1. Eurotech Industrial Technologies, Inc. v. Edwin Cuizon and Erwin Cuizon G.R. No.

167552
April 23, 2007 Chico-Nazario, J. FACTS: Eurotech is engaged in the business of importation
and distribution of various European industrial equipment. It has as one of its customers Impact
Systems Sales which is a sole proprietorship owned by Erwin Cuizon. Eurotech sold to Impact
Systems various products allegedly amounting to P91,338.00. Cuizons sought to buy from
Eurotech 1 unit of sludge pump valued at P250,000.00 with Cuizons making a down payment of
P50,000.00. When the sludge pump arrived from the United Kingdom, Eurotech refused to
deliver the same to Cuizons without their having fully settled their indebtedness to Eurotech.
Thus, Edwin Cuizon and Alberto de Jesus, general manager of Eurotech, executed a Deed of
Assignment of receivables in favor of Eurotech. Cuizons, despite the existence of the Deed of
Assignment, proceeded to collect from Toledo Power Company the amount of P365,135.29.
Eurotech made several demands upon Cuizons to pay their obligations. As a result, Cuizons were
able to make partial payments to Eurotech. Cuizons total obligations stood at P295,000.00
excluding interests and attorneys fees. Edwin Cuizon alleged that he is not a real party in
interest in this case. According to him, he was acting as mere agent of his principal, which was
the Impact Systems, in his transaction with Eurotech and the latter was very much aware of this
fact. ISSUE: WON Edwin exceeded his authority when he signed the Deed of Assignment
thereby binding himself personally to pay the obligations to Eurotech HELD: No. Edwin
insists that he was a mere agent of Impact Systems which is owned by Erwin and that his status
as such is known even to Eurotech as it is alleged in the Complaint that he is being sued in his
capacity as the sales manager of the said business venture. Likewise, Edwin points to the Deed of
Assignment which clearly states that he was acting as a representative of Impact Systems in said
transaction. Art. 1897. The agent who acts as such is not personally liable to the party with
whom he contracts, unless he expressly binds himself or exceeds the limits of his authority
without giving such party sufficient notice of his powers. In a contract of agency, a person
binds himself to render some service or to do something in representation or on behalf of another
with the latters consent. Its purpose is to extend the personality of the principal or the party for
whom another acts and from whom he or she derives the authority to act. The basis of agency is
representation, that is, the agent acts for and on behalf of the principal on matters within the
scope of his authority and said acts have the same legal effect as if they were personally executed
by the principal. elements of the contract of agency: (1) 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 agent acts as a representative and not for himself; (4) the agent acts within
the scope of his authority An agent, who acts as such, is not personally liable to the party with
whom he contracts. There are 2 instances when an agent becomes personally liable to a third
person. The first is when he expressly binds himself to the obligation and the second is when he
exceeds his authority. In the last instance, the agent can be held liable if he does not give the
third party sufficient notice of his powers. Edwin does not fall within any of the exceptions
contained in Art. 1897. In the absence of an agreement to the contrary, a managing agent may
enter into any contracts that he deems reasonably necessary or requisite for the protection of the
interests of his principal entrusted to his management. Edwin Cuizon acted well-within his
authority when he signed the Deed of Assignment. Eurotech refused to deliver the 1 unit of
sludge pump unless it received, in full, the payment for Impact Systems indebtedness. Impact
Systems desperately needed the sludge pump for its business since after it paid the amount of
P50,000.00 as downpayment it still persisted in negotiating with Eurotech which culminated in
the execution of the Deed of Assignment of its receivables from Toledo Power Company. The
significant amount of time spent on the negotiation for the sale of the sludge pump underscores
Impact Systems perseverance to get hold of the said equipment. Edwins participation in the
Deed of Assignment was reasonably necessary or was required in order for him to protect the
business of his principal.

2. RIENT AIR SERVICES & HOTEL REPRESENTATIVES v. COURT OF APPEALS and

AMERICAN AIRLINES INCORPORATED G.R. No. 76933 May 29, 1991 PADILLA, J.:
Facts: American Airlines, Inc. (American Air), an air carrier offering passenger and air cargo
transportation in the Philippines, and Orient Air Services and Hotel Representatives (Orient Air),
entered into a General Sales Agency Agreement (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. In the agreement, Orient Air shall remit in United States dollars to American the
ticket stock or exchange orders, less commissions to which Orient Air Services is entitled, not
less frequently than semi-monthly. On the other hand, American will pay Orient Air Services
commission on transportation sold by Orient Air Services or its sub-agents. Thereafter, American
alleged 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 which authorize the termination of the thereof in case Orient Air is unable to
transfer to the United States the funds payable by Orient Air Services to American. American Air
instituted suit against Orient Air with the Court of First Instance of Manila for Accounting with
Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order 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." 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. The trial court ruled
in its favor which decision was affirmed with modification by Court of Appeals. It held the
termination made by the latter as affecting the GSA agreement illegal and improper and ordered
the plaintiff to reinstate defendant as its general sales agent for passenger transportation in the
Philippines in accordance with said GSA agreement. Issue:
Whether the Court of Appeals erred in ordering the reinstatement of the defendant as its general
sales agent for passenger transportation in the Philippines in accordance with said GSA
Agreement

Held: Yes. 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 . 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.

3. Eduardo Litonjua, Jr. and Antonio Litonjua v. Eternit Corp. (now Eterton
Multi-ResourcesCorp.), Eteroutremer, S.A. and Far East Bank & Trust Co.

G.R. No. 144805 June 8, 2006Callejo, Sr.

FACTS:

Eternit Corp. is engaged in the manufacture of roofing materials a

n d p i p e p r o d u c t s . I t s manufacturing operations were conducted on 8 parcels of land
located in Mandaluyong City, coveredby TCTs with Far East Bank & Trust Company, as trustee.
90% of the shares of stocks of Eternit Corp.were owned by Eteroutremer S.A. Corporation
(ESAC), a corporation organized and registered underthe laws of Belgium. Jack Glanville, an
Australian citizen, was the General Manager and President of Eternit Corp., while Claude
Frederick Delsaux was the Regional Director for Asia of ESAC.

In 1986, the management of ESAC grew concerned about the political situation in the
Philippines andwanted to stop its operations in the country. The Committee for Asia
of ESAC instructed MichaelAdams, a member of Eternit Corp.s Board of Directors,
to dispose of the eight parcels of land.Adams engaged the services of realtor/broker
Lauro G. Marquez so that the properties could beoffered for sale to prospective buyers.

Marquez offered the parcels of land and the improvements thereon to Eduardo B. Litonjua, Jr. of
theL i t o n j u a & C o m p a n y, I n c . M a r q u e z d e c l a r e d t h a t h e w a s
a u t h o r i z e d t o s e l l t h e p r o p e r t i e s f o r P27,000,000.00 and that the terms of the sale were
subject to negotiation.
Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo Litonjua,
Jr.,a n d h i s b r o t h e r A n t o n i o K . L i t o n j u a . T h e L i t o n j u a s i b l i n g s o f f e r
e d t o b u y t h e p r o p e r t y f o r P20,000,000.00 cash. Marquez apprised Glanville of
the Litonjua siblings offer and relayed the sameto Delsaux in Belgium, but the latter did
not respond. Glanville telexed Delsaux in Belgium, inquiringon his position/ counterproposal to
the offer of the Litonjua siblings. Delsaux sent a telex to Glanvillestating that,
based on the Belgian/Swiss decision, the final offer was
US$1,000,000.00 andP2,500,000.00 to cover all existing obligations prior to final
liquidation.

Litonjua, Jr. accepted the counterproposal of Delsaux. Marquez conferred

w i t h G l a n v i l l e , a n d confirmed that the Litonjua siblings had accepted the counter-proposal
of Delsaux. He also statedthat the Litonjua siblings would confirm full payment within 90 days
after execution and preparationof all documents of sale, together with the necessary
governmental clearances.

The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security
Bank & TrustCompany, Ermita Branch, and drafted an Escrow Agreement to expedite the sale.

With the assumption of Corazon Aquino as President of RP, the political situation in the
Philippineshad improved. Marquez received a telephone call from Glanville, advising
that the sale would nolonger proceed. Glanville followed it up with a letter, confirming that
he had been instructed by hisprincipal to inform Marquez that the decision has been
taken at a Board Meeting not to sell theproperties on which Eternit Corp. is situated.

When apprised of this development, the Litonjuas, through counsel, wrote Eternit Corp.,
demandingpayment for damages they had suffered on account of the aborted sale. EC, however,
rejected theirdemand.
ISSUE:
WON Marquez, Glanville, and Delsaux were authorized by respondent Eternit Corp. to act as
itsagents relative to the sale of the properties of Eternit Corp., and if so, what are the boundaries
of theirauthority as agents
HELD:
No.

A corporation is a juridical person separate and distinct from its members or stockholders and is
notaffected by the personal rights, obligations and transactions of the latter. It may act only
through itsboard of directors or, when authorized either by its by-laws or by its board
resolution, through itsofficers or agents in the normal course of business. The
general principles of agency govern therelation between the corporation and its officers or
agents, subject to the articles of incorporation, by-laws, or relevant provisions of law.

The property of a corporation is not the property of the stockholders or members, and as such,
maynot be sold without express authority from the board of directors. Physical acts, like
the offering of theproperties of the corporation for sale, or the acceptance of a counter-offer of
prospective buyers of such properties and the execution of the deed of sale covering such
property, can be performed by thecorporation only by officers or agents duly authorized
for the purpose by corporate by-laws or byspecific acts of the board of directors. Absent
such valid delegation/authorization, the rule is that thedeclarations of an individual director
relating to the affairs of the corporation, but not in the course of,

or connected with, the performance of authorized duties of such director, are not
binding on thecorporation.

While a corporation may appoint agents to negotiate for the sale of its real properties, the final
say willhave to be with the board of directors through its officers and agents
as authorized by a boardresolution or by its by-laws.30 An unauthorized act of an officer of
the corporation is not binding on itunless the latter ratifies the same expressly or
impliedly by its board of directors. Any sale of realproperty of a corporation by a person
purporting to be an agent thereof but without written authorityfrom the corporation is null and
void.

An agency may be expressed or implied from the act of the principal, from his silence or lack of
action,or his failure to repudiate the agency knowing that another person is acting on
his behalf withoutauthority. Acceptance by the agent may be expressed, or implied
from his acts which carry out theagency, or from his silence or inaction according to the
circumstances. Agency may be oral unless thelaw requires a specific form. However, to
create or convey real rights over immovable property, aspecial power of attorney is necessary.

The Litonjuas failed to adduce in evidence any resolution of the Board of Directors
of Eternit Corp.empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone
offer for sale, for and in itsbehalf, the 8 parcels of land owned by Eternit Corp. including the
improvements thereon. The bare factthat Delsaux may have been authorized to sell to Ruperto
Tan the shares of stock of respondent ESACcannot be used as basis for Litonjuas claim that he
had likewise been authorized by Eternit Corp. tosell the parcels of land.

While Glanville was the President and General Manager of Eternit Corp., and Adams and
Delsaux weremembers of its Board of Directors, the three acted for and in behalf of respondent
ESAC, and not asduly authorized agents of Eternit Corp.; a board resolution evincing
the grant of such authority isneeded to bind Eternit Corp. to any agreement regarding the
sale of the subject properties. Such boardresolution is not a mere formality but is a condition sine
qua non to bind Eternit Corp.Requisites of an agency by estoppels: (1) the principal manifested a
representation of the agentsauthority or knowingly allowed the agent to assume such authority;
(2) the third person, in good faith,relied upon such representation; (3) relying upon
such representation, such third person has changedhis position to his detriment
4. Jocelyn B. Doles vs. Ma. Aura Tina Angeles
G.R. No. 149353. June 26, 2006.

Facts:
Petitioner executed a Deed of Absolute Sale ceding a parcel of land in favor of respondent to
satisfy the
alleged indebtedness of the former in the amount of P405,430.00. Since the said land was
mortgaged to
the National Home Mortgage Finance Corporation, they further agreed that respondent
assume the
remaining balance of the loan. Learning that the petitioner still has arrearages, respondent
demanded that
the arrearages be paid first. Petitioner did not heed, thus a case was filed by the respondent.

In answer, the petitioner alleged that sale was void for lack of consideration and that she was not
indebted
to the respondent as she only referred her friends to respondent whom she knew to be
engaged in the
business of lending money in exchange for personal checks through her capitalist Arsenio
Pua. Further
petitioner contended that since the respondent is also an agent, she does not have the capacity to
sue her.

It is an admitted fact by both petitioner and defendant, based on their testimonies, that
respondent knew
that the money will be used by the friends of the petitioner; that the respondent was merely
representing
Arsenio Pua; and that before the supposed friends of the petitioner defaulted in payment, each
issued their
personal checks in the name of Arsenio Pua for the payment of their debt.

Issue/s:
Whether or not petitioner and respondent were acting on their personal capacity or as mere
agents.

Ruling:
The question whether an agency has been created is ordinarily a question which may be
established in the
same was as any other fact, either by direct or circumstantial evidence. Agency may be implied
from the
words and conduct of the parties and the circumstances of the particular case. Though the fact or
extent of
authority of the agents may not, as a general rule, be established from the declarations of the
agents alone,
if one frofessed to act as agent for another, she may be stopped to deny her agency
both as against the
asserted principal and the third persons interested in the transaction in which he or she is
engaged.

In this case, petitioner knew that the financier of the respondent is Pua, and respondent
knew that the
borrowers are friends of petitioner. It is sufficient that petitioner disclosed to respondent that
the former
was acting in behalf of her principals, her friends. For an agency to arise, it is not
necessary that the
principal personally encounter the third person with whom the agent interacts.

Here, both petitioner and respondent have undeniably disclosed to each other that they
are representing
someone else and so both of them are estopped to deny the same.

That both parties acted as mere agents is shown by the undisputed fact that the friends of the
petitioner
issued checks in payment of the loan in the name of Arsenio Pua.
5.

Philex Mining Corp. v. Commissioner of Internal Revenue

G.R. No. 148187 April 16, 2008 Ynares-Santiago, J.
FACTS:

Philex Mining Corp. entered into an agreement with Baguio Gold Mining Co. for the former to
manageand operate the latters mining claim, known as the Sto. Nino Mine. The
parties agreement wasdenominated as Power of Attorney which provides inter
alia:4. Within three (3) years from date thereof, the PRINCIPAL (Baguio Gold) shall make avail
able tothe MANAGERS (Philex Mining) up to ELEVEN MILLION PESOS (P11,000,000.00),
in such amounts asfrom time to time may be required by the MANAGERS within the
said 3-year period, for use in theMANAGEMENT of the STO. NINO MINE. The said
ELEVEN MILLION PESOS (P11,000,000.00) shall bedeemed, for internal audit purposes, as
the owners account in the Sto. Nino PROJECT. Any part of any income of the PRINCIPAL
from the STO. NINO MINE, which is left with the Sto. Nino PROJECT,shall be added
to such owners
account.5. Whenever the MANAGERS shall deem it necessary and convenient in connection wit
h theMANAGEMENT of the STO. NINO MINE, they may transfer their own funds or property
to the Sto. NinoPROJECT, in accordance with the following
arrangements:(a) The properties shall be appraised and, together with the cash, shall be carried b
y the Sto.Nino PROJECT as a special fund to be known as the MANAGERS
account.(b) The total of the MANAGERS account shall not exceed P11,000,000.00, except with
priorapproval of the PRINCIPAL; provided, however, that if the compensation of the
MANAGERS as hereinprovided cannot be paid in cash from the Sto. Nino PROJECT, the
amount not so paid in cash shall beadded to the MANAGERS
account.(c) The cash and property shall not thereafter be withdrawn from the Sto. Nino PROJEC
T untiltermination of this
Agency.(d) The MANAGERS account shall not accrue interest. Since it is the desire of the PRI
NCIPAL toextend to the MANAGERS the benefit of subsequent appreciation
of property, upon a projectedtermination of this Agency, the ratio which the MANAGERS
account has to the owners account willbe determined, and the
corresponding proportion of the entire assets of the STO. NINO MINE,excluding
the claims, shall be transferred to the MANAGERS, except that such transferred
assetsshall not include mine development, roads, buildings, and similar property which will be
valueless, orof slight value, to the MANAGERS. The MANAGERS can, on the other
hand, require at their optionthat property originally transferred by them to the Sto. Nino
PROJECT be re-transferred to them. Untilsuch assets are transferred to the MANAGERS, this
Agency shall remain subsisting.x x x x12. The compensation of the
MANAGER shall be fifty per cent (50%) of the net profit of the Sto.Nino PROJECT before
income tax. It is understood that the MANAGERS shall pay income tax on theircompensation,
while the PRINCIPAL shall pay income tax on the net profit of the Sto. Nino PROJECTafter
deduction therefrom of the MANAGERS compensation.

Philex Mining
made advances of cash and property in accordance with paragraph 5 of the
agreement. However, the mine suffered continuing losses over the years which resulted to
PhilexMinings withdrawal as manager of the mine and in the eventual cessation of
mine operations.

The parties executed a Compromise with Dation in Payment wherein Baguio

Gold admitted anindebtedness to petitioner in the amount of P179,394,000.00 and agreed to
pay the same in threesegments by first assigning Baguio Golds tangible assets to Philex Mining,
transferring to the latterBaguio Golds equitable title in its Philodrill assets and finally settling
the remaining liability throughproperties that Baguio Gold may acquire in the future.

The parties executed an Amendment to Compromise with Dation in Payment

where the partiesdetermined that Baguio Golds indebtedness to petitioner actually amounted
to P259,137,245.00,which sum included liabilities of Baguio Gold to other creditors
that petitioner had assumed asguarantor. These liabilities pertained to long-term loans
amounting to US$11,000,000.00 contracted

by Baguio Gold from the Bank of America NT & SA and Citibank N.A.
This time, Baguio
Goldu n d e r t o o k t o p a y p e t i t i o n e r i n t w o s e g m e n t s b y f i r s t a s s
i g n i n g i t s t a n g i b l e a s s e t s f o r P127,838,051.00 and then transferring its
equitable title in its Philodrill assets for
P16,302,426.00. T h e p a r t i e s t h e n a s c e r t a i n e d t h a t B a g u i o G o l d h a d a r e m a i n i n
g o u t s t a n d i n g i n d e b t e d n e s s t o petitioner in the amount of P114,996,768.00.

Philex Mining wrote off in its 1982 books of account the remaining outstanding
indebtedness of Baguio Gold by charging P112,136,000.00 to allowances and reserves that
were set up in 1981 andP2,860,768.00 to the 1982 operations.

In its 1982 annual income tax return, Philex Mining deducted from its gross income the amount
of P112,136,000.00 as loss on settlement of receivables from Baguio Gold against
reserves andallowances. However, the BIR disallowed the amount as deduction for
bad debt and assessedpetitioner a deficiency income tax of P62,811,161.39. Philex Mining
protested before the BIR arguingthat the deduction must be allowed since all requisites for a bad
debt deduction were satisfied, towit: (a) there was a valid and existing debt; (b) the debt was
ascertained to be worthless; and (c) itw a s c h a r g e d o f f
within the tax able year when it was determined to be worthless. BIR
d e n i e d petitioners protest. It held that the alleged debt was not ascertained to be worthless
since BaguioGold remained existing and had not filed a petition for bankruptcy; and that the
deduction did notconsist of a valid and subsisting debt considering that, under the management
contract, petitionerwas to be paid 50% of the projects net profit.
ISSUE:
WON the parties entered into a contract of agency coupled with an interest which is
notrevocable at will
HELD:
No. An examination of the Power of Attorney reveals that a partnership or joint venture
wasindeed intended by the parties.
In an agency coupled with interest, it is the agency that cannot be revoked or
withdrawn by theprincipal due to an interest of a third party that depends upon it, or
the mutual interest of bothprincipal and agent. In this case, the non-revocation or non-
withdrawal under paragraph 5(c) appliesto the advances made by petitioner who is
supposedly the agent and not the principal under
thec o n t r a c t . T h u s , i t c a n n o t b e i n f e r r e d f r o m t h e s t i p u l a t i o n t h a t t h e p a r t i e
s r e l a t i o n u n d e r t h e agreement is one of agency coupled with an interest and not
a partnership.

Neither can paragraph 16 of the agreement be taken as an indication that the

relationship of theparties was one of agency and not a partnership. Although the
said provision states that thisAgency shall be irrevocable while any obligation of
the PRINCIPAL in favor of the MANAGERS isoutstanding, inclusive of the
MANAGERS account, it does not necessarily follow that the partiesentered into an
agency contract coupled with an interest that cannot be withdrawn by Baguio Gold.

The main object of the Power of Attorney was not to confer a power in favor of
petitioner tocontract with third persons on behalf of Baguio Gold but to create a business
relationship betweenpetitioner and Baguio Gold, in which the former was to manage
and operate the latters minethrough the parties mutual contribution of material
resources and industry. The essence of anagency, even one that is coupled with interest, is
the agents ability to represent his principal andbring about business relations between the
latter and third persons.

The strongest indication that petitioner was a partner in the Sto. Nino Mine is the fact that it
wouldreceive 50% of the net profits as compensation under paragraph 12 of the
agreement. Thee n t i r e t y o f t h e p a r t i e s c o n t r a c t u a l s t i p u l a t i o n s s i m p l y l e a d s
t o n o o t h e r c o n c l u s i o n t h a n t h a t petitioners compensation is actually its share in the
income of the joint venture. Article 1769 (4) of the Civil Code explicitly provides that the
receipt by a person of a share in the profits of a businessis prima facie evidence that he is a
partner in the business.

6. RALLOS v FELIX GO CHAN & REALTY COPR., Munoz-Palma

Plaintiff: Ramon Rallos

Defendant: Felix Go Chan & Sons Realty Corporation

Facts: Concepcion and Gerundia Rallos were sisters and registered co-owners of the parcel

of land in issue. They executed a special power of attorney in favor of their brother, Simeon

Rallos, authorizing him to sell such land for and in their behalf. After Concepcion died,

Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia to Felix Go
Chan & Sons Realty Corporation for the sum of P10,686.90. New TCTs were issued to the

latter.

Petitioner Ramon Rallos, administrator of the Intestate Estate of Concepcion filed a

complaint praying (1) that the sale of the undivided share of the deceased Concepcion

Rallos in lot 5983 be unenforceable, and said share be reconveyed to her estate; (2) that the

Certificate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation be

cancelled and another title be issued in the names of the corporation and the "Intestate

estate of Concepcion Rallos" in equal undivided and (3) that plaintiff be indemnified by way

of attorney's fees and payment of costs of suit.

Issues: Whether or not the sale fell within the exception to the general rule that death

extinguishes the authority of the agent

Held/Ratio: Yes the sale is void. The court held that no one may contract in the name of

another without being authorized by the latter, or unless he has by law a right to represent

him (Art. 1317 of the Civil Code). Simons authority as agent was extinguished upon

Concolacions death. The sale did not fall under the exceptions to the general rule that

death ipso jure extinguishes the authority of the agent. Art. 1930 inapplicable since SPA in

favor of Simon Rallos was not coupled with interest and Art. 1931 inapplicable because

Rallos knew of principal Concepcions death. For Art 1931 to apply, both requirements must

be present

Laws on agency, the terms of which are clear and unmistakable leaving no room for an

interpretation contrary to its tenor, should apply, the law provides that death of the principal

ipso jure extinguishes the authority of the agent to sell rendering the sale to a third person

in good faith unenforceable unless at the agent had no knowledge of the principals death at

that time (exception under Art. 1931)

Dispositive: CA Decision reversed, CFI decision affirmed. Sale was null and void.
(Court discussed relevant principles first)

Relationship of Agency (concept arising from principles under Art 1317 and 1403)- one

party, caged the principal (mandante), authorizes another, called the agent (mandatario), to

act for and in his behalf in transactions with third persons.

-derivative in nature, power emanating from principal

-agents acts are acts of the principal

(1)

(2)

(3)

(4)

Essential Elements:

there is consent, express or implied of the parties to establish the relationship;

the object is the execution of a juridical act in relation to a third person;

the agents acts as a representative and not for himself, and

the agent acts within the scope of his authority.

Extinguishment
o

Generally: among others, By the death, civil interdiction, insanity or insolvency

of the principal or of the agent

- death of the principal effects instantaneous and absolute revocation

of the authority of the agent

Exceptions:

(Art. 1930) if it has been constituted in the common interest of the

latter and of the agent, or in the interest of a third person who has

accepted the stipulation in his favor.

(Art. 1931) agent acted without knowledge of the pricipals death

and that the third person was in good faith (both these reqs should be

present)

7. AIR FRANCE vs. COURT OF APPEALS

G.R. No. 76093/ March 21, 1989

FACTS:
Atty. Narciso Morales, a lawyer, thru his representative purchased an airline ticket fromAspac
Management Corporation, petitioner's General Sales Agent
in Makati. The itineraryc o v e r e d b y t h e t i c k e t i n c l u d e d s e v e r a l c i t i e s , w i t h c e
r t a i n s e g m e n t s t h e r e o f r e s t r i c t e d b ymarkings of "non endorsable' and 'valid on
Air France only. While in New York, U.S.A., Atty.Morales suffered an ear infection
which necessitated medical treatment. He obtained threemedical certificate. From New
York, he flew to Paris, Stockholm and then Copenhagen wherehe made representations with
petitioner's office to shorten his trip by deleting some of the citiesin the itinerary. Atty.
Morales was informed that, as a matter of procedure, confirmation of petitioner's
office in Manila (as ticketing office) must be secured before shortening of the route(already paid
for). The Air France Manila replied in negative with the request of Atty. Morales toshorten his
trip. After reiterating his need to flying home on a shorter route due to his
ear infection, and presentation of supporting medical certificates, again, the airline office made
thenecessary request to Manila a Hamburg, Paris, Geneva, Rome, Paris, Hongkong
and Manilaroute. Still, the request was denied. Atty. Morales, therefore, had to buy an entirely
new set of tickets, paying 1,914 German marks for the homeward route. Upon arrival
in Manila, Atty.Morales filed a complaint for breach of contract of carriage and
damages. The CFI found Air France was in evident bad faith for violation of the
contract of carriage, aggravated by thethreatening attitude of its employees in Hamburg.
On appeal the Court of Appeals affirmed theCFI's decision with modifications on the award of
damages. Questioning the factual findings of the CA Air France filed a petition for review..
ISSUE:
Whether or not Air France is guilty of Breach of Contract of Carriage.
HELD:
No, Air France is not guilty of Breach of Contract of Carriage. The respondent
court'sruling that there was breach of contract of carriage is premised on
petitioner's refusal to re-route Atty. Morales and, in effect, requiring him to purchase a new
set of tickets.International Air Transportation Association (IATA) Resolution No. 275
e, 2., specialnote reads:
"Where a fare is restricted and such restrictions are not clearly evident
f r o m t h e required entries on the ticket, such restrictions may be written, stamped or
reprinted
in plainlanguage in the Endorsement/Restrictions" box of the applicable flight coup
on(s); or attached thereto by use of an appropriate notice." Voluntary changes to
tickets,

while allowable, are alsocovered by (IATA) Resolution No. 1013, Art. II, which provides:
"1. changes to the ticket requested by the passenger will be subject to carriers regulations.
Considering the original restrictions on the ticket, it was not unreasonable for Air
Francet o d e n y t h e r e q u e s t . I t i s e s s e n t i a l
b e f o r e a n a w a r d o f d a m a g e s t h a t t h e c l a i m a n t m u s t satisfactorily prove during
the trial the existence of the factual basis of the damages and itscausal connection
to defendant's acts. Atty. Morales failed to substantiate his claim due tofailure to
present a medical certificate that he indeed had undergone medical examination uponarrival in
Manila. Furthermore, Air France employees in Hamburg informed Atty. Morales thathis tickets
were partly stamped "non-endorsable" and "valid on Air France only."

The mererefusal to accede to the passenger's wishes does not necessarily translate into damages
in thea b s e n c e o f b a d f a i t h .

Atty.

M o r a l e s h a s f a i l e d t o s h o w w a n t o n , m a l e v o l e n t o r r e c k l e s s misconduct
imputable to petitioner in its refusal to re-route. Omissions by ordinary passengersmay be
condoned but more is expected of members of the bar who cannot feign ignorance
of s u c h l i m i t a t i o n s a n d r e s t r i c t i o n s .
A n a w a r d o f m o r a l a n d e x e m p l a r y d a m a g e s c a n n o t b e sustained under the
circumstances, but petitioner has to refund the unused coupons in the Air France ticket to the
private respondent
7. In March 1958, Rafael Carrascoso and several other Filipinos were tourists en route to Rome
from Manila. Carrascoso was issued a first class round trip ticket by Air France. But during a
stop-over in Bangkok, he was asked by the plane manager of Air France to vacate his seat
because a white man allegedly has a better right than him. Carrascoso protested but when
things got heated and upon advise of other Filipinos on board, Carrascoso gave up his seat and
was transferred to the planes tourist class.
After their tourist trip when Carrascoso was already in the Philippines, he sued Air France for
damages for the embarrassment he suffered during his trip. In court, Carrascoso testified, among
others, that he when he was forced to take the tourist class, he went to the planes pantry where
he was approached by a plane purser who told him that he noted in the planes journal the
following:
First-class passenger was forced to go to the tourist class against his will, and that the captain
refused to intervene
The said testimony was admitted in favor of Carrascoso. The trial court eventually awarded
damages in favor of Carrascoso. This was affirmed by the Court of Appeals.
Air France is assailing the decision of the trial court and the CA. It avers that the issuance of a
first class ticket to Carrascoso was not an assurance that he will be seated in first class because
allegedly in truth and in fact, that was not the true intent between the parties.
Air France also questioned the admissibility of Carrascosos testimony regarding the note made
by the purser because the said note was never presented in court.
ISSUE 1: Whether or not Air France is liable for damages and on what basis.
ISSUE 2: Whether or not the testimony of Carrasoso regarding the note which was not presented
in court is admissible in evidence.
HELD 1: Yes. It appears that Air Frances liability is based on culpa-contractual and on culpa
aquiliana.
Culpa Contractual
There exists a contract of carriage between Air France and Carrascoso. There was a contract to
furnish Carrasocoso a first class passage; Second, That said contract was breached when Air
France failed to furnish first class transportation at Bangkok; and Third, that there was bad faith
when Air Frances employee compelled Carrascoso to leave his first class accommodation
berth after he was already, seated and to take a seat in the tourist class, by reason of which he
suffered inconvenience, embarrassments and humiliations, thereby causing him mental anguish,
serious anxiety, wounded feelings and social humiliation, resulting in moral damages.
The Supreme Court did not give credence to Air Frances claim that the issuance of a first class
ticket to a passenger is not an assurance that he will be given a first class seat. Such claim is
simply incredible.
Culpa Aquiliana
Here, the SC ruled, even though there is a contract of carriage between Air France and
Carrascoso, there is also a tortuous act based on culpa aquiliana. Passengers do not contract
merely for transportation. They have a right to be treated by the carriers employees with
kindness, respect, courtesy and due consideration. They are entitled to be protected against
personal misconduct, injurious language, indignities and abuses from such employees. So it is,
that any rule or discourteous conduct on the part of employees towards a passenger gives the
latter an action for damages against the carrier. Air Frances contract with Carrascoso is one
attended with public duty. The stress of Carrascosos action is placed upon his wrongful
expulsion. This is a violation of public duty by the Air France a case of quasi-delict. Damages
are proper.
HELD: 2: Yes. The testimony of Carrascoso must be admitted based on res gestae. The subject
of inquiry is not the entry, but the ouster incident. Testimony on the entry does not come within
the proscription of the best evidence rule. Such testimony is admissible. Besides, when the
dialogue between Carrascoso and the purser happened, the impact of the startling occurrence was
still fresh and continued to be felt. The excitement had not as yet died down. Statements then, in
this environment, are admissible as part of the res gestae. The utterance of the purser regarding
his entry in the notebook was spontaneous, and related to the circumstances of the ouster
incident. Its trustworthiness has been guaranteed. It thus escapes the operation of the hearsay
rule. It forms part of the res gestae.
8. FERMIN Z. CARAM, JR. V. CLARO L. LAURETAG.R. No. L-28740. February 24, 1981FERNANDEZ,
J.

FACTS:
O n J u n e 1 0 , 1 9 4 5 , M a r c o s M a t a c o n v e y e d a l a r g e t r a c t o f agr
icultural land covered by OCT No. 3019 in favor of Claro Laureta,plaintiff, the
respondent herein. The deed of absolute sale in favor
of t h e p l a i n t i f f w a s n o t r e g i s t e r e d b e c a u s e i t w a s n o t a c k n o w l e d g e d before a
notary public or any other authorized officer. Since June 10,1945, the plaintiff Laureta
had been and is in continuous, adverse andnotorious occupation of said land, without being
molested, disturbed ors t o p p e d b y a n y o f t h e d e f e n d a n t s o r t h e i r
r e p r e s e n t a t i v e s . I n f a c t , Laureta had been paying realty taxes due thereon and had
introducedimprovements worth not less than P20,000.00 at the time of the filingof the
complaint. On May 5, 1947, the same land covered by OCT No.3 0 1 9 w a s s o l d b y
Marcos Mata to defendant Fermin Z. Caram,
Jr.,p e t i t i o n e r h e r e i n . T h e d e e d o f s a l e i n f a v o r
o f C a r a m w a s a c k n o w l e d g e d b e f o r e A t t y. A b e l a r d o A p o r t a d e r a . O n
D e c e m b e r 9 , 1947, the second sale between Marcos Mata and Fermin Caram, Jr.
wasr e g i s t e r e d w i t h t h e R e g i s t e r o f D e e d s . O n t h e s a m e d a t e ,
T r a n s f e r Certificate of Title No. 140 was issued in favor of Fermin Caram
Jr.Thed e f e n d a n t F e r m i n C a r a m J r .
claimed that he has no knowledge ori n f o r m a t i o n a b o u t t h e p r e v i o u s e n
c u m b r a n c e s , t r a n s a c t i o n s , a n d alienations in favor of plaintiff until the filing of the
complaints.
ISSUE:
Whether or not the knowledge petitioner of a prior
u n r e g i s t e r e d s a l e o f a t i t l e d p r o p e r t y a t t r i b u t a b l e t o p e t i t i o n e r a n d equivalent
in law of registration of sale.
HELD:
Yes. There is no doubt then that Irespe and Aportadera,
actinga s a g e n t s o f C a r a m , p u r c h a s e d t h e p r o p e r t y o f M a t a i n b a d f a i
t h . Applying the principle of agency, Caram as principal, should also bedeemed to
have acted in bad faith.Since Caram was a registrant in badfaith, the situation is as if there
was no registration at all. A possessori n g o o d f a i t h i s o n e w h o i s n o t a w a r e
t h a t t h e r e e x i s t s i n h i s t i t l e o r mode of acquisition any flaw which invalidates it.
Laureta was first inpossession of the property. He is also a possessor in good faith.
It istrue that Mata had alleged that the deed of sale in favor of Laureta wasprocured by force.
Such defect, however, was cured when, after the
Jerome C. Aviso

lapse of four years from the time the intimidation ceased, Marcos Matalost both his rights to file
an action for annulment or to set up nullity of the contract as a defense in an action to enforce the
same.

9. PNB V. RITRATTO G.R. NO. 142616 362 SCRA 216

Facts:

PNB-IFL, a subsidiary company of PNB extended credit to Ritratto and secured by the real estate
mortgages on four parcels of land. Since there was default, PNB-IFL thru PNB, foreclosed the
property and were subject to public auction. Ritratto Group filed a complaint for injunction. PNB
filed a motion to dismiss on the grounds of failure to state a cause of action and the absence of
any privity between respondents and petitioner.

Issue:

Is PNB privy to the loan contracts entered into by respondent & PNB-IFL being that PNB-IFL is
owned by PNB?

Held:

No. The contract questioned is one entered into between Ritratto and PNB-IFL. PNB was
admittedly an agent of the latter who acted as an agent with limited authority and specific duties
under a special power of attorney incorporated in the real estate mortgage.

The mere fact that a corporation owns all of the stocks of another corporation, taken alone is not
sufficient to justify their being treated as one entity. If used to perform legitimate functions, a
subsidiarys separate existence may be respected, and the liability of the parent corporation as
well as the subsidiary will be confined to those arising in their respective business. The courts
may, in the exercise of judicial discretion, step in to prevent the abuses of separate entity
privilege and pierce the veil of corporate entity.

10. DOMINION INSURANCE V. CA

February 6, 2002 Pardo alycat SUMMARY: Guevarra instituted a civil case for the recovery of a
sum of money against Dominion Insurance. He sought to recover sums he had advanced in his
capacity as manager. Dominion denied any liability to Guevarra. RTC ruled that Dominion was
to pay Guevarra. CA affirmed. SC also ruled that Dominion should pay Guevarra, but not under
the law on agency, but the law on obligations and contracts. This is because Guevarra deviated
from the instructions of Dominion under which he would have had authority to settler the latters
claims, i.e. to pay through the revolving fund. Nevertheless, recovery may be made under Art.
1236. DOCTRINE: When a special power of attorney is required for the agent to do a certain act,
the agent, in the performance of such act, must comply with the specifications embodied in the
special power of attorney giving him authority to do such. For example, here, a special power of
attorney was needed for Guevarra to settle the claims of Dominions clients. And for this
purpose, there was a memorandum. However, the memorandum stated that Guevarra was to
settle the claims using the money in a revolving fund. Guevarra did not comply with this, so e
expenses Guevarra incurred in the settlement of the claims of the insured my not be reimbursed
from Dominion, at least under the law of agency. FACTS: Rodolfo Guevarra instituted a civil
case for the recovery of a sum of money against Dominion Insurance. He sought to recover
P156,473.90, which he claimed to have advanced in his capacity as manager of Dominion to
satisfy claims filed by Dominions clients. Dominion denied any liability to Guevarra and
asserted a counterclaim for premiums allegedly unremitted by the latter. The pre-trial conference
never pushed through despite being scheduled and postponed nine times over the course of six
months. Finally, the case was called again for pre-trial and Dominion and counsel failed to show
up. The trial court declared Dominion in default and denied any reconsideration.

On the merits of the case, the RTC ruled that Dominion was to pay Guevarra the P156,473.90
claimed as the total amount advanced by the latter in the payment of the claims of Dominions
clients. The CA affirmed. ISSUES + RATIO: WON Guevarra acted within his authority as agent
for Dominion NO A perusal of the Special Power of Attorney would show that Dominion
and Guevarra intended to enter into a principal-agent relationship. Despite the word special,
the contents of the document reveal that what was constituted was a general agency. The agency
comprises all the business of the principal, but, couched in general terms, is limited only to acts
of administration. A general power permits the agent to do all acts for which the law does not
require a special power. Art. 1878 enumerates the instances when a special power of attorney is
required, including (1) to make such payments as are not usually considered as acts of
administration; (15) any other act of strict dominion. The payment of claims is not an act of
administration. The settlement of claims is not included among the acts enumerated in the
Special Power of Attorney, neither is it of a character similar to the acts enumerated therein. A
special power of attorney would have been required before Guevarra could settle the insurance
claims of the insured. Guevarras authority to settle claims is embodied in the Memorandum of
Management Agreement which enumerated the scope of Guevarras duties and responsibilities.
However, the Memorandum showed the instruction of Dominion that payment of claims shall
come from a revolving fund. Having deviated from the instructions of the principal, the expenses
that Guevarra incurred in the settlement of the claims of the insured may not be reimbursed from
Dominion. WON Guevarra is entitled to reimbursement of amounts YES However, while the
law on agency prohibits Guevarra from obtaining reimbursement, his right to recovery may still
be justified under the general law on Obligations and Contracts, particularly, Art. 1236 1. In this
case, when the risk insured against occurred, Dominions liability as insurer arose. This
obligation was extinguished when Guevarra paid such claims. Thus, to the extent that the
obligation of Dominion had

Art. 1236. The creditor is not bound to accept payment or performance by a third person who has
no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary

Agency & Partnership | B2015 CASES

been extinguished, Guevarra may demand reimbursement from his principal. To rule otherwise
would result in unjust enrichment of Dominion. RULING: Dominion is ordered to pay Guevarra
P112,6762.11, representing the total amount advanced by the latter in the payment of the claims
of the formers clients, minus the amount in the revolving fund and the outstanding balance and
remittance.

11. INLAND REALTY V. CA

G.R. No. 76969

June 9, 1997

FACTS:

Petitioner Inland Realty Investment Service, Inc. (Inland Realty) is a corporation engaged

in the real estate business and brokerages. Respondent Gregorio Araneta Inc., through its

Assistant General Manager J. Armando Eduque, granted Inland Realty the authority to sell on a

first come first served basis the total holdings of Gregorio Araneta, Inc. in Architects' Bldg. Inc.,

equivalent to 98% or 9,800 shares of stock at P1,500 per share for 30 days.

After receiving a proposal letter from Inland Realty, Stanford Microsystems, Inc., a

prospective buyer, counter-proposed to buy 9,800 shares at P1,000 per share or for a total

of P9.8M, P4.9M payable in five years at 12% per annum interest until fully paid. Araneta, Inc.
replied to a letter sent by Inland Realty, saying that the price offered by Stanford was too low
and

suggested that Inland Realty negotiate more for a lower price with Standford.

The authority to sell given to Inland Realty by Gregorio Araneta Inc. was extended for

three times, 30 days each, where the last extension of its contract expired on December 2, 1975.

On July 8, 1977, Inland Realty finally sold the 9,800 shares of stock in Architects' Bldg.,

Inc. to Stanford Microsystems, Inc. for P13.5M. Thereafter, Inland Realty sent a demand letter to

Gregorio Araneta Inc., for the payment of their 5% brokers commission (P675,000), which was

declined by respondent, claiming that after their authority to sell expired thirty (30) days from

December 2, 1975, petitioners were no longer privy to the consummation of the sale.

Inland Realty filed a case in RTC for the collection of its brokers commission from

respondent, but the RTC dismissed its case. On its appeal, the CA also dismissed Inland Realtys

petition, since the petitioners agency contract and authority to sell already expired on January 1,

1976, whereas the consummation of the sale to Stanford had only been on July 8, 1977 or more

than 1 year and 5 months after petitioners' agency contract and authority to sell expired.

The petitioner filed this present petition before the Supreme Court, contending that Inland

Realty, as a broker is automatically entitled to the 5% commission merely upon securing for, and

introducing to, the seller, the buyer who ultimately purchases from the former the object of the

sale, regardless of the expiration of the broker's contract of agency and authority to sell.

ISSUE: Whether or not Inland Realty is entitled for the 5% brokers commission.

HELD: NO. The Court ruled that since Inland Realty was not the efficient procuring cause in

bringing about the sale on July 8, 1977, therefore it is not entitled to the 5% broker's

commission. During the subsistence of its authority to sell, Inland Realty had nothing to show

that they performed substantial acts that proximately and causatively led to the consummation of

the sale to Stanford of Araneta, Inc.'s 9,800 shares in Architects'. Inland Realty failed in selling
said shares under the terms and conditions set out by Araneta, Inc.; it did nothing but submit

Stanford's name as prospective buyer.

The lapse of more than one (1) year and five (5) months between the expiration of

petitioners' authority to sell and the consummation of the sale to Stanford shows the petitioners

non-participation in the crucial events leading to the consummation of said sale, i.e., the

negotiations to convince Stanford to sell at Araneta, Inc.'s asking price, the finalization of the

terms and conditions of the sale, the drafting of the deed of sale, the processing of pertinent

documents, and the delivery of the shares of stock to Stanford.

Therefore, the Court dismissed Inland Realtys present petition.

EDIT

12. CASE DIGEST : Manotoc Vs Ca

G.R. No. L-62100 May 30, 1986 RICARDO L. MANOTOC, JR., petitioner, vs. THE COURT
OF APPEALS, HONS. SERAFIN E. CAMILON and RICARDO L. PRONOVE, JR., as Judges
of the Court of First Instance of Rizal, Pasig branches, THE PEOPLE OF THE PHILIPPINES,
the SECURITIES & EXCHANGE COMISSION, HON. EDMUNDO M. REYES, as
Commissioner of Immigration, and the Chief of the Aviation Security Command (AVSECOM),
respondents.

FACTS : There was a torrens title submitted to and accepted by Manotoc Securities Inc which
was suspected to be fake. 6 of its clients filed separate criminal complaints against the petitioner
and Leveriza, President and VP respectively. He was charged with estafa and was allowed by the
Court to post bail. Petitioner filed before each trial court motion for permission to leave the
country stating his desire to go to US relative to his business transactions and opportunities. Such
was opposed by the prosecution and was also denied by the judges. He filed petition for
certiorari with CA seeking to annul the prior orders and the SEC communication request denying
his leave to travel abroad. According to the petitioner, having been admitted to bail as a matter of
right, neither the courts that granted him bail nor SEC, which has no jurisdiction over his liberty,
could prevent him from exercising his constitutional right to travel

ISSUE : WON the Court Acted with grave abuse of discretion

HELD : A court has the power to prohibit a person admitted to bail from leaving the Philippines.
This is a necessary consequence of the nature and function of a bail bond. Rule 114, Section 1 of
the Rules of Court defines bail as the security required and given for the release of a person who
is in the custody of the law, that he will appear before any court in which his appearance may be
required as stipulated in the bail bond or recognizance The condition imposed upon petitioner to
make himself available at all times whenever the court requires his presence operates as a valid
restriction on his right to travel If the accused were allowed to leave the Philippines without
sufficient reason, he may be placed beyond the reach of the courts As petitioner has failed to
satisfy the trial courts and the appellate court of the urgency of his travel, the duration thereof, as
well as the consent of his surety to the proposed travel, We find no abuse of judicial discretion in
their having denied petitioner's motion for permission to leave the country, in much the same
way, albeit with contrary results, that We found no reversible error to have been committed by
the appellate court in allowing Shepherd to leave the country after it had satisfied itself that she
would comply with the conditions of her bail bond.

13. rats v. CA (1978)

Fernandez, J.

Under what topic: IX. What are the obligations and liabilities of principals to

agents?

Petitioner: Antonio E. Prats, doing business under the name of Philippine Real Estate

Exchange

Respondent: Courts of Appeals, Alfonso Doronila, and Philippine National Bank

Synopsis: This is a petition for certiorari to review the decision of CA, dismissing Prats case

for recovery of sum of money. Doronila was ordered in the RTC to pay Prats P1.380M based on

an alleged exclusive option and authority to negotiate the sale of Doronilas property. CA

reversed. SC said that there was no evidence that shows that Prats was the efficient procuring

cause in bringing about the sale, hence he is not entitled to the commission which was

awarded by the RTC. However, he was awarded an amount in the interest of equity.

Doctrine: The principal has the obligation to pay commissions to his agent, subject to the

limitations of the stipulations in the agency. Based on equity, however, in this case, it is but
proper to give compensation to the efforts of the agent which helped further the principals

interest.

Facts:

provided

that

should

negotiations with the buyer

This is a suit for the recovery of a sum

have been started, said period

of money and damages instituted by

is automatically extended until

Prats against Doronila and PNB.

said

negotiations

is

terminated,

but

not

more

than

July 1967: Doronila was the registered

(15) days.

owner of a 300-hectare land in Rizal.

d.

The written offers must be

He offered to sell such land to the

made

by

the

prospective

Social Security System (SSS) for PHP

buyers and if no written offer is

4.00/sq. m. SSS made a counter-offer

made to Doronila until the last

of PHP 3.25/sq. m.

day of this authorization, this

option and authority shall

February 14, 1968: Doronila then gave

expire and become null and

Prats an exclusive option and authority

void.

in writing to negotiate the sale of the

e.

Prospective buyers and all parties

property under the following terms:

interested shall be referred to

a. Prats is to sell the land at a basic

Prats.

price of PHP 3.00/sq. m.

b. A 10% commission shall be paid to

Prats based on PHP 2.10/sq. m. or

at any price finally agreed upon

and if the property be sold over

and above PHP 3.00/sq. m., the

excess shall be paid to Prats in

addition to his 10% commission.

c. Such exclusive option and

authority is good for (60) days

from the date of conformity;

As a result of this exclusive option and

authority

to

negotiate,

Doronila

withdrew his previous offer to sell to

SSS and asked for the return of all

papers

concerning

his

offered

property. These papers were given to

Prats as Doronilas authorized real

estate broker.
AGENCY

February 26, 1968: Doronila was

invited by SSS to have a meeting but

the former declined and asked that

SSS communicate directly with Prats.

Prats wrote SSS signifying his

intentions to sit down and meet with

the latter.

April 18, 1968: Doronila extended

Prats exclusive option and authority

up to May 18.

May 6, 1968: Prats made a formal

written offer to the SSS at the price of

PHP6.00/sq. m. SSS ignored said offer.

May 18, 1968: Prats wrote to Doronila

emphasizing that they still had (15)

days within which to complete the

negotiations as per agreement or until

June 2.

May 30, 1968: Prats wrote to Doronila

again advising him that the SSS

agreed to purchase the land, though

no formal offer was made by the

latter.

June 6, 1968: Doronila wrote to Prats

informing him that he has not

received any written offer from the

SSS during the 60 days of the

exclusive option and authority which

expired on April 14, nor during the

period of extension which expired on

May 18, nor during the 15-day grace

period. As per their agreement, the

option expired and became null and

void.

June 19, 1968: Doronila wrote to SSS

renewing his offer to sell the land at

PHP 4.00/sq. m. SSS replied and made

a counter-offer of PHP 3.25/sq. m., for

a total price of P9,750,000.00.

July 30, 1968: Doronila accepted the

counter-offer and executed the deed

of absolute sale.

September 17, 1968: Prats presented

his statement of account to Doronila

for the payment of his professional

services as real estate broker in the

amount of P1,380,000.00. Doronila

refused to pay. Hence, a suit was filed.

RTC ruled in favor of Prats, ordering

Doronila to pay the commission plus

damages.

CA reversed. As per the agreement, a

written offer by the prospective buyer

was required and if no such written

offer is made until the last day of the

authorization, the option shall expire.

Issue/s - Holding:

WON CA erred in concluding that Prats was

not the efficient procuring cause in bringing

about the sale of Doronilas land to SSS and

as such should not be entitled to his

commission. NO. CA was correct.

Ratio:

It is clear from the stipulation of facts

and evidence on record that the offer

of Doronila to sell the land to SSS was

formally accepted by SSS only on June

20, 1968 after the exclusive option

had already expired. Prats was not the

efficient procuring case in bringing

about the sale proceeding from the

fact of expiration of his exclusive

option.

o This is manifested by the fact

that the SSS officials specifically

requested Prats not to be

present at the meeting with

Doronila on May 29 because the

SSS officials never wanted the

mediation or intervention of

Prats. The conclusion is that this

May 29 meeting was done

independently and not by virtue

of Prats wish or efforts to hold

such meeting.

o The fact that Prats also made

offers of PHP 4.50/sq. m. and

AGENCY

PHP 6.00/sq. m. belies the claim

that he arranged the May 29

meeting as SSS was only willing

to buy it at PHP 3.25/sq. m.

Prats offers to SSS received no

attention.

However, the Court took note that

Prats had taken steps to bring back

together Doronila and SSS:

o Prats wrote several letters to

SSS offering the land and

inviting them to discuss the

offer. He even made a former

offer of PHP 6.00/sq. m., albeit it

was ignored.

o Prats had several dinner and

lunch meetings with Doronila

and his nephew Atty. Asencio.

The latter corroborated this fact.

As such, the Court granted in

equity a sum of PHP 100,000.00

by way of compensation for Prats

efforts and assistance in the

transaction, which however was

finalized and consummated after

the expiration of his

option.

exclusive

Dispositive:

WHEREFORE, the decision appealed from is

hereby affirmed, with the modification that

private respondent Alfonso Doronila in equity

is ordered to pay petitioner or his heirs the

amount of One Hundred Thousand Pesos

(P100,000.00) and that the portion of the

said decision ordering Prats to pay

respondent Doronila attorneys' fees in the

sum of P10,000.00 is set aside.

The lifting of the injunction issued by the

lower court on the PHP 2,000,000.00 cash

deposit of respondent Doronila as ordered by

respondent court is hereby with the

exception of the sum of One Hundred

Thousand Pesos (P100,000.00) which is

ordered segregated therefrom to satisfy the

award herein given to petitioner, the lifting of

said injunction, as herein ordered, is

immediately executory upon promulgation

hereof.

14.

Amon Trading Corp. and Juliana Marketing v. CA and Tri-

R e a l t y D e v e l o p m e n t a n d Construction Corp.
G.R. No. 158585 December 13, 2005Chico-Nazario, J.
FACTS:

Tri-Realty is a developer and contractor with projects in Bulacan and Quezon City.
Sometime inFebruary 1992, Tri-Realty had difficulty in purchasing cement needed for
its projects. Lines & SpacesInterior Center, represented by Eleanor Bahia Sanchez,
informed Tri-Realty that it could obtaincement to its satisfaction from Amon Trading
Corporation and its sister company, Juliana Marketing.On the strength of such representation,
Tri-Realty proceeded to order from Sanchez 6,050 bags of cement from Amon Trading Corporation,
and from Juliana Marketing, 6,000 bags at P98.00/bag.

Tri-Realty, through Mrs. Sanchez of Lines & Spaces, paid in advance the amount of the cement.
Tri-Realty likewise paid to Lines & Spaces an advance fee for the 12,050 cement
bags at the rate of P7.00/bag, or a total of P84,350.00, in consideration of the facilitation of
the orders and certainty of delivery.

The balance of 2,200 bags from Amon Trading Corporation and 3,000 bags from Juliana Marketing, ora total of
5,200 bags, was not delivered. Tri-Realty, thus, sent Amon Trading and Juliana
Marketingw r i t t e n d e m a n d s b u t i n r e p l y, t h e y s t a t e d t h a t t h e y h a v e a l r e a d y r e
f u n d e d t h e a m o u n t o f undelivered bags of cement to Lines & Spaces per written instructions of
Sanchez.
ISSUES:
(1) WON there was a contract of agency between Lines & Spaces and Tri-Realty;
(2) WON Amon Trading and Juliana Marketing and Tri-Realty has privity of contract
HELD:
(1 & 2) No
 There was no written contract entered into between Amon Trading and Juliana Marketing and
Tri-Realty for the delivery of the bags of cement. Tri-Realty agreed with Sanchez of Lines &
Spaces forthe latter to source the cement needs of the former in consideration of P7.00 per bag of
cement. It isworthy to note that the payment in managers checks was made to Sanchez and was
not directlypaid to Amon Trading and Juliana Marketing. While the managers check issued by
Tri-Realty waseventually paid to Amon Trading and Juliana Marketing for the delivery of the
bags of cement, thereis obviously nothing from the face of said managers check to
hint that Tri-Realty was the onemaking the payments. There was likewise no
intimation from Sanchez that the purchase orderplaced by her was for Tri-Realtys
benefit. The meeting of minds, therefore, was between Tri-Realtyand Sanchez. This contract is
distinct and separate from the contract of sale between Amon Tradingand Juliana Marketing and
Sanchez who represented herself to be from Lines & Spaces/Tri-Realty,which, per her representation,
was a single account or entity.

Neither Sanchez nor Lines & Spaces was an agent for Tri-Realty, but rather a supplier for the
latterscement needs.

Art. 1868. By the

contract of agency a person binds himself to render some service or to dos
omething in representation or on behalf of another, with the consent or authority of the latter.

On the part of the principal, there must be an actual intention to appoint or an intention
naturallyinferable from his words or actions and on the part of the agent, there must
be an intention toaccept the appointment and act on it, and in the absence of such
intent, there is generally noagency. One factor which most clearly distinguishes agency from
other legal concepts is control; oneperson - the agent - agrees to act under the control or direction
of another - the principal. Indeed,the very word agency has come to connote control by the
principal. The control factor, more thanany other, has caused the courts to put contracts
between principal and agent in a separatecategory.

The intention of Tri-Realty was merely for Lines & Spaces, through Eleanor Sanchez, to supply
themwith the needed bags of cement. Inasmuch as Amon Trading and Juliana
Marketing have neverdirectly dealt with Tri-Realty and there is no paper trail on record to
guide them that the Tri-Realty,in fact, is the beneficiary, Amon Trading and Juliana Marketing
had no reason to doubt the request of Sanchez later on to refund the value of the undelivered bags of cement
to Lines & Spaces. Moreover,the check refund was payable to Lines & Spaces, not to Sanchez, so
there was indeed no cause tosuspect the scheme.

Tri-Realty was negligent. It was the one who had reposed too much trust on Sanchez for the
latter tosource its cement needs. Second, it failed to employ safety nets to steer clear of the rip-
off. For such huge sums of money involved in this case, it is surprising that a corporation such
as Tri-Realty wouldpay its construction materials in advance instead of in credit thus opening a
window of opportunityfor Sanchez or Lines & Spaces to pocket the remaining balance of
the amount paid corresponding tothe undelivered materials. Tri-Realty likewise paid in advance
the commission of Sanchez for thematerials that have yet to be delivered so it really had no
means of control over her. Finally, there isno paper trail linking Tri-Realty to Amon Trading and
Juliana Marketing thereby leaving the latterclueless that Tri-Realty was their true client. Tri-
Realty should have, at the very least, required Amon Trading and Juliana Marketing to sign
the check vouchers or to issue receipts for the advancepayments so that it could have a hold on
Amon Trading and Juliana Marketing. In this case, it was therepresentative of Lines & Spaces who signed the
check vouchers.

15. Monday, April 20, 2015

VICTORIAS MILLING CO. vs. COURT OF APPEALS

FACTS:

St. Therese Merchandising (STM) regularly bought sugar from Victorias Milling Co
(VMC). In the course of their dealings, VMC issued several Shipping List/Delivery Receipts
(SLDRs) to STM as proof of purchases. Among these was SLDR No. 1214M.SLDR No.
1214M, dated October 16, 1989, covers 25,000 bags of sugar. Each bag contained 50 kg and
priced at P638.00 per bag. The transaction covered was a direct sale.

On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation
(CSC) its rights in the same SLDR for P14,750,000.00. CSC issued checks in payment. That
same day, CSC wrote petitioner that it had been authorized by STM to withdraw the sugar
covered by the said SLDR. Enclosed in the letter were a copy of SLDR No. 1214M and a letter
of authority from STM authorizing CSC to withdraw for and in our behalf the refined sugar
covered by the SLDR On Oct. 27, 1989, STM issued checks to VMC as payment for 50,000
bags, covering SLDR No. 1214M. CSC surrendered the SLDR No. 1214M and to VMCs
NAWACO Warehouse and was allowed to withdraw sugar. But only 2,000 bags had been
released because VMC refused to release the other 23,000 bags.

Therefore, CSC informed VMC that SLDR No. 1214M had been sold and endorsed to
it. But VMC replied that it could not allow any further withdrawals of sugar against SLDR No.
1214M because STM had already withdrawn all the sugar covered by the cleared checks. VMC
also claimed that CSC was only representing itself as STMs agent as it had withdrawn the 2,000
bags against SLDR No. 1214M for and in behalf of STM. Hence, CSC filed a complaint for
specific performance against Teresita Ng Sy (doing business under STM's name) and VMC.
However, the suit against Sy was discontinued because later became a witness. RTC ruled in
favor of CSC and ordered VMC to deliver the 23,000 bags left. CA concurred. Hence this
appeal.
ISSUES:W/N CA erred in not ruling that CSC was an agent of STM and hence, estopped to sue
upon SLDR No. 1214M as assignee.

HELD:

NO. CSC was not an agent of STM. VMC heavily relies on STMs letter of authority that said
CSC is authorized to withdraw sugar for and in our behalf. It is clear from Art. 1868 that
the: basis of agency is representation. On the part of the principal, there must be an actual
intention to appoint or an intention naturally inferable from his words or actions, and on
the part of the agent, there must be an intention to accept the appointment and act on it,
and in the absence of such intent, there is generally NO agency. One factor, which most
clearly distinguishes agency from other legal concepts, is control; one person the agent
agrees to act under the control or direction of another the principal. Indeed, the very word
agency has come to connote control by the principal. The control factor, more than any other,
has caused the courts to put contracts between principal and agent in a separate category. Where
the relation of agency is dependent upon the acts of the parties, the law makes no presumption of
agency and it is always a fact to be proved, with the burden of proof resting upon the persons
alleging the agency, to show not only the fact of its existence but also its nature and extent. It
appears that CSC was a buyer and not an agent of STM. CSC was not subject to STMs control.
The terms for and in our behalf should not be eyed as pointing to the existence of an agency
relation. Whether or not a contract is one of sale or agency depends on the intention of the
parties as gathered from the whole scope and effect of the language employed. Ultimately,
what is decisive is the intention of the parties. (In fact, CSC even informed VMC that the
SLDR was sold and endorsed to it.)

Agency distinguished from sale.

In an agency to sell, the agent, in dealing with the thing received, is bound to act according to the
instructions of his principal, while in a sale, the buyer can deal with the thing as he pleases, being
the owner. The elementary notion of sale is the transfer of title to a thing from one to another,
while the essence of agency involves the idea of an appointment of one to act for another.
Agency is a relationship which often results in a sale, but the sale is a subsequent step in the
transaction. (Teller, op. cit., p. 26; see Commissioner of Internal Revenue vs. Manila Machinery
& Supply Co., 135 SCRA 8 [1985].) An authorization given to another containing the phrase
for and in our behalf does not necessarily establish an agency, as ultimately what is decisive is
the intention of the parties. Thus, the use of the words sold and endorsed may mean that the
parties intended a contract of sale, and not a contract of agency.
16. Republic v. Evangelista, 466 SCRA 544 (2005)

FACTS: Plaintiff Dante Legaspi, through his Attorney-in-fact Paul Gutierrez, filed a complaint
for damages, with prayer

for the issuance of a writ of preliminary injunction against Defendants then Lt. Gen. Jose M.
Calimlim et al.

Previous thereto, Legaspi as principal executed a Special Power of Attorney (SPA) in favor of
his nephew Gutierrez.

Based on records, Gutierrez was given by Legaspi, inter alia, the power to manage the treasure
hunting activities in the

subject land; to file any case against anyone who enters the land without authority from Legaspi;
to engage the services of

lawyers to carry out the agency; and, to dig for any treasure within the land and enter into
agreements relative thereto. It

was likewise agreed upon that Gutierrez shall be entitled to 40% of whatever treasure may be
found in the land. Pursuant

to this authority and to protect Legaspis land from the alleged illegal entry of petitioners, agent
Gutierrez hired the

services of Atty. Adaza to prosecute the case for damages and injunction against [defendants
who were allegedly treasure

hunting on Legaspis land, with 80 military personnel detailed to guard and intimidate Legaspis
group from going near

the area of operations]. As payment for legal services, Gutierrez agreed to assign to Atty. Adaza
30% of Legaspis share

in whatever treasure may be recovered in the subject land.

On a motion to dismiss, defendants cited the nullity of the complaint which was filed by agent
Gutierrez after his principal
Legaspi subsequently executed a Deed of Revocation, among others. The trial court denied the
motion.

ISSUE: Whether the Contract of Agency has been validly revoked.

RULING: The contract of agency between principal Legaspi and agent Gutierrez is not
revocable at will. A contract of

agency is generally revocable as it is a personal contract of representation based on trust and

confidence reposed by the

principal on his agent. As the power of the agent to act depends on the will and license of the
principal he represents, the

power of the agent ceases when the will or permission is withdrawn by the principal. Thus,
generally, the agency may be

revoked by the principal at will.

However, an exception to the revocability of a contract of agency is when it is coupled with

interest, i.e., if a bilateral

contract depends upon the agency. The reason for its irrevocability is because the agency
becomes part of another

obligation or agreement. It is not solely the rights of the principal but also that of the agent and
third persons which are

affected

Here, the agency is coupled with interest as a bilateral contract depends on it. It is clear that the
treasure that may be

found in the land is the subject matter of the agency; that under the SPA, Gutierrez can enter into
contract for the legal

services of Atty. Adaza; and, thus Gutierrez and Atty. Adaza have an interest in the subject
matter of the agency, i.e., in
the treasures that may be found in the land. This bilateral contract depends on the agency and
thus renders it as one

coupled with interest, irrevocable at the sole will of the principal Legaspi. When an agency is
constituted as a clause in a

bilateral contract, that is, when the agency is inserted in another agreement, the agency ceases to
be revocable at the

pleasure of the principal as the agency shall now follow the condition of the bilateral agreement.
Consequently, the Deed

of Revocation executed by Legaspi has no effect. The authority of Gutierrez to file and continue
with the prosecution of

the case at bar is unaffected.

When a contract of agency is at will, the principal may compel the agent to return the document
evidencing the agency at

any time. If the agency was constituted in order to contract with specified persons, the revocation
of the agency does not

prejudice the latter if they were not given notice thereof. Notice in these cases are crucial.

18. Nielson & Co. Inc. vs. Lepanto Consolidated Mining Co.

[GR L-21601, 28 December 1968]

Facts: [GR L-21601, 17 December 1966; Zaldivar (J): 6 concur, 2 took no part] 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 1940, a dispute arose regarding the computation of the 10% share of Nielson in the
profits. The Board of Directors of Lepanto, realizing that the mechanics of the contract was
unfair to Nielson, authorized its President to enter into an agreement with Nielson modifying the
pertinent provision of the contract effective 1 January 1940 in such a way that Nielson shall
receive (1) 10% of the dividends declared and paid, when and as paid, during the period of the
contract and at the end of each year, (2) 10% of any depletion reserve that may be set up, and (3)
10% of any amount expended during the year out of surplus earnings for capital account. In the
latter part of 1941, the parties agreed to renew the contract for another period of 5 years, but in
the meantime, the Pacific War broke out in December 1941. In January 1942 operation of the
mining properties was disrupted on account of the war. In February 1942, the mill, power plant,
supplies on hand, equipment, concentrates on hand and mines, were destroyed upon orders of the
United States Army, to prevent their utilization by the invading Japanese Army.

The Japanese forces thereafter occupied the mining properties, operated the mines during the
continuance of the war, and who were ousted from the mining properties only in August 1945.
After the mining properties were liberated from the Japanese forces, LEPANTO took possession
thereof and embarked in rebuilding and reconstructing the mines and mill; setting up new
organization; clearing the mill site; repairing the mines; erecting staff quarters and bodegas and
repairing existing structures; installing new machinery and equipment; repairing roads and
maintaining the same; salvaging equipment and storing the same within the bodegas; doing
police work necessary to take care of the materials and equipment recovered; repairing and
renewing the water system; and retimbering. The rehabilitation and reconstruction of the mine
and mill was not completed until 1948. 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. On 6 February 1958, NIELSON
brought an action against LEPANTO before the Court of First Instance of Manila 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 entered into between
them on 30 January 1937, including attorney's fees and costs. LEPANTO in its answer denied
the material allegations of the complaint and set up certain special defenses, among them,
prescription and laches, as bars against the institution of the action.

After trial, the court a quo rendered a decision dismissing the complaint with costs. The court
stated that it did not find sufficient evidence to establish LEPANTO's counterclaim and so it
likewise dismissed the same. NIELSON appealed. The Supreme Court reversed the decision of
the trial court and enter in lieu thereof another, ordering Lepanto to pay Nielson (1) 10% share of
cash dividends of December, 1941 in the amount of P17,500.00, with legal interest thereon from
the date of the filing of the complaint; (2) management fee for January, 1942 in the amount of
P2,500.00, with legal interest thereon from the date of the filing of the complaint; (3)
management fees for the sixty-month period of extension of the management contract,
amounting to P150,000.00, with legal interest from the date of the filing of the complaint; (4)
10% share in the cash dividends during the period of extension of the management contract,
amounting to P1,400,000.00, with legal interest thereon from the date of the filing of the
complaint; (5) 10% of the depletion reserve set up during the period of extension, amounting to
P53,928.88, with legal interest thereon from the date of the filing of the complaint; (6) 10% of
the expenses for capital account during the period of extension, amounting to P694,364.76, with
legal interest thereon from the date of the filing of the complaint; (7) to issue and deliver to
Nielson and Co. Inc. shares of stock of Lepanto Consolidated Mining Co. at par value equivalent
to the total of Nielson's 10% share in the stock dividends declared on November 28, 1949 and
August 22, 1950, together with all cash and stock dividends, if any, as may have been declared
and issued subsequent to November 28, 1949 and August 22, 1950, as fruits that accrued to said
shares; provided that if sufficient shares of stock of Lepanto's are not available to satisfy this
judgment, Lepanto shall pay Nielson an amount in cash equivalent to the market value of said
shares at the time of default, that is, all shares of stock that should have been delivered to Nielson
before the filing of the complaint must be paid at their market value as of the date of the filing of
the complaint; and all shares, if any, that should have been delivered after the filing of the
complaint at the market value of the shares at the time Lepanto disposed of all its available
shares, for it is only then that Lepanto placed itself in condition of not being able to perform its
obligation; (8) the sum of P50,000.00 as attorney's fees; and (9) the costs.

Lepanto seeks the reconsideration of the decision rendered on 17 December 1966.

Issue: Whether the management contract is a contract of agency or a contract of lease of

services.

Held: 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." In both agency and lease of
services one of the parties binds himself to render some service to the other party. Agency,
however, is distinguished from lease of work or services in that the basis of agency is
representation, while in the lease of work or services the basis is employment. The lessor of
services does not represent his employer, while the agent represents his principal. Further,
agency is a preparatory contract, as agency "does not stop with the agency because the purpose is
to enter into other contracts." The most characteristic feature of an agency relationship is the
agent's power to bring about business relations between his principal and third persons. "The
agent is destined to execute juridical acts (creation, modification or extinction of relations with
third parties). Lease of services contemplate only material (non-juridical) acts." Herein, the
principal and paramount undertaking of Nielson under the management contract was the
operation and development of the mine and the operation of the mill. All the other undertakings
mentioned in the contract are necessary or incidental to the principal undertaking these other
undertakings being dependent upon the work on the development of the mine and the operation
of the mill. In the performance of this principal undertaking Nielson was not in any way
executing juridical acts for Lepanto, destined to create, modify or extinguish business relations
between Lepanto and third persons. In other words, in performing its principal undertaking
Nielson was not acting as an agent of Lepanto, in the sense that the term agent is interpreted
under the law of agency, but as one who was performing material acts for an employer, for a
compensation. 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. Further, from the statements in
the annual report for 1936, and from the provision of paragraph XI of the Management contract,
that the employment by Lepanto of Nielson to operate and manage its mines was principally in
consideration of the know-how and technical services that Nielson offered Lepanto. The contract
thus entered into pursuant to the offer made by Nielson and accepted by Lepanto was a "detailed
operating contract". It was not a contract of agency. Nowhere in the record is it shown that
Lepanto considered Nielson as its agent and that Lepanto terminated the management contract
because it had lost its trust and confidence in Nielson.

19. Ker and Co., LTD vs Lingad

GR No. L-20871 April 30, 1971

Facts:

CIR assessed the sum of P20,272.33 as the commercial brokers percentage tax, surcharge, and
compromise penalty against Ker & Co. Ker and Co. requested for the cancellation of the
assessment and filed a petition for review with the Court of Tax Appeals. The CTA ruled that
Ker and Co is liable as a commercial broker. Ker has a contract with US rubber. Ker is the
distributor of the said company. Ker was precluded from disposing the products elsewhere unless
there has been a written consent from the company. The prices, discounts, terms of payment,
terms of delivery and other conditions of sale were subject to change in the discretion of the
Company.

Issue:

Whether the relationship of Ker and Co and US rubber was that of a vendor- vendee or principal-
broker

Ruling:

The relationship of Ker and Co and US rubber was that of a principal-broker/ agency. Ker and
Co is only an agent of the US rubber because it can dispose of the products of the Company only
to certain persons or entities and within stipulated limits, unless excepted by the contract or by
the Rubber Company, it merely receives, accepts and/or holds upon consignment the products,
which remain properties of the latter company, every effort shall be made by petitioner to
promote in every way the sale of the products and that sales made by petitioner are subject to
approval by the company. Since the company retained ownership of the goods, even as it
delivered possession unto the dealer for resale to customers, the price and terms of which were
subject to the companys control, the relationship between the company and the dealer is one of
agency.

20. ROSA LIM vs. CA

FACTS:
Lim, who arrived from Cebu, received from Suarez 2 pieces of jewelry: a diamond ring and a
bracelet to be sold on commission basis. Lim returned the bracelet to Suarez, but failed to return
the diamond ring or to turn over the proceeds thereof if sold. Suarez wrote a demand letter asking
for the return of the ring or the proceeds of the sale thereof. Lim, however, alleges that she had
returned both the ring and the bracelet, hence she no longer has any liability.

Lim has a different version of the facts. She denies the transaction was for her to sell the 2 pieces
of jewelry on commission basis. She told Suarez that she would consider buying the pieces of
jewelry for her own use. Lim took the pieces of jewelry and asked Suarez to prepare the
necessary papers for her to sign because she was not yet prepared to buy it. The document was
prepared, and Lim signed it, but she claims that she didnt agree to the terms of the receipt
regarding the sale on commission basis. Her proof is that she signed the document on the upper
portion and not at the bottom where a space is provided for the signature of the persons receiving
the jewelry.

ISSUE:

Was the real transaction between Lim & Suarez a real contract of agency to sell on commission
basis as set out in the receipt or a sale on credit?

HELD:

The transaction between them was a contract of agency to sell on commission basis. Lims
signature indeed appears on the upper portion of the receipt below, but this fact doesnt have the
effect of altering the terms of the transaction form a contract of agency to sell on commission
basis to a contract of sale. The moment she affixed her signature thereon, Lim became bound by
all the terms stipulated in the receipt.

Contracts shall be obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present. However there are some provisions in law w/c
require certain formalities for particular contracts. The 1st is when the form is required for the
validity of the contract; the 2nd is when it is required to make the contract effective as against
3rd parties; and the 3rd is for the purpose of proving the existence of the contract, e.g. those
included in the Statute of Frauds. A contract of agency to sell on commission basis doesnt
belong to any of these 3 categories, hence it is valid and enforceable in whatever form they may
be entered into.
There is only 1 type of legal instrument where the law strictly prescribes the location of the
signature of the parties thereto. This is in case of notarial wills. But in the case at bar, the parties
didnt execute a notarial will but a simple contract of agency to sell on commission basis, thus
making the position of Lims signature immaterial.
21. NARIC vs. CA et al
G.R. No. L-32320
July 16, 1979
FACTS: The National Rice and Corn Corporation (Naric) had on stock 8000 metric tons of corn
which it could not dispose of due to its poor quality. Naric called for bids for the purchase of the
corn and rice. But precisely because of the poor quality of the corn, a direct purchase of said corn
even with the privilege of importing commodities did not attract good offers. Davao
Merchandising Corporation (Damerco) came in with its offer to act as agent in the exportation
of the corn, with the agent answering for the price thereof and shouldering all expenses
incidental thereto, provided it can import commodities, paying the NARIC therefor from the
price it offered for the corn. Damerco was to open a domestic letter of credit, which shall be
available to the NARIC drawing therefrom through sight draft without recourse. The availability
of said letter or letters of credit to the NARIC was dependent upon the issuance of the export
permit. The payment therefor depended on the importation of the collateral goods, that is after its
arrival.
The first half of the collateral goods were successfully imported. Due to the inferior quality of
the corn, it had to be replaced with more acceptable stock. This caused such delay that the letters
of credit expired without the NARIC being able to draw the full amount therefrom. Checks and
PN were issued by DAMERCO for the purpose of securing the unpaid part of the price of the
corn and as guaranty that DAMERCO will purchase the corresponding collateral goods.

But because of the change of administration in the government, barter transactions were
suspended. Hence, DAMERCO was not able to import the remaining collateral goods.

NARIC instituted in the CFI of Manila against DAMERCO and Fieldmens Insurance Co. Inc.
an action for recovery of a sum of money representing the balance of the value of corn and rice
exported by DAMERCO.

The trial court rendered in favor of NARIC ordering DAMERCO and Fieldmens Insurance Co.
Inc., to pay, jointly and severally. CA reversed the trial courts decision and rendered a new
judgement dismissing the complaint as premature and for lack of cause of action. Hence this
petition for certiorari.

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

HELD: the petition for review is denied and the resolution of the CA appealed from is hereby
affirmed
AGENT

Clearly from the contract between NARIC and DAMERCO: bids were previously called for by
the NARIC for the purchase of corn and rice to be exported as well as of the imported
commodities that will be brought in, but said biddings did not succeed in attracting good offers.
Subsequently, Damerco made an offer. Now, to be sure, the contract designates the Naric as the
seller and the Damerco as the buyer. These designations, however, are merely nominal, since the
contract thereafter sets forth the role of the buyer (Damerco) as agent of the seller in
exporting the quantity and kind of corn and rice as well as in importing the collateral goods thru
barter and to pay the aforementioned collateral goods.
The contract between the NARIC and the DAMERCO is bilateral and gives rise to a reciprocal
obligation. The said contract consists of two parts: (1) the exportation by the DAMERCO as
agent for the NARIC of the rice and corn; and (2) the importation of collateral goods by barter on
a back to back letter of credit or no-dollar remittance basis. It is evident that the DAMERCO
would not have entered into the agreement were it not for the stipulation as to the importation of
the collateral goods which it could purchase.

It appears that we were also misled to believe that the Damerco was buying the corn. A closer
look at the pertinent provisions of the contract, however, reveals that the price as stated in the
contract was given tentatively for the purpose of fixing the price in barter. It should likewise be
stressed that the aforesaid exportation and importation was on a no-dollar remittance basis. In
other words, the agent, herein defendant Damerco, was not to be paid by its foreign buyer in
dollars but in commodities. Damerco could not get paid unless the commodities were imported,
and Damerco was not exporting and importing on its own but as agent of the plaintiff, because
it is the latter alone which could export and import on barter basis according to its
charter.Thus, unless Damerco was made an agent of the plaintiff, the former could not export
the corn and rice nor import at the same time the collateral goods. This was precisely the
intention of the parties.
He is not to be considered a buyer, who should be liable for the sum sought by NARIC because
the contract itself clearly provides the Damerco was to export the rice and corn, AND TO BUY
THE collateral goods. There is nothing in the contract providing unconditionally that Damerco
was buying the rice and corn. To be more specific, if the agreement was just a sale of corn to
Damerco, the contract need not specify that Damerco was to buy the collateral goods