimbursement and pays the indemnity set forth in the two preceding articles.
(1730)

Guzman v. Court of Appeals

G.R. No. L-9572, July 31, 1956.

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.

While it is true that appellant 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.

Article 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. (1731)

De Castro v. Court of Appeals

G.R. No. 115838, July 18, 2002

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.

Page 23 of 30
 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.
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.
Article 1916. When two persons contract with regard to the same thing, one of them with the agent
and the other with the principal, and the two contracts are incompatible with each other, that of
prior date shall be preferred, without prejudice to the provisions of article 1544. (n)

Article 1917. In the case referred to in the preceding article, if the agent has acted in good faith, the
principal shall be liable in damages to the third person whose contract must be rejected. If the agent
acted in bad faith, he alone shall be responsible. (n)

Article 1918. The principal is not liable for the expenses incurred by the agent in the following cases:

(1) If the agent acted in contravention of the principal's instructions, unless the latter should
wish to avail himself of the benefits derived from the contract;
(2) When the expenses were due to the fault of the agent;
(3) When the agent incurred them with knowledge that an unfavorable result would ensue, if
the principal was not aware thereof;
(4) When it was stipulated that the expenses would be borne by the agent, or that the latter
would be allowed only a certain sum. (n)

Dominion Insurance Corporation Vs. Court Of Appeals

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

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.

Page 24 of 30
 "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.

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.

Modes of Extinguishment of Agency

Article 1919. Agency is extinguished:

(1) By its revocation;

Bacaling v. Muya,
G.R. Nos. 148404-05, April 11, 2002.

Substantively, we rule that Bacaling cannot revoke at her whim and pleasure the irrevocable special
power of attorney which she had duly executed in favor of petitioner Jose Juan Tong and duly

Page 25 of 30
 acknowledged before a notary public. The agency, to stress, is one coupled with interest which is
explicitly irrevocable since the deed of agency was prepared and signed and/or accepted by
petitioner Tong and Bacaling with a view to completing the performance of the contract of sale of
the one hundred ten (110) sub-lots. It is for this reason that the mandate of the agency constituted
Tong as the real party-in-interest to remove all clouds on the title of Bacaling and that, after all
these cases are resolved, to use the irrevocable special power of attorney to ultimately "cause and
effect the transfer of the aforesaid lots in the name of the vendees [Tong with two (2) other buyers]
and execute and deliver document/s or instrument of whatever nature necessary to accomplish the
foregoing acts and deeds." The fiduciary relationship inherent in ordinary contracts of agency is
replaced by material consideration which in the type of agency herein established bars the removal
or dismissal of petitioner

Rallos v. Yangco
G.R. No. 6906, September 27, 1911.

The general rule is that, when the relationship of principal and agent is established, and the
principal gives notice of the agency and holds out the agent as his authorized representative, upon
the termination of the agency it is the duty of the principal to give due and timely notice thereof,
otherwise, he will be held liable to third parties acting in good faith and properly relying upon
such agency.||

(2) By the withdrawal of the agent;

(3) By the death, civil interdiction, insanity or insolvency of the principal or of the agent;

(4) By the dissolution of the firm or corporation which entrusted or accepted the agency;

(5) By the accomplishment of the object or purpose of the agency;

(6) By the expiration of the period for which the agency was constituted. (1732a)

Article 1920. The principal may revoke the agency at will, and compel the agent to return the
document evidencing the agency. Such revocation may be express or implied. (1733a)

New Manila Lumber vs. Republic

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

Where a contractor, after executing powers of attorney in favor of another to collect whatever amounts
may be due him from the Government, demands and collects from the latter the money the collection of
which he entrusted to his attorney-in-fact, the agency is thereby revoked. (Articles 1920 and 1924, new
Civil Code.)

Powers of attorney executed by one in favor of another are obligatory only on the principal who
executed the agency, and though irrevocable and coupled with interest, cannot affect a person who is
not a party thereto.

Infante v. Cunanan
G.R. No. L-67889, October 10, 1985

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.

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The principal cannot deprive his agent of the commission agreed upon by cancelling the agency and,
thereafter, dealing directly with the buyer.

Republic v. Evangelista,
G.R. No. 156015, August 11, 2005.

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. When an agency is
constituted as a clause in a bilateral contract, that is, when theagency 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. 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.
|||

Diolosa v. Court of Appeals,

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

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,

Page 27 of 30
 (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."

Article 1921. If the agency has been entrusted for the purpose of contracting with specified persons,
its revocation shall not prejudice the latter if they were not given notice thereof. (1734)

Article 1922. If the agent had general powers, revocation of the agency does not prejudice third
persons who acted in good faith and without knowledge of the revocation. Notice of the revocation in
a newspaper of general circulation is a sufficient warning to third persons. (n)

Central Surety & Insurance Co. v. Hodges,

G.R. No. L-28633, March 30, 1971.

Article 1922 of our Civil Code provides: If the agent had general powers, revocation of the agency does not
prejudice third person 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 and, notice of the revocation of Mrs. Mesa's authority to issue
surety bonds on its behalf, notwithstanding the fact that the powers of Mrs. Mesa, as its branch manager in
Iloilo, were of a general nature, for she had exclusive authority, in the City of Iloilo, to represent petitioner
herein, not with a particular person, but with the public in general "in all the negotiations, transactions, and
business wherein the Company may lawfully transact or engage in," subject only to the restrictions
specified in their agreement, copy of which was attached to petitioner's answer as Annex 3. Contrary to
petitioner's claim, Article 1922 applies whenever an agent has general powers not merely when the
principal has published the same, apart from the fact that the opening of petitioner's branch office amounted
to a publication of the grant of powers to the manager of said office. Then, again, by honoring several
surety bonds issued in its behalf by Mrs. Mesa subsequently to March 15, 1952, petitioner induced the
public to believe that she had authority to issue such bonds. As a consequence, petitioner is now estopped
from pleading, particularly against a regular customer thereof, like Hodges, the absence of said authority.||

Article 1923. The appointment of a new agent for the same business or transaction revokes the
previous agency from the day on which notice thereof was given to the former agent, without
prejudice to the provisions of the two preceding articles. (1735a)

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Article 1924. The agency is revoked if the principal directly manages the business entrusted to the
agent, dealing directly with third persons. (n)

Prats vs. Court Of Appeals

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

In equity, however, the Court notes that Prats had diligently taken steps to bring back together Doronila
and 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.

Sanchez vs. Medicard Philippines, Inc.,

G.R. No. 141525. September 2, 2005.

It is dictum that in order for an agent to be entitled to a commission, he must be the procuring cause of the
sale, which simply means that the measures employed by him and the efforts he exerted must result in a
sale. In other words, an agent receives his commission only upon the successful conclusion of 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 Prats vs. Court of Appeals, this Court held that for the purpose of equity, an agent who is not the
efficient procuring cause is nonetheless entitled to his commission, where said agent, notwithstanding the
expiration of his authority, nonetheless, took diligent steps to bring back together the parties, such that a
sale was finalized and consummated between them. In Manotok Borthers vs. Court of Appeals, where the
Deed of Sale was only executed after the agent's extended authority had expired, this Court, applying its
ruling in Prats, held that the agent (in Manotok) 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. The
proximate, close, and causal connection between the agent's efforts and the principal's sale of his property
can not be ignored. Xxx

It is clear that since petitioner refused to reduce his commission, Medicard directly negotiated with Unilab,
thus revoking its agency contract with petitioner. We hold that such revocation is authorized by Article
1924 of the Civil Code which provides:

"Art. 1924. The agency is revoked if the principal directly manages the business entrusted to
the agent, dealing directly with third persons."

We find no reason in law or in equity to rule that he is entitled to a commission. Obviously, he was not the
agent or the "procuring cause" of the third Health Care Program Contract between Medicard and Unilab.

Cms Logging, Inc., Vs. The Court Of Appeals And D.R. Aguinaldo Corporation,
G.R. No. 41420. July 10, 1992

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

Page 29 of 30
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.

Article 1925. When two or more principals have granted a power of attorney for a common
transaction, any one of them may revoke the same without the consent of the others. (n)

Article 1926. A general power of attorney is revoked by a special one granted to another agent, as
regards the special matter involved in the latter. (n)

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. (n)

Article 1928. The agent may withdraw from the agency by giving due notice to the principal. If the
latter should suffer any damage by reason of the withdrawal, the agent must indemnify him therefor,
unless the agent should base his withdrawal upon the impossibility of continuing the performance of
the agency without grave detriment to himself. (1736a)

Article 1929. The agent, even if he should withdraw from the agency for a valid reason, must continue
to act until the principal has had reasonable opportunity to take the necessary steps to meet the
situation. (1737a)

Article 1930. The agency shall remain in full force and effect even after the death of the principal, if it
has been constituted in the common interest of the latter and of the agent, or in the interest of a third
person who has accepted the stipulation in his favor. (n)

Article 1931. Anything done by the agent, without knowledge of the death of the principal or of any
other cause which extinguishes the agency, is valid and shall be fully effective with respect to third
persons who may have contracted with him in good faith. (1738)

Buason v. Panuyas
G.R. No. L-11415, May 25, 1959.

The contention that as the death of the principal ended the authority of the agent, the sale made by the
latter of the land in question after the death of the principal is null and void, is untenable, it not having
been shown that the agent knew of his principal's demise, and for that reason the sale made by the agent is
valid and effective with respect to third persons who have contracted with him in good faith. (Art. 1723,
Old Civil Code, 1931, New Civil Code).
Article 1932. If the agent dies, his heirs must notify the principal thereof, and in the meantime adopt
such measures as the circumstances may demand in the interest of the latter. (1739).

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