Eurotech Industrial Technologies, Inc. v.

Edwin Cuizon and Erwin Cuizon

G.R. No. 167552 April 23, 2007Chico-Nazario, J.
FACTS:

Eurotech is engaged in the business of importation and distribution of various

European industrial equipment. It has as one of its customers Impact
Systems Sales which is a sole proprietorship owned by Erwin Cuizon.

Eurotech sold to Impact Systems various products allegedly amounting to

P91,338.00. Cuizons sought to buy from Eurotech 1 unit of sludge pump
valued at P250,000.00 with Cuizons making a down payment of P50,000.00.
When the sludge pump arrived from the United Kingdom, Eurotech refused
to deliver the same to Cuizons without their having fully settled their
indebtedness to Eurotech. Thus, Edwin Cuizon and Alberto de Jesus,
general manager of Eurotech, executed a Deed of Assignment of receivables
in favor of Eurotech.

Cuizons, despite the existence of the Deed of Assignment, proceeded to

collect from Toledo Power Company the amount of P365,135.29. Eurotech
made several demands upon Cuizons to pay their obligations. As a result,
Cuizons were able to make partial payments to Eurotech. Cuizons
totalobligations stood at P295,000.00 excluding interests and attorneys fees.

Edwin Cuizon alleged that he is not a real party in interest in this case.
According to him, he wasacting as mere agent of his principal, which was the
Impact Systems, in his transaction with Eurotechand the latter was very
much aware of this fact.
ISSUE:
WON Edwin exceeded his authority when he signed the Deed of Assignment
thereby binding himself personally to pay the obligations to Eurotech?
HELD:
No.

Edwin insists that he was a mere agent of Impact Systems which is owned
by Erwin and that hisstatus as such is known even to Eurotech as it is
alleged in the Complaint that he is being sued in hiscapacity as the sales
manager of the said business venture. Likewise, Edwin points to the Deed of
Assignment which clearly states that he was acting as a representative of
Impact Systems in saidtransaction.

Art. 1897. The agent who acts as such is not personally liable to the party
with whom he contracts,unless he expressly binds himself or exceeds the
limits of his authority without giving such partysufficient notice of his powers.

In a
contract of agency

, a person binds himself to render some service or to do something

inrepresentation or on behalf of another with the latters consent. Its purpose
is to extend thepersonality of the principal or the party for whom another acts
and from whom he or she derives theauthority to act. The basis of agency is
representation, that is, the agent acts for and on behalf of theprincipal on
matters within the scope of his authority and said acts have the same legal
effect as if they were personally executed by the principal.

elements of the contract of agency: (1) consent, express or implied, of the

parties to establish therelationship; (2) the object is the execution of a
juridical act in relation to a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts within the scope of
hisauthority

An agent, who acts as such, is not personally liable to the party with whom
he contracts. There are 2instances when an agent becomes personally liable
to a third person. The first is when he expresslybinds himself to the obligation
and the second is when he exceeds his authority. In the last instance,the
agent can be held liable if he does not give the third party sufficient notice of
his powers. Edwindoes not fall within any of the exceptions contained in Art.
1897.

In the absence of an agreement to the contrary, a managing agent may enter

into any contracts thathe deems reasonably necessary or requisite for the
protection of the interests of his principalentrusted to his management.

Edwin Cuizon acted well-within his authority when he signed the Deed of
Assignment. Eurotechrefused to deliver the 1 unit of sludge pump unless it
received, in full, the payment for ImpactSystems indebtedness. Impact
Systems desperately needed the sludge pump for its business sinceafter it
paid the amount of P50,000.00 as downpayment it still persisted in
negotiating with Eurotechwhich culminated in the execution of the Deed of
Assignment of its receivables from Toledo PowerCompany. The significant
amount of time spent on the negotiation for the sale of the sludge
pumpunderscores Impact Systems perseverance to get hold of the said
equipment. Edwins participation.
In the Deed of Assignment was reasonably necessary or was required in
order for him to protectthe business of his principal.
RALLOS v FELIX GO CHAN & REALTY COPR., Munoz-Palma
Plaintiff: Ramon Rallos
Defendant: Felix Go Chan & Sons Realty Corporation
Facts: Concepcion and Gerundia Rallos were sisters and
registered co-owners of the parcel of land in issue. They executed
a special power of attorney in favor of their brother, Simeon Rallos,

authorizing him to sell such land for and in their behalf. After
Concepcion died, Simeon Rallos sold the undivided shares of his
sisters Concepcion and Gerundia to Felix Go Chan & Sons Realty
Corporation for the sum of P10,686.90. New TCTs were issued to the
latter.
Petitioner Ramon Rallos, administrator of the Intestate Estate of
Concepcion filed a complaint praying (1) that the sale of the
undivided share of the deceased Concepcion Rallos in lot 5983 be
unenforceable, and said share be reconveyed to her estate; (2) that
the Certificate of 'title issued in the name of Felix Go Chan & Sons
Realty Corporation be cancelled and another title be issued in the
names of the corporation and the "Intestate estate of Concepcion
Rallos" in equal undivided and (3) that plaintiff be indemnified by
way of attorney's fees and payment of costs of suit.
Issues: Whether or not the sale fell within the exception to the
general rule that death extinguishes the authority of the agent
Held/Ratio: Yes the sale is void. The court held that no one may
contract in the name of another without being authorized by the
latter, or unless he has by law a right to represent him (Art. 1317 of
the Civil Code). Simons authority as agent was extinguished upon
Concolacions death. The sale did not fall under the exceptions to
the general rule that death ipso jure extinguishes the authority of
the agent. Art. 1930 inapplicable since SPA in favor of Simon Rallos
was not coupled with interest and Art. 1931 inapplicable because
Rallos knew of principal Concepcions death. For Art 1931 to apply,
both requirements must be present
Laws on agency, the terms of which are clear and unmistakable
leaving no room for an interpretation contrary to its tenor, should
apply, the law provides that death of the principal ipso jure
extinguishes the authority of the agent to sell rendering the sale to
a third person in good faith unenforceable unless at the agent had
no knowledge of the principals death at that time (exception under
Art. 1931)
Dispositive: CA Decision reversed, CFI decision affirmed. Sale was
null and void.
(Court discussed relevant principles first)
Relationship of Agency (concept arising from principles under Art
1317 and 1403)- one party, caged the principal (mandante),
authorizes another, called the agent (mandatario), to act for and in
his behalf in transactions with third persons.
-derivative in nature, power emanating from principal

-agents acts are acts of the principal

1
2
3

Essential Elements:
there is consent, express or implied of the parties to
establish the relationship;
the object is the execution of a juridical act in relation to a
third person;
the agents acts as a representative and not for himself, and
the agent acts within the scope of his authority.
Extinguishment
o Generally: among others, By the death, civil
interdiction, insanity or insolvency of the principal or
of the agent
- death of the principal effects instantaneous
and absolute revocation of the authority of
the agent
o Exceptions:
(Art. 1930) if it has been constituted in the
common interest of the latter and of the
agent, or in the interest of a third person who
has accepted the stipulation in his favor.
(Art. 1931) agent acted without knowledge
of the pricipals death and that the third
person was in good faith (both these reqs
should be present)

Inland Realty vs.CA

Facts:On Sept.6, 1975, defendant corporation Ayala, Inc. through its
Assistant GeneralManager J. Armando Eduque, granted to Land Realty,
authority to sell 9,800 shares of stocks in Architect's Bldg. Inc. The terms of
the sale was for P1,500.00 per share andthe contract was to last for thirty
days.Inland Realty, a Company engaged in realty and brokerage, strategized
its salethrough sending letters to its prospective buyers. Stanford
Microsystems, Inc. proposed buying the stocks but submitted a count-offer
for P1,000.00/share for 9,800shares payable in 5 years at 12% per annul
interest until fuly paid.This proposal was communicated by Inland Realty to
defendant corporation but thelatter opposed, claiming the offer was too low
and asked petitioner if the price can beadjusted according to the terms of the
authority to sell. The period of the contractextended for several times.
Petitioner asked for an exclusive authority and for a longer period but
Eduque would not give the same. The sale was made in favor of
Stanford.Later on, Inland Realty sued defendant for its brokerage fees.
Defendant claims that itis not entitled because after the thirty day period

expired, petitioner was no longer connected to the transaction and that it

abandoned it,
Issue: Whether or not Inland Realty is entitled to the brokerage fees?
Held: No. Petitioner was not entitled to the brokerage commission of 5%. It
appearedthat there was no express authority given y defendant for th
extension of the thirty-day period of the authority to sell. Moreover, petitioner
did not do anything except submitthe name of the prospective buyer,
Microsystems. I did not take part in theconsummation of the sale and the
processing of the necessary documents. Moreimportantly, what existed was
a proposal and a counter-proposal which Dd notconstitute the closing of the
transaction just because it was plaintiff who solelysuggested to defendants
the name of Stanford as buyer, and that Inland Realty did notsell the stocks
in accordance with the terms of the agreement with Ayala Co., thateach stock
be sold at P1,500 each.
Doles vs Angeles
FACTS
In 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint
for Specific Performance with Damages against Jocelyn B. Doles (petitioner)
alleging that petitioner was indebted to the former in the concept of a
personal loan amounting to P405,430.00 representing
the principal amount and interest. Petitioner, then respondent, while admitting
some allegations in the Complaint, denied that she borrowed money from
respondent, and averred that from June to September 1995, she referred her
friends to respondent whom she knew to be engaged in the business of
lending money in exchange for personal checks through her capitalist
Arsenio Pua. She alleged that her friends borrowed money from respondent
and issued personal checks in payment of the loan but the checks bounced.
In order to collect money, the respondent then threatened to initiate a
criminal case against her for violation of
Batas Pambansa Blg.
22; that she was forced by respondent to execute an "Absolute Deed of Sale"
over her property in Bacoor, Cavite, to avoid criminal prosecution; that the
said deed had no valid consideration; that she did not appear before a notary
public; that the Community Tax Certificate number on the deed was not hers
and for which respondent may be prosecuted for falsification and perjury; and
that she suffered damages and lost rental as a result.
ISSUE
Is Doles (petitioner) merely an agent or representative of the alleged debtors,
hence not a party to the loan?
RULING
NO. In view of the two agency relationships, petitioner and respondent are
not privy to
the contract of loan between their principals. Since the sale is predicated on
that loan, then the

sale is void for lack of consideration. Indeed, the Deed of Absolute Sale
purports to be supported by a consideration in the form of a price certain in
money and that this sum indisputably pertains to the debt in issue. This Court
has consistently held that a contract of sale is null and void and produces no
effect whatsoever where the same is without cause or consideration. The
question that has to be resolved for the moment is whether this debt can be
considered as a valid cause or consideration for the sale. To restate, the CA
cited four instances in the record to support its holding that petitioner "relends" the amount borrowed from respondent to her friends: first, the friends
of petitioner never presented themselves to respondent and that all
transactions were made by and between petitioner and respondent; second;
the money passed through the bank accounts of petitioner and respondent;
third, petitioner herself admitted that she was "re-lending" the money loaned
to other individuals for profit; and fourth, the documentary evidence shows
that the actual borrowers, the friends of petitioner, consider her as their
creditor and not the respondent.
21
On the first, third, and fourth points, the CA cites the testimony of the
petitioner, then defendant, during her cross-examination: Respondent is
estopped to deny that she herself acted as agent of a certain Arsenio Pua,
her disclosed principal. She is also estopped to deny that petitioner acted as
agent for the alleged debtors, the friends whom she (petitioner) referred. This
Court has affirmed that, under Article 1868 of the Civil Code, the basis of
agency is representation. The question of whether an agency has been
created is ordinarily a question which may be established in the same way
as any other fact, either by direct or circumstantial evidence. The question is
ultimately one of intention. Agency may even be implied from the words and
conduct of the parties and the circumstances of the particular case. Though
the fact or extent of authority of the agents may not, as a general rule, be
established from the declarations of the agents alone, if one professes to act
as agent for another, she may be estopped to deny her agency both as
against the asserted principal and the third persons interested in the
transaction in which he or she is engaged. In this case, petitioner knew that
the financier of respondent is Pua; and respondent knew that the borrowers
are friends of petitioner. The CA is incorrect when it considered the fact that
the "supposed friends of [petitioner], the actual borrowers, did not present
themselves to [respondent]" as evidence that negates the agency
relationship

it is sufficient that petitioner disclosed to respondent that the former was

acting in behalf of her principals, her friends whom she referred to
respondent. For an agency to arise, it is not necessary that the principal
personally encounter the third person with whom the agent interacts. The law
in fact contemplates, and to a great degree, impersonal dealings where the
principal need not personally know or meet the third person with whom her

agent transacts: precisely, the purpose of agency is to extend the personality

of the principal through the facility of the agent. In the case at bar, both
petitioner and respondent have undeniably disclosed to each other that they
are representing someone else, and so both of them are estopped to deny
the same. It is evident from the record that petitioner merely refers actual
borrowers and then collects and disburses the amounts of the loan upon
which she received a commission; and that respondent transacts on behalf of
her "principal financier", a certain Arsenio Pua. If their respective principals
do not actually and personally know each other, such ignorance does not
affect their juridical standing as agents, especially since the very purpose of
agency is to extend the personality of the principal through the facility of the
agent. With respect to the admission of petitioner that she is "re-lending" the
money loaned from respondent to other individuals for profit,
it must be stressed that the manner in which the parties designate the
relationship is not controlling
. If an act done by one person in behalf of another is in its essential nature
one of agency, the former is the agent of the latter notwithstanding he or she
is not so called. The question is to be determined by the fact that one
represents and is acting for another, and if relations exist which will constitute
an agency,
it will be an agency whether the parties understood the exact nature of the
relation or not.
That both parties acted as mere agents is shown by the undisputed fact that
the friends of petitioner issued checks in payment of the loan in the name of
Pua. If it is true that petitioner was "re-lending", then the checks should have
been drawn in her name and not directly paid to Pua. With respect to the
second point, particularly, the finding of the CA that the disbursements and
payments for the loan were made through the bank accounts of petitioner
and respondent, suffice it to say that in the normal course of commercial
dealings and for reasons of convenience and practical utility it can be
reasonably expected that the facilities of the agent, such as a bank account,
may be employed, and that a sub-agent be appointed, such as the bank
itself, to carry out the task, especially where there is no stipulation to the
contrary.

G.R. No. L-8169

January 29, 1957
THE SHELL COMPANY OF THE PHILIPPINES, LTD., petitioner,
vs.
FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY
COMMERCIAL CASUALTY INSURANCE CO., SALVADOR SISON,
PORFIRIO DE LA FUENTE and THE COURT OF APPEALS (First Division),
respondents.
PADILLA, J.:

Appeal by certiorari under Rule 46 to review a judgment of the Court of

Appeals which reversed that of the Court of First Instance of Manila and
sentenced ". . . the defendants-appellees to pay, jointly and severally, the
plaintiffs-appellants the sum of P1,651.38, with legal interest from December
6, 1947 (Gutierrez vs. Gutierrez, 56 Phil., 177, 180), and the costs in both
instances."
The Court of Appeals found the following:
Inasmuch as both the Plaintiffs-Appellants and the Defendant-Appellee, the
Shell Company of the Philippine Islands, Ltd. accept the statement of facts
made by the trial court in its decision and appearing on pages 23 to 37 of the
Record on Appeal, we quote hereunder such statement:
This is an action for recovery of sum of money, based on alleged negligence
of the defendants.
It is a fact that a Plymounth car owned by Salvador R. Sison was brought, on
September 3, 1947 to the Shell Gasoline and Service Station, located at the
corner of Marques de Comillas and Isaac Peral Streets, Manila, for washing,
greasing and spraying. The operator of the station, having agreed to do
service upon payment of P8.00, the car was placed on a hydraulic lifter under
the direction of the personnel of the station.
What happened to the car is recounted by Perlito Sison, as follows:
Q. Will you please describe how they proceeded to do the work?
A. Yes, sir. The first thing that was done, as I saw, was to drive the car over
the lifter. Then by the aid of the two grease men they raised up my car up to
six feet high, and then washing was done. After washing, the next step was
greasing. Before greasing was finished, there is a part near the shelf of the
right fender, right front fender, of my car to be greased, but the the grease
men cannot reached that part, so the next thing to be done was to loosen the
lifter just a few feet lower. Then upon releasing the valve to make the car
lower, a little bit lower . . .
Q. Who released the valve?
A. The greasemen, for the escape of the air. As the escape of the air is too
strong for my ear I faced backward. I faced toward Isaac Peral Street, and
covered my ear. After the escaped of the air has been finished, the air
coming out from the valve, I turned to face the car and I saw the car swaying
at that time, and just for a few second the car fell., (t.s.n. pp. 22-23.)

The case was immediately reported to the Manila Adjustor Company, the
adjustor of the firemen's Insurance Company and the Commercial Casualty
Insurance Company, as the car was insured with these insurance
companies. After having been inspected by one Mr. Baylon, representative of
the Manila Adjustor Company, the damaged car was taken to the shops of
the Philippine Motors, Incorporated, for repair upon order of the Firemen's
Insurance Company and the Commercial Casualty Company, with the
consent of Salvador R. Sison. The car was restored to running condition after
repairs amounting to P1,651.38, and was delivered to Salvador R. Sison,
who, in turn made assignments of his rights to recover damages in favor of
the Firemen's Insurance Company and the Commercial Casualty Insurance
Company.
On the other hand, the fall of the car from the hydraulic lifter has been
explained by Alfonso M. Adriano, a greaseman in the Shell Gasoline and
Service Station, as follows:
Q. Were you able to lift the car on the hydraulic lifter on the occasion,
September 3, 1947?
A. Yes, sir.
Q. To what height did you raise more or less?
A. More or less five feet, sir.
Q. After lifting that car that height, what did you do with the car?

Q. Were you able to reach the portion which you were not able to reach while
it was lower?
A. No more, sir.
Q. Why?
A. Because when I was lowering the lifter I saw that the car was swinging
and it fell.
THE COURT. Why did the car swing and fall?
WITNESS: 'That is what I do not know, sir'. (t.s.n., p.67.)
The position of Defendant Porfirio de la Fuente is stated in his counterstatement of facts which is hereunder also reproduced:
In the afternoon of September 3, 1947, an automobile belonging to the
plaintiff Salvador Sison was brought by his son, Perlito Sison, to the gasoline
and service station at the corner of Marques de Comillas and Isaac Peral
Streets, City of Manila, Philippines, owned by the defendant The Shell
Company of the Philippine Islands, Limited, but operated by the defendant
Porfirio de la Fuente, for the purpose of having said car washed and greased
for a consideration of P8.00 (t.s.n., pp. 19-20.) Said car was insured against
loss or damage by Firemen's Insurance Company of Newark, New Jersey,
and Commercial Casualty Insurance Company jointly for the sum of P10,000
(Exhibits "A', "B", and "D").

A. I also washed it, sir.

Q. And after washing?
A. I greased it.
Q. On that occasion, have you been able to finish greasing and washing the
car?
A. There is one point which I could not reach.
Q. And what did you do then?

The job of washing and greasing was undertaken by defendant Porfirio de la

Fuente through his two employees, Alfonso M. Adriano, as greaseman and
one surnamed de los Reyes, a helper and washer (t.s.n., pp. 65-67). To
perform the job the car was carefully and centrally placed on the platform of
the lifter in the gasoline and service station aforementioned before raising up
said platform to a height of about 5 feet and then the servicing job was
started. After more than one hour of washing and greasing, the job was about
to be completed except for an ungreased portion underneath the vehicle
which could not be reached by the greasemen. So, the lifter was lowered a
little by Alfonso M. Adriano and while doing so, the car for unknown reason
accidentally fell and suffered damage to the value of P1, 651.38 (t.s.n., pp.
65-67).

A. I lowered the lifter in order to reach that point.

Q. After lowering it a little, what did you do then?
A. I pushed and pressed the valve in its gradual pressure.

The insurance companies after paying the sum of P1,651.38 for the damage
and charging the balance of P100.00 to Salvador Sison in accordance with
the terms of the insurance contract, have filed this action together with said

Salvador Sison for the recovery of the total amount of the damage from the
defendants on the ground of negligence (Record on Appeal, pp. 1-6).
The defendant Porfirio de la Fuente denied negligence in the operation of the
lifter in his separate answer and contended further that the accidental fall of
the car was caused by unforseen event (Record on Appeal, pp. 17-19).
The owner of the car forthwith notified the insurers who ordered their
adjustor, the Manila Adjustor Company, to investigate the incident and after
such investigation the damaged car, upon order of the insures and with the
consent of the owner, was brought to the shop of the Philippine Motors, Inc.
The car was restored to running condition after thereon which amounted to
P1,651.38 and returned to the owner who assigned his right to collect the
aforesaid amount to the Firemen's Insurance Company and the Commercial
Casualty Insurance Company.
On 6 December 1947 the insures and the owner of the car brought an action
in the Court of First Instance of Manila against the Shell Company of the
Philippines, Ltd. and Porfirio de la Fuente to recover from them, jointly and
severally, the sum of P1,651.38, interest thereon at the legal rate from the
filing of the complaint until fully paid, the costs. After trial the Court dismissed
the complaint. The plaintiffs appealed. The Court of Appeals reversed the
judgment and sentenced the defendant to pay the amount sought to be
recovered, legal interest and costs, as stated at the beginning of this opinion.
In arriving at the conclusion that on 3 September 1947 when the car was
brought to the station for servicing Profirio de la Fuente, the operator of the
gasoline and service station, was an agent of the Shell Company of the
Philippines, Ltd., the Court of Appeals found that
. . . De la Fuente owned his position to the Shell Company which could
remove him terminate his services at any time from the said Company, and
he undertook to sell the Shell Company's products exculusively at the said
Station. For this purpose, De la Fuente was placed in possession of the
gasoline and service station under consideration, and was provided with all
the equipments needed to operate it, by the said Company, such as the tools
and articles listed on Exhibit 2 which the hydraulic lifter (hoist) and
accessories, from which Sison's automobile fell on the date in question
(Exhibit 1 and 2). These equipments were delivered to De la Fuente on a socalled loan basis. The Shell Company took charge of its care and
maintenance and rendered to the public or its customers at that station for
the proper functioning of the equipment. Witness Antonio Tiongson, who was
sales superintendent of the Shell Company, and witness Augusto Sawyer,
foreman of the same Company, supervised the operators and conducted
periodic inspection of the Company's gasoline and service station, the
service station in question inclusive. Explaining his duties and responsibilities

and the reason for the loan, Tiongson said: "mainly of the supervision of
sales or (of) our dealers and rountinary inspection of the equipment loaned
by the Company" (t.s.n., 107); "we merely inquire about how the equipments
are, whether they have complaints, and whether if said equipments are in
proper order . . .", (t.s.n., 110); station equipments are "loaned for the
exclusive use of the dealer on condition that all supplies to be sold by said
dealer should be exclusively Shell, so as a concession we loan equipments
for their use . . .," "for the proper functioning of the equipments, we answer
and see to it that the equipments are in good running order usable condition .
. .," "with respect to the public." (t.s.n., 111-112). De la Fuente, as operator,
was given special prices by the Company for the gasoline products sold
therein. Exhibit 1 Shell, which was a receipt by Antonio Tiongson and
signed by the De la Fuente, acknowledging the delivery of equipments of the
gasoline and service station in question was subsequently replaced by
Exhibit 2 Shell, an official from of the inventory of the equipment which De
la Fuente signed above the words: "Agent's signature" And the service
station in question had been marked "SHELL", and all advertisements therein
bore the same sign. . . .
. . . De la Fuente was the operator of the station "by grace" of the Defendant
Company which could and did remove him as it pleased; that all the
equipments needed to operate the station was owned by the Defendant
Company which took charge of their proper care and maintenance, despite
the fact that they were loaned to him; that the Defendant company did not
leave the fixing of price for gasoline to De la Fuente; on the other hand, the
Defendant company had complete control thereof; and that Tiongson, the
sales representative of the Defendant Company, had supervision over De la
Fuente in the operation of the station, and in the sale of Defendant
Company's products therein. . . .
Taking into consideration the fact that the operator owed his position to the
company and the latter could remove him or terminate his services at will;
that the service station belonged to the company and bore its tradename and
the operator sold only the products of the company; that the equipment used
by the operator belonged to the company and were just loaned to the
operator and the company took charge of their repair and maintenance; that
an employee of the company supervised the operator and conducted
periodic inspection of the company's gasoline and service station; that the
price of the products sold by the operator was fixed by the company and not
by the operator; and that the receipt signed by the operator indicated that he
was a mere agent, the finding of the Court of Appeals that the operator was
an agent of the company and not an independent contractor should not be
disturbed.
To determine the nature of a contract courts do not have or are not bound to
rely upon the name or title given it by the contracting parties, should there be

a controversy as to what they really had intended to enter into, but the way
the contracting parties do or perform their respective obligation stipulated or
agreed upon may be shown and inquired into, and should such performance
conflict with the name or title given the contract by the parties, the former
must prevail over the latter.
It was admitted by the operator of the gasoline and service station that "the
car was carefully and centrally placed on the platform of the lifter . . ." and the
Court of Appeals found that
. . . the fall of Appellant Sison's car from the hydraulic lift and the damage
caused therefor, were the result of the jerking and swaying of the lift when
the valve was released, and that the jerking was due to some accident and
unforeseen shortcoming of the mechanism itself, which caused its faulty or
defective operation or functioning,

Quiroga files a case against Parsons for allegedly violating the following
stipulations: not to sell the beds at higher prices than those of the invoices; to
have an open establishment in Iloilo; itself to conduct the agency; to keep the
beds on public exhibition, and to pay for the advertisement expenses for the
same; and to order the beds by the dozen and in no other manner. With the
exception of the obligation on the part of the defendant to order the beds by
the dozen and in no other manner, none of the obligations imputed to the
defendant in the two causes of action are expressly set forth in the contract.
But the plaintiff alleged that the defendant was his agent for the sale of his
beds in Iloilo, and that said obligations are implied in a contract of
commercial agency. The whole question, therefore, reduced itself to a
determination as to whether the defendant, by reason of the contract
hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the
sale of his beds.
Issue: Whether the contract is a contract of agency or of sale.

. . . the servicing job on Appellant Sison's automobile was accepted by De la

Fuente in the normal and ordinary conduct of his business as operator of his
co-appellee's service station, and that the jerking and swaying of the
hydraulic lift which caused the fall of the subject car were due to its defective
condition, resulting in its faulty operation. . . .
As the act of the agent or his employees acting within the scope of his
authority is the act of the principal, the breach of the undertaking by the
agent is one for which the principal is answerable. Moreover, the company
undertook to "answer and see to it that the equipments are in good running
order and usable condition;" and the Court of Appeals found that the
Company's mechanic failed to make a thorough check up of the hydraulic
lifter and the check up made by its mechanic was "merely routine" by raising
"the lifter once or twice and after observing that the operator was satisfactory,
he (the mechanic) left the place." The latter was negligent and the company
must answer for the negligent act of its mechanic which was the cause of the
fall of the car from the hydraulic lifter.
The judgment under review is affirmed, with costs against the petitioner.
Quiroga vs Parsons
G.R. No. L-11491
Subject: Sales
Doctrine: Contract of Agency to Sell vs Contract of Sale
Facts: On Jan 24, 1911, plaintiff and the respondent entered into a contract
making the latter an agent of the former. The contract stipulates that Don
Andres Quiroga, here in petitioner, grants exclusive rights to sell his beds in
the Visayan region to J. Parsons. The contract only stipulates that J.Parsons
should pay Quiroga within 6 months upon the delivery of beds.

Held: In order to classify a contract, due attention must be given to its

essential clauses. In the contract in question, what was essential, as
constituting its cause and subject matter, is that the plaintiff was to furnish the
defendant with the beds which the latter might order, at the price stipulated,
and that the defendant was to pay the price in the manner stipulated.
Payment was to be made at the end of sixty days, or before, at the plaintiffs
request, or in cash, if the defendant so preferred, and in these last two cases
an additional discount was to be allowed for prompt payment. These are
precisely the essential features of a contract of purchase and sale. There
was the obligation on the part of the plaintiff to supply the beds, and, on the
part of the defendant, to pay their price. These features exclude the legal
conception of an agency or order to sell whereby the mandatory or agent
received the thing to sell it, and does not pay its price, but delivers to the
principal the price he obtains from the sale of the thing to a third person, and
if he does not succeed in selling it, he returns it. By virtue of the contract
between the plaintiff and the defendant, the latter, on receiving the beds, was
necessarily obliged to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not sold the beds.
In respect to the defendants obligation to order by the dozen, the only one
expressly imposed by the contract, the effect of its breach would only entitle
the plaintiff to disregard the orders which the defendant might place under
other conditions; but if the plaintiff consents to fill them, he waives his right
and cannot complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and
between the plaintiff and the defendant was one of purchase and sale, and
that the obligations the breach of which is alleged as a cause of action are
not imposed upon the defendant, either by agreement or by law.
Schmid and Oberly, Inc. v. RJL Martinez Fishing Corp.

G.R. No. 75198

October 18, 1988
Facts:
RJL Martinez Fishing Corporation is engaged in deep-sea fishing. In the
course of its business, it needed electrical
generators for the operation of its business. Schmid and Oberly sells
electrical generators with the brand of Nagata, a
Japanese product. D. Nagata Co. Ltd. of Japan was Schmids supplier.
Schmid advertised the 12 Nagata generators for
sale and RJL purchased 12 brand new generators. Through an irrevocable
line of credit, Nagata shipped to the Schmid the
generators and RJL paid the amount of the purchase price. (First sale = 3
generators; Second sale = 12 generators).
Later, the generators were found to be factory defective. RJL informed the
Schmid that it shall return the 12 generators. 3
were returned. Schmid replaced the 3 generators subject of the first sale with
generators of a different brand. As to the
second sale, 3 were shipped to Japan and the remaining 9 were not
replaced.
RJL sued the defendant on the warranty, asking for rescission of the contract
and that Schmid be ordered to accept the
generators and be ordered to pay back the purchase money as well as be
liable for damages. Schmid opposes such liability
averring that it was merely the indentor in the sale between Nagata Co., the
exporter and RJL Martinez, the importer. As
mere indentor, it avers that is not liable for the sellers implied warranty
against hidden defects, Schmid not having
personally assumed any such warranty.
Issue:
1) WON the second transaction between the parties was a sale or an indent
transaction?
2) Even is Schmid is merely an indentor, may it still be liable for the
warranty?
Held:
As to the first issue, the SC held it to be an indent transaction. An indentor is
a middlemen in the same class as
commercial brokers and commission merchants. A broker is generally
defined as one who is engaged, for others, on a
commission, negotiating contracts relative to property with the custody of
which he has no concern; the negotiator
between other parties, never acting in his own name but in the name of those
who employed him; he is strictly a
middleman and for some purpose the agent of both parties. There are 3
parties to an indent transaction, (1) buyer, (2)
indentor, and (3) supplier who is usually a non-resident manufacturer residing
in the country where the goods are to be

bought. The chief feature of a commercial broker and a commercial merchant

is that in effecting a sale, they are merely
intermediaries or middle-men, and act in a certain sense as the agent of both
parties to the transaction.
RJL MARTINEZ admitted that the generators were purchased through
indent order. RJL admitted in its demand letter
previously sent to SCHMID that 12 of 15 generators were purchased
through your company, by indent order and three
(3) by direct purchase. The evidence also show that RJL MARTINEZ paid
directly NAGATA CO, for the generators,
and that the latter company itself invoiced the sale and shipped the
generators directly to the former. The only
participation of Schmid was to act as an intermediary or middleman between
Nagata and RJL, by procuring an order from
RJL and forwarding the same to Nagata for which the company received a
commission from Nagata.
Even as SCHMID was merely an indentor, there was nothing to prevent it
from voluntarily warranting that twelve (12)
generators subject of the second transaction are free from any hidden
defects. In other words, SCHMID may be held
answerable for some other contractual obligation, if indeed it had so bound
itself. As stated above, an indentor is to some
extent an agent of both the vendor and the vendee. As such agent, therefore,
he may expressly obligate himself to
undertake the obligations of his principal.

Harry E. Keeler Electric Co. vs. Rodriguez

November 11,1922, Johns, J.***This case involves an action for the payment
of purchase price by plaintiff Keeler Electric against defendant Rodriguez
Legal Doctrine:
Persons dealing with an assumed agent, whether the assumed agency be a
general or special one, are bound at theirperil, if they would hold the
principal, to ascertain not only the fact of the agency but the nature and
extent of the authority, and in caseeither is controverted, the burden of proof
is upon them to establish it.
Facts
:

Plaintiff is Harry E. Keeler Electric Co., a domestic corporation based in

Manila engaged in the electrical business, and amongother things in the sale
of what is known as the "Matthews" electric plant.

Defendant is Domingo Rodriguez a resident of Talisay, Occidental Negros


Montelibano, a resident of Iloilo, went to Keeler Electric and made
arrangement with the latter wherein:
o
He claimed that he could find purchaser for the "Matthews" plant
o
Keeler Electric told Montelibano that for any plant that he could sell or any
customer that he could find
he would bepaid a commission of 10%
for his services, if the sale was consummated.

Through Montelibanos efforts, Keeler was able to sell to Rodriguez

one of the "Matthews" plants

Rodriguez paid Montelibano (the purchase price of P2,513.55), after the

installation of the plant and without the knowledge ofKeeler Electric,

Keeler Electric filed an action against Rodriguez for the payment of the
purchase price.

Rodriguez: Claimed that he already paid the price of the plant. In addition, he
alleged that:
o
Montelibano sold and delivered the plant to him, and "was the one who
ordered the installation of that electrical plant"
o
There were evidences: a statement and receipt which Montelibano signed to
whom he paid the money.
o
He paid Montelibano because the latter was the one who sold, delivered, and
installed the electrical plant, and hepresented to him the account, and
assured him that he was duly authorized to collect the value of the electrical
plant
o
The receipt had the following contents:STATEMENT Folio No. 2494Mr.
DOMINGO RODRIGUEZ,
Iloilo, Iloilo, P.I.
In account withHARRY E. KEELER ELECTRIC COMPANY, INC.221 Calle
Echaque, Quiapo, Manila, P.I.MANILA, P.I.,
August 18, 1920
.The answer alleges and the receipt shows upon its face that the plaintiff sold
the plant to thedefendant, and that he bought it from the plaintiff. The receipt
is signed as follows:
Received payment

HARRY E. KEELER ELECTRIC CO. Inc.,Recibi(Sgd.) A. C.

MONTELIBANO.

Witness (Juan Cenar):

o
Cenar was sent by Keeler Electric to install the plant in Rodriguezs premises
in Iloilo
o
He brought with him a statement of account for Rodriguez but the latter said
that he would pay in Manila.

***Lower Court: In favor of Rodriguez. It held that:

o
Keeler Electric had held out Montelibano to Rodriguez as an agent
authorized to collect
o
Payment to Montelibano would discharge the debt of Rodriguez
o
The bill was given to Montelibano for collection purposes

Keeler Electric appealed. It alleged that:

o
Montelibano had no authority to receive the money.
o
His services were confined to the finding of purchasers for the "Matthews"
plant
o
Montelibano was not an electrician, could not install the plant and did not
know anything about its mechanism.
Issues:
1. WON Keeler Electric authorized Montelibano to receive or receipt for
money in its behalf2. WON Rodriguez had a right to assume by any act or
deed of Keeler Electric that Montelibano was authorized to receive themoney
Held/Ratio:
1. NO, Montelibano was not authorized.
The plant was sold by Keeler Electric to Rodriguez and was consigned to
Iloilo whereit was installed by Cenar, acting for, and representing, Keeler
Electric, whose expense for the trip is included in, and made apart of, the bill
which was receipted by Montelibano.
a. Montelibano was not an agent of Keeler Electric

There is nothing on the face of this receipt to show that Montelibano

was the agent of, or that he was acting for,Keeler Electric. It is his
own personal receipt and his own personal signature.
o
Outside of the fact that Montelibano received the money and signed
this receipt, there is no evidence that he had anyauthority, real or
apparent, to receive or receipt for the money.
o
Neither is there any evidence that Keeler Electric ever delivered the
statement to Montelibano. (It is very apparentthat the statement is
the one which was delivered by Keeler Electric to Cenar, and is the
one which Cenar deliveredto Rodriguez)b. It was Juan Cenar, and
not Montelibano who sold the plant to Rodiguez
o
The evidence is in direct conflict with
Rodriguezs
own pleadings and the receipt statement which he offered
inevidence. This statement also shows upon its face that P81.60 of
the bill is
round trip fare and machines
transportation costs.
o
This claim must be for the expenses of Cenar in going to Iloilo from
Manila and return, to install the plant, and isstrong evidence that it
was Cenar and not Montelibano who installed the plant.
o
If Montelibano installed the plant, there would not have been any
necessity for Cenar to make this trip at the expenseof Rodriguez.
o
After Cenar's return to Manila, Keeler Electric wrote a letter to
Rodriguez requesting the payment of its account, towhich Rodriguez
answered that he already paid to Montelibano.

This is in direct conflict with the receipted statement, which

Rodriguez offered in evidence, signed byMontelibano.
o
It will be noted that the receipt which Montelibano signed is not
dated, and it does not show when the money waspaid.2. NO.a.
Relevant laws:

Article 1162 CC: Payment must be made to the persons in whose

favor the obligation is constituted, or to anotherauthorized to receive
it in his name.

Article 1727 CC: The principal shall be liable as to matters with

respect to which the agent has exceeded hisauthority only when he
ratifies the same expressly or by implication.

Ormachea Tin-Conco vs. Trillana

: The repayment of a debt must be made to the person in whose
favor theobligation is constituted, or to another expressly authorized
to receive the payment in his name.b. On whether an assumed
authority exist

Certain principles must be considered: (Mechem on Agency, volume

I, section743)

(1) that the law indulges in no bare presumptions that an agency

exists: it must be proved or presumed from facts;

(2) that the agent cannot establish his own authority, either by his
representations or by assuming to exercise it;

(3) that an authority cannot be established by mere rumor or general

reputation;

(4)that even a general authority is not an unlimited one; and

(5) that every authority must find its ultimate source in some act or
omission of the principal.Applying the above rules:
o
Persons dealing with an assumed agent, whether the assumed
agency be a general or special one, are bound attheir peril, if they
would hold the principal, to ascertain not only the fact of the agency
but the nature and extent of theauthority, and in case either is
controverted, the burden of proof is upon them to establish it.
o
The person dealing with the agent must act with ordinary prudence
and reasonable diligence.
Obviously, if heknows or has good reason to believe that the agent is
exceeding his authority, he cannot claim protection. So if
thesuggestions of probable limitations be of such a clear and
reasonable quality, or if the character assumed by theagent is of
such a suspicious or unreasonable nature, or if the authority which
he seeks to exercise is of such anunusual or improbable character,
the party dealing with him may not shut his eyes to the real state of
the case, butshould either refuse to deal with the agent at all, or
should ascertain from the principal the true condition of affairs.

Judgment of the lower court is REVERSED. Rodriguez should pay

Keeler Electric the purchase price of the plant.
Coleonco vs Claparols
Claparols, who was operating a factory for the manufacture of nails, was
looking for someone to finance his imports of nail wires. At first Kho To
(not a party to this case) who owned the company handling the marketing
of the nails agreed to do it but later on introduced his compadre
Coleongco and recommended him (Coleongco) to be the financier in his
stead. Claparols agreed and entered into a contract with Coleongco
wherein the latter undertook to finance the imports of the nail wires
which Claparols bound himself to convert into nails.
The following stipulations were agreed upon in the financing agreement
- that Caleongco would have the exclusive distribution, marketing and
promotion of the product all over the Phils except in Davao,
- that Caleongco would share the control of all the cash,
- that he (Caleongco) would have a representative in the management,
- that contracts should be jointly approved by the parties,
- that proper books would be kept and annual accounts rendered, and
- that profits and losses would be shared on a 50-50 basis.
(in short, they became partners)
Claparols also executed a special power of attorney in favor of
Caleongco where the former authorized the latter
- to open and negotiate letters of credit,
- to sign contracts, bills of lading, invoices and papers covering
transactions,
- to represent Claparols and the nail factory, and
- to accept payments and cash advances from dealers and distributors.
Caleongco also became the assistant manager of the company.
(This is where it all begins) Sometime after, Claparols received an alias
writ of execution to enforce a judgment obtained against him by PNB,
despite fact that he had submitted an amortization plan to settle the
account. He went to Manila to confer with the bank authorities, and this is
where he starts to discover all the acts of Caleongco.
Caleongcos acts of betrayal:
1. He wrote a letter to PNB saying that he had acquired the whole
interest of Claparols in the plant and in the factory.
2. He wrote another letter telling the bank wherein he charged Claparols
of taking the machines mortgaged to the bank.
3. He proposed to Agsam, the machinery superintendent of the company,
that the latter pour acid on the machinery to paralyze the factory.

4. He wrote a letter to Kho To where he proposed that Kho To cut his

monthly advances to Claparols. He also mentioned their (Caleongco
and Kho To) plan to acquire ownership of the factory.
5. He surreptitiously disposed the Yates band resaw machine in favor of his
cousins lumber yard. Claparols managed to settle matters with the bank. He
also decided to revoke the power of attorney and informed Caleongco of
such by registered mail. He also dismissed Caleongco as assistant manager
of the plant. Caleongco filed suit against Claparols for breach of contract and
damages. He argued that Caleongco had no legal power to revoke the power
of attorney because it was coupled with an interest.
ISSUE: WON Caleongco was correct in his contention that the power of
attorney was made to protect his interest and that Claparols did not have
legal power to revoke the power of attorney because it was coupled with an
interest.
HELD: NOPE!! RATIO: The financing agreement already contained clauses
to protect Caleongco and did not call for the execution of any power of
attorney in favor of Caleongco. Granting appellants view, a power of attorney
can be made irrevocable only in the sense that the principal may not recall it
at his pleasure. It can be revoked for a just cause regardless of whether it
was coupled with an interest or not. Irrevocability may not be used to shield
the perpetration of acts in bad faith, breach of confidence, or betrayal of trust
(like in this case) by the agent for this would amount to a waiver of future
fraud, which is prohibited by the Civil Code. It has been proven that
Coleongco acted in bad faith. (Acts have been enumerated in the facts.) As
to his justification that he wrote the letter to PNB because of Claparols maladministration, the court said that it was to be expected that he would have
first protested to Claparols but he didnt. As to the plan to pour of acid on the
machinery which he denied, the court said that the testimonies of Agsam and
Claparols were more believable. (basta everything was done by him, and he
did everything) EXTRA: Coleongcos claim for damages and lost profits
because of the discontinuance of the financing agreement may not proper
because he breached his part of the contract. Instead of putting up the
money needed to finance the imports, he merely advanced 25% in cash and
had the balance covered by surety agreements executed by Claparols and
others as solidary guarantors. In some instances, Coleongco paid the cost of
the imports with the dealers; advances without Claparols knowledge. Also,
the examination of the books showed that Coleongco did not give Claparols
his half of the profits.
GR No. 46667 June 20, 1940
KERR & COMPANY, LTD., Plaintiff and appellant,
vs.
THE ADMINISTRATOR OF INTERNAL REVENUE, defendant and
appellee.
Messrs. Ross, Lawrence, Selph and Carrascoso and Robert D. Janda on
behalf of the appellant.

The Attorney General Mr. Ozaeta and Assistant Attorney General Messrs.
Concepcion and Amparo for appellee.
CONCEPCION, J .:
This is an appeal that object to determine whether a tax trader for the
appellant, under protest, was not legally or according to the facts in the
decision appealed relate as follows:
It Appears from the stipulation of facts That in effecting the sales under
consideration the plaintiff sent a wire to Shaw Wallace & Co. of Calcutta,
India, offering a price for Certain merchandise or asking for quotation. The
Calcutta firm accepted the offer Either or gave ITS quotation of the price.
After the price was THUS Agreed upon, Entered into a contract plaintiff of
sale Local With buyers quoting a price higher than That Agreed upon or fixed
by the Calcutta firm; and the price of the merchandise for home buyers was
fixed by the plaintiff. After the contract of sale was THUS Entered into, the
plaintiff instructed to send the Calcutta firm goods to, and draw a draft on, the
Local buyers. This draft Agreed upon price bore Between the plaintiff and
home buyers, and was drawn Against local bank in Accordance With the
letter of guarantee Executed in the form of Local the bank by the buyer and
by the plaintiff. After receiving the draft and shipping documents, the bank
released locally the merchandise to the buyer Against a trust receipt. In due
course, the draft was paid by the buyers to place the bank and after the
proceeds of the draft Were received by the Calcutta firm, the Latter paid the
plaintiff the Difference between the price Agreed upon Between plaintiff and
the Calcutta firm, and the Which price for the merchandise was sold to the
Local whos buyers.
The Court decided the case stated that the appellant in the above
transactions should be considered as a trader, in accordance with Article
provisioners Administrative Revised 1459 which provides:
SEC. 1459. Percentage sales tax on merchants . - All merchants not
HEREIN specially Exempted Shall pay tax of one per centum on the gross
value in money of the commodities, goods, wares and merchandise sold,
bartered, Exchanged, or consigned abroad by them, Such tax to be based on
current the selling price or value of the things in question at the time are
disposed of or consigned, raw materials Whether Consisting of or of
manufactured or partially manufactured, and Whether of domestic or foreign
origin. The tax upon things consigned abroad Shall be refund upon
satisfactory proof of the return thereof to the Philippine.Islands unsold.
The following Shall be exempt from tax esta:
( A ) Persons engaged in public market in the sale of food products at retail,
and other small merchants Whose quarterly gross sales do not Exceed two
hundred pesos.
( B ) Peddlers and sellers at fixed stands of fruit, produce, and food, raw or
Otherwise, the full selling value whereof does not Exceed three pesos per
day and Who Do not renew Their stock oftener than eleven every twenty-four
hours.

( C ) Producers commodities of all classes or working in Their own homes,

parents and children Consisting of living as one family, When the value of
each day's production by each person capable of working is not in excess of
one weight.
Merchants, as used here, means a person engaged in the sale, barter, or
exchange of personal property of whatever character. Except as specially
provided, the term includes articles of manufactures Who Sell Their Own
production, and commission merchants Having establishment of Their Own
for the keeping and disposal of goods Which sales or exchanges are
effected, but not include merchandise brokers.
The appellant contends that the Court erred in failing to declare that she had
bought goods from Shaw Wallace & Co. of Calcutta, India, and had sold to
local buyers on their own, and acted as a trader in transactions above and as
such had to pay the tax. The contention of the appellant is that she acted in
such Transactiones as a trade corridor. The question to be determined in this
case, then, that the appellant's ability efectuo sales of the subject
merchandise to local buyers. To address this question, we must consider not
the legal relationship between the appellant and local buyers but the
relationships mediated between the appellant and Shaw Wallace & Co
.;because transactions with that firm began and ended with it. But of course,
there were two transactions: the 1st, between Kerr & Company and Shaw
Wallace & Co. ' and 2.a between Kerr & Company and local buyers; but the
performance of Kerr & Company is not finished with local buyers, but with
Shaw Wallace & Co.
In last analysis seems, in fact, they are in the transaction with the signing of
Calcutta certain circumstances which are conclusive evidence that the
appellant in this case I act as a trader.
First of all should bear in mind that "the corridor is defined in general terms
as negotiating for other contracts of commission relating to farms whose
custody in nothing concerns, the trading as intermediary of others, without
negotiating ever on behalf own but of those who use it, strictly speaking is a
mediator, and somehow the mandatory on both sides (19 Cyc 186;.
Henderson. v ... the State, 50 Ind, 234 Black's Law Dictionary) the broker is
the one that deals in making stakeholders are understood in a business or
business to them in commercial or navigation issues. (Mechem on Agency,
section 13, Wharton on Agency, section 695.) the Storey Judge in his work
entitled Agency defines the corridor, saying it is a mandatory that is used for
business contracts with other persons, companies or navigational matters
through a compensation is generally called brokerage. (Storey on Agency,
section 28.) "Behn Meyer & Co., Ltd., against Nolting and Garcia, 35 Phil.
Rep., 284.
Desprendese than transcribed.
That 1st runner never hires in its own name, but of his client. In this case,
Kerr & Company to contract with Shaw Wallace & Company offering to buy
certain goods at a price that has been offered and Shaw Wallace & Company
has accepted, or at a price that Shaw Wallace & Company has traded and

Kerr & Company has accepted, has entered into a contract of sale perfect.
(Art. 1450 of the Civil Code.) No matter that the goods have not passed to
the possession of Kerr & Company because the tradition of the thing
purchased is necessary for the consummation of the contract of sale, but not
for perfection. Made after the contract of sale, Kerr & Company, on its own
behalf, agreed to sell to local traders who had purchased goods. So true is
that Kerr & Company, contract with local merchants in their own name,
independently and after the transaction view with Shaw Wallace & Company,
Kerr & Fixed Company the price of sales to local buyers, price not was the
price agreed with Shaw Wallace & Company but greater than it had offered
to Shaw Wallace & Company, or which had been accepted by the company.
2nd Runner make the transaction with a third party on behalf of his client,
based on a fixed commission determined. In this case, Kerr & Company and
Shaw Wallace & Company at no time had established a commission based
Kerr & Company which would effect the sale of goods to local merchants.
Kerr & Company after completed the sale of goods to local buyers for a
higher price he had agreed with Shaw Wallace & Company, charging the
difference in their benefit, a difference that can not be conceptualized as a
commission, because 1. th, the parties did not agree on any committee; and
2nd, because so much depended solely and exclusively charged Kerr &
Company, according to the price she had affixed to the goods sold by it. The
commission is somewhat of money stipulated between the broker and the
principal and paid for this to that, at their own expense, which does not
happen in this case because the price difference Kerr & Company cobra, not
it is money from Shaw Wallace & Company.
3rd The broker does not guarantee payment of the goods it sells to a third
party, because it is only a mediator who deals in making stakeholders
understand in a business or businesses in commercial or navigational issues.
(Behn, Meyer & Co., Ltd. v Nolting and Garcia, supra , Pacific Commercial
Company against Alfredo L. Yatco, RG No. 45976, July 20, 1939.) In the
present case guarantee Kerr & Company Shaw Wallace & Company paying
the bill drawn by this company against local buyers.
It is argued by the appellant, that she was not the buyer of the goods,
because if it were, the letter would have turned against her and not against
local buyers, and it would not guarantee the payment of the amount of the
bill.This argument, however, has no weight, because once purchased goods
by Kerr & Company, she could order that the goods were sent to anyone
else, because the most important thing for Shaw Wallace & Company is to be
paid the amount of goods, and this obligation has assumed Kerr & Company
in the event that local buyers not paying the letter at maturity.
The fact that the contract concluded by Kerr and Company with the local
buyer Lim Ki Choa & Company, Kerr & Company, according to Exhibit D, it
has noted that this transaction with Lim Ki Choa & Company she acted in the
capacity of corridor only and that it assumes no responsibility, does not show
that really Kerr & Company was a runner number when contract with Lim Ki
Choa & Company, because to determine the nature of the transaction that

Kerr & Company had with Shaw Wallace & Company, and to judge whether
Kerr & Company contract in its own name with the signing of Calcutta, or
contract on behalf of Shaw Wallace & Company and local buyers, vamor not
to consider what Kerr & Company said or stopped Lim Ki tell Choa & Co., but
the terms and conditions of the contract itself has actually been concluded
between Shaw Wallace & Company and Kerr & Company.
In addition, in the case of breach of Kerr & Company the contract awarded to
local buyers, they would have no action whatsoever to be directed against
Shaw Wallace & Company to demand from this company contract
performance, since none have been held with Shaw, Wallace & Co., as the
facts show that Kerr & Company first contract in its own name with Shaw
Wallace & Company, and then also contract in its own name with local
buyers.
All of the above considerations show a single and a single proposition: that
Kerr & Company contract in its own name and on their own with Shaw
Wallace & Comprany as a trader, and sold in its own name as a trader; and
therefore is subject to tax trader.
appealed the decision, with costs to the appellant is formed. So it is ordered.
Litonjua, Jr. v. Eternit Corp
8 June 2006 | Callejo, Sr., J.
Topic: Essential characteristics and requirements of a contract of agency
Overview:
Statement of the Case: Petition for Review on Certiorati of the CA decision
affirming the TC-Pasig and
denying petitioners MR
Petitioners: Eduardo Litonjua, Jr. and Antonio Litonjua
Respondents: Eternit Corporation (now Eterton Multi-resources
Corporation; EC for brevity),
Eteroutremer, S.A. Corporation (ESAC for brevity) and Far East Bank and
Trust Company (Bank
for brevity)
Statement of Facts:
EC is a manufacturer of roofing materials and pipe products in the
Philippines and operates on
eight parcels of lands in Mandaluyong City with a total of 47,233 sq.m., all
covered by various
Transfer Certificates under the name of Bank as trustee.
90% of the shares of EC were owned by ESAC, a Belgian company.
1986: ESACs management grew wary of the political situation of the
Philippines (Marcos
administration) and instructed Michael Adams, a member of ECs Board of
Directors, to dispose
of the eight parcels of lands. For this, he hired Lauro G. Marquez as
realtor/broker. Jack Glanville,
an Australian citizen and the General Manager and President of EC, showed
Marquez the lands.

 Sept. 12, 1986: Marquez offered the lands to Eduardo Litonjua, Jr. of the
Litonjua & Company,
Inc. The offer, made through letter with Marquez claim of authority to sell the
property, was for
27M with the terms of the sale subject to negotiation.
Eduardo, along with his brother Antonio, looked at the property and offered
to buy it for 20M in
cash. Marquez communicated the offer to Glanville and Claude Delsaux,
Regional Director for
Asia of ESAC (both held offices in Belgium).
Oct. 28, 1986: Glanville telexed Delsaux about their decision on the offer
since Delsaux failed to
reply to the previous communication
Feb. 12, 1987: Delsaux replied that their final offer, based on Belgian/Swiss
decision, was for
$1M plus P2.5M to cover all existing obligations prior to liquidation.
Eduardo accepted the final offer and said that they would confirm full
payment within 90 days
after execution and preparation of all documents of sale and government
clearances
The Litonjua brothers deposited $1M with Security Bank and executed an
Escrow Agreement
Sometime later, Glanville communicated with Delsaux that he had met with
the buyers and asked
when the sale would be implemented, upon inquiry of the Litonjua brothers
and Marquez. The
Litonjua brothers were concerned because they would be incurring expenses
in bank
commitment fees.
Soon after Corazon Aquino assumed office, Glanville told Marquez that the
sale would not push
through because of the stabilization of the political situation.
The Litonjuas demanded payment for damages from EC but EC refused
The Litonjuas filed with the RTC-Pasig a complaint for specific performance
and damages against
herein respondents and amended to include Benito Tan, Ruperto Tan, Stock
Ha Tan and
Deogracias Eufemio because of their purchase of ESAC stocks and were the
controlling
stockholders.
Respondents answer:
o ESACr does not do business in the Philippines so the court has no
jurisdiction
o The Board and stockholders of EC never approved a resolution to sell the
land or to

authorize Marquez to do the same

o The Oct. 28 telex of Glanville was his own personal making and does not
bind EC
TC dismissed case:
o No valid and binding sale between parties.
No cause of action against Far East Bank and Trust Company
o Counter-claim of respondents dismissed as well
o The authority of the agents/realtors was not made in writing therefore the
sale is not
merely unenforceable but void. Ratification of this authority may not be
applied
retroactively. Petitioners could not assume that the defendants gave the
agents authority
without clear authorization in the form of Board resolutions.
o The supposed sale involves all assets of EC which would mean complete
cessation of its
operations.
Litonjuas appealed to the CA, claiming that:
o Marquez was not an agent but merely a broker or go-between so he did not
need written
authority
o Agency by estoppels was created when corporation clothed Marquez with
apparent
authority
o It was a bilateral contract to buy and sell which is equivalent to a contract of
sale and is
binding upon the corporation to consummate
ECs answer: Neither Marquez nor Glanville and Desaux were authorized
by the Board of
Directors had written authority to sell or offer the property for sale. Since the
sale involved almost
all the properties of EC, naturally it would need the consent of all the
stockholders.
CA affirmed the RTC and denied petitioners MR:
o Marquez being a real estate broker was considered to be a special agent
under NCC
1874. Under Sec. 23 of the Corporation Code, he needed a special authority
from the
Board of Directors to bind the corporation to the sale.
o Delsaux was merely a representative of ESAC, the majority stockholder of
EC, but was
not a part of ECs Board of Directors, so he had no authority to bind EC.
o Litonjuas failed to prove agency by estoppels
Petitioners brought case to the SC, claiming that:
o There was valid offer and acceptance when they accepted the final offer of
EC and

Marquez made known to them the acceptance before they withdrew the offer
o Marquez did not need special authority because he was not tasked to sell
the properties
but merely to bring both parties to a sale together, as a broker. Therefore,
NCC 1874
does not apply.
o Glanville and Delsaux were clothed with authority to sell the properties
because it would
be inconsistent to say they didnt when they made a counter-offer and later
on rejected
the sale
o Petitioners were in good faith because Glanville and Delsaux presented
themselves to
the public as if they had authority from EC
o Glanville and Delsaux have authority because they sold 90% of the stocks
of EC to
Ruperto Tan in 1997, therefore a Board Resolution is a mere formality since
they hold
such high positions
Respondents reply:
o Factual matters so cannot be taken cognizance by the SC under Rule 45 of
the Rules of
Court
o On the matters, they reiterate their stand in the CA
Issues:
1. W/N there was a perfected contract of sale
2. W/N Marquez needed written authority from ESAC
3. W/N Glanville and Delsaux had the necessary or apparent authority from
ESAC
Held & Rationale: Petition is without merit
1. The issues are factual, therefore not falling within the ambit of Rule 45.
In the absence of express written terms of the relationship of agency, the
existence of a
relationship and the bounds of it is a question of fact. Whether the person
acted within his authority or whether there was apparent authority is also a
question of fact. These findings shall
not be disturbed unless it is shown that some facts and circumstances were
not properly
appreciated.
2. Petitioners failed to prove agency.
Petitioners failed to prove that EC accepted their counter-offer through
Glanville and Delsaux.
When the case is for specific performance of a contract, agency must be
proven through clear,

certain and specific proof. Under Sec. 23 of the Corporation Code, a

corporation has a separate
and distinct personality from its stockholders and is not affected by
transactions of the latter.
Under Sec. 36 of the same code, it authorizes the corporation to dispose of
their properties.
However, these acts such as offering a property for sale and accepting a
counter-offer may not
be done without the authority of corporate by-laws or specific acts of the
board of directors.
Absent this authority, the rule is that the declaration of one director conferring
such is not binding
on the corporation. Any act of an agent of a corporation must be ratified by
the Board of Directors,
therefore it has to have written authority. Written authority is also necessary
because in this
case, real rights over immoveable property are conveyed, with which agency
is required to be in
writing or else the sale is void.
Facts also showed that the final offer made by Delsaux was only from the
Belgian/Swiss
component but not from the management or Board of Directors of ESAC,
thus it is not binding
upon EC because they were officers of ESAC but not EC. Though it is true
that they owned
majority of the stocks of EC, the Court held that even if it owned all of the
stocks, it does not
merge them into one corporation. Thus, they could not act to bind EC without
a Board resolution
from the Board of Directors of EC itself. A Board resolution is not a mere
formality but is a
condition sine qua non to the validity of the sale.
The Litonjuas had the responsibility to exercise due diligence in confirming
the authority of the
agent. The rule is that anyone who deals with an assumed does so at his
own peril.
Marquez had no authority to be an agent. Marquez acted not merely as a
broker but also as an
agent. He confirmed the offer and acceptance of the Litonjuas to the officers
of ESAC.
There was no agency by estoppels. The following are the requisites for
agency by estoppel: (1)
the principal manifested a representation of the agents authority or
knowingly allowed the agent
to assume such authority; (2) the third person, in good faith, relied upon such
representation; (3)

relying upon such representation, such third person has changed his position
to his detriment.
Proof of reliance on such representation was lacking in this case because in
the communications
between the Litonjuas and Glanville, Delsaux and Marquez, the latter parties
clearly stated that
they were acting in the behalf of ESAC only. It cannot be said also that EC
ratified the acts of the
latter parties. There is no showing that the communications between them
were forwarded to
ECs Board of Directors for ratification.
Judgment: Petition denied for lack of merit. Costs against petitioners.
Mercado vs Allied Bank (scribd)
G.R. Nos. 148404-05

April 11, 2002

NELITA M. BACALING, represented by her attorney-in-fact JOSE JUAN

TONG, and JOSE JUAN TONG, in his personal capacity, petitioners,
vs.
FELOMINO MUYA, CRISPIN AMOR, WILFREDO JEREZA, RODOLFO
LAZARTE and NEMESIO TONOCANTE, respondents.
DE LEON, JR., J.:
Before us is a Petition for Review of the consolidated Decision 1 dated
January 31, 2001 of the Court of Appeals2 in CA-G.R. SP No. 54413,3 and in
CA-G.R. SP No. 54414,4 and of its Resolution5 dated June 5, 2001 reversing
the Decision6 dated May 22, 1998 and Resolution July 22, 1999 of the Office
of the President.

the National Urban Planning Commission (NUPC).7 On May 24, 1955 the
Bureau of Lands approved the corresponding subdivision plan for purposes
of developing the said property into a low-cost residential community which
the spouses referred to as the Bacaling-Moreno Subdivision.8
In 1957, a real estate loan of Six Hundred Thousand Pesos (P600,000.00)
was granted to the spouses Nelita and Ramon Bacaling by the Government
Service Insurance System (GSIS) for the development of the subdivision. 9 To
secure the repayment of the loan, the Bacalings executed in favor of the
GSIS a real estate mortgage over their parcels of land including the one
hundred ten (110) sub-lots.10 Out of the approved loan of Six Hundred
Thousand Pesos (P600,000.00), only Two Hundred Forty Thousand Pesos
(P240,000.00) was released to them.11 The Bacalings failed to pay the
amortizations on the loan and consequently the mortgage constituted on
the one hundred ten (110) sub-lots was foreclosed by the GSIS. 12 After a
court case that reached all the way to this Court,13 Nelita Bacaling (by then a
widow) in 1989 was eventually able to restore to herself ownership of the one
hundred ten (110) sub-lots.14
According to the findings of the Office of the President, in 1972 and
thereafter, respondents Felomino Muya, Crispin Amor, Wilfredo Jereza,
Rodolfo Lazarte and Nemesio Tonocante clandestinely entered and occupied
the entire one hundred ten (110) sub-lots (formerly known as Lot No. 2103-A,
Lot No. 2103-B-12 and Lot No. 2295) and grabbed exclusively for
themselves the said 9.9631 hectare landholding.15 Apparently, respondents
took advantage of the problematic peace and order situation at the onset of
martial law and the foreclosure of the lots by GSIS. 16 They sowed the lots as
if the same were their own, and altered the roads, drainage, boundaries and
monuments established thereon.17

The facts of the case are as follows:

Petitioner Nelita M. Bacaling and her spouse Ramon Bacaling were the
owners of three (3) parcels of land, with a total area of 9.9631 hectares,
located in Barangay Cubay, Jaro, Iloilo City, and designated as Lot No. 2103A (Psd-24069), Lot No. 2103-B-12 (Psd 26685) and Lot No. 2295. These lots
were duly covered by Transfer Certificates of Title Nos. T-5801, T-5833 and
T-5834, respectively. In 1955 the landholding was subdivided into one
hundred ten (110) sub-lots covered by TCT Nos. T-10664 to T-10773,
inclusive of the Registry of Deeds of the City of Iloilo. On May 16, 1955, the
landholding was processed and approved as "residential" or "subdivision" by

Respondents, on the other hand, claim that in 1964 they were legally
instituted by Bacaling's administrator/overseer as tenant-tillers of the subject
parcels of land on sharing basis with two and a half (2) hectares each for
respondents Muya, Amor, Tonocante and Lazarte, and one and a half (1)
hectares for respondent Jereza. In 1974, their relationship with the
landowner was changed to one of leasehold. They religiously delivered their
rental payments to Bacaling as agricultural lessor. In 1980, they secured
certificates of land transfer in their names for the one hundred ten (110) sublots. They have made various payments to the Land Bank of the Philippines
as amortizing owners-cultivators of their respective tillage.

In 1977, however, the City Council of Iloilo enacted Zoning Ordinance No.
212 declaring the one hundred ten (110) sub-lots as "residential" and "nonagricultural," which was consistent with the conversion effected in 1955 by
the NUPC and the Bureau of Lands. In 1978, Nelita Bacaling was able to
register the subject property as the Bacaling-Moreno Subdivision with the
National Housing Authority and to obtain therefrom a license to sell the
subject one hundred ten (110) sub-lots comprising the said subdivision to
consummate the original and abiding design to develop a low-cost residential
community.
In August 21, 1990, petitioner Jose Juan Tong, together with Vicente Juan
and Victoria Siady, bought from Nelita Bacaling the subject one hundred ten
(110) sub-lots for One Million Seven Hundred Thousand Pesos
(P1,700,000.00).18 The said sale was effected after Bacaling has
repurchased the subject property from the Government Service Insurance
System. To secure performance of the contract of absolute sale and facilitate
the transfer of title of the lots to Jose Juan Tong, Bacaling appointed him in
1992 as her attorney-in-fact, under an irrevocable special power of attorney
with the following mandate1. To file, defend and prosecute any case/cases involving lots nos. 1
to 110 covered by TCT Nos. T-10664 to T-10773 of the Register of
Deeds of the City of Iloilo;
2. To assume full control, prosecute, terminate and enter into an
amicable settlement and compromise agreement of all cases now
pending before the DARAB, Region VI, Iloilo City, which involved
portion of Lots 1 to 110, covered by TCT Nos. T-10664 to T-10773 of
the Register of Deeds of Iloilo City, which were purchased by Jose
Juan Tong, Vicente Juan Tong and Victoria Siady;
3. To hire a lawyer/counsel which he may deem fit and necessary to
effect and attain the foregoing acts and deeds; handle and prosecute
the aforesaid cases;
4. To negotiate, cause and effect a settlement of occupation and
tenants on the aforesaid lots;
5. To cause and effect the transfer of the aforesaid lots in the name
of the VENDEES;

6. To execute and deliver document/s or instrument of whatever

nature necessary to accomplish the foregoing acts and deeds. 19
It is significant to note that ten (10) years after the perfection and execution
of the sale, or on April 26, 2000, Bacaling filed a complaint to nullify the
contract of sale. The suit was, however, dismissed with prejudice and the
dismissal has long become final and executory.20
Following the sale of the one hundred ten (110) sub-lots and using the
irrevocable special power of attorney executed in his favor, petitioner Tong
(together with Bacaling) filed a petition for cancellation of the certificates of
land transfer against respondents and a certain Jaime Ruel with the
Department of Agrarian Reform (DAR) Region VI Office in Iloilo City.21 The
DAR, however, dismissed the petition on the ground that there had been no
legitimate conversion of the classification of the 110 sub-lots from agricultural
to residential prior to October 21, 1972 when Operation Land Transfer under
P.D. No. 72 took effect.22 Bacaling and Tong appealed to the DAR Central
Office but their appeal was similarly rejected.23 The motion for
reconsideration failed to overturn the ruling of the Central Office Order.24
On September 19, 1997, Bacaling and Tong appealed the adverse DAR
Orders to the Office of the President which reversed them in toto in a
Decision25 dated May 22, 1998 (OP Decision, for brevity), the dispositive
portion of which reads:
WHEREFORE, premises [considered], the assailed order of the
Regional Director, DAR Region VI, dated April 3, 1996, as well as the
orders of the DAR Secretary dated December 12, 1996 and
September 4, 1997, are hereby REVERSED AND SET ASIDE and
subject landholdings declared exempt from coverage of the CARL.
The Certificates of Land Transfer (CLTs) issued to the appellees are
hereby cancelled and the Department of Agrarian Reform directed to
implement the voluntary offer made by appellant with respect to the
payment of disturbance compensation and relocation of the affected
parties. 1wphi1.nt
SO ORDERED.26
The OP Decision found that the one hundred ten (110) parcels of land had
been completely converted from agricultural to residential lots as a result of

the declarations of the NUPC and the Bureau of Lands and the factual
circumstances, i.e., the GSIS loan with real estate mortgage, the division of
the original three (3) parcels of land into one hundred ten (110) sub-lots
under individual certificates of title, and the establishment of residential
communities adjacent to the subject property, which indubitably proved the
intention of Nelita and Ramon Bacaling to develop a residential subdivision
thereon. The OP Decision also categorically acknowledged the competence
of the NUPC and the Bureau of Lands to classify the one hundred ten (110)
sub-lots into residential areas. On July 22, 1999, separate motions for
reconsideration thereof were denied.27
Respondents elevated the OP Decision to the Court of Appeals on a petition
for review under Rule 43 of the Rules of Civil Procedure. 28 Before the petition
was resolved, or on December 2, 1999, Nelita Bacaling manifested to the
appellate court that she was revoking the irrevocable power of attorney in
favor of Jose Juan Tong and that she was admitting the status of
respondents as her tenants of the one hundred ten (110) sub-lots which
allegedly were agricultural in character. The manifestation was however
characterized by an obvious streak of ambivalence when her prayer therein
urged the Court of Appeals to decide the case, curiously, "on the basis of the
clear intent of Private Respondent" and "in accordance with the perception of
this Honorable Court."29
On January 31, 2001 the Court of Appeals reversed the OP Decision and
validated the certificates of land transfers in favor of respondents without
however promulgating a ruling on petitioner Tong's supposedly ensuing lack
of material interest in the controversy as a result of the manifestation. 30 The
dispositive portion of the decision reads:
WHEREFORE, premises considered, petition is GRANTED; and the
May 22, 1998 Decision of the Office of the President is hereby
REVERSED and SET ASIDE. The April 3, 1996 Order of the
Regional Director, DARAB, Region VI, is REINSTATED.31
The appellate court refused to recognize the 1955 NUPC and Bureau of
Lands classification of the subject lots as residential subdivision. Tong moved
for reconsideration of the CA Decision which Bacaling did not oppose despite
her manifestation. On June 5, 2001, again without a single reference to
Bacaling's alleged repudiation of Tong's actions, the Court of Appeals denied

reconsideration of its decision,32 Hence, this petition for review on certiorari

based on the following assignment of errors:
I
SUBJECT LANDHOLDINGS ARE EXEMPT FROM THE
COVERAGE OF P.D. 27 AND OPERATION LAND TRANSFER
(1972, AS WELL (sic) THE COMPREHENSIVE AGRARIAN
REFORM LAW (1988) AS THEY WERE CLASSIFIED AS
RESIDENTIAL WAY BACK IN 1955 BY THE THEN NATIONAL
PLANNING COMMISSION AND THE SUBDIVSION PLAN WAS
APPROVED BY THE BUREAU OF LANDS. AS A CONSEQUENCE,
THE CLTs ISSUED TO PRIVATE RESPONENTS IN OCTOBER,
1980 ARE INVALID AS HAVING BEEN ISSUED WITHOUT
JURISDICTION.
II
PRIVATE RESPONDENTS ARE NOT BONA FIDE TENANTS OF
THE LANDS INVOLVED. PUBLIC REPSONDENT'S RULING THAT
THE LATTER ARE SUCH IS CONTRARY TO LAW AS IT IGNORED
THE FACT THAT THE LANDHOLDINGS ARE RESIDENTIAL AND
NO COMPETENT PROOF OF CONSENT OF THE OWNER WAS
EVER PRESENTED BY PRIVATE RESPONDENTS.
III
APPROVAL OF THE SECRETARY OF AGRARIAN REFORM IS
NOT NECESSARY FOR THE VALID CLASSIFICATION OF THE
LANDS INVOLVED INTO RESIDENTIAL BECAUSE THE CARL, AS
ALSO THE RELATED AGRARIAN LAWS, HAVE NO
RETROACTIVE APPLICATION.33
Long after issues were joined in the instant proceedings, or on October 8,
2001, petitioner Nelita Bacaling resurrected her manifestation with the Court
of Appeals and moved to withdraw/dismiss the present petition on the ground
that the irrevocable power of attorney in favor of petitioner Jose Juan Tong
had been nullified by her and that Tong consequently lacked the authority to
appear before this Court.34 She also manifested that, contrary to the
arguments of petitioner Tong, respondents were bona fide tenants of the one

hundred ten (110) sub-lots which were allegedly agricultural and not
residential pieces of realty.35 Accordingly, petitioner Tong was left all alone to
pursue the instant case.
The issues in this case can be summarized as follows: (1) Does petitioner
Tong have the requisite interest to litigate this petition for review on
certiorari?; (2) Are the respondents agricultural lessees?; and (3) Are the one
hundred ten (110) sub-lots admittedly classified for residential use by the
National Urban Planning Commission and the Bureau of Lands prior to
October 21, 197236 covered by the Operation Land Transfer under P.D. No.
72?
We hold that petitioner Jose Juan Tong possesses adequate and legitimate
interest to file the instant petition. Under our rules of procedure, interest
means material interest, that is, an interest in issue and to be affected by the
judgment,37 while a real party in interest is the party who would be benefited
or injured by the judgment or the party entitled to the avails of the suit. 38
There should be no doubt that as transferee of the one hundred ten (110)
sub-lots through a contract of sale and as the attorney-in-fact of Nelita
Bacaling, former owner of the subject lots, under an irrevocable special
power of attorney, petitioner Tong stands to be benefited or injured by the
judgment in the instant case as well as the orders and decisions in the
proceedings a quo. The deed of sale categorically states that petitioner Tong
and his co-sellers have fully paid for the subject parcels of land. The said
payment has been duly received by Bacaling. Hence, it stands to reason that
he has adequate and material interest to pursue the present petition to
finality.
Respondents put too much weight on the motion to dismiss/withdraw filed by
Nelita Bacaling. Under the facts obtaining in this case, the motion should be
treated cautiously, and more properly, even skeptically. It is a matter of law
that when a party adopts a certain theory in the court below, he will not be
permitted to change his theory on appeal, for to permit him to do so would
not only be unfair to the other party but it would also be offensive to the basic
rules of fair play, justice and due process.39 Bacaling's motion to dismiss the
instant petition comes at the heels of her admission that she had immensely
benefited from selling the said one hundred ten (110) sub-lots to petitioner
Tong and of the dismissal with prejudice of the civil case which she had
earlier filed to nullify the sale.40 It appears that the motion to dismiss is a
crude and belated attempt long after the dismissal of the civil case to divest

Tong of his indubitable right of ownership over the one hundred ten (110)
sub-lots through the pretext of revoking the irrevocable special power of
attorney which Bacaling had executed in his favor hoping that in the process
that her act would cause the assailed orders of the DAR to become final and
executory.
The records also bear out the fact that Bacaling's design to dispossess
petitioner Tong of material interest in the subject matter of the instant petition
appears to be subtly coordinated with respondents' legal maneuvers when it
began as a side pleading (a mere Manifestation) in the proceedings before
the Court of Appeals (CA-G.R. SP No. 54413 and CA-G.R. SP No. 54414)
but which was never pursued to its ultimate conclusion until it again surfaced
before this Court long after respondents' voluminous comment to the instant
petition had been filed. Under these circumstances, we certainly cannot
place our trust upon such an unsolicited motion having dubious roots,
character and purpose.
Substantively, we rule that Bacaling cannot revoke at her whim and pleasure
the irrevocable special power of attorney which she had duly executed in
favor of petitioner Jose Juan Tong and duly acknowledged before a notary
public. The agency, to stress, is one coupled with interest which is explicitly
irrevocable since the deed of agency was prepared and signed and/or
accepted by petitioner Tong and Bacaling with a view to completing the
performance of the contract of sale of the one hundred ten (110) sub-lots. It
is for this reason that the mandate of the agency constituted Tong as the real
party in interest to remove all clouds on the title of Bacaling and that, after all
these cases are resolved, to use the irrevocable special power of attorney to
ultimately "cause and effect the transfer of the aforesaid lots in the name of
the vendees [Tong with two (2) other buyers] and execute and deliver
document/s or instrument of whatever nature necessary to accomplish the
foregoing acts and deeds."41 The fiduciary relationship inherent in ordinary
contracts of agency is replaced by material consideration which in the type of
agency herein established bars the removal or dismissal of petitioner Tong as
Bacaling's attorney-in-fact on the ground of alleged loss of trust and
confidence.
While Bacaling alleges fraud in the performance of the contract of agency to
justify its revocation, it is significant to note that allegations are not proof, and
that proof requires the intervention of the courts where both petitioners Tong
and Bacaling are heard. Stated otherwise, Bacaling cannot vest in herself

just like in ordinary contracts the unilateral authority of determining the

existence and gravity of grounds to justify the rescission of the irrevocable
special power of attorney. In Sevilla v. Court of Appeals42 we thus heldBut unlike simple grants of a power of attorney, the agency that we
hereby declare to be compatible with the intent of the parties, cannot
be revoked at will. The reason is that it is one coupled with an
interest, the agency having been created for the mutual interest of
the agent and the principal xxx [Petitioner's] interest, obviously, is not
limited to the commissions she earned as a result of her business
transactions, but one that extends to the very subject matter of the
power of management delegated to her. It is an agency that, as we
said, cannot be revoked at the pleasure of the principal. Accordingly,
the revocation complained of should entitle the petitioner x x x to
damages.
The requirement of a judicial process all the more assumes significance in
light of the dismissal with prejudice, hence, res judicata, of Bacaling's
complaint to annul the contract of sale which in turn gave rise to the
irrevocable special power of attorney. It is clear that prima facie there are
more than sufficient reasons to deny the revocation of the said special power
of attorney which is coupled with interest. Inasmuch as no judgment has set
aside the agency relationship between Bacaling and Tong, we rule that
petitioner Tong maintains material interest to prosecute the instant petition
with or without the desired cooperation of Bacaling.
On the issue of whether the private respondents are agricultural tenants and
entitled to the benefits accorded by our agrarian laws, we rule in the
negative. The requisites in order to have a valid agricultural leasehold
relationship are: (1) The parties are the landowner and the tenant or
agricultural lessee; (2) The subject matter of the relationship is agricultural
land; (3) There is consent between the parties to the relationship; (4) the
purpose of the relationship is to bring about agricultural production; (5) There
is personal cultivation on the part of the tenant or agricultural lessee; and (6)
The harvest is shared between the landowner and the tenant or agricultural
lessee.
We find that the first, third and sixth requisites are lacking in the case at bar.
One legal conclusion adduced from the facts in Government Service
Insurance System v. Court of Appeals43 provides that GSIS, not Bacaling,

was the owner of the subject properties from 1961 up to 1989 as a result of
the foreclosure and confirmation of the sale of the subject properties.
Although the confirmation only came in 1975, the ownership is deemed to
have been vested to GSIS way back in 1961, the year of the sale of the
foreclosed properties. This is due to the fact that the date of confirmation by
the trial court of the foreclosure sale retroacts to the date of the actual sale
itself.44
Thus, the respondents cannot validly claim that they are legitimate and
recognized tenants of the subject parcels of land for the reason that their
agreement to till the land was not with GSIS, the real landowner. There is no
showing that GSIS consented to such tenancy relationship nor is there proof
that GSIS received a share in the harvest of the tenants. Consequently, the
respondents cannot claim security of tenure and other rights accorded by our
agrarian laws considering that they have not been validly instituted as
agricultural lessees of the subject parcels of land. And from the time Bacaling
recovered the subject properties from GSIS up to the time the former
changed her legal position in the instant case, Bacaling has consistently
disclaimed respondents as her alleged tenants. Bacaling's current legal
posture cannot also overturn our finding since, as earlier mentioned, the said
change of mind of Bacaling has little or no evidentiary weight under the
circumstances.
The respondents argue that GSIS cannot be considered as the owner of the
said properties from 1961 up to 1989 inasmuch as the foreclosure
proceedings that started in 1957 only attained finality during its promulgation
by this Court in 1989. Respondents contend that GSIS was the owner of the
said parcels of land only from 1989.
We disagree. The pendency of the GSIS case cannot be construed as a
maintenance of status quo with Bacaling as the owner from 1957 up to 1989
for the reason that what was appealed to this Court was only the issue of
redemption, and not the validity of the foreclosure proceedings including the
public auction sale, the confirmation of the public auction sale and the
confirmation and transfer of ownership of the foreclosed parcels of land to
GSIS. The ownership of GSIS over the subject parcels of land was not
disputed. It was the existence of the right to redeem in a judicial foreclosure
that was the subject of the controversy. We ruled that there was no longer
any right of redemption in a judicial foreclosure proceeding after the
confirmation of the public auction. Only foreclosures of mortgages in favor of

banking institutions and those made extrajudicially are subject to legal

redemption. Since GSIS is not a banking institution and the procedure of the
foreclosure is not extrajudicial in nature, no right of redemption exists after
the judicial confirmation of the public auction sale of the said lots.
With respect to the third issue, we find that the one hundred ten (110) sublots are indeed residential. In Tiongson v. Court of Appeals45 we held that if
the lot in question is not an agricultural land then the rules on agrarian reform
do not apply since the "key factor in ascertaining whether there is a
landowner-tenant relationship xxx is the nature of the disputed property." 46
We reiterated this rule in Natalia Realty, Inc. v. Department of Agrarian
Reform47 where we excluded lands not devoted to agricultural activity, i.e.,
lands previously converted to non-agricultural or residential uses prior to the
effectivity of the 1988 agrarian reform law (R.A. No. 6657) by agencies other
than the DAR, from the coverage of agrarian reform. The statement of the
rule is buttressed by P.D. No. 27 which by its terms applies only to "tenantfarmers of private agricultural lands primarily devoted to rice and corn under
a system of shared-crop or lease tenancy, whether classified as landed
estate or not."48
In the case at bar, the indubitable conclusion from established facts is that
the one hundred ten (110) sub-lots, originally three (3) parcels of land, have
been officially classified as residential since 1955. The classification began
when the NUPC and the Bureau of Lands approved the subdivision of the
original three (3) parcels of land into one hundred ten (110) sub-lots each
covered with transfer certificates of title. To build the subdivision project,
Nelita Bacaling then obtained a real estate mortgage loan from the GSIS
which she used to fund the project but he was unfortunately unable to
complete it due to the immensity of the project cost. Bacaling undertook to
complete the sale of the subdivision when in 1978 she obtained the
registration thereof with the National Housing Authority as well as a license to
sell individually the one hundred ten (110) sub-lots. Earlier, in 1977, the City
Council of Iloilo also recognized the residential classification of the same one
hundred ten (110) sub-lots when it passed the Land Use Plan and Zoning
Ordinance. In 1990, Bacaling sold the same parcels of land to petitioner Tong
who obviously wanted to pursue the development of the subdivision project.
It is clear that Tong bought the property for residential and not agricultural
purposes upon the strong assurance of Bacaling that the one hundred ten
(110) sub-lots were legally available for such prospect. To be sure, the
subject lots were valuable in the buyer's market only for residential use as

shown by the example of adjacent lots which had long been utilized for
building subdivisions and the implausibility of believing that Tong would buy
the lands only to lose them at a bargain to agrarian reform. 49
Clearly, both intention and overt actions show the classification of the one
hundred ten (110) sub-lots for residential use. There can be no other
conclusion from the facts obtaining in the instant case. Indeed, one cannot
imagine Nelita Bacaling borrowing the substantial amount of Six Hundred
Thousand Pesos (P600,000.00) from the GSIS and spending Two Hundred
Fifty Thousand Pesos (P250,000.00) for the purpose of developing and
subdividing the original three (3) parcels of land into one hundred ten (110)
homelots, with individual transfer certificates of title ready and available for
sale, if her purported desire were to keep the landholding for agricultural
purposes. It also makes no sense that petitioner Tong would invest so much
money, time and effort in these sub-lots for planting and cultivating
agricultural crops when all the mechanisms are already in place for building a
residential community. One cannot likewise deny the consistent official
government action which decreed the said one hundred ten (110) sub-lots as
most appropriate for human settlements considering that for several times
beginning in 1955 and in accordance with relevant laws and regulations, the
said landholding was categorically reserved as a residential subdivision.
It is also grave error to gloss over the NUPC action since its declarations
have long been recognized in similar cases as the present one as clear and
convincing evidence of residential classification. In Magno-Adamos v.
Bagasao50 we found the endorsements of the NUPC approving albeit
tentatively a subdivision plan to be a very strong evidence of conversion of
the disputed parcels of land into a residential subdivision which would
contradict the alleged tenancy relationship. We found nothing objectionable
in the trial court's ruling in Santos v. de Guzman51 ejecting an alleged tenant
from the landholding "because the same was included in a homesite
subdivision duly approved by the National Planning Commission." 52 In
Republic v. Castellvi53 we gave great weight to the certification of the NUPC
that the subject parcels of land were classified as residential areas and
ordered their appraisal as residential and not agricultural lands The lower court found, and declared, that the lands of Castellvi and
Toledo-Gozun are residential lands. The finding of the lower court is
in consonance with the unanimous opinion of the three
commissioners who, in their report to the court, declared that the

lands are residential lands. The Republic assails the finding that the
lands are residential, contending that the plans of the appellees to
convert the lands into subdivision for residential purposes were only
on paper, there being no overt acts on the part of the appellees
which indicated that the subdivision project had been commenced
xxx. We find evidence showing that the lands in question had ceased
to be devoted to the production of agricultural crops, that they had
become adaptable for residential purposes, and that the appellees
had actually taken steps to convert their lands into residential
subdivisions xxx. The evidence shows that Castellvi broached the
idea of subdividing her land into residential lots as early as July 11,
1956 in her letter to the Chief of Staff of the Armed Forces of the
Philippines xxx. As a matter of fact, the layout of the subdivision plan
was tentatively approved by the National Planning Commission on
September 7, 1956 xxx. The land of Castellvi had not been devoted
to agriculture since 1947 when it was leased to the Philippine Army.
In 1957 said land was classified as residential, and taxes based on
its classification as residential had been paid since then xxx. The
location of the Castellvi land justifies its suitability for a residential
subdivision.
The NUPC was created under EO 98, s. of 194654 to "prepare general plans,
zoning ordinances, and subdivision regulations, to guide and accomplish a
coordinated, adjusted, harmonious reconstruction and future development of
urban areas which will in accordance with present and future needs, best
promote health, safety, morals, order, convenience, prosperity, and general
welfare, as well as efficiency and economy in the process of development;
including among other things adequate provisions for traffic, the promotion of
safety from fire and other dangers, adequate provision for light and air, the
promotion of healthful and convenient distribution of populations xxx." 55
Under the express terms of its mandate, the NUPC was therefore duty-bound
to act only upon realty projects which would be used for human settlements
and not for agricultural purposes. It is in this light that we must take stock of
the 1955 NUPC conversion of the one hundred ten (110) sub-lots from
agricultural to residential classification.
To bolster the exclusive role of the NUPC over developmental projects for
residential and industrial purposes, the term "subdivision" (which NUPC was
mandated to review and if properly executed to approve) was defined in EO
98 as "the division of a tract or parcel of land into two (2) or more lots, sites

or other divisions for the purpose, whether immediate or future, of sale or

building development, and includes resubdivision, and when appropriate to
the context, relates to the process of subdividing or to the land or area
subdivided."56 The Subdivision Regulations57 (which the NUPC adopted
pursuant to EO 98) decreed as mandatory the NUPC approval of all
subdivisions of land in the Philippines intended for residential, commercial
and industrial purposes, before lots comprising the subdivision could be
legally sold or building development therein could validly commence Any owner of land wishing to subdivide land shall submit to the
Director of Planning [who was the head of NUPC] a plat of the
subdivision which shall conform to the requirements set forth in these
Regulations. No subdivider shall proceed with the sale of lots of a
subdivision and no plat of a subdivision shall be filed with the
Director of Lands for approval or recorded in the Office of the
Register of Deeds until such plat shall have been approved by the
Director of Planning. Applications for plat approval submitted to the
District or City Engineer of a town or city in the Philippines shall be
forwarded to the Director of Planning together with the District or City
Engineer's recommendations (underscoring supplied).
We are convinced that the 1955 approval by the NUPC of the subdivision of
the subject three (3) parcels of land owned by Nelita Bacaling and her
spouse into one hundred ten (110) sub-lots caused the conversion, if not
outright classification, of the entire landholding into a residential community
for sale to interested buyers. This is an official classification of the sub-lots as
residential units and constitutes the only objective and effectual means of
obtaining in 1955 the classification and reservation of private land for nonagricultural use, i.e. residential, industrial or commercial, since neither P.D.
No. 27 nor R.A. No. 665758 (together with the specified formal mechanisms
stipulated therein for converting a piece of agricultural land into a residential
lot) were then binding and effective. The assignment or conversion of the one
hundred ten (110) sub-lots for residential purposes was not abrogated by
P.D. No. 27 under which respondents invalidly secured their certificates of
land transfer since the decree was only prospectively effective 59 and its
coverage was limited only to agricultural lands which clearly do not include
the residential sub-lots in question.60
By virtue of the official classification made by NUPC and the other
circumstances convincingly proved herein, the only fair and legally

acceptable decision in the instant case would be to declare, as we now

indeed rule, that the one hundred ten (110) sub-lots are truly residential in
character as well as in purpose and are thus excluded from the coverage of
P.D. No. 27.
Verily, the Certificates of Land Transfer (CLT) issued in respondents' names
are not valid and do not change our ruling. The respondents cannot rely on
said CLTS as proof of security of tenure. It is well settled that the certificates
of land transfer are not absolute evidence of ownership of the subject lots 61
and consequently do not bar the finding that their issuance is void from
inception since they cover residential lands contrary to the mandate of P.D.
No. 27. It follows from the fact of nullity of the certificates of land transfer in
respondents' names that the respondents are not entitled to occupy and
possess the one hundred ten (110) sub-lots or portions thereof without the
consent of the owner, herein petitioner Tong.1wphi1.nt

1. The certificates of land transfer over the one hundred ten (110) sub-lots
located in Barangay Cubay, Jaro, Iloilo City, in the name of respondents
and/or their successors in interest are hereby DECLARED VOID AB INITIO.
The said one hundred ten (110) sub-lots, covered by TCT Nos. T-10664 to T10773 of the Registry of Deeds of the City of Iloilo, are declared outside the
coverage and operation of P.D. No. 27 and other land reform laws.
2. The consolidated Decision of the Court of Appeals in CA-G.R. SP No.
54413 ("Felomino Muya and Crispin Amor v. Nelita Bacaling, represented by
her attorney-in-fact, Jose Juan Tong, and the Executive Secretary, Office of
the President") and in CA-G.R. SP No. 54414, ("Wilfredo Jereza, Rodolfo
Lazarte and Nemesio Tonocante v. Hon. Executive Secretary, Office of the
President and Nelita Bacaling") and its Resolution dated June 5, 2001
denying petitioners' Motion for Reconsideration are REVERSED AND SET
ASIDE.

While not raised as issues in the instant petition, we nevertheless rule now
(conformably with Gayos v. Gayos62 that it is a cherished rule of procedure
that a court should always strive to settle the entire controversy in a single
proceeding leaving no root or branch to bear the seeds of future litigation)
that respondents cannot claim disturbance compensation for the reason that
the sub-lots are not and have never been available for agrarian reform. In the
same vein, respondents also have no right to be reimbursed by petitioner
Jose Juan Tong for the value of or expenses for improvements which they
might have introduced on the one hundred ten (110) sub-lots since they did
not allege nor prove the existence of such improvements and their right to
compensation thereto, if any.63

3. The Decision dated May 22, 1998 and the Resolution dated July 22, 1999
of the Office of the President in OP Case No. 98-K-8180 are REINSTATED
with the modification in that the respondents are not entitled to disturbance
compensation; and

WHEREFORE, the Petition for Review is GRANTED. It is further ordered

and adjudged that:

No pronouncement as to costs.

4. Respondents Felomino Muya, Crispin Amor, Wilfredo Jereza, Rodolfo

Lazarte and Nemesio Tonocante together with their assigns and successors
in interest are ordered to vacate and surrender peacefully the possession of
the one hundred ten (110) sub-lots, covered by TCT Nos. T-10664 to T10773-Iloilo City, to petitioner Jose Juan Tong within thirty (30) days from
notice of this Decision.