agency (arteche digests)

Agency for Atty. Cochingyan by Jason Arteche

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1

Rallos vs Felix Corp. Facts Concepcion Rallos and Gerundia Rallos are sisters and registered co-owner of Land X. The sisters executed a special power of attorney in their brothers favor, Simeon Rallos. When Concepcion died, Simeon Rallos sold Concepcions share in Land X to Felix Corp. Ramon Rallos (complainant) as administrator of Concepcions estate filed a complaint to declare Simeons sale of Concepcions share unenforceable and to recover said share. Issue Was the sale of Concepcions share valid despite the agent executing it after his principals death? Held No. In an agency the principal (mandante), authorizes another called the agent (mandatario) to act for and in his behalf in transactions with 3rd persons. The agencys essential elements are:

1. There is consent, express or implied of the parties to establish the relationship 2. Object is to execute a juridical act in relation to a 3rd person 3. The agent acts as a representative and not for himself 4. The agent acts within the scope of his authority.

Agency is basically personal representative and derivative in nature. The agents authority to act emanates from the powers granted to him by his principal, his act is the principals act if done within the scope of his authority. Agency is extinguished by the principals or agents death among others. The general rule is: The principals death effects instantaneous and absolute revocation of the agents authority by operation of law. The agents act after the principals death is void ab initio. The principals heirs dont event need to notify the agent of the principals death. There are exceptions to this general rule in Art. 1930 and Art. 1931. No exception applies because:

1. The agency wasnt coupled with an interest 2. Simeon knew of Concepcions death at the time he sold the shares in Land X.



2

Urban Bank vs Pena Facts ISCI Corp. owns Property X that it leased to tenants. The tenants leased Property X to Subtenants in contravention of the lease agreement. ISCI Corp. eventually moved to sell Property X Urban Bank. Urban Bank agreed on the condition that payment will be in installments and the final install will be paid only when the Subtenants have been removed from Property X and Urban Bank can take possession. ISCI Corp. then authorized its corporate secretary Pena to clear Property X of the Subtenants. Pena stationed guards around the property and filed a case in court to keep the Subtenants out. The court issued a TRO in Penas favor when the lease agreement with the tenants expired; ISCI Corp. then executed a deed of sale in Urban Banks favor. Without authority from Urban Bank, the court revoked the TRO in Penas favor. Pena then contacted Urban Bank and the latter agreed to authorize Pena to clear Property X of the Subtenants, such authority was written. Urban Bank also promised to pay Pena compensation if he clears Property X within a certain time period but such promise was made over the telephone. Eventually, Pena managed to force the Subtenants out after paying them. Urban Bank was able to take possession of Property X. Pena demanded compensation but Urban Bank refused. Issue Is Pena entitled to compensation? Held Yes. Pena should be paid for services rendered under the agency relationship that existed between him and Urban Bank based on the civil law principle against unjust enrichment and quantum merit. Also, Pena is still ISCIs principal and the latter is also liable to pay Pena compensation. Whether or not an agency has been created is determined by the fact that one is representing and acting for another. The law makes no presumption of agency; proving its existence, nature and extent is incumbent upon the person alleging it.

In this case, the evidence shows Urban Bank constituted Pena as its agent to secure possession of Property X. Union Bank gave Pena a specific and special authority to act on its behalf with respect to the latters claims of ownership over the property against the tenants. Further, Urban Banks actions ratified Penas authority as its agent, such as in the court actions and security guards.

Agency is presumed to be for compensation. Unless the contrary intent is shown, a person who acts as an agent does so with the expectation of payment according to the agreement and to the services rendered or results effected.



3

Loadmaster Customs vs Glodel Brokerage Corp. Facts R&B Insurance (respondent) insured Columbias shipment of its products against all risks. The products were shipped by sea and arrived at the pier. From there, Columbia contracted Glodel (respondent) to deliver the products to its warehouse. Glodel in turn contracted Loadmaster to use its delivery trucks in transporting the products. Out of 12 trucks used, only 11 reached the warehouse. Columbia sought reimbursement from R&B Insurance and the latter paid. R&B Insurance then went after Loadmaster and Glodel. Issue Is there a principal-agent relationship between Glodel and Loadmasters? Held No. Loadmasters never represented Glodel because it was never authorized to make such representation. The settled rule is the basis for agency is representation, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by the principal. On the principals part, there must be an actual intention to appoint or an intention naturally inferable from his words or actions, while on the part of the agent, there must be an intention to accept the appointment and act on it. In this case, theres no mutual intent.



4

Bordador vs Luz Facts Bordador is engaged in the business of purchase and sale of jewelry. Luz is their regular customer. On several occasions, Deganos (respondent) received jewelry from Bordador with the responsibility to sell the items at a profit and remit the proceeds and return the unsold items to Bordador. The jewerly and prices were indicated in receipts stating they were received for Deganos niece and Luz. Deganos never returned the sales proceeds or the unsold items. Luz appeared on Deganos behalf and obligated himself to pay the amount due to Bordador on an installment basis. Luz failed to comply with his obligation. Issue Is Deganos an agent of Luz? Held No. The basis for agency is representation. In this case, theres no evidence to show Luz consented to Deganos acts or authorized him to act on her behalf with respect to the particular transactions involved. In fact, Bordador was grossly and inexcusably negligent to entrust Deganos with the jewelry without requiring a written authorization for his alleged principal. A person dealing with an agent is put on inquiry and must discover upon his peril the agents authority. Theres no express or implied agency between Deganos and Luz.



5

Eurotech Industrial vs Cuizon Facts Eurotech is in the business of importing and distributing various European industrial equipment for customers in the Philippines. Eurotech has Impact Systems (represented by Sales Manager Cuizon) as one of its customers. Impact Systems bought equipment from Eurotech. When the equipment arrived in the Philippines Eurotech refused to give it to Impact Systems until it fully pays their indebtedness. Impact Systems paid by way of a deed of assignment transferring the receivables due it from Toledo Power in Eurotechs favor. However, Impact Systems still collected on the receivables due from Toledo Power. When Eurotech discovered Impact Systems actions, Eurotech demanded payment from Impact Systems that it failed to do so. Issue Did Cuizon exceed his authority when he signed the Deed of Assignment thereby making him personally liable to Eurotech? Held No. The basis of agency is representation, the agents acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if the principal personally executed them. As a general rule an agent is not personally liable to the party with whom he contracts. The exception is if the agent binds himself to the obligation and if the agent exceeds his authority. If the agent exceeds his authority, the 3rd person affected cant recover from both agent and principal. In this case, Cuizon is the agent while Erwin Cuizon (Impact Systems owner) is the principal. Cuizon signed the deed of assignment in his capacity as Impact Systems Sales Manager. An agents powers are particularly broad in the case of one acting as a general agent or manager. A high degree of confidence and liberal powers are invested in such agent. Such agent may enter into any contract he deems reasonably necessary or requisite to protect the principals interest. Here, Cuizon acted within his authority because Impact Systems had great need for the equipment and negotiations were being held up.



6

Orient Air Services vs CA Facts American Airlines (respondent) is an air carrier offering passenger and air cargo transportation in the Philippines. American Airlines and Orient Air entered into a General Sales Agency Agreement where American Airlines authorizes Orient Air to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation. American Air lines terminated the Agreement alleging Orient Air failed to remit the net proceeds of sales for certain months in accordance with the Agreement. American Airlines further filed a complaint for accounting. The lower courts ruled that American Airlines should reinstate Orient Air as its general sales agent in accordance with the Agreement. Issue Can American Airlines be compelled to reinstate Orient Air as its agent? Held No. Such order in effect compels American Air to extend its personality to Orient Air. It violates the principles and essence of agency that requires that agency be constituted with the consent or authority of the principal. In an agent-principal relationship, the principals personality is extended through the agents facility. The agent, by legal fiction, becomes the principal authorized to perform all acts which the principal would have him do. Such relationship can be effected only with the principals consent which mustnt in any way be compelled by any law or court.



7

Domingo vs Domingo Facts Vicente Domingo (complainant) granted Gregorio Domingo (respondent) the exclusive agency to sell Vicentes Property X. Gregorio would receive a 5% commission if Property X is sold to a purchaser Gregorio introduces. Gregorio authorized Purisima to look for a buyer promising the latter a share of the commission. Purisima introduced Oscar, a potential buyer to Gregorio. Negotiations took place between Oscar and Vicente with Gregorio managing to persuade Vicente to sell Property X at a lower price. Oscar gave Gregorio a P1,000.00 gift for Gregorios success in lowering the price. Gregorio didnt disclose to Vicente the gift. After some time, Oscar told Gregorio he was no longer buying the property and didnt meet Gregorio anymore. Gregorio sensed something fishy and discovered that Vicente had actually sold Property X to Oscars wife. When Gregorio demanded his commission, Vicente refused arguing Property X was sold not to Gregorios buyer, but to another buyer namely Oscars wife. Issue Is Gregorio still entitled to his commission? Held No. The Civil code demands the utmost good faith, fidelity, honesty, candor and fairness on the agents part to his principal. The agent has an absolute obligation to make a full disclosure to his principal of all his transactions and facts relevant to the agency. An agent who takes a secret profit from the vendee without revealing the same to his principal is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission from the principal. In this case, Gregorio received a gift from Oscar but failed to disclose it to Vicente. The gift corrupted Gregorios duty to serve his principals interest by persuading Vicente to sell Property X at a much lower price than he intended. Art. 1891 doesnt apply if the agent acted only as middleman with the task of bringing together the vendor and vendee. The article also wont apply if the agent had informed his principal of the gift he received from the purchaser and the principal didnt object to it. Here, Gregorio wasnt merely a middleman because he served as Vicentes broker and agent. Gregorio also didnt disclose Oscars gift to Vicente. As a consequence of such breach of trust, Gregorio has forfeited his right to the commission.



8

Schmid Inc. vs RJL Corp. Facts RJL needed 12 electric generators and while canvassing for generators, Schmid sent RJL its quotation for 12 Nagata-brand electric generators. Schmid stipulated RJL would pay by opening a letter of credit in Nagata Corps favor. Nagata sent the electric generators to RJL and Schmid got its commission. Afterwards, the 12 generators broke down and it turns out they were faulty. Some of the generators were repaired but most were neither repaired nor replaced. RJL demanded Schmid refund it but the latter refused arguing it wasnt the vendor of the Nagata-brand generators. Issue Is Schmid Inc. liable for the faulty electric generators? Held No. Schmid was merely an indentor, and not a vendor. Being an indentor, Schmid cant be held liable for the implied warranty for hidden defects under the Civil Code. Further, Schmid never expressly bound itself to warrant the 12 generators as free of any hidden defects. An indentor is similar to a broker and in effecting a sale, theyre merely middlemen and act in a certain sense as the agent of both parties to the transaction. A broker is generally defined as one who is engaged, for others, on a commission, negotiating contracts relative to property with the custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the name of those who employed him; he is strictly a middleman and for some purpose the agent of both parties.



9

Tan vs Gullas Facts Gullas owns Property X that he wants to sell. Gullas authorized Tan, a real estate broker, to negotiate for the sale of the land with a commission if Tan does sell it. Tan found a buyer in the Sisters of Mary Banneaux. After negotiations, Gullas agreed to sell Property X to Sisters of Mary Banneaux. Gullas authorized his attorney to sell, transfer, and convey Property X. The transaction went smoothly and title was issued in Sisters of Mary Banneauxs favor. Afterwards, Tan went to Gullas to collect his commission but Gullas refused reasoning another broker introduced Sisters of Mary Banneaux to Gullas. Issue Is Tan entitled to the commission? Held Yes. An agent receives a commission upon the sale's successful conclusion. Meanwhile, a broker earns his commission by merely bringing the buyer and seller together, even if no sale is eventually made. In this case, it was Tan who first introduced Sisters of Mary Banneaux to Gullas. Gullas allegation that he hired another broker who first introduced Sisters of Mary Banneaux to him is untenable because he failed to provide evidence proving it. Gullas is merely avoiding paying Tan his commission for Tans role in the transaction. Further, Tan wasn't able to participate in the negotiations because of Gullas actions.



10

Medrano vs CA Facts Vice-Chairman Medrano of Ibaan Rural Bank was looking for a buyer of a foreclosed bank asset. Medrano asked Flor (complainant) to look for a buyer. Borbon, Flors associate and a real estate broker, knew of Lee, who might be interested in the property. Medrano gave Flor and Borbon written authority to negotiate the propertys sale. The defendants arranged for the propertys ocular inspection with Lee but were delayed for one reason or another. After a few weeks, defendants discovered Medrano had already sold the property to Lee. With the sale consummated, defendants asked Medrano for their commission but Medrano refused to pay. Issue Are defendants entitled to their commission? Held Yes. Procuring cause is meant to be the proximate cause. Procuring cause, in a brokers activity, refers to a cause originating a series of events which, without break in their continuity, result in accomplishment of prime object of the brokers employment - producing a purchaser ready, willing and able to buy real estate in the owners terms. A broker will be regarded as the sales procuring cause if his efforts are the foundation on which the negotiations resulting in sale are begun. The means he employs and his efforts must result in the sale. He must find the purchaser and the sale must proceed from his efforts acting as broker. In this case, defendants are the sales procuring cause because they were the ones who informed Buyer A leading him to its consummation. Even if defendants didnt take part in the negotiations, they are still entitled to the commission. A brokers conventional employment is merely to find a willing and able buyer to purchase the property. There is no agreement to the contrary that defendants also had to negotiate the sale to get paid their commission.



11

Litonjua vs Eternit Corp. Facts Eternit Corp. owns Property X in the Philippines. ESAC Corp, a majority shareholder in Eternit Corp. grew concerned about the Philippines political situation and wanted to stop operations. ESAC Corp moved to sell Property X. ESAC Corp, through Glanville and Delsaux engaged the services of realtor/broker Lauro G. Marquez. Marquez later showed Property X to Litonjua. Litonjua wanted to buy Property X and negotiations went underway. Litonjua deposited the necessary fees in the bank. Meanwhile, the Philippines political situation improved with Cory Aquinos assumption to Presidency. ESAC Corp changed its mind and wanted to continue operations. ESAC Corp decided no longer to sell Property X. Litonjua demanded payment for damages from Eternit Corp. but the latter refused. Issue Did Marquez, Glanville, and Delsaux bind Eternit Corp. to sell Property X? Held No. Litonjua failed to prove Eternit Corp. allowed Glanville, Delsaux, and Marquez to sell its property. Litonjua filed to establish the agency by clear, certain, and specific proof. Glanville, Delsaux, and Marquez had no authority to bind Eternit Corp. in the transaction with Litonjua. A corporation may act only through its board of directors or, when authorized either by its by-laws or by its board resolution, through its officers or agents in the normal course of business. While a corporation may appoint agents to negotiate for the sale of its real properties, the final say will have to be with the board of directors through its officers and agents as authorized by a board resolution or by its by-laws. An unauthorized act of an officer of the corporation isnt binding on it unless the latter ratifies the same expressly or impliedly by its board of directors. Any sale of real property of a corporation by a person purporting to be an agent thereof but without written authority from the corporation is null and void. In creating or conveying real rights over immovable property, a special power of attorney is necessary. In a sale of a piece of land or any portion thereof through an agent, the latters authority shall be in writing, otherwise the sale is void. Here, complainants failed to provide in evidence the Board resolution of Eternit Corp. empowering Marquez, Glanville, or Delsaux as its agents to sell, let alone offer for sale, Property X. ESACs authorization is not equal to Eternits authorization. A real estate broker is one who negotiates the sale of real properties. His business, generally speaking, is only to find a purchaser who is willing to buy the land upon terms fixed by the owner. He has no authority to bind the principal by signing a contract of sale. Indeed, an authority to find a purchaser of real property does not include an authority to sell.



12

Spouses Viloria vs Continental Airlines Facts The Spouses Viloria purchased 2 tickets on board Continental Airlines from Holiday Travel. However, the Spouses Viloria found out Holiday Travel misled them into buying the tickets and decided to refund the tickets instead. Continental refused and advised them they can apply for a re-issuance of new tickets within 2 years from the date the original tickets were issued. The Spouses Viloria then had the original tickets replaced by a single round trip ticket. However, Continental informed the Spouses Viloria that the tickets were non-transferrable and so both tickets cant be used to purchase the single round trip ticket. Also, they will have to pay additional fees because a single original ticket cant cover the entire price of the single round trip ticket. The Spouses Viloria then demanded for a refund of the original tickets but Continental refused. Spouses Viloria then filed a civil case to refund the money plus damages. Issue Is there a principal-agent relationship between Continental and Holiday Travel? Held Yes. All the elements of agency are present. Continental doesnt deny that it concluded an agreement with Holiday Travel, where Holiday Travel would enter into contracts of carriage with 3rd persons on Continentals behalf. Further, Holiday Travel merely acted in a representative capacity and its Continental, not Holiday Travel, whos bound by the contracts of carriage entered into by Holiday Travel on its behalf. Also, Continental hasnt made any allegation Holiday Travel exceeded its scope of authority. In an agency, the principal retains ownership and control over the property and the agent merely acts on the principals behalf and under his instructions in furtherance of the agency. On the other hand, theres a sale if the delivery of property will effect a relinquishment of title, control, and ownership in such a way the recipient can do with the property as he pleases. In this case, Continental recognized the validity of the contracts of carriage that Holiday Travel entered into with Spouses Viloria and considered itself bound by the terms and conditions thereof.



13

Rallos vs Yangco Facts Yangco sent Rallos a letter informing Rallos that he has a shipping and commission department for buying and selling tobacco. The letter also states Collantes is Yangcos agent. Rallos did business with Yangco through Collantes. After some time, Rallos sent Collantes, as Yangcos agent, tobacco to be sold on commission. Collantes didnt turn the commission over but rather appropriated it for his own use. It turns out Yangco had already removed Collantes as his agent before Rallos sent the tobacco leaf. Rallos didnt know Collantes was no longer Yangcos agent and Yangco never gave any notice of the terminations agency. Rallos demanded payment from Yangco but the latter refused arguing Collantes acted in his personal capacity. Issue Is Yangco liable? Held Yes. Yangco advertised the fact Collantes was his agent and it was Yangcos duty to give due notice to Rallos of the agencys termination. Failing to give notice, Yangco is responsible for any goods delivered in good faith to Collantes as Yangcos agent without knowledge of the agencys termination.



14

Litonjua vs Fernandez Facts 2 brokers offered to sell to Litonjua Property X. Respondents Fernandez and Eleosida represented Property Xs owners. The respondents authorized the brokers to offer the property for sale. Afterwards, Litonjua met with Fernandez and the 2 brokers where they agreed Litonjua would buy Property X and set a date to finalize the sale. The date for the sale passed and Litonjua asked Fernandez to execute the deed of sale and Property X be turned over to him. Fernandez refused saying the sale will no longer push through because of alleged tenants that appeared on Property X and causing problems. Litonjua filed a case for specific performance and damages against Fernandez and Property Xs owners. Issue Does Fernandez have authority to sell Property X? Held No. The Civil Code provides that a special power of attorney is necessary to enter into any contract involving immovable property or real rights. Any sale of real property by one purporting to be the registered owners agent must show his authority in writing otherwise the sale is null and void. The agents declarations alone are generally insufficient to establish his authority. In this case, theres no documentary evidence to show Property Xs owners specifically authorized Fernandez to sell Property X to Litonjua. Fernandez specifically denied authority to sell Property X. The purported letter Fernandez sent Litonjua representing herself to have authority do so is signed by Fernandez alone. Further, Property Xs owners never ratified any of Fernandezs actions.



15

Spouses Aggabao vs Parulan Jr. Facts Real Estate Broker Atanacio offered to sell Land X and Land Y, owned by Elena and Parulan Jr, to the Spouses Aggabao. The Spouses Aggabao met with Elena, the properties co-owner, where they discussed the sale and payment terms. Elena presented a document to the spouses stating Elena was authorized to sell on her husband's behalf. Afterwards, Spouses Aggabao paid Elena as promised and received a TCT for Land X. Elena failed to turn over the duplicate owners copy of the TCT over Land Y. It turns out the duplicate copy was with Parulan, Parulan Jrs brother. Parulan demanded money in exchange for the duplicate copy over Land Y. Spouses Aggabao refused and when Parulan again demanded payment the Spouses Aggabao explained they already fully paid Elena. Parulan Jr then filed a case to declare the sale void. Issue Is the sale valid? Held No. The power of administration doesnt include acts of disposition or encumbrance, which are acts of strict ownership. An authority to dispose cant proceed from an authority to administer, and vice versa, for the 2 powers many only be exercised by an agent following the provisions of agency in the Civil Code. In this case, Parulans authority, as special agency, was limited to selling the property, which didnt include the power of administration. The sale is void because Parulan Jr, as co-owner in a conjugal property, never gave his consent. If the Spouses had taken the time to verify the document Elena based her authority on, they would've found out the same was fake and Elena and her husband were already estranged.



16

Dominion Insurance Corp. vs CA Facts Respondent Guevarra, Dominion Insurance Corps manager, filed a case to recover money which he claimed to have advanced in his capacity as manager to satisfy claims filed by Dominion Insurances clients. Issue Did Guevarra act within his authority as Dominion Insurance Corps agent? Held No. A general power of agency permits the agent to do all acts for which the law doesnt require a special power. One such instance where a special power of attorney is required is to make such payments as are not usually considered as acts of administration, In this case, Dominion Insurance and Guevarra entered into a principal-agent relationship evidenced by the document Special Power of Attorney. However, despite the word Special in the documents title, the contents reveal a general agency. The agency comprises all the principals business but is couched in general terms limited only to acts of administration. Payment of insurance claims isnt an act of administration and consequently requires a special power of attorney. Guevarra had authority to pay only very specific insurance claims and even then from a specific fund in his possession. Guevarra acted outside the scope of his authority and therefore the principal isnt liable.



17

Veloso vs CA Facts Veloso owns Land X with title registered in his name. Afterwards, Velosos wife sold Land X to respondent Escario, supported by a general power-of-attorney and deed of absolute sale without Velosos knowledge. Veloso found out when he discovered his title was cancelled and a new one issued in Escarios name. Veloso filed a case to recover Land X. Veloso alleged in court that hes the absolute owner of Land X and he never authorized anybody, not even his wife, to sell it. Veloso denied ever having executed a power-of-attorney in his wifes favor. Issue Was there a valid sale of Land X? Held Yes. A special power-of-attorney can be included in the general power when the act or transaction for which the special power is required is specified therein. In this case, the records show the assailed power-of-attorney was valid and regular on its face. It was notarized and therefore carries evidentiary weight. Further, there was no need to execute a separate and special power-of-attorney because the general power-of-attorney expressly authorized the agent to sell Land X.



18

Pineda vs CA Facts PMSI availed of life insurance from Insular Life for its employees. Afterwards, some of PMSIs employees died at sea when its ship sank. Pineda, one of the dead employees relative, sought death benefits from the Government and PMSI assisted him. PMSI made Pineda execute a special power-of-attorney authorizing PMSI Capt. Nuval to follow up, ask, demand, collect and receive on Pinedas behalf money due him relative to the ships sinking. Afterwards, PMSI claimed from Insular Life on Pinedas behalf. Among the documents PMSI submitted to Insular Life to process the claim included the special power-of-attorney Pineda executed. Insular Life released money pursuant to the insurance on the basis of these documents. PMSI then deposited the money in Nuvals account. Afterwards, Pineda discovered he was entitled to benefits under Insular Life and demanded these benefits but Insular Life refused arguing the money was already released to PMSI. Issue Did the special power-of-attorney authorize Nuval to claim benefits from Insular Life in Pinedas behalf? Held No. The special power-of-attorney doesnt contain in unequivocal and clear terms authority to Nuval to obtain from Insular Life insurance proceeds arising from the insureds death. A special-power-of-attorney must be strictly construed. The document is couched in terms which would easily arouse an ordinary man suspicion because it deviated from Insular Lifes standard practice. Further, it cant even be considered a general power-of-attorney because theres no intent to grant such power or constitute a universal agency. In a group insurance policy, the employer acts as the insurance companys agent. In this case, PMSI, through Nuval, was Insular Lifes agent.



19

Home Insurance Co. vs USL Facts A USL-owned ship arrived in Manila discharging its cargo to the custody of the Bureau of Customs as arrastre operator. The cargo was consigned to Burroughs Limited but when Burroughs received the cargo some parts of the cargo were damaged. Home Insurance paid Burroughs the cost of damages and demanded payment from USL and the Bureau of Customs. Both refused to pay. Home Insurance filed a case in court but the latter dismissed because only Home Insurances attorney appeared at the pre-trial. Issue Was the dismissal proper? Held Yes. The Rules of Court provide the court can direct the parties and their attorneys to appear before it for a conference (pre-trial). The rules purpose is to possibly reach a compromise among the parties. The court has the discretion to dismiss the case if the plaintiff fails to appear at the pre-trial. In this case, Home Insurance failed to appear at the pre-trial. True, Home Insurances attorney asserted he was given verbal authority to enter into a compromise. However, the rules require a special authority for an attorney to compromise on his clients behalf. Such authority doesnt need to be in writing but must be duly established by evidence. Authority to compromise cant be presumed. The attorneys self-serving assertion doesnt prove such authority.



20

Estate of Lina Olaguer vs Ongjoco Facts When Lino Olaguer died, Olivia and Eduardo became administrators. Olivia and Eduardo sold the properties to Bacani. Bacani then sold the properties back to Olivia and Eduardo. Olivia and Eduardo then sold the properties to Estanislao. Estanislao then sold them to Jose Olaguer. Jose then sold them to his son, Virgilio. Under an alleged general power of attorney, Jose sold the lots 1 & 2 to Ongjoco. Jose sold the other lots to Ongoco as well, also through an alleged general power of attorney. The lots were sold twice evidenced by 2 deeds of sale but still to Ongjoco. The heirs of the estate of Lina Olaguer are claiming the sale is void and the properties should be returned to the estate. Issue Was Ongjoco an innocent purchaser for value? Held Partly. When the sale of a piece of land or any interest therein is made through an agent, the latters authority shall be in writing, otherwise the sale is void. A special power-of-attorney is necessary in order for an agent to enter into a contract where ownership of an immovable property is transmitted or acquired, either gratuitously or for valuable consideration. Even if a document is designated as a general power-of-attorney, the requirement of a special power-of-attorney is met provided the act that requires the special power-of-attorney is specified therein. In this case, as to Property X and Y the Torrens title for these properties were in Virgilios name. Ongjoco failed to produce the power-of-attorney Virgilio purportedly issued in Jose Olaguers favor on the sale of said properties. However, as to the rest of the properties Ongjoco was able to present a general power-of-attorney Virgilio executed. While the law requires a special power-of-attorney, the general power-of-attorney was sufficient because it expressly authorized Jose Olaguer to sell said properties.



21

City Lite Realty Inc. vs CA Facts F.P. Holdings is the registered owner of the Violago Property and offered it for sale to the general public. F.P. Holdings sought respondent Roy of Metro Drugs help in finding buyers. Roy sent the sales brochure and pertinent documents to real estate broker Mamaril who in turn passed them to City Lite. City Lite met with Roy to tell him it wanted to purchase the front lot of Violago Property. City Lite, Mamaril, and Roy met together to negotiate the sale and finally reached an agreement. Roy agreed to sell the Violago Propertys front portion to City Lite after City Lite submits its formal acceptance of the sale and its terms, which City Lite did so. However, F.P. Holding refused to execute the deed of sale despite repeated demands from City Lite. City Lite had an adverse claim annotated on Violago Propertys certificate of title. Then, City Lite instituted a complaint against F.P. Holdings. During the complaints pendency, the property was transferred to defendant Viewmaster Corp. Issue Can F.P. Holdings be forced to sell the Violago Propertys front portion? Held No. The Civil Code provides that when a sale of a piece of land or any interest therein is through an agent, the latters authority shall be in writing otherwise the sale is void. In this case, Metro Drugs assistance was limited to looking for buyers for the Violago Property and endorsing such buyers to F.P. Holdings. The final evaluation, appraisal, and acceptance of any sale remained with F.P. Holdings. Roy and Metro drug were mere contact persons with no authority to sell the Violago Property. For lack of written authority, the sale City Lite concluded with Roy is void.



22

Pineda vs CA Facts Pineda owns Property X in California while respondent Banez owns Property Y in White Plains. Pineda and Banez agreed to exchange properties after the parties have cleared the mortgages on their respective properties. The exchange agreement failed because Pineda failed to clear the mortgage on the California property. Afterwards, Banez found out his title to the White Plains property was cancelled and a new one issued in Pinedas favor. There was also a deed of sale in Pinedas favor. Pineda then sold the property to Duque. Issue Did Duque validly acquire the White Plains property? Held No. The Civil Code provides that in a sale of a parcel of land or any interest therein made through an agent, a special power of attorney is essential. The authority must be in writing otherwise the sale is void. A special power of attorney is necessary to enter into any contract where ownership of an immovable is transmitted or acquired for valuable consideration. In this case, Banez never authorized Pineda to sell the White Plains property to Duque. Without authority in writing, Pinedas sale of the property is void.



23

Cosmic Lumber vs CA Facts Cosmic Lumber executed a Special Power of Attorney in Paz Vilamil-Estradas favor. Paz, as Cosmic Lumbers attorney-in-fact, then filed an ejectment suit against respondent Perez to recover Property X. Afterwards, Paz and Perez entered into a compromise agreement where Perez would just buy Property X. The court approved the compromise agreement but it was never executed because Cosmic Lumber failed to produce the needed owners duplicate copy of title over Property X. Perez then filed a case to revive judgement. Issue Is the compromise agreement valid? Held No. When the sale of a piece of land or any interest thereon is through an agent, the agents authority shall be in writing; otherwise the sale shall be void. In this case, Pazs special power-of-attorney was explicit and exclusionary and she was never granted authority to sell Property X or any portion thereof. Such power cant be implied from her authority to enter into a compromise agreement because such agreement should protect Cosmic Lumbers right to physically possess Property X. Pazs alienation of Property X cant be considered protecting Cosmic Lumbers rights, more so when Paz sold it at a loss. Without authority from Cosmic Lumber, Pazs sale of Property X is void. Further, the general rule the principal is charged with knowledge of his agents actions doesnt apply here. Cosmic Lumber cant be expected to know of Pazs actions because she was acting fraudulently. Its contrary to common sense to expect Paz to inform Cosmic Lumber of her fraudulent actions. Excerpt from the special power-of-attorney To initiate, institute and file any court action for the ejectment of third persons and/or squatters of the entire lot 9127 and 443 and covered by TCT Nos. 37648 and 37649, for the said squatters to remove their houses and vacate the premises in order that the corporation may take material possession of the entire lot, and for this purpose, to appear at the pre-trial conference and enter into any stipulation of facts and/or compromise agreement so far as it shall protect the rights and interest of the corporation in the aforementioned lots.



24

Gutierrez Hermanos vs Orense Facts Orense owns Property X. Jose Duran, Orenses nephew, sold Property X to Gutierrez by means of a public instrument executed before a notary. The instrument allowed the vendor to redeem Property X within 4 years from the time of sale. Orense was allowed to occupy Property X through a contract of lease. The redemption period expired but Orense refused to convey Property X and furthermore stopped paying rent. Orense argues he never gave Durant authority to sell Property X. Gutierrez then filed a civil case against Duran and Orense to get Property X. Gutierrez also filed a criminal case against Duran for estafa. In both criminal and civil trial Orense testified he consented to Durans selling of Property X to Gutierrez. Issue Was Durans sale valid? Held Yes. Orenses testimony in both the criminal and civil cases proved Orense gave his consent to Durans sale of Property X. It follows Orense conferred verbal, or at least implied, power of agency to Duran who accepted it by selling Property X. Even if Durans authority to sell wasnt in writing, Orenses testimony affirming he gave consent to the sale legally excuses the lack of written authority, amounts to full ratification of Durans acts, and produces the effects of an express power of agency. Further, even if such consent was granted subsequent to the sale, Orense ratified the sale through his testimony. Such sale would have been void but Orenses testimony cured it of the defect of nullity.1

1 Under the Old Civil Code, a contract entered into in the name of another without authority from the latter is void, unless ratified by the person in whose name it was executed before the other contracting party revokes it. Under the New Civil Code, the contract wouldve been unenforceable and not void.



25

Shoppers Paradise Realty vs Roque Facts Shoppers Paradise entered into a 25-year lease contract with Felipe over Property X. Property X was covered by a TCT in Felipes name. Simultaneously, both parties likewise entered into an agreement to construct and operate a commercial building complex on Property X. Afterwards, Felipe died forcing Shoppers Paradise to negotiate with his heir, respondent Roque. Negotiations broke down and Roque filed a case to annul the contracts. Roque alleges hes Property Xs absolute owner when Felipe donated it to him but the TCT remained in Felipes name. The donation happened years before Felipe entered into the contracts with Shoppers Paradise. Further alleged, Felipe had no authority to enter in such contracts involving Property X because he only had administration over it. Issue Are the contracts Felipe entered into valid? Held No. An agent requires a special power of attorney to lease any real property to another person for more than 1 year. A lease of property for more than 1 year is considered an act of dominion, not merely administration. In this case, Felipe wasnt Roques authorized agent to lease Property X because he had no special power of attorney. Further, Shoppers Paradise knew Felipe wasnt Property Xs true owner because the latter informed it of the same.



26

Vda. De Chua vs IAC Facts Defendant Herrera executed a 10-year lease contract renewable for another 5 years over Property X in Ons favor. The lease contract gave the lessee an option to buy the leased property. On built a house on Property X and resided there. 4 years into the lease contract, On sold the house to plaintiff Chua with Chua replacing On as lessee with Herreras consent. The lease contract expired but Herreras alleged attorney-in-fact renewed it for another 5 years with Chua. Afterwards, Herrera sold Property X to respondent Sps. Go. Chua filed a case to annul the sale alleging it violated her right of option to buy Property X as provided in the contract of lease and the Sps. Go were in bad faith because they knew Chuas right to buy Property X. Issue Is the renewed contract of lease valid? Held No. The agent must be armed with a special power-of-attorney when leasing real property to another person for more than 1 year. In this case, Herreras attorney-in-fact was never armed with a special power-of-attorney. True, Herrera herself allowed Chua to occupy Property X after the original lease contract expired and a tacit renewal is deemed to have taken place. However, the tacit renewal is limited only to the contracts terms that are germane to the lessees right to continued enjoyment of the property and doesnt extend to alien matters, like option to buy the leased premises.



27

BA Finance vs CA Facts Respondent Sps. Cuady obtained from Supercars a credit of P40 thousand to cover the cost of Car X. The obligation was evidenced by a promissory note and to secure compliance with the promissory note a chattel mortgage was also constituted on Car X. Supercars then assigned the promissory note and chattel mortgage to BA Finance. BA Finance also renewed Car Xs insurance coverage when the Sps. Cuady failed to do so and under the terms and conditions of said insurance coverage, the proceeds shall be payable to BA Finance. Afterwards, Car X got into an accident. Cuady wanted the car be declared a total loss under the insurance coverage but BA Finance forced him to repair it. Not long after, the car bogged down and Cuady again requested to have BA Finance declare Car X as a total loss. BA Finance didnt respond favorable and Cuady stopped paying the promissory note. BA Finance filed a case to recover the amount of the note. Issue Has BA Finance waived its right collect on the note by failing to enforce the total loss provision in the insurance coverage? Held Yes. BA Finance is bound by the terms and conditions of the chattel mortgage when it accepted Supercars assignment. Under the deed of chattel mortgage, BA Finance was made attorney-in-fact with full authority and power to follow-up, prosecute, compromise or settle insurance claims, to sign, execute and deliver documents to the Insurance Company as may be necessary to prove the claim, and to collect the insurance proceeds if Car X suffers any loss or damage. Cuady in fact created in BA Finances favor an agency that BA Finance was bound by its acceptance to carry out. Consequently, BA Finance is liable for damages that Cuady may suffer through its non-performance. In this case, Cuady suffered loss when BA Finance stubbornly refused to enforce the insurance coverages total loss provision.



28

British Airways vs CA Facts Respondent Mahtani purchased a ticket from British Airways going to India. Mahtani would board PAL going to Hong Kong, and then British Airways going to India. When Mahtani finally arrived in India, he discovered his luggage was missing. Mahtani waited a week for his lugge until British Airways advised him to file a claim. Afterwards, back in the Philippines Mahtani filed a complaint for damages against British Airways. British Airways claims it is PAL who should be liable because the PAL plane arrived late resulting in the missing luggage. Issue Is British Airways liable to Mahtani? Is PAL liable to British Airways? Held Yes & Yes. Carriage by plane although performed by successive carriers is regarded as a single operation and the carrier issuing the passengers ticker is considered the principal party and the other carriers merely agents. In this case, the contract of air transportation was exclusively between Mahtani and British Airways with PAL acting as British Airways agent. PAL acted as British Airways agent in transporting Mahtani from Manila to Hong Kong. British Airways is liable to Mahtani but PAL is liable to British Airways for its negligence in the performance of its function and is liable for damages that the principal may suffer by reason of such negligence. PAL was negligent in failing to arrive in Hong Kong on time and transfer Mahtanis luggage to his flight going to India.



29

Pacific Rehouse Corp. vs EIB Securities Inc. Facts Pacific Corp bought KPP and DMCI shares from the PSE through its broker, EIB Securities. Afterwards, Pacific Corp and EIB Securities agreed to sell the KPP shares without a buy back option. Afterwards, EIB Securities sold the DMCI shares at a substantial loss without Pacific Corps knowledge and consent and used the proceeds to buy back the KPP shares. EIB bought back the KPP shares because it made an unauthorized promise to buy back said KPP shares. Upon finding out, Pacific Corp. demanded EIB Securities return the DMCI shares but the latter couldnt comply because it already sold said DMCI shares. Issue Did EIB Securities have authority to sell the DMCI shares and use the proceeds to buy back the KPP shares? Held No. An agent must act within the scope of his authority. The agent is granted the right to affect his principals legal relations by performing acts done in accordance with the principals consent. In this case, Pacific Corp never consented to EIBs sale of the DMCI shares. EIBs right as Pacific Corps agent to sell or dispose Pacific Corps properties is confined to paying the obligations and liabilities Pacific Corp may have to EIB and none other. Thus, when EIB sold the DMCI shares to buy back the KKP shares, it paid Pacific Corps obligation to a 3rd party and hence was beyond EIBs authority. Consequently such sale is void.



30

Cervantes vs CA Facts Respondent Philippine Air Lines issued to Cervantes a round trip ticket for Manila-Honolulu-Los Angeles-Honolulu-Manila pursuant to a compromise agreement between the 2 parties in another case. The ticket would expire 1-year from its issuance. Cervantes used the ticket 4 days before it expired and arrived in Los Angeles. Cervantes then booked his return flight, which was already past the 1-year expiration period. Cervantes later learned his return PAL plane would stopover in San Francisco and he made arrangements with PAL to board his flight in San Francisco instead of Los Angeles. At San Francisco, Cervantes wasnt allowed to board and PAL marked his ticket as expired. Cervantes then filed a complaint against PAL. Issue Did the PAL agents in confirming the ticket extend its period of validity? Held No. An agent who acts beyond the scope of his authority doesnt bind the principal, unless the latter ratifies the same expressly or impliedly. Further, when the 3rd person knows the agent was acting beyond his authority, the principal cant be held liable for the agents acts. The 3rd person is to blame and is not entitled to recover damages from the agent, unless the latter undertook to secure the principals ratification. In this case, Cervantes knew his ticket would expire before he returned to the Philippines. Also, he knew beforehand that he needed to file a written request for extension to PAL to extend the validity of his ticket. The PAL agents didnt know about the compromise agreement and acted without authority when they confirmed Cervantes return flight.



31

Borja Sr. vs Sulyap Inc. Facts Borja leased Property X to Sulyap Inc. Pursuant to the lease contract; Sulyap Inc. paid advance rentals, dues, and deposits. When the lease contract expired, Sulyap demanded the return of the advance payments it made. Borja refused causing Sulyap to file a case in court. Afterwards, the parties entered into a Compromise Agreement that the court approved. However, Borja failed to fulfill his duty under the Agreement and Sulyap filed a motion to enforce the Agreements penalty clause. Borja challenged the motion twice and in his 2nd challenge he argued there was fraud in the Agreements execution. Borja argued 3 sets of Compromise Agreements were submitted for his approval. He signed the Agreement without the penalty clause but his former counsel removed the page containing his signature and attached it to another Agreement. Issue Is Borja bound by the penalty clause in the Agreement? Held Yes. Borja had several opportunities to raise the issue of the penalty clauses fraudulent inclusion. The 1st was when the court rendered judgement dismissing the case pursuant to the Agreement which was reproduced in full in said judgement. The second was when he 1st opposed Sulyaps motion to enforce the penalty clause. In this case, even assuming Borjas counsel exceeded his authority in inserting the penalty clause, the status of said clause was voidable, not void. Borjas failure to question the penalty clauses inclusion despite several opportunities to do so was tantamount to ratification.



32

Gozun vs Mercado Facts Gozun owns a printing shop. Mercado ran for governor in Pampanga and Gozun submitted to Mercado sample campaign materials. Mercados wife told Gozun Mercado already approved the samples and Gozun should start printing the campaign materials. Gozun printed and delivered the campaign materials to Mercado. Afterwards, Lilian, Mercados sister-in-law, obtained a loan from Gozun allegedly for the poll-watchers allowance. Later, Gozun demanded payment from Mercado but the latter failed to pay in full. Gozun then filed a case to enforce payment. Issue Was Lilian authorized to obtain a loan from Gozun? Held No. A special power of attorney is necessary for agent to borrow money unless it is urgent and indispensable for the preservation of the things that are under administration. The special power-of-attorney refers to the authorizations nature and not to its form. A special power-of-attorney doesnt need to be in writing provided its duly established by evidence. In this case, Gozuns testimony failed to establish Lilian obtained the loan on Mercados behalf. Further, Gozuns receipt of the loan indicates Lilian received the money but it neither specified what reason the loan was obtained nor in what capacity Lilian received the money. Also, Lilian alone signed the receipt.



33

Sazon vs Vasquez-Menancio Facts Respondent Vasquez-Menancio is a resident of the US and she entrusted the management, administration, care and preservation of her properties to Sazon. Vasquez avers the properties are productive and Sazon as administrator collected and received all the fruits and income accruing therefrom. She further alleges Sazon never rendered a full accounting of such fruits and income derived from the properties but instead applied them for her own use and benefit. Consequently, Vasquez revoked Sazons authority as administrator and demanded the latter return the possession and administration of the properties. Vasquez also made repeated demands upon Sazon to render and accounting and remit the fruits. Sazon denied all of Vasquez allegations forcing Vasquez to file a case before the RTC. Issue Did Sazon fail to render accounting and return the fruits and incomes of the property under her administration? Held Yes. First, Sazon cant turn over possession of all the properties because some have been leased. Meanwhile, other properties have already been sold to 3rd persons. Both the lease agreements and sales are valid because Sazon was acting within her authority as Vasquez agent. However, Sazon can still return administration over the remaining properties including the leased ones. On the accounting issue, the reason behind Sazons failure to render accounting is immaterial. Whats important is Sazon failed to fulfill her duty to render accounting of the transactions she entered into as Vasquez agent. Sazons claims she sent letters to Vasquez to comply with her obligation to render accounting. Such claim is insufficient because Sazon was administrator for 18 years and 4 letters within 18 years can hardly be considered as sufficient to keep Vasquez informed and updated of her properties condition. As to the fruits and incomes, the Civil Code states every agent is bound to deliver the principal whatever the former may have received by virtue of the agency, even though the amount may not be owed to the principal. In this case, the evidence shows the properties under Sazons administration generated fruits and income but Sazon failed to turn them over. However, theres insufficient evidence to show how much income the properties actually generated and how much expenses Sazon incurred administering said properties. The Court now orders both parties to present evidence as to:

1. The total income generated by the properties 2. The total expenses Sazon incurred that should be borne by Vasquez as owner of the

properties.



34

Hernandez vs Hernandez Facts Cornelia Hernandez (petitioner) is a co-owner of a piece of property the DPWH wants to buy. DPWH negotiated with the 3 co-owners but it broke down and DPWH was forced to file an expropriation case. Later, the co-owners executed a letter appointing Cecilio Hernandez (respondent) as their representative and fixing his compensation for such job. The expropriation proceedings continued with the judge appointing Cecilio as one of the commissioners to determine just compensation. Afterwards, the co-owner executed an irrevocable special power of attorney appointing Cecilio as their true and lawful attorney with respect to the expropriation of the property. The expropriation proceedings concluded with the co-owners being entitled to P21 million in just compensation. Later, Cornelia revoked Cecilios SPA and moved to withdraw her share in the just compensation worth P7 million. The judge granted Cornelias motion and released the entire P21 million to Cecilio. Afterwards, Cecilio sent Cornelia a check for P1.1 million accompanied by a Receipt and Quitclaim document. The Quitclaim documents states

1. The check represents Cornelias share of the just compensation 2. Cecilio is forever discharged from any action, damages, claims, or demands 3. Cornelia wont institute any action and pursue her opposition to release of the P21 million to

Cecilio. Cornelia accepted the check because she badly needed the money. A few days later, Cornelia got hold of the judges decision and found out she was entitled to P7 million and demanded an accounting of the proceeds from Cecilio. Cecilio didnt reply and so Cornelia filed a case to annul the Quitclaim and recover her share in the just compensation. Issue Is Cecilio entitled to his share of the compensation in the just compensation? Held No. In this case, under the compensation scheme that the co-owners approved, Cecilio would obtain 83% of the just compensation due to Cornelia as co-owner. This is because Cecilio is allowed to obtain the excess of anything beyond P300 per square meter. The judge pegged just compensation at P1500 per square meter, the reason being the propertys value skyrocketed during the proceedings. Cornelia asked for an accounting of the just compensation from Cecilio several times, but the request remained unheeded. Until that point, Cecilio violated the fiduciary relationship of an agent and a principal. Instead of an accounting, Cornelia received a receipt and quitclaim document ready for signing. Cecilio didnt disclose the truth as to Cornelias share in the just compensation and consequently the Quitclaim document is fraudulent. Further, the compensation scheme that the co-owners approved is also vitiated by mistake. Further, Cecilio cant claim any authority to collect payment from the just compensation based on the SPA the co-owners executed. Because Cecilio was appointed as commissioner and proceeded to perform the duties of a commissioner until he completed his mandate. He created a barrier that preventing him from performing his duties under the SPA. Cecilio couldnt have been a hearing officer as commissioner and defendant as agent for the co-owners at the same time. Cecilio is entitled only to be compensated for his services as commissioner.



35

Escueta vs Lim Facts Respondent Rufina Lim filed an action to quiet title to real property with preliminary injunction and issuance of an HDO against petitioner Rubio. Rufina alleges she bought land from Rubio and heirs of Luz Baloloy. That she made a downpayment as earnest money with an agreement the remaining balance of the purchase price would be paid once the sellers turn over the Certificate of Title. However, both Ignacio and the heirs refused to deliver the Certificate of Title even if she was willing to pay. Further, Ignacio made a simulate sale in Escuetas favor despite the former knowing of the sale to Rufina. For Ignacio, he denies the allegations arguing he never entered into a contract of sale with Rufina. He argues he appointed his daughter, Llamas, as his attorney-in-fact and not Virginia Lim who was the one who represented him in the sale with Rufina. Further, he alleges the downpayment was actually a loan with Rufina. Issue Is the Contract of Sale between Rufina and Ignacio valid? Held Yes. The Civil Code allows an agent to appoint a substitute if the principal hasnt prohibited him from doing so; but he shall be responsible for the substitutes acts if he wasnt given the power to appoint one. In this case, Ignacio executed a special power of attorney in Llamas favor who in turn appointed Virginia as her substitute. Llamas was acting within her authority in appointing Virginia but she will be responsible for Virginias acts. Among these is Virginias sale of the property to Rufina. Further, even if Virginia had no authority to sell the property, the contract she executed was unenforceable and not void pursuant to Art. 1317. Ignacios acceptance of part of the purchase price constitutes ratification of the contract of sale. Similarly, the heirs have also ratified the sale in accepting part of the purchase price.2

2 If Virginia had no authority, it would be void and not subject to ratification because in the sale of real property or any interest therein through an agent, the latters authority shall be in writing otherwise the sale is void.



36

Serona vs CA Facts Quilatan delivered jewelry to Serona to be sold on commission basis. The parties agreed Serona will remit payment or return the unsold jewelry within 30 days from receipt of the item. Serona failed to pay or return the jewelry after 30 days. Quilatan then required Serona to execute an acknowledgement receipt indicating their previous agreement and the amount due. Serona and a witness, Navarette, signed the receipt. Unknown to Quilatan, Serona entrusted the jewelry to Labrador to sell on commission basis. Serona failed to collect from Labrador causing the former to fail to pay her obligation to Quilatan. Quilatan then filed a case for estafa against Serona. Issue Is Serona guilty of estafa? Held No. Missing is the element of misappropriation or conversion of such money or property by the offender or denial on his part of such receipt. Serano didnt ipso facto commit the crime of estafa by delivering the jewelry to a sub-agent for sale on commission basis. An agent is allowed to appoint a sub-agent in the absence of an express agreement to the contrary between the agent and principal. In this case, Serano was neither expressly prohibited from appointing Labrador as her sub-agent nor passing on the jewelry to a 3rd person. Serano passed along the jewelry to Labrador for the very same purpose she received it. Consequently, there was no conversion because the jewelry wasnt devoted to a purpose different from that agreed upon. Also, Serano didnt dispose of the jewelry without right because she was within her rights to appoint a sub-agent and to give the jewelry to the sub-agent for selling. However, Serano is responsible for Labradors actions as her sub-agent and consequently is civilly liable to Quilatan for the value of the jewelry.



37

Municipal Council of Iloilo vs Evangelista Facts Toco owns a piece of land that the Municipality of Iloilo took to widen a public street. Toco then filed a civil case against the Municipality of Iloilo to recover the value of land. The Iloilo CFI ordered the Municipality to pay Toco P42 thousand. At the hearing for the claims the following persons appeared: Evangelista, Soriano, PNB, and Mauricio Cruz & Co. Evangelista is claiming professional fees for services he rendered in the civil case. Soriano is claiming on the strength of Tiongs assignment to him of part of Tocos rights to the judgement in the case, Tiong was Tocos attorney-in-fact. PNB is claiming the amount of the judgement because the disputed land was actually mortgaged to it. The municipality then paid P6 thousand each to Soriano and Evangelista. The rest of the amount was turned over to PNB. Issue Was Tiongs assignment of credits, rights, and interests due to Toco in the civil case valid? Held Yes. In this case, Tiong was authorized to employ the services of lawyers upon such conditions as he may deem convenient to take charge of any actions necessary for his principals interest, and to defend suits brought against her. This power necessarily implies the authority to pay for the professional services thus engaged. Tiong assignment in Sorianos favor was payment for professional services rendered in other cases in Tocos interests, such assignment taken from the judgement amount due in the instant civil case. Concerning the failure of Tocos other attorney-in-fact, Montano, to consent to the assignment in Sorianos favor, the same doesnt affect the assignment. Montano was also authorized to pay, in the principals name and behalf, all her debts, claims, and encumbrances on her property. The very fact that different letters of attorney were given to each of them shows it wasnt the principals intention they should act jointly in order to make their acts valid. Further, Toco knew of such assignment but continued employing Soriano to represent her. Consequently, an agent empowered to pay the principals debt, and to employ lawyers to defend the latters interests, is impliedly empowered to pay the lawyers fees for services rendered in the principals interests, and may satisfy them by assigning judgement rendered in the principals favor. Further, when a person appoints 2 attorneys-in-fact independently, the consent of one wont be required to validate the others acts unless that appears positively to have been the principals intention.



38

Smith Bell vs CA Facts Chua bought and imported to the Philippines 50 metric tons of Dicalcium Phospate. These were shipped from Taiwan on board the ship S.S. Golden Wealth bound for Manila. First Insurance Co insured the shipment against all risks at port of departure. Smith Bell was stamped at the lower left side of the policy as Claim Agent. The cargo arrived in Manila and the cargo was discharged to the local arrastre operator, Metroport Services Inc. Some of the cargo was in bad condition with some damaged and contents partly empty. Chua then filed before Smith Bell a formal claim for the value of the loss. Smith Bell conveyed the claim to First Insurance Co. but the latter offered only 50% of the claim. Chua didnt accept the offer and filed a case to enforce payment. Smith Bell denied any liability arguing its a mere claim agent of First Insurance Co. and as agent; it isnt personally liable under the policy. Issue Can a claim agent of a disclosed principal be held solidarily liable with said principal under the principals marine cargo insurance policy given the agent isnt a party to the insurance contract? Held No. An adjustment and settlement agents function doesnt include personal liability. His function is merely to settle and adjust claims in his principals behalf if those claims are proven and undisputed. If the principal disapproves the claim, the agent doesnt assume any personal liability. Further, Smith Bells only participation in the contract is limited to having its name stamped at the bottom left portion of the policy as Claim Agent. Smith Bell isnt a real party-in-interest being a mere agent. Also, theres no proof Smith Bell is First Insurances resident agent. Even if theres proof, a resident agent is tasked only to receive legal processes on its principals behalf and not to answer personally for insurance claims.



39

Chemphil Export vs CA Facts Dynetics and Antonio Garcia filed a complaint before the RTC against the consortium (a collection of banks) regarding a surety agreement Dynetics and Garcia entered into with the consortium. The complaint seeks to prevent the consortium from enforcing any obligation Dynetics and Garcia may have under the surety agreement. Meanwhile, Dynetics and Garcia also filed a similar complaint before the RTC against Security Bank. The RTC in both cases issued a writ of garnishment against Garcias Chemphil shares, but the writ was issued first in the Security Bank case. Later, the consortium and Garcia entered into a compromise agreement with the former agreeing to limit Garcias debt to P145 million immediately demandable. Later, Garcia sold his Chemphil shares to Ferro Chemicals with the understanding part of the purchase price will be paid to Security Bank. Ferro Chemicals then assigned the shares to CEIC. Meanwhile, Garcia failed to comply with the Compromise Agreement and so the consortium filed a motion for execution that the RTC granted. Among Garcias properties levied upon on execution were his Chemphil shares. The consortium acquired Garcias shares at the public auction. The RTC ordered Chemphil to register the shares in the consortiums name. This caused CEIC to intervene in the case on the grounds its the shares rightful owner. The trial court then revoked its earlier order transferring the shares to the consortium. Later, the consortium, except for PCIB, assigned all its rights and interest to the shares to Gonzales. The case now centers on who is the shares rightful owner; CEIC or PCIB and Gonzales? Issue Was CEIC subrogated to the rights of Security Bank against Garcia and acquired the latters attachment to the disputed shares? Held No. CEIC traces its claim over the disputed shares to the attachment claim the RTC issued in Security Banks favor against Garcia. It argues that when FCI paid Security Bank the obligations due to Garcia, FCI was subrogated to Security Banks rights. In turn, CEIC was subrogated to FCIs rights by virtue of FCIs assignment in its favor. Further, Security Banks attachment is superior to the consortiums because it was issued first and duly recorded in Chemphils books, unlike the consortiums. However, the facts show FCI is a mere agent because it paid Security Bank with Garcias own money. Payment was to be taken from the purchase price that FCI owed Garcia by virtue of the sale over the Chemphil shares. Its as if Garcia paid Security Bank himself but through an agent, namely FCI. FCI then cant be considered a 3rd party payor for purposes of legal subrogation. Further, FCI isnt a disinterested party as required by legal subrogation because the benefits of the extinguishment would redound to its benefit. Payment would result in Security Bank no longer having any claim to the Chemphil shares; FCI would then have a clean slate to the titles. Consequently, CEIC wasnt subrogated to Security Banks rights against Garcia and didnt acquire the latters attachment over the disputed shares.



40

Uy vs CA Facts Petitioners Uy and Roxas are agents authorized to sell 8 parcels of land by the owners thereof. The petitioners then offered to sell the lands to the NHA to be used for a housing project. The NHA agreed to buy the 8 parcels of land. However, NHA only paid for 5 out of 8 parcels of lands because the DENR reported the 3 unpaid lands were at an active landslide area and not suitable for a housing project. The NHA then cancelled the sale over the 3 parcels of land and offered P1 million to the landowners as danos perjuicios. The petitioners then filed before the RTC a complaint for damages against NHA and its general manager. Issue Do petitioners possess the right to seek damages? Held No. Every action must be prosecuted and defended in the name of the real party-in-interest. The real party-in-interest is the party who stands to be benefited or injured by the judgement or the party entitled to the avails of the suit. The party, who by substantive law, has the right sought to be enforced. In this case, petitioners arent parties to the contract of sale between the principals and the NHA. They are mere agents and their rendering of service didnt make them parties to the contracts of sale executed in the principals behalf. The real parties-in-interest in an action upon the contract are the parties to the contract. Further, petitioners arent assignees to the rights under the contract of sale. The petitioners havent established any agreement granting them the right to receive payment and out of the proceeds to reimburse themselves for advances and commissions before turning the balance over to the principals. Otherwise, the agents couldve brought an action on the contract as assignee of such contract. Also, theres no stipulation pour autrui benefitting petitioners. Consequently, petitioners arent real parties-in-interest.



41

Angeles vs PNR Facts PNR informed Romualdez that it has accepted the latters offer to buy on an As is, Where is basis the PNRs scrap rails located in Del Carmen and Lubao respectively for a total amount of P96 thousand. Romualdez then addressed a letter authorizing Angeles to withdraw the scrap rails to PNRs acting purchasing agent. Later, Angeles requested PNR to transfer the location of withdrawal because the scrap rails located in the original areas werent ready for hauling. The PNR granted the request and chose another location. However, the PNR subsequently suspended the withdrawal because of documentary discrepancies coupled by pilferages in the new locations. Consequently, Angeles demanded a refund in the amount of P96 thousand but PNR refused to pay alleging the Angeles already withdrew scrap rails worth P114 thousand. Angeles then filed suit against PNR for specific performance and damages. Issue Did the letter Romualdez sent to PNR designate Angeles as mere agent or as assignee of Romualdezs interest in the scrap rails? Held Agent. Normally, an agent has neither rights nor liabilities against 3rd parties to a contract because only the parties to the contract may violate a contract; the real party-in-interest is generally a contracting party. However, the legal situation is different where an agent is constituted as an assignee. In such case, the agent may in his own behalf sue on a contract made for his principal as an assignee of such contract. A person who has a right assigned to him is a real party-in-interest and can maintain an action upon such right. In this case, Angeles was constituted as a mere agent and not assignee. The mere fact the letter doesnt contain the words agent or attorney-infact doesnt matter because other terms are used to designate the parties in an agency, such as representative. Further, the letter used the verb authorized indicating Romualdez intention to limit Angeles role as agent. Also, the letters 2nd paragraph was qualified by the phrase For this reason which reinforces the idea that Angeles is a mere agent. Further, Angles own actions after the letter was sent confirm the agency. She referred to herself as an authorized representative and signed receipts indicating she was doing so in a representative capacity. Consequently, the letter is a power of attorney that merely authorized Angeles to withdraw the scrap rails and didnt allow her to sue in her own name in the contract. Excerpt from the letter: This is to inform you as President of San Juanico Enterprises, that I have authorized the bearer, LIZETTE R. WIJANCO of No. 1606 Aragon St., Sta. Cruz, Manila, to be my lawful representative in the withdrawal of the scrap/unserviceable rails awarded to me. For this reason, I have given her the ORIGINAL COPY of the AWARD, dated May 5, 1980 and O.R. No. 8706855 dated May 20, 1980 which will indicate my waiver of rights, interests and participation in favor of LIZETTE R. WIJANCO.



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National Power Corporation vs NAMARCO Facts NPC and NAMARCO, as representative of International Commodities Corp (IC), based in New York, executed in Manila a contract with NPC purchasing from IC sulfur for a total price of P450 thousand. Domestic Insurance executed a performance bond worth P90 thousand in NPCs favor to guarantee ICs obligation. NPC paid way of opening a letter of credit and duly informed NAMARCo of such act. IC however wasnt able to deliver the sulfur because there was no available ship causing NPC to shut down its fertilizer plant. NPC rescinded the sale and filed suit against IC, NAMARCO, and Domestic Insurance to recover stipulated damages worth P360 thousand. Issue Is NAMARCO liable for damages? Held Yes. In this case, NPCs invitation to bid clearly stipulated that nonavailability of a steamer to transport sulfur isnt a ground for non-payment of liquidated damages in case of the sellers non-performance. NAMARCOs bid is even more explicit because it guaranteed the availability of a steamer to ship the sulfur. True, IC notified NAMARCO the sale was subject to a steamers availability buy the latter didnt disclose such information to NPC and, contrary to the principals instructions, agreed that non-availability of a steamer wouldnt be an justification for non-payment of damages. NAMARCO was even aware IC was having trouble booking a steamer, and yet continued with the contract. Consequently, NAMARCO acted beyond the scope of its authority by violating ICs explicit instructions namely the sale being subject to a steamers availability. In effect, NAMARCO was acting in its own name and could be held liable as such. Further, NAMARCO is liable for damages because the agent who exceeds the scope of his authority without giving the party he contracts with sufficient notice of his powers is personally liable to such party. The rule that a person dealing with an agent must inquire into the scope of the latters authority if the principal is to be held liable doesnt apply in this case. Here, its the agent to be held liable and such stipulation for damages is being enforced against the agent.



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BA Finance vs CA Facts Gebbs International applied for and was granted a loan from respondent Traders Royal Bank in the amount of P60 thousand. As security, Gaytano became a surety promising to pay jointly and severally to Traders Royal Bank the loan. BA Finances credit administrator, Wong, sent a letter to Traders Royal Bank binding BA Finance as guarantor to the loan. Later, Gaytano failed to pay the loan causing Traders Royal Bank to filed a case to recover the loan against Gaytano and BA Finance. BA Finance argues its credit administrator had no authority to bind it as guarantor. Issue Is BA Finance liable as guarantor? Held No. A person dealing with an agent is bound at his peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the agents authority. The burden of proof is on the person claiming an agency exists and the agent acted within his authority. In this case, Traders Royal only presented Wong to prove the agency that in turn testified that he acted within his authority based on a memorandum BA Finance gave to him on his lending authority. Granting Wong was authorized to approve loans up to P350 thousand without any security requirement, nothing in the memorandum authorizes Wong to issue guarantees. The word contingent commitment in the memorandum cant be held to mean guarantees. A power of attorney shouldnt be inferred from vague or general words. Guaranty isnt presumed; it must be express and cant extend beyond its specified limits. Wong sole testimony he acted within his authority in the absence of other proof shouldnt be given weight. More likely, Wong is testifying to save himself from personal liability for damages to Traders Royal considering he exceeded his authority. An agent who exceeds his authority is personally liable for damages.



44

DBP vs CA Facts Respondent Dans applied for a P500 thousand loan with DBP. DBP advised Dans, then 76 years old, to obtain a mortgage redemption insurance with the DBP MRI pool. Later, DBP approved a P300 thousand loan in Dans favor from which it deducted P1.5 thousand as insurance premium. Dans accomplished the MRI application for Insurance and Health Statement for DBP MRI pool. Later, DBP credited the DBP MRI pool with Dans MRI premium. Dans then died of cardiac arrest and DBP notified the DBP MRI pool. The DBP MRI pool then informed DBP that Dans wasnt eligible for MRI coverage because he was over the accepted age limit of 60 when he applied. DBP then apprised Dans family of Dans disapproved MRI application. DBP offered to pay back the P1.5 thousand premium plus P30 thousand as ex gratia settlement. Dans family refused DBPs offer demanding the MRIs face value or an amount equivalent to the loan. Later, Dans family filed a case before the RTC to collect the amount demanded. Issue Is DBP liable to the Dans family? Held Yes, An agent isnt personally liable to the party with whom he contracts unless he expressly binds himself or exceeds the limit of his authority without giving such party sufficient notice of his powers. An agents liability who exceeds the scope of his authority depends if the 3rd person is aware of the limits of the agents powers. In dealing with Dans, DBP was acting both as lender and as insurance agent. DBP compelled Dans to secure a DBP MRI pool coverage instead of allowing Dans to look for his own insurer. DBP released the loan deducting already the MRI premium and 4 days later made Dans complete an MRI application form as well as a health statement. The DBP then submitted both forms to the DBP MRI pool. DBP made Dans believe he had already fulfilled all the requirements for an MRI and the insurance policy was forthcoming. Further, DBP had full knowledge Dans application would be denied because they knew of the age limit and Dans age. DBP isnt authorized to accept MRI applications when the application is over 60. Consequently, DBP exceeded the scope of its authority in accepting Dans MRI application. Also, theres no showing Dans knew of the limitation on DBPs authority to accept MRI applications. DBP is liable to Dans for damages in making the latter believe the former had authority to accept his MRI application.



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Eugenio vs CA Facts Eugenio was a dealer of soft drink products of respondent Pepsi-Cola corp. She had a regular charge account in both the Quezon City plant and Muntinlupa plant. Meanwhile, her husband and co-petitioner used to be a route manager of Pepsi-Cola corp. in the Quezon City plant. Later, Pepsi-Cola filed a complaint for a sum of money against Eugenio and her husband for various products and empties totaling P96 thousand because they failed to pay despite repeated demands. In their defense, the petitioners presented 4 trade provisional receipts (TPR) allegedly issued to them from Pepsi-Colas route manager Estrada showing payments totaling P80.5 thousand. The TPRs shouldve been credited in their favor. However, Estrada denied issuing the TPRs. Issue Should the amounts in the TPRs be credited in Eugenios favor? Held Yes. Payment shall be made to the person in whose favor the obligation has been constituted, or his successor-in-interest or any person authorized to receive it. As far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if such is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and his agent. In this case, Pepsi-Cola failed to prove that Estrada, its duly authorized agent with respect to Eugenio, didnt receive the amounts reflected in the TPRs from Eugenio. So long as Pepsi-Colas customers are concerned, for as long as they pay their obligations to Pepsi-Colas sales representative using the official receipt, said payment extinguishes their obligations. Pepsi-Cola itself admitted its the collectors, in this case Estrada, responsibility to turn over the collection. Simply put, Eugenio paid the right person, Pepsi-Colas agent, and if Pepsi-Cola received the payment is no longer Eugenios problem. Payment should be credited.


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