AGENCY CASE DIGEST | A.
General Articles 1868 to 1883 DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN
1. ORIENT SERVICES AND HOTEL REPRESENTATIVES VS.
CA AND AMERICAN AIRLINES
FACTS:
This case is a consolidation of two (2) petitions for review on certiorari of a decision of
the Court of Appeals. The antecedent facts are as follows: On 15 January 1977,
American Airlines, Inc. (hereinafter referred to as American Air), an air carrier offering
passenger and air cargo transportation in the Philippines, and Orient Air Services and
Hotel Representatives (hereinafter referred to as Orient Air), entered into a General
Sales Agency Agreement (hereinafter referred to as the Agreement), whereby the
former authorized the latter to act as its exclusive general sales agent within the
Philippines for the sale of air passenger transportation. 1. Representation of American
by Orient Air Services: Orient Air Services will act on American's behalf as its exclusive
General Sales Agent within the Philippines, including any United States military
installation therein which are not serviced by an Air Carrier Representation Office
(ACRO), for the sale of air passenger transportation.
On 11 May 1981, alleging that Orient Air had reneged on its obligations under the
Agreement by failing to promptly remit the net proceeds of sales for the months of
January to March 1981 in the amount of US $254,400.40, American Air by itself
undertook the collection of the proceeds of tickets sold originally by Orient Air and
terminated forthwith the Agreement in accordance with Paragraph 13 thereof
(Termination). Four (4) days later, or on 15 May 1981, American Air instituted suit
against Orient Air with the Court of First Instance of Manila, averring the aforesaid
basis for the termination of the Agreement as well as therein defendant's previous
record of failures "to promptly settle past outstanding refunds of which there were
available funds in the possession of the defendant, . . . to the damage and prejudice of
plaintiff." Defendant Orient Air denied the material allegations of the complaint with
respect to plaintiff's entitlement to alleged unremitted amounts, contending that after
application thereof to the commissions due it under the Agreement, plaintiff in fact
still owed Orient Air a balance in unpaid overriding commissions. Further, the
defendant contended that the actions taken by American Air in the course of
terminating the Agreement as well as the termination itself were untenable, Orient Air
claiming that American Air's precipitous conduct had occasioned prejudice to its
business interests.
ISSUE: WON ORIENT AIR FAILED ITS OBLIGATION AS AN AGENT TO THE
PRINCIPAL (AMERICAN AIRLINES)?
HELD: NO. Orient Air was clearly justified in retaining and refusing to remit the sums
claimed by American Air. The latter's termination of the Agreement was, therefore,
without cause and basis, for which it should be held liable to Orient Air. Orient Air was
entitled to an overriding commission based on total flown revenue. American Air's
perception that Orient Air was remiss or in default of its obligations under the
Agreement was, in fact, a situation where the latter acted in accordance with the
1
Agreementthat of retaining from the sales proceeds its accrued commissions before
remitting the balance to American Air. Since the latter was still obligated to Orient Air
by way of such commissions.
By affirming this ruling of the trial court, respondent appellate court, in effect, compels
American Air to extend its personality to Orient Air. Such would be violative of the
principles and essence of agency, defined by law as a contract whereby "a person
binds himself to render some service or to do something in representation or on
behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER . (emphasis
supplied) In an agent-principal relationship, the personality of the principal is
extended through the facility of the agent. In so doing, the agent, by legal fiction,
becomes the principal, authorized to perform all acts which the latter would have him
do. Such a relationship can only be effected with the consent of the principal, which
must not, in any way, be compelled by law or by any court. The Agreement itself
between the parties states that "either party may terminate the Agreement without
cause by giving the other 30 days' notice by letter, telegram or cable." (emphasis
supplied) We, therefore, set aside the portion of the ruling of the respondent appellate
court reinstating Orient Air as general sales agent of American Air.
WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision and
resolution of the respondent Court of Appeals, dated 27 January 1986 and 17
December 1986, respectively. Costs against petitioner American Air.
2. RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS vs. FELIX
GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS
FACTS:
The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos
were sisters and registered co-owners of a parcel of land. On April 21, 1954, the sisters
executed a special power of attorney in favor of their brother, Simeon Rallos,
authorizing him to sell for and in their behalf lot 5983. On March 3, 1955, Concepcion
Rallos died. On September 12, 1955, Simeon Rallos sold the undivided shares of his
sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons Realty
Corporation. Ramon Rallos as administrator of the Intestate Estate of Concepcion
Rallos filed a complaint (1) that the sale of the undivided share of the deceased
Concepcion Rallos in lot 5983 be d 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". Felix Go Chan & Sons
Realty Corporation appealed in due time to the Court of Appeals from the foregoing
judgment insofar as it set aside the sale of the one-half (1/2) share of Concepcion
Rallos.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ISSUE: What is the legal effect of an act performed by an agent after the death of
his principal?
WON THE DEATH OF THE PRINCIPAL EXTINGUISHES SUCH AGENCY?
HELD: Out of the above given principles, sprung the creation and acceptance of
the relationship of agency whereby one party, caged the principal (mandante),
authorizes another, called the agent (mandatario), to act for and in his behalf in
transactions with third persons. The essential elements of agency are: (1) there is
consent, express or implied of the parties to establish the relationship; (2) the object is
the execution of a juridical act in relation to a third person; (3) the agents acts as a
representative and not for himself, and (4) the agent acts within the scope of his
authority. Agency is basically personal representative, and derivative in nature. The
authority of the agent to act emanates from the powers granted to him by his
principal; his act is the act of the principal if done within the scope of the authority. Qui
facit per alium facit se. "He who acts through another acts himself".
YES. By reason of the very nature of the relationship between Principal and agent,
agency is extinguished by the death of the principal or the agent. This is the law in this
jurisdiction. It is the contention of respondent corporation which was sustained by
respondent court that notwithstanding the death of the principal Concepcion Rallos
the act of the attorney-in-fact, Simeon Rallos in selling the former's sham in the
property is valid and enforceable inasmuch as the corporation acted in good faith in
buying the property in question. Articles 1930 and 1931 of the Civil Code provide the
exceptions to the general rule afore-mentioned. ART. 1930. The agency shall remain in
full force and effect even after the death of the principal, if it has been constituted in
the common interest of the latter and of the agent, or in the interest of a third person
who has accepted the stipulation in his favor.ART. 1931. Anything done by the agent,
without knowledge of the death of the principal or of any other cause which
extinguishes the agency, is valid and shall be fully effective with respect to third
persons who may have contracted with him in good. faith. Article 1930 is not involved
because admittedly the special power of attorney executed in favor of Simeon Rallos
was not coupled with an interest.
Article 1931 is the applicable law. Under this provision, an act done by the agent after
the death of his principal is valid and effective only under two conditions, viz: (1) that
the agent acted without knowledge of the death of the principal and (2) that the third
person who contracted with the agent himself acted in good faith. Good faith here
means that the third person was not aware of the death of the principal at the time he
contracted with said agent. These two requisites must concur the absence of one will
render the act of the agent invalid and unenforceable.In the instant case, it cannot be
questioned that the agent, Simeon Rallos, knew of the death of his principal at the time
he sold the latter's share in Lot No. 5983 to respondent corporation. The knowledge of
the death is clearly to be inferred from the pleadings filed by Simon Rallos before the
trial court. 12 That Simeon Rallos knew of the death of his sister Concepcion is also a
finding of fact of the court a quo 13 and of respondent appellate court when the latter
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 2
stated that Simon Rallos 'must have known of the death of his sister, and yet he
proceeded with the sale of the lot in the name of both his sisters Concepcion and
Gerundia Rallos without informing appellant (the realty corporation) of the death of
the former. On the basis of the established knowledge of Simon Rallos concerning the
death of his principal Concepcion Rallos, Article 1931 of the Civil Code is
inapplicable. The law expressly requires for its application lack of knowledge on the
part of the agent of the death of his principal; it is not enough that the third person
acted in good faith.
Costs against respondent realty corporation at all instances.
3. AIRFANCE VS. CA, GANA
FACTS: Sometime in February, 1970, the late Jose G. Gana and his family, numbering
nine (the GANAS), purchased from AIR FRANCE through Imperial Travels,
Incorporated, a duly authorized travel agent, nine (9) "open-dated" air passage tickets
for the Manila/Osaka/Tokyo/Manila route. The GANAS paid a total of US$2,528.85 for
their economy and first class fares. Said tickets were bought at the then prevailing
exchange rate of P3.90 per US$1.00. The GANAS also paid travel taxes of P100.00 for
each passenger. On 24 April 1970, AIR FRANCE exchanged or substituted the
aforementioned tickets with other tickets for the same route. At this time, the GANAS
were booked for the Manila/Osaka segment on AIR FRANCE Flight 184 for 8 May
1970, and for the Tokyo/Manila return trip on AIR FRANCE Flight 187 on 22 May
1970. The aforesaid tickets were valid until 8 May 1971, the date written under the
printed words "Non valuable apres de (meaning, "not valid after the").The GANAS did
not depart on 8 May 1970. Sometime in January, 1971, Jose Gana sought the assistance
of Teresita Manucdoc, a Secretary of the Sta. Clara Lumber Company where Jose Gana
was the Director and Treasurer, for the extension of the validity of their tickets, which
were due to expire on 8 May 1971. Teresita enlisted the help of Lee Ella Manager of
the Philippine Travel Bureau, who used to handle travel arrangements for the
personnel of the Sta. Clara Lumber Company. Ella sent the tickets to Cesar Rillo, Office
Manager of AIR FRANCE. The tickets were returned to Ella who was informed that
extension was not possible unless the fare differentials resulting from the increase in
fares triggered by an increase of the exchange rate of the US dollar to the Philippine
peso and the increased travel tax were first paid. Ella then returned the tickets to
Teresita and informed her of the impossibility of extension.
In the meantime, the GANAS had scheduled their departure on 7 May 1971 or one day
before the expiry date. In the morning of the very day of their scheduled departure on
the first leg of their trip, Teresita requested travel agent Ella to arrange the
revalidation of the tickets. Ella gave the same negative answer and warned her that
although the tickets could be used by the GANAS if they left on 7 May 1971, the tickets
would no longer be valid for the rest of their trip because the tickets would then have
expired on 8 May 1971. Teresita replied that it will be up to the GANAS to make the
arrangements. Ella on his own, attached to the tickets validating stickers for the
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
Osaka/Tokyo flight, one a JAL. sticker and the other an SAS (Scandinavian Airways
System) sticker. The SAS sticker indicates thereon that it was "Reevaluated by: the
Philippine Travel Bureau, Branch No. 2" (as shown by a circular rubber stamp) and
signed "Ador", and the date is handwritten in the center of the circle. Notwithstanding
the warnings, the GANAS departed from Manila in the afternoon of 7 May 1971 on
board AIR FRANCE Flight 184 for Osaka, Japan. There is no question with respect to
this leg of the trip.However, for the Osaka/Tokyo flight on 17 May 1971, Japan Airlines
refused to honor the tickets because of their expiration, and the GANAS had to
purchase new tickets.
ISSUE: WON IRREGULAR ACTIONS OF TRAVEL AGENT ELLA WAS RATIFIED BY
ITS PRINCIPAL RENDERING THEM LIABLE?
HELD: NO. The circumstances that AIR FRANCE personnel at the ticket counter in the
airport allowed the GANAS to leave is not tantamount to an implied ratification of
travel agent Ella's irregular actuations. It should be recalled that the GANAS left in
Manila the day before the expiry date of their tickets and that "other arrangements"
were to be made with respect to the remaining segments. Besides, the validating
stickers that Ella affixed on his own merely reflect the status of reservations on the
specified flight and could not legally serve to extend the validity of a ticket or revive an
expired one.
The conclusion is inevitable that the GANAS brought upon themselves the
predicament they were in for having insisted on using tickets that were due to expire
in an effort, perhaps, to beat the deadline and in the thought that by commencing the
trip the day before the expiry date, they could complete the trip even thereafter. It
should be recalled that AIR FRANCE was even unaware of the validating SAS and JAL.
stickers that Ella had affixed spuriously. Consequently, Japan Air Lines and AIR
FRANCE merely acted within their contractual rights when they dishonored the tickets
on the remaining segments of the trip and when AIR FRANCE demanded payment of
the adjusted fare rates and travel taxes for the Tokyo/Manila flight.
WHEREFORE, the judgment under review is hereby reversed and set aside, and the
Amended Complaint filed by private respondents hereby dismissed.
4. IN RE: PETITION FOR ISSUANCE OF SEPARATE CERTIFICATE OF TITLE.
JOSE A. SANTOS Y Diaz vs. ANATOLIO BUENCONSEJO, ET AL.
FACTS: The main facts are not disputed. They are set forth in the order appealed from,
from which we quote:
It appears that the aforementioned Lot No. 1917 covered by Original Certificate of
Title No. RO-3848 (25322) was originally owned in common by Anatolio Buenconsejo
to the extent of undivided portion and Lorenzo Bon and Santiago Bon to the extent
of the other (Exh. B); that Anatolio Buenconsejo's rights, interests and participation
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 3
over the portion abovementioned were on January 3, 1961 and by a Certificate of Sale
executed by the Provincial Sheriff of Albay, transferred and conveyed to Atty. Tecla
San Andres Ziga, awardee in the corresponding auction sale conducted by said Sheriff
in connection with the execution of the decision of the Juvenile Delinquency and
Domestic Relations Court in Civil Case No. 25267, entitled "Yolanda Buenconsejo, et al.
vs. Anatolio Buenconsejo"; that on December 26, 1961 and by a certificate of
redemption issued by the Provincial Sheriff of Albay, the rights, interest, claim and/or
or participation which Atty. Tecla San Andres Ziga may have acquired over the
property in question by reason of the aforementioned auction sale award, were
transferred and conveyed to the herein petitioner in his capacity as Attorney-in-fact of
the children of Anatolio Buenconsejo, namely, Anastacio Buenconsejo, Elena
Buenconsejo and Azucena Buenconsejo (Exh. C).
It would appear, also, that petitioner Santos had redeemed the aforementioned share
of Anatolio Buenconsejo, upon the authority of a special power of attorney executed in
his favor by the children of Anatolio Buenconsejo; that relying upon this power of
attorney and redemption made by him, Santos now claims to have acquired the share
of Anatolio Buenconsejo in the aforementioned Lot No. 1917; that as the alleged
present owner of said share, Santos caused a subdivision plan of said Lot No. 1917 to
be made, in which the portion he claims as his share thereof has been marked as Lot
No. 1917-A; and that he wants said subdivision at No. 1917-A to be segregated from
Lot No. 1917 and a certificate of title issued in his name exclusively for said
subdivision Lot No. 1917-A.
ISSUE: WON THE SPECIAL POWER OF ATTORNEY GIVEN TO JOSE SANTOS
VESTED HIM SUCH PROPERTY RIGHTS IN HIS OWN NAME?
HELD: NO. As correctly held by the lower court, petitioner's claim is clearly untenable,
for: (1) said special power of attorney authorized him to act on behalf of the children
of Anatolio Buenconsejo, and, hence, it could not have possibly vested in him any
property right in his own name; (2) the children of Anatolio Buenconsejo had no
authority to execute said power of attorney, because their father is still alive and, in
fact, he and his wife opposed the petition of Santos; (3) in consequence of said power
of attorney (if valid) and redemption, Santos could have acquired no more than the
share pro indiviso of Anatolio Buenconsejo in Lot No. 1917, so that petitioner cannot
without the conformity of the other co-owners (Lorenzo and Santiago Bon), or a
judicial decree of partition issued pursuant to the provisions of Rule 69 of the new
Rules of Court (Rule 71 of the old Rules of Court) which have not been followed By
Santos adjudicate to himself in fee simple a determinate portion of said Lot No.
1917, as his share therein, to the exclusion of the other co-owners.
Inasmuch as the appeal is patently devoid of merit, the order appealed from is hereby
affirmed, with treble cost against petitioner-appellant Jose A. Santos y Diaz. It is so
ordered.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
5. ALBALADEJO Y CIA., S. en C. vs. The PHILIPPINE REFINING CO., as successor to
The Visayan Refining Co.,
FACTS:
It appears that Albaladejo y Cia. is a limited partnership, organized in conformity with
the laws of these Islands, and having its principal place of business at Legaspi, in the
Province of Albay; and during the transactions which gave origin to this litigation said
firm was engaged in the buying and selling of the products of the country, especially
copra, and in the conduct of a general mercantile business in Legaspi and in other
places where it maintained agencies, or sub-agencies, for the prosecution of its
commercial enterprises. The Visayan Refining Co. is a corporation organized under the
laws of the Philippine Islands; and prior to July 9, 1920, it was engaged in operating its
extensive plant at Opon, Cebu, for the manufacture of coconut oil. On August 28, 1918,
the plaintiff made a contract with the Visayan Refining Co.
Pursuant to this agreement the plaintiff, during the year therein contemplated, bought
copra extensively for the Visayan Refining Co. At the end of said year both parties
found themselves satisfied with the existing arrangement, and they therefore
continued by tacit consent to govern their future relations by the same agreement. In
this situation affairs remained until July 9, 1920, when the Visayan Refining Co. closed
down its factory at Opon and withdrew from the copra market. When the contract
above referred to was originally made, Albaladejo y Cia. apparently had only one
commercial establishment, i.e., that at Legaspi; but the large requirements of the
Visayan Refining Co. for copra appeared so far to justify the extension of the plaintiff's
business that during the course of the next two or three years it established some
twenty agencies, or subagencies, in various ports and places of the Province of Albay
and neighboring provinces.
After the Visayan Refining Co. had ceased to buy copra, as above stated, of which fact
the plaintiff was duly notified, the supplies of copra already purchased by the plaintiff
were gradually shipped out and accepted by the Visayan Refining Co., and in the
course of the next eight or ten months the accounts between the two parties were
liquidated. The last account rendered by the Visayan Refining Co. to the plaintiff was
for the month of April, 1921, and it showed a balance of P288 in favor of the
defendant.
Upon reference to paragraph five of the contract reproduced above it will be seen that
the Visayan Refining Co. obligated itself to provide transportation by sea to Opon,
Cebu, for the copra which should be delivered to it by the plaintiff; and the first cause
of action set forth in the complaint is planted upon the alleged negligent failure of the
Visayan Refining Co. to provide opportune transportation for the copra collected by
the plaintiff and deposited for shipment at various places.
ISSUE: WON contract between the plaintiff and the Visayan Refining Co. created
the relation of principal and agent between the parties, and the reliance is
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 4
placed upon article 1729 of the Civil Code which requires the principal to
indemnify the agent for damages incurred in carrying out the agency
HELD: NO. Attentive perusal of the contract is, however, convincing to the effect that
the relation between the parties was not that of principal and agent in so far as relates
to the purchase of copra by the plaintiff. It is true that the Visayan Refining Co. made
the plaintiff one of its instruments for the collection of copra; but it is clear that in
making its purchases from the producers the plaintiff was buying upon its own
account and that when it turned over the copra to the Visayan Refining Co., pursuant
to that agreement, a second sale was effected. In paragraph three of the contract it is
declared that during the continuance of this contract the Visayan Refining Co. would
not appoint any other agent for the purchase of copra in Legaspi; and this gives rise
indirectly to the inference that the plaintiff was considered its buying agent. But the
use of this term in one clause of the contract cannot dominate the real nature of the
agreement as revealed in other clauses, no less than in the caption of the agreement
itself. In some of the trade letters also the various instrumentalities used by the
Visayan Refining Co. for the collection of copra are spoken of as agents. But this
designation was evidently used for convenience; and it is very clear that in its
activities as a buyer the plaintiff was acting upon its own account and not as agents, in
the legal sense, of the Visayan Refining Co. The title to all of the copra purchased by
the plaintiff undoubtedly remained in it until it was delivered by way of subsequent
sale to said company.
6. THOMAS vs. PINEDA
June 28, 1951; Tuason, J.
FACTS OF THE CASE
Summary: Defendant managed the business as plaintiffs employee or trustee during
the Japanese occupation of the City of Manila and on a share of the profits basis. The
business burned down. After the war, defendant established a business of the same
name, located in the same place; he also refused to make an accounting of the
business. The court held that the defendant is obliged to account for the business
while he was its manager, and that he acted in bad faith in his failure to do so.
Plaintiff owns the bar and restaurant known as Silver Dollar Caf located in Plaza
Santa Cruz, Manila. In the course of time, the defendant became successively cashier
and manager of the business. On the onset of the war, plaintiff made a fictitious sale of
the business to defendant to prevent the business and its property from falling into
enemy hands. Simultaneously with, or soon after the execution of the simulated sale,
the plaintiff and defendant signed a private or secret document stating that the deed of
sale conveying the restaurant was fictitious and upon the restoration of peace and
order, the document automatically becomes null and void and of no effect. On
February 3, 1945, the building was destroyed by fire but the defendant had been able
to remove some of its furniture. According to the defendant, all of these goods were
accounted for and turned over to the plaintiff. On May 8, 1945, a bar was opened on
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
Calle Bambang under the name Silver Dollar Caf. On September of the same year, it
was transferred to its original location in Plaza Santa Cruz. It is alleged that after
liberation, plaintiff brought a certified public accountant to the caf for the purpose of
examining the books of the business. The defendant resisted, and even pointed a gun
at them. Because of this incident, plaintiff brought the present action to compel an
accounting of the business. It also asked the court to enjoin the defendant from using
the name of that business, Silver Dollar Caf. The defendant avers that there was a
third, verbal agreement, the import of which was that he was to operate the business
with no liability other than to turn it over to the plaintiff as the plaintiff would find it
after the war. He insists therefore that he was relieved of any duty to make an
accounting.
ISSUE OF THE CASE: Whether or not defendant is obliged to render an accounting to
the plaintiff. YES.
RULING OF THE COURT
The defendants contention is at war with the care and precaution which the plaintiff
took to insure his rights in the business and its assets. Unless Thomas was willing to
give away his property and its profits, no man in his right senses would have given his
manager an outright license such as the defendant claims to have gotten from his
employer. The exact legal character of the defendants relation to the plaintiff matters
not a bit. It was enough to show, and it had been shown, that he had been entrusted
with the possession and management of the plaintiffs business and property for the
owners benefit and had not made an accounting.
Neither did the defendants sweeping statement at the trial that all the proceeds
from the business had been used to support the plaintiff and his daughters to entertain
or bribe Japanese officers and civilians dispense with defendants duty to account. It
was clear error for the court to declare that there were no surplus profits. The courts
inquiry ought to have been confined to the determination of the plaintiffs right to
secure an accounting. The defendant denied that the plaintiff had any proprietary
interest in the saloon in Bambang and at Plaza Sta. Cruz after liberation. Thomas
however said that he borrowed P2000 from a friend, and with that amount he
constructed a temporary building in Bambang and with the stocks saved by the
defendant, opened the business there. He said that, as before, the defendant now
worked as manager, with the difference that under the new arrangement he was to get
one-half the net profits. The defendant said that he returned several cases of whiskey,
rum, gin and other kinds of liquor to the plaintiff, and he gave the latter P2000 in cash.
He avers that this payment was in full and complete liquidation of the Silver Dollar
Caf. The court said that this was highly improbable, to put it mildly.
The use of the old name for the bar in Bambang suggests that the business was in fact
an extension and continuation of the Silver Dollar Caf. It was also the plaintiff who
entered into a written contract of lease with the owner of the Santa Cruz location.
Thomas was even named as its proprietor. That the defendant was only a manager is
also made evident by two sets of business cards of the Silver Dollar Caf which he
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 5
himself caused to be printed. On the first set, David Thomas was held out as the
proprietor and Hermogenes Pineda, as manager. On the second set, which were
ordered later, the defendant was not even mentioned as manager, but one Bill Magner,
while David Thomas name was retained as proprietor. At different times from May 8
to December 15, 1945, the defendant handed the plaintiff averse amounts totaling
P24,100 without so much as asking Thomas to sign a receipt for any of them. The
defendant testified that these amounts were simple loans secured by plaintiffs mining
shares of stock. The court held that the lack of any receipt is incompatible with the
hypothesis of loans. There is no escaping the conclusion that the plaintiff was the sole
owner of the post-war Silver Dollar bar and restaurant, that the defendant was only
an industrial partner, and that the said amounts were withdrawals on account of the
profits.
As to the use of the trade name:
It appears that the defendant on September 27, 1945, registered the business and its
name as his own. He contends that in 1940, the plaintiffs right to use this trade name
expired and by abandonment and non-use, the plaintiff ceased to have any title
thereto. The alleged abandonment or non-use is predicated on the testimony that the
plaintiff expressly allowed the defendant to appropriate the trade name in dispute.
The court held that the defendant registered the business in bad faith. The plaintiffs
non-use of his trade name did not work as a forfeiture of his exclusive right to the
name.
As legal proposition and in good conscience, the defendants registration of the trade
name Silver Dollar Caf must be deemed to have been affected for the benefit of its
owner of whom he was a mere trustee or employee.
"The relations of an agent to his principal are fiduciary and it is an elementary
and very old rule that in regard to property forming the subject matter of the
agency, he is estopped from acquiring or asserting a title adverse to that of
principal. His position is analogous to that of a trustee and he cannot
consistently, with the principles of good faith, be allowed to create in himself an
interest in opposition to that of his principal or cestui que trust. A receiver,
trustee, attorney, agent or any other person occupying fiduciary relations
respecting property or persons utterly disabled from acquiring for his own
benefit the property committed to his custody for management. This rule is
entirely independent of the fact whether any fraud has intervened. No fraud in
fact need be shown, and no excuse will be heard from any such inquiry that the
rule takes so general form. The rule stands on the moral obligation to refrain
from placing one's self in position which ordinarily excite conflicts between self-
interest at the expense of one's integrity and duty to another, by making it
possible to profit by yielding to temptation"
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
7. PALMA vs CRISTOBAL
FACTS: In 1909, after registration proceedings under ACT 496, the original certificate
of title was issued in the names of Palma and his wife (Luisa Cristobal). By the year
1923, said certificate was cancelled by virtue of CFI decree, but was later substituted
by another certificate of title also in the name of Palma and his wife. His wife died.
Because of its death, a new certificate was issued, but this time only in the name of
Palma only. With such, Palma sought to eject Cristobal from a parcel of land in Tondo
(TCT of w/c registered to Palma). Cristobal raised the question of ownership and the
case was dismissed. Palma filed w/ CFI Manila praying he be declared owner of the
land and for Cristobal to be ordered to restore its possession to him and remove his
house therefrom.
The CFI dismissed the case, and when the case was brought to the CA it was similarly
dismissed.
The court of appeals concluded that the parcel of land in question is a community
property held by Palma in trust for the real owners (respondent Cristobal being an
heir of one of them), the registration having been made in accordance with an
understanding between the coowners, by reason of the confidence they had in Palma
and his wife. This confidence, close relationship, and the fact that co-owners were
receiving their shares in the rentals, were the reasons why no step had been taken to
partition the property. Before the death of Palma's wife, she called her husband and
enjoined him to give her co-owners their shares and he told her not to worry about it
because he would. The CA, in dismissing the case, invoked SC rulings w/c declared that
the registration of the property in the name of the trustees in possession thereof, must
be deemed to have been effected for the benefit of the principal/cestui que trust. Thus
this appeal by certiorari.
ISSUE OF THE CASE: Whether or not the CA erred in dismissing the case
RULING OF THE COURT:
NO, the CA did not erred in dismissing the case. Palma contends that if he did commit
fraud, Cristobal was in fact a part of it, but the SC held that the fact that Cristobal has
been a party to the deception which resulted in Palma's securing in his name the title
to a property not belonging to him, is not a valid reason for changing the legal
relationship between the latter and its true owners to such an extent as to let them
lose their ownership to a person trying to usurp it.
Cristobal is not barred because his appearance as attorney for petitioner was not a
misrepresentation which would induce Palma to believe that he recognized Palma as
the sole owner of the property in controversy. The misrepresentation could deceive
the court and outsiders, because they were not aware of the understanding between
the co-owners that the property be registered in the name of Palma.
Palma then claimed that even granting the property was owned by several co-owners
he now owns it because of prescription. This theory holds no water because, according
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 6
to the pronouncement of the CA, Palma held the property and secured its the
registration in his name in a fiduciary capacity, and it is elementary that a trustee
cannot acquire by prescription the ownership of a property entrusted to him. The
position of a trustee is of representative nature. His position is the position of a cestui
que trust. It is logical that all benefits derived by the possession and acts of the agent,
as such agent, should accrue to the benefit of his principal.
The relations of an agent to his principal are fiduciary and in regard to property
forming the subject matter of the agency, he is estopped from acquiring or asserting a
title adverse to that of the principal. His position is analogous to that of a trustee and
he cannot consistently, with the principles of good faith, be allowed to create in himself
an interest in opposition to that of his principal or cestui que trust.
8. FEDERICO VALERA VS. MIGUEL VELASCO
G.R. No. L-28050 March 13, 1928
FACTS OF THE CASE:
By virtue of the powers of attorney executed by the plaintiff-appellant, the defendant-
appellee was appointed attorney-in-fact with authority to manage his property in the
Philippines, consisting of the usufruct of a real property. The liquidation of accounts
revealed that the plaintiff-appellant owed the defendant P1,100, and as
misunderstanding arose between them, the defendant-appellee brought suit against
the plaintiff-appellant . The trial court decided in favor of agent; sheriff levied upon
plaintiff-appellants right of usufruct, sold it at public auction and adjudicated it to
defendant-appellee in payment of his claim.
Plaintiff-appellant sold his right of redemption to Eduardo Hernandez- Hernandez
conveyed the same right of redemption himself-but then another person Salvador
Vallejo, who had an execution upon a judgment against the plaintiff rendered in
another case, levied upon said right of redemption- right of redemption sold to Vallejo
and was definitely adjudicated to him. Later, he transferred the said right of
redemption to defendant-appellee. The title was consolidated in his name, thus, the
agent got the title to the right of usufruct to the aforementioned property.
ISSUE OF THE CASE: Whether or not the agency was terminated
RULING OF THE COURT:
YES. Art 1732- Agency is terminated by:
a) Revocation
b) Withdrawal of agent
c) Death, interdiction, bankruptcy, or insolvency of the principal or of the agent.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
While Art 1736- An agent may withdraw by giving notice to principal. If principal
suffer any damage, agent must indemnify him unless the agents reason should be the
impossibility of continuing to act as such without serious detriment to himself. The
misunderstanding between the plaintiff and the defendant over the payment of the
balance of P1, 000 due the latter more than prove the breach of the juridical relation
between them;
For, although the agent has not expressly told his principal that he renounced
the agency, yet neither dignity nor decorum permits the latter to continue
representing a person who has adopted such an antagonistic attitude towards
him. When the agent filed a complaint against his principal for recovery of a sum of
money arising from the liquidation of the accounts between them in connection with
the agency, principal could not have understood otherwise than that agent renounced
the agency; because his act was more expressive than words and could not have
caused any doubt. In order to terminate their relations by virtue of the agency the
defendant, as agent, rendered his final account on March 31, 1923 to the plaintiff, as
principal.
Briefly, then, the fact that an agent institutes an action against his principal for
the recovery of the balance in his favor resulting from the liquidation of the
accounts between them arising from the agency, and renders and final account
of his operations, is equivalent to an express renunciation of the agency, and
terminates the juridical relation between them.
Hence, the said agent's purchase of the aforesaid principal's right of usufruct at public
auction held by virtue of an execution issued upon the judgment rendered in favor of
the former and against the latter, is valid and legal. Moreover, the defendant-appellee,
having acquired right of redemption from Salvador Vallejo, who had acquired it at
public auction by virtue of a writ of execution issued upon the judgment obtained by
the said Vallejo against the said plaintiff, the latter lost all right to said usufruct.
Neither did the trial court err in not ordering the agent to render a liquidation of
accounts from March 31, 1923, inasmuch as he had acquired the rights of the plaintiff
by purchase at the execution sale, and as purchaser, he was entitled to receive the
rents from the date of the sale until the date of the repurchase, considering them as
part of the redemption price; but not having exercised the right repurchase during the
legal period, and the title of the re purchaser having become absolute, the latter did
not have to account for said rents.
9. JESUS MA. CUI, ET AL. v. ANTONIO MA. CUI, ET AL. [G.R. No. L-7041. February
21, 1957.]
FACTS OF THE CASE:
Jesus and Antonio are the legitimate children of Don Mariano Cui and Doa Antonia
Perales who died intestate in1939. Jesus alleged that during the marriage of Don
Mariano and Dona Antonia, their parents acquired certain properties in the City of
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 7
Cebu, namely, Lots Nos. 2312, 2313 and 2319. Upon the death of their mother, the
properties were placed under the administration of their dad. that while the latter was
84 years of age, Antonio by means of deceit, secured the transfer to themselves the
said lots without any pecuniary consideration; that in the deed of sale executed
on March 8, 1946, Rosario Cui appeared as one of the vendees, but on learning of this
fact she subsequently renounced her rights under the sale and returned her portion to
Don Mariano Cui by executing a deed of resale in his favor on October 11, 1946; that
defendants, fraudulently and with the desire of enriching themselves unjustly at the
expense of their father, Don Mariano Cui, and of their brothers and co-heirs, secured a
loan of P130,000 from the Rehabilitation properties, and with the loan thus obtained,
defendants constructed thereon an apartment building of strong materials consisting
of 14 doors, valued at approximately P130,000 and another building on the same
parcels of land, which buildings were leased to some Chinese commercial firms a
monthly rental of P7,600, which defendants have collected and will continue to collect
to the prejudice of the plaintiffs; Jesus alleged that the sale should be invalidated so far
as the portion of the property sold to Antonio Cui is concerned, for the reason that
when that sale was effected, Antonio was then acting as the agent or administrator of
the properties of Don Mariano Cui. Jesus lays stress on the power of attorney Exhibit L
which was executed by Don Mariano in favor of Antonio Cui on March 2,1946, wherein
the former has constituted the latter as his "true and lawful attorney" to perform in his
name and that of theintestate heirs of Doa Antonia Perales.
ISSUE OF THE CASE: Whether or not the sale of the property to Antonio was valid.
RULING OF THE COURT:
YES. While under article 1459 of the old Civil Code an agent or administrator is
disqualified from purchasing property in his hands for sale or management, and, in
this case, the property in question was sold to Antonio Cui while he was already the
agent or administrator of the properties of Don Mariano Cui, we however believe that
this question cannot now be raised or invoked.
The prohibition of the law is contained in article 1459 of the old Civil Code, but
this prohibition has already been removed.
Under the provisions of article 1491, section 2, of the new Civil Code, an agent may
now buy property placed in his hands for sale or administration, provided that the
principal gives his consent thereto. While the new Code came into effect only on
August 30, 1950, however, since this is a right that is declared for the first time, the
same may be given retroactive effect if no vested or acquired right is impaired (Article
2253, new Civil Code). During the lifetime Don Mariano, and particularly on March 8,
1946, the herein appellants could not claim any vested or acquired right in these
properties, for, as heirs, the most they had was a mere expectancy. We may, therefore,
invoke now this practical and liberal provision of our new Civil Code even if the sale
had taken place before its effectivity
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
10. ALLIED FREE WORKERS UNION VS C. MARITIMA et al. [JAN.31, 1967]
NATURE: Petitions for review by certiorari of CIR decision
FACTS: This is a consolidation of 3 cases involving both parties
Respondent Compania Maritima (MARITIMA), a local corp. engaged in shipping
entered into a contract for lease of services with petitioner Allied Free Workers Union
(AFWU), a duly registered legitimate labor union. In the contract, it was stipulated that
AFWU will do and perform all the work of stevedoring and arrastre services of all
vessels or boats of MARITIMA in Iligan City; that the contract is good and valid for 1
month starting Aug.12, 1952, but may be renewed by agreement of the parties with
the reservation that MARITIMA has the right to revoke said contract even before the
expiration of the term, if and when AFWU fails to render good service.
Towards the end of 1953, MARITIMA complained to AFWU of unsatisfactory and
inefficient service. To remedy the situation, MARITIMA was forced to hire extra
laborers from among stand-by workers not affiliated to any union.
On July 1954, AFWU sent a written proposal to MARITIMA for a CBA, but the latter did
not reply. Thereafter, AFWU instituted an action in the CIR praying that it be certified
as the sole and exclusive bargaining unit composed of all the laborers doing arrastre
and stevedoring work for MARITIMA, to which action MARITIMA answered, alleging
lack of EREE relationship. On Aug.1954, MARITIMA informed AFWU of the
termination of the contract because of the inefficient service rendered by the latter
which had adversely affected its business. The termination was to take effect as of
Sept.1, 1954. MARITIMA then contracted with the Iligan Stevedoring Union for the
arrastre and stevedoring work. The latter agreed to perform the work subject to the
same terms and conditions of the contract with AFWU. The new agreement was to be
carried out on Sept.1, 1954.
On Aug.26, 1954, AFWU charged MARITIMA of unfair labor practices (ULPs) before
the CIR. MARITIMA answered, again denying the ER-EE relationship between the
parties. On Sept.9, 1954, MARITIMA filed an action to rescind the contract, enjoin
AFWU members from doing arrastre and stevedoring work in connection with its
vessels, and for recovery of damages against AFWU and its officers. The CFI ordered
the rescission of the contract and permanently enjoined AFWU members from
performing work in connection with MARITIMAs vessels.
AFWU was later able to secure a writ of preliminary injunction ordering the
maintenance of the status quo prior to Jan.6, 1961. Thus, after Jan.18, 1961, AFWU
laborers were again back doing the same work as before.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 8
On Nov.4, 1963, after almost 10 years, the CFI finally rendered its decision: In
pursuance of the provisions of Sec.12 of R.A. 875 and the Rules of this court on
certification election, the Honorable Secretary of Labor or any of his authorized
representative is hereby requested to conduct certification election among all the
workers and/or stevedores working in the wharf of Iligan City who are performing
stevedoring and arrastre service aboard Compania Maritima vessels docking at Iligan
City port in order to determine their representative for collective bargaining with the
employer, whether these desire to be represented by the petitioner Allied Free
Workers Union or neither; and upon termination of the said election, the result thereof
shall forthwith be submitted to this court for further consideration. From this ruling,
both parties appealed, AFWU claiming that it should be declared outright as the
majority union while MARITIMA contends that said court could not even have
correctly ordered a certification election considering that there was an absence of ER-
EE relationship between it and said laborers.
ISSUE OF THE CASE: Whether or not the order of a certification election by the CIR
was proper. (WON there was an ER-EE relationship between AFWU and MARITIMA)
RULING OF THE COURT:
NO. Before a certification election can be held, there must exist an ER-EE relationship
between the ER and the petitioner union. Ratio The duty to bargain collectively exists
only between the employer and its employees. Where there is no duty to bargain
collectively, it is not proper to hold certification elections in connection therewith.
Reasoning In its findings, the CIR observed that after the rescission, the AFWU
laborers continued working in accordance with the cabo system, which was the
prevailing custom in the place. Under this system, the union was an independent
contractor. The CIR also made a finding that prior to the contract between MARITIMA
and AFWU, the former had an oral arrastre and stevedoring agreement with another
union, the Iligan Laborers Union (ILU), which agreement was also based on the cabo
system. After unsatisfactory service, MARITIMA cancelled this oral contract and
entered into a new contract with AFWU, the terms and conditions of which were
similar to the oral contract with ILU. The written contract between AFWU and
MARITIMA was signed under the assurance by AFWU that the same arrangement
previously had with the former union regarding performance and execution of
arrastre and stevedoring contract be followed in accordance with the custom of such
kind of work in Iligan. Thus, petitioner union operated as a labor contractor under the
so-called cabo system. Now, in its all-out endeavor to make an "employer" out of
MARITIMA, AFWU citing an impressive array of jurisprudence, even goes to the
extent of insisting that it be considered a mere "agent" of MARITIMA. Suffice it to
say on this point that an agent can not represent two conflicting interests that
are diametrically opposed. And that the cases sought to be relied upon did not
involve representatives of opposing interests.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
From these findings, Insofar as the working agreement was concerned, there was no
real difference between the contract and the prior oral agreement. Both were based on
the cabo system. Hence, since the parties observed the cabo system after the
rescission of the contract, and since the characteristics of said system show that the
contracting union was an independent contractor, it is reasonable to assume that
AFWU continued being an independent contractor of MARITIMA. And, being an
independent contractor, it could not qualify as an employee. With more reason
would this be true with respect to the laborers. Moreover, there is no evidence at all
regarding the characteristics of the working arrangement between AFWU and
MARITIMA after the termination of the CONTRACT. All we have to go on is the court a
quos finding that the cabo system was observed-a system that negatives
employment relationship.
Since the only function of a certification election is to determine, with judicial sanction,
which union shall be the official representative or spokesman of the employees will
be, there being no ER-EE relationship between the parties disputants, it follows that
there is neither a duty to bargain collectively. Thus, the order for certification election
in question cannot be sustained.
Disposition
Appealed decision of the CIR is AFFIRMED insofar as it dismissed the charge of ULP,
but REVERSED and SET ASIDE insofar as it ordered the holding of a certification
election. The petition for certification election should be DISMISSED.
11. FAR EASTERN EXPORT & IMPORT CO., vs. LIM TECK SUAN; G.R. No. L-7144;
May 31, 1955
FACTS OF THE CASE:
Sometime in November, 1948, Ignacio Delizalde, an agent of the Far Eastern
Export & Import Company, went to the store of Lim Teck Suan situated at 267
San Vicente Street, Manila, and offered to sell textile, showing samples thereof, and
having arrived at an agreement with Bernardo Lim, the General Manager of Lim Teck
Suan, Delizalde returned on November 17 with the buyer's order. plaintiff established
a letter of credit No. 6390 (Exhibit B) in favor of Frenkel International Corporation
through the Hongkong and Shanghai Bangking Corporation, attached to the agreed
statement of facts.
On February 11, 1949, the textile arrived at Manila on board the vessel M. S. Arnold
Maersk. The plaintiff complained to the defendant of the inferior quality of the textile
received by him and had them examined by Marine Surveyor Del Pan & Company.
Upon instructions of the defendants plaintiff deposited the goods with the United
Warehouse Corporation. As per suggestion of the Far Eastern Export and Import
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 9
Company contained in its letter dated June 16, 1949, plaintiff withdrew from the
United Bonded Warehouse, Port Area, Manila, the fifteen cases of Ashtone Acetate and
Rayon Suiting for the purpose of offering them for sale which netted P11,907.30.
Deducting this amount from the sum of P23,686.96 which included the amount paid
by plaintiff for said textile and the warehouse expenses, a difference of P11,476.66 is
left, representing the net direct loss.
The defense set up is that the Far Eastern Export and Import Company only acted as a
broker in this transaction; that after placing the order the defendants took no further
action and the cargo was taken directly by the buyer Lim Teck Suan, the shipment
having been made to him and all the documents were also handled by him directly
without any intervention on the part of the defendants; The trial court acquitted
defendants. CA reversed judgement on the case of Jose Velasco, vs. Universal Trading
Co., Inc., 45 Off. Gaz. 4504 where the transaction therein involved was found by the
court to be one of purchase and sale and not of brokerage or agency.
ISSUE OF THE CASE: Whether or not Far Eastern is liable to the direct loss and acted
as an agent
RULING OF THE COURT:
In the present case, the export company acted as agent for Frenkel International
Corporation, presumably the supplier of the textile sold. In the Velasco case, the
Universal Trading Co., was acting as agent for A. J. Wilson Company, also the supplier
of the whisky sold. In the present case, Suan according to the first part of the
agreement is said merely to be commissioning the Export Company to procure for him
the merchandise in question, just as in the other case, Velasco was supposed to be
ordering the whisky thru the Universal Trading Co. In the present case, the price of the
merchandise bought was paid for by Suan by means of an irrevocable letter of credit
opened in favor of the supplier, Frenkel International Corporation. In the Velasco case,
Velasco was given the choice of either opening a similar irrevocable letter of credit in
favor of the supplier A. J. Wilson Company or making a cash deposit.
It is true that in the Velasco case, upon the arrival of the whisky and because it did not
conform to specifications, Velasco refused to received it; but in the present case
although Suan received the merchandise he immediately protested its poor
quality and it was deposited in the warehouse and later withdrawn and sold for
the best price possible, all at the suggestion of the Export company. The present
case is in our opinion a stronger one than that of Velasco for holding the transaction as
one of purchase and sale because as may be noticed from the agreement (Exhibit "A"),
the same speaks of the items (merchandise) therein involved as sold, and the sale was
even confirmed by the Export company. In both cases, the agents Universal Trading
Co. and the export company dealt directly with the local merchants Velasco and Suan
without expressly indicating or revealing their principals. In both cases there was no
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
privity of contract between the buyers Suan and Velasco and the suppliers Frenkel
International Corporation and A. J. Wilson Company, respectively. In both cases no
commission or monetary consideration was paid or agreed to be paid by the buyers to
the Export company and the Universal Trading Co., proof that there was no agency or
brokerage, and that the profit of the latter was undoubtedly the difference between
the price listed to the buyers and the net or special price quoted to the sellers, by the
suppliers. As already stated, it was held in the Velasco case that the transaction
therein entered into was one of purchase and sale, and for the same reasons
given there, we agreed with the Court of Appeals that the transaction entered
into here is one of purchase and sale.
As was held by this Tribunal in the case of Gonzalo Puyat & Sons Incorporated vs. Arco
Amusement, 72 Phil., 402, where a foreign company has an agent here selling its
goods and merchandise, that same agent could not very well act as agent for
local buyers, because the interests of his foreign principal and those of the buyer
would be in direct conflict. He could not serve two masters at the same time. In
the present case, the Export company being an agent of the Frenkel
International Corporation could not, as it claims, have acted as an agent or
broker for Suan.
12. NIELSON&CO VS LEPANTO CONSOLIDATED MINING CO.
FACTS: An operating agreement was executed before World War II (on 30 January
1937) between Nielson & Co. Inc. and the Lepanto Consolidated Mining Co. whereby
the former operated and managed the mining properties owned by the latter for a
management fee of P2,500.00 a month and a 10% participation in the net profits
resulting from the operation of the mining properties, for a period of 5 years.
In the latter part of 1941, the parties agreed to renew the contract for another period
of 5 years, but in the mean time, the Pacific War broke out in December 1941.
In January 1942 operation of the mining properties was disrupted on account of the
war. The mill, power plant, supplies on hand, equipment, concentrates on hand and
mines, were destroyed. The Japanese forces thereafter occupied the mining properties,
operated the mines during the continuance of the war.
After the mining properties were liberated from the Japanese forces, LEPANTO took
possession thereof and embarked in rebuilding and reconstructing the mines and mill.
On 26 June 1948 the mines resumed operation under the exclusive management of
LEPANTO.
Shortly after the mines were liberated from the Japanese invaders in 1945, a
disagreement arose between NIELSON and LEPANTO over the status of the operating
contract which as renewed expired in 1947. Under the terms thereof, the management
contract shall remain in suspense in case fortuitous event or force majeure, such as
war or civil commotion, adversely affects the work of mining and milling.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 10
On 6 February 1958, NIELSON brought an action against LEPANTO to recover certain
sums of money representing damages allegedly suffered by the former in view of the
refusal of the latter to comply with the terms of a management contract.
The Trial Court dismissed the complaint.
The Supreme Court reversed the decision. It held that the war suspended the contract
by virtue of the force majeure clause. And that the intention of the parties regarding
the meaning and usage concerning the force majeure clause meant the extension of the
same for a period equivalent to the suspension.
In this motion for reconsideration, LEPANTO advances a new theory. It now asserts
that the management contract in question is a contract of agency such that it has the
right to revoke and terminate the said contract, as it did terminate the same, under the
law of agency, and particularly pursuant to Article 1733 of the Old Civil Code (Article
1920 of the New Civil Code).
ISSUE: W/N the management contract is a contract of agency or a contract of lease of
services.
HELD: Contract of lease of services
Contract of Agency v Contract of Lease of Services:
Article 1709 of the Old Civil Code, defining contract of agency, provides that "By the
contract of agency, one person binds himself to render some service or do something
for the account or at the request of another."
Article 1544, defining contract of lease of service, provides that "In a lease of work or
services, one of the parties binds himself to make or construct something or to render
a service to the other for a price certain."
It is true that the management contract provides that Nielson would also act as
purchasing agent of supplies and enter into contracts regarding the sale of mineral, but
the contract also provides that Nielson could not make any purchase, or sell the
minerals, without the prior approval of Lepanto. It is clear, therefore, that even in
these cases Nielson could not execute juridical acts which would bind Lepanto without
first securing the approval of Lepanto. Nielson, then, was to act only as an
intermediary, not as an agent.
From the provision of paragraph XI of the management contract, Lepanto could not
terminate the agreement at will. Lepanto could terminate or cancel the agreement by
giving notice of termination ninety days in advance only in the event that Nielson
should prosecute in bad faith and not in accordance with approved mining practice the
operation and development of the mining properties of Lepanto. Lepanto could not
terminate the agreement if Nielson should cease to prosecute the operation and
development of the mining properties by reason of acts of God, strike and other causes
beyond the control of Nielson. The management contract in question is not revocable
at the will of Lepanto. It is not a contract of agency as defined in Article 1709 of the old
Civil Code, but a contract of lease of services as defined in Article 1544 of the same
Code. This contract can not be unilaterally revoked by Lepanto.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
13. SHELL CO OF THE PHIL Ltd VS FIREMENS INSURANCE OF NEWARK
FACTS: This case is about an action for recovery of sum of money, based on the alleged
negligence of the defendants.
A car was brought to a Shell gasoline station owned by Dela Fuente for washing and
greasing. The car was placed on a hydraulic lifter for greasing. As some parts of the car
couldnt be reached by the greaseman, the lifter was lowered. Unfortunately, for
unknown reasons (probably due to mechanical failure or human error), while the lifter
was being lowered, the car swung and fell from the platform. 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. 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, 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.
ISSUE: W/N Dela Fuente is merely an agent of Shell Co.
HELD: Yes. 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; That the service station belonged to the company and bore its trade name 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.
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. 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.
14. SEVILLA VS CA
FACTS: On Oct. 19, 1960, the Tourist World Service, Inc. leased an office at Mabini St.,
Manila for the former's use as a branch office. When the branch office was opened, the
same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service
Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to
go to Lina Sevilla and 3% was to be withheld by the Tourist World Service, Inc.
On or about November 24, 1961, the Tourist World Service, Inc. appears to have been
informed that Lina Sevilla was connected with a rival firm, the Philippine Travel
Bureau, and, since the branch office was anyhow losing, the Tourist World Service
considered closing down its office.
This was firmed up by two resolutions of the board of directors of Tourist World
Service, Inc. dated Dec. 2, 1961, the first abolishing the office of the manager and vice-
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 11
president of the Tourist World Service, Inc., Ermita Branch, and the second,
authorizing the corporate secretary to receive the properties of the Tourist World
Service then located at the said branch office. It further appears that on Jan. 3, 1962,
the contract with the appellees for the use of the Branch Office premises was
terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no longer
used it. As a matter of fact appellants used it since Nov. 1961. Because of this, and to
comply with the mandate of the Tourist World Service, the corporate secretary Gabino
Canilao went over to the branch office, and, finding the premises locked, and, being
unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to protect
the interests of the Tourist World Service.
When neither the appellant Lina Sevilla nor any of her employees could enter the
locked premises, a complaint was filed by the herein appellants against the appellees
with a prayer for the issuance of mandatory preliminary injunction. Both appellees
answered with counterclaims. For apparent lack of interest of the parties therein, the
trial court ordered the dismissal of the case without prejudice.
ISSUE: W/N the act of Tourist World Service in abolishing its Ermita branch proper
HELD: No. The Supreme Court held that when the petitioner, Lina Sevilla, agreed to
manage Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to
a contract of agency.
In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her
principal, Tourist World Service, Inc. As compensation, she received 4% of the
proceeds in the concept of commissions. And as we said, Sevilla herself, based on her
letter of November 28, 1961, presumed her principal's authority as owner of the
business undertaking. We are convinced, considering the circumstances and from the
respondent Court's recital of facts, that the parties had contemplated a principal-agent
relationship, rather than a joint management or a partnership.
But 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. Accordingly, the revocation complained of
should entitle the petitioner, Lina Sevilla, to damages
15. LIM VS PEOPLE
FACTS: The appellant is a businesswoman. on January 10, 1966, the appellant went to
the house of Maria Ayroso and proposed to sell Ayroso's tobacco. Ayroso agreed to the
proposition of the appellant to sell her tobacco consisting of 615 kilos at P1.30 a kilo.
The appellant was to receive the overprice for which she could sell the tobacco. This
agreement was made in the presence of plaintiff's sister, Salud G. Bantug. Salvador
Bantug drew the document, Exh. A, dated January 10, 1966, which reads:
'To Whom It May Concern:
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
This is to certify that I have received from Mrs. Maria de Guzman Vda. de Ayroso, of
Gapan, Nueva Ecija, six hundred fifteen kilos of leaf tobacco to be sold at P1.30 per kilo.
The proceed in the amount of Seven Hundred Ninety Nine Pesos and 50/100
(P799.50) will be given to her as soon as it was sold.'
This was signed by the appellant and witnessed by the complainant's sister, Salud
Bantug, and the latter's maid, Genoveva Ruiz. The appellant at that time was bringing a
jeep, and the tobacco was loaded in the jeep and brought by the appellant. Of the total
value of P799.50, the appellant had paid to Ayroso only P240.00, and this was paid on
three different times. Demands for the payment of the balance of the value of the
tobacco were made upon the appellant by Ayroso, and particularly by her sister, Salud
Bantug. Salud Bantug further testified that she had gone to the house of the appellant
several times, but the appellant often eluded her; and that the 'camarin' of the
appellant was empty. Although the appellant denied that demands for payment were
made upon her, it is a fact that on October 19, 1966, she wrote a letter to Salud Bantug
which reads as follows:
'Dear Salud,
'Hindi ako nakapunta dian noon a 17 nitong nakaraan, dahil kokonte pa ang nasisingil
kong pera, magintay ka hanggang dito sa linggo ito at tiak na ako ay magdadala sa iyo.
Gosto ko Salud ay makapagbigay man lang ako ng marami para hindi masiadong
kahiyahiya sa iyo. Ngayon kung gosto mo ay kahit konte muna ay bibigyan kita.
Pupunta lang kami ni Mina sa Maynila ngayon. Salud kuug talagang kailangan mo ay
bukas ay dadalhan kita ng pera.
'Medio mahirap ang maningil sa palengke ng Cabanatuan dahil nagsisilipat ang mga
suki ko ng puesto. Huwag kang mabahala at tiyak na babayaran kita.
'Patnubayan tayo ng mahal na panginoon Dios. (Exh. B).
Ludy'
"Pursuant to this letter, the appellant sent a money order for P100.00 on October 24,
1967, Exh. 4, and another for P50.00 on March 8, 1967; and she paid P90.00 on April
18, 1967 as evidenced by the receipt Exh. 2, dated April 18, 1967, or a total of P240.00.
As no further amount was paid, the complainant filed a complaint against the appellant
for estafa.
ISSUE: W/N court erred in holding that the transaction is a contract of agency to sell
HELD: NO. It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the
tobacco should be turned over to the complainant as soon as the same was sold, or,
that the obligation was immediately demandable as soon as the tobacco was disposed
of. Hence, Article 1197 of the New Civil Code, which provides that the courts may fix
the duration of the obligation if it does not fix a period, does not apply.
Anent the argument that petitioner was not an agent because Exhibit "A" does not say
that she would be paid the commission if the goods were sold, the Court of Appeals
correctly resolved the matter as follows: LLpr
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 12
" . . . Aside from the fact that Maria Ayroso testified that the appellant asked her to be
her agent in selling Ayroso's tobacco, the appellant herself admitted that there was an
agreement that upon the sale of the tobacco she would be given something. The
appellant is a businesswoman, and it is unbelievable that she would go to the extent of
going to Ayroso's house and take the tobacco with a jeep which she had brought if she
did not intend to make a profit out of the transaction. Certainly, if she was doing a
favor to Maria Ayroso and it was Ayroso who had requested her to sell her tobacco, it
would not have been the appellant who would have gone to the house of Ayroso, but it
would have been Ayroso who would have gone to the house of the appellant and
deliver the tobacco to the appellant." (p. 19, Rollo)
The fact that appellant received the tobacco to be sold at P1.30 per kilo and the
proceeds to be given to complainant as soon as it was sold, strongly negates transfer of
ownership of the goods to the petitioner. The agreement (Exhibit "A") constituted her
as an agent with the obligation to return the tobacco if the same was not sold.
ACCORDINGLY, the petition for review on certiorari is dismissed for lack of merit.
16. SAN DIEGO v NOMBRE (Yap)
Facts: Respondent Adelo Nombre was the duly constituted judicial administrator. As
such, he leased one of the properties of the estatea fishpondto Pedro Escanlar, the
other respondent. The terms of the lease was for 3 years, with a yearly rental of
P3,000. The transaction was done without previous authority or approval of the Court.
A year after, Nombre was removed as administrator, and was replaced by one Sofronio
Campillanos. Escalanlar was cited for contempt for allegedly refusing to surrender the
fishpond to the newly appointed administrator. Subsequently, Campillanos filed a
motion for authority to execute a lease contract over the fishpond, in favor of
petitioner Moises San Diego, for 5 years with yearly rental of P5,000. Escalanlar was
not notified of the said motion. Nombre, on the other hand, opposed to the motion,
pointing out that the fishpond was leased by him to Escalandar for 3 years. He alleged
that the validity of the lease contract entered into by a judicial administrator must be
recognized unless declared void in a separate action.
The lower court declared the contract in favor of Escanlar null and void for want of
judicial authority and that San Diego offered better lease conditions than Escanlar. In
light of this, Escanlar agreed to increase the rental to P5,000 after the termination of
his original contract. However, the trial judge stated that such contract was fraudulent
and executed in bad faith because Nombre was removed as administrator and the
rentals of the property was inadequate.
However, on appeal, the CA ruled:
No such limitation on the power of a judicial administrator to grant lease of property
placed under his custody is provided for in the present law. Under Art. 1647, it is only
when the lease is to be recorded in the Registry of Property that it cannot be instituted
without special authority. Thus, regardless of the period of lease, there is no need for
special authority unless the contract is to be recorded in the Registry.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
Rule 85, Sec. 3 of the ROC authorizes a judicial administrator to administer the estate
of the deceased not disposed by will, for purposes of liquidation and distribution. He
may, therefore, exercise all acts of administration without special authority of the
Court; such as the leasing the property. And where the lease has been formally entered
into, the court cannot, in the same proceeding, annul the same. The proper remedy
would be a separate action by the administrator or the heirs to annul the lease.
On appeal to the SC, petitioner contends that Art. 1878(8) limits the right of a judicial
administrator to lease the real property without prior court authority and approval, if
it exceeds 1 year. The lease in favor of Escalanlar, being 3 years and without court
approval, is therefore void.
ISSUE: W/N the provisions on Agency should apply in this case
HELD: No.
The provisions on agency should not apply to a judicial administrator. A judicial
administrator is appointed by the court. He is not only the representative of said Court,
but also the heirs and creditors of the estate. Before entering into his duties, he is
required to file a bond. These circumstances are not required in agency. The agent is
only answerable to his principal. The protection which law gives the principal in
limiting the powers and rights of an agent stems from the fact that control by the
principal can only be through agreements. Whereas, the acts of a judicial
administrator are subject to specific provisions of law and orders of the appointing
court.
17. DELA PENA VS HIDALGO
Facts:
The defendant, as such agent, collected the rents and income from the said properties,
amounting to P50,244, which sum, collected in partial amounts and on different dates,
he should have deposited, in accordance with the verbal agreement between the
deceased and himself, the defendant, in the general treasury of the Spanish
"government at an interest of 5 per cent per annum, which interest on accrual was
likewise to be deposited in order that it also might bear interests that the defendant
did not remit or pass to Jose de la Pena y Gomez, during the latters lifetime, nor to nay
representative of the said De la Pena y Gomez, the sum afore stated nor any part
thereof, with the sole exception of P1,289.03, nor has he deposited the unpaid balance
of the said sum in the treasury, according to agreement, wherefore he has become
liable to his principal and to the defendant administrator for the said sum, together
with its interest, which amounts to P72,548.24 and that, whereas the defendant has
not paid over all nor any part of the last mentioned sum, he is liable for the same, as
well as for the interest thereon at 6% per cent per annum from the time of the filing of
the complaint, and for the costs of the suit.
By virtue of the powers conferred upon him by Pena y Gomez, he took charge of the
administration of the latters property and administered the same until December 31,
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 13
1893, when for reasons of health he ceased to discharge the duties of said positions
that during the years 1889, 1890, 1891, and 1892, the defendant continually by letter
requested Pena y Gomez, his principal, to appoint a person to substitute him in the
administration of the latters property , inasmuch as the defendant, for reasons of
health, was unable to continue in his trusts that, on March 22, 1894, the defendant
Federico Hidalgo, because of serious illness, was absolutely obliged to leave these
islands and embarked on the steamer Isla de Luzon for Spain, on which date the
defendant notified his principal that, for the reason afore stated, he had renounced his
powers and turned over the administration of his property to Antonio Hidalgo, to
whom he should transmit a power of attorney for the fulfillment, in due form, of the
trust that the defendant had been discharging since January 1, 1894, or else execute a
power of attorney in favor of such other person as he might deem proper.
Issue: WON Hidalgo can be liable as an agent/WON there is implied agency
Held:
From the procedure followed by the agent, Federico Hidalgo, it is logically inferred that
he had definitely renounced his agency was duly terminated, according to the
provisions of article 1732 of the Civil Code, because, although in the said letter of
March 22, 1894, the word renounced was not employed in connection with the agency
or power of attorney executed in his favor, yet when the agent informs his principal
that for reasons of health and by medical advice he is about to depart from the place
where he is exercising his trust and where the property subject to his administration
is situated, abandons the property, turns it over a third party, and asks that a power of
attorney in due form in due form be executed and transmitted to another person who
substituted him and took charge of the administration of the principals property, it is
then reasonable and just to conclude that the said agent expressly and definitely
renounced his agency , and it may not be alleged that the designation of Antonio
Hidalgo to take charge of the said administration was that of a mere proceed lasted for
more than fifteen years, for such an allegation would be in conflict with the nature of
the agency.
The proof of the tacit consent of the principal, Jose de la Pena y Gomez', the owner of
the property administered a consent embracing the essential element of a legitimate
agency , Federico Hidalgo, his agent, who was giving up his trust, requested him to
send a new power of attorney in favor of the said Antonio Hidalgo, nevertheless he,
Jose de la Pena y Gomez, saw fit not to execute nor transmit any power of attorney
whatever to the new administrator of his property and remained silent for nearly nine
years wherefore, in permitting Antonio Hidalgo to administer his property in this city
during such a number of years, it is inferred, from the procedure and silence of the
owner thereof, that he consented to have Antonio Hidalgo administer his property, and
in fact created in his favor an implied agency, as the true and legitimate administrator.
The implied agency is founded on the lack of contradiction or opposition, which
constitutes simultaneous agreement on the part of the presumed principal to the
execution of the contract, while in the management of another's business there is no
simultaneous consent, either express or implied, but a fiction or presumption of
consent because of the benefit received
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
In the power of attorney executed by Pea y Gomez in this city on November 12, 1887,
in favor of, among others, Federico Hidalgo, no authority was conferred upon the latter
by his principal to substitute the power or agency in favor of another person;
wherefore the agent could not, by virtue of the said power of attorney, appoint any
person to substitute or relieve him in the administration of the principal's property,
for the lack of a clause of substitution in the said instrument authorizing him so to do.
The designation of Antonio Hidalgo was not made as a result of substitution of the
power of attorney executed by Pea in favor of the defendant, but in order that the
principal's property should not be abandoned, inasmuch as, for the purposes of the
discharge of the duties of administrator of the same, the agent, who was about to
absent himself from this city, requested his principal to send to the party, provisionally
designated by the former, a new power of attorney, for the reason that the general
power of attorney which Federico Hidalgo had left, executed in favor of his cousin
Antonio Hidalgo, was so executed in his own name and for his own affairs, and not in
the name of Pea y Gomiz, as the latter had not authorized him to take such action.
18. CONDE vs. CA
Facts: On 7 April 1938, Margarita Conde, Bernardo Conde and Dominga Conde, as
heirs of Santiago Conde, sold with right to repurchase, within 10 years from said date,
a 1 hectare parcel of agricultural land situated in Burauen, Leyte to Casimira Pasagui
and Pio Altera for P165. Three years later, Original Certificate of Title No. N-534
covering the land in question was issued in the name of the Alteras subject to the
stipulated right of repurchase by the Condes. On 28 November 1945, Paciente Cordero,
son-in-law of the Alteras and their representative, signed a document in Bisaya stating
that the Memorandum of Repurchase got lost during World War II despite all diligent
searches being made; that the two parcels of land were inherited by the Condes; that
Eusebio Amarille was authorized by the Condes to repurchase the land; that they
received P165 in consideration of the sale; and that the Condes, by virtue of the
repurchase, shall repossess the said parcels of land. Neither the vendees-a-retro, Pio
Altera nor Casimira Pasagui, were signatories to that document. Many years later, the
pacto de retro document was found. In June 1965, Pio Altera sold the disputed lot to
Ramon and Catalina Conde, whose relationship to Dominga does not appear on record.
Consequently, in 1969, Dominga filed with the CFI of Leyte a complaint for quieting of
title and declaration of ownership against all the respondents. The trial court
dismissed the complaint and ordered Dominga to vacate the premises and to deliver
the disputed land to respondents. The Court of Appeals affirmed the decision and ruled
that Dominga failed to validly exercise her right to repurchase because the
Memorandum of Repurchase was not signed by the Alteras but by Paciente, who was
not authorized to sign for the said vendees-a-retro.
ISSUE: Whether or not there was an implied agency when Cordero signed the
Memorandum of Repurchase.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 14
HELD: Yes. Although the contending parties were legally wanting in their respective
actuations, for example Dominga did nothing to formalize her repurchase while the
Alteras did nothing to clear their title of the encumbrance therein regarding Domingas
right to repurchase, the repurchase by Dominga is supported by her admission that
she had been in possession since 1945, the date of the repurchase, and has been
paying land taxes thereon since then. No new agreement was entered into by the
parties as stipulated in the deed of pacto de retro, if the vendors-a-retro failed to
exercise their right of redemption within 10 years. If, as alleged, Dominga did not exert
an effort to procure Pio Alteras signature after he had recovered from illness, neither
did the Alteras repudiate the deed signed by their son-in-law for 24 years, from which
the Alteras are deemed to have incurred in laches. Thus, an implied agency must have
been held to have been created by their silence or lack of action, or their failure to
repudiate the agency created. (Art. 1869, New Civil Code). Wherefore, Dominga is
declared the owner of the land in question.
19. HARRY E. KEELER ELECTRIC CO., INC., plaintiff-appellant, vs. DOMINGO
RODRIGUEZ, defendant-appellee.
Facts: The plaintiff is a domestic corporation with its principal office in the city of
Manila and engaged in the electrical business, and among other things in the sale of
what is known as the "Matthews" electric plant, and the defendant is a resident of
Talisay, Occidental Negros, and A. C. Montelibano was a resident of Iloilo.
Having this information, Montelibano approached plaintiff at its Manila office, claiming
that he was from Iloilo and lived with Governor Yulo; that he could find purchaser for
the "Matthews" plant, and was told by the plaintiff that for any plant that he could sell
or any customer that he could find he would be paid a commission of 10 per cent for
his services, if the sale was consummated. Among other persons. Montelibano
interviews the defendant, and, through his efforts, one of the "Matthews" plants was
sold by the plaintiff to the defendant, and was shipped from Manila to Iloilo, and later
installed on defendant's premises after which, without the knowledge of the plaintiff,
the defendant paid the purchase price to Montelibano. As a result, plaintiff commenced
this action against the defendant, alleging that about August 18, 1920, it sold and
delivered to the defendant the electric plant at the agreed price of P2,513.55 no part of
which has been paid, the demands judgment for the amount with interest from
October 20, 1920.
For answer, the defendant admits the corporation of the plaintiff, and denies all other
material allegations of the complaint, and, as an affirmative defense, alleges "that on or
about the 18th of August, 1920, the plaintiff sold and delivered to the defendant a
certain electric plant and that the defendant paid the plaintiff the value of said electric
plant, to wit: P2,513.55."
Upon such issues the testimony was taken, and the lower court rendered judgment for
the defendant, from which the plaintiff appeals, claiming that the court erred in
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
holding that the payment to A. C. Montelibano would discharge the debt of defendant,
and in holding that the bill was given to Montelibano for collection purposes, and that
the plaintiff had held out Montelibano to the defendant as an agent authorized to
collect, and in rendering judgment for the defendant, and in not rendering judgment
for the plaintiff.
Issue: WON MONTELIBANO is authorized to receive payment?
Held: No. There is no evidence that the plaintiff ever delivered any statements to
Montelibano, or that he was authorized to receive or receipt for the money, and
defendant's own telegram shows that the plaintiff "did not present bill" to defendant.
He now claims that at the very time this telegram was sent, he had the receipt of
Montelibano for the money upon the identical statement of account which it is
admitted the plaintiff did render to the defendant.
Article 1162 of the Civil Code provides:
Payment must be made to the persons in whose favor the obligation is
constituted, or to another authorized to receive it in his name.
And article 1727 provides:
The principal shall be liable as to matters with respect to which the agent has
exceeded his authority only when he ratifies the same expressly or by
implication.
Mechem on Agency, volume I, section 743, says:
In approaching the consideration of the inquiry whether an assumed authority exist in
a given case, there are certain fundamental principles which must not be overlooked.
Among these are, as has been seen, (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. An assumption of
authority to act as agent for another of itself challenges inquiry. Like a railroad
crossing, it should be in itself a sign of danger and suggest the duty to "stop, look, and
listen." It is therefore declared to be a fundamental rule, never to be lost sight of and
not easily to be overestimated, that persons dealing with an assumed agent, whether
the assumed agency be a general or special one, are bound at their peril, if they would
hold the principal, to ascertain not only the fact of the agency but the nature and extent
of the authority, and in case either is controverted, the burden of proof is upon them to
establish it.
. . . It is, moreover, in any case entirely within the power of the person dealing with the
agent to satisfy himself that the agent has the authority he assumes to exercise, or to
decline to enter into relations with him. (Melchem on Agency, vol. I, sec. 746.)
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 15
The person dealing with the agent must also act with ordinary prudence and
reasonable diligence. Obviously, if he knows or has good reason to believe that the
agent is exceeding his authority, he cannot claim protection. So if the suggestions of
probable limitations be of such a clear and reasonable quality, or if the character
assumed by the agent is of such a suspicious or unreasonable nature, or if the authority
which he seeks to exercise is of such an unusual or improbable character, as would
suffice to put an ordinarily prudent man upon his guard, the party dealing with him
may not shut his eyes to the real state of the case, but should either refuse to deal with
the agent at all, or should ascertain from the principal the true condition of affairs.
(Mechem on Agency, vol. I, sec 752.)
And not only must the person dealing with the agent ascertain the existence of the
conditions, but he must also, as in other cases, be able to trace the source of his
reliance to some word or act of the principal himself if the latter is to be held
responsible. As has often been pointed out, the agent alone cannot enlarge or extend
his authority by his own acts or statements, nor can he alone remove limitations or
waive conditions imposed by his principal. To charge the principal in such a case, the
principal's consent or concurrence must be shown. (Mechem on Agency, vol. I, section
757.)
20. RALLOS VS. YANGCO
Facts: the plaintiffs proceeded to do a considerable business with the defendant
through the said Collantes, as his factor, sending to him as agent for the defendant a
good deal of produce to be sold on commission. Later, and in the month of February,
1909, the plaintiffs sent to the said Collantes, as agent for the defendant, 218 bundles
of tobacco in the leaf to be sold on commission, as had been other produce previously.
The said Collantes received said tobacco and sold it for the sum of P1,744. The charges
for such sale were P206.96. leaving in the hands of said Collantes the sum of P1,537.08
belonging to the plaintiffs. This sum was, apparently, converted to his own use by said
agent.
It appears, however, that prior to the sending of said tobacco the defendant had
severed his relations with Collantes and that the latter was no longer acting as his
factor. This fact was not known to the plaintiffs; and it is conceded in the case that no
notice of any kind was given by the defendant to the plaintiffs of the termination of the
relations between the defendant and his agent. The defendant refused to pay the said
sum upon demand of the plaintiffs, placing such refusal upon the ground that at the
time the said tobacco was received and sold by Collantes he was acting personally and
not as agent of the defendant. This action was brought to recover said sum.
Issue: WON whether or not the plaintiffs, acting in good faith and without
knowledge, having sent produce to sell on commission to the former agent of the
defendant, can recover of the defendant under the circumstances above set forth
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
HELD:
YES. We are of the opinion that the defendant is liable. Having advertised the fact that
Collantes was his agent and having given them a special invitation to deal with such
agent, it was the duty of the defendant on the termination of the relationship of
principal and agent to give due and timely notice thereof to the plaintiffs. Failing to do
so, he is responsible to them for whatever goods may have been in good faith and
without negligence sent to the agent without knowledge, actual or constructive, of the
termination of such relationship.
21. B. H. MACKE ET AL V JOSE CAMPS
FACTS: B. H. Macke and W.H. Chandler, partners doing business under thee firm name
of Macke, Chandler And Company, allege that during the months of February and
March 1905, they sold to Jose Camps and delivered at his place of business, known as
the :Washington Caf, various bills of goods amounting to P351.50; that Camps has
only paid on account of said goods the sum of P174; that there is still due them on
account of said goods the sum of P177.50
Plaintiffs made demand for the payment from defendant and that the latter failed and
refused to pay the said balance or any part of it
Macke, one of the plaintiffs, testified that on the order of one Ricardo Flores, who
represented himself to be the agent of Jose Camps, he shipped the said goods to the
defendant at the Washington Caf; that Flores (agent) later acknowledged the receipt
of the said goods and made various payments thereon amounting in all to P174; that
believes that Flores is still the agent of Camps; and that when he went to the
Washington Caf for the purpose of collecting his bill he found Flores, in the absence of
Camps, apparently in charge of the business and claiming to be the business manager
of Camps, said business being that of a hotel with a bar and restaurant annexed.
A written contract was introduced as evidence, from which it appears that one Galmes,
the former of Washington Caf subrented the building wherein the business was
conducted, to Camps for 1 year for the purpose of carrying on that business, Camps
obligating himself not to sublet or subrent the building or the business without the
consent of the said Galmes. *This contract was signed by Camps and the name of
Ricardo Flores as a witness and attached thereon is an inventory of the furniture and
fittings which also is signed by Camps with the word sublessee below the name, and
at the foot of this inventory the word received followed by the name Ricardo Flores
with the words managing agent immediately following his name.
ISSUE: WON Ricardol Flores was the agent of Camps
HELD: Yes
Evidence is sufficient to sustain a finding that Flores is the agent of Camps in the
management of the bar of the Washington Caf with authority to bind Camps, his
principal, for the payment of the goods
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 16
The contract sufficiently establishes the fact that Camps was the owner of the business
and of the bar, and the title of managing agent attached to the signature of Flores
which appears on that contract, together with the fact that at the time the purchases
were made, Flores was apparently in charge of the business performing the duties
usually intrusted to a managing agent leave little room for doubt that he was there as
the authorized agent of Camps.
Agency by Estoppel --- One who clothes another with apparent authority as his agent,
and holds him out to the public as such, can not be permitted to deny the authority of
such person to act as his agent, to the prejudice of innocent third persons dealing with
such person in good faith and in the honest belief that he is what he appears to be.
Estopple---- Whenever a party has, by his own declaration, act or omission,
intentionally and deliberately led another to believe a particular thing true, and
to act upon such belief, he can not, in any litigation arising out of such
declaration, act, or omission be permitted to falsify; and unless the contrary
appears, the authority of the agent must be presumed to include all the
necessary and usual means of carrying his agency into effect.
22. LINAN VS PUNO
FACTS: Plaintiff, was the owner of a certain parcel of land
Plaintiff executed the following document, which conferred upon the defendant
Marcos Puno the power, duties, and obligations
Contract provides that: Linan, plaintiff, confers sufficient power upon Marcos Puno,
respondent, to represent him in administering his interest that the former possess
within the municipality of Tarlac, purchase, sell, as well as sue and be sued before any
authority, appear before the courts of justice and administrative officers in any
proceeding or business concerning the good administration and advancement of my
interests and may, in necessary cases, appoint attorneys at law or attorneys in fact to
represent him
Puno, for the sum of P800 sold and delivered parcel of land to the other defendants
Plaintiff alleges that the said document did not confer upon Puno the power to sell the
land and prayed that the sale be set aside and that the land be returned to him and
with damages
ISSUE: WON Puno is an agent of the plaintiff and the sale made by the former in
favor of other defendants binds the principal/plaintiff
Held:
Puno is an agent but and has authority to sell the land, binds principal
The Document presented did not give Puno authority to sell the land; that the sale was
illegal and void; that defendants should return the land to the plaintiff; and that
defendants should pay plaintiff the sum of P1,000 as damages, P400 of which Puno
should be responsible for, and to pay the costs.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
Puno had no authority to sell the land but only to administer the land
Contracts of agency as well as general powers of attorney must be interpreted in
accordance with the language used by the parties. The real intention of the parties is
primarily to be determined from the language used. The intention is to be gathered
from the whole instrument. In case of doubt, resort must be had to the situation,
surroundings and relations of the parties.
Whenever it is possible, effect is to be given to every word and clause used by the
parties. It is to be presumed that the parties said what they intended to say and that
they used each word or clause with some purpose and that purpose, if possible to be
ascertained and enforced. The intention of the parties must be sustained rather than
defeated.
If the contract be open to two constructions, one of which would uphold while the
other would overthrow it, the former is to be chosen. So, if by one construction the
contract would be illegal, and by another equally permissible construction it would be
lawful, the latter must be adopted. The acts of the parties in carrying out the contract
will presumed to be done in good faith. The acts of the parties will be presumed to
have been done in conformity with and not contrary to the intent of the contract
Supreme Court: The words administer, sell, purchase etc used in the contract seem
to be used coordinately. Each has equal force with the other. There seems to be no
good reason for saying that Puno had authority to administer and not to sell when to
sell was as advantageous to the plaintiff in the administration of his affairs as to
administer. To hold that the power was to administer only when the power to sell
was equally conferred would be to give effect to a portion of the contract only. That
would give to special words of the contract a special and limited meaning to the
exclusion of other general words of equal import
Supreme Court: No proof that Puno acted in bad faith or fraudulently in selling the
land. It will be presumed that he acted in good faith and in accordance with his power
as he understood it. That his interpretation of his power is tenable cannot be
successfully denied.
Supreme Court: defendants should be relieved from liability
23. JULIO DANON, plaintiff-appellee, vs. ANTONIO A. BRIMO & CO., defendant-
appellant.
Facts:
The plaintiff alleges that in the month of August, 1918, the defendant company,
through its manager, Antonio A. Brimo, employed him to look for a purchaser of its
factory known as "Holland American Oil Co.," for the sum of P1,200,000, payable in
cash; that the defendant promised to pay the plaintiff, as compensation for his services,
a commission of five per cent on the said sum of P1,200,000, if the sale was
consummated, or if the plaintiff should find a purchaser ready, able and willing to buy
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 17
said factory for the said sum of P1,200,000; that subsequently the plaintiff found such
a purchaser, but that the defendant refused to sell the said factory without any
justifiable motive or reason therefor and without having previously notified the
plaintiff of its desistance or variation in the price and terms of the sale.
To that complaint the defendant interposed a general denial. Upon the issue thus
presented, the Honorable Simplicio del Rosario, judge, after hearing and considering
the evidence adduced during the trial of the cause, rendered a judgment in favor of the
plaintiff and against the defendant for the sum of P60,000, with costs. From that
judgment the defendant appealed to this court.
The proof with regard to the authority of the plaintiff to sell the factory in question for
the defendant, on commission, is extremely unsatisfactory. It consists solely of the
testimony of the plaintiff, on the one hand, and of the manager of the defendant
company, Antonio A. Brimo, on the other. From a reading of their testimony we believe
that neither of them has been entirely free from prevarications. However, after giving
due weight to the finding of the trial court in this regard and after carefully considering
the inherent probability or improbability of the testimony of each of said witnesses, we
believe we are approximating the truth in finding: (1) That Antonio A. Brimo, in a
conversation with the plaintiff, Julio Danon, about the middle of August, 1918,
informed the latter that he (Brimo) desired to sell his factory, the Holland American Oil
Co., for the sum of P1,200,000; (2) that he agreed and promised to pay to the plaintiff a
commission of 5 per cent provided the latter could sell said factory for that amount;
and (3) that no definite period of time was fixed within which the plaintiff should
effect the sale. It seems that another broker, Sellner, was also negotiating the sale, or
trying to find a purchaser for the same property and that the plaintiff was informed of
the fact either by Brimo himself or by someone else; at least, it is probable that the
plaintiff was aware that he was not alone in the field, and his whole effort was to
forestall his competitor by being the first to find a purchaser and effect the sale. Such,
we believe. was the contract between the plaintiff and the defendant, upon which the
present action is based.
Issue: WON the plaintiff is entitled to the commission?
Held: No. The rule laid down in the foregoing case was adopted and followed in the
cases of Zeimer vs. Antisell (75 Cal. 509), and Ayres vs. Thomas (116 Cal., 140).
The undertaking to procure a purchaser requires of the party so undertaking, not
simply to name or introduce a person who may be willing to make any sort of contract
in reference to the property, but to produce a party capable, and who ultimately
becomes the purchaser. (Kimberly vs. Henderson and Lupton, 29 Md., 512, 515, citing:
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
Keener vs. Harrod and Brooke, 2 Md. 63; McGavock vs. Woodlief, 20 How., 221. See
also Richards, Executor, vs. Jackson, 31 Md., 250.)
The defendant sent a proposal to a broker in these words: If you send or cause to be
sent to me, by advertisement or otherwise, any party with whom I may see fit and
proper to effect a sale or exchange of my real estate, above described I will pay you the
sum of $200. The broker found a person who proposed to purchase the property, but
the sale was not affected. Held: That the broker was not entitled to compensation.
(Walker vs. Tirrel, 3 Am. Rep., 352.)
It is clear from the foregoing authorities that, although the present plaintiff could
probably have effected the sale of the defendant's factory had not the defendant sold it
to someone else, he is not entitled to the commissions agreed upon because he had no
intervention whatever in, and much sale in question. It must be borne in mind that no
definite period was fixed by the defendant within which the plaintiff might effect the
sale of its factory. Nor was the plaintiff given by the defendant the exclusive agency of
such sale. Therefore, the plaintiff cannot complaint of the defendant's conduct in
selling the property through another agent before the plaintiff's efforts were crowned
with success. "One who has employed a broker can himself sell the property to a
purchaser whom he has procured, without any aid from the broker." (Hungerford vs.
Hicks, 39 Conn., 259; Wylie vs. Marine National Bank, 61 N.Y., 415, 416.)
Take note: A leading case on the subject is that of Sibbald vs. Bethlehem Iron Co. (83 N.
Y., 378; 38 Am. Rep., 441). In the case, after an exhaustive review of various cases, the
Court of Appeals of New York stated the rule as follows:
In all the cases, under all and varying forms of expression, the fundamental and correct
doctrine, is, that the duty assumed by the broker is to bring the minds of the buyer and
seller to an agreement for a sale, and the price and terms on which it is to be made, and
until that is done his right to commissions does not accrue.
24. CONSEJO INFANTE, petitioner, vs. JOSE CUNANAN, JUAN MIJARES and THE
COURT OF APPEALS, Second Division, respondents.|||
DOCTRINE: Oral evidence is presented to the effect that while the agents agreed to
cancel the written authority given them by their principal, they did so merely upon
the principal's verbal assurance that, should the property subject of their contract of
agency be sold to their own buyer, they would be given the commission agreed
upon. Held: The cancellation of the written authority being in writing, parole
evidence is not admissible under section 22 of Rule 123.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 18
If there is other evidence which would justify the agents' claim for commission, even
if such parol evidence is disregarded, they are entitled to such commission.
The principal took advantage of the agents' services consisting in locating a buyer
for the principal's land. The principal, perhaps by stratagem, advised the agents that
she was no longer interested in the deal and was able to prevail upon them to sign a
document agreeing to the cancellation of the written authority she had originally
given the agents, believing that she could evade payment of their commission. Then
she sold the property to the buyer found by the agents. Held: The principals act is
unfair as would amount to bad faith, and cannot be sanctioned without according to
the agents the reward which is due them.
FACTS: Consejo Infante (defendant), was the owner of two parcels of land, together
with a house built thereon. On or before November 30, 1948, she contracted the
services of Jose Cunanan and Juan Mijares(Plaintiffs), to sell the above-mentioned
property for a price of P30,000 subject to the condition that the purchaser would
assume the mortgage existing thereon in favor of the Rehabilitation Finance
Corporation. She agreed to pay them a commission of 5% on the purchase price plus
whatever overprice they may obtain for the property. Plaintiffs found one Pio S. Noche
who was willing to buy the property under the terms agreed upon with defendant, but
when they introduced him to defendant, the latter informed them that she was no
longer interested in selling the property and succeeded in making them sign a
document stating therein that the written authority she had given them was already
cancelled.However, on December 20, 1948, defendant dealt directly with Pio S. Noche
selling to him the property for P31,000.
Upon learning this transaction, plaintiffs demanded from defendant the payment of
their commission, but she refused and so they brought the present action
Defendant admitted having contracted the services of the plaintiffs to sell her property
as set forth in the complaint, but stated that she agreed to pay them a commission of
P1,200 only on condition that they buy her a property somewhere in Taft Avenue to
where she might transfer after selling her property. Consejo avers that while plaintiffs
took steps to sell her property as agreed upon, they sold the property at Taft Avenue to
another party and because of this failure it was agreed that the authority she had given
them be cancelled.
TC & CA: The lower court found that the preponderance of evidence was in favor of
the plaintiffs and rendered judgment sentencing the defendant to pay the plaintiffs
the sum of P2,500 with legal interest plus the costs of action.
CONTENTION: Petitioner, however, contends that that authority has already been
withdrawn on November 30, 1948 when, by the voluntary act of respondents, they
executed a document stating that said authority shall be considered cancelled and
without any effect, so that when petitioner sold the property to Pio S. Noche on
December 20, 1948, she was already free from her commitment with respondents and,
therefore, was not in duty bound to pay them any commission for the transaction.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
ISSUE: (1) WON the cancellation of the written authority being in writing, parole
evidence is not admissible under section 22 of Rule 123.
(2) WON the principals act is in bad faith
HELD:
(1) YES, parole evidence is not admissible. If the facts were as claimed by petitioner,
there is indeed no doubt that she would have no obligation to pay respondents the
commission which was promised them under the original authority because, under the
old Civil Code, her right to withdraw such authority is recognized. A principal may
withdraw the authority given to an agent at will. (Article 1733.) But this fact is
disputed. Thus, respondents claim that while they agreed to cancel the written
authority given to them, they did so merely upon the verbal assurance given by
petitioner that, should the property be sold to their own buyer, Pio S. Noche, they
would be given the commission agreed upon. True, this verbal assurance does not
appear in the written cancellation, Exhibit 1, and, on the other hand, it is disputed by
petitioner, but respondents were allowed to present oral evidence to prove it, and this
is now assigned as error in this petition for review.
The plea that oral evidence should not have been allowed to prove the alleged verbal
assurance is well taken it appearing that the written authority given to respondents
has been cancelled in a written statement. The rule on this matter is that "When the
terms of an agreement have been reduced to writing, it is to be considered as
containing all those terms, and, therefore, there can be, between the parties and their
successors in interest, no evidence of the terms of the agreement other than the
contents of the writing." (Section 22, Rule 123, Rules of Court.) The only exceptions to
this rule are: "(a) Where a mistake or imperfection of the writing, or its failure to
express the true intent and agreement of the parties, or the validity of the agreement is
put in issue by the pleadings"; and "(b) Where there is an intrinsic ambiguity in the
writing." (Ibid.) There is no doubt that the point raised does not come under any of the
cases excepted, for there is nothing therein that has been put in issue by respondents
in their complaint. The terms of the document, Exhibit 1, seem to be clear and they do
not contain any reservation which may in any way run counter to the clear intention of
the parties
But even disregarding the oral evidence adduced by respondents in contravention of
the parole evidence rule, we are, however, of the opinion that there is enough
justification for the conclusion reached by the lower court as well as by the Court of
Appeals to the effect that respondents are entitled to the commission originally agreed
upon. It is a fact found by the Court of Appeals that after petitioner had given the
written authority to respondents to sell her land for the sum of P30,000, respondents
found a buyer in the person of one Pio S. Noche who was willing to buy the property
under the terms agreed upon, and this matter was immediately brought to the
knowledge of petitioner. But the latter, perhaps by way of stratagem, advised
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 19
respondents that she was no longer interested in the deal and was able to prevail upon
them to sign a document agreeing to the cancellation of the written authority.
(2) yes. The principal took advantage of the agents' services consisting in locating a
buyer for the principal's land. The principal, perhaps by stratagem, advised the agents
that she was no longer interested in the deal and was able to prevail upon them to sign
a document agreeing to the cancellation of the written authority she had originally
given the agents, believing that she could evade payment of their commission. Then
she sold the property to the buyer found by the agents. Thus, the principals act is
unfair as would amount to bad faith, and cannot be sanctioned without according to
the agents the reward which is due them.
25. MANOTOK BROTHERS, INC., petitioner, vs. THE HONORABLE COURT OF
APPEALS, THE HONORABLE JUDGE OF THE REGIONAL TRIAL COURT OF MANILA
(Branch VI), and SALVADOR SALIGUMBA, respondents.
FACTS: Petitioner herein (then defendant-appellant) is the owner of a certain parcel of
land and building which were formerly leased by the City of Manila and used by the
Claro M. Recto High School. By means of a letter, petitioner authorized herein private
respondent Salvador Saligumba to negotiate with the City of Manila the sale of
aforementioned property for not less than P425,000.00. In the same writing, petitioner
agreed to pay private respondent a five percent (5%) commission in the event the sale
is finally consummated and paid. Petitioner ,executed another letter extending the
authority of private respondent for 120 days. Thereafter, another extension was
granted to him for 120 more days, as evidenced by another letter. Finally, through
another letter dated November 16, 1967, the corporation with Rufino Manotok, its
President, as signatory, authorized private respondent to finalize and consummate the
sale of the property to the City of Manila for not less than P410,000.00. With this letter
came another extension of 180 days. The Municipal Board of the City of Manila
eventually, on April 26, 1968, passed Ordinance No. 6603, appropriating the sum of
P410,816.00 for the purchase of the property which private respondent was
authorized to sell. Said ordinance however, was signed by the City Mayor only on May
17, 1968, one hundred eighty three (183) days after the last letter of authorization. On
January 14, 1969, the parties signed the deed of sale of the subject property. The initial
payment of P200,000.00 having been made, the purchase price was fully satisfied with
a second payment on April 8, 1969 by a check in the amount of P210,816.00.
Notwithstanding the realization of the sale, private respondent never received any
commission, which should have amounted to P20,554.50. This was due to the refusal
of petitioner to pay private respondent said amount as the former does not recognize
the latter's role as agent in the transaction.
COMPLAINT: Private respondent filed a complaint against petitioner, alleging that he
had successfully negotiated the sale of the property. He claimed that it was because of
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
his efforts that the Municipal Board of Manila passed Ordinance No. 6603 which
appropriated the sum for the payment of the property subject of the sale.
ANSWER: Petitioner denied the claim of private respondent on the following grounds:
(1) private respondent would be entitled to a commission only if the sale was
consummated and the price paid within the period given in the respective letters of
authority; and (2) private respondent was not the person responsible for the
negotiation and consummation of the sale, instead it was Filomeno E. Huelgas, the PTA
president for 1967-1968 of the Claro M. Recto High School.
Huelgas testified to the effect that after being inducted as PTA president in August,
1967 he followed up the sale from the start with Councilor Magsalin until after it was
approved by the Mayor on May 17, 1968. He. also said that he came to know Rufino
Manotok only in August, 1968, at which meeting the latter told him that he would be
given a "gratification" in the amount of P20,000.00 if the sale was expedited.
TC & CA: rendered judgment sentencing petitioner and/or Rufino Manotok to pay
unto private respondent the sum of P20,540.00 by way of his commission fees with
legal interest thereon from the date of the filing of the complaint until payment.
It is petitioner's contention that as a broker, private respondent's job is to bring
together the parties to a transaction. Accordingly, if the broker does not succeed in
bringing the minds of the purchaser and the vendor to an agreement with respect to
the sale, he is not entitled to a commission.
ISSUE: WON private respondent is entitled to the five percent (5%) agent's
commission.
HELD: YES. In an earlier case, this Court ruled that when there is a close, proximate
and causal connection between the agent's efforts and labor and the principal's sale of
his property, the agent is entitled to a commission. We agree with respondent Court
that the City of Manila ultimately became the purchaser of petitioner's property mainly
through the efforts of private respondent. Without discounting the fact that when
Municipal Ordinance No. 6603 was signed by the City Mayor on May 17, 1968, private
respondent's authority had already expired, it is to be noted that the ordinance was
approved on April 26, 1968 when private respondent's authorization was still in force.
Moreover, the approval by the City Mayor came only three days after the expiration of
private respondent's authority. It is also worth emphasizing that from the records, the
only party given a written authority by petitioner to negotiate the sale from July 5,
1966 to May 14, 1968 was private respondent.|||
While it may be true that Filomeno Huelgas followed up the matter with Councilor
Magsalin, the author of Municipal Ordinance No. 6603 and Mayor Villegas, his
intervention regarding the purchase came only after the ordinance had already been
passed when the buyer has already agreed to the purchase and to the price for
which said property is to be paid. Without the efforts of private respondent then,
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 20
Mayor Villegas would have nothing to approve in the first place. It was actually private
respondent's labor that had set in motion the intervention of the third party that
produced the sale, hence he should be amply compensated. Cdll
26. VICENTE M. DOMINGO, represented by his heirs, ANTONIA RAYMUNDO VDA.
DE DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR., SALVADOR, IRENE and
JOSELITO, all surnamed DOMINGO, petitioners-appellants, vs. GREGORIO M.
DOMINGO, intervenor-respondent.
FACTS: In a document executed on June 2, 1956, Vicente M. Domingo granted Gregorio
Domingo, a real estate broker, the exclusive agency to sell his lot No. 883 of Piedad
Estate with an area of about 88,477 square meters at the rate of P2.00 per square
meter (or for P176,954.00) with a commission of 5% on the total price, if the property
is sold by Vicente or by anyone else during the 30-day duration of the agency or if the
property is sold by Vicente within three months from the termination of the agency to
a purchaser to whom it was submitted by Gregorio during the continuance of the
agency with notice to Vicente. The said agency contract was in triplicate, one copy was
given to Vicente, while the original and another copy were retained by Gregorio.
On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a
buyer, promising him one-half of the 5% commission.
Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective
buyer.
Oscar de Leon submitted a written offer which was very much lower than the price of
P2.00 per square meter. Vicente directed Gregorio to tell Oscar de Leon to raise his
offer. After several conferences between Gregorio and Oscar de Leon, the latter raised
his offer to P109,000.00 on June 20, 1956, to which Vicente agreed by signing. Upon
demand of Vicente, Oscar de Leon issued to him a check in the amount of P1,000.00 as
earnest money, after which Vicente advanced to Gregorio the sum of P300.00. Oscar de
Leon confirmed his former offer to pay for the property at P1.20 per square meter in
another letter. Subsequently, Vicente asked for an additional amount of P1,000.00 as
earnest money, which Oscar de Leon promised to deliver to him. Thereafter, was
amended to the effect that Oscar de Leon will vacate on or about September 15, 1956
his house and lot at Denver Street, Quezon City which is part of the purchase price. It
was again amended to the effect that Oscar will vacate his house and lot on December
1, 1956, because his wife was on the family way and Vicente could stay in lot No. 883
of Piedad Estate until June 1, 1957, in a document dated June 30, 1956 (the year 1957
therein is a mere typographical error) and marked Exhibit "D". Pursuant to his
promise to Gregorio, Oscar gave him as a gift or propina the sum of One Thousand
Pesos (P1,000.00) for of One succeeding in persuading Vicente to sell his lot at P1.20
per square meter or a total in round figure Hundred Nine Thousand Pesos
(P109,000.00). This gift of One Thousand Pesos (P1,000.00) was not disclosed by
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
Gregorio to Vicente. Neither did Oscar pay Vicente the additional amount of One
Thousand Pesos (P1,000.00) by way of earnest money. When the deed of sale was not
executed on August 1, 1956 as stipulated in Exhibit "C" nor on August 16, 1956 as
extended by Vicente, Oscar told Gregorio that he did not receive his money from his
brother in the United States, for which reason he was giving up the negotiation
including the amount of One Thousand Pesos (P1,000.00) given as earnest money to
Vicente and the One Thousand Pesos (P1,000.00) given to Gregorio aspropina or gift.
When Oscar did not see him after several weeks, Gregorio sensed something fishy. So,
he went to Vicente and read a portion of Exhibit "A" marked Exhibit "A-1" to the effect
that Vicente was still committed to pay him 5% commission, if the sale is
consummated within three months after the expiration of the 30-day period of the
exclusive agency in his favor from the execution of the agency contract on June 2, 1956
to a purchaser brought by Gregorio to Vicente during the said 30-day period. Vicente
grabbed the original of Exhibit "A" and tore it to pieces. Gregorio held his peace, not
wanting to antagonize Vicente further, because he had still the duplicate of Exhibit "A".
From his meeting with Vicente, Gregorio proceeded to the office of the Register of
Deeds of Quezon City, where he discovered Exhibit "G", a deed of sale executed on
September 17, 1956 by Amparo Diaz, wife of Oscar de Leon, over their house and lot at
No. 40 Denver Street, Cubao, Quezon City, in favor of Vicente as down payment by
Oscar de Leon on the purchase price of Vicente's lot No. 883 of Piedad Estate. Upon
thus learning that Vicente sold his property to the same buyer, Oscar de Leon and his
wife, he demanded in writing payment of his commission on the sale price of One
Hundred Nine Thousand Pesos (P109,000.00), Exhibit "H". He also conferred with
Oscar de Leon, who told him that Vicente went to him and asked him to eliminate
Gregorio in the transaction and that he would sell his property to him for One Hundred
Four Thousand Pesos (P104,000.00). In Vicente's reply to Gregorio's letter, Exhibit
"H", Vicente stated that Gregorio is not entitled to the 5 % commission because he sold
the property not to Gregorio's buyer, Oscar de Leon, but to another buyer, Amparo
Diaz, wife of Oscar de Leon.
The Court of Appeals found from the evidence that Exhibit "A", the exclusive agency
contract, is genuine; that Amparo Diaz, the vendee, being the wife of Oscar de Leon, the
sale by Vicente of his property is practically a sale to Oscar de Leon since husband and
wife have common or identical interests; that Gregorio and intervenor Teofilo
Purisima were the efficient cause in the consummation of the sale in favor of the
spouses Oscar de Leon and Amparo Diaz; that Oscar de Leon paid Gregorio the sum of
One Thousand Pesos (P1,000.00) as "propina" or gift and not as additional earnest
money to be given to the plaintiff, because Exhibit "66", Vicente's letter addressed to
Oscar de Leon with respect to the additional earnest money, does not appear to have
been answered by Oscar de Leon and therefore there is no writing or document
supporting Oscar de Leon's testimony that he paid an additional earnest money of One
Thousand Pesos (P1,000.00) to Gregorio for delivery to Vicente, unlike the first
amount of One Thousand Pesos (P1,000.00) paid by Oscar de Leon to Vicente as
earnest money, evidenced by the letter Exhibit "4"; and that Vicente did not even
mention such additional earnest money in his two replies Exhibits "I" and "J" to
Gregorio's letter of demand of the 5% commission.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 21
ISSUE: (1) whether the failure on the part of Gregorio to disclose to Vicente the
payment to him by Oscar de Leon of the amount of One Thousand Pesos (P1,000.00) as
gift or "propina" for having persuaded Vicente to reduce the purchase price from P2.00
to P1.20 per square meter, so constitutes fraud as to cause a forfeiture of his 5%
commission on the sale price;
(2) whether Vicente or Gregorio should be liable directly to the intervenor Teofilo
Purisima for the latter's share in the expected commission of Gregorio by reason of the
sale; and
HELD:
The duties and liabilities of a broker to his employer are essentially those which an
agent owes to his principal. 1
Consequently, the decisive legal provisions are found in Articles 1891 and 1909 of the
New Civil Code.
"Art. 1891. Every agent is bound to render an account of his
transactions and to deliver to the principal whatever he may have
received by virtue of the agency, even though it may not be owing
to the principal.
"Every stipulation exempting the agent from the obligation to
render an account shall be void."
xxx xxx xxx
"Art. 1909. The agent is responsible not only for fraud, but also
for negligence, which shall be judged with more or less rigor by
the courts, according to whether the agency was or was not for a
compensation."
Article 1891 of the New Civil Code amends Article 1720 of the old Spanish Civil Code
which provides that:
"Art. 1720. Every agent is bound to give an account of his
transaction and to pay to the principal whatever he may have
received by virtue of the agency, even though what he has
received is not due to the principal."
Consequently, the decisive legal provisions are found in Articles 1891 and 1909 of the
New Civil Code. The aforecited provisions demand the utmost good faith, fidelity,
honesty, candor and fairness on the part of the agent, the real estate broker in this
case, to his principal, the vendor. The law imposes upon the agent the absolute
obligation to make a full disclosure or complete account to his principal of all his
transactions and other material facts relevant to the agency, so much so that the law as
amended does not countenance any stipulation exempting the agent from such an
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
obligation and considers such an exemption as void. The duly of an agent is likened to
that of a trustee. This is not a technical or arbitrary rule but a rule founded on the
highest and truest principle of morality as well as of the strictest justice.
(1) An agent who takes a secret profit in the nature of a bonus, gratuity or personal
benefit from the vendee, without revealing the same to his principal, the vendor, is
guilty of a breach of his loyalty to the principal and forfeits his right to collect the
commission from his principal, even if the principal does not suffer any injury by
reason of such breach of fidelity, or that he obtained better results or that the agency is
a gratuitous one, or that usage or custom allows it, because the rule is to prevent the
possibility of any wrong, not to remedy or repair an actual damage.
By taking such profit or bonus or gift orpropina from the vendee, the agent thereby
assumes a position wholly inconsistent with that of being an agent for his principal,
who has a right to treat him, insofar as his commission is concerned, as if no agency
had existed. The fact that the principal may have been benefited by the valuable
services of the said agent does not exculpate the agent who has only himself to blame
for such a result by reason of his treachery or perfidy.
Because of his responsibility under the aforecited Article 1720, an agent is likewise
liable for estafa for failure to deliver to his principal the total amount collected by him
in behalf of his principal and cannot retain the commission pertaining to him by
subtracting the same from his collections.
Where a principal has paid an agent or broker a commission while ignorant of the fact
that the latter has been unfaithful, the principal may recover back the commission
paid, since an agent or broker who has been unfaithful is not entitled to any
compensation. If the agent does not conduct himself with entire fidelity towards his
principal, but is guilty of taking a secret profit or commission in regard the matter in
which he is employed, he loses his right to compensation on the ground that he has
taken a position wholly inconsistent with that of agent for his employer, and which
gives his employer, upon discovering it, the right to treat him so far as compensation,
at least, is concerned as if no agency had existed. This may operate to give to the
principal the benefit of valuable services rendered by the agent, but the agent has only
himself to blame for that result.
As a general rule, it is a breach of good faith and loyalty to his principal for an agent,
while the agency exists, so to deal with the subject matter thereof, or with information
acquired during the course of the agency, as to make a profit out of it for himself in
excess of his lawful compensation; and if he does so he may be held as a trustee and
may be compelled to account to his principal for all profits, advantages, rights, or
privileges acquired by him in such dealings, whether in performance or in violation of
his duties, and be required to transfer them to his principal upon being reimbursed for
his expenditures for the same, unless the principal has consented to or ratified the
transaction knowing that benefit or profit would accrue, or had accrued, to the agent,
or unless with such knowledge he has allowed the agent so as to change his condition
that he cannot be put in status quo. The application of this rule is not affected by the
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 22
fact that the principal did not suffer any injury by reason of the agent's dealings, or
that he in fact obtained better results; nor is it affected by the fact that there is a usage
or custom to the contrary, or that the agency is a gratuitous one.
The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or
broker acted only as a middleman with the task of merely bringing together the vendor
and vendee, who themselves thereafter will negotiate on the terms and conditions of
the transaction. Neither would the rule apply if the agent or broker had informed the
principal of the gift or bonus or profit he received from the purchaser and his principal
did not object thereto. Herein defendant-appellee Gregorio Domingo was not merely a
middleman of the petitioner-appellant Vicente Domingo and the buyer Oscar de Leon.
He was the broker and agent of said petitioner-appellant only. And herein petitioner-
appellant was not aware of the gift of One Thousand Pesos (P1,000.00) received by
Gregorio Domingo form the prospective buyer; much less did he consent to his agent's
accepting such a gift.
(2) Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from
Gregorio Domingo his one-half share of whatever amounts Gregorio Domingo received
by virtue of the transaction as his sub-agency contract was with Gregorio Domingo
alone and not with Vicente Domingo, who was not even aware of such sub-agency.
Since Gregorio Domingo received from Vicente Domingo and Oscar de Leon
respectively the amounts of Three Hundred Pesos (P300.00) and One Thousand Pesos
(P1,000.00) or a total of One Thousand Three Hundred Pesos (P1,300.00), one-half of
the same, which is Six Hundred Fifty Pesos (P650.00), should be paid by Gregorio
Domingo to Teofilo Purisima.
WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of
Appeals and directing the defendant-appellee Gregorio Domingo: (1) to pay to the
heirs of Vicente Domingo the sum of One Thousand Pesos (P1,000.00) as moral
damages and One Thousand Pesos (P1,000.00) as attorney's fees; (2) to pay Teofilo
Purisima the sum of Six Hundred Fifty Pesos (P650.00); and (3) to pay the costs.
27. PRIMITIVO SIASAT and MARCELINO SIASAT, petitioners, vs. INTERMEDIATE
APPELLATE COURT and TERESITA NACIANCENO, respondents.
FACTS: Sometime in 1974, respondent Teresita Nacianceno succeeded in convincing
officials of the then Department of Education and Culture (Department), to purchase
without public bidding, one million pesos worth of national flags for the use of public
schools throughout the country. The respondent was able to expedite the approval of
the purchase by handcarrying the different indorsements from one office to another,
so that by the first week of September, 1974, all the legal requirements had been
complied with, except the release of the purchase orders. When Nacianceno was
informed by the Chief of the Budget Division of the Department that the purchase
orders could not be released unless a formal offer to deliver the flags in accordance
with the required specifications was first submitted for approval, she contacted the
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
owners of the United Flag Industry on September 17, 1974. The next day, after the
transaction was discussed, the following document (Exhibit A) was drawn up:
"Mrs. Tessie Nacianceno,
"This is to formalize our agreement for you to represent United
Flag Industry to deal with any entity or organization, private or
government in connection with the marketing of our products -
flags and all its accessories.
"For your service, you will be entitled to a commission of thirty
(30%) percent.
Signed
Mr. Primitivo Siasat
Owner and Gen. Manager"
On October 16, 1974, the first delivery of 7,933 flags was made by the United Flag
Industry. The next day, on October 17, 1974, the respondent's authority to represent
the United Flag Industry was revoked by petitioner Primitivo Siasat.
According to the findings of the courts below, Siasat, after receiving the payment of
P469,980.00 on October 23, 1974 for the first delivery, tendered the amount of
P23,900.00 or five percent (5%) of the amount received, to the respondent as payment
of her commission. The latter allegedly protested. She refused to accept the said
amount insisting on the 30% commission agreed upon. The respondent was prevailed
upon to accept the same, however, because of the assurance of the petitioners that
they would pay the commission in full after they delivered the other half of the order.
The respondent states that she later on learned that petitioner Siasat had already
received payment for the second delivery of 7,833 flags. When she confronted the
petitioners, they vehemently denied receipt of the payment, at the same time claiming
that the respondent had no participation whatsoever with regard to the second
delivery of flags and that the agency had already been revoked.
She filed an action in CFI to recover the following commissions: 25% as balance on the
first delivery and 30% on the second delivery. LLpr
TC & IAC: decided in favor of the respondent.
In assailing the appellate court's decision, the petition tenders the following
arguments: first, the authorization making the respondent the petitioner's
representative merely states that she could deal with any entity in connection with the
marketing of their products for a commission of 30%. There was no specific
authorization for the sale of 15,666 Philippine flags to the Department
ISSUE: WON respondent has no capacity to represent petitioners in the transaction
with the Department
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 23
HELD: We find petitioners' argument regarding respondent's incapacity to represent
them in the transaction with the Department untenable. There are several kinds of
agents. To quote a commentator on the matter:
"An agent may be (1) universal; (2) general, or (3) special. A
universal agent is one authorized to do all acts for his principal
which can lawfully be delegated to an agent. So far as such a
condition is possible, such an agent may be said to have universal
authority.
"A general agent is one authorized to do all acts pertaining to a
business of a certain kind or at a particular place, or all acts
pertaining to a business of a particular class or series. He has
usually authority either expressly conferred in general terms or
in effect made general by the usages, customs or nature of the
business which he is authorized to transact.
"An agent, therefore, who is empowered to transact all the
business of his principal of a particular kind or in a particular
place, would, for this reason, be ordinarily deemed a general
agent.
"A special agent is one authorized to do some particular act or to
act upon some particular occasion. He acts usually in accordance
with specific instructions or under limitations necessarily implied
from the nature of the act to be done."
One does not have to undertake a close scrutiny of the document embodying the
agreement between the petitioners and the respondent to deduce that the latter was
instituted as a general agent. Indeed, it can easily be seen by the way general words
were employed in the agreement that no restrictions were intended as to the manner
the agency was to be carried out or in the place where it was to be executed. The
power granted to the respondent was so broad that it practically covers the
negotiations leading to, and the execution of, a contract of sale of petitioners'
merchandise with any entity or organization.
28. GERMANN & CO., plaintiffs-appellees, vs. DONALDSON, SIM & CO., defendants-
appellants.
The validity of a power of attorney executed in Germany between German subjects
should considered according to the laws of that country.
The right to commence action for collection of debts owing to principal is not an
incident of strict ownership, which must be conferred in express terms.
The power to "legally compel" the payment of debts owing to the principal is an
express grant of the right to bring suit for the collection of such debts.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
FACTS: This is an incident of want of personality of the plaintiffs attorney. The action
is to recover money said to be due for freight under charter party. It was brought by
virtue of general power of suits, executed in Manila by Fernando Kammerzell, and
purports to be a substitution in favor of several attorneys of power given to
Kammerzell in an instrument executed in Berlin by Max Leonard Tornow, the sole
owner of the business carried on in Berlin and Manila under the name Germann & Co.
The first-named instrument was authenticated by a notary with the formalities
required by the domestic laws. The other was not so authenticated. Both Tornow and
Kammerzell are citizens of Germany. Tornow is a resident of Berlin and Kammerzell of
Manila.
The defendants claim that the original power is invalid under article 1280, No. 5, of the
Civil Code, which provides that powers for suits must be contained in a public
instrument. No claim is made that the document was not executed with the formalities
required by the German law in the case of such an instrument. We see no reason why
the general principle that the formal validity of contracts is to be tested by the laws of
the country where they are executed should not apply.
The defendants also claim that the original power cannot be construed as conferring
upon Kammerzell authority to institute or defend suits, from which contention, if
correct, it would of course follow that the delegated power is invalid. In support of this
contention reliance is placed upon article 1713 of the Civil Code, by which it is
provided that "an agency stated in general terms only includes acts of administration,"
and that "in order to compromise, alienate, mortgage, or to execute any other act of
strict ownership an express commission is required."
ISSUE: WON the original power cannot be construed as conferring upon Kammerzell
authority to institute or defend suits
HELD: YES, original power cannot be construed as conferring upon Kammerzell
authority to institute or defend suits.
By this instrument Tornow constitutes Kammerzell his "true and lawful attorney with
full power to enter the firm name of Germann & Co. in the Commercial Registry of the
city of Manila as a branch of the house of Germann & Co. in Berlin, it being the purpose
of this power to invest said attorney with full legal powers and authorization to direct
and administer in the city of Manila for us and in our name a branch of our general
commercial business of importation and exportation, for which purpose he may make
contracts of lease and employ suitable assistants, as well as sign every kind of
documents, accounts, and obligations connected with the business which may be
necessary, take charge in general of the receipt and delivery of merchandise connected
with the business, sign all receipts for sums of money and collect them and exact their
payment by legal means, and in general execute all the acts and things necessary for
the perfect carrying on of the business committed to his charge in the same manner as
we could do ourselves if we were present in the same place."
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 24
We should not be inclined to regard the institution of a suit like the present, which
appears to be brought to collect a claim accruing in the ordinary course of the
plaintiff's business, as properly belonging to the class of acts described in article 1713
of the Civil Code as acts "of strict ownership." It seems rather to be something which is
necessarily a part of the mere administration of such a business as that described in
the instrument in question and only incidentally, if at all, involving a power to dispose
of the title to property.
But whether regarded as an act of strict ownership or not, it appears to be expressly
and specially authorized by the clause conferring the power to "exact the payment" of
sums of money "by legal means." This must mean the power to exact the payment of
debts due the concern by means of the institution of suits for their recovery. If there
could be any doubt as to the meaning of this language taken by itself, it would be
removed by a consideration of the general scope and purpose of the instrument in
which it occurs. (See Civil Code, art. 1286.) The main object of the instrument is clearly
to make Kammerzell the manager of the Manila branch of the plaintiff's business, with
the same general authority with reference to its conduct which his principal would
himself possess if he were personally directing it. It cannot be reasonably supposed, in
the absence of very clear language to that effect, that it was the intention of the
principal to withhold from his agent a power so essential to the efficient management
of the business entrusted to his control as that to sue for the collection of debts.
29. THE MUNICIPAL COUNCIL OF ILOILO, plaintiff-appellee, vs. JOSE EVANGELISTA
ET AL., defendants-appellees. TAN ONG SZE VDA. DE TAN TOCO, appellant.
FACTS: March 20, 1924: Court of First Instance of Iloilo rendered judgment in civil
case No. 3514 thereof, wherein the appellant herein, Tan Ong Sze Vda. de Tan Toco
was the plaintiff, and the municipality of Iloilo the defendant, and the former sought to
recover of the latter the value of a strip of land belonging to said plaintiff taken by the
defendant to widen a public street. The judgment entitled the plaintiff to recover Php
42,966.40 representing the value of said strip of land from the municipality of Iloilo.
On appeal to the SC, judgment was affirmed. After the case was remanded to the court
of origin and the judgment rendered therein had become final and executory. Attorney
Jose Evangelista in his own behalf and as counsel for the administratix of Jose Ma.
Arroyos intestate estate filed a claim in the said case for professional services
rendered by him, which the court acting with the consent of the appellant widow, fixed
at 15% of the amount of the judgment. At the hearing on said claim, the claimants
appeared, as did also the Philippine National Bank, which prayed that the amount of
the judgment be turned over to it because the land taken over had been mortgaged to
it. Antero Soriano also appeared claiming the amount of the judgment as it had been
assigned to him, and by him, in turn, assigned to Mauricio Cruz & Co., Inc. After
hearing, all the adverse claims on the amount of the judgment, the court ordered that
the attorneys lien in the amount of 15% of the judgment be recorded in favor of
Attorney Evangelistain his own behalf and counsel for the administratix of the
deceased Jose Ma. Arroyo and directed the Municipality of Iloilo to file an action of
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
interpleading against the adverse claimants: the PNB,Antero Soriano, Mauricio Cruz
& Co., Jose Evangelista and Jose Arroyo. March 29, 1928: with the approval of the
auditor of the provincial treasurer of Iloilo and with the Executive Bureau paid the late
Antero Soriano the amount of Php 6,000.00 in part payment of the judgment
mentioned above assigned to him by Tan Boon Tiong acting as attorney-in-fact of the
appellant herein, Tan Ong Sze Vda. de Tan Toco. December 18, 1928: the municipal
treasurer of Iloilo deposited with the clerk of the CFI of Iloilo the amount of Php
6,000.00 on account of the judgment rendered in said civil case.
In pursuance of the resolution of the court below ordering that the attorneys lien in
the amount of15% of the judgment be recorded in favor of Attorney Jose Evangelista.
In his own behalf and as a counsel for the late Jose Ma. Arroyo, the said clerk of court
delivered on the same date to said Attorney Evangelista the said amount of Php
6,000.00
With these 2 payments of Php 6,000.00 each making a total of Php 12,000.00 , the
judgment forPhp 42,966.44 against the Municipality of Iloilo was reduced to Php
30,966.40 which was adjudicated by said court to Maurice Cruz & Co. This appeal, then
is confined to the claim of Mauricio Cruz & Co. as alleged assignee of the rights of the
late Soriano by virtue of the said judgment in payment of professional services
rendered by him to the said widow and her co-heirs
Issue: (1) WON assignment made by Tan Buntiong, as attorney-in-fact of Tan Ong
Sze Vda. deTan Toco to Atty. Soriano, of all the credits, rights and interests belonging
to Tan Ong Sze Vda. de TanToco in the amount of P42,966.40, plus the costs of court
against municipal council of Iloilo, inconsideration of the professional services
rendered by Soriano to the widow is valid
(2) WON the other attorney-in-facts, Tan Montanos, consent is required to validate
the actsof the other attorney-in-fact, Tan Butiong, who assigned the amount
as payment to Soriano
Held: (1) YES . Tan Boon Tiong is authorized to employ and contract for the services
of lawyers upon such conditions as he may deem convenient, to take charge of any
actions necessary or expedient for the interests of his principal, and to defend suits
brought against her. This power necessarily implies the authority to pay for the
professional services thus engaged. In the present case, the assignment made by Tan
Boon Tiong, as Attorney-in-fact for the appellant, in favor of Attorney Antero Soriano
for professional services rendered in other cases in the interests of the appellant
and her coheirs, was that credit which she had against the municipality of Iloilo, and
such assignment was equivalent to the payment of the amount of said credit to Antero
Soriano for professional services
(2) No. With regard to the failure of the other attorney-in-fact of the appellant, Tan
Montano, authorized by Tan Toco, to consent to the deed of assignment, the latter
being also authorized to pay, in the name and behalf of the principal, all her debts and
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 25
the liens and encumbrances her property, the very fact that different letters of
attorney were given to each of these two representatives shows that itwas not the
principal's intention that they should act jointly in order to make their acts valid. From
the syllabus: When two letters of attorney are issued simultaneously to two different
attorneys-in-fact, but covering the same powers shows that it was not the principals
intention that they should act jointly in order to make their acts valid; the separate act
of one of the attorney-in-fact, even when not consented to by the other attorney-in-
fact, is a valid and binding on the principal, especially the principal did not only
repudiate the act done, but continued to retain the said attorney-in-fact.
30. CABALLERO VS. DEIPARINE, 60 SCRA 136
Facts: Plaintiffs are the children by the first marriage. Vicenta Bucao. Defendants
(Ragas) are the children by Bucao's second marriage. Vicenta Bucao and Tomas Raga
acquired land in Cebu. of this land was sold to Antonio Caballero (one of the
plaintiffs). Land was never transferred thru title. Vicenta dies, but no partition of her
estate was made between her heirs-Later on, Deiparine acquired the whole lot
through purchase from Tomas Raga. TCT was issued to Deiparine, who instituted
ejectment proceedings against the plaintiff. Plaintiffs assailed said sale, alleging said
land was previously sold to him and is also forms part of the share inherited from
Vicenta.
During pre-trial hearing, parties allegedly executed a stipulation of facts. The
stipulation was only signed by Atty. Guba (for plaintiffs) and Atty. Hilario Davide (for
respondents). From the stipulation of facts, the CFI rendered decision in favor of the
defendants (that Deiparine owns the whole lot). Plaintiffs filed for reconsideration
saying that they were never made to participate in the preparation and formation of
the stipulation of facts.
Issue: Whether or not the stipulation of facts is valid.
Ratio: No. Court found it puzzling that petitioners signatures were not affixed in the
stipulation of facts even if Atty. Guba required said stipulation to be verified by the
plaintiff (despite the fact that by its nature/subject matter the complaint did not
require verification).
Said stipulation of facts entered into by parties constituted a compromise agreement
(which practically confesses judgement), without the consent or conformity of his
clients Guba, as counsel for plaintiffs, agreed to facts adverse to his client's interest in
the compromise agreement
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
i.e. agreeing that Deiparine was a buyer in good faith (despite plaintiff's claim
that they can prove that Deiparine was a purchaser in bad faith)
that during her lifetime, Vicenta Bucao, with conformity of her husband, sold
her undivided half of said land to Tomas Raga(despite the fact that no
evidence was adduced in support of this claim)
Admission of such facts prejudicial to his client's interests was beyond the scope of his
authority as counsel and practically gave away the case. The conduct of Atty. Guba in
entering into a compromise agreement without the knowledge and consent of his
clients is not in keeping with the sworn duty of a lawyer to protect the interest of his
clients. It amounts to fraud. The stipulation of facts which was made the basis of the
decision was null and void as it contained serious unauthorized admissions against the
interest of the plaintiffs who had no hand in its preparation. Attorneys cannot, without
special authority, compromise their clients litigation. The case is remanded to court of
origin for further proceedings and the amended complaint submitted by plaintiffs
should be accepted.
Note:
No agency related provision was cited in the decision, but Rule 138, Section 23 of
the Rules of Court was cited providing that: Authority of attorneys to bind
clients. Attorneys have authority to bind their clients in any case by any
agreement in relation thereto made in writing, and in taking appeals, and in all
matters of ordinary judicial procedure.
But they cannot, without special authority, compromise their client's litigation,
or receive anything in discharge of a client's claim but the full amount in cash.
Hence we can infer that the relevant provision may be Art. 1878 (3) which
provides that: Art. 1878. Special powers of attorney are necessary in the
following cases:
(3) To compromise, to submit questions to arbitration, to renounce the right to
appeal from a judgment, to waive objections to the venue of an action or to
abandon a prescription already acquired.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 26
31. PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. MAXIMO STA. MARIA, ET
AL., VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO and LEONILA, all
surnamed STA. MARIA,
FACTS: Plaintiff bank filed this action on February 10, 1961 against defendant
Maximo Sta. Maria and his six brothers and sisters, defendants-appellants, Valeriana,
Emeteria, Teofilo, Quintin, Rosario and Leonila, all surnamed Sta. Maria, and the
Associated Insurance & Surety Co., Inc. as surety, for the collection of certain amounts
representing unpaid balances on two agricultural sugar crop loans due allegedly from
defendants. The said sugar crop loans were obtained by defendant Maximo Sta. Maria
from plaintiff bank under a special power of attorney, executed in his favor by his six
brothers and sisters, defendants-appellants herein, to mortgage a 16-odd hectare
parcel of land, jointly owned by all of them, in the Municipality of Dinalupihan, Bataan.
In addition, Valeriana Sta. Maria alone also executed in favor of her brother, Maximo, a
special power of attorney to borrow money and mortgage any real estate owned by
her, granting him the following authority:
For me and in my name to borrow money and make, execute, sign and deliver
mortgages of real estate now owned by me standing in my name and to make, execute,
sign and deliver any and all promissory notes necessary in the premises.
By virtue of the two above powers, Maximo Sta. Maria applied for two separate crop
loans with the plaintiff bank, one in the amount of P15,000.00, of which only the sum
of P13,216.11 was actually extended by plaintiff, and the other in the amount of
P23,000.00, of which only the sum of P12,427.57 was actually extended by plaintiff. As
security for the two loans, Maximo Sta. Maria executed in his own name in favor of
plaintiff bank two chattel mortgages on the standing crops, guaranteed by surety
bonds for the full authorized amounts of the loans executed by the Associated
Insurance & Surety Co., Inc. as surety with Maximo Sta. Maria as principal. The records
of the crop loan application further disclose that among the securities given by
Maximo for the loans were a "2nd mortgage on 25.3023 Has. of sugarland, including
sugar quota rights therein" including, the parcel of land jointly owned by Maximo and
his six brothers and sisters herein for the 1952-1953 crop loan, with the notation that
the bank already held a first mortgage on the same properties for the 1951-1952 crop
loan of Maximo, 4 and a 3rd mortgage on the same properties for the 1953-1954 crop
loan.
The trial court rendered a judgment declaring Maximo Sta. Maria, together with
Valeriana and the others, jointly and severally liable to the plaintiff bank. Defendant
Maximo Sta. Maria and his surety, defendant Associated Insurance & Surety Co., Inc.
who did not resist the action, did not appeal the judgment. This appeals been taken by
his six brothers and sisters, defendants-appellants who reiterate in their brief their
main contention in their answer to the complaint that under this special power of
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
attorney, Exh. E, they had not given their brother, Maximo, the authority to borrow
money but only to mortgage the real estate jointly owned by them; and that if they are
liable at all, their liability should not go beyond the value of the property which they
had authorized to be given as security for the loans obtained by Maximo. In their
answer, defendants-appellants had further contended that they did not benefit
whatsoever from the loans, and that the plaintiff bank's only recourse against them is
to foreclose on the property which they had authorized Maximo to mortgage.
ISSUE: Whether or not Maximo Sta. Maria, together with Valeriana Sta. Maria
and the others should be held jointly and severally liable to the plaintiff bank.
HELD: Plaintiff bank has not made out a cause of action against defendants-
appellants (except Valeriana), so as to hold them liable for the unpaid balances
of the loans obtained by Maximo under the chattel mortgages executed by him in
his own name alone. The authority granted by defendants-appellants (except
Valeriana) unto their brother, Maximo, was merely to mortgage the property jointly
owned by them. They did not grant Maximo any authority to contract for any loans in
their names and behalf. Maximo alone, with Valeriana who authorized him to borrow
money, must answer for said loans and the other defendants-appellants' only liability
is that the real estate authorized by them to be mortgaged would be subject to
foreclosure and sale to respond for the obligations contracted by Maximo. But they
cannot be held personally liable for the payment of such obligations, as erroneously
held by the trial court.
The fact that Maximo presented to the plaintiff bank Valeriana's additional special
power of attorney expressly authorizing him to borrow money, Exh. E-1, aside from
the authority to mortgage executed by Valeriana together with the other defendants-
appellants also in Maximo's favor, lends support to our view that the bank was not
satisfied with the authority to mortgage alone. For otherwise, such authority to
borrow would have been deemed unnecessary and a surplusage. And having failed to
require that Maximo submit a similar authority to borrow, from the other defendants-
appellants, plaintiff, which apparently was satisfied with the surety bond for
repayment put up by Maximo, cannot now seek to hold said defendants-appellants
similarly liable for the unpaid loans. Plaintiff's argument that "a mortgage is simply an
accessory contract, and that to effect the mortgage, a loan has to be secured" 10 falls,
far short of the mark. Maximo had indeed, secured the loan on his own account and the
defendants-appellants had authorized him to mortgage their respective undivided
shares of the real property jointly owned by them as security for the loan. But that was
the extent of their authority land consequent liability, to have the real property
answer for the loan in case of non-payment. It is not unusual in family and business
circles that one would allow his property or an undivided share in real estate to be
mortgaged by another as security, either as an accommodation or for valuable
consideration, but the grant of such authority does not extend to assuming personal
liability, much less solidary liability, for any loan secured by the grantee in the absence
of express authority so given by the grantor.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 27
The outcome might be different if there had been an express ratification of the loans
by defendants-appellants or if it had been shown that they had been benefited by the
crop loans so as to put them in estoppel. But the burden of establishing such
ratification or estoppel falls squarely upon plaintiff bank. It has not only failed to
discharge this burden, but the record stands undisputed that defendant-appellant
Quintin Sta. Maria testified that he and his co-defendants executed the authority to
mortgage "to accommodate (my) brother Dr. Maximo Sta. Maria ... and because he is
my brother, I signed it to accommodate him as security for whatever he may apply as
loan. Only for that land, we gave him as, security" and that "we brothers did not
receive any centavo as benefit." 11 The record further shows plaintiff bank itself
admitted during the trial that defendants-appellants "did not profit from the loan" and
that they "did not receive any money (the loan proceeds) from (Maximo)." 12 No
estoppel, therefore, can be claimed by plaintiff as against defendants-appellants.
Now, as to the extent of defendant Valeriana Sta. Maria's liability to plaintiff. As
already stated above, Valeriana stands liable not merely on the mortgage of her share
in the property, but also for the loans which Maximo had obtained from plaintiff bank,
since she had expressly granted Maximo the authority to incur such loans. (Exh. E-1.)
Although the question has not been raised in appellants' brief, we hold that Valeriana's
liability for the loans secured by Maximo is not joint and several or solidary as
adjudged by the trial court, but only joint, pursuant to the provisions of Article 1207 of
the Civil Code that "the concurrence ... of two or more debtors in one and the same
obligation does not imply that ... each one of the (debtors) is bound to render entire
compliance with the prestation. There is a solidary liability only when the obligation
expressly so states, or when the law or the nature of the obligation requires
solidarity." It should be noted that in the additional special power of attorney, Exh. E-
1, executed by Valeriana, she did not grant Maximo the authority to bind her solidarity
with him on any loans he might secure thereunder.
32. BA FINANCE CORPORATION, petitioner, vs.THE HONORABLE COURT OF
APPEALS, AUGUSTO YULO, LILY YULO (doing business under the name and style
of A & L INDUSTRIES), respondents.
FACTS: Private respondent Augusto Yulo secured a loan from the petitioner in the
amount of P591,003.59 as evidenced by a promissory note he signed in his own behalf
and as representative of the A & L Industries. Respondent Yulo presented an alleged
special power of attorney executed by his wife, respondent Lily Yulo, who manages A
& L Industries and under whose name the said business is registered, purportedly
authorizing Augusto Yulo to procure the loan and sign the promissory note. About two
months prior to the loan, however, Augusto Yulo had already left Lily Yulo and their
children and had abandoned their conjugal home. When the obligation became due
and demandable, Augusto Yulo failed to pay the same.
On October 7, 1975, the petitioner filed its amended complaint against the spouses
Augusto and Lily Yulo on the basis of the promissory note. It also prayed for the
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
issuance of a writ of attatchment alleging that the said spouses were guilty of fraud in
contracting the debt upon which the action was brought and that the fraud consisted
of the spouses' inducing the petitioner to enter into a contract with them by executing
a Deed of Assignment in favor of the petitioner, assigning all their rights, titles and
interests over a construction contract executed by and between the spouses and A.
Soriano Corporation on June 19, 1974 for a consideration of P615,732.50 when, in
truth, the spouses did not have any intention of remitting the proceeds of the said
construction contract to the petitioner because despite the provisions in the Deed of
Assignment that the spouses shall, without compensation or costs, collect and receive
in trust for the petitioner all payments made upon the construction contract and shall
remit to the petitioner all collections therefrom, the said spouses failed and refuse to
remit the collections and instead, misappropriated the proceeds for their own use and
benefit, without the knowledge or consent of the petitioner. The trial court issued the
writ of attachment prayed for thereby enabling the petitioner to attach the properties
of A & L Industries. Apparently not contented with the order, the petitioner filed
another motion for the examination of attachment debtor, alleging that the properties
attached by the sheriff were not sufficient to secure the satisfaction of any judgment
that may be recovered by it in the case. This was likewise granted by the court.
Private respondent Lily Yulo filed her answer with counterclaim, alleging that
although Augusta Yulo and she are husband and wife, the former had abandoned her
and their children five (5) months before the filing of the complaint; that they were
already separated when the promissory note was executed; that her signature in the
special power of attorney was forged because she had never authorized Augusto Yulo
in any capacity to transact any business for and in behalf of A & L Industries, which is
owned by her as a single proprietor, that she never got a single centavo from the
proceeds of the loan mentioned in the promissory note; and that as a result of the
illegal attachment of her properties, which constituted the assets of the A & L
Industries, the latter closed its business and was taken over by the new owner.
After hearing, the trial court rendered judgment dismissing the petitioner's complaint
against the private respondent Lily Yulo and A & L Industries and ordering the
petitioner to pay the respondent Lily Yulo P660,000.00 as actual damages;
P500,000.00 as unrealized profits; P300,000.00 as exemplary damages; P30,000.00 as
and for attorney's fees; and to pay the costs. The petitioner appealed. The Court of
Appeals affirmed the trial court's decision except for the exemplary damages which it
reduced from P300,000.00 to P150,000.00 and the attorney's fees which were reduced
from P30,000.00 to P20,000.00.
ISSUE: 1. Whether or not the signature of the private respondent on the Special
Power of Attorney was forged.
2. Whether or not A & L Industries could be held liable for the obligations
contracted by Augusto Yulo, as administrator of the partnership.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 28
HELD: 1. According to the petitioner, the Court of Appeals disregarded the direct
mandate of Section 23, Rule 132 of the Rules of Court which states in part that
evidence of handwriting by comparison may be made "with writings admitted or
treated as genuine by the party against whom the evidence is offered, or proved to be
genuine to the satisfaction of the judge," and that there is no evidence on record which
proves or tends to prove the genuineness of the standards used.
There is no merit in this contention. The records show that the signatures which were
used as "standards" for comparison with the alleged signature of the private
respondent in the Special Power of Attorney were those from the latter's residence
certificates in the years 1973, 1974 and 1975, her income tax returns for the years
1973 and 1975 and from a document on long bond paper dated May 18, 1977. Not
only were the signatures in the foregoing documents admitted by the private
respondent as hers but most of the said documents were used by the private
respondent in her transactions with the government. As was held in the case of
Plymouth Saving & Loan Assn. No. 2 v. Kassing (125 NE 488, 494):
We believe the true rule deduced from the authorities to be that the genuineness of a
"standard" writing may be established (1) by the admission of the person sought to be
charged with the disputed writing made at or for the purposes of the trial or by his
testimony; (2) by witnesses who saw the standards written or to whom or in whose
hearing the person sought to be charged acknowledged the writing thereof; (3) by
evidence showing that the reputed writer of the standard has acquiesced in or
recognized the same, or that it has been adopted and acted upon by him his business
transactions or other concerns....
Furthermore, the judge found such signatures to be sufficient as standards. In the case
of Taylor-Wharton Iron & Steel Co. v. Earnshaw (156 N.E. 855, 856), it was held: When
a writing is offered as a standard of comparison it is for the presiding judge to decide
whether it is the handwriting of the party to be charged. Unless his finding is founded
upon error of law, or upon evidence which is, as matter of law, insufficient to justify
the finding, this court will not revise it upon exceptions."
2. There is no dispute that A & L Industries was established during the marriage
of Augusta and Lily Yulo and therefore the same is presumed conjugal and the fact that
it was registered in the name of only one of the spouses does not destroy its conjugal
nature (See Mendoza v. Reyes, 124 SCRA 161, 165). However, for the said property to
be held liable, the obligation contracted by the husband must have redounded to the
benefit of the conjugal partnership under Article 161 of the Civil Code. In the present
case, the obligation which the petitioner is seeking to enforce against the conjugal
property managed by the private respondent Lily Yulo was undoubtedly contracted by
Augusto Yulo for his own benefit because at the time he incurred the obligation he had
already abandoned his family and had left their conjugal home. Worse, he made it
appear that he was duly authorized by his wife in behalf of A & L Industries, to procure
such loan from the petitioner. Clearly, to make A & L Industries liable now for the said
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
loan would be unjust and contrary to the express provision of the Civil Code. As we
have ruled in Luzon Surety Co., Inc. v. De Gracia (30 SCRA 111, 115-117):
As explained in the decision now under review: "It is true that the husband is the
administrator of the conjugal property pursuant to the provisions of Art. 163 of the
new Civil Code. However, as such administrator the only obligations incurred by the
husband that are chargeable against the conjugal property are those incurred in the
legitimate pursuit of his career, profession or business with the honest belief that he is
doing right for the benefit of the family. This is not true in the case at bar for we
believe that the husband in acting as guarantor or surety for another in an indemnity
agreement as that involved in this case did not act for the benefit of the conjugal
partnership. Such inference is more emphatic in this case, when no proof is presented
that Vicente Garcia in acting as surety or guarantor received consideration therefore,
which may redound to the benefit of the conjugal partnership.(Ibid, pp. 46-47).
In the most categorical language, a conjugal partnership under that provision is liable
only for such "debts and obligations contracted by the husband for the benefit of the
conjugal partnership." There must be the requisite showing then of some advantage
which clearly accrued to the welfare of the spouses. There is none in this case.
Moreover, it would negate the plain object of the additional requirement in the
present Civil Code that a debt contracted by the husband to bind a conjugal
partnership must redound to its benefit. That is still another provision indicative of
the solicitude and tender regard that the law manifests for the family as a unit. Its
interest is paramount; its welfare uppermost in the minds of the codifiers and
legislators.
We, therefore, rule that the petitioner cannot enforce the obligation contracted by
Augusto Yulo against his conjugal properties with respondent Lily Yulo. Thus, it
follows that the writ of attachment cannot issue against the said properties.
33. THE DIRECTOR OF PUBLIC WORKS, plaintiff-appellee, vs. SING JUCO, ET AL.,
defendants. SING JUCO, SING BENGCO and PHILIPPINE NATIONAL BANK,
appellants.
Facts: Sing Juco, Sing Bengco, Gonzales Tanboontien, and Mariano de la Rama (Sing
Juco et al.) are co-owners of a parcel of land located at the mouth of Iloilo river. Said
land is so low that it is frequently flooded. In 1920 the co-owners conveyed the
property by way of mortgage to the Philippine National Bank to secure a credit of
Php170,000. In 1921, the government was planning extensive harbor improvements
in the vicinity which required dredging to be carried out by the Bureau of Public Work
(the Bureau). The dredging activity made it necessary to secure an area where the dirt
and mud from the areas dredged could be deposited. The aforementioned land was a
prime candidate, being accessible and low. The Bureau contracted with the co-owners
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 29
Sing Juco et al. for this purpose, where the co-owners would pay the Bureau 20 to 75
centavos per cubic meter of material deposited on the property. It was contemplated
in the contract that the Bureau would furnish only the material dredged from the river
as a result of the government improvements, which was expected to be 250,000 cubic
meters.
In connection with the contract mentioned, the Bureau required that the co-owners
provide a bond in the amount of Php150,000, approximately twice the estimated cost
of the filling, conditioned for the payment of the amount due from the owners. This
bond was executed contemporaneously with the main contract. One of the names
appearing upon said contract was that of Casa Viuda de Tan Toco, purporting to be
signed by M. de la Rama x x x as the formers attorney-in-fact. The Bureau, having
completed the dredging, demanded payment for the dredged material. The coowners
failed to pay, prompting the Director of the Burea to file an action to recover the
amount due from the parties of the suretyship and to enforce the obligation as a lien
upon the property. The PNB was impleaded as having an interest in the property
under its prior mortgage. Tan Ong Sze, the widow (viuda) of Tan Toco was also
impleaded by reason of her supposed liability derived from the act of De la Rama in
signing the firm Casa Viuda de Tan Toco as a surety on bond. In its complaint, the
government conceded to the primacy of PNBs encumbrance. In their defense, the co-
owners averred that the land had not been benefited, since the Bureau had not
appreciably raised the level of the land above high water. Tan Ong Sze avers that she
should be released from the bond since de la Rama signed Casa Viuda de Tan Toco
on the surety without authority. PNB asserts that the mortgage was superior to
governments lien.
The trial court ordered: (1) the co-owners to pay the government Php70,938; (2) that
the governments lien was superior to PNBs mortgage; and (3) that Tan Ong Sze was
personally liable in case the coowners fail to satisfy their debt to the government. The
defendants appeal as follows: (1) The co-owners and sureties argue to be released
from their respective obligations on the basis of the Bureaus breach of contract; (2)
Tan Ong Sze reasserts the same argument of want of authority of de la Rama to bind
her in the suretyship; and (3) PNB reasserts that its mortgage had be constituted first
is therefore superior to the governments lien.
Issue: 1. Is the Bureau in breach of its contract with the co-owners?
2. Is Tan Ong Sze bound as a surety by virtue of de la Ramas act of signing
as her attorney-in-fact?
3. Is PNBs mortgage superior to the governments lien?
Held: 1. No. The government is not in breach. The Bureau is not obligated to raise the
co-owners land to any specified level. The obligation is merely to furnish only the
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
material dredged from the river as a result of the proposed improvements. The
mention of 250,000 cubic meters of material in the contract, although not binding on
the government as it was merely an estimate of the amount of material to be
deposited, was duly satisfied. In fact, the Bureau deposited more than the mentioned
250,000 cubic meters.
2. No. Tan Ong Sze is not bound as surety. The powerof-attorney conferred to de
la Rama relate more specifically to the execution of contracts relating to property x x
x. Power to execute a contract so exceptional a nature as a contract of suretyship or
guaranty cannot be inferred from the general words contained in these powers.
In article 1827 of the Civil Code it is declared that guaranty shall not be presumed; it
must be expressed and cannot be extended beyond its specified limits. By analogy a
power of attorney to execute a contract of guaranty should not be inferred from vague
or general words, especially when such words have their origin and explanation in
particular powers of a wholly different nature. It results that the trial court was in
error in giving personal judgment against Tan Ong Sze upon the bond upon which she
was sued in this case.
3. Yes. PNBs mortgage is superior to the governments lien. The mortgage was
created by the lawful owners at a time when no other competing interest existed in
the property. The lien of the mortgage therefore attached to the fee, or unlimited
interest of the owners in the property. On the other hand, the lien created by the filling
contract was created after the mortgage had been made and registered, and therefore,
after the owners of the property had parted with the interest created by the mortgage.
The Government's lien owes its origin to the contract, and derives its efficacy from the
volition of the contracting parties. But no party can by contract create a right in
another intrinsically greater than that which he himself possess. The owners, at the
time this contract was made, were owners of the equity of redemption only and not of
the entire interest in the property, and the lien created by the contract could only
operate upon the equity of redemption.
34. THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD., INC., plaintiff-
appellee, vs. JUAN M. POIZAT, ET AL., defendants. GABRIELA ANDREA DE
COSTER, appellant.
FACTS: August 25, 1905, the appellant, with his consent executed to and in favor of
her husband, Juan M. Poizat, a general power of attorney, which among other things,
authorized him to do in her name, place and stead, and making use of her rights and
actions, the following things: To loan or borrow any amount in cash or fungible
conditions he may deem convenient collecting or paying the principal or interest, for
the time, and under the principal of the interest, when they respectively should or
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 30
private documents, and making there transactions with or without mortgage, pledge
or personal securities.
November 2, 1912, Juan M. Poizat applied for and obtained from the plaintiff a credit
for the sum of 10,000 Pounds Sterling to be drawn on the" Banco Espanol del Rio de la
Plata" in London not later than January, 1913. Later, to secure the payment of the loan,
he executed a mortgage upon the real property of his wife. For failure to pay the loan,
on November 12, 1923, the plaintiff brought an action against the defendants to
foreclose the mortgage. In this action, the summons was served upon the defendant
Juan M. Poizat only, who employed the services of Antonio A. Sanz to represent the
defendants. The attorneys filed a general appearance for all of them, and later an
answer in the nature of a general denial.
February 18, 1924, when the case was called for trial, Jose Galan y Blanco in open
court admitted all of the allegations made in the compliant, and consented that
judgment should be rendered as prayed for . Later, Juan M. Poizat personally, for
himself and his codefendants, file an exception to the judgment and moved for a new
trial, which was denied March 31, 1924. August 22, 1924, execution was issued
directing the sale of the mortgaged property to satisfy the judgment. September 18,
1924, the property, which had an assessed value of P342,685, was sold to the plaintiff
for the sum of P100,000. September 23, 1924, and for the first time, the appellant
personally appeared by her present attorney, and objected to the confirmation of the
sale, among other things, upon illegally executed, and is null and void, because the
agent of this defendant was not authorized to execute it. That there was no
consideration. That the plaintiff, with full knowledge that J. M. Poizat was acting
beyond the scope of his authority, filed this action to subject the property of this
defendant to the payment of the debt which, as to appellant, was not a valid contract.
That the judgment was rendered by confession when the plaintiff and J. M. Poizat
knew that Poizat was not authorized to confess judgment, and that the proceeding was
a constructive fraud. That at the time the action was filed and the judgment rendered,
this defendant was absent from the Philippine Islands, and had no knowledge of the
execution of the mortgage. That after the judgment of foreclosure became final and
order of the sale of the property was made, that this defendant for the first time
learned that he mortgage contract was tainted with fraud, and that she first knew and
learned of such things on the 11th of September, 1924. That J. M. Poizat was not
authorized to bind her property to secure the payment of his personal debts. That the
plaintiff knew that the agent of the defendant was not authorized to bind her or her
property. That the mortgage was executed to secure a loan of 10,000 Pounds which
was not made to this defendant or for her benefit, but was made to him personally and
for the personal use and benefit of J. M. Poizat.
ISSUE: Whether or not Juan M. Poizat acted in behalf of his principal and binds
the latter (which is his wife).
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
HELD: Under his power of attorney, Juan M. Poizat may have had authority to borrow
money and mortgage the real property of his wife, but the law specifies how and in
what manner it must be done, and the stubborn fact remains that, as to the transaction
in question, that power was never exercised. The mortgage in question was executed
by him and him only, and for such reason, it is not binding upon the wife, and as to her,
it is null and void.
It follows that the whole decree against her and her paraphernal property and the sale
of that property to satisfy the mortgage are null and void, and that any title she may
have had in or to her paraphernal property remains and is now vested in the wife as
fully and as absolutely as if the mortgage had never been executed, the decree
rendered or the property sold. As to Don Juan M. Poizat, the decree is valid and
binding, and remains in full force and effect. It is an undisputed fact, which appears in
the mortgage itself, that the land in question was the paraphernal property of the wife,
but after the marriage the old buildings on the property were torn down and a new
building constructed and, in the absence of evidence to the contrary, it must be
presumed that the new building is conjugal property of the husband and wife. As such,
it is subject of the debts of the conjugal partnership for the payment or security of
which the husband has the power to mortgage or otherwise encumber the property .
It is very probable that his particular question was not fully presented to or
considered by the lower court. The mortgage as to the paraphernal property of the
wife is declared null and void ab initio, and as to her personally, the decree is declared
null and void, and as to her paraphernal property, the sale is set aside and vacated, and
held for naught, leaving it free and clear from the mortgage, decree and sale, and in the
same condition as if the mortgage had never been executed, with costs in favor of the
appellant. So ordered.
35. RURAL BANK OF BOMBON (CAMARINES SUR), INC., petitioner, vs. HON.
COURT OF APPEALS, EDERLINDA M. GALLARDO, DANIEL MANZO and RUFINO S.
AQUINO, respondents.
FACTS: Ederlinda M. Gallardo, married to Daniel Manzo, executed a special power of
attorney in favor of Rufina S. Aquino authorizing him: 1. To secure a loan from any
bank or lending institution for any amount or otherwise mortgage the property
covered by Transfer Certificate of Title No. S-79238 situated at Las Pias, Rizal, the
same being my paraphernal property, and in that connection, to sign, or execute any
deed of mortgage and sign other document requisite and necessary in securing said
loan and to receive the proceeds thereof in cash or in check and to sign the receipt
therefor and thereafter endorse the check representing the proceeds of loan.
Thereupon, Gallardo delivered to Aquino both the special power of attorney and her
owner's copy of Transfer Certificate of Title No. S-79238. On August 26, 1981, a Deed
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 31
of Real Estate Mortgage was executed by Rufino S. Aquino in favor of the Rural Bank of
Bombon (Camarines Sur), Inc. (hereafter, defendant Rural Bank) over the three
parcels of land covered by TCT No. S-79238. The deed stated that the property was
being given as security for the payment of "certain loans, advances, or other
accommodations obtained by the mortgagor from the mortgagee in the total sum of
Three Hundred Fifty Thousand Pesos only (P350,000.00), plus interest at the rate of
fourteen (14%) per annum.
Ederlinda Gallardo and Daniel Manzo filed an action against Rufino Aquino and the
Bank because Aquino allegedly left his residence at San Pascual, Hagonoy, Bulacan,
and transferred to an unknown place in Bicol. She discovered that Aquino first resided
at Sta. Isabel, Calabanga, Camarines Sur, and then later, at San Vicente, Calabanga,
Camarines Sur, and that they (plaintiffs) were allegedly surprised to discover that the
property was mortgaged to pay personal loans obtained by Aquino from the Bank
solely for personal use and benefit of Aquino; that the mortgagor in the deed was
defendant Aquino instead of plaintiff Gallardo whose address up to now is Manuyo,
Las Pias, M.M., per the title (TCT No. S-79238) and in the deed vesting power of
attorney to Aquino; that correspondence relative to the mortgage was sent to Aquino's
address at "Sta. Isabel, Calabanga, Camarines Sur" instead of Gallardo's postal address
at Las Pias, Metro Manila; and that defendant Aquino, in the real estate mortgage,
appointed defendant Rural Bank as attorney in fact, and in case of judicial foreclosure
as receiver with corresponding power to sell and that although without any express
authority from Gallardo, defendant Aquino waived Gallardo's rights under Section 12,
Rule 39, of the Rules of Court and the proper venue of the foreclosure suit.
On January 23, 1984, the trial court, thru the Honorable Fernando P. Agdamag,
temporarily restrained the Rural Bank "from enforcing the real estate mortgage and
from foreclosing it either judicially or extrajudicially until further orders from the
court" (p.36, Rollo). Rufino S. Aquino in his answer said that the plaintiff authorized
him to mortgage her property to a bank so that he could use the proceeds to liquidate
her obligation of P350,000 to him. The obligation to pay the Rural Bank devolved on
Gallardo. Of late, however, she asked him to pay the Bank but defendant Aquino set
terms and conditions which plaintiff did not agree to. Aquino asked for payment to
him of moral damages in the sum of P50,000 and lawyer's fees of P35,000. The Bank
moved to dismiss the complaint and filed counter-claims for litigation expenses,
exemplary damages, and attorney's fees. It also filed a crossclaim against Aquino for
P350,000 with interest, other bank charges and damages if the mortgage be declared
unauthorized. Meanwhile, on August 30, 1984, the Bank filed a complaint against
Ederlinda Gallardo and Rufino Aquino for "Foreclosure of Mortgage". The trial court
rendered a summary judgment in Civil Case No. 6062, dismissing the complaint for
annulment of mortgage and declaring the Rural Bank entitled to damages the amount
of which will be determined in appropriate proceedings. The court lifted the writ of
preliminary injunction it previously issued. Plaintiff appealed to CA. Hence, this
petition for review.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883 DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 32

ISSUE: Whether or not the Deed of Real Estate Mortgage is valid which was
executed by Rufino S. Aquino, as attorney-in-fact of Ederlinda Gallardo, in favor
of the Rural Bank of Bombon (Cam. Sur), Inc.
HELD: The Rural Bank contends that the real estate mortgage executed by respondent
Aquino is valid because he was expressly authorized by Gallardo to mortgage her
property under the special power of attorney she made in his favor which was duly
registered and annotated on Gallardo's title. Since the Special Power of Attorney did
not specify or indicate that the loan would be for Gallardo's benefit, then it could be for
the use and benefit of the attorney-in-fact, Aquino. However, the Court of Appeals
ruled otherwise. It held:
The Special Power of Attorney above quoted shows the extent of authority given by
the plaintiff to defendant Aquino. But defendant Aquino in executing the deed of Real
Estate Mortgage in favor of the rural bank over the three parcels of land covered by
Gallardo's title named himself as the mortgagor without stating that his signature on
the deed was for and in behalf of Ederlinda Gallardo in his capacity as her attorney-in-
fact. At the beginning of the deed mention was made of "attorney-in-fact of Ederlinda
H. Gallardo," thus: " (T)his MORTGAGE executed by Rufino S. Aquino attorney in fact of
Ederlinda H. Gallardo, of legal age, Filipino, married to Bibiana Panganiban with postal
address at Sta. Isabel . . .," but which of itself, was merely descriptive of the person of
defendant Aquino. Defendant Aquino even signed it plainly as mortgagor with the
marital consent yet of his wife Bibiana P. Aquino who signed the deed as "wife of
mortgagor."
only. It is not enough merely that the agent was in fact authorized to make the
mortgage, if he has not acted in the name of the principal. Neither is it ordinarily
sufficient that in the mortgage the agent describes himself as acting by virtue of a
power of attorney, if in fact the agent has acted in his own name and has set his own
hand and seal to the mortgage. This is especially true where the agent himself is a
party to the instrument. However clearly the body of the mortgage may show and
intend that it shall be the act of the principal, yet, unless in fact it is executed by the
agent for and on behalf of his principal and as the act and deed of the principal, it is not
valid as to the principal. In view of this rule, Aquino's act of signing the Deed of Real
Estate Mortgage in his name alone as mortgagor, without any indication that he was
signing for and in behalf of the property owner, Ederlinda Gallardo, bound himself
alone in his personal capacity as a debtor of the petitioner Bank and not as the agent
or attorney-in-fact of Gallardo.
36. COMMERCIAL BANK & TRUST CO. OF THE PHIL. VS. REPUBLIC ARMORED CAR
SERVICE CORP., 9 SCRA 142

The three (3) promissory notes respectively dated August 31, 1981, September 23,
1981 and October 26, 1981, were each signed by Rufino Aquino on top of a line
beneath which is written "signature of mortgagor" and by Bibiana P. Aquino on top of 37. LIM TIU VS. RUIZ Y REMENTERIA, 15 PHIL. 367
a line under which is written "signature of spouse," without any mention that
execution thereof was for and in behalf of the plaintiff as mortgagor. It results, borne
out from what were written on the deed, that the amounts were the personal loans of
defendant Aquino. As pointed out by the appellant, Aquino's wife has not been
appointed co-agent of defendant Aquino and her signature on the deed and on the
promissory notes can only mean that the obligation was personally incurred by them
and for their own personal account. The deed of mortgage stipulated that the amount
obtained from the loans shall be used or applied only for "fishpond (bangus and sugpo
production)." As pointed out by the plaintiff, the defendant Rural Bank in its Answer
had not categorically denied the allegation in the complaint that defendant Aquino in
the deed of mortgage was the intended user and beneficiary of the loans and not the
plaintiff. And the special power of attorney could not be stretched to include the
authority to obtain a loan in said defendant Aquino's own benefit.

It is a general rule in the law of agency that, in order to bind the principal by a 38. THE PHILIPPINE NATIONAL BANK vs. PAZ AGUDELO Y GONZAGA, ET AL.,
mortgage on real property executed by an agent, it must upon its face purport to be defendants. PAZ AGUDELO Y GONZAGA, appellant.
made, signed and sealed in the name of the principal, otherwise, it will bind the agent
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
FACTS: On November 9, 1920, the defendant-appellant Paz Agudelo y Gonzaga
executed in favor of her nephew, Mauro A. Garrucho, the document Exhibit K
conferring upon him a special power of attorney sufficiently broad in scope to enable
him to sell, alienate and mortgage in the manner and form he might deem convenient,
all her real estate situated in the municipalities of Murcia and Bacolod, Occidental
Negros, consisting in lots Nos. 61 and 207 of the cadastral survey of Bacolod,
Occidental Negros, together with the improvement thereon.
Amparo A. Garrucho executed the document Exhibit H whereby she conferred upon
her brother Mauro A Garrucho a special power of attorney sufficiently broad in scope
to enable him to sell, alienate, mortgage or otherwise encumber, in the manner and
form he might deem convenient, all her real estate situated in the municipalities of
Murcia and Bago, Occidental Negros.
Mauro A. Garrucho executed in the favor of the plaintiff entity, the Philippine National
bank, the document Exhibit G, whereby he constituted a mortgage on lot No. 878 of the
cadastral survey of Murcia, Occidental Negros, with all the improvements thereon.
The mortgage deeds Exhibit G and J as well as the corresponding promissory notes for
P6,000 and P16,000, respectively, were executed in Mauro A. Garrucho's own name
and signed by him in his personal capacity, authorizing the mortgage creditor, the
Philippine National Bank, to take possession of the mortgaged properties, by means of
force if necessary, in case he failed to comply with any of the conditions stipulated
therein.
On July 15, 1922, Mauro A. Garrucho, executed in favor of the plaintiff entity the deed
Exhibit C whereby he constituted a mortgage on lots Nos. 61 and 207 of the cadastral
survey of Bacolod, together with the improvements thereon, described in transfer
certificates of title Nos. 2216 and 1148, respectively, issued in the name of Paz Agudelo
y Gonzaga, and on lot No. 878 of the cadastral survey of Murcia, described in transfer
certificate of title No. 2415, issued in the name of Amparo A. Garrucho.
In connection of the credits, loans, and commercial overdrafts amounting to P21,000
which had been granted him, Mauro A. Garrucho, on the said date July 15, 1922,
executed the promissory note, Exhibit B, for P21,000 as a novation of the former
promissory notes for P6,000 and P16,000, respectively.
On November 25, 1925, Amparo A. Garrucho sold lot No. 878 described in certificate of
title No. 2415, to Paz Agudelo y Gonzaga (Exhibit M).
ISSUE: Whether or not Paz Agudelo y Gonzaga is liable for the payment of the
loans obtained by Mauro A. Garrucho from the Philippine National Bank for the
security of which he constituted a mortgage on the aforesaid real estate
belonging to the defendant-appellant Paz Agudelo y Gonzaga.
HELD: No.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 33
ART. 1709. By the contract of agency, one person binds himself to render some service,
or to do something for the account or at the request of another.
ART. 1717. When an agent acts in his own name, the principal shall have no right of
action against the persons with whom the agent has contracted, or such persons
against the principal. In such case, the agent is directly liable to the person with whom
he has contracted, as if the transaction were his own. Cases involving things belonging
to the principal are excepted.
The provisions of this article shall be understood to be without prejudice to actions
between principal and agent.
Aside from the phrases "attorney in fact of his sister, Amparo A. Garrucho, as
evidenced by the power of attorney attached hereto" and "attorney in fact of Paz
Agudelo y Gonzaga" written after the name of Mauro A. Garrucho in the mortgage
deeds, Exhibits G. and J, respectively, there is nothing in the said mortgage deeds to
show that Mauro A. Garrucho is attorney in fact of Amparo A. Garrucho and of Paz
Agudelo y Gonzaga, and that he obtained the loans mentioned in the aforesaid
mortgage deeds and constituted said mortgages as security for the payment of said
loans, for the account and at the request of said Amparo A. Garrucho and Paz Agudelo y
Gonzaga. The above-quoted phrases which simply described his legal personality, did
not mean that Mauro A. Garrucho obtained the said loans and constituted the
mortgages in question for the account, and at the request, of his principals.
Furthermore, the promissory notes executed by Mauro A. Garrucho in favor of the
Philippine National Bank, evidencing loans of P6,000 and P16,000 have been novated
by the promissory notes for P21,000 (Exhibit B) executed by Mauro A. Garrucho, not
only without express authority from his principal Paz Agudelo y Gonzaga but also
under his own signature.
Furthermore, the records do not show that the loan obtained by Mauro A. Garrucho,
evidenced by the promissory note, Exhibit B, was for his principal Paz Agudelo y
Gonzaga. The special power of attorney, Exhibit K, does not authorize Mauro A.
Garrucho to constitute a mortgage on the real estate of his principal to secure his
personal obligations. Therefore, in doing so by virtue of the document, Exhibit C, he
exceeded the scope if his authority and his principal is not liable for his acts. (2 Corpus
Juris, p. 651; article 1714, Civil Code.)
It is further claimed that inasmuch as the properties mortgaged by Mauro A. Garrucho
belong to Paz Agudelo y Gonzaga, the latter is responsible for the acts of the former
although he acted in his own name, in accordance with the exception contained in
article 1717 of the Civil Code. It would be an exception with the properties of his own
name in connection with the properties of his principal, does so within the scope of his
authority. It is noted that Mauro A. Garrucho was not authorized to execute
promissory notes even in the name of his principal Paz Agudelo y Gonzaga, nor to
constitute a mortgage on her real properties to secure such promissory notes.
Wherefore, it is hereby held that the liability constructed by the aforesaid defendant-
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
appellant Paz Agudelo y Gonzaga is merely subsidiary to that of Mauro A. Garrucho,
limited lot No. 878 of the cadastral survey of Murcia, Occidental Negros, described in
Torrens title No. 2415. However, inasmuch as the principal obligator, Mauro A.
Garrucho, has been absolved from the complaint and the plaintiff- appellee has not
appealed from the judgment absolving him, the law does not afford any remedy
whereby Paz Agudelo y Gonzaga may be required to comply with the said subsidiary
obligation in view of the legal maxim that the accessory follows the principal.
Wherefore, the defendant herein should also be absolved from the complaint which is
hereby dismissed, with the costs against the appellee. So ordered.
39. SY-JUCO and VIARDO v. SY-JUCO
DOCTRINE: When an agency acts in his own name, the principal shall have no right of
action against the person with whom the agent has contracted, cases involving things
belonging to the principal are excepted. According to this exception (when things
belonging to the principal are dealt with) the agent is bound to the principal although
he does not assume the character of such agent and appears acting in his own name.
This means that in the case of this exception the agent's apparent representation
yields to the principal's true representation and that, in reality and in effect, the
contract must be considered as entered into between the principal and the third
person; and, consequently, if the obligations belong to the former, to him alone must
also belong the rights arising from the contract.
FACTS:
In 1902, Defendant Santiago Sy-juco was appointed by plaintiffs Vicente and
Cipriana as administrator of their property, and acted as such until June 30, 1916,
when his authority was cancelled. Santiago is the son of Vicente and Cipriana. Vicente
and Cipriana allege that during Santiagos administration, Santiago acquired the
property claimed in the complaint in his capacity as the plaintiffs administrator with
their money and for their benefit. Trial Court Ordered Santiago to return to the
plaintiffs: the launch Malabon, two cascos , an automobile, a typewriting machine, the
house occupied by Santiago, and the price of the piano. Both parties appealed from this
judgment.
ISSUE: WON the properties bought by Santiago in his own name, as an administrator,
belong to him. (NO, except the second casco.)
HELD: Judgment appealed from affirmed except in so far as casco no. 2545 is
concerned.
As to the launch Malabon:
Santiago bought it in his own name from the Pacific Commercial Co., and
afterwards registered it at the Custom House. But this does not necessarily show that
he bought it for himself and with his own money. This transaction was within the
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 34
agency which he had received from the plaintiffs. The fact that he has acted in his own
name may be only, as we believe it was, a violation of the agency on his part. The
question is not in whose favor the document of sale of the launch is executed nor in
whose name same was registered, but with whose money was said launch bought. The
plaintiffs' testimony that it was bought with their money and for them is supported by
the fact that, immediately after its purchase, the launch had to be repaired at their
expense, although said expense was collected from the defendant. Santiago invoked
the case of Martinez v. Martinez:
Martinez, Jr., bought a vessel in his own name and in his name registered it at
the Custom House. This court then said that although the funds with which the vessel was
bought belonged to Martinez Sr., Martinez Jr. is its sole and exclusive owner.
But the Court ruled that this is not applicable to the case at bar. In said case the
relation of principal and agent, which exists between the plaintiffs and the defendant
in the present case, did not exist between Martinez, Sr., and Martinez, Jr. By this agency
the plaintiffs herein clothed the defendant with their representation in order to
purchase the launch in question. However, the defendant acted without this
representation and bought the launch in his own name thereby violating the agency. If
the result of this transaction should be that the defendant has acquired for himself the
ownership of the launch, it would be equivalent to sanctioning this violation and
accepting its consequences. But not only must the consequences of the violation of this
agency not be accepted, but the effects of the agency itself must be sought. If the
defendant contracted the obligation to but the launch for the plaintiffs and in their
representation, but virtue of the agency, notwithstanding the fact that he bought it in
his own name, he is obliged to transfer to the plaintiffs the rights he received from the
vendor, and the plaintiffs are entitled to be subrogated in these rights.
From the rule established in Article 1717 of the Civil Code that, when an
agency acts in his own name, the principal shall have no right of action against the
person with whom the agent has contracted, cases involving things belonging to the
principal are excepted. According to this exception (when things belonging to the
principal are dealt with), the agent is bound to the principal although he does not
assume the character of such agent and appears acting in his own name. This means
that in the case of this exception the agent's apparent representation yields to the
principal's true representation and that, in reality and in effect, the contract must be
considered as entered into between the principal and the third person; and,
consequently, if the obligations belong to the former, to him alone must also belong the
rights arising from the contract. The money with which the launch was bough having
come from the plaintiff, the exception established in article 1717 is applicable to the
instant case.
As to Casco no. 2584:
Santiagos allegation that it was constructed at his instance and with his
money is not supported by the evidence. In fact the only proof presented to support
AGENCY CASE DIGEST | A. General Articles 1868 to 1883
this allegation is his own testimony contradicted, on the on hand, by the plaintiffs'
testimony and, on the other hand, rebutted by the fact that, on the date this casco was
constructed, he did not have sufficient money with which to pay the expense of this
construction.
As to the automobile:
There is sufficient evidence to show that its prices was paid with plaintiffs'
money. Defendant's adverse allegation that it was paid with his own money is not
supported by the evidence.
As to Casco no. 2545:
Upon examination of the evidence relative to this casco, it was found that it
belonged to the plaintiffs but sold it afterwards to the defendant by means of a public
instrument. The plaintiffs have not adduced sufficient proof of such deceit (on the part
of Santiago, when they signed) which would destroy the presumption of truth which a
public document carries with it. Attorney Sevilla, who acted as the notary in the
execution of this instrument, testifying as a witness in the case, said that he never
verified any document without first inquiring whether the parties knew its content.
Our conclusion is that this casco was lawfully sold to the defendant by the plaintiffs.
(Fun fact: This casco had been leased and was sunk while in the lessees hands before
the complaint in this case was filed. As such, the issue of ownership is determinative of
who may enforce the responsibility of damages for losses on the lessee.)
40. NATIONAL FOOD AUTHORITY VS. IAC
Facts: Medalla, as a commission agent of plaintiff Superior Shipping Corporation,
entered into a contract for hireof ship (MV Sea Runner) with defendant NFA. The
contract obligated Medalla to transport on the MV Sea Runner 8,550 sacks of rice
belonging to NFA from Occidental Mindoro to Malabon, Metro Manila. Upon
completion of the delivery, plaintiff wrote a letter around October 1979,requesting
NFA that it be allowed to collect the amount for freightage and other charges. Plaintiff
wrote again around November 1979, this time specifically requesting that payment be
made to it and not to Medalla because plaintiff was the owner of the vessel. On
November 16, 1979, NFA informed plaintiff that it could not grant its request because
the contract to transport the rice was entered into by NFA and defendant Medalla who
did not disclose that he was acting as a mere agent of plaintiff. Thereupon on
November 19, 1979, defendant NGA paid defendant Medalla the sum of P25,974.90, for
freight services. On December 4, 1979, plaintiff wrote defendant Medalla demanding
that he turn over to plaintiff the amount of P27,000.00 paid to him by defendant NFA.
Defendant Medalla, however, "ignored the demand."
Issue: Whether NFA is jointly and severally liable with defendant Medalla.
DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 35
Held: Yes, NFA is solidarily liable with defendant Medalla. It is an undisputed fact
that Gil Medalla was a commission agent of respondent Superior Shipping Corporation
which owned the vessel "MV Sea Runner" that transported the sacks of rice belonging
to petitioner NFA. The context of the law is clear. Art. 1883, which is the applicable law
in the case at bar provides:
Art. 1883. If an agent acts in his own name, the principal has no right of action against
the persons with whom the agent has contracted; neither have such persons against
the principal. In such case the agent is the one directly bound in favor of the person
with whom he has contracted, as if the transaction were his own, except when the
contract involves things belonging to the principal.
The provision of this article shall be understood to be without prejudice to the actions
between the principal and agent. Consequently, when things belonging to the principal
(in this case, Superior Shipping Corporation) are dealt with, the agent is bound to the
principal although he does not assume the character of such agent and appears acting
in his own name. In other words, the agent's apparent representation yields to the
principal's true representation and that, in reality and in effect, the contract must be
considered as entered into between the principal and the third person. Corollarily, if
the principal can be obliged to perform his duties under the contract, then it can also
demand the enforcement of its rights arising from the contract.
41. E. AWAD, vs. FILMA MERCANTILE CO., INC.,
FACTS: the plaintiff, doing business in the Philippine Islands under the name of E.
Awad & Co., delivered certain merchandise of the invoice value of P11,140 to Chua
Lioc, a merchant operating under the name of Hang Chua Co. in Manila, said
merchandise to be sold on commission by Chua Lioc. Representing himself as being the
owner of the merchandise, Chua Lioc, on September 8, 1924, sold it to the defendant
for the sum of P12,155.60. He owed the Philippine Manufacturing Co., the sum of
P3,480, which the defendant agreed to pay, and was also indebted to the defendant
itself in the sum of P2,017.98. The total amount of the two debts, P5,497.98, was
deducted from the purchase price, leaving a balance of P6,657.52 which the defendant
promised to pay to Chua Lioc on or before October 9, 1924. The merchandise so
purchased on September 9, was delivered to the defendant, who immediately offered it
for sale. Three days later D. J. Awad, the representative of the plaintiff in the Philippine
Islands; having ascertained that the goods entrusted to Chua Lioc was being offered for
sale by the defendant, obtained authorization from Chua Lioc to collect the sum of
P11,707 from said defendant and informed the latter's treasurer of the facts above set
forth. On September 15, D. J. Awad, in behalf of E. Awad & Co., wrote a letter to the
defendant corporation advising it that, inasmuch as the merchandise belonged to E.
Awad & Co., the purchase price should be paid to them.
AGENCY CASE DIGEST | A. General Articles 1868 to 1883 DAVID-IWAKI-SARANZA-MENDOZA-CAMBALIZA-CARBONELL-ALCAZAREN 36

September 18, 1924, the Philippine Trust Company, brought an action, civil case No.
26934, against Chua Lioc for the recovery of the sum of P1,036.36 and under a writ of
attachment garnished the balance due Chua Lioc from the defendant. On October 7, E.
Awad also brought an action, civil case No. 27016, against Chua Lioc for the recovery of
the sum of P11,140, the invoice value of the merchandise above-mentioned and also
obtained a writ of attachment under which notice of garnishment of the said aforesaid
balance we served upon the herein defendant.

The complaint in the present action was filed on November 26, 1924, the plaintiff
demanding payment of the same sum of P11,140 for which action had already been
brought against Chua Lioc. The defendant, its answer, set up as special defense that it
brought the merchandise in good faith and without any knowledge whether of the
person from whom or the condition under which the said merchandise had been
acquired by Chua Lioc or Hang Chuan Co.; that the defendant therefore had acquired
title to the merchandise purchased; that the balance of P6,657.52, now in the hands of
the defendant had been attached in the two actions brought on September 18, and
October 7, respectively, and garnishment served upon the defendant, who therefore,
holds the money subject to the orders of the court in the cases above-mentioned, but
which sum the defendant is able and willing to pay at any time when the court decides
to whom the money lawfully pertains.

HELD: The law applicable to the case is well settled. Article 246 of the Code of
Commerce reads as follows: When the agent transacts business in his own name, it
shall not be necessary for him to state who is the principal and he shall be directly
liable, as if the business were for his own account, to the persons with whom he
transacts the same, said persons not having any right of action against the principal,
nor the latter against the former, the liabilities of the principal and of the agent to each
other always being reserved.

The rule laid down in the article quoted is contrary to the general rule in the United
States as to purchases of merchandise from agents with undisclosed principal, but it
has been followed in a number of cases and is the law in its jurisdiction. But the
appellant points out several circumstances which, in his opinion, indicate that the
defendant-appellee was aware of the condition under which the merchandise was
entrusted to the agent Chua Lioc and therefore did not purchase the goods in good
faith. This, if true, would, of course, lead to a decision of the case in favor of the
plaintiff, but there is, in our opinion, nothing conclusive about the circumstances
referred to and they are not sufficient to overcome the presumption of good faith. The
appealed judgment is in accordance with the law and the facts and is affirmed with the
costs against the appellant. So ordered.