agency- case digest manila memorial park cemetery,...

AGENCY- CASE DIGEST©Raisa G. Marasigan

MANILA MEMORIAL PARK CEMETERY, INC.vs.PEDRO L. LINSANGAN

FACTS:

Florencia Baluyot offered Atty. Pedro L. Linsangan alot called Garden State at the Holy Cross MemorialPark owned by petitioner (MMPCI). According toBaluyot, a former owner of a memorial lot underContract No. 25012 was no longer interested inacquiring the lot and had opted to sell his rightssubject to reimbursement of the amounts he alreadypaid. The contract was for P95,000.00. Baluyotreassured Atty. Linsangan that once reimbursementis made to the former buyer, the contract would betransferred to him.

Atty. Linsangan agreed and gave Baluyot P35,295.00representing the amount to be reimbursed to theoriginal buyer and to complete the down payment toMMPCI. Baluyot issued handwritten and typewrittenreceipts for these payments. Contract No. 28660 hasa listed price of P132,250.00. Atty. Linsanganobjected to the new contract price, as the same wasnot the amount previously agreed upon. To convinceAtty. Linsangan, Baluyot executed a documentconfirming that while the contract price isP132,250.00, Atty. Linsangan would pay only theoriginal price of P95,000.00.

Later on, Baluyot verbally advised Atty. Linsanganthat Contract No. 28660 was cancelled for reasonsthe latter could not explain. For the alleged failure ofMMPCI and Baluyot to conform to their agreement,Atty. Linsangan filed a Complaint for Breach ofContract and Damages against the former.

MMPCI alleged that Contract No. 28660 wascancelled conformably with the terms of the contractbecause of non-payment of arrearages. MMPCIstated that Baluyot was not an agent but anindependent contractor, and as such was notauthorized to represent MMPCI or to use its nameexcept as to the extent expressly stated in theAgency Manager Agreement. Moreover, MMPCI wasnot aware of the arrangements entered into by Atty.Linsangan and Baluyot, as it in fact received a downpayment and monthly installments as indicated inthe contract.

The trial court held MMPCI and Baluyot jointly andseverally liable. The Court of Appeals affirmed thedecision of the trial court.

ISSUES:

1. Whether or not there was a contract of agencybetween Baluyot and MMPCI?2. Whether or not MMPCI should be liable forBaluyot’s act?

HELD:

Yes. By the contract of agency, a person bindshimself to render some service or to do something inrepresentation or on behalf of another, with theconsent or authority of the latter. As properly foundboth by the trial court and the Court of Appeals,Baluyot was authorized to solicit and remit toMMPCI offers to purchase interment spacesobtained on forms provided by MMPCI. The terms ofthe offer to purchase, therefore, are contained insuch forms and, when signed by the buyer and anauthorized officer of MMPCI, becomes binding onboth parties.

No. While there is no more question as to the agencyrelationship between Baluyot and MMPCI, there isno indication that MMPCI let the public, orspecifically, Atty. Linsangan to believe that Baluyothad the authority to alter the standard contracts ofthe company. Neither is there any showing that priorto signing Contract No. 28660, MMPCI had anyknowledge of Baluyot's commitment to Atty.Linsangan. Even assuming that Atty. Linsangan wasmisled by MMPCI's actuations, he still cannot invokethe principle of estoppel, as he was clearly negligentin his dealings with Baluyot, and could have easilydetermined, had he only been cautious and prudent,whether said agent was clothed with the authority tochange the terms of the principal's written contract.To repeat, the acts of the agent beyond the scope ofhis authority do not bind the principal unless thelatter ratifies the same. It also bears emphasis thatwhen the third person knows that the agent wasacting beyond his power or authority, the principalcannot be held liable for the acts of the agent. If thesaid third person was aware of such limits ofauthority, he is to blame and is not entitled torecover damages from the agent, unless the latterundertook to secure the principal's ratification.

IR FRANCE vs. COURT OF APPEALSG.R. No. 76093/ March 21, 1989

FACTS:Atty. Narciso Morales, a lawyer, thru hisrepresentative purchased an airline ticket fromAspac Management Corporation, petitioner's GeneralSales Agent in Makati. The itinerary covered by theticket included several cities, with certain segmentsthereof restricted by markings of "non endorsable'and 'valid on Air France only. While in New York,U.S.A., Atty. Morales suffered an ear infection whichnecessitated medical treatment. He obtained threemedical certificate. From New York, he flew to Paris,Stockholm and then Copenhagen where he maderepresentations with petitioner's office to shorten histrip by deleting some of the cities in the itinerary.Atty. Morales was informed that, as a matter ofprocedure, confirmation of petitioner's office inManila (as ticketing office) must be secured beforeshortening of the route(already paid for). The AirFrance Manila replied in negative with the request ofAtty. Morales to shorten his trip. After reiterating hisneed to flying home on a shorter route due to his earinfection, and presentation of supporting medicalcertificates, again, the airline office made the

CASE DIGEST|AGENCY 1

necessary request to Manila a Hamburg, Paris,Geneva, Rome, Paris, Hongkong and Manila route.Still, the request was denied. Atty. Morales,therefore, had to buy an entirely new set of tickets,paying 1,914 German marks for the homewardroute. Upon arrival in Manila, Atty. Morales filed acomplaint for breach of contract of carriage anddamages. The CFI found Air France was in evidentbad faith for violation of the contract of carriage,aggravated by the threatening attitude of itsemployees in Hamburg. On appeal the Court ofAppeals affirmed the CFI's decision withmodifications on the award of damages. Questioningthe factual findings of the CA Air France filed apetition for review..

ISSUE:Whether or not Air France is guilty of Breach ofContract of Carriage.

HELD:No, Air France is not guilty of Breach of Contract ofCarriage. The respondent court's ruling that therewas breach of contract of carriage is premised onpetitioner's refusal to re-route Atty. Morales and, ineffect, requiring him to purchase a new set of tickets.International Air Transportation Association (IATA)Resolution No. 275 e, 2., special note reads:"Where a fare is restricted and such restrictions arenot clearly evident from the required entries on theticket, such restrictions may be written, stamped orreprinted in plain language in theEndorsement/Restrictions" box of the applicableflight coupon(s); or attached thereto by use of anappropriate notice." Voluntary changes totickets,while allowable, are also covered by (IATA)Resolution No. 1013, Art. II, which provides: "1.changes to the ticket requested by the passenger willbe subject to carriers regulations. Considering theoriginal restrictions on the ticket, it was notunreasonable for Air France to deny the request. It isessential before an award of damages that theclaimant must satisfactorily prove during the trialthe existence of the factual basis of the damages andits causal connection to defendant's acts. Atty.Morales failed to substantiate his claim due tofailure to present a medical certificate that he indeedhad undergone medical examination upon arrival inManila. Furthermore, Air France employees inHamburg informed Atty. Morales that his ticketswere partly stamped "non-endorsable" and "valid onAir France only." The mere refusal to accede to thepassenger's wishes does not necessarily translateinto damages in the absence of bad faith. Atty.Morales has failed to show wanton, malevolent orreckless misconduct imputable to petitioner in itsrefusal to re-route. Omissions by ordinarypassengers may be condoned but more is expected ofmembers of the bar who cannot feign ignorance ofsuch limitations and restrictions. An award of moraland exemplary damages cannot bes ustained underthe circumstances, but petitioner has to refund theunused coupons in the Air France ticket to theprivate respondent.

RALLOS v FELIX GO CHAN & REALTY COPR.,

Munoz-Palma

Plaintiff: Ramon Rallos

Defendant: Felix Go Chan & Sons Realty Corporation

Facts: Concepcion and Gerundia Rallos weresisters and registered co-owners of the parcel of landin issue. They executed a special power of attorneyin favor of their brother, Simeon Rallos, authorizinghim to sell such land for and in their behalf. AfterConcepcion died, Simeon Rallos sold the undividedshares of his sisters Concepcion and Gerundia toFelix Go Chan & Sons Realty Corporation for thesum of P10,686.90. New TCTs were issued to thelatter.Petitioner Ramon Rallos, administrator of theIntestate Estate of Concepcion filed a complaintpraying (1) that the sale of the undivided share ofthe deceased Concepcion Rallos in lot 5983 beunenforceable, and said share be reconveyed to herestate; (2) that the Certificate of 'title issued in thename of Felix Go Chan & Sons Realty Corporation becancelled and another title be issued in the names ofthe corporation and the "Intestate estate ofConcepcion Rallos" in equal undivided and (3) thatplaintiff be indemnified by way of attorney's fees andpayment of costs of suit.

Issues: Whether or not the sale fell within the exception tothe general rule that death extinguishes theauthority of the agent

Held/Ratio: Yes the sale is void. The court held that no one maycontract in the name of another without beingauthorized by the latter, or unless he has by law aright to represent him (Art. 1317 of the CivilCode). Simon’s authority as agent was extinguishedupon Concolacion’s death. The sale did not fallunder the exceptions to the general rule that deathipso jure extinguishes the authority of the agent.Art.1930 inapplicable since SPA in favor of SimonRallos was not coupled with interest and Art. 1931inapplicable because Rallos knew of principalConcepcion’s death. For Art 1931 to apply, bothrequirements must be present Laws on agency, theterms of which are clear and unmistakable leavingno room for an interpretation contrary to its tenor,should apply, the law provides that death of theprincipal ipso jure extinguishes the authority of theagent to sell rendering the sale to a third person ingood faith unenforceable unless at the agent had noknowledge of the principal’s death at that time(exception under Art. 1931) Dispositive: CA Decision reversed, CFI decisionaffirmed. Sale was null and void.


ORIENT AIR SERVICES & HOTELREPRESENTATIVES v. COURT OF APPEALS andAMERICAN AIR-LINES INCORPORATEDG.R. No. 76933 May 29, 1991 PADILLA, J.:

Facts:

American Airlines, Inc. (American Air), an air carrieroffering passenger and air cargo transportation inthe Philippines, and Orient Air Services and HotelRepresentatives (Orient Air),entered into a GeneralSales Agency Agreement (Agreement), whereby theformer authorized the latter to act as its exclusivegeneral sales agent within the Philippines for thesale of air passenger transportation. In theagreement, Orient Air shall remit in United Statesdollars to American the ticket stock or exchangeorders, less commissions to which Orient AirServices is entitled, not less frequently than semi-monthly. On the other hand, American will payOrient Air Services commission on transportationsold by Orient Air Services or its sub-agents.Thereafter, American alleged that Orient Air hadreneged on its obligations under the Agreement byfailing to promptly remit the net proceeds of sales forthe months of January to March 1981 in theamount of US $254,400.40, American Air by itselfundertook the collection of the proceeds of ticketssold originally by Orient Air and terminatedforthwith the Agreement in accordance withparagraph 13 which authorize the termination of thethereof in case Orient Air is unable to transfer to theUnited States the funds payable by Orient AirServices to American. American Air instituted suitagainst Orient Air with the Court of First Instance ofManila for Accounting with Preliminary Attachmentor Garnishment, Mandatory Injunction andRestraining Order averring the aforesaid basis forthe termination of the Agreement as well as thereindefendant's previous record of failures "to promptlysettle past outstanding refunds of which there wereavailable funds in the possession of thedefendant, . . . to the damage and prejudice ofplaintiff. “Orient Air denied the material allegationsof the complaint with respect to plaintiff’sentitlement to alleged unremitted amounts,contending that after application thereof to thecommissions due it under the Agreement, plaintiff infact still owed Orient Air a balance in unpaidoverriding commissions. Further, the defendantcontended that the actions taken by American Air inthe course of terminating the Agreement as well asthe termination itself were untenable. The trial courtruled in its favor which decision was affirmed withmodification byCourt of Appeals. It held thetermination made by the latter as affecting the GSAagreementillegal and improper and ordered theplaintiff to reinstate defendant as its general salesagent for passenger transportation in the Philippinesin accordance with said GSA agreement.

ISSUE:

The principal issue for resolution by the Court is theextent of Orient Air's right to the 3% overridingcommission.

HELD:

We agree with the findings of the respondentappellate court. As earlier established, Orient Airwas entitled to an overriding commission based ontotal flown revenue. American Air's perception thatOrient Air was remiss or in default of its obligationsunder the Agreement was, in fact, a situation wherethe latter acted in accordance with the Agreement—that of retaining from the sales proceeds its accruedcommissions before remitting the balance toAmerican Air. Since the latter was still obligated toOrient Air by way of such commissions. Orient Airwas clearly justified in retaining and refusing toremit the sums claimed by American Air. The latter'stermination of the Agreement was, therefore, withoutcause and basis, for which it should be held liable toOrient Air.

On the matter of damages, the respondent appellatecourt modified by reduction the trial court's award ofexemplary damages and attorney's fees. This Courtsees no error in such modification and, thus, affirmsthe same.

It is believed, however, that respondent appellatecourt erred in affirming the rest of the decision ofthe trial court.1âwphi1 We refer particularly to thelower court's decision ordering American Air to"reinstate defendant as its general sales agent forpassenger transportation in the Philippines inaccordance with said GSA Agreement."

By affirming this ruling of the trial court,respondent appellate court, in effect, compelsAmerican Air to extend its personality to Orient Air.Such would be violative of the principles andessence of agency, defined by law as a contractwhereby "a person binds himself to render someservice or to do something in representation or onbehalf of another, WITH THE CONSENT ORAUTHORITY OF THE LATTER . 17 (emphasissupplied) In an agent-principal relationship, thepersonality of the principal is extended through thefacility of the agent. In so doing, the agent, by legalfiction, becomes the principal, authorized to performall acts which the latter would have him do. Such arelationship can only be effected with the consent ofthe principal, which must not, in any way, becompelled by law or by any court. The Agreementitself between the parties states that "either partymay terminate the Agreement without cause bygiving the other 30 days' notice by letter, telegram orcable." (emphasis supplied) We, therefore, set asidethe portion of the ruling of the respondent appellatecourt reinstating Orient Air as general sales agent ofAmerican Air.

WHEREFORE, with the foregoing modification, theCourt AFFIRMS the decision and resolution of therespondent Court of Appeals, dated 27 January1986 and 17 December 1986, respectively. Costsagainst petitioner American Air.


Sevilla vs CA G..R. No. L-41182-3 April 16, 1988

Facts:

The petitioners invoke the provisions on humanrelations of the Civil Code in this appeal bycertiorari.

Mrs. Segundina Noguera, party of the first part; theTourist World Service, Inc., represented by Mr. EliseoCanilao as party of the second part, and hereinafterreferred to as appellants, the Tourist World Service,Inc. leased the premises belonging to the party of thefirst part at Mabini St., Manila for the former-s useas a branch office. In the said contract the party ofthe third part held herself solidarily liable with theparty of the part for the prompt payment of themonthly rental agreed on. When the branch officewas opened, the same was run by the hereinappellant Una 0. Sevilla payable to Tourist WorldService Inc. by any airline for any fare brought in onthe efforts of Mrs. Lina Sevilla, 4% was to go to LinaSevilla and 3% was to be withheld by the TouristWorld Service, Inc.

On November 24, 1961 the Tourist World Service,Inc. appears to have been informed that Lina Sevillawas connected with a rival firm, the Philippine TravelBureau, and, since the branch office was anyhowlosing, the Tourist World Service considered closingdown its office.

On June 17,1963, appellant Lina Sevilla refiled hercase against the herein appellees and after theissues were joined, the reinstated counterclaim ofSegundina Noguera and the new complaint ofappellant Lina Sevilla were jointly heard followingwhich the court ordered both cases dismiss for lackof merit.

In her appeal, Lina Sevilla claims that a jointbussiness venture was entered into by and betweenher and appellee TWS with offices at the Ermitabranch office and that she was not an employee ofthe TWS to the end that her relationship with TWSwas one of a joint business venture appellant madedeclarations.

Issue:

Whether or not the padlocking of the premises bythe Tourist World Service, Inc. without theknowledge and consent of the appellant Lina Sevillaentitled the latter to the relief of damages prayed forand whether or not the evidence for the saidappellant supports the contention that the appelleeTourist World Service, Inc. unilaterally and withoutthe consent of the appellant disconnected thetelephone lines of the Ermita branch office of theappellee Tourist World Service, Inc.?

Held:

The trial court held for the private respondent on thepremise that the private respondent, Tourist WorldService, Inc., being the true lessee, it was within itsprerogative to terminate the lease and padlock thepremises. It likewise found the petitioner, LinaSevilla, to be a mere employee of said Tourist WorldService, Inc. and as such, she was bound by the actsof her employer. The respondent Court of Appealrendered an affirmance.

In this jurisdiction, there has been no uniform testto determine the evidence of an employer-employeerelation. In general, we have relied on the so-calledright of control test, "where the person for whom theservices are performed reserves a right to control notonly the end to be achieved but also the means to beused in reaching such end." Subsequently, however,we have considered, in addition to the standard ofright-of control, the existing economic conditionsprevailing between the parties, like the inclusion ofthe employee in the payrolls, in determining theexistence of an employer-employee relationship.

the Decision promulgated on January 23, 1975 aswell as the Resolution issued on July 31, 1975, bythe respondent Court of Appeals is herebyREVERSED and SET ASIDE. The privaterespondent, Tourist World Service, Inc., and EliseoCanilao, are ORDERED jointly and severally toindemnify the petitioner, Lina Sevilla, the sum of25,00.00 as and for moral damages, the sum ofP10,000.00, as and for exemplary damages, and thesum of P5,000.00, as and for nominal and/ortemperate damages.

GREEN VALLEY POULTRY & ALLIED PRODUCTS,INC., vs. THE INTERMEDIATE APPELLATECOURT and E.R. SQUIBB & SONS PHILIPPINECORPORATION.

FACTS:On November 3, 1969, Squibb and Green Valleyentered into a letter agreement the text of whichreads: E.R. Squibb & Sons Philippine Corporation ispleased to appoint Green Valley Poultry & AlliedProducts, Inc. as a non-exclusive distributor forSquibb Veterinary Products, as recommended by Dr.Leoncio D. Rebong, Jr. and Dr. J.G. Cruz, AnimalHealth Division Sales Supervisor. A stipulation inthe agreement specifies that:

Payment for Purchases of Squibb Products will bedue 60 days from date of invoice or the nearestbusiness day thereto. No payment win be accepted inthe form of post-dated checks. Payment by checkmust be on current dating. It is mutually agreed thatthis non-exclusive distribution agreement can beterminated by either Green Valley Poultry & AlliedProducts, Inc. or Squibb Philippines on 30 daysnotice. For goods delivered to Green Valley butunpaid, Squibb filed suit to collect. Green Valleyclaimed that the contract with Squibb was a mereagency to sell; that it never purchased goods fromSquibb; that the goods received were onconsignment only with the obligation to turn over


the proceeds, less its commission, or to return thegoods if not sold, and since it had sold the goods buthad not been able to collect from the purchasersthereof, the action was premature. Upon the otherhand, Squibb claimed that the contract was one ofsale so that Green Valley was obligated to pay for thegoods received upon the expiration of the 60-daycredit period. TC and CA upheld the claim of Squibbthat the agreement between the parties was a salescontract.

ISSUE:WON the contract is an agency to sell or a contractof sale.

HELD:CONTRACT OF SALE. Green Valley is liable becauseit sold on credit without authority from its principal.The Civil Code has a provision...

Ker and Co., LTD vs LingadGR No. L-20871 April 30, 1971

Facts:CIR assessed the sum of P20,272.33 as thecommercial broker’s percentage tax, surcharge, andcompromise penalty against Ker & Co. Ker and Co.requested for the cancellation of the assessment andfiled a petition for review with the Court of TaxAppeals. The CTA ruled that Ker and Co is liable asa commercial broker. Ker has a contract with USrubber. Ker is the distributor of the said company.Ker was precluded from disposing the productselsewhere unless there has been a written consentfrom the company. The prices, discounts, terms ofpayment, terms of delivery and other conditions ofsale were subject to change in the discretion of theCompany.

Issue:Whether the relationship of Ker and Co and USrubber was that of a vendor- vendee or principal-broker

Ruling:The relationship of Ker and Co and US rubber wasthat of a principal-broker/ agency. Ker and Co isonly an agent of the US rubber because it candispose of the products of the Company only tocertain persons or entities and within stipulatedlimits, unless excepted by the contract or by theRubber Company, it merely receives, accepts and/orholds upon consignment the products, which remainproperties of the latter company, every effort shall bemade by petitioner to promote in every way the saleof the products and that sales made by petitioner aresubject to approval by the company. Since thecompany retained ownership of the goods, even as itdelivered possession unto the dealer for resale tocustomers, the price and terms of which weresubject to the company’s control, the relationshipbetween the company and the dealer is one ofagency.

LIM vs. PEOPLEG.R. No. L-34338 November 21, 1984

RELOVA,J

FACTS:Lourdes Lim went to the house of Maria de Guzmanand proposed to sell the latter’s tobacco.Maria agreed with the proposal. Hence the executionof a receipt manifesting that Lourdes received 615kilos of tobacco to be sold at P1.30 per kilo, theoverprice for which would be received by Lourdes.The receipt also states that the proceeds will begiven to Mariaas soon as it was sold. However,Lourdes paid only P240, despite repeated demands.5. Thus, Maria filed a complaint, and Lourdes wasfound guilty of estafa. (Estafa is present wherecontract to sell constituted another as mere agent)Lourdes argued that the receipt was a “contract ofsale” and not a “contract of agency to sell.” ISSUE:Is Lourdes’ argument tenable?

RULING:NO. The contract was not a contract of sale becausethere was no transfer of ownership of the goods toLourdes. Instead, the agreement was a contract ofagency to sell for it constituted Lourdes as agentwith the obligation to give the proceeds of the sale toMaria as soon as the same was sold. The obligationwas immediately demandable as soon as the tobaccowas disposed of. Consequently, there is no need forthe court to fix the duration of the obligation, ascontended by Lourdes.

NARIC vs. CAG.R. No. L-32320, July 16, 1979

FACTS: The National Rice and Corn Corporation (Naric) hadon stock 8000 metric tons of corn which it could notdispose of due to its poor quality. Naric called forbids for the purchase of the corn and rice. Butprecisely because of the poor quality of the corn, adirect purchase of said corn even with the privilegeof importing commodities did not attract good offers.Davao Merchandising Corporation (Damerco) camein with its offer to act as agent in the exportation ofthe corn, with the agent answering for the pricethereof and shouldering all expenses incidentalthereto, provided it can import commodities, payingthe NARIC therefor from the price it offered for thecorn. Damerco was to open a domestic letter ofcredit, which shall be available to the NARIC drawingtherefrom through sight draft without recourse. Theavailability of said letter or letters of credit to theNARIC was dependent upon the issuance of theexport permit. The payment therefor depended onthe importation of the collateral goods, that is afterits arrival.

The first half of the collateral goods weresuccessfully imported. Due to the inferior quality ofthe corn, it had to be replaced with more acceptablestock. This caused such delay that the letters ofcredit expired without the NARIC being able to draw


the full amount therefrom. Checks and PN wereissued by DAMERCO for the purpose of securing theunpaid part of the price of the corn and as guarantythat DAMERCO will purchase the correspondingcollateral goods.

But because of the change of administration in thegovernment, barter transactions were suspended.Hence, DAMERCO was not able to import theremaining collateral goods. NARIC instituted in theCFI of Manila against DAMERCO and Fieldmen’sInsurance Co. Inc. an action for recovery of a sum ofmoney representing the balance of the value of cornand rice exported by DAMERCO. The trial courtrendered in favor of NARIC ordering DAMERCO andFieldmen’s Insurance Co. Inc., to pay, jointly andseverally. CA reversed the trial court’s decision andrendered a new judgement dismissing the complaintas premature and for lack of cause of action. Hencethis petition for certiorari.

ISSUE: Whether DAMERCO only acted as an agent of NARICor is a buyer

HELD: The petition for review is denied and the resolutionof the CA appealed from is hereby affirmed

AGENT

Clearly from the contract between NARIC andDAMERCO: bids were previously called for by theNARIC for the purchase of corn and rice to beexported as well as of the imported commodities thatwill be brought in, but said biddings did not succeedin attracting good offers. Subsequently, Damercomade an offer. Now, to be sure, the contractdesignates the Naric as the seller and the Damercoas the buyer. These designations, however, aremerely nominal, since the contract thereafter setsforth the role of the “buyer” (Damerco)’ “as agent ofthe seller” in exporting the quantity and kind of cornand rice as well as in importing the collateral goodsthru barter and “to pay the aforementioned collateralgoods.”

The contract between the NARIC and the DAMERCOis bilateral and gives rise to a reciprocal obligation.The said contract consists of two parts: (1) theexportation by the DAMERCO as agent for theNARIC of the rice and corn; and (2) the importationof collateral goods by barter on a back to back letterof credit or no-dollar remittance basis. It is evidentthat the DAMERCO would not have entered into theagreement were it not for the stipulation as to theimportation of the collateral goods which it couldpurchase.

It appears that we were also misled to believe thatthe Damerco was buying the corn. A closer look atthe pertinent provisions of the contract, however,reveals that the price as stated in the contract wasgiven tentatively for the purpose of fixing the price inbarter. It should likewise be stressed that the

aforesaid exportation and importation was on a “no-dollar remittance basis”. In other words, the agent,herein defendant Damerco, was not to be paid by itsforeign buyer in dollars but in commodities.Damerco could not get paid unless the commoditieswere imported, and Damerco was not exporting andimporting on its own but as agent of the plaintiff,because it is the latter alone which could export andimport on barter basis according to its charter.Thus, unless Damerco was made an agent of theplaintiff, the former could not export the corn andrice nor import at the same time the collateralgoods. This was precisely the intention of theparties.

He is not to be considered a buyer, who should beliable for the sum sought by NARIC because thecontract itself clearly provides the Damerco was toexport the rice and corn, AND TO BUY THEcollateral goods. There is nothing in the contractproviding unconditionally that Damerco was buyingthe rice and corn. To be more specific, if theagreement was just a sale of corn to Damerco, thecontract need not specify that Damerco was to buythe collateral goods.

SSS vs. CA(120 SCRA 707)

FACTS:Spouses David and Socorro Cruz, applied andgranted a real estate loan by the SSS with residentiallot located at Pateros, Rizal as collateral. Thespouses Cruz complied with their monthlypayments. When delayed were incurred in theirmonthly payments SSS filed a petition for foreclosureof their real estate mortgage executed by the spousesCruz on the ground that the spouses Cruz defaultedin payment, Pursuant for these application forforeclosure notices were published on the secondnotice the counsel for spouses Cruz sent a letter toSSS informing the latter that his clients are up todate in their payment of the monthly amortizationand the SSS should discontinued the publication ofthe notices of foreclosure. This request remainunheeded, this spouses Cruz filed an action fordamages against SSS before RTC in Rizal. SSSinvoking its immunity from suit being an agency ofthe government performing government function.The trial court and court of appeal neverthelessawarded damages in favor of spouses Cruz whichwas affirmed by court of appeal, Hence this petition.

ISSUE: Whether or not SSS is immune from suit?

HELD:Negative.The SSS has a distinct legal personality andit can be sued for damages. The SSS does not enjoyimmunity from suit by express statutory consent. Ithas corporated power separate and distinct from thegovernment. SSS own organic act specificallyprovides that it can sue and be sued in court. Thesewords “sue and be sued” embrace all civil processincident to a legal action. So that even assumingthat the SSS, as it claims, enjoys immunity from suit


as an entity performing governmental function, byvirtue of the explicit provision of the afore citedenabling law, the government must be deemed tohave waived immunity in respect of the SSS,although it does not thereby concede its liability thatstatutory law has given to the private citizen aremedy for the enforcement and protection of hisrights. The SSS thereby has been required to submitto the jurisdiction of the court; subject to its right tointerpose any lawful defense.

Jai-Alai Corp. of the Phil. vs. Bank of the Phil.IslandsG.R. No. L-29432 August 6, 1975 66 SCRA 29

FACTS:Petitioner deposited 10 checks in its current accountwith BPI. The checks which were acquired bypetitioner from Ramirez, a sales agent of the Inter-Island Gas were all payable to Inter-Island GasService, Inc. or order. After the checks had beensubmitted to Inter-bank clearing, Inter-Island Gasdiscovered that all the indorsements made on thechecks purportedly by its cashiers were forgeries.BPI thus debited the value of the checks againstpetitioner's current account and forwarded to thelatter the checks containing the forged indorsementswhich petitioner refused to accept. ISSUE:Whether BPI had the right to debit from petitioner'scurrent account the value of the checks with theforged indorsements.

RULING:BPI acted within legal bounds when it debited thepetitioner's account. Having indorsed the checks torespondent bank, petitioner is deemed to have giventhe warranty prescribed in Section 66 of the NIL thatevery single one of those checks "is genuine and inall respects what it purports to be." Respondentwhich relied upon the petitioner's warranty shouldnot be held liable for the resulting loss.

**The depositor of a check as indorser warrants thatit is genuine and in all respects what it purports tobe. Having indorsed the checks to respondent bank,petitioner is deemed to have given the warrantyprescribed in Section 66 of the NIL that every singleone of those checks " is genuine and in all respectswhat it purports to be."

Conde V. CA

RATIO DECIDENDI| Melencio-Herrera, J. (1982)

The purpose of the rule is to give stability to writtenagreements, and to remove the temptation andpossibility of perjury, which would be afforded ifparol evidence was admissible.

FACTS• Margarita Conde, Bernardo Conde andDominga Conde sold with a right of repurchase,

within 10 years from, a parcel of agricultural land tothe Altera Spouses.o The contract provided that: “If at the end of10 years the said land is not repurchased, a newagreement shall be made between the parties and inno case title and ownership shall be vested in thehand of the party of the Second Part (Alteras).”• The Cadastral Court of Leyte thenadjudicated the lot to the Alteras subject to the rightof redemption counting from 7 April 1938 afterreturning the amount of PHP 165.00• On 28 November 1945, Paciente Cordero,son-in-law of the Alteras signed a document allowingEusebio Amarille, the representative of the Condes,to repurchase the land.• On 30 June 1965, Pio Altera sold thedisputed lot to the spouses Ramon Conde andCatalina Conde. (Relationship to the other Condeswere not shown)• Dominga then filed a Complaint for quietingof title to property.

ISSUE/HELDWoN Dominga Conde validly repurchased the said lot- YES

RATIO• An implied agency was created from thesilence or lack of action, or their failure to repudiatethe agreement.

The Alteras did not repudiate the agreementthat their son-in-law signed. • From the execution of the repurchasedocument in 1945, possession, which heretofore hadbeen with the Alteras, has been in the hands ofDominga Conde as stipulated therein.• Land taxes has already been paid for byDominga Conde.• Ramon and Catalina Conde are notpurchasers in good faith.o The OCT in the name of the Alterasspecifically contained the condition that it wassubject to the right of repurchase within 10 yearsfrom 1938.o Although the 10 year period had lapsed in1965, and there was no annotation of anyrepurchase by Dominga Conde, neither had the titlebeen cleared of the encumbrance. They were put on notice that some otherperson could have a right to or interest in saidproperty.• The Conde spouses conends that PacienteCordero signed the document of repurchase merelyto show that he had no objection to the repurchase.They introduced evidence for this purpose.o There is nothing in the document ofrepurchase to show that Paciente Cordero hadsigned the same merely to indicate that he had noobjection to Dominga Conde’s right of repurchase.o At the same time, he had no personality toobject.o To uphold his oral testimony on that point,would be a departure from the parol evidence ruleand would defeat the purpose for which the doctrineis intended.


The purpose of the rule is to give stability towritten agreements, and to remove the temptationand possibility of perjury, which would be afforded ifparol evidence was admissible.

Naguiat vs CA and QueañoGR No. 118375, 03 October 2003412 SCRA 591

FACTSQueaño applied with Naguiat a loan for P200,000,which the latter granted. Naguiat indorsed toQueaño Associated bank Check No. 090990 for theamount of P95,000 and issued also her ownFilmanbank Check to the order of Queaño for theamount of P95,000. The proceeds of these checkswere to constitute the loan granted by Naguiat toQueaño. To secure the loan, Queaño executed aDeed of Real Estate Mortgage in favor of Naguiat,and surrendered the owner’s duplicates of titles ofthe mortgaged properties. The deed was notarizedand Queaño issued to Naguiat a promissory note forthe amount of P200,000. Queaño also issued a post-dated check amounting to P200,000 payable to theorder of Naguait. The check was dishonoured forinsufficiency of funds. Demand was sent to Queaño.Shortly, Queaño, and one Ruby Reubenfeldt metwith Naguiat. Queaño told Naguiat that she did notreceive the loan proceeds, adding that the checkswere retained by Reubenfeldt, who purportedly wasNaguiat’s agent.

Naguiat applied for extrajudicial foreclosure of themortgage. RTC declared the Deed as null and voidand ordered Naguiat to return to Queaño the owner’sduplicates of titles of the mortgaged lots.

ISSUEWhether or not the issuance of check resulted in theperfection of the loan contract.

HELDThe Court held in the negative. No evidence wassubmitted by Naguiat that the checks she issued orendorsed were actually encashed or deposited. Themere issuance of the checks did not result in theperfection of the contract of loan. The Civil Codeprovides that the delivery of bills of exchange andmercantile documents such as checks shall producethe effect of payment only when they have beencashed. It is only after the checks have beenproduced the effect of payment that the contract ofloan may have been perfected.

Article 1934 of the Civil Code provides: An acceptedpromise to deliver something by way of commodatumor simple loan is binding upon the parties, but thecommodatum or simple loan itsel shall not beperfected until the delivery of the object of thecontract. A loan contract is a real contract, notconsensual, and as such, is perfected only upon thedelivery of the objects of the contract.

Prats v. Court of Appeals G.R. No. L-39822,January 31, 1978,

Fernandez, J.

Facts: In 1968, Antonio Prats, under the name of “Philippine Real Estate Exchange” instituted againstAlfonso Doronilla and PNB a case to recover a sum ofmoney and damages. Doronilla had for sometimetried to sell his 300 ha land and he had designatedseveral agents for that purpose at one time. Heoffered the property to the Social Security Systembut was unable to consummate the sale.Subsequently he gave a written authority in writingto Prats to negotiate the sale of the property. Suchauthorization was published by Prats in the ManilaTimes. The parties agreed that Prats will be entitledto 10% commission and if he will be able to sell itover its price, the excess shall be credited to thelatter plus his commission. Thereafter, Pratsnegotiated the land to the SSS. SSS invited Doronillafor a conference but the latter declined and insteadinstructed that the former should deal with Pratsdirectly. Doronilla had received the full paymentfrom SSS. When Prats demanded from him hisprofessional fees as real estate broker, Doronillarefused to pay. Doronilla alleged that Prats had noright to demand the payment not rendered accordingto their agreement and that the authority extendedto Prats had expired prior to the closing of the sale.. Issue: Whether petitioner was the efficient procuring causein bringing about the sale of respondent’s land tothe SSS. Ruling: The Supreme Court ruled that Prats was not theefficient procuring cause of the sale. It was notcategorical that it was through Prats efforts thatmeeting with the SSS official to close the sale tookplace. The court concluded that the meeting tookplace independently because the SSS hadmanifested disinterest in Prats intervention.However, in equity, the court noted that Prats haddiligently taken steps to bring back togetherDoronilla and SSS. Prats efforts somehow wereinstrumental in bringing them together again andfinally consummating the sale although suchfinalization was after the expiration of Pratsextended exclusive authority. Doronilla was orderedto pay Prats for his efforts and assistance in thetransaction.

AF Realty & Development, Inc. vs DieselmanFreight Services, Co Facts:

In 1988, Manuel Cruz, Jr., a board member ofDieselman Freight Services, Co. (DFS) authorizedCristeta Polintan to sell a 2,094 sq. m. parcel of landowned by DFS. Polintan in turn authorizedFelicisima Noble to sell the same lot. Noble thenoffered AF Realty & Development, Co., representedby Zenaida Ranullo, the land at the rate of


P2,500.00 per sq. m. AF Realty accepted the offerand issued a P300,000 check as downpayment.

However, it appeared that DFS did not authorizeCruz, Jr. to sell the said land. Nevertheless, ManuelCruz, Sr. (father) and president of DFS, accepted thecheck but modified the offer. He increased the sellingprice to P4,000.00 per sq. m. AF Realty, in itsresponse, did not exactly agree nor disagree with thecounter-offer but only said it is willing to pay thebalance (but was not clear at what rate). Eventually,DFS sold the property to someone else.

Now AF Realty is suing DFS for specific performance.It claims that DFS ratified the contract when itaccepted the check and made a counter-offer.

ISSUE: Whether or not the sale made through an agent wasratified.

HELD: No. There was no valid agency created. The Board ofDirectors of DFS never authorized Cruz, Jr. to sellthe land. Hence, the agreement between Cruz, Jr.and Polintan, as well as the subsequent agreementbetween Polintan and Noble, never bound thecorporation. Therefore the sale transacted by Noblepurportedly on behalf of Polintan and ultimatelypurportedly on behalf of DFS is void.

Being a void sale, it cannot be ratified even if Cruz,Sr. accepted the check and made a counter-offer.(Cruz, Sr. returned the check anyway). Under Article1409 of the Civil Code, void transactions can neverbe ratified because they were void from the verybeginning.

Manotoc vs. CA | May 30, 1986

FACTS:

Ricardo Manotoc Jr. was one of the two principalstockholders of Trans-Insular Management Inc. andthe Manotoc Securities Inc. (stock brokerage house).He was in US for a certain time, went home to file apetition with SEC for appointment of a managementcommittee for both businesses. Such was granted.However, pending disposition of a case filed withSEC, the latter requested the Commissioner ofImmigration not to clear him for departure.Consequently, a memorandum to this effect wasissued.

There was a torrens title submitted to and acceptedby Manotoc Securities Inc which was suspected to befake. 6 of its clients filed separate criminalcomplaints against the petitioner and Leveriza,President and VP respectively. He was charged withestafa and was allowed by the Court to post bail.

Petitioner filed before each trial court motion forpermission to leave the country stating his desire togo to US relative to his business transactions andopportunities. Such was opposed by theprosecution and was also denied by the judges. He

filed petition for certiorari with CA seeking to annulthe prior orders and the SEC communicationrequest denying his leave to travel abroad.

According to the petitioner, having been admitted tobail as a matter of right, neither the courts thatgranted him bail nor SEC, which has no jurisdictionover his liberty, could prevent him from exercisinghis constitutional right to travel.

ISSUE: WON petitioner’s constitutional right to travel wasviolated.

HELD:

NO. The court has power to prohibit person admittedto bail from leaving the country because this is anecessary consequence of the nature and function ofa bail bond. The condition imposed upon petitionerto make himself available at all times whenever thecourt requires his presence operates as a validrestriction on his constitutional right to travel. Incase he will be allowed to leave the country withoutsufficient reason, he may be placed beyond thereach of courts.

Furthermore, petitioner failed to satisfy trial courtand CA of the urgency of his travel, duration thereof,as well as consent of his surety to the proposedtravel. He was not able to show the necessity of histravel abroad. He never indicated that no otherperson in his behalf could undertake such businesstransaction.

Article 3 Sec6: “The liberty of abode and of changingthe same… shall not be impaired except upon lawfulorder of the court….” According to SC, the order oftrial court in releasing petitioner on bail constitutessuch lawful order as contemplated by the provisionon right to travel.

SIASAT vs. INTERMEDIATE APPELLATE COURTG.R. No. L-67889, October 10, 1985

GUTIERREZ, JR., J. FACTS:

Teresita Nacianceno succeeded in convincingofficials of the Department of Education and Cultureto purchase without public bidding, one millionpesos worth of national flags for the use of publicschools throughout the country. Nancianceno wasable to expedite the approval of the purchase. All thelegal requirements had been complied with, exceptthe release of the purchase orders. She wasinformed by the Chief of the Budget Division of theDepartment that the purchase orders could not bereleased unless a formal offer to deliver the flags wasfirst submitted for approval. She contacted theowners of the United Flag Industry. Mr. Primitivo


Siasat, owner and general manager of United FlagIndustry came up with a document which read:

Mrs. Tessie Nacianceno,

This is to formalize our agreement for you torepresent United Flag Industry to deal with anyentity or organization, private or government inconnection with the marketing of our products-flagsand all its accessories. For your service, you will beentitled to a commission of thirty (30%) percent.

Signed Mr. Primitive Siasat Owner and Gen.Manager

The first delivery of 7,933 flags was made by theUnited Flag Industry.Then, Nancianceno’s authority to represent theUnited Flag Industry was revoked by Primitivo Siasaton theground that she was not authorized to sell 16,666 Philippine flags to the Department.Nanciancenosaid that for the first delivery, United Flag Industrytendered the amount of P23,900.00 or five percent(5%) of the amount received as payment of hercommission. She refused to accept the said amountinsisting on the 30% commission agreed upon. Shelater learned that petitioner Siasat had alreadyreceived payment for the second delivery of 7,833flags. When she confronted the petitioners, theyvehemently denied receipt of the payment, at thesame time claimed that the respondent had noparticipation whatsoever with regard to the seconddelivery of flags and that the agency had alreadybeen revoked. Nancianceno filed an action in theCourt of First Instance of Manila to recover thefollowing commissions: 25%, as balance on the firstdelivery and 30%, on the second delivery. The trial court decided in favor of the respondent.The decision was affirmed in toto by theIntermediate Appellate Court.

ISSUE:1. Did Nancianceno have the capacity to representUnited Flag in the transaction with the Department?2. Did the revocation of agency foreclose therespondent's claim of 30% commission on thesecond transaction?

RULING:

YES, she had the capacity to represent United FlagIn fact, she was a general agent. There are severalkinds of agents. An agent may be (1) universal: (2)general, or (3) special. A universal; agent is oneauthorized to do all acts for his principal which canlawfully be delegated to an agent. So far as such acondition is possible, such an agent may be said tohave universal authority. A general agent is oneauthorized to do all acts pertaining to a business ofa certain kind or at a particular place, or all actspertaining to a business of a particular class orseries. He has usually authority either expresslyconferred in general terms or in effect made general

by the usages, customs or nature of the businesswhich he is authorized to transact.An agent, therefore, who is empowered to transact allthe business of his principal of a particular kind orin a particular place, would, for this reason, beordinarily deemed a general agent A special agent isone authorized to do some particular act or to actupon some particular occasion. lie acts usually inaccordance with specific instructions or underlimitations necessarily implied from the nature ofthe act to be done.By the way general words were employed in theagreement, no restrictions were intended as to themanner the agency was to be carried out or in theplace where it was to be executed. The power grantedto the respondent was so broad that it practicallycovers the negotiations leading to, and the executionof, a contract of sale of petitioners' merchandise withany entity or organization. There was nothing toprevent the petitioners from stating in the contractof agency that the respondent could represent themonly in the Visayas or to state that the Departmentof Education and Culture and the Department ofNational Defense, which alone would need a millionpesos worth of flags, are outside the scope of theagency. 2. NO, the revocation did not foreclose the respondent’sclaimed of 30% commission on the secondtransaction. The revocation of agency could notprevent the Nancianceno from earning hercommission because the contract of sale had beenalready perfected and partly executed. The principalcannot deprive his agent of the commission agreedupon by cancelling the agency and, thereafter,dealing directly with the buyer.

Shoppers Paradise Realty & DevelopmentCorporation vs. Felipe Roque (G.R. No. 148775, January 13, 2004, 419 SCRA 93)

FACTS:On 23 December 1993, petitioner Shopper’s ParadiseRealty & Development Corporation, represented byits president, Veredigno Atienza, entered into atwenty-five year lease with Dr. Felipe C. Roque, nowdeceased, over a parcel of land. Simultaneously,petitioner and Dr. Roque likewise entered into amemorandum of agreement for the construction,development and operation of a commercial buildingcomplex on the property. Conformably with theagreement, petitioner issued a check for anotherP250,000.00 "downpayment" to Dr. Roque.

The contract of lease and the memorandum ofagreement, both notarized, were to be annotated onTCT No. 30591 within sixty (60) days from 23December 1993 or until 23 February 1994. Theannotations, however, were never made because ofthe untimely demise of Dr. Felipe C. Roque. Thedeath of Dr. Roque on 10 February 1994 constrainedpetitioner to deal with respondent Efren P. Roque,one of the surviving children of the late Dr. Roque,but the negotiations broke down due to somedisagreements. Respondent then filed a case for

CASE DIGEST|AGENCY10

annulment of the contract of lease and thememorandum of agreement, with a prayer for theissuance of a preliminary injunction.

Efren P. Roque alleged that he had long been theabsolute owner of the subject property by virtue of adeed of donation inter vivos executed in his favor byhis parents, Dr. Felipe Roque and Elisa Roque, on 26December 1978, and that the late Dr. Felipe Roquehad no authority to enter into the assailedagreements with petitioner. The donation was madein a public instrument duly acknowledged by thedonor-spouses before a notary public and dulyaccepted on the same day by respondent before thenotary public in the same instrument of donation.The title to the property, however, remained in thename of Dr. Felipe C. Roque, and it was onlytransferred to and in the name of respondent sixteenyears later, or on 11 May 1994.

The trial court dismissed the complaint of therespondent, explaining that "(o)rdinarily, a deed ofdonation need not be registered in order to be validbetween the parties. Registration, however, isimportant in binding third persons. Thus, whenFelipe Roque entered into a leased contract withdefendant corporation, plaintiff Efren Roque (could)no longer assert the unregistered deed of donationand say that his father, Felipe, was no longer theowner of the subject property at the time the leaseon the subject property was agreed upon."

On appeal, the Court of Appeals reversed thedecision of the trial court, explaining that petitionerwas not a lessee in good faith having had priorknowledge of the donation in favor of respondent,and that such actual knowledge had the effect ofregistration insofar as petitioner was concerned.

HELD:The existence, albeit unregistered, of the donation infavor of respondent is undisputed. The trial courtand the appellate court have not erred in holdingthat the non-registration of a deed of donation doesnot affect its validity. As being itself a mode ofacquiring ownership, donation results in an effectivetransfer of title over the property from the donor tothe donee. In donations of immovable property, thelaw requires for its validity that it should becontained in a public document, specifying thereinthe property donated and the value of the chargeswhich the donee must satisfy. The Civil Codeprovides, however, that "titles of ownership, or otherrights over immovable property, which are not dulyinscribed or annotated in the Registry of Property(now Registry of Land Titles and Deeds) shall notprejudice third persons." It is enough, between theparties to a donation of an immovable property, thatthe donation be made in a public document but, inorder to bind third persons, the donation must beregistered in the registry of Property (Registry ofLand Titles and Deeds). Consistently, Section 50 ofAct No. 496 (Land Registration Act), as so amendedby Section 51 of P.D. No. 1529 (Property RegistrationDecree), states:

"SECTION 51. Conveyance and other dealings byregistered owner.- An owner of registered land mayconvey, mortgage, lease, charge or otherwise dealwith the same in accordance with existing laws. Hemay use such forms of deeds, mortgages, leases orother voluntary instruments as are sufficient in law.But no deed, mortgage, lease, or other voluntaryinstrument, except a will purporting to convey oraffect registered land shall take effect as aconveyance or bind the land, but shall operate onlyas a contract between the parties and as evidence ofauthority to the Register of Deeds to makeregistration.

"The act of registration shall be the operative act toconvey or affect the land insofar as third persons areconcerned, and in all cases under this Decree, theregistration shall be made in the office of theRegister of Deeds for the province or city where theland lies."

Petition denied.

BA Finance Corp vs. CAGR 61464, May 28 1988

FACTS:

Augusto Yulo secured a loan from the petitioner inthe amount of P591,003.59 as evidenced by apromissory note he signed in his own behalf and asa representative of A&L Industries. Augustopresented an alleged special power of attorneyexecuted by his wife, Lily Yulo, who managed thebusiness and under whose name the said businesswas registered, purportedly authorized the husbandto procure the loan and sign the promissory note.2months prior the procurement of the loan, Augustoleft Lily and their children which in turn abandonedtheir conjugal home. When the obligation becamedue and demandable, Augusto failed to pay thesame.

The petitioner prayed for the issuance of a writ ofattachment alleging that said spouses were guilty offraud consisting of the execution of Deed ofAssignment assigning the rights, titles and interestsover a construction contract executed by andbetween the spouses and A. Soriano Corporation.The writ hereby prayed for was issued by the trialcourt and not contented with the order, petitionerfiled a motion for the examination of attachmentdebtor alleging that the properties attached by thesheriff were not sufficient to secure the satisfactionof any judgment which was likewise granted by thecourt.

ISSUE: WON A&L Industries can be held liable for theobligations contracted by the husband.

HELD:


A&L Industries is a single proprietorship, whoseregistered owner is Lily Yulo. The saidproprietorship was established during the marriageand assets were also acquired during the same.Hence, it is presumed that the property forms partof the conjugal partnership of the spouses and beheld liable for the obligations contracted by thehusband. However, for the property to be liable, theobligation contracted by the husband must haveredounded to the benefit of the conjugal partnership.The obligation was contracted by Augusto for hisown benefit because at the time he incurred suchobligation, he had already abandoned his family andleft their conjugal home. He likewise made it appearthat he was duly authorized by his wife in behalf ofthe company to procure such loan from thepetitioner. Clearly, there must be the requisiteshowing that some advantage accrued to the welfareof the spouses.

Thus, the Court ruled that petitioner cannot enforcethe obligation contracted by Augusto against hisconjugal properties with Lily. Furthermore, the writof attachment cannot be issued against the saidproperties and that the petitioner is ordered to payLily actual damages amouting to P660,000.00.

Bicol Savings and Loan Association vs. CA

Facts:Juan de Jesus was the owner of a parcel of land inNaga City. He executed a Special Power of Attorney in favor of Jose de Jesus, his son, whereinthe latter could negotiate and mortgage the former’sproperty in any bank preferably in the Bicol Savingsand Loan Association. By virtue of such document,.Jose was able to obtain P20,000 from Bicol Savings.To secure payment, he executed a deed of mortgagewherein it was stipulated that upon the mortgagor’sfailure or refusal to pay the obligation, the mortgageemay immediately foreclose the property. Juan deJesus died and the loan obligation was not paid. Asa result, Bicol Savings extrajudicially foreclosed themortgaged property. The bank won as the highestbidder during the auction sale. Jose and the otherheirs failed to redeem the property. Thereafter,theytried to negotiate with Bicol Savings but theparties did not come up to an agreement. BicolSavings sold the property to another person. Hence,Jose filed for annulment of the foreclosure sale. Thelower court dismissed the case. On appeal, the CAreversed RTC’s decision. Hence, this appeal.

Issue:

Whether or not the extrajudicial foreclosure sale ofthe property was valid.

Ruling.Yes. Art 1879 of the CC which states that specialpower to sell excludes the power to mortgageand viceversa is inapplicable in the case. What it proscribesis a voluntary and independent contract of sale andnot an auction sale resulting from extrajudicial

foreclosure caused by the default of themortgagor.The power to foreclose is not an ordinary agency butis primarily conferred upon themortgagee for itsprotection. The right of the bank to foreclose isindependent of the mortgage contract asit isrecognized by the Rules of Court.

Rural Bank of Bombon v CAG.R. No. 95703 | August 3, 1992

Ederlinda Gallardo transacted with Rufino Aquino,contracting him to be her agent and providing himwith a Special Power of Attorney authorizing him tomortgage her property in her behalf for the purposeof securing loans from banks. She provided him withthe TCT to the property as well. Rufino Aquinosecured a loan from Rural Bank of Bombon fortheamount of PhP350,000.00 as principal andchargeable with a 14% interest per annum. In thecontract of mortgage, he represented himself to bethe attorney-in-fact of Gallardo, but proceeded tosign his name as mortgagor. He even got his wife tosign the documents as wife of mortgagor. Gallardo,upon knowing of the transaction, went to court tosecure the annulment of such contract since shewas allegedly surprised to find out that her propertywas already mortgaged and correspondenceregarding the contract of mortgage were not beingsent to her, and instead sent to the address ofAquino, who has since disappeared from Bulacanand now resides in Camarines Sur. Further, themortgage was secured to pay off personal loans ofAquino and to establish his personal fishpondbusiness. RTC issued a TRO restraining Rural Bankof Bombon to foreclose the mortgage. In his Answer,Aquino alleged that Gallardo owed him money and itwas already the responsibility of Aquino to take careof payments due. RTC ruled in favor of Aquino andBank of Bombon.CA reversed the ruling of the RTCand held that the Deal of Real Estate Mortgage wasnot valid. It not binding on the principal Gallardosince it was executed not in her name as principalbut in the personal capacity of the Aquino spouses.

Issue:WON the Deed of Real Estate Mortgage executed byRufino S.Aquino as attorney-in-fact of EderlindaGallardo in favor of the Rural Bank of Bombon isvalid.

Held:

No. Aquino signed the Deed of Real Estate Mortgagein his name alone as mortgagor, without anyindication that he was signing for and in behalf ofthe property owner, Ederlinda Gallardo. He boundhimself alone in his personal capacity as a debtor ofthe petitioner Bank and not as the agent or attorney-in-fact of Gallardo:It is a general rule in the law of agency that, in orderto bind the principal by a mortgage on real propertyexecuted by an agent, it must upon its face purportto be made, signed and sealed in the name of theprincipal, otherwise, it will bind the agent only. It is


not enough merely that the agent was in factauthorized to make the mortgage, if he has not actedin the name of the principal. Neither is it ordinarilysufficient that in the mortgage the agent describeshimself as acting by virtue of a power of attorney, ifin fact the agent has acted in his own name and hasset his own hand and seal to the mortgage. This isespecially true where the agent himself is a party tothe instrument. However clearly the body of themortgage may show and intend that it shall be theact of the principal, yet, unless in fact it is executedby the agent for and on behalf of his principal and asthe act and deed of the principal, it is not valid as tothe principal. (Philippine Sugar Estates DevelopmentCo. vs. Poizat)Bank cannot rely on Article 1883 tobind the principal Gallardo. It is not applicable tothe case at bar. Article 1883states“in such case theagent is the one directly bound in favor of the personwith whom he has transacted, as if the transactionwas his own, except when the contract involvesthings belonging to the principal.” There is no principle of law by which a person canbecome liable on a real mortgage which she neverexecuted either in person or by attorney in fact.Here, Aquino acted purportedly as an agent ofGallardo, but actually acted in his personal capacity.Involved herein are properties titled in the name ofrespondent Gallardo against which the Bankproposes to foreclose the mortgage constituted by anagent (Aquino)acting in his personal capacity.

G.R. No. L-32116 April 2l, 1981 RURAL BANK OFCALOOCAN, INC. and JOSE O. DESIDERIO, JR.,petitioners, vs. THE COURT OF APPEALS andMAXIMA CASTRO, respondents.

FACTS: Maxima Castro, accompanied by Severino Valencia,went to the Rural Bank of Caloocan to apply for aloan. Valencia arranged everything about the loanwith the bank. He supplied to the latter the personaldata required for Castro's loan application. After thebank approved the loan for the amount ofP3,000.00, Castro, accompanied by the Valenciaspouses, signed a promissory note corresponding toher loan in favor of the bank. On the same day, theValencia spouses obtained from the bank an equalamount of loan for P3,000.00. They signed anotherpromissory note (Exhibit "2") corresponding to theirloan in favor of the bank and had Castro affixedthereon her signature as co-maker. Both loans weresecured by a real-estate mortgage on Castro's houseand lot. Later, the sheriff of Manila sent a notice toCastro, saying that her property would be sold atpublic auction to satisfy the obligation covering thetwo promissory notes plus interest and attorney'sfees. Upon request by Castro and the Valencias andwith conformity of the bank, the auction sale waspostponed, but was nevertheless auctioned at a laterdate. Castro claimed that she is a 70-year old widowwho cannot read and write in English. According toher, she has only finished second grade. She neededmoney in the amount of P3,000.00 to invest in thebusiness of the defendant spouses Valencia, whoaccompanied her to the bank to secure a loan of

P3,000.00. While at the bank, an employee handedto her several forms already prepared which she wasasked to sign, with no one explaining to her thenature and contents of the documents. She alsoalleged that it was only when she received the letterfrom the sheriff that she learned that the mortgagecontract which was an encumbrance on her propertywas for P6.000.00 and not for P3,000.00 and thatshe was made to sign as co-maker of the promissorynote without her being informed. Castro filed a suitagainst petitioners contending that thru mistake onher part or fraud on the part of Valencias she wasinduced to sign as co-maker of a promissory noteand to constitute a mortgage on her house and lot tosecure the questioned note. At the time of filing hercomplaint, respondent Castro deposited the amountof P3,383.00 with the court a quo in full payment ofher personal loan plus interest. Castro prayed for: (1)the annulment as far as she is concerned of thepromissory note (Exhibit "2") and mortgage (Exhibit"6") insofar as it exceeds P3,000.00; and that shewas made to sign as co-maker of the promissorynote without her being informed. Castro filed a suitagainst petitioners contending that thru mistake onher part or fraud on the part of Valencias she wasinduced to sign as co-maker of a promissory noteand to constitute a mortgage on her house and lot tosecure the questioned note. At the time of filing hercomplaint, respondent Castro deposited the amountof P3,383.00 with the court a quo in full payment ofher personal loan plus interest. Castro prayed for:(1)the annulment as far as she is concerned of thepromissory note (Exhibit "2") and mortgage (Exhibit"6") insofar as it exceeds P3,000.00; and(2) for thedischarge of her personal obligation with the bankby reason of a deposit of P3,383.00 with the court aquo upon the filing of her complaint.

ISSUE:

Whether or not respondent court correctly affirmedthe lower court in declaring the promissory note(Exhibit 2) invalid insofar as they affect respondentCastro vis-a-vis petitioner bank, and the mortgagecontract (Exhibit 6) valid up to the amount ofP3,000.00 only.

HELD:

Yes While the Valencias defrauded Castro by makingher sign the promissory note and the mortgagecontract, they also misrepresented to the bankCastro's personal qualifications in order to secure itsconsent to the loan. Thus, as a result of the fraudupon Castro and the misrepresentation to the bankinflicted by the Valencias both Castro and the bankcommitted mistake in giving their consents to thecontracts.In other words, substantial mistakevitiated their consents given. For if Castro had beenaware of what shesigned and the bank of the truequalifications of the loan applicants, it is evidentthat they would not have given their consents to thecontracts. Article 1342 of the Civil Code whichprovides: Art. 1342. Misrepresentation by a thirdperson does not vitiate consent, unless such


misrepresentation has created substantial mistakeand the same is mutual. We cannot declare thepromissory note valid between the bank and Castroand the mortgage contract binding on Castro beyondthe amount of P3,000.00, for while the contractsmay not be invalidated insofar as they affect thebank and Castro on the ground of fraud because thebank wasnot a participant thereto, such mayhowever be invalidated on the ground of substantialmistake mutually committed by them as aconsequence of the fraud and misrepresentationinflicted by the Valencias. Thus, in the case of Hillvs. Veloso, this Court declared that a contract maybe annulled on the ground of vitiated consent ifdeceit by a third person, even without connivance orcomplicity with one of the contracting parties,resulted in mutual error on the part of the parties tothe contract. The fraud particularly averred in thecomplaint, having been proven, is deemed sufficientbasis for the declaration of the promissory noteinvalid insofar as it affects Castro vis-a-vis the bank,and the mortgage contract valid only up to theamount of P3,000.00

Ignacio Vicente vs Ambrosio Geraldez

FACTS:In 1967, HI Cement Corporation was grantedauthority to operate mining facilities in Bulacan.However, the areas allowed for it to explore coverareas which were also being explored by IgnacioVicente, Juan Bernabe, and Moises Angeles. And soa dispute arose between the three and HI Cement asneither side wanted to give up their mining claimsover the disputed areas. Eventually, HI Cement fileda civil case against the three. During pre-trial, thepossibility of an amicable settlement was exploredwhere HI Cement offered to purchase the areas ofclaims of Vicente et al at the rate of P0.90 per squaremeter. Vicente et al however wanted P10.00 persquare meter.

In 1969, the lawyers of HI Cement agreed to enterinto a compromise agreement with the threewhereby commissioners shall be assigned by thecourt for the purpose of assessing the value of thedisputed areas of claim. An assessment wassubsequently made pursuant to the compromiseagreement and the commissioners recommended aprice rate of P15.00 per square meter.

One of the lawyers of HI Cement, Atty. FranciscoVentura, then notified the Board of Directors of HICement for the approval of the compromiseagreement. But the Board disapproved thecompromise agreement hence Atty. Ventura filed amotion with the court to disregard the compromiseagreement. Vicente et al naturally assailed themotion. Vicente et al insisted that the compromiseagreement is binding because prior to entering intothe compromise agreement, the three lawyers of HICement declared in open court that they areauthorized to enter into a compromise agreement forHI Cement; that one of the lawyers of HI Cement,Atty. Florentino Cardenas, is an executive official of

HI Cement; that Cardenas even nominated one ofthe commissioners; that such act ratified thecompromise agreement even if it was not approvedby the Board. HI Cement, in its defense, averred thatthe lawyers were not authorized and that in factthere was no special power of attorney executed intheir favor for the purpose of entering into acompromise agreement. Judge Ambrosio Geraldezruled in favor of HI Cement.

ISSUE: Whether or not a compromise agreement enteredinto by a lawyer purportedly in behalf of thecorporation is valid without a written authority.

HELD: No. Corporations may compromise only in the formand with the requisites which may be necessary toalienate their property. Under the corporation lawthe power to compromise or settle claims in favor ofor against the corporation is ordinarily and primarilycommitted to the Board of Directors but such powermay be delegated. The delegation must be clearlyshown for as a general rule an officer or agent of thecorporation has no power to compromise or settle aclaim by or against the corporation, except to theextent that such power is given to him eitherexpressly or by reasonable implication from thecircumstances. In the case at bar, there was nospecial power of attorney authorizing the threelawyers to enter into a compromise agreement. Thisis even if the lawyers declared in open court thatthey are authorized to do so by the corporation (inthis case, the transcript of stenographic notes doesnot show that the lawyers indeed declare such inopen court). The fact that Cardenas, an officer of HICement, acted in effecting the compromiseagreement, i.e. nominating a commissioner, does notratify the compromise agreement. There is noshowing that Cardenas’ act binds HI Cement; noproof that he is authorized by the Board; no proofthat there is a provision in the articles ofincorporation of HI Cement that he can bind thecorporation.

Vda de Chua vs. CAGR No. 70909, January 5, 1994

FACTS:

Roberto Lim Chua, during his lifetime, lived out ofwedlock with private respondent Florita A. Vallejofrom 1970-1981. The couple had two illegitimatechildren, Roberto Rafson Alonzo and Rudyard PrideAlonzo, all surnamed Chua. Roberto died intestatein Davao City on May 28, 1992. Vallejo filed on July2, 1992 with RTC-Cotabato a petition for declarationof guardianship of the two child and their propertiesworth P5,000,000.00.

Antonietta Garcia Vda De Chua, the petitioner, fileda motion alleging that she was the true wife ofRoberto. However, according to Vallejo, she is notthe surviving spouse of the latter but a pretender to


the estate since the deceased never contractedmarriage with any woman and died a bachelor.

ISSUE:

Whether petitioner is indeed the true wife of RobertoChua.

HELD:

The court ruled that petitioner was not able to proveher status as wife of the decedent. She could notproduce the original copy or authenticated copy oftheir marriage certificate. Furthermore, acertification from the Local Civil Registrar waspresented that no such marriage contract betweenpetitioner and Roberto Chua was ever registered withthem, attested by Judge Augusto Banzali, the allegedperson to have solemnized the alleged marriage, thathe has not solemnized such alleged marriage.

Hence, it is clear that petitioner failed to establishthe truth of her allegation that she was the lawfulwife of the decedent. The best evidence is a validmarriage contract which she failed to produce.

NAPOCOR v. NATIONAL MERCHANDISING Corp.G.R. Nos. L-33819 and L-33897; October 23, 1982

Ponente: J. Aquino

FACTS: Plaintiff-appellant National Power Corporation (NPC)and defendant- appellant National MerchandisingCorporation (NAMERCO), the Philippinerepresentative of New York-based InternationalCommodities Corporation, executed a contract ofsale of sulfur with a stipulation for liquidateddamages in case of breach.

Defendant-appellant Domestic Insurance Companyexecuted a performance bond in favor of NPC toguarantee the seller's obligation. In entering into thecontract, Namerco, however, did not disclose to NPCthat Namerco's principal, in a cabled instruction,stated that the sale was subject to availability of asteamer, and contrary to its principal's instruction,Namerco agreed that non-availability of a steamerwas not a justification for non-payment of liquidateddamages.

The New York supplier was not able to deliver thesulfur due to its inability to secure shipping space.Consequently, the Government Corporate Counselrescinded the contract of sale due to the supplier'snon-performance of its obligations, and demandedpayment of liquidated damages from both Namercoand the surety. Thereafter, NPC sued for recovery ofthe stipulated liquidated damages. After trial, theCourt of First Instance rendered judgment orderingdefendants-appellants to pay solidarity to the NPCreduced liquidated damages with interest.

ISSUE:Whether NaMerCo exceeded their authority

HELD:Yes, NaMerCo exceeded their authority. The SupremeCourt held that before the contract of sale wassigned Namerco was already aware that its principalwas having difficulties in booking shipping space. It is being enforced against the agent because article1897 implies that the agent who acts in excess of hisauthority is personally liable to the party with whomhe contracted. Moreover, the rule is complementedby article 1898 of the Civil Code which provides that"if the agent contracts in the name of the principal,exceeding the scope of his authority, and theprincipal does not ratify the contract, it shall be voidif the party with whom the agent contracted is awareof the limits of the powers granted by the principal".Namerco never disclosed to the Napocor the cabledor written instructions of its principal. For thatreason and because Namerco exceeded the limits ofits authority, it virtually acted in its own name andnot as agent and it is, therefore, bound by thecontract of sale which, however, is not enforceableagainst its principal.

Veloso vs La Urbana

Facts:Veloso was the owner of some portions of certainparcels of lands. Her brother in law, Jose Maria delMar forged two powers of attorney supposedly madeby Veloso and her husband which gave him theauthority to mortgage their interests/participation inthe said properties. These powers of attorney wereregistered in the registry of deeds.

Using the powers of attorney, he mortgaged theparticipations to La Previsoa Filipina but hesubsequently transferred the mortgage to La Urbanawith whom he executed another deed of mortgage foran additional loan. When he violated the conditionsof mortgage, La Urbana foreclosed the mortgage andsold it at a public auction. It was only then thatVelasco found out about the fraudulent transactions.

Issue:W/N mortgage is valid

Held:

No, mortgage is null and void. Even though Del Marhad powers of attorney, La Urbana should haveexerted effort to ascertain the genuineness of theinstruments. Every person dealing with an agent hasthe responsibility to ascertain the authority of anagent.

NATIONAL FOOD AUTHORITY vs. INTERMEDIATEAPPELLATE COURTGR NO. 75640, April 5, 1990

FACTS:Paras


Medalla, as commission agent of Superior ShippingCorporation (SSC), entered into a contract for hire ofship with the National Grains Authority (NGA),where sacks of rice belonging to the latter would betransported from Occidental Mindoro to Manila. SSCthen asked payments from NGA and it requestedthat the payment be made to it and not to Medalla.NGA replied that it could not grant its requestbecause the contract was entered into by NGA andMedalla who did not disclose that he was acting as amere agent of SSC. NGA paid Medalla. The SSCasked Medalla for the payment but the latter ignoredthe request.

ISSUE:

Is NGA liable to SSC?

RULING:

NGA is liable under Art 1883 of the Civil Code.Relevant portion of the provision states, “In suchcase the agent is the one directly bound in favor ofthe person with whom he has contracted, as if thetransaction were his own, except when the contractinvolves things belonging to the principal .”Consequently, when things belonging to theprincipal(in this case, SSC) are dealt with, the agent is boundto the principal although he does not assume thecharacter of such agent and appears acting in hisown name. Thus, in effect, the contract must beconsidered as entered into between the principal andthe third person.

BRITISH AIRWAYS VS CA

FACTS:

On April 16, 1989, Mahtani decided to visit hisrelatives in Bombay, India. He asked Mr. Gumar toprepare his travel plans. Mr. Gumar purchased aticket from British Airways (BA).Since BA had nodirect flights from Manila to Bombay, Mahtani had totake a flight to Hongkong via PAL, and upon arrivalin Hongkong he had to take a connecting flight toBombay on board BA. Before departure, Mahtanichecked in at PAL counter his two pieces of luggagecontaining his clothings and personal effects,confident that upon reaching Hongkong, the samewould be transferred to the BA flight bound forBombay.when Mahtani arrived in Bombay hediscovered that his luggage was missing and thatupon inquiry from the BA representatives, he wastold that the same might have been diverted toLondon. After waiting for 1 week, BA finally advisedhim to file a claim by accomplishing the "PropertyIrregularity Report .In the Philippines, on June 11,1990 Mahtani filed his complaint for damages andattorney's fees against BA and Mr. Gumar before theRTC.L alleging that the reason for the non-transferof the luggage was due to the latter's late arrival inHongkong, thus leaving hardly any time for theproper transfer of Mahtani's luggage to the BAaircraft bound for Bombay. The RTC rendered its

decision in favor of Mahtani.BA is ordered to payMahtani P7,000 for the value of the 2 suitcases$400for the value of the contents of the luggageP50,000for moral and eemplary damages and 20% forattorney’s fees and cost of the action. This decisionwas affirmed by CA.

ISSUE:WON the award of the damages was without basissince Mahtani failed to declare a higher valuation w/respect to his luggage.

RULING:The SC ruled in the negative. The nature of anairline's contract of carriage partakes of two types,namely: a contract to deliver a cargo or merchandiseto its destination and a contract to transportpassengers to their destination. A business intendedto serve the traveling public primarily, it is imbuedwith public interest, hence, the law governingcommon carriers imposes an exacting standard.Neglect or malfeasance by the carrier's employeescould predictably furnish bases for an action fordamages. Admittedly, in a contract of air carriage adeclaration by the passenger of a higher value isneeded to recover a greater amount. Article 22(1) ofthe Warsaw Convention. However, , we have heldthat benefits of limited liability are subject to waiversuch as when the air carrier failed to raise timelyobjections during the trial when questions andanswers regarding the actual claims and damagessustained by the passenger were asked. Given the foregoing postulates, the inescapableconclusion is that BA had waived the defense oflimited liability when it allowed Mahtani to testify asto the actual damages he incurred due to themisplacement of his luggage, without any objection.Indeed, it is a well-settled doctrine that where theproponent offers evidence deemed by counsel of theadverse party to be inadmissible for any reason, thelatter has the right to object. However, such right isa mere privilege which can be waived. Necessarily,the objection must be made at the earliestopportunity, lest silence when there is opportunity tospeak may operate as a waiver of objections.

BA has precisely failed in this regard. To compoundmatters for BA, its counsel failed, not only tointerpose a timely objection, but even conducted hisown cross-examination as well

Philippine Bank of Commerce v. Aruego [G.R.Nos. L-25836-37.January 31, 1981]

FACTSDefendant-appellant Aruego signed various bills ofexchange which was negotiated and laterdishonored. Appellee bank aggrieved, sued Aruego.

ISSUE


Whether or not defendant may effectively put up thedefense that he was just an agent of the companyissuing the bills of exchange.

RULING

Section 20 of the Negotiable Instruments Lawprovides that “Where the instrument contains or aperson adds to his signature words indicating thathe signs for or on behalf of a principal or in arepresentative capacity, he is not liable on theinstrument if he was duly authorized; but the mereaddition of words describing him as an agent or asfiling a representative character, without disclosinghis principal, does not exempt him from personalliability.”

CERVANTES VS CA

FACTS:PAL issued to Cervantes a round trip ticketfor Manila-Honolulu-Los Angeles-Honolulu-Manila.This ticket expressly provide an expiry date of 1year from issuance or until March 27, 1990.Theticket was issued in compliance w/ a CompromiseAgreement entered between PAL & Cervantes in2previous suits between them. On March 3, 1990, $days before the expiry date, Cervantes used it. Uponhis arrival to LA, on the same day, he immediatelybooked his LA-Manila return ticket w/ PAL officewhich was confirmed for April 2, 1990 flight.Cervantes learned that the same PAL plane wouldmake a stop-over in San Francisco and because hewould be in San Francisco on April 2, 1990, hemade arrangements w/ PAL for him to board theflight in SanFrancisco instead of boarding it in LA.When Cervantes checked in at PAL counter in SanFrancisco he was not allowed to board. PALpersonnel made a notation on his ticket “TICKETNOT ACCEPTED DUE TO EXPIRATION OFVALIDITY” .Aggrieved, Cervantes filed a complaintfor damages for Breach of Contract of Carriage. TheRTC dismissedthe complaint w/c was upheld by theCA.

ISSUE: WON the act of the PAL agents in confirmingthe ticket of Cervantes extended the period ofvalidity.

RULING: The SC ruled in the negative. The plane ticket itselfprovides that it is not valid after March 27, 1990. Itis also stipulated in paragraph 8 of the Conditions ofContract that 8. This ticket is good for carriagefor one year from date of issue, except asotherwise provided in this ticket, in carrier's tariffs,conditions of carriage, or related regulations. Thefare for carriage hereunder is subject to change priorto commencement of carriage. Carrier may refusetransportation if the applicable fare has not beenpaid. 6In the case of Lufthansa vs. Court of Appeals,the SC held that the "ticket constitute the contractbetween the parties. It is axiomatic that when theterms are clear and leave no doubt as to the

intention of the contracting parties, contracts are tobe interpreted according to their literal meaning. "Inhis effort to evade this inevitable conclusion,petitioner theorized that the confirmation by thePAL's agents in Los Angeles and San Franciscochanged the compromise agreement between theparties. As aptly by the appellate court:. . . on March23, 1990, he was aware of the risk that his ticketcould expire, as it did, before he returned to thePhilippines. 'The 2 personnel from PAL did not havean authority to extend the validity of the ticket.Cervantes knew this from the start when he calledup the Legal Department of appellee in thePhilippines before he left for the United States ofAmerica. He had firsthand knowledge that the ticketin question would expire on March 27,1990 and thatto secure an extension, he would have to file awritten request for extension at the PAL's office inthe Philippines. ). Despite this knowledge, hepersisted to use the ticket in question." Since thePAL agents are not privy to the said Agreement andCervantes knew that a written request to the legalcounsel of PAL was necessary, he cannot use whatthe PAL agents did to his advantage. The saidagents, according to the Court of Appeals, 10 actedwithout authority when they confirmed the flights ofthe petitioner. Under Article 1989 11 of the New CivilCode, the acts an agent beyond the scope of hisauthority do not bind the principal, unless the latterratifies the same expressly or impliedly.Furthermore, when the third person (hereinpetitioner) knows that the agent was acting beyondhis power or authority, the principal cannot be heldliable for the acts of the agent. If the said thirdperson is aware of such limits of authority, he is toblame, and is not entitled to recover damages fromthe agent, unless the latter undertook to secure theprincipal's ratification.

DEVELOPMENT BANK OF THE PHILIPPINES,petitioner vs. Court of Appeals and the ESTATEOF THE LATE JUAN B. DANS, represented byCANDIDA G. DANS, and the DBP MORTGAGEREDEMPTION INSURANCE POOL, respondents.

FACTS: Juan B. Dans, 76 years of age, together with hisfamily, applied for a loan worth Php 500, 000 at theDevelopment Bank of the Philipppines on May 1987.The loan was approved by the bank dated August 4,1987 but in the reduced amount of Php 300, 000.Mr. Dans was advised by DBP to obtain a mortgageredemption insurance at DBP MRI pool. DBPdeducted the amount to be paid for MRI Premiumthat is worth Php 1476.00. The insurance of Mr.Dans, less the DBP service fee of 10%, was creditedby DBP to the savings account of DBP MRI-Pool.Accordingly, the DBP MRI Pool was advised of thecredit. On September 3, 1987, Mr. Dans died ofcardiac arrest. DBP MRI notified DBP was noteligible for the coverage of insurance for he wasbeyond the maximum age of 60. The wife, Candida,filed a complaint to the Regional Trial Court BranchI Basilan against DBP and DBP MRI pool for


‘Collection of Sum of Money with Damages’. Prior tothat, DBP offered the administratrix (Mrs. Dans) arefund of the MRI payment but she refused forinsisting that the family of the deceased must receivethe amount equivalent of the loan. DBP also offeredand ex gratia for settlement worth Php 30, 000. Mrs.Dans refused to take the offer. The decision of theRTC rendered in favor of the family of the deceasedand against DBP. However, DBP appealed to thecourt.

ISSUE: Whether or not the DBP MRI Pool should be heldliable on the ground that the contract was alreadyperfected.

HELD: No. DBP MRI Pool is not liable. Though the power toapprove the insurance is lodged to the pool, the DBPMRI Pool did not approve the application of thedeceased. There was no perfected contract betweenthe insurance pool and Mr. Dans. DBP was wearingtwo legal hats: as a lender and insurance agent. Asan insurance agent, DBP made believed that thefamily already fulfilled the requirements for the saidinsurance although DBP had a full knowledge thatthe application would never be approved. DBP actedbeyond the scope of its authority for acceptingapplications for MRI. If the third person whocontracted is unaware of the authority conferred bythe principal on the agent and he has been deceived,the latter is liable for damages. The limits of theagency carries with it the implication that adeception was perpetrated—Articles 19-21 come intoplay. However, DBP is not entitled to compensate thefamily of the deceased with the entire value of theinsurance policy. Speculative damages are tooremote to be included in the cost of damages. Mr.Dans is entitled only to moral damages. Suchdamages do not need a proof of pecuniary loss forassessment. The court granted only moral damages(Php 50, 000) plus attorney fees’s (Php 10, 000) andthe reimbursement of the MRI fees with legal interestfrom the date of the filing of the complaint until fullypaid.

Austria vs. CA (GR 133323, 9 March 2000)Second Division, Quisumbing (J): 4 concur

On 9 July 1989 at around 7:00 p.m. along theOlongapo-Gapan Road in the vicinity of barangayCabetican, Bacolor, Pampanga, Alberto P. Austriawas driving his Ford Fiera with 10 passengers. Theycamefrom the Manila International Airport bound toDinalupihan, Bataan. One of the vehicle’s tiresuddenly hit astone lying in the road, while thuscruising, which caused Austria to lose control andcollide with the rear ofan improperly parked cargotruck trailer driven by Rolando M. Flores. As a resultof the collision, 5 passengers (Armin Q. Manalansan,Mylene S. Gigante, Luzviminda S. Diwa, Mark S.Diwa, and Virginia Lapid Vda. de Diwa [+]) sufferedvarying degrees of injuries. While trial ensued,accused truck driver Flores remained at-large.

Austria and his co-accused was charged in aninformation dated 27 August 1990. The informationwas amended to correctly state the name of co-accused Rolando M. Flores, which was RolandoTorres in the original Information. The informationaccused Austria and Flores of the crime of recklessimprudence resulting in Homicide and multiplephysical injuries. On 21 March 1994, the trial courtpromulgated its decision, finding Austria guiltybeyond reasonable, sentenced him to suffer anindeterminate penalty of imprisonment of 2 monthsand 1 day of arresto mayor, as minimum, to 2 years,10 months and 20 days of Prision Correccional, asmaximum, and ordered Austria to pay the heirs ofVirginia Lapid Vda. de Diwa the amount ofP50,000.00 as indemnity; P6,320.00 as and foractual expenses incurred by Luzviminda Diwa,representing medical and funeral expenses; and costof suit. Austria filed a motion for reconsiderationdated 4 April 1994. On 10 June 1994, the courtmodified its decision, to the effect that the Courtfound Austria guilty beyond reasonable doubt of thecrime of Reckless Imprudence Resulting in SeriousPhysical Injuries, sentenced him to suffer anindeterminate penalty of imprisonment of 1 monthand 1 day 4 months of arresto mayor; and orderedhim to indemnify Luzviminda Diwa the amount ofP1,345.75; Mark Diwa the amount ofP4,716.31; andMylene Gigante the amount of P6,199.62 as and foractual damages incurred. The court made nopronouncement as to his civil liability to ArminManalansan considering that the latter filed aseparate civil action against Austria before the RTCof Bataan. Austria timely appealed his convictionbefore the Court of Appeals, which affirmed, on 13August 1997, the lower court’s decision withmodifications that a straight penalty of 1 month and1 day of arresto mayor for the imprisonment of theaccused is imposed; and the award in favor ofMylene Gigante of P6,199.62 is deleted.

Austria’s motion for reconsideration was denied on25 March 1998. Hence, the petition for review oncertiorari.The Supreme Court denied the petition, andaffirmed the assailed decision of the Court ofAppeals; with costs against Austria.

1. Finding of fact of the Court of Appealsbinding and conclusive upon the SupremeCourt

As a general rule, findings of fact of the Court ofAppeals are binding and conclusive upon theSupreme Court, and the Court will not normallydisturb such factual findings unless the findings ofthe court are palpably unsupported by the evidenceon record or unless the judgment itself is based onmisapprehension of facts. The Court found nopalpable factual error that would warrant a reversalof the appellate courts’ factual determination.

2. Factual finding of the appellate court as toAustria’s negligence


The appellate court, in determining Austria’snegligence, observed: “In his direct examination, theappellant admitted that he saw the trailer at adistance of about 6 meters but at the same timestated that the distance of the focus of the vehicle’sheadlight in dim position was 20 meters. Theseinconsistent statements, taken together with hisclaim on cross-examination that he saw the traileronly when he bumped it, only show that he wasdriving much faster than 30 kilometers per hour.Assuming that he was driving his vehicle at thatspeed of 30 kilometers per hour, appellant wouldhave not lost control of the vehicle after it hit thestone before the collision. Under thesecircumstances, the appellant did not exercise thenecessary precaution required of him. He wasnegligent.”

3. Negligence of Austria is immediate andproximate cause of the collision; PhoenixConstruction vs. IAC

While the Court notes similarities of the factualmilieu of Phoenix to that of the present case, theCourt is unable to agree with Austria that the truckdriver should be held solely liable. In Phoenix, thedriverof the improperly parked vehicle was liable andthe driver of the colliding car contributorily liable.Herein,that Austria had no opportunity to avoid thecollision is of his own making and this should notrelieve him ofliability. Patently, the negligence ofAustria as driver of the Ford Fiera is the immediateand proximate causeof the collision.

4. Materiality of medical certificates andreceipts presented as to award of damages tothe Diwas

The materiality of medical certificates and receiptspresented is amply supported by evidence on record.Herein, the award of liability by the trial court toLuzviminda Diwa and Mark Diwa was justifiedbecause the expenses for hospitalization andtreatments were incurred as a direct result of thecollision caused by the appellant’s negligence. Thefact that the doctors did not testify on the medicalcertificates is of no moment. Appellant’s counseladmitted their due execution and genuinenessduring the trial. 5. Austria convicted of recklessimprudence resulting in serious physical injuries,not simple negligence The appellate court did notfind Austria guilty of simple negligence, it merelyaffirmed the findings of the trial court convicting theaccused beyond reasonable doubt for the crime ofReckless Imprudence resulting in Serious PhysicalInjuries. The appellate court only modified the trialcourt’s decision by imposing the straight penalty of 1month and 1 day of arresto mayor and deleted theaward in favor of Mylene Gigante inthe amount ofP6,199.62.

5. Article 365, Revised Penal Code

Article 365 of the Revised Penal Code (Imprudenceand negligence) provides that “any person who, byreckless imprudence, shall commit any act which,

had it been intentional, would constitute a gravefelony, shall suffer the penalty of arresto mayor in itsmaximum period to prision correccional in itsmedium period; if it would have constituted a lessgrave felony, the penalty of arresto mayor in itsminimum and medium periods shall be imposed; if itwould have constituted a light felony, the penalty ofarresto menor in its maximum period shall beimposed. xxx In the imposition of these penalties,the courts shall exercise their sound discretion,without regard to the rules prescribed in articlesixty-four.”

6. Imposition of straight penalty valid;Determination of periods of penalty entirelyto the discretion of the court

The Court found nothing objectionable legally in theimposition of a straight penalty of 1 month and 1day of arresto mayor by the appellate court againstAustria. The penalty imposed is well within thelimits fixed by law and within the sound discretion ofthe respondent court as well. Since thedetermination of the minimum and maximumperiods of the penalty as provided by law is leftentirely to the discretion of the appellate court, itsexercise of that discretion will not be disturbed onappeal, unless there is a clear abuse.

DOMINGO VS. DOMINGO GR No. L-30573, Oct.29, 1971

FACTS:

Makasiar, J.

Vicente Domingo granted to Gregorio Domingo, areal estate broker, the exclusive agency to sell his LotNo. 883, Piedad Estate in a document. The lot hasan area of 88,477 sq. m. According to the document,said lot must be sold for P2 per sq. m. Accordingly,Gregorio is entitled to 5% commission on the totalprice if the property is sold by Vicente or by anyoneelse during the 30-day duration of the agency or byVicente within 3 months from the termination of theagency to a purchaser to whom it was submitted byGregorio during the effectivity of the agency withnotice to Vicente. This contract is in triplicate withthe original and another copy being retained byGregorio.

The last copy was given to Vicente. Subsequently,Gregorio authorized Teofilo Purisima to look for abuyer without notifying Vicente. Gregorio promisedTeofilo ½ of the 5% commission. Teofilo thenintroduced Oscar de Leon to Gregorio as aprospective buyer. Oscar submitted a written offerwhich was very much lower than the P2 per sq. m.price. Vicente directed Gregorio to tell Oscar to raisehis offer. After several conferences between theparties, Oscar raised his offer to P1.20 per sq. m. orP109k in total to which Vicente agreed to said offer.Upon Vicente’s demand. Oscar issued a P1,000check to him as earnest money. Vicente, then,advanced P300 to Gregorio.


Subsequently, Vicente asked for an additionalP1,000 as earnest money, which Oscar promised todeliver to Vicente. The written agreement, Exhibit C,between the parties was amended. Oscar will vacateon or about September 15, 1956 his house and lot atDenver St., QC, which is part of the purchase pricelater on, it was again amended to state that Oscarwill vacate his house and lot on Dec.1, 1956 becausehis wife was pregnant at that time. Oscar gaveGregorio P1,000 as a gift or propina for succeedingin persuading Vicente to sell his lot at P1.20 per sq.m.

Gregorio did not disclose said gift or propina toVicente.Oscar did not pay Vicente the additionalP1,000 Vicente asked from him as earnestmoney.The deed of sale was not executed sinceOscar gave up on the negotiation when he did notreceive his money from his brother in the US, whichhe communicated to Gregorio Gregorio did not seeOscar for several weeks thus sensing that somethingfishy might be going on.He went to Vicente’s housewhere he read a portion of the agreement to theeffect that Vicente was still willing to pay him 5%commission, P5,450.Gregorio went to the Register ofDeeds of QC, where he discovered that a Deed ofsale was executed by Amparo deLeon, Oscar’s wife,over their house and lot in favor of Vicente. Afterdiscovering that Vicente sold hislot to Oscar’s wife,Gregorio demanded in writing the payment of hiscommission. Gregorio also conferred with Oscar whotold him that: Vicente went to him and asked him toeliminate Gregorio in the transaction and that hewould sell his property to him for P104k. In hisreply, Vicente stated that Gregorio is not entitled tothe 5% commission: Since he sold the property notto Gregorio’s buyer (Oscar de Leon) but to anotherbuyer (Amparo Diaz) who isthe wife of Oscar deLeon.CA said: the exclusive agency contract isgenuine. The sale of the lot to Amparo de Leon ispractically a sale to Oscar.

ISSUE:

Does Gregorio’s act of accepting the gift or propinafrom Oscar constitute fraud which would cause theforfeiture of his 5%commission?

RULING:

Gregorio Domingo as the broker received a gift orpropina from the prospective buyer Oscar de Leon,without the knowledge and consent of the principal,Vicente. His acceptance of said substantial monetarygift corrupted his duty to serve the interests only ofhis principal and undermined his loyalty to hisprincipal, who gave him partial advance of P3000 onhis commission. As a consequence, instead ofexerting his best to persuade his prospective buyerto purchase the property on the most advantageousterms desired by his principal, Gregorio Domingo,succeeded in persuading his principal to accept thecounter-offer of the prospective buyer to purchasethe property at P1.20 per sq. m. The duties andliabilities of a broker to his employer are essentially

those which an agent owes to his principal. An agentwho takes a secret profit in the nature of a bonus,gratuity or personal benefit from the vendee, withoutrevealing the same to his principal, the vendor, isguilty of a breach of his loyalty to the principal andforfeits his right to collect the commission from hisprincipal, even if the principal does not suffer anyinjury by reason of such breach of fidelity, or that heobtained better results or that the agency is agratuitous one, or that usage or custom allowsit..This is to prevent the possibility of any wrong notto remedy or repair an actual damage agent therebyassumes a position wholly inconsistent with that ofbeing an agent for his principal, who has a right totreat him, insofar as his commission is concerned,as if no agency had existed. The fact that theprincipal may have been benefited by the valuableservices of the said agent does not exculpate theagent who has only himself to blame for such aresult by reason of his treachery or perfidy.

As a necessary consequence of such breach of trust,Gregorio Domingo must forfeit his right to thecommission and must return the part of thecommission he received from his principal. DecisiveProvisions Article 1891 and 1909 CC. Article 1891consists in changing the phrase "to pay" to "todeliver", which latter term is more comprehensivethan the former.Paragraph 2 of Article 1891 is a new additiondesigned to stress the highest loyalty that is requiredto an agent condemning as void any stipulationexempting the agent from the duty and liabilityimposed on him in paragraph one thereof. Article1909 demands the utmost good faith, fidelity,honesty, candor and fairness on the part of theagent, the real estate broker in this case, to hisprincipal, the vendor. The law imposes upon theagent the absolute obligation to make a fulldisclosure or complete account to his principal of allhis transactions and other material facts relevant tothe agency, so much so that the law as amendeddoes not countenance any stipulation exempting theagent from such an obligation and considers such anexemption as void. Situations where the duty mandated by Art 1891does not apply Agent or broker acted only as amiddleman with the task of merely bringing togetherthe vendor and vendee, who themselves thereafterwill negotiate on the terms and conditions of thetransaction.Agent or broker had informed theprincipal of the gift or bonus or profit he receivedfrom the purchaser and his principal did not object.Teofilo Purisima’s entitlement to his share in the 5%commission Teofilo can only recover from Gregoriohis ½ share of whatever amounts Gregorio Domingoreceived by virtue of the transaction as his sub-agency contract was with Gregorio Domingo aloneand not with Vicente Domingo, who was not evenaware of such sub-agency. Since Gregorio alreadyreceived a total of P1,300 from Oscar and Vicente,P650 of which should be paid by Gregorio to Teofilo

Disposition: CA decision reversed


Pineda v Insular G.R. No. 105562 September 27,1993

J. Davide Jr.

Facts:PMSI obtained a group insurance policy for itssailors. 6 of the sailors, during the effectivity of thepolicy, perished while the ship sank in Morocco. Thefamilies of the victims then wanted to claim thebenefits of the insurance. Hence, under the advice ofNuval, the president of PMSI, they executed a specialpower of attorney authorizing Capt. Nuval to, "followup, ask, demand, collect and receive" for theirbenefit the indemnities.Insular drew against its account 6 checks, four forP200,00.00 each, one for P50,000.00 and anotherfor P40,00.00, payable to the order the families. Thechecks were given to PMSI. Nuval, the PMSIpresident, pocketed the amounts in his bankaccount. When the families went to insular to get thebenefits, their request was denied because Insularclaimed that the checks were already given to PMSI.The families filed a petition with the InsuranceCommission. They won and Insular was ordered topay them 500 a day until the amount was furnishedto them. The insurance Commission held that thespecial powers of attorney executed by complainantsdo not contain in unequivocal and clear termsauthority to Nuval to obtain and receive fromrespondent company insurance proceeds arisingfrom the death of the seaman-insured; also, thatInsular Life did not convincingly refuted the claim ofMrs. Alarcon that neither she nor her husbandexecuted a special power of authority in favor ofCapt. Nuval and that it did not observe Sec 180(3),when it released the benefits due to the minorchildren of Ayo and Lontok, when the saidcomplainants did notpost a bond as required-Insular Life appealed to the CA. CA modified thedecision of the Insurance Commission, eliminatingthe award to the minor children. Hence, this petitionby the beneficiary families.

Issues:1. WON Insular Life should still be liable to thecomplainants when they relied on the special powersof attorney, which Capt. Nuval presented asdocuments, when they released the checks to thelatter.2. WON Insular Life should be liable to thecomplainants when they released the check in favorof Ayo and Lontok, even if no bond was posted asrequired.

Held: Yes to both. Petition granted.1. The special powers of attorney "do not contain inunequivocal and clear terms authority to Capt.Nuval to obtain, receive, receipt from respondentcompany insurance proceeds arising from the deathof the seaman-insured.Insular Life knew that a power of attorney in favor ofCapt. Nuval for the collection and receipt of such

proceeds was a deviation from its practice withrespect to group policies.They gave the proceeds to the policyholder instead ofthe beneficiaries themselves. Even the Isnular repadmitted that he gave the checks to the policyholder.Insular Life recognized Capt. Nuval as the attorney-in-fact of the petitioners. However, it actedimprudently and negligently in the premises byrelying without question on the special power ofattorney.Strong vs. Repide- third persons deal with agents attheir peril and are bound to inquire as to the extentof the power of the agent with whom they contract.Harry E. Keller Electric Co. vs. Rodriguez- Theperson dealing with an agent must also act withordinary prudence and reasonable diligence.Obviously, if he knows or has good reason to believethat the agent is exceeding his authority, he cannotclaim protection… the party dealing with him maynot shut his eyes to the real state of the case, butshould either refuse to deal with the agent at all, orshould ascertain from the principal the truecondition of affairs.Insular delivered the checks to a party not the agentof the beneficiaries.2. Art. 225. The father and the mother shall jointlyexercise legal guardianship over the property of theirunemancipated common child without the necessityof a court appointment. In case of disagreement, thefather's decision shall prevail, unless there is judicialorder to the contrary.

Where the market value of the property or theannual income of the child exceeds P50,000, theparent concerned shall be required to furnish a bondin such amount as the court may determine, but notless than ten per centum (10%) of the value of theproperty or annual income, to guarantee theperformance of the obligations prescribed for generalguardians.“If the market value of the property or the annualincome of the child exceeds P50,000.00, a bond hasto be posted by the parents concerned to guaranteethe performance of the obligations of a generalguardian.”On group insurance : Group insurance is essentiallya single insurance contract that provides coveragefor many individuals, particularly for the employeesof one employer. There is a master agreement issuedto an employer. The employer acts as the collector ofthe dues and premiums. Disbursement of insurancepayments by the employer is also one of his duties.They require an employee to pay a portion of thepremium, which the employer deducts from wageswhile the remainder is paid by the employer. This isknown as a contributory plan as compared to a non-contributory plan where the premiums are solelypaid by the employer. Although the employer may bethe policyholder, the insurance is actually for thebenefit of the employee. In a non-contributory plan,the payment by the employer of the entire premiumis a part of the total compensation paid for theservices of the employee.The primary aim of group insurance is to provide theemployer with a means of procuring insurance


protection for his employees at a low cost andthereby retain their loyalty and efficiency.

Samar Mining Co., Inc. V. Nordeutcher Lloyd, Et.Al.(1984)G.R. No. L-28673 October 23, 1984

FACTS:Samar Mining Company, Inc. imported1 crate ofwelded wedge wire sieves shipped throughNordeutscher Lloyd Bill of Lading No. 18:transshipped at port of discharge: davao Section 1,paragraph 3 of Bill of Lading No. 18 The carrier shallnot be liable in any capacity whatsoever for anydelay, loss or damage occurring before the goodsenter ship's tackle to be loaded or after the goodsleave ship's tackle to be discharged, transshipped orforwarded ... Section 11:Whenever the carrier or master may deem it advisable or in any case where thegoods are placed at carrier's disposal at or consignedto a point where the ship does not expect to load ordischarge, the carrier or master may, without notice,forward the whole or any part of the goods before orafter loading at the original port of shipment, ... Thiscarrier, in making arrangements for anytransshipping or forwarding vessels or means oftransportation not operated by this carrier shall beconsidered solely the forwarding agent of the shipperand without any other responsibility whatsoevereven though the freight for the whole transport hasbeen collected by him. ... Pending or duringforwarding or transshipping the carrier may storethe goods ashore or afloat solely as agent of theshipper and at risk and expense of the goods andthe carrier shall not be liable for detention norresponsible for the acts, neglect, delay or failure toact of anyone to whom the goods are entrusted ordelivered for storage, handling or any serviceincidental thereto When the goods arrived in theport of Davao, it was delivered in good order andcondition to the bonded warehouse of AMCYL but itwas not delivered and received by Samar MiningCompany, Inc. Samar filed a claim againstNordeutscher and C.F. Sharp who brought in AMCYLas third party defendantRTC: favored Samar Nordeutscher and C.F. Sharplaible but may enforce judgment against AMCYL

ISSUE: W/N the stipulations in bills of ladingexempting the carrier from liability for loss ordamage to the goods when the same are not in itsactual custody is valid

HELD: YES. Reversed

Article 1736. The extraordinary responsibility ofthe common carrier lasts from the time the goodsare unconditionally placed in the possession of, andreceived by the carrier for transportation until thesame are delivered, actually or constructively, by thecarrier to the consignee, or to the person who has aright to receive them, without prejudice to theprovisions of article 1738. - applicable

Article 1738. The extraordinary liability of thecommon carrier continues to be operative evenduring the time the goods are stored in a warehouseof the carrier at the place of destination, until theconsignee has been advised of the arrival of thegoods and has had reasonable opportunitythereafter to remove them or otherwise dispose ofthem. - no applicable since article contemplates asituation where the goods had already reached theirplace of destination and are stored in the warehouseof the carrierArticle 1884. The agent is bound by hisacceptance to carry out the agency, and is liable forthe damages which, through his non-performance,the principal may suffer.Article 1889. The agent shall be liable fordamages if, there being a conflict between hisinterests and those of the principal, he should preferhis own.Article 1892. The agent may appoint a substituteif the principal has not prohibited him from doingso; but he shall be responsible for the acts of thesubstitute:

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

(2) When he was given such power but withoutdesignating the person and the person appointedwas notoriously incompetent or insolventArticle 1909. The agent is responsible not onlyfor fraud, but also for negligence which shall bejudged with more or less rigor by the courts,according to whether the agency was or was not for acompensation.The records fail to reveal proof of negligence, deceitor fraud committed by appellant or by itsrepresentative in the Philippines. Neither is thereany showing of notorious incompetence or insolvencyon the part of AMCYT, which acted as appellant'ssubstitute in storing the goods awaitingtransshipment (2) for the discharge of her personalobligation with the bank by reason of a deposit ofP3,383.00 with the court a quo upon the filing of hercomplaint.

Toyota Shaw Inc. vs. Court of Appeals, and Sosa 244 SCRA 320 May 1995

FACTS:

Luna L. Sosa and his son, Gilbert, went to purchasea yellow Toyota Lite Ace from the Toyota office atShaw Boulevard, Pasig (petitioner Toyota) on June14, 1989 where they met Popong Bernardo who wasa sales representative of said branch. Sosaemphasized that he needed the car not later thanJune 17, 1989 because he, his family, and abalikbayan guest would be using it on June 18 to gohome to Marinduque where he will celebrate hisbirthday on June 19. Bernardo assured Sosa that aunit would be ready for pick up on June 17 at 10:00in the morning, and signed the "AgreementsBetween Mr. Sosa & Popong Bernardo of Toyota


Shaw, Inc.,” a document which did not mentionanything about the full purchase price and themanner the installments were to be paid. Sosa andGilbert delivered the down payment of P100,000.00on June 15, 1989 and Bernardo accomplished aprinted Vehicle Sales Proposal (VSP) No. 928 whichshowed Sosa’s full name and home address, thatpayment is by "installment," to be financed by "B.A.,"and that the "BALANCE TO BE FINANCED" is"P274,137.00", but the spaces provided for "DeliveryTerms" were not filled-up.

When June 17 came, however, petitioner Toyota didnot deliver the Lite Ace. Hence, Sosa asked that hisdown payment be refunded and petitioner Toyotaissued also on June 17 a Far East Bank check forthe full amount of P100,000.00, the receipt of whichwas shown by a check voucher of Toyota, which Sosasigned with the reservation, "without prejudice toour future claims for damages." Petitioner Toyotacontended that the B.A. Finance disapproved Sosa’sthe credit financing application and further allegedthat a particular unit had already been reserved andearmarked for Sosa but could not be released due tothe uncertainty of payment of the balance of thepurchase price. Toyota then gave Sosa the option topurchase the unit by paying the full purchase pricein cash but Sosa refused.

The trial court found that there was a valid perfectedcontract of sale between Sosa and Toyota whichbound the latter to deliver the vehicle and thatToyota acted in bad faith in selling to another theunit already reserved for Sosa, and the Court ofAppeals affirmed the said decision.

ISSUE:

Was there a perfected contract of sale betweenrespondent Sosa and petitioner Toyota?

RULING:

The Supreme Court granted Toyota’s petition anddismissed Sosa’s complaint for damages because thedocument entitled “Agreements Between Mr. Sosa &Popong Bernardo of Toyota Shaw, Inc.,” was not aperfected contract of sale, but merely an agreementbetween Mr. Sosa and Bernardo as privateindividuals and not between Mr. Sosa and Toyota asparties to a contract.

There was no indication in the said document of anyobligation on the part of Toyota to transfer ownershipof a determinate thing to Sosa and neither was therea correlative obligation on the part of the latter topay therefor a price certain. The provision on thedownpayment of P100,000.00 made no specificreference to a sale of a vehicle. If it was intended fora contract of sale, it could only refer to a sale oninstallment basis, as VSP No.928 executed on June15, 1989 confirmed. The VSP also created nodemandable right in favor of Sosa for the delivery ofthe vehicle to him, and its non-delivery did notcause any legally indemnifiable injury.

Bacaltos vs CA

Facts: Petitioners seek the reversal of the decision of 30September 1993 of the Court of Appeals in CA-G.R.CV No. 35180, 1 entitled "San Miguel Corporationvs. Bacaltos Coal Mines, German A. Bacaltos andRene R. Savellon," which affirmed the decision of 19August 1991 of the Regional Trial Court (RTC) ofCebu, Branch 9, in Civil Case No. CEB-8187 2holding petitioners Bacaltos Coal Mines and GermanA. Bacaltos and their co-defendant Rene R. Savellonjointly and severally liable to private respondent SanMiguel Corporation under a Trip Charter Party. TheTrip Charter Party was executed on 19 October 1988"by and between BACALTOS COAL MINES,represented by its Chief Operating Officer, RENEROSEL SAVELLON" and private respondent SanMiguel Corporation (hereinafter SMC), representedby Francisco B. Manzon, Jr. Savellon claims thatBacaltos Coal Mines is the owner of the vessel M/VPremship II and that for P650,000.00 to be paidwithin seven days after the execution of the contract,it "lets, demises" the vessel to charterer SMC "forthree round trips to Davao but only one trip wasdone. SMC filed against Bacaltos for specificperformance. Bacaltos stated that Savellon was nottheir Chief Operating Officer and that the powersgranted to him are only those clearly expressed inthe Authorization which do not include the power toenter into any contract with SMC. They furtherclaimed that if it is true that SMC entered into acontract with them, it should have issued the checkin their favor.

Issue: Whether or not Savellon was duly authorized by thepetitioners to enter into the Trip Charter under andby virtue of an Authorization. Decision: Every person dealing with an agent is put uponinquiry and must discover upon his peril theauthority of the agent. If he does not make suchinquiry, he is chargeable with knowledge of theagent's authority, and his ignorance of thatauthority will not be any excuse. Persons dealingwith an assumed agent, whether the assumedagency be a general or special one, are bound attheir peril, if they would hold the principal, toascertain not only the fact of the agency but also thenature and extent of the authority, and in caseeither is controverted, the burden of proof is uponthem to establish it. There is only one express powergranted to Savellon, viz., to use the coal operatingcontract for any legitimate purpose it may serve.Furthermore, had SMC exercised due diligence andprudence, it should have known in no time thatthere is absolutely nothing on the face of theAuthorization that confers upon Savellon theauthority to enter into any Trip Charter Party. Sincethe principal subject of the Authorization is the coaloperating contract, SMC should have required itspresentation to determine what it is and how it maybe used by Savellon. Such a determination is


indispensable to an inquiry into the extent or scopeof his authority. SMC made no attempt to verify ifBacaltos owned the vessel and merely was satisfiedwith Savellon's presentation. There is an equitablemaxim that between two innocent parties, the onewho made it possible for the wrong to be doneshould be the one to bear the resulting loss. In thepresent case, SMC is guilty of not ascertaining theextent and limits of the authority of Savellon. In notdoing so, SMC dealt with Savellon at its own peril.

Metropolitan Bank and Trust Co. v. Court ofAppeals [G.R. No. 88866. February 18, 1991]

FACTS

Various treasury warrants drawn by the PhilippineFish Marketing Authority were subsequentlyindorsed by Golden Savings. Petitioner allowedGolden Savings to withdraw thrice from unclearedtreasury warrants as the former was exasperatedover persistent inquiries of the latter after one week.Warrants were later dishonored by the Bureau ofTreasury.

ISSUE

(a) Whether or not treasury warrants are negotiableinstruments.

(b) Whether or not petitioner’s negligence would barthem for recovery.

RULING

(a) NO. The indication of fund as the source of thepayment to be made on the treasury warrants makesthe order or promise to pay “not unconditional” andthe warrants themselves non-negotiable. Metrobankcannot contend that by indorsing the warrants ingeneral, Golden Savings assumed that they were“genuine and in all respects what they purport tobe,” in accordance with Section 66 of the NegotiableInstruments Law. The simple reason is that this lawis not applicable to the non-negotiable treasurywarrants.

(b) YES. Metrobank was indeed negligent in givingGolden Savings the impression that the treasurywarrants had been cleared and that, consequently, itwas safe to allow Gomez to withdraw the proceedsthereof from his account with it. Without suchassurance, Golden Savings would not have allowedthe withdrawals; with such assurance, there was noreason not to allow the withdrawal. However,withdrawals released after the notice of the dishonormay be debited as it will result to unjust enrichment.

DOMINION INSURANCE CORPORATION vs.COURT OF APPEALS, RODOLFO S. GUEVARRA,and FERNANDO AUSTRIA

FACTS:

Rodolfo Guevarra (Guevarra) filed a civil case forsum of money against Dominion Insurance Corp.(Dominion) for the amount advanced by Guevarra inhis capacity as manager of defendant to satisfycertain claims filed by defendant’s client.

The pre-trial was always postponed, and during oneof the pre-trial conference dominion failed to arrivetherefore the court declared them to be in default.Dominion filed several Motions to Lift Order ofDefault but was always denied by the court. TheRTC rendered its decision making Dominion liable torepay Guevarra for the sum advanced and otherdamages and fees. Dominion appealed but CAaffirmed the decision of RTC and denied the appealof Dominion.

ISSUE:(a) W/N Guevarra acted within his authority asagent of petitioner.(b) W/N Guevarra must be reimbursed for theamount advanced.

HELD:(a) NO. Even though the contact entered into byGuevarra and Dominion was with the word “special”the contents of the document was actually a generalagency. A general power permits the agent to do allacts for which the law does not require a specialpower and the contents in the document did notrequire a special power of attorney.

Art 1878 of the civil code provides instances when aspecial power of attorney is required.:1) To make such payment as are not usuallyconsidered as acts of administration.15) any other act of dominion

The payment of claims is not an act ofadministration which requires a special power ofattorney before Guevarra could settle the insuranceclaims of the insured.

Also Guevarra was instructed that the payment forthe insured must come from the revolving fund orcollection in his possession, Gueverra should nothave paid the insured through his own capacity.Under 1918 of civil code an agent who acted incontravention of the principal’s instruction theprincipal will not be liable for the expenses incurredby the agent.

(b) YES. Even if the law on agency prohibitsGueverra from obtaining reimbursement his right torecover may be justified under the article 1236 of thecivil code.[1] Thus Guevarra must be reimbursed butonly to the extent that Dominion has benefitedwithout interest or demand for damages.

CONSTANTE AMOR DE CASTRO v. CA(GR115838, July 8 2002)

FACTS:


Appellants were co-owners of four (4) lots located atEDSA corner New York and Denver Streets in Cubao,Quezon City. In a letter dated January 24, 1984(Exhibit "A-1, p. 144,Records), appellee wasauthorized by appellants to act as real estate brokerin the sale of these properties for the amount ofP23,000,000.00, five percent (5%) of which will begiven to the agent as commission. It was appelleewho first found Times Transit Corporation,represented by its president Mr. Rondaris, asprospective buyer which desired to buy two(2) lotsonly, specifically lots 14 and 15. Eventually,sometime in May of 1985, the sale of lots 14 and 15was consummated. Appellee received fromappellants P48, 893.76as commission. It was thenthat the rift between the contending parties soonemerged. Appellee apparently felt short changedbecause according to him, his total commissionshould beP352,500.00 which is five percent (5%) ofthe agreed price of P7,050,000.00 paid by TimesTransit Corporation to appellants for the two (2) lots,and that it was he who introduced the buyer toappellants and unceasingly facilitated thenegotiation which ultimately led to theconsummation of the sale. Hence, he sued below tocollect the balance of P303,606.24 after havingreceived P48,893.76in advance. On the other hand,appellants completely traverse appellee’s claims andessentially argue that appellee is selfishly asking formore than what he truly deserved as commission tothe prejudice of other agents who were moreinstrumental in the consummation of the sale.Although appellants readily concede that it wasappellee who first introduced Times Transit Corp. tothem, appellee was not designated by them as theirexclusive real estate agent but that in fact there weremore or less eighteen (18) others whose collectiveefforts in the long run dwarfed those of appellee's,considering that the first negotiation for the salewhere appellee took active participation failed and itwasthese other agents who successfully brokered inthe second negotiation. But despite this and out ofappellants' "pure liberality, beneficence andmagnanimity”, appellee nevertheless was given thelargest cut in the commission (P48,893.76),although on the principle of quantum meruit hewould have certainly been entitled toless. So appelleeshould not have been heard to complain of gettingonly a pittance when he actually got the lion's shareof the commission and worse, he should not havebeen allowed to get the entire commission.Furthermore, the purchase price for the two lots wasonly P3.6 million as appearing in the deed of saleand not P7.05 million asalleged by appellee. Thus,even assuming that appellee is entitled to the entirecommission, he would only be getting5% of the P3.6million, or P180,000.00."Private respondentFrancisco Artigo ("Artigo" for brevity) suedpetitioners Constante A. De Castro ("Constante"forbrevity) and Corazon A. De Castro ("Corazon" forbrevity)to collect the unpaid balance of his broker'scommission from the De Castros. The Trial Courtfinds defendants Constante and Corazon Amor deCastro jointly and solidarity liable to plaintiff. TheCourt of Appeals affirmed in toto the decision of theRTC. Hence, this petition

ISSUE:Whether the complaint merits dismissal for failure toimplead other co-owners as indispensable parties

HELD:The De Castros argue that Artigo's complaint shouldhave been dismissed for failure to implead all the co-owners of the two lots. The De Castros claim thatArtigo always knew that the two lots were co-ownedby Constante and Corazon with their other siblingsJose and Carmela whom Constant merelyrepresented. The De Castros contend that failure toimplead such indispensable parties is fatal to thecomplaint since Artigo, as agent of all the four co-owners, would bepaid with funds co-owned by thefour co-owners. The De Castros' contentions aredevoid of legal basis. An indispensable party is onewhose interest will be affected by the court's actionin the litigation, and without whom no finaldetermination of the case can be had. The joinder ofindispensable parties is mandatory and courtscannot proceed without their presence.Whenever it appears to the court in the course of aproceeding that an indispensable party has not beenjoined, it is the duty of the court to stop the trial andorder the inclusion of such party.

However, the rule on mandatory joinder ofindispensable parties is not applicable to the instantcase. There is no dispute that Constanta appointedArtigo in handwritten note dated January 24, 1984to sell the properties of the De Castros for P23million at a 5 percent commission. The authoritywas on a first come, first serve basis. Constantesigned the note as owner and as representative ofthe other co-owners. Under this note, a contract ofagency was clearly constituted between Constanteand Artigo. Whether Constante appointed Artigoasagent, in Constante's individual or representativecapacity, or both, the De Castros cannot seek thedismissal of the case for failure to implead the otherco-owners as indispensable parties.

The De Castros admit that the other co-owners aresolidarily liable under the contract of agency citingArticle 1915 of the Civil Code, which reads: Art.1915. If two or more persons have appointed anagent for a common transaction or undertaking,they shall be solidarily liable to the agent for all theconsequences of the agency. The solidary liability ofthe four co-owners, however, militates against the DeCastros' theory that the other co-owners should beimpleaded as indispensable parties. When the lawexpressly provides for solidarity of the obligation, asin the liability of co-principals in a contract ofagency, each obligor may be compelled to pay theentire obligation.

The agent may recover the whole compensation fromany one of the co-principals, as in this case. Indeed,Article 1216 of the Civil Code provides thataccreditor may sue any of the solidary debtors. Thisarticlereads:Art. 1216. The creditor may proceedagainst any one of the solidary debtors or some or all


of them simultaneously. The demand made againstone of them shall not be an obstacle to those whichmay subsequently be directed against the others, solong as the debt has not been fully collected. Thus,the Court has ruled inOperators Incorporated vs.American Biscuit Co., Inc. that"x x x solidarity doesnot make a solidary obligor an indispensable partyin a suit filed by the creditor . Article 1216 of theCivil Code says that the creditor `may proceedagainst anyone of the solidary debtors or some or allof them simultaneously'." (Emphasis supplied)

CUISON vs. CA and ValiantG.R. No. 88539October 26, 1993

FACTS: Kue Cuison is a sole proprietorship engaged in thepurchase and sale of newsprint, bond paper andscrap.

Valiant Investment Associates delivered variouskinds of paper products to a certain Tan. Thedeliveries were made by Valiant pursuant to ordersallegedly placed by Tiac who was then employed inthe Binondo office of petitioner. Upon delivery, Tanpaid for the merchandise by issuing several checkspayable to cash at the specific request of Tiac. Inturn, Tiac issued nine (9) postdated checks toValiant as payment for the paper products.Unfortunately, sad checks were later dishonored bythe drawee bank.

Thereafter, Valiant made several demands uponpetitioner to pay for the merchandise in question,claiming that Tiac was duly authorized by petitioneras the manager of his Binondo office, to enter intothe questioned transactions with Valiant and Tan.Petitioner denied any involvement in the transactionentered into by Tiac and refused to pay Valiant.

Left with no recourse, private respondent filed anaction against petitioner for the collection of sum ofmoney representing the price of the merchandise.After due hearing, the trial court dismissed thecomplaint against petitioner for lack of merit. Onappeal, however, the decision of the trial court wasmodified, but was in effect reversed by the CA. CAordered petitioner to pay Valiant with the sum plusinterest, AF and costs.

ISSUE: WON Tiac possessed the required authority frompetitioner sufficient to hold the latter liable for thedisputed transaction

HELD:

YES. As to the merits of the case, it is a well-established rule that one who clothes another withapparent authority as his agent and holds him outto the public as such cannot be permitted to denythe authority of such person to act as his agent, tothe prejudice of innocent third parties dealing withsuch person in good faith and in the honest beliefthat he is what he appears to be

It matters not whether the representations areintentional or merely negligent so long as innocent,third persons relied upon such representations ingood faith and for value. Article 1911 of the CivilCode provides:

“Even when the agent has exceeded his authority,the principal is solidarily liable with the agent if theformer allowed the latter to act as though he had fullpowers.”

The above-quoted article is new. It is intended toprotect the rights of innocent persons. In such asituation, both the principal and the agent may beconsidered as joint tortfeasors whose liability is jointand solidary.

It is evident from the records that by his own actsand admission, petitioner held out Tiac to the publicas the manager of his store in Binondo. Moreparticularly, petitioner explicitly introduced toVillanueva, Valiant’s manager, as his (petitioner’s)branch manager as testified to by Villanueva.Secondly, Tan, who has been doing business withpetitioner for quite a while, also testified that sheknew Tiac to be the manager of the Binondo branch.Even petitioner admitted his close relationship withTiu Huy Tiac when he said that they are “likebrothers” There was thus no reason for anybodyespecially those transacting business with petitionerto even doubt the authority of Tiac as his managerin the Binondo branch. Tiac, therefore, bypetitioner’s own representations and manifestations,became an agent of petitioner by estoppel, anadmission or representation is rendered conclusiveupon the person making it, and cannot be denied ordisproved as against the person relying thereon(Article 1431, Civil Code of the Philippines). A partycannot be allowed to go back on his own acts andrepresentations to the prejudice of the other partywho, in good faith, relied upon them. Taken in thislight,. petitioner is liable for the transaction enteredinto by Tiac on his behalf. Thus, even when theagent has exceeded his authority, the principal issolidarily liable with the agent if the former allowedthe latter to fact as though he had full powers(Article 1911 Civil Code), as in the case at bar.

Finally, although it may appear that Tiac defraudedhis principal (petitioner) in not turning over theproceeds of the transaction to the latter, such factcannot in any way relieve nor exonerate petitioner ofhis liability to private respondent. For it is anequitable maxim that as between two innocentparties, the one who made it possible for the wrongto be done should be the one to bear the resultingloss.

THE MANILA REMNANT CO., INC vs. THEHONORABLE COURT OF APPEALS, OSCARVENTANILLA, JR. and CARMEN GLORIA DIAZ

FACTS:


Petitioner Manila Remnant Co., Inc. is theowns parcels of land situated in Quezon City andconstituting the Capital Homes Subdivision Nos. Iand II. Manila Remnant and A.U. Valencia & Co. Inc.entered into a contract entitled "Confirmation ofLand Development and Sales Contract" to formalizea prior verbal agreement whereby A.U. Valencia andCo., Inc. was to develop the aforesaid subdivision fora consideration of 15.5% commision. At that timethe President of both A.U. Valencia and Co. Inc. andManila Remnant Co., Inc. was Artemio U. Valencia.Manila Remnant thru A.U. Valencia and Co.executed two "contracts to sell" covering Lots 1 and 2of Block 17 in favor of Oscar C. Ventanilla andCarmen Gloria Diaz. Ten days after the signing ofthe contracts with the Ventanillas, Artemio U.Valencia, without the knowledge of the Ventanillacouple, sold Lots 1 and 2 of Block 17 again, toCarlos Crisostomo, one of his sales agents withoutany consideration. Artemio Valencia thentransmitted the fictitious Crisostomo contracts toManila Remnant while he kept in his files thecontracts to sell in favor of the Ventanillas. All theamounts paid by the Ventanillas were deposited inValencia's bank account. Upon orders of ArtemioValencia, the monthly payments of the Ventanillaswere remitted to Manila Remnant as payments ofCrisostomo for which the former issued receipts infavor of Crisostomo.

General Manager Karl Landahl, wrote ArtemioValencia informing him that Manila Remnant wasterminating its existing collection agreement with hisfirm on account of the considerable amount ofdiscrepancies and irregularities. As a consequence,Artemio Valencia was removed as President by theBoard of Directors of Manila Remnant. Therefore,Valencia stopped transmitting Ventanilla's monthlyinstallments. A.U. Valencia and Co. sued ManilaRemnant to impugn the abrogation of their agencyagreement. The court ordered all lot buyers todeposit their monthly amortizations with the court.But A.U. Valencia and Co. wrote the Ventanillas thatit was still authorized by the court to collect themonthly amortizations and requested them tocontinue remitting their amortizations with theassurance that said payments would be depositedlater in court.

Thereafter, the trial court issued an orderprohibiting A.U. Valencia and Co. from collecting themonthly installments. Valencia complied with thecourt's order of submitting the list of all his clientsbut said list excluded the name of the Ventanillas.Manila Remnant caused the publication in theTimes Journal of a notice cancelling the contracts tosell of some lot buyers. To prevent the effectivecancellation of their contracts, Artemio Valencia fileda complaint for specific performance with damagesagainst Manila Remnant

The Ventanillas, believing that they had alreadyremitted enough money went directly to ManilaRemnant and offered to pay the entire outstandingbalance of the purchase price. Unfortunately, theydiscovered from Gloria Caballes that their names did

not appear in the records of A.U. Valencia and Co. aslot buyers. Also, Manila Remnant refused the offer ofthe Ventanillas to pay for the remainder of thecontract price. The Ventanillas then commenced anaction for specific performance, annulment of deedsand damages against Manila Remnant, A.U. Valenciaand Co. and Carlos Crisostomo.

The trial court found that Manila Remnant couldhave not been dragged into this suit without thefraudulent manipulations of Valencia. Subsequently,Manila Remnant and A.U. Valencia and Co. elevatedthe lower court's decision to the Court of Appealsthrough separate appeals. On October 13, 1987, theAppellate Court affirmed in toto the decision of thelower court. Reconsideration sought by petitionerManila Remnant was denied, hence the instantpetition.

ISSUE:

Whether or not petitioner Manila Remnantshould be held solidarily liable together with A.U.Valencia and Co. and Carlos Crisostomo for thepayment of moral, exemplary damages andattorney's fees in favor of the Ventanillas

HELD:

YES. In the case at bar, the Valencia realtyfirm had clearly overstepped the bounds of itsauthority as agent — and for that matter, even thelaw — when it undertook the double sale of thedisputed lots. Such being the case, the principal,Manila Remnant, would have been in the clearpursuant to Article 1897 of the Civil Code whichstates that "(t)he agent who acts as such is notpersonally liable to that party with whom hecontracts, unless he expressly binds himself orexceeds the limits of his authority without givingsuch party sufficient notice of his powers." However,the unique relationship existing between theprincipal and the agent at the time of the dual salemust be underscored. Bear in mind that thepresident then of both firms was Artemio U.Valencia, the individual directly responsible for thesale scam. Hence, despite the fact that the doublesale was beyond the power of the agent, ManilaRemnant as principal was chargeable with theknowledge or constructive notice of that fact and nothaving done anything to correct such an irregularitywas deemed to have ratified the same. More in point,we find that by the principle of estoppel, ManilaRemnant is deemed to have allowed its agent to actas 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 theformer allowed the latter to act as though he had fullpowers." In such a situation, both the principal andthe agent may be considered as joint feasors whoseliability is joint and solidary (Verzosa vs. Lim, 45Phil. 416). In essence, therefore, the basis for ManilaRemnant's solidary liability is estoppel which, in


turn, is rooted in the principal's neglectfulness infailing to properly supervise and control the affairsof its agent and to adopt the needed measures toprevent further misrepresentation. As aconsequence, Manila Remnant is consideredestopped from pleading the truth that it had nodirect hand in the deception employed by its agent.That the principal might not have had actualknowledge of the agent's misdeed is of no moment.

LIM v. SABANG.R. No. 163720; December 16, 2004Ponente: J. Tinga

FACTS:

Under an Agency Agreement, Ybañez authorizedSaban to look for a buyer of the lot for Two HundredThousand Pesos (P200,000.00) and to mark up theselling price to include the amounts needed forpayment of taxes, transfer of title and other expensesincident to the sale, as well as Saban's commissionfor the sale.

Through Saban's efforts, Ybañez and his wife wereable to sell the lot to the petitioner Genevieve Lim(Lim) and the spouses Benjamin and Lourdes Lim(the Spouses Lim) on March 10, 1994. The price ofthe lot as indicated in the Deed of Absolute Sale isTwo Hundred Thousand Pesos (P200,000.00). Itappears, however, that the vendees agreed topurchase the lot at the price of Six HundredThousand Pesos (P600,000.00), inclusive of taxesand other incidental expenses of the sale.

After the sale, Lim remitted to Saban the amounts ofP113,257 for payment of taxes due on thetransaction as well as P50,000.00 as broker'scommission. Lim also issued in the name of Sabanfour postdated checks in the aggregate amount ofP236,743.00.

Subsequently, Ybañez sent a letter dated June 10,1994 addressed to Lim. In the letter Ybañez askedLim to cancel all the checks issued by her in Saban'sfavor and to "extend another partial payment" for thelot in his (Ybañez's) favor.

After the four checks in his favor were dishonoredupon presentment, Saban filed a complaint forcollection of sum of money and damages againstYbañez and LimSaban alleged that Ybañez told Lim that he (Saban)was not entitled to any commission for the sale sincehe concealed the actual selling price of the lot fromYbañez and because he was not a licensed realestate broker. Ybañez was able to convince Lim tocancel all four checks.

In his Answer, Ybañez claimed that Saban was notentitled to any commission because he concealed theactual selling price from him and because he wasnot a licensed real estate broker.

ISSUE: Whether Saban is entitled to receive hiscommission from the sale

HELD:

Yes, Saban is entitled to receive hiscommission from the sale.

The Supreme Court held that to depriveSaban of his commission subsequent to the salewhich was consummated through his efforts wouldbe a breach of his contract of agency with Ybañezwhich expressly states that Saban would be entitledto any excess in the purchase price after deductingthe P200,000.00 due to Ybañez and the transfertaxes and other incidental expenses of the sale. Moreover, the Court has already decided inearlier cases that would be in the height of injusticeto permit the principal to terminate the contract ofagency to the prejudice of the broker when he hadalready reaped the benefits of the broker's efforts.

Valenzuela v CA G.R. No. 83122 October 19, 1990J. Gutierrez Jr.

Facts:Petitioner Valenzuela, a General Agent respondentPhilamgen, was authorized to solicit and sell allkinds of non-life insurance. He had a 32.5%commission rate. From 1973 to 1975, Valenzuelasolicited marine insurance from Delta Motors, Inc. inthe amount of P4.4 Million from which he wasentitled to a commission of 32%. However,Valenzuela did not receive his full commission whichamounted to P1.6 Million from the P4.4 Million.Premium payments amounting to P1,946,886.00were paid directly to Philamgen. Valenzuela’scommission amounted to P632,737.00.Philamgen wanted to cut Valenzuela’s commission to50% of the amount. He declined.When Philamgen offered again, Valenzuela firmlyreiterated his objection.Philamgen took drastic action against Valenzuela.They: reversed the commission due him, threatenedthe cancellation of policies issued by his agency, andstarted to leak out news that Valenzuela has asubstantial debt with Philamgen. His agencycontract was terminated.The petitioners sought relief by filing the complaintagainst the private respondents. The trial courtfound that the principal cause of the termination asagent was his refusal to share his Delta commission.The court considered these acts as harassment andordered the company to pay for the resulting damagein the value of the commission. They also orderedthe company to pay 350,000 in moral damages.The company appealed. The CA ordered Valenzuelato pay the entire amount of the commission. Hence,this appeal by Valenzuela.


Issue:1. WON the agency contract is coupled with intereston the part of agent Valenzuela.2. Whether or not Philamgen can be held liable fordamages due to the termination of the GeneralAgency Agreement it entered into with thepetitioners.3. WON Valenzuela should pay the premiums hecollected.

Held: Yes. Yes. Petition granted

Ratio:1. In any event the principal's power to revoke anagency at will is so pervasive, that the SupremeCourt has consistently held that termination may beeffected even if the principal acts in bad faith,subject only to the principal's liability for damages.The Supreme Court accorded great weight on thetrial court’s factual findings and found the cause ofthe conflict to be Valenzuela’s refusal to share thecommission. Philamgen told the petitioners of itsdesire to share the Delta Commission with them. Itstated that should Delta back out from theagreement, the petitioners would be chargedinterests through a reduced commission after fullpayment by Delta. Philamgen proposed reducing thepetitioners' commissions by 50% thus giving theman agent's commission of 16.25%. The companyinsisted on the reduction scheme. The companypressured the agents to share the income with thethreat to terminate the agency. The petitioners werealso told that the Delta commissions would not becredited to their account. This continued until theagency was terminated. Records also show that theagency is one "coupled with an interest," and,therefore, should not be freely revocable at theunilateral will of the company. The records sustainthe finding that the private respondent started tocovet a share of the insurance business thatValenzuela had built up, developed and nurtured.The company appropriated the entire insurancebusiness of Valenzuela. Worse, despite thetermination of the agency, Philamgen continued tohold Valenzuela jointly and severally liable with theinsured for unpaid premiums.

Under these circumstances, it is clear thatValenzuela had an interest in the continuation of theagency when it was unceremoniously terminated notonly because of the commissions he procured, butalso Philamgen’s stipulation liability against him forunpaid premiums. The respondents cannot statethat the agency relationship between Valenzuela andPhilamgen is not coupled with interest.There is an exception to the principle that an agencyis revocable at will and that is when the agency hasbeen given not only for the interest of the principalbut also for the mutual interest of the principal andthe agent. The principal may not defeat the agent'sright to indemnification by a termination of thecontract of agency. Also, if a principal violates acontractual or quasi-contractual duty which he oweshis agent, the agent may as a rule bring anappropriate action for the breach of that duty.

2. Hence, if a principal acts in bad faith and withabuse of right in terminating the agency, then he isliable in damages. The Civil Code says that "everyperson must in the exercise of his rights and in theperformance of his duties act with justice, give everyone his due, and observe honesty and good faith:(Art. 19, Civil Code), and every person who, contraryto law, wilfully or negligently causes damages toanother, shall indemnify the latter for the same (Art.20, Civil Code).3. As to the issue of whether or not the petitionersare liable to Philamgen for the unpaid anduncollected premiums which the appellate courtordered Valenzuela to pay, the respondent courterred in holding Valenzuela liable.Under Section 77 of the Insurance Code, the remedyfor the non-payment of premiums is to put an end toand render the insurance policy not binding.Philippine Phoenix- non-payment of premium doesnot merely suspend but puts an end to an insurancecontract since the time of the payment is peculiarlyof the essence of the contract.Section 776 of the insurance Code says that nocontract of insurance by an insurance company isvalid and binding unless and until the premium hasbeen paid, notwithstanding any agreement to thecontrarySince the premiums have not been paid, the policiesissued have lapsed. The insurance coverage did notgo into effect or did not continue and the obligationof Philamgen as insurer ceased. Philam can’tdemand from or sue Valenzuela for the unpaidpremiums.

The court held that the CA’s giving credence to anaudit that showed Valenzuela owing PhilamgenP1,528,698.40 was unwarranted. Valenzuela had nounpaid account with Philamgen. But, facts showthat the beginning balance of Valenzuela's accountwith Philamgen amounted to P744,159.80. 4statements of account were sent to the agent. It wasonly after the filing of the complaint that a radicallydifferent statement of accounts surfaced in court.Certainly, Philamgen's own statements made by itsown accountants over a long period of time andcovering examinations made on four differentoccasions must prevail over unconfirmed andunaudited statements made to support a positionmade in the course of defending against a lawsuit.The records of Philamgen itself are the bestrefutation against figures made as an afterthoughtin the course of litigation. Moreover, Valenzuelaasked for a meeting where the figures would bereconciled. Philamgen refused to meet with him and,instead, terminated the agency agreement. After off-setting the amount, Valenzuela had overpaidPhilamgen the amount of P530,040.37 as ofNovember 30, 1978. Philamgen cannot later beheard to complain that it committed a mistake in itscomputation. The alleged error may be givencredence if committed only once. But as earlierstated, the reconciliation of accounts was arrived atfour (4) times on different occasions wherePhilamgen was duly represented by its accountexecutives. On the basis of these admissions and


representations, Philamgen cannot later on assumea different posture and claim that it was mistaken inits representation with respect to the correctbeginning balance as of July 1977 amounting toP744,159.80. The audit report commissioned byPhilamgen is unreliable since its results areadmittedly based on an unconfirmed and unauditedbeginning balance of P1,758,185.43.

Philamgen has been appropriating for itself all theseyears the gross billings and income that it took awayfrom the petitioners. A principal can be held liablefor damages in cases of unjust termination ofagency. This Court ruled that where no time for thecontinuance of the contract is fixed by its terms,either party is at liberty to terminate it at will,subject only to the ordinary requirements of goodfaith. The right of the principal to terminate hisauthority is absolute and unrestricted, except onlythat he may not do so in bad faith. Thecircumstances of the case, however, require that thecontractual relationship between the parties shall beterminated upon the satisfaction of the judgment.No more claims arising from or as a result of theagency shall be entertained by the courts after thatdate.

ESTATE OF THE LATE JULIANA DIEZ VDA. DEGABRIEL vs. CIRGR. No. 155541, January 27, 2004

FACTS:

During the lifetime of the decedent Juliana vda. DeGabriel, her business affairs were managed by thePhilippine Trust Company (PhilTrust). The decedentdied on April 3, 1979 but two days after her death,PhilTrust filed her income tax return for 1978 notindicating that the decedent had died. The BIRconducted an administrative investigation of thedecedent’s tax liability and found a deficiencyincome tax for the year 1997 in the amount ofP318,233.93. Thus, in November 18, 1982, the BIRsent by registered mail a demand letter andassessment notice addressed to the decedent “c/oPhilTrust, Sta. Cruz, Manila, which was the addressstated in her 1978 income tax return. On June 18,1984, respondent Commissioner of Internal Revenueissued warrants of distraint and levy to enforce thecollection of decedent’s deficiency income tax liabilityand serve the same upon her heir, FranciscoGabriel. On November 22, 1984, Commissioner fileda motion to allow his claim with probate court forthe deficiency tax. The Court denied BIR’s claimagainst the estate on the ground that no propernotice of the tax assessment was made on theproper party. On appeal, the CA held that BIR’sservice on PhilTrust of the notice of assessment wasbinding on the estate as PhilTrust failed in its legalduty to inform the respondent of antecedent’s death.Consequently, as the estate failed to question theassessment within the statutory period of thirtydays, the assessment became final, executory, andincontestable.

ISSUES:(1) Whether or not the CA erred in holding that theservice of deficiency tax assessment on Julianathrough PhilTrust was a valid service as to bind theestate.(2) Whether or not the CA erred in holding that thetax assessment had become final, executory, andincontestable.

HELD:(1) Since the relationship between PhilTrust and thedecedent was automatically severed the moment ofthe taxpayer’s death, none of the PhilTrust’s acts oromissions could bind the estate of the taxpayer.Although the administrator of the estate may havebeen remiss in his legal obligation to informrespondent of the decedent’s death, the consequencethereof merely refer to the imposition of certainpenal sanction on the administrator. These do notinclude the indefinite tolling of the prescriptiveperiod for making deficiency tax assessment orwaiver of the notice requirement for suchassessment.

(2) The assessment was served not even on an heiror the estate but on a completely disinterested party.This improper service was clearly not binding on thepetitioner. The most crucial point to be rememberedis that PhilTust had absolutely no legal relationshipwith the deceased or to her Estate. There wastherefore no assessment served on the estate as tothe alleged underpayment of tax. Absent thisassessment, no proceeding could be initiated incourt for collection of said tax; therefore, it could nothave become final, executory and incontestable.Respondent’s claim for collection filed with the courtonly on November 22, 1984 was barred for havingbeen made beyond the five-year prescriptive periodset by law.

Mariano Diolosa &Alegria Villanueva-Diolosav.CAand Quirino Baterna ( (1984)

Facts:Relova, J.

Baterna is a licensed real estate broker. The spousesBiolosa owned the Villa Alegre subdivision .June 20,1968, they entered into an agreement: Baternawould be their exclusive sales agent to sell the lots ofthe subdivision “until all the property is fullydisposed.” Sept 27, 1986 (about 3 mos later) thespouses terminated the services of Baterna asbecause the remaining unsold lots were reserved fortheir 6 grandkids.(there were 27 lots which remainedunsold) Now, Baterna is claiming that under theterms of their contract, he had unrevocableauthority to sell the lots until all were disposed. Therescission of the contract contravenes theiragreement. He also claims to be entitled to acommission on the lots unsold because of therescission The spouses argue that they are withintheir legal right to terminate the agency becausethey needed the undisposed lots for the use of their


family. They also say that Baterna has no legal rightto a commission to unsold lots. CFI dismissed. CAsays that notwithstanding NCC 1920 (that theprincipal may revoke the agency at will) spousescould not terminate the agency agreement withoutpaying damages. The agency agreement expresslystipulated“ until all the property as is fully disposed"The testimony of a certain Roberto Malundo thatBaterna agreed to the intention of Mrs. Diolosa toreserve some lots cannot prevail over the clear termsof the agreement. Wanting to reserve the lots for thegrandkids is not a legal reason to rescind the agencyagreement. (even if each kid would be given one loteach, there would still be 21lotsavailable and thespouses have other lands that can be reserved forthe kids)

IssueCan the spouses terminate the agency withoutpaying damages to Baterna, the real estate broker?

Held/Ratio: NO. They have to pay damages. Under the contract,the spouses allowed the real estate broker to sell,cede, etc. until all lots are fully disposed. Theauthority to sell is not extinguished until all lots aredisposed. When they revoked the contract, theybecame liable to the real estate broker for damagesfor breach of contract. Since the agency agreement isa valid contract, it may only be rescinded on grounds

specified in NCC 1381-82. ART. 1381. The followingcontracts are rescissible:(1)Those which are enteredin to by guardians whenever the wards whom theyrepresent suffer lesion by more than one-fourth ofthe 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 precedingnumber;(3)Those undertaken in fraud of creditorswhen the latter cannot in any other name collect theclaims due them;(4)Those which refer to thingsunder litigation if they have been entered into by thedefendant without the knowledge and approval ofthe litigants or of competent judicial authority;(5)Allother contracts specially declared by law to besubject to rescission. ART. 1382. Payments made ina state of insolvency for obligations to whosefulfillment the debtor could not be compelled at thetime they were effected, are also rescissible In thiscase, not one of the grounds are present

Petition denied.

DISCLAIMER/NOTE:

UN PONG MGA WALA PLEASE REFER SA FULLCASES OR IF IBA UNG DIGEST PAKI DOUBLECHECK NA LANG SA FULL CASES.


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