PART ONE - AGENCY
American Air the ticket stock or exchange orders, less
I. Nature, Form, and Kinds of Agency
A. Definition
ORIENT AIR SERVICES AND HOTEL REPS. v. CA and AMERICAN AIRLINES
(1991)
Padilla, J. | GR No. 76931 | Definition
SUMMARY:
American Air and Orient Air entered into a General Sales Agency
Agreement (GSAA), where Orient Air served as American Air’s sales agent
in the Philippines. Orient Air failed to remit ticket proceeds to American
Air, so the latter terminated the GSAA and filed this case against Orient
Air.
The CFI declared the termination illegal and ordered American Air to
reinstate Orient Air as its agent, and to pay Orient Air commission and
damages. The SC reversed the reinstatement of Orient Air, ruling that
American Air cannot be compelled to make Orient Air its agent.
DOCTRINE:
Art. 1868, NCC: By the contract of agency a person binds himself to
render some service or to do something in representation or in behalf of
another, with the consent or authority of the latter.
● A principal cannot be compelled by any authority to establish an
agent-principal relationship without its consent. Such would
violate the principles of agency.
FACTS
1. This is a consolidation of two petitions for certiorari from a CA
decision which dismissed American Air’s civil case against Orient
Air and granted Orient Air’s counterclaim for agent’s overriding
commission and damages.
2. 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 (GSAA), whereby
American Air authorized Orient Air to act as its exclusive general
sales agent within the Philippines for the sale of air passenger
transportation.
1
○ Under the GSAA, Orient Air shall remit (in US dollars) to
commissions due to Orient Air, at least semi-monthly. On
the other hand, American Air will pay Orient Air Services
commission on transportation sold by Orient Air Services
or its sub-agents.
3. American Air alleged that Orient Air had reneged on its
obligations under the GSAA by failing to promptly remit the net
proceeds of sales for January-March 1981 in the amount of US
$254,400.40.
○ American Air then undertook the collection of the
proceeds of tickets sold originally by Orient Air and
terminated forthwith the GSAA in accordance with par.
13, which authorizes termination in case Orient Air is
unable to transfer to the funds payable by Orient Air to
American Air.
4. American Air filed a civil case against Orient Air before CFI Manila
for accounting with preliminary attachment/ garnishment,
mandatory injunction, and restraining order averring the
aforesaid basis for the termination of the GSAA, as well as Orient
Air’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."
5. Orient Air denied the material allegations of the complaint with
respect to American Air's entitlement to the alleged unremitted
amounts, contending that after application thereof to the
commissions due it under the GSAA, American Air in fact still
owed Orient Air a balance in unpaid overriding commissions.
○ Further, Orient Air contended that the actions taken by
American Air in the course of terminating the GSAA, as
well as the termination itself, were untenable.
6. CFI Manila ruled in favor of Orient Air, ruling that the termination
of the GSAA by American Air was illegal and improper, and
ordering American Air to pay the balance of the overriding
commission on total flown revenue of US$84,821.31, plus the
additional amount of US$8,000.00 (3% overriding commission);
Pl,500,000 in exemplary damages; and P300,000 in attorney's
fees.
 7. IAC (now CA) affirmed with modification the CFI decision with
respect to the damages granted, reducing exemplary damages
to P200,000, and attorney’s fees to P25,000.

ISSUES and HELD

WON the CFI erred in ordering American Air to reinstate Orient Air as its
agent --- YES.

RATIO
1. By affirming this ruling of the trial court, respondent IAC, 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 (Art. 1868) as a contract whereby
"a person binds himself to render some service or to do
something in representation or on behalf of another,
with the consent or authority of the latter” (emphasis
supplied)
○ In an agent-principal relationship, the personality of the
principal is extended through the facility of the agent. In
so doing, the agent, by legal fiction, becomes the
principal, authorized to perform all acts which the latter
would have him do. Such a relationship can only be
effected with the consent of the principal, which must
not, in any way, be compelled by law or by any court.
○ The GSAA 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)

DISPOSITIVE
Lower court judgment affirmed with modification.

2
 B. Elements
Loadmasters Customs Services Inc. v Glodel Brokerage Corporation
J Mendoza; Elements of Agency
Facts:
1. R&B Insurance insured Columbia Wire & Cable’s shipment of
132 bundles of copper cathodes against All Risks. When the
shipment arrived in Manila, Columbia hired Glodel to release and
withdraw the cargo from the pier; Glodel in turn hired
Loadmasters to use 12 of latter’s trucks to transport the goods
to Columbia’s warehouses in Bulacan and Valenzuela (6 trucks
to each city).
2. The 6 trucks got to Valenzuela safely, but only 5 to Bulacan. The
missing truck was later recovered but without the cathodes, so
Columbia filed a claim against R&B and recovered P1.9m as
insurance indemnity, after the requisite investigation and
adjustment. In turn, R&B sued both Loadmasters & Glodel for
reimbursement.
3. The RTC held only Glodel liable for the P1.9m. R&B & Glodel
appealed, with the CA granting only R&B’s appeal, making
Loadmaster, as the agent of Glodel, likewise liable to R&B.
Loadmaster filed this petition for review.
Issues:
1. WON Loadmaster be legally considered an Agent of Glodel? No.
2. WON Glodel and Loadmaster are still liable for the loss? Yes, as
joint-tortfeasors. .
3. WON Loadmaster is liable to Glodel despite the lack of cross
claim filed by the latter? No.
Ratio:
1. The CA erred in holding so. A1868 provides the elements of
Agency:
a. Consent, express or implied, of the parties to establish
the relationship. There was no mutual intent to establish
the relationship of Agency;
b. Object is the execution of a juridical act in relation to a
third person.
c. Agent acts as a representative and not for himself. As
such, Loadmasters never represented Glodel;
d. Agent acts within the scope of his authority. Glodel never
authorized Loadmasters to represent it.
3
The basis of Agency is representation, that the agent acts for and on
behalf of the principal on matters within the scope of his authority and
said acts have the same legal effect as if they were personally executed
by the principal.
On the part of the principal, there must be an intention to appoint, either
actual or inferable.
On the part of the agent, there must be an intention to accept the
appointment.
2. Both Loadmaster & Glodel are common carriers and are
obligated to exercise extraordinary diligence from the time goods
are placed in their care until actual/constructive delivery, as per
CC A1733.
a. Private Carriers are those wherein carriage is
undertaken by special agreement and the carrier does
not hold itself to carry goods for the general public.
b. Glodel is a customs broker as conceded in its
memorandum. In [Schmitz Transport v Transport
Venture], the SC held that customs brokers are common
carriers, since transportation of goods is an integral part
of its business. It was thus negligent in selecting
Loadmasters, or not ensuring the safety of the cargo via
escorting the trucks, etc.
c. Loadmasters admitted it was a common carrier, and
there was no indication that the agreement between
Glodel & Loadmasters was private in character. Under
A2180, employers are liable for the damage of their
employees, and are juris tantum presumed negligent
unless they present convincing proof that they exercised
the diligence of a good father of the family in selecting
and supervising their employees. This Loadmasters
failed to do.
Under A2194, the responsibility of 2 or more persons who are liable for a
quasi-delict is solidary, and either of them are responsible for the whole
injury.
3. Despite having a definite cause of action, Glodel failed to file a
cross-claim pursuant to S2 Rule 9. Under the rules, a compulsory
counterclaim or a cross-claim not set up shall be barred. The
Court’s equity jurisdiction cannot come to the aid of a party who
was negligent, as Glodel was, as it can never operate against
statutory law or judicial rules of procedure.
WESTMONT INVESTMENT CORP v. FRANCIA (2011)
MENDOZA, J | GR No. 194128 | Nature, Form and Kinds of Agency
SUMMARY: Amos Francia and two siblings invested 3.9 million in
Vestment’s investment arm Wincorp. At maturity Wincorp extended the
maturity date by making a Confirmation Advice in the name of Pearlbank
(making it look like Pearlbank borrowed the 3.9m from the plaintiffs). It
insists there was a contract of agency between it and the Francias (in
effect saying that Pearlbank is the recipient of the investment and is
responsible too). Court says there is non because the evidence fails to
establish it.
DOCTRINE: 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
 and that the actual borrower of plaintiffs-appellees’ money is
4. the agent acts within the scope of his authority.
FACTS
• RTC: respondents Amos P. Francia, Jr., Cecilia Zamora and
Benjamin Francia (the Francias) filed a Complaint for Collection
of Sum of Money and Damages against petitioner Westmont
Investment Corporation (Wincorp) and respondent Pearlbank
Securities Inc. (Pearlbank)
• RTC issued an order dismissing the motions to dismiss of
Wincorp and Pearlbank for lack of merit
Wincorp then filed its
Answer, while Pearlbank filed its Answer with Counterclaim and
Crossclaim (against Wincorp)
• Testimony of Amos (FACTS): Amos Francia, his sister and and
brother were enticed by a member of Westmont Bank in
Meycauayan to invest 1.4m and 2.5 in its investment arm,
Wincorp, promising 11% return over a 43 day spread. The
receipts were both dates Janueary 27, 2000. Upon maturity,
Wincorp said it had no funds. It the“rolled-over” their placements
and issued Confirmation Advices extending their placements for
another 34 days.
4
• The confirmation advice indicated the name of the borrower as
Pearlbank. The due date was April 13, 2000
On April 13, 2000,
they again tried to get back the principal amount they invested
plus interest but, again, they were frustrated. Several attempts
to settle the case proved futile.
• After the testimony of Amos Francia, Wincorp filed a MOtion to
Postpone due to unavailability of wtinesses. Denied by RTC
• Pearlbank filed a Demurrer to Evidence. Granted. Complaint
against Pearlbank dismissed. Case with respect to Wincorp was
submitted for decision
• RTC Decision: Wincorp solely liable and ordered to pay 3.9m
representing the total investments + 11% per annum to be
counted from 10 March 2000
• CA: Affirmed with minor modification
• Also mentioned by CA: "Defendant- appellant Wincorp never
negated these established facts because defendant-appellant
WincorpÊs claim is that it received the money of plaintiffs-
appellees but it merely acted as an agent of plaintiffs- appellees
defendant-appellee PearlBank. Hence, defendant- appellant
Wincorp alleges that it should be the latter who must be held
liable to the plaintiffs-appellees.
• However, the contract of agency and the fact that defendant-
appellee PearlBank actually received their money were never
proven. The records are bereft of any showing that defendant-
appellee PearlBank is the actual borrower of the money invested
by plaintiffs-appellees as defendant-appellant Wincorp never
presented any evidence to prove the same.”
• Wincorp brings this to SC through Rule 45
ISSUE and HELD
Is there a contract of agency between Wincorp and the Plaintiffs? NO.
RATIO
• Wincorp insists that there was a contract of agency between it
and the Francias with the latter authorizing the former as their
agent to lend money to Pearlbank. According to Wincorp, the two
Confirmation Advices presented as evidence by the Francias and
admitted by the court, were competent proof that the recipient of
the loan proceeds was Pearlbank
• 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 latter’s consent. It is said that the underlying
principle of the contract of agency is to accomplish results by
using the services of others·to do a great variety of things. Its aim
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. Its basis is representation.
• 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.
• In this case, the principal-agent relationship between the
Francias and Wincorp was not duly established by evidence. The
records are bereft of any showing that Wincorp merely brokered
the loan transactions between the Francias and Pearlbank and
the latter was the actual recipient of the money invested by the
former.
• Pearlbank did not authorize Wincorp to borrow money for it.
Neither was there a ratification, expressly or impliedly, that it had
authorized or consented to said transaction.
• Although the subject Confirmation Advices indicate the name of
Pearlbank as the purported borrower of the said investments,
said documents do not bear the signature or acknowledgment of
Pearlbank or any of its officers.
• Another significant point which would support the stand of
Pearlbank that it was not the borrower of whatever funds
supposedly invested by the Francias was the fact that it initiated,
filed and pursued several cases against Wincorp questioning the
latter’s acts of naming it as borrower of funds from investors.
• Also, all the documents attached by Wincorp to its pleadings
before the CA cannot be given any weight or evidentiary value for
the sole reason that, as correctly observed by the CA, these
documents were not formally offered as evidence in the trial
court.
DISPOSITIVE: Petition Denied

5
Soriamont Steamship Agencies, Inc. v. Sprint Transport Services, Inc. (14
July 2009)
CHICO-NAZARIO, J. | GR No. 174610 | Agency; Elements of;
SUMMARY: Soriamont assails the lower court decision that it was liable
to Sprint, as it held 1) it’s Equipment Lease Agreement (ELA) with the
latter established it as the principal – contracting party who 2) authorized
co-respondent Papa Transport Services (PTS) to withdraw the equipment
to be leased to the former. The Court denies the petition.
DOCTRINE: The settled rule is that persons dealing with an assumed
agent are bound at their peril, and if they would hold the principal liable,
they must ascertain not only the fact of agency, but also the nature and
extent of authority.
FACTS
1. Soriamont and Sprint entered into an ELA where the latter would
lease to the former equipment to facilitate its transport services.
2. Co-petitioner Patrick Ronas, General Manager of Soriamont,
issued authorization letters for Papa Transport Services (PTS)
and Rebson Trucking to withdraw the said chassis units from the
container yard of Sprint.
3. Sprint was informed of the supposed loss of the equipment by
Soriamont and Ronas. Sprint sought recovery of the equipment
and/or payment but neither were achieved.
4. Soriamont alleges that they could not be faulted as it was actually
PTS who withdrew the equipment for the real “agent” of
Soriamont, which was Harman Foods.
1.c. The case is barren of any piece of evidence pointing to Harman Foods
being involved in the transaction, save for it being identified as “xxx
shipper/consignee, and the location of said shipping line.”
1.d. “The settled rule is that persons dealing with an assumed agent are
bound at their peril, and if they would hold the principal liable, they must
ascertain not only the fact of agency, but also the nature and extent of
authority” – in this case, Sprint was able to prove by evidence by way of
the ELA, the Equipment Interchange Receipts which were signed by the
driver of PTS.
2.a. Again, the authorization letter “xxx established an agency
relationship, with Soriamont as the principal and PTS as an agent.”
2.b. “xxx the actions taken by PTS as regards the subject equipment were
binding on Soriamont, making the latter laible to Sprint.”
DISPOSITIVE:
WHEREFORE, premises considered, the instant Petition for Review on
Certiorari is hereby DENIED. The Decision dated 22 June 2006 and
Resolution dated 7 September 2006 of the Court of Appeals in CA-G.R.
CV No. 74987 are hereby AFFIRMED. Costs against petitioner Soriamont
Steamship Agencies, Inc.

ISSUES and HELD

1. WoN a contract of agency existed between Soriamont and PTS –
YES
2. WoN Soriamont is therefore liable to Sprint - YES

RATIO
1.a.“The authorization issued by Soriamont to PTS established an agency
relationship, with Soriamont as the principal and PTS as an agent.”

1.b. The case is replete with evidence of PTS having been intended, both
by conduct and by the very authorization letter of Soriamont, as agent of
the petitioner to effect the ELA.

6
J. Philippine Marine, Inc v. NLRC 1. Counsel argues that the amount of P450,000 is unconscionably
Carpio-Morales, J | GR 175366 | Scope of Agency low. However, only respondent Dumalaog can impugn the
consideration of the compromise as being unconscionable.
Summary: Warlito Dumaloag filed a claim against J. Phil. Marine for 2. The relation of attorney and client is in many respects one of
disability benefits. Pending his case in the NLRC, he had a compromise agency. The general rules of agency apply to such relation. The
agreement with quit claim with J. Marine. When J. Phil filed a acts of an agent are deemed acts of the principal only if the agent
manifestation with the NLRC saying that they had an amicable acts within the scope of his authority. However, the
settlement, Warlito’s counsel filed an opposition saying that there was circumstances of this case indicate that respondent’s counsel is
still a balance left to be paid and that the compromise was acting beyond the scope of his authority in questioning the
unconscionable. compromise agreement.
The Court dismissed the case saying that An employee had the right to 3. The client has a right to compromise a suit without intervention
compromise, and that the agent(lawyer) was exceeding his authority of the lawyer, who may only intervene if the compromise is
when he questioned the compromise. entered into with the intent to defraud the lawyer of the fees
justly due him. However, there is no showing that respondent
Doctrine: The acts of an agent are deemed the acts of the principal only intended to defraud his counsel of his fees. In fact, the Quitclaim
if the agent acts within the scope of his authority. and Release notes that “20% attorney’s fees (P90,000) would be
paid on April 12, 2007.
Facts:
1. Respondent Warlito Dumaloag served as a cook aboard vessels Dispositive: WHEREFORE, the petition is, in light of all the foregoing
plying overseas. He filed a complaint before the NLRC against discussion, DISMISSED.
petitioners J-Phil, a manning agency, and its foreign principal
Norman Shipping Services, for unpaid money claims, paid
leaves, disability benefits, among others. He claimed to have
been disabled due to enlargement of the heart and severe
thyroid enlargement contacted while discharging his duties as a
cook.
2. The NLRC awarded $50,000 disability benefit to respondent.
However, during the pendency of the case, respondent, against
the advice of his counsel, entered into a compromise agreement
with petitioners. He received P450,000. He signed a Quitclaim
and Release subscribed and sworn to before the Labor Arbiter.
3. Respondent’s counsel filed a Comment and Opposition
“purportedly on behalf of respondent” objecting to the absolution
of petitioners from paying respondent the award granted by the
NLRC ($50,000). Counsel prayed that the remaining balance be
paid.

Issue and Held: W/N counsel, as agent of respondent, acted within the
scope of his authority as to allow him to impugn the consideration of the
compromise as being unconscionable. – NO
Ratio:

7
Filipinas Life Assurance Co. v Pedroso (Feb. 4, 2008) 11. In this petition, Filipinas Life claims that the investment scheme
Quisimbing, J.|Gr no. 159489|Elements offered by the Valle, Apetrior, and Alcantara was outside the
scope of their authority and thus it cannot be held responsible.
Summary: Pedroso and Palacio invested in Filipinas Life due to a
promotional investment offered by its agent Valle, and this was verified Issue and Held: WON Filipinas Life is liable for the acts of its agent Valle,
by Apretrior and Alcantara (Administrative Asst. and Manager of Filipinas Apetrior, and Alcantara? Yes
Life Office). Filipinas Life refused to return the investment, which
prompted Pedroso and Palacio to file an action for a sum of money Ratio:
against Filipinas Life ,Valle, Apetrior and Alcantara. Filipinas Life argues 1. The investments were received by Valle and remitted to Filipinas
that Valle acted beyond its scope. SC held that his acts were ratified by Life, using Filipinas Life official receipts. Valles authority to solicit
Apetrior and Alcantara which binds Filipinas Life. and receive investments were established by the parties by
seeking confirmation with Alcantara and Apetrior, therefore the
Doctrine: The acts of an agent beyond the scope of his authority do not respondents exercised due diligence in confirming the validity of
bind the principal, unless the principal ratifies them, expressly or the Valles representations.
impliedly. Ratification in agency is the adoption or confirmation by one 2. Filipinas Life, as principal, is liable for obligations contracted by
person of an act performed on his behalf by another without authority. its agent Valle. Even if Valle acted beyond the scope of his
authority, the principal is still bound by his acts if it is ratified,
Facts: expressly or impliedly. In this case, Filipinas Life expressly ratified
1. Pedroso is a policyholder of Filipinas Life Assurance. Valles acts through Alcantara and Apetrior.
2. She was offered by her insurance agent, Valle, to invest in a Dispositive:
promotional investment program which gives 8% prepaid interest Petition denied for lack of merit. CA resolution affirmed.
per month for certain amounts deposited monthly.
3. Pedroso initially invested and issued a post-dated check for
P10,000, then Valle gave her a personal check for P800 for the
8% interest and a Life Agents Receipt.
4. Pedroso verified the promotional investment with the Filipinas
Life office and was assured by Alcantara (Administrative
Assistant) and Apetrior (Branch Manager) that there was a
promotion.
5. Pedroso waited for the maturity of her initial investment and then
requested a refund, which she received a month after.
6. Pedroso invested 7-8 more times at a lower rate of 5% prepaid
interest per month totaling P37,000.
7. Pedroso told Palacio about the investments and Palacio invested
a total amount of P49,950.
8. However, Filipinas Life refused to return the amounts when
Pedroso and Palacio tried to withdraw the investment.
9. Pedroso and Palacio filed an action for recovery of sum of money.
10. TC and CA held Filipinas Life and Valle, Apetrior, Alcantara jointly
and solidarily liable to Pedroso and Palacio.

8
EUROTECH INDUSTRIAL TECHNOLOGIES, INC. v. CUIZON (April 23 2007)
Chico-Nazario, J. | 521 SCRA 584 | Agency: Elements
Petitioner: EUROTECH INDUSTRIAL TECHNOLOGIES, INC.
Respondents: EDWIN CUIZON and ERWIN CUIZON
Summary: Edwin, as sales manager of the sole proprietorship of his
brother, signed a Deed of Assignment in favor of Eurotech, covering
receivables from Toledo Power. Despite this, the brother-proprietor
proceeded to collect from Toledo, prompting Eurotech to file a complaint.
Eurotech impleads Edwin, claiming that he, in signing the Deed, acted in
excess of his authority as agent, as evidenced by his brother’s contrary
action of collecting from Toledo. SC disagrees, as jurisprudence provides
that the powers of an agent are particularly broad in the case of one acting
as a general agent or manager.
Doctrine: 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.
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, a sole proprietorship
owned by ERWIN Cuizon. His brother EDWIN is the sales
manager.
● Eurotech sold to Impact Systems various products allegedly
amounting to P91,338. Subsequently, the Cuizons sought to buy
from Eurotech one unit of sludge pump valued at P250,000.
When the sludge pump arrived, Eurotech refused to deliver the
same without respondents having fully settled their
indebtedness.
● Thus, respondent Edwin executed a Deed of Assignment of
receivables from Toledo Power Company in favor of Eurotech. Yet
despite the existence of the Deed of Assignment, respondents
proceeded to collect from Toledo Power.
● Because of respondents' failure to abide by demand letters,
petitioner instituted a complaint. Respondent Edwin averred that
he is not a real party in interest. According to him, he was acting
as mere agent of his principal, and the latter was very much
9
aware of this fact. Trial court ruled in favor of Edwin. CA affirmed
TC. Hence this petition.
Issue - Held
Did Edwin bind himself personally to pay the obligation to Eurotech? NO
Ratio
● Petitioner contends that Erwin’s act of collecting the receivables
from Toledo Power notwithstanding the existence of the Deed of
Assignment signed by Edwin, repudiated Edwin's power to sign
the DOA. As Edwin did not sufficiently notify it of the extent of his
powers as an agent, Eurotech claims that he should be made
personally liable.
● The elements of the contract of agency are: (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; and (4) the agent acts within the scope of his authority.
● The parties do not dispute the existence of the agency
relationship between Erwin as principal and Edwin as agent. The
only cause of the present dispute is whether Edwin exceeded his
authority when he signed the Deed of Assignment.
● Article 1897 presents two 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.
● The Deed of Assignment clearly states that Edwin signed thereon
as the sales manager of Impact Systems. The powers of an agent
are particularly broad in the case of one acting as a general agent
or manager; such a position presupposes a degree of confidence
reposed and investiture with liberal powers for the exercise of
judgment and discretion in transactions and concerns which are
incidental or appurtenant to the business entrusted to his care
and management. 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.
● 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. There is,
therefore, no doubt that Edwin's participation in the Deed of
Assignment was "reasonably necessary" or was required in order
for him to protect the business of his principal.
● Also, petitioner is seeking to recover both from respondents
Erwin, the principal, and Edwin, the agent. It must be pointed out
that in case of excess of authority by the agent, like what
petitioner claims exists here, the law does not say that a third
person can recover from both the principal and the agent.

DENIED.

10
Mr. and Mrs. Tan vs GVT Engineering Services (August 7, 2006)
Austria-Martinez | GR No. 153057 | Nature, Form, and Kinds of Agency -
Elements
SUMMARY:
The spouses Tan hired GVT though its owner Tactaquin to construct their
residential house and engineer Cadag to supervise the project. changes
were made during the course of the project which led to strained relations
between the parties and the deletion of certain tasks from the scope of
GVT’s work. GVT withdrew from the project as a consequence of this. An
action was filed by Tactaquin for the payment of the balance of the
contract against the Tans and Cadag but the case against Cadag was
eventually dismissed. The Tans argued that the case against them should
have been dismissed as well since they merely relied on Cadag’s
instructions but the court ruled that Cadag acted merely as an agent of
the spouses Tan so the spouses, as principals, were liable for his acts.
DOCTRINE:
The essence of agency being the representation of another, it is evident
that the obligations contracted are for and on behalf of the principal. A
consequence of this representation is the liability of the principal for the
acts of his agent performed within the limits of his authority as if they were
acts of the principal himself.
FACTS
1. 18OCT1989 - the spouses Tan entered into a contract with GVT
through its owner/manager Gerino Tactaquin for the
construction of their residential house in consideration of P1.7M.
They hired engineer Rudy Cadag to supervise the construction.
2. During the course of the construction, the spouses Tan made
changes in the plans and removed certain tasks from GVT’s
scope of work, causing some strain in their relations with
Tactaquin and Cadag. Following this, Tactaquin stopped the
construction of the house.
3. Tactaquin filed a complaint for specific performance against the
Tans and Cadag alleging that (1) they were forced to borrow
money at exorbitant interest because of the changes made to the
plans (2) portions of their contract were deleted and awarded to
other contractors (3) the completion of the project was delayed
because the Tans delayed the delivery of construction materials
11
a. answer of spouses Tan and Cadag: (1) GVT’s work was
defective so they awarded the work to other contractors
to avoid further losses. (2) these changes were agreed
upon by the parties. (3) GVT has no legal personality
since it is a single proprietorship
4. Cadag testified that he was at the job site everyday to closely
supervise the construction with the assistance of other
supervising representatives of the spouses (2 other engineers
and an architect)
5. RTC ruled that the allegations of poor workmanship and
incompetence were unsupported and that the act of deleting
major items from GVT’s scope of work was uncalled for. The
losses suffered by GVT and the delay in the project was caused
by the Tans’ failure to deliver the construction materials on time.
Cadag and the spouses were held solidarily liable for the
damages resulting from the breach of contract.
6. The spouses filed an appeal and the CA modified the RTC
decision by dismissing the case against Cadag
ISSUES and HELD
1. if GVT as a sole proprietorship has the legal personality to
institute the complaint — NO, but the complaint was instituted by
Tactaquin himself
2. if Tactaquin was wrong to discontinue the construction, in
violation of their construction agreement, considering that he
consented and acquiesced to the changes made in the plans?
also if the spouses should be required to pay for the unfinished
portion of the house after it was abandoned and for the 5%
retention fee of Tactaquin — NO, the spouses Tan were the ones
guilty of breaching the contract. YES, they should pay.
3. if the spouses should be absolved of any liability considering that
the case against Cadag was dismissed and they merely relied
upon the advice and instructions of Cadag whom they hired to
supervise the construction — NO
RATIO
1. being a sole proprietorship, GVT is not vested with a legal
personality to bring suit or defend an action in court. though
initially the records were captioned as “GVT Engineering Services
acting through its owner Gerino Tactaquin” suggesting that GVT
was the one which filed the complaint, subsequent allegations in
 the complaint show that the suit was actually brought by
Tactaquin. In fact, one of the prayers in the complaint was for the
recovery of moral damages for, among other things, his
besmirched reputation as an Engineer and Contractor.
Considering the rule that juridical persons aren’t entitled to moral
damages, it is clear that Tactaquin was actually the complainant.
The caption should have read “Gerino Tactaquin doing business
under the name and style of GVT Engineering Services” as is
usually the practice but this is merely a technical defect that
doesn’t affect jurisdiction
2. SC agreed with the RTC and CA ruling regarding the liability of the
spouses Tan for breach of their contract with GVT. Having
established this, they also ruled that the spouses should pay for
the balance of the price of their contract with GVT. contract
a. while he consented to the changes made to the plans,
records show that Tactaquin refused to give his consent
to the deletions in their agreement as evidenced by 2
letters addressed to the spouses. the delay in the
delivery of construction materials was evidenced by the
minutes of the meeting held among the representatives
of the spouses and GVT and a letter.
b. Art. 2134 NCC states that if the obligation has been
substantially performed in good faith, the obligor may
recover as though there had been a strict and complete
fulfilment less damages suffered by the obligee. in the
present case, 74% of the work had been completed at
the time that Tactaquin withdrew from the project. In
other words, he had already substantially performed his
obligation in good faith especially considering the fact
that a substantial part of the remaining work to be done
was deleted from the scope of GVT’s work and awarded
to other contractors, forcing him to withdraw.
c. If the deleted items were performed by GVT in
accordance with their contract, 96% of the work would
have been completed. So, Tactaquing should be paid
96% of the total contract price (P1,632,000 of P1.7M).
since P1,265,660 had already been paid, the spouses
are liable for the remaining P366,340
d. since his failure to complete his obligation was not due
to his own fault, he is still entitled to the retention fee.
12
3. the CA was correct in ruling that contracts can only bind the
parties who entered into it and cannot favor or prejudice third
persons in line with the principle on relativity of contracts.
a. contracts take effect only between he parties, their
successors in interest, heirs and assigns. also, every
cause of action ex contractu must be founded upon a
contract.
b. here, the complaint for specific performance was based
on the failure of the spouses Tan to comply with their
contract. Cadag isn’t a party to this contract. Neither did
he enter into any contract with Tactaquin regarding the
construction of the house. since the Tactaquin’s cause
of action was breach of contract and there’s no privity of
contract between him and Cadag, there is no obligation
to speak about and no cause of action between Cadag
and Tactaquin.
c. Cadag was employed by the spouses to supervise the
construction of their house. This being the case, his role
was merely that of an agent. The essence of agency
being the representation of another, it is evident that the
obligations contracted are for and on behalf of the
principal. A consequence of this representation is the
liability of the principal for the acts of his agent
performed within the limits of his authority as if they
were acts of the principal himself. In the absence of any
allegation that he exceeded his authority, his acts are
considered as those of his principal who are answerable
for such acts.
DISPOSITIVE
WHEREFORE, the petition is partly GRANTED. The appealed Decision and
Resolution of the Court of Appeals are AFFIRMED with MODIFICATION
whereby the amount of retention fee which petitioners are ordered to pay
is reduced from P49,578.56 to P20,772.05
JOCELYN B. DOLES v. MA. AURA TINA ANGELES (June 6, 2006)
Austria Martinez, J. | GR No. 149353 | Topic in the syllabus
SUMMARY: The respondent alleged that she lent money to the petitioner
however, the latter failed to pay the same. Thus the petitioner executed a
deed of absolute sale over a property in Cavite. Meanwhile, the petitioner
denied that she borrowed money from the respondent. She averred that
she re-lent the money to her friends who in turn, issued checks which
bounced. Because of the non-payment of her friends, she executed the
said deed of sale over the property.
The Court held that both petitioner and respondent were agents of the
debtor-friends and one Arsenio Pua respectively. Since both parties are
agents, the deed of absolute sale is void for lack of consideration because
neither of them are privy to the loan.
DOCTRINE: This Court has affirmed that, under Article 1868 of the Civil
Code, the basis of agency is representation. The question of whether an
agency has been created is ordinarily a question which may be
established in the same way as any other fact, either by direct or
circumstantial evidence. The question is ultimately one of intention.
Agency may even be implied from the words and conduct of the parties
and the circumstances of the particular case. Though the fact or extent of
authority of the agents may not, as a general rule, be established from
the declarations of the agents alone, if one professes to act as agent for
another, she may be estopped to deny her agency both as against the
asserted principal and the third persons interested in the transaction in
which he or she is engaged.
FACTS
1. Respondent alleged that petitioner took a loan from the former
in the amount of P405,430.00. Subsequently, a "Deed of
Absolute Sale" was executed by the petitioner, as seller, to the
respondent, as buyer, a parcel of land, as well as the
improvements thereon in Camella Townhomes Sorrente in
Bacoor, Cavite, in order to satisfy her personal loan with
respondent. This property was mortgaged to National Home
Mortgage Finance Corporation (NHMFC) to secure petitioner's
loan in the sum of P337,050.00 with that entity. Moreover
respondent shall assume the undue balance of the mortgage
and pay the monthly amortization.
13
2. Petitioner, then defendant, while admitting some allegations in
the Complaint, denied that she borrowed money from
respondent. According to her, she referred her friends to
respondent whom she knew to be engaged in the business of
lending money in exchange for personal checks through her
(respondent’s) capitalist Arsenio Pua. She alleged that her
friends borrowed money from respondent and issued personal
checks. However, these checks bounced and said friends could
not be located. This resulted to the respondent getting furious
and threatened to filed a criminal case against petitioner. With
regard to the sale of the Camella property, petitioner was forced
to execute the same to avoid criminal prosecution.
3. The RTC dismissed the complaint for insufficiency of evidence
and held that the sale was void for lack of cause or consideration.
4. The CA reversed and set aside the judgement and concluded that
petitioner was the borrower and, in turn, would "re-lend" the
amount borrowed from the respondent to her friends. Hence, the
Deed of Absolute Sale was supported by a valid consideration,
which is the sum of money petitioner owed respondent
amounting to P405,430.00, representing both principal and
interest.
ISSUES and HELD
1. WON the petitioner can be considered as a debtor of the
respondent --- (NO)
2. WON the contract of sale was executed for a cause – (NO)
RATIO
1. During the examination, the Court took note that both petitioner
and respondent admitted that they are agents of the debtor-
friends and Arsenio Pua respectively.
a. This Court has affirmed that, under Article 1868 of the
Civil Code, the basis of agency is representation. The
question of whether an agency has been created is
ordinarily a question which may be established in the
same way as any other fact, either by direct or
circumstantial evidence. The question is ultimately one
of intention. Agency may even be implied from the words
and conduct of the parties and the circumstances of the
particular case. Though the fact or extent of authority of
the agents may not, as a general rule, be established
 from the declarations of the agents alone, if one
professes to act as agent for another, she may be
estopped to deny her agency both as against the
asserted principal and the third persons interested in
the transaction in which he or she is engaged.
b. In this case, petitioner knew that the financier of
respondent is Pua; and respondent knew that the
borrowers are friends of petitioner. For an agency to
arise, it is not necessary that the principal personally
encounter the third person with whom the agent
interacts.
c. In view of the two agency relationships, petitioner and
respondent are not privy to the contract of loan between
their principals.
2. Since the sale is predicated on that loan, then the sale is void for
lack of consideration. Moreover, the subject property does not
belong to the petitioner but to NHMFC.

DISPOSITIVE WHEREFORE, the petition is granted. The Decision and

Resolution of the Court of Appeals
are REVERS

14
APEX Mining Co. v. Southeast Mindanao Gold Mining Corp June 23,
2006 Chico-Nazario, J.
Summary: MMC was granted an exploration permit over the Diwalwal
Gold Rush Area, subject to the condition that the permit shall only be for
MMC's exclusive use and benefit, or of its duly authorized agents. MMC
assigned the exploration permit to SEM, a domestic corp. that is 100%
subsidiarily owned by MMC. The CA upheld the assignment, holding that
SEM is an agent of MMC, and under the doctrine of piercing the
corporate veil, MMC and SEM should not be treated as separate
entities. The SC reversed, holding that MMC did not prove SEM was their
agent, and the assignment violated the condition in the EP. The doctrine
of piercing the corporate veil is therefore inapplicable, because it seeks
to prevent illegal acts, and allowing the application of the doctrine here
would allow an illegal act.
Facts:
• This case concerns multiple mining claims over the Diwalwal
Gold Rush Area. The said area is within the Agusan-Davao-
Surigao Forest Reserve in Davao del Norte and Davao Oriental,
as per Proclamation 369 (in 1931), which set aside the said
area as a forest reserve.
• 1984: Marcopper Mining Corp. (MMC) filed 16 DOLs
(Declaration of Location/mining claims) with the Bureau of
Mines and Geo-Sciences (BMG) over the area. After learning
that the area was within the forest reserve, MMC abandoned its
claims and instead applied for a Prospecting Permit with the
Bureau of Forest Development (BFD). The permit was granted,
but it also included areas claimed by Apex Mining.
• Mar. 1986: Marcopper Mining Corp. (MMC) was granted an
Exploration Permit (EP 133) over the Diwalwal Gold Rush Area,
by the BMG. Hence, MMC sought to cancel Apex's mining claims
on the ground that they covered areas within the forest reserve.
As such, MMC argued that Apex should have applied for a
Prospecting Permit with the BFD, and not a DOL with the BMG.
• BMG: Dismissed MMC's petition for cancellation, and held that
the area covered by Apex's claim was not within a forest
reserve. Apex's claim was upheld.
• DENR: Reversed. Upheld the exploration permit of MMC
instead.
15
• Office of the President: Affirmed DENR ruling.
• SC: On certiorari, the SC held against Apex. The land was in the
forest reserve, hence Apex should have first applied for a permit
with the BFD.
• Multiple groups then sought to cancel MMC's EP 133, but
failed. In 1994, while one petition for cancellation against MMC
was pending, MMC assigned EP 133 to Southeast Mindanao
Gold Mining Corporation (SEM), a domestic corporation which is
alleged to be a 100%-owned subsidiary of MMC.
• 1995: BMG accepted and registered the assignment, as well as
SEM's Mineral Production Sharing Agreement application
• Due to the many oppositions, the DENR formed a Panel of
Arbitrators to look into the issue. The panel upheld the validity
of EP 133. The adverse claimants appealed to the Mines
Adjudication Board, which ordered the stop of all mining
operations in the area pending compliance with mining licenses
and requirements, but upheld SEM's application for Mineral
Production Sharing. They appealed to the SC, which remanded
the cases to the CA. The CA upheld the validity of EP 133,
because SEM is an agent of MMC. (Note: The CA used the
doctrine of piercing the corporate veil to uphold the validity of
EP 133. Please see Ratio.) Hence, this petition by those
opposing MMC and SEM's EP 133.
Issue: WON EP 133 and its transfer to SEM are valid—NO. The
assignment was a circumvention of the condition in the EP.
WHEREFORE, the petitions are PARTIALLY GRANTED, thus we
hereby REVERSE and SET ASIDE the Decision of the CA and hereby
declare that EP 133 of MMC has EXPIRED on 7 July 1994 and that
its subsequent transfer to SEM on 16 February 1994 is VOID.
Ratio:
Re: Agency
• Apex argues that MMC failed to comply with the terms and
conditions in EP 133, thus MMC and its successor-in-
interest SEM lost their rights in the mining area. Apex
pointed out that MMC violated four conditions in its permit.
First, MMC failed to comply with the mandatory work
program, to complete exploration work, and to declare a
 mining feasibility. Second, it reneged on its duty to submit
an Environmental Compliance Certificate. Third, it failed to
comply with the reportorial requirements. Fourth, it violated
the terms of EP 133 when it assigned said permit to SEM
despite the explicit prohibition against its transfer.
• Apex likewise emphasizes that MMC failed to file its MPSA
application required under DAO No. 8220 which caused its
exploration permit to lapse because DAO No. 82 mandates
holders of exploration permits to file a Letter of Intent and a
MPSA application not later than 17 July 1991. EP 133
expired prior to its assignment to SEM.
• One of the conditions of the exploration permit categorically
states that the permit shall be for the exclusive use and
benefit of MMC or its duly authorized agents. While it may
be true that SEM, the assignee of EP 133, is a 100%
subsidiary corporation of MMC, there is no proof that SEM
is a duly authorized agent of MMC. SEM is a distinct and
separate entity from MMC. For a contract of agency to exist,
it is essential that there is: (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;
and (4) the agent acts within the scope of his authority.
• Since SEM is not an authorized agent of MMC, it goes
without saying that the assignment or transfer of the permit
in favor of SEM is null and void as it directly contravenes
the terms and conditions of the grant of EP 133. The
assignment by MMC of EP 133 in favor of SEM did not
make the latter the former's agent. Such assignment
involved actual transfer of all rights and obligations MMC
had under the permit in favor of SEM, thus making SEM the
permittee. It was not a mere grant of authority to SEM, as
an agent of MMC, to use the permit. MMC totally abdicated
its rights over the permit.
• Agency vs. Assignment: In agency, the agent acts not on his
own behalf but on behalf of his principal. On the other
hand, in assignment, there is total transfer or
relinquishment of right by the assignor to the assignee. The
assignee takes the place of the assignor and is no longer
bound to the latter.
16
Re: piercing the corporate veil
• The CA held that by virtue of SEM being a 100% subsidiary of
MMC, it was automatically an agent of MMC. The CA also
invoked the doctrine of piercing the corporate veil to legitimize
the prohibited transfer or assignment of EP 133. It held that
SEM is just a business conduit of MMC, hence, the distinct legal
personalities of the two entities should not be recognized.
• SC holds that the doctrine is inapplicable. The assignment of
the permit to SEM was used to circumvent the condition of non-
transferability of the exploration permit. To allow SEM to avail
itself of this doctrine and to approve the validity of the
assignment is tantamount to sanctioning an illegal act, which is
what the doctrine precisely seeks to forestall.
• For reasons of public policy and in the interest of justice, the
corporate veil will justifiably be impaled only when it becomes a
shield for fraud, illegality or inequity committed against a third
person. However, courts should be mindful that it must only be
applied in cases where the corporate fiction was misused to
such an extent that injustice, fraud or crime was committed
against another in disregard of its rights. Only then may the veil
be pierced. Thus, a subsidiary corporation may be made to
answer for the liabilities or illegalities done by the parent
corporation if the former was organized for the purpose of
evading obligations that the latter may have entered into. In
other words, this doctrine is in place in order to expose and hold
liable a corporation which commits illegal acts and use the
corporate fiction to avoid liability from the said acts. The
doctrine of piercing the corporate veil cannot therefore be used
as a vehicle to commit prohibited acts because these acts are
the ones which the doctrine seeks to prevent.
Litonjua Jr vs. Eternit Corpotration (June 8, 2006)
CALLEJO, SR., J.| G.R. No. 144805 | Elements of Agency
SUMMARY:
Eternit Corporation (EC) owns eight parcels of land in Mandaluyong City
where its manufacturing operations are done. In 1986, due to the political
situation (Marcos time) in the Philippines, the management of
Eteroutremer S.A Corporation (ESAC) which owns 90% of EC’s share,
wanted to stop the operations in the country. It instructed one of EC’s
Board of Director’s member (Michael Adams) to dispose its land in PH.
Adams engaged the services of a broker, Marquez, who offered the land
to Eduardo and Antonio Litonjua, Jr. Litonjua brothers offered to buy the
land for 20 Million but EC’s General manager (Glanville) and Regional
Director for Asia of ESAC (Delsaux) made a counterproposal offer. Litonjua
bros accepted the counter proposal offer and deposited the amount to a
trust account. Sometime in April 1987, GM of EC informed Marquez that
ECs BOD has decided not to sell the properties in view of the improving
situation in PH upon assumption in office of Corazon Aquino. Litonjua bros
filed a complaint for specific performance and damages against EC,
ESAC. RTC dismissed the case and its decision was affirmed by CA. CA
ruled that Marquez is a special agent under Art 1874 and under Sec 23
of the Corporation Code, he needs a special authority from EC’s BOD to
bind such corporation to the sale of properties. Delsaux is merely a
representative of ESAC and had to authority to bind EC. SC affirmed CA.
SC ruled that sale of real property of a corporation by a person purporting
to be an agent thereof but without written authority from the corp’s BOD
who has such power, is null and void.
DOCTRINE:
An agency may be express or implied from the act of the principal, from
his silence or lack of action or failure to repudiate the agency. Agency may
be oral unless the law requires a specific form. However, to create or
convey real rights, a special power of attorney is necessary
FACTS
17
1. Eternit Corporation (EC) is a corporation duly organized and
registered under Philippine laws. It’s engaged in the manufacture
of roofing materials and pipe products.
a. It owns eight parcels of land with a total area of 47,233
square meter situated in Mandaluyong
b. 90% of EC is owned by Eteroutremer S.A Corporation
(ESAC) a corporation organized and registered under the
laws of Belgium. Jack Glanville, was the General
Manager and President of EC, while Claude Frederick
Delsaux was the Regional Director for Asia of ESAC.
2. In 1986, the management of ESAC grew concerned about the
political situation in the PH and wanted to stop its operations in
the country. It engaged the services of realtor/broker Lauro G.
Marquez. Marquez offered the land to Eduardo Litonjua, Jr. of the
Litonjua & Company, Inc. for Php 27MM. Litonjua Bros offered to
pay Php 20M cash. Marquez apprised Glanville of the Litonjua
siblings’ offer and relayed the same to Delsaux in Belgium.
Delsaux later on made a counterproposal offer/final offer of
"US$1,000,000.00 and P2,500,000.00 to cover all existing
obligations prior to final liquidation. This was accepted by
Litonjua’s brother and proceeded to deposit the amount in
Security Bank & Trust Company.
3. In 1987, Corazon Aquino took her oath of office and PH political
condition improved. Marquez, through a letter from Delsaux, was
informed that EC Board decided not to sell the eight parcel of
land and to continue operations in the country.
4. Litonjua brothers filed a complaint for specific performance and
damages against EC, ESAC and Far East Bank & Trust Company
(trustee under which the land’s TCT are entrusted).
5. Argument of Litonjua: Marquez acted merely as a broker or go-
between and not as agent of the corporation; hence, it was not
necessary for him to be empowered as such by any written
authority. They further claimed that an agency by estoppel was
created when the corporation clothed Marquez with apparent
authority to negotiate for the sale of the properties. However,
since it was a bilateral contract to buy and sell, it was equivalent
 to a perfected contract of sale, which the corporation was obliged
to consummate.
6. Argument of EC: Glanville, Delsaux and Marquez had no authority
from the stockholders of respondent EC and its Board of
Directors to offer the properties for sale to the petitioners, or to
any other person or entity for that matter.
7. RTC and CA ruled in favor of EC and dismissed the complaint.
Petitioner filed a petition for review with SC.
ISSUES and HELD:
1. WON there was a perfected Contract of Sale? NONE
2. Whether a written authority from EC is required before the sale
can be perfected? YES
3. Whether Glanville and Delsaux have authority to enter into the
contract of sale/ granted the apparent authority by EC to enter
into such contract of sale? NO
RATIO:
1. Petitioners failed to prove that respondent EC had decided to sell
its properties and that it had empowered Adams, Glanville and
Delsaux or Marquez to offer the properties for sale to prospective
buyers and to accept any counter-offer. Petitioners likewise failed
to prove that their counter-offer had been accepted by
respondent EC, through Glanville and Delsaux. It must be
stressed that when specific performance is sought of a contract
made with an agent, the agency must be established by clear,
certain and specific proof.
2. A corporation is a juridical person separate and distinct from its
members or stockholders and is not affected by the personal
rights, obligations and transactions of the latter. It may act only
through its board of directors or, when authorized either by its by-
laws or by its board resolution, through its officers or agents in
the normal course of business. Under Sec 36 of the Corporation
Code, a corporation may sell or convey its real properties, subject
to the limitations prescribed by law and the Constitution. Absent
valid delegation/authorization, the rule is that the declarations
18
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 the
corporation.
While a corporation may appoint agents to negotiate for the sale of its real
properties, the final say will have to be with the board of directors through
its officers and agents as authorized by a board resolution or by its by-
laws. An unauthorized act of an officer of the corporation is not binding
on it unless the latter ratifies the same expressly or impliedly by its board
of directors. Any sale of real property of a corporation by a person
purporting to be an agent thereof but without written authority from the
corporation is null and void. The declarations of the agent alone are
generally insufficient to establish the fact or extent of his/her authority.
Agency may be oral unless the law requires a specific form. However, to
create or convey real rights over immovable property, a special power of
attorney is necessary (under Article 1874). Thus, when a sale of a piece
of land or any portion thereof is through an agent, the authority of the
latter shall be in writing, otherwise, the sale shall be void.
3. Petitioners, failed to adduce in evidence any resolution of the
Board of Directors of respondent EC empowering Marquez,
Glanville or Delsaux as its agents, to sell, let alone offer for sale,
for and in its behalf.
While Glanville was the President and General Manager of respondent EC,
and Adams and Delsaux were members of its Board of Directors, the three
acted for and in behalf of respondent ESAC, and not as duly authorized
agents of respondent EC; a board resolution evincing the grant of such
authority is needed to bind EC to any agreement regarding the sale of the
subject properties. Such board resolution is not a mere formality but is a
condition sine qua non to bind respondent EC. Admittedly, respondent
ESAC owned 90% of the shares of stocks of respondent EC; however, the
mere fact that a corporation owns a majority of the shares of stocks of
another, or even all of such shares of stocks, taken alone, will not justify Article 1874, NCC: When a sale of a piece of land or any interest therein
their being treated as one corporation. is through an agent, the authority of the latter shall be in writing; otherwise
the sale shall be void.
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.

Marquez had no authority to bind respondent EC to sell the subject

properties. A real estate broker is one who negotiates the sale of real
properties. His business, is only to find a purchaser who is willing to buy
the land upon terms fixed by the owner. He has no authority to bind the
principal by signing a contract of sale. Indeed, an authority to find a
purchaser of real property does not include an authority to sell.

DISPOSITIVE

Neither may respondent EC be deemed to have ratified the transactions

between the petitioners and respondent ESAC, through Glanville, Delsaux
and Marquez. The transactions and the various communications inter se
were never submitted to the Board of Directors of respondent EC for
ratification.
Petition is DENIED for lack of merit.

NOTES:
Requisites for an agency by estoppel to exist: For an agency by estoppel
to exist, the following must be established: (1) the principal manifested a
representation of the agent’s authority or knowingly allowed the agent to
assume such authority; (2) the third person, in good faith, relied upon
such representation; (3) relying upon such representation, such third
person has changed his position to his detriment. An agency by estoppel,
which is similar to the doctrine of apparent authority, requires proof of
reliance upon the representations, and that, in turn, needs proof that the
representations predated the action taken in reliance.

19
Amon Trading Corporation v. Court of Appeals (December 13, 2005)
Chico-Nazario | GR No. 158585 | Nature, Form, and Kinds of Agency-
Elements
SUMMARY: Tri-Realty Corp. needed cement w/c Sanchez, representing
Lines & Spaces promised it could source. Tri-Realty paid in advance to
Sanchez who made the orders for 12k bags. 5200 bags were undelivered
and when Tri-Realty tried to claim, Petitioners said they refunded the
amount undelivered to Sanchez who had since fled the country. RTC held
Lines & Spaces solely liable but CA Reversed. SC disgreed with the
reversal saying there was no contract of agency between Lines & Spaces
and Tri-Realty Corp. thus there was no privity of contract between Tri-
Realty and the Petitioners. Contract of Agency needs intent to appoint as
seen through his words, or actions which is lacking here.
DOCTRINE: Art. 1868. By the contract of agency 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.
• 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.
FACTS
1. Private respondent Tri-Realty Corporation is a developer and
contractor w/ projects in Bulacan and QC. Lines & Spaces,
represented by Eleanor Sanchez informed PR that it could obtain
the cement it needed for its projects from Amon Trading (P) and
its sister company, Juliana Marketing.
2. PR ordered from Sanchez who ordered from P 6050 bags of
cement and 6000 bags from Juliana at P98/bag
3. PR through Sanchez/Lines & Spaces, paid in advance P592K to
P and P588K to Juliana.
20
a. A certain Weng Chua signed the check vouchers while
Sanchez issued receipts for the manager’s checks
b. P84K was also paid to Lines & Spaces as consideration
for facilitation of orders
4. A total of 5200 out of the 12050 bags ordered were not delivered
so PR sent demand letters to P and Juliana
a. Ps both responded that they already refunded the
amount of undelivered bags to Lines & Spaces per
written instructions of Sanchez
b. It was found out that Sanchez fled the country
5. PR filed collection suit against Amon Trading/Juliana and Lines
& Spaces
a. P: no privity of contract between them since it was Lines
& Spaces/Sanchez that ordered and paid the price, not
informed that Lines & Spaces and Tri-Realty were
separate entities since Sanchez just represented being
from those corporations.
b. LINES & SPACES: denied being represented by Sanchez
6. RTC: Lines & Spaces solely liable, Ps absolved
7. CA: REVERSED. Held the Ps solidarily liable with Lines & Spaces
ISSUES and HELD
WON there was a contract of agency between Lines & Spaces and Tri-
Realty? NO
RATIO
• There was no written contract between Ps and PR; It was
Sanchez who sourced the cement
o The manager’s checks were also made to Sanchez; not
directly paid to Ps
o No information from Sanchez that the order was for PRs
benefit.
• The meeting of minds was between Sanchez and Tri-Realty which
was separate from the contract between Sanchez and Ps
• The receipts for the manager’s check was also issued by Lines &
Spaces and NOT by Ps
• Petitioners were not remiss when they believed Eleanor
Sanchez's representation that "Lines & Spaces/Tri-Realty" refers
 to just one entity. è Jurisprudence holds that “And/or” is used
interchangeable
• Neither Eleanor Sanchez nor Lines & Spaces was an agent for
private respondent, but rather a supplier for the latter's cement
needs. (SEE DOCTRINE)
• IN THIS CASE: The intention of PR was merely for Lines & Spaces
to supply them with the needed bags of cement.
• Ps have never directly dealt with private respondent and there is
no paper trail on record to guide them that the private
respondent, in fact, is the beneficiary, petitioners had no reason
to doubt the request of Eleanor Sanchez later on to refund the
value of the undelivered bags of cement to Lines & Spaces.
o Moreover, the check refund was payable to Lines &
Spaces, not to Sanchez, so there was indeed no cause
to suspect the scheme.
o The fact that the deliveries were made at the
construction sites of private respondent does not by
itself raise suspicion that petitioners were delivering for
private respondent. There was no sufficient showing
that petitioners knew that the delivery sites were that of
private respondent and for another thing, the deliveries
were made by petitioners' men who have no business
nosing around their client's affairs

DISPOSITIVE: WHEREFORE, the present petition is hereby GRANTED.

Accordingly, the Decision and the Resolution dated 28 November 2002
and 10 June 2003, of the Court of Appeals in CA-G.R CV No. 60031, are
hereby REVERSED and SET ASIDE. The Decision dated 29 January 1998
of the Regional Trial Court of Quezon City, Branch 104, in Civil Case Q-92-
14235 is hereby REINSTATED. No costs.

21
YU ENG CHO v. PAN AMERICAN WORLD AIRWAYS (2000)
Puno, J. | GR No. 123560 | Elements
SUMMARY:
Plaintiff Yu Eng Cho bought plane tickets for three flights from Claudia
Tagunicar, who he claimed represented herself to be an agent of TWSI (a
travel agency) and Pan Am. It was later discovered that the third ticket
was not confirmed, which led to Yu Eng Cho not reaching his destination
and canceling an important business transaction. Yu Eng Cho sued
Tagunicar, as well as TWSI and Pan Am. CA found only Tagunicar liable.
Yu Eng Cho appealed to the SC, averring that Tagunicar was an agent of
TWSI and Pan Am, and the latter should be held solidarily liable with her.
SC denied the petition and affirmed the CA.
DOCTRINE:
By the contract of agency, 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.
The elements of agency are:
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; and
4. the agent acts within the scope of his authority.
FACTS
1. Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and
Achilles Marketing. He traveled from time to time to Malaysia,
Taipei, and Hong Kong.
2. Jul, 10, 1976: He bought plane tickets from private respondent
Claudia Tagunicar, who represented herself as an agent of
Tourist World Services, Inc. (TWSI). Each ticket cost PhP25,000
and the destinations were Hong Kong, Tokyo, and San Francisco.
○ She advised petitioners to take Pan Am since Northwest
Airlines was on strike and Pan Am had a Tokyo-San
Francisco flight.
22
○ Petitioner was supposed to go to Fairfield, New Jersey to
purchase two lines of infrared heating system
processing textured plastic article.
○ Only the Manila-HK, then Tokyo was confirmed on the
said date. Plan 002 or the flight from Tokyo-San
Franciso was on “RQ” status or “on request.” She told
the petitioners to come back after a few days to confirm
the last flight.
○ After calling Julieta Canilao, the office manager of TWSI,
Tagunicar confirmed the petitioners flight to San
Francisco and attached confirmation stickers on their
tickets.
○ Adrian Yu, son of petitioner, called the Pan Am office to
verify the status of their flight, and a personnel from Pan
Am confirmed it.
3. They left for Hong Kong and stayed there for five days before
leaving for Tokyo. In Tokyo, they again called Pan Am for
reconfirmation, to which it said that their names were not on the
manifest.
○ Since they were transient passengers, they couldn’t stay
in Japan for more than 72 hours. They couldn’t get any
flights to San Francisco because Northwest Airlines was
on strike at that time and booking a flight was difficult.
○ They were offered tickets to Taipei, which they paid for,
but upon reaching Taipei, they were forced to go back to
Manila since there were no flights available.
○ Yu Eng Cho lost the chance to buy said infrared heating
system from Radiant Heat, which could’ve given him a
profit of P300-400,000.
4. A complaint for damages was filed by petitioners before RTC
Manila.
5. Defendant TWSI testified that petitioners were referred to
Tagunicar who was an independent travel solicitor. She helped
process travel papers, tickets, booking of passengers, and
airport assistance, and that Yu Eng Cho knew her because he
dealt with her in the past.
○ Tagunicar then bought the tickets from Canilao.
Tagunicar says Julieta Canilao told her, “o, sige Claudia,
confirm na,” which she even noted in her index card.
However, TWSI/Canilao denied confirming the San
 Francisco flight since it was really difficult to book one Neither TWSI nor Pan Am ever authorized private respondent Tagunicar
because of the strike. to confirm the subject flight to San Francisco. It is a settled rule that
○ Neither TWSI nor Pan Am confirmed the flight and they persons dealing with an assumed agent are bound at their peril, if they
never authorized Tagunicar to attach said confirmation would hold the principal liable, to ascertain not only the fact of agency but
stickers. also the nature and extent of authority, and in case either is controverted,
6. RTC ruled in favor of Yu Eng Cho, holding Pan Am, TWSI, and the burden of proof is upon them to establish it.
Tagunicar jointly and severally liable. (Canilao was not included
since she was just doing her job as the general manager of TWSI.) DISPOSITIVE
They were ordered to pay P200,000 for actual damages, CA decision affirmed.
P100,000 as exemplary damages, 20% of the award as
attorney’s fees, and P30,000 for litigation expenses.
7. Pan Am and Tagunicar appealed. CA modified the judgment,
holding Tagunicar solely liable, lowering the amount for moral
and exemplary damages, and attorney’s fees to P50,000 and
P25,000, and P10,000 respectively, plus costs of suit, and
deleting the amount for actual damages.
○ CA also found that Tagunicar was an independent travel
solicitor and not a duly authorized agent or
representative of TWSI or Pan Am.

ISSUES and HELD

WON Tagunicar was an agent of Pan American Airways or Travel World
Services Inc. --- NO

RATIO
Petitioners assert that Tagunicar is a sub-agent of TWSI while TWSI is a
duly authorized ticketing agent of Pan Am. Proceeding from this premise,
they contend that TWSI and Pan Am should be held liable as principals for
the acts of Tagunicar. They stubbornly insist that the existence of the
agency relationship has been established by the judicial admissions
allegedly made by respondents:
(1) the admission made by Pan Am in its Answer that TWSI is its
authorized ticket agent;
(2) the affidavit executed by Tagunicar where she admitted that
she is a duly authorized agent of TWSI; and
(3) the admission made by Canilao that TWSI received
commissions from ticket sales made by Tagunicar.
However, Tagunicar has openly denied in court that she was an agent of
TWSI, and declared that she is an independent travel solicitor. In case of
conflict between statements in the affidavit and testimonial declarations,
the latter command greater weight.

23
RALLOS vs. FELIX GO CHAN
Elements | Jan. 31, 1978 | Munoz Palma, J.
Summary: Attorney – in – fact, Simeon Rallos, who after the death of his
principal, Concepcion Rallos, sold the latter’s undivided share in a parcel
of land pursuant to a special power of attorney which the principal had
executed in his favor. The administrator of the estate of the deceased
principal went to court to have the sale declared unenforceable and to
recover the disposed share. TC granted but the CA upheld the validity of
the sale and dismissed the complaint. The SC ruled that the case does
not fall under the exceptions provided by Article 1931 of the Civil Code,
because a sale by an agent after the death of the principal is not allowed,
therefore invalidating the sale to the Realty Corporation.
Facts:
• Concepcion and Gerundia Rallos were sisters and registered co
– owners of a parcel of land, they executed a special power of
attorney in favor of their brother, Simeon Rallos, authorizing him
to sell for and in their behalf.
• Simeon sold the undivided shared of his sisters to Felix Go Chan
and Sons Realty Corporation for the sum of P10,686.90 – the
deed of sale was duly registered in the Registry of Deeds of Cebu
and a new TCT was issued in the name of the vendee
• Ramon Rallos, as administrator of the Intestate Estate of
Concepcion filed a complaint with the CFI of Cebu:
o The sale of the undivided share of the deceased
Concepcion Rallos should be declared unenforceable
and said share be reconveyed to her estate
o The Title issued in the name of Feliz Go Chan and Sons
Realty Corporation should be cancelled and another title
shall be issued in the names of the corporation and the
“Intestate estate of Concepcion Rallos” in equal
undivided shares
o Indemnification by way of attorney’s fees and payment
of costs of suit
• CFI rendered judgment declaring the Deed of Sale null and void
insofar as the ½ pro – indivisio share of Concepcion Rallos in the
property in question and that the TCTs would be cancelled and to
deliver the possession of the portion to the Estate of Concepcion
Rallos as well as denying the Realty Corporation’s cross claim
24
• The realty company appealed to the CA which sustained the sale
in question and denying the motion for reconsideration
Issue:
WON the sale of the undivided share of Concepcion Rallos in the lot is
valid although it was executed by the agent after the death of his
principal?
Ratio:
• The SC ruled on this first by restating principles of law relevant to
the issue:
• Basic axiom in Civil Code – 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 – A contract entered into in the
name of another by one who has no authority or legal
representation, or who has acted beyond his power, shall be
unenforceable, unless it is ratified, expressly or impliedly (Article
1403(1), CC)
• Creation and acceptance of the relationship of agency – one
party, called the principal (mandante), authorized another, called
the agent (mandatorio), to act for and in his behalf in
transactions with third persons
• Essential elements of agency:
o There is consent, express or implied, of the parties to
establish the relationship
o The object is the execution of a juridical act in relation
to a third person
o The agents act as a representative and not for himself
o The agent acts within the scope of his authority
• Agency is basically personal, representative, and derivative in
nature. The authority of the agent to act emanates from the
powers granted to him by his principal; his act is the act of the
principal if done within the scope of the authority. Qui facit per
alium facit per se. “He who acts through another acts himself.”
• Extinguishment of agency – Death of a principal (Article 1919,
CC) – agency is extinguished by the death of the principal or the
agent. The rationale for the law is found in the juridical basis of
agency which is representation
• Exceptions to the rule (1930 and 1931)
 o Article 1931 is the one applicable to the case at bar: An purchases a registered land from one who acquired it in bad
act done by the agent after death of his principal is valid faith·even to the extent of foregoing or falsifying the deed of sale
and effective only under 2 conditions: in his favor·the registered owner has no recourse against such
§ That the agent acted without knowledge of the innocent purchaser for value but only against the forger. (Citing
death of the principal Blondeau vs. Nano and Vallejo)
§ That the third person who contracted with the • SC – Blondeau case is not on all fours with the case at bar:
agent himself acted in good faith o We are confronted with one who admittedly was an
o Good faith – the third person was not aware of the death agent of his sister and who sold the property of the latter
of the principal at the time he contracted with said agent after her death with full knowledge of such death.
o Two requisites must concur – absence of one will render o expressly covered by a provision of law on agency the
the act of the agent invalid and Unenforceable terms of which are clear and unmistakable leaving no
room for an interpretation contrary to its tenor, in the
• Simeon Rallos knew of the death of his principal when the share same manner that the ruling in Blondeau
of the lot was sold and this can be clearly inferred from the • CA – Cassiday vs. MacKenzie - payments made to an agent after
pleadings filed by Simeon Rallos before the trial court the death of the principal were held to be good, the parties being
• Article 1931 is therefore inapplicable - law expressly requires for ignorant of the death
its application lack of knowledge on the part of the agent of the • SC - Opinion of Justice Rogers was premised on the statement
death of his principal, it is not enough that the third person acted that the parties were ignorant of the death of the principal
in good faith • Whatever conflict of legal opinion was generated by Cassiday v.
• CA there is no provision in the Code which provides that whatever McKenzie in American jurisprudence, no such conflict exists in
is done by an agent having knowledge of the death of his our own provided by the Civil Code
principal is void even with respect to third persons who may have
contracted with him him in good faith
• SC - Article 1931, being an exception to the general rule, is to be HELD: Set aside the decision of respondent appellate court. Affirmed the
strictly construed; it is not to be given an interpretation or decision of the CFI Cebu
application beyond the clear import of its terms for otherwise the
courts will be involved in a process of legislation outside of their
judicial function.
• CA - vendee acting in good faith relied on the power of attorney
which was duly registered on the original certificate of title
recorded in the Register of Deeds of the Province of Cebu, that
no notice of the death was ever annotated on said certificate of
title by the heirs of the principal and accordingly they must suffer
the consequences of such omission
• SC - by reason of the very nature of the relationship between
principal and agent, agency is extinguished ipso jure upon the
death of either principal or agent. With death, the principal’s will
ceases or is terminated; the source of authority is extinguished.
• CA - a parallel between the instant case and that of an innocent
purchaser for value of a registered land, stating that if a person

25
 C. Parties to the Contract
COMMERCIAL BANK & TRUST CO. OF THE PHILS Vs. REP. ARMORED CAR
SERVICE CORP. (1963)
BERSAMIN, J | GR No. 162826| Parties to the Contract
SUMMARY: A jeweler agreed to give pieces of jewelry to Narciso, who in
turn should give the same to his sister for the latter to sell. If they cannot
pay within a certain period, they should return the jewelry. They eventually
defaulted in payment and also failed to return the jewelry. Narciso was
convicted of estafa. However, he insisted that the agreement was a sale
on credit. The Court held that the transaction was an agency and not a
sale on credit because the ownership of the items did not pass to him.
DOCTRINE: Where principal was bound by contract of loan executed by
his agent; Case at Bar.—Where in accordance with a power of attorney
executed by the principal, the agent was authorized to negotiate for a loan
or various loans with banking institutions, financing or insurance
companies etc., m such sum or sums, aforesaid agent may deem proper
and convenient to the interest of the principal, such general power of
attorney was held sufficient authority for the agent to obtain the credits
subject of the case at bar.
FACTS
• Defendant-appellant Damaso Perez has presented a motion for
new trial on the ground of newly discovered evidence. 
 DISPOSITIVE: Motion for new trial is denied.
• Damaso Perez claims that he was not aware of the nature of the
power of attorney that Ramon Racelis used, purportedly signed
by him, to secure the loans for the Republic Armored Car Service
Corporation and the Republic Credit Corporation. 

• He claims that Ramon Racelis only used a photastic copy as
proof of the Power of Attorney. He further presents the original
purporting the alleged true authority granted by the movant.
26
• It is not expressly mentioned that this is the precise power of
attorney that Ramon Racelis Utilized to secure the loans the
collection of which is sought in these cases.

ISSUE and HELD
W/N the power of Atty gave Racelis authority to secure the loans? YES .
RATIO
• Racelis was authorized to negotiate for loans with other
institutions.
• Assuming, for the sake of argument, that the said power of
attorney incorporated in the motion for reconsideration was the
one used to obtain the loans.
• We find that the movant's contention has no merit.
• In accordance with the document, Racelis was authorized to
negotiate for a loan or various loans .. with other being institution,
financing corporation, insurance companies or investment
corporations, in such sum or sums, aforesaid Attorney-in-fact Mr.
Ramon Racelis, may deem proper and convenient to my
interests, ... and to execute any and all documents he deems
requisite and necessary in order to obtain such loans, always
having in mind best interest;
• We hold that this general power attorney to secure loans from
any banking institute was sufficient authority for Ramon Racelis
to obtain the credits subject of the present suits.
PCIC v. Explorer Maritime (September 7, 2011)
Leonardo-De Castro, J. | GR No. 175409 | Parties to the Contract;
Undisclosed;
SUMMARY: PCIC was faulted by the RTC and the CA for failure to
prosecute its case for an unreasonable length of time, against Explorer
Maritime, then an unknown or undisclosed party in the RTC level. PCIC’s
contention mainly was that it was waiting for resolution of its Motion to
Disclose before it could even proceed with its pre-trial conference and
setting of the same. The Court denies the petition, mainly on procedural
rules and applications thereof.
DOCTRINE: An agent acting in his own name and for the benefit of an
undisclosed principal may sue or be sued without joining the principal
except when the contract involves things belonging to the principal.
FACTS
1. PCIC filed a complaint against respondents (then Unknown
Owner of the M/V Explorer) Explorer Maritime, its agent Wallem
Philippines Shipping Inc., arrastre Asian Terminals Inc., and
broker company Foremost International Port Services, Inc.
2. PCIC intended to recover the value of lost or damaged goods
which it paid to the insured, as well as interest and attorney’s
fees.
3. The seminal complaint was filed on March 22, 1995; on
December 5, 2000 the respondents filed a Motion to Dismiss by
reason of PCIC’s failure to prosecute for an unreasonable length
of time.
4. PCIC opposed the Motion anchoring its cause on the yet
unresolved Motion to Disclose (the identity of then unknown
owner of the ship M/V Explorer.)
5. The RTC dismissed the case. Elevated to the CA, the CA affirmed
the decision of the RTC, hence the case was elevated yet still to
the Supreme Court.
ISSUES and HELD
WoN the dismissal of PCIC’s case was proper - YES
RATIO
1. Citing the case of Espiritu v. Lazaro, “xxx the sanction of
dismissal may be imposed even absent any allegation and proof
27
of the plaintiff's lack of interest to prosecute the action, or of any
prejudice to the defendant resulting from the failure of the
plaintiff to comply with the rules. The failure of the plaintiff to
prosecute the action without any justifiable cause within a
reasonable period of time will give rise to the presumption that
he is no longer interested in obtaining the relief prayed for xxx”
2. Sec.14, Rule 3 of the Rules of Court provides that even an
unknown owner or any defendant yet unknown may be properly
sued. The resolution of the Motion to Disclose was therefore
unnecessary.
3. In this case therefore, it is of no moment that the identity of
respondent Explorer Maritime had been disclosed only after the
Supreme Court had directed its counsel to show proof of its
identity.
4. Section 3, Rule 3 of the RoC expressly provides the enunciated
doctrine in this case: An agent acting in his own name and for
the benefit of an undisclosed principal may sue or be sued
without joining the principal except when the contract involves
things belonging to the principal.
DISPOSITIVE:
WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals
dated July 20, 2006 in CA-G.R. CV No. 78834 is hereby AFFIRMED.
Costs against petitioner Philippine Charter Insurance Corporation.
SO ORDERED.
Maritime Agencies & Securities v. CA July 12, 1990
Cruz, J. | GR 77638 GR 77674 | Undisclosed
Doctrine: The agent shall be liable for the act or omission of the principal
only if the latter is undisclosed.
Facts:
1. Transcontinental Fertilizer Company of London chartered from
Hongkong Island Shipping Company of Hongkong the motor
vessel named "Hongkong Island" for the shipment of 8073.35
MT bagged urea from USSR to the Philippines.
2. Maritime Agencies & Services, Inc. was appointed as the
charterer's(Transcontinental) agent and Macondray Company,
Inc. as the owner's(Hong Kong Shipping) agent
3. The agreement between Transcontinental and Hongkong was a
contract of affreightment.
a. Maritime was responsible for loading, stowage and
discharging at the ports visited, while the Macondray
was responsible for the care of the cargo during the
voyage.
4. Of the total shipment, 5,400.04 MT was for the account of Atlas
Fertilizer Company as consignee, 3,400.04 to be discharged in
Manila and the remaining 2,000 MT in Cebu.
5. The goods were insured by Atlas with the Union Insurance
Society of Canton, Ltd.
6. There were 1,383 bags that were shortlanded, which could only
mean that they were damaged or lost on board the vessel before
unloading of the shipment.
7. Goods were also lost during the loading and unloading process.
8. Atlas went to Union Insurance, which on demand paid the total
indemnity of P113,123.86 pursuant to the insurance contract.
9. As subrogee of Atlas, Union then filed a complaint for
reimbursement against Hongkong Island Company, Maritime
Agencies & Services, and later Macondray Company.
10. TC rendered judgment holding the defendants liable
11. CA modified the TC decision, finding the charterer
Transcontinental Fertilizer Co., Ltd. represented by its agent
Maritime Agencies & Services, Inc. for the same liability but held
that Hongkong Island Co., Ltd. represented by Macondray Co.,
Inc. are accordingly exempted from any liability.
In G.R. No. 77638, Maritime pleads non-liability on the ground
that it was only the charterer's agent and should not answer for
28
whatever responsibility might have attached to the principal.
In G.R. No. 77674, Union asks for the modification of the
decision of the respondent court so as to make Maritime
solidarily and solely liable, its principal not having been
impleaded and so not subject to the jurisdiction of our courts.
These two cases were consolidated.
Issue and Held: WON Maritime is liable? NO
Ratio:
1. Non-topic
a. The Court held that this was a contract of affreightment
meaning the charterer retains control of the vessel
which makes them liable in case of loss during the
voyage.
b. Maritime was only the agent of the charterer which will
only make them liable for the losses during the loading
and unloading process of the voyage.
2. Topic: Liable for losses during loading and unloading? NO
a. As regards the goods damaged or lost during unloading,
the charterer is liable therefor. The difficulty is that
Transcontinental has not been impleaded in these
cases and so is beyond our jurisdiction. The liability
imposable upon it cannot be borne by Maritime which,
as a mere agent, is not answerable for injury caused by
its principal. It is a well-settled principle that the agent
shall be liable for the act or omission of the principal only
if the latter is undisclosed.
b. Maritime acted in representation of the charterer and
not of the vessel. It thus cannot be considered a ship
agent. As a mere charterer’s agent, it cannot be held
solidarily liable with Transcontinental for the
losses/damages to the cargo outside the custody of the
vessel. Notably, Transcontinental was disclosed as the
charterer’s principal and there is no question that
Maritime acted within the scope of its authority.
3. Only Hong Kong Shipping is liable for the losses during the
voyage.
Dispositive: WHEREFORE, the decision of the respondent court is
SET ASIDE and that of the trial court is REINSTATED as above
modified. The parties shall bear their respective costs.
Goldstar Mining v Lim-Jimena (Oct. 26, 1968)
JBL Reyes, J.|Gr no. L-25301 |Parties to the Contract: Principal:
Undisclosed: Exceptions
Summary: Lincallo bound himself to turn over to Jimena 1/2 of the
proceeds from the mining claims he would purchase with the money
advanced by Jimena. However, Lincallo entered into several contracts in
his own name and for his own benefit involving the same mining claims.
Jimena demanded his share from Lincallo and the companies Lincallo
contracted with. Gold Star argued that Jimena has no cause of action
against it since there is no privity of contract between them. SC held that
Lincallo, in transferring the mining claims to Gold Star, acted as Jimena's
agent with respect to Jimena's share which gives Jimena a cause of action
against Gold Star, pursuant to Art 1883, which provides that the principal
may sue the person with whom the agent dealt with in his own (agent's)
name, when the transaction involves things belonging to the principal.
Doctrine: The principal may sue the person with whom the agent dealt
with in his own name, when the transaction involves things belonging to
the principal.
Issue and Held: WON Jimena has a cause of action against Gold Star? Yes
Facts:
Ratio:
1. Lincallo bound himself to turn over to Jimena 1/2 of the proceeds
from all mining claims he would purchase with the money
advanced by Jimena and the lands constituting the same, and is
binding on their heirs, assigns, or legal representatives.
2. The mining claims were made subject matter of contracts
entered into by Lincallo in his own name and for his own benefit.
3. The mining rights over part of a claim were assigned by Lincallo
to Gold Star Mining Co.
4. Thereafter, Lincallo and Alejandro Marquez, as separate owners
of particular mining claims, entered into an agreement with Gold
Star, the assignee, regarding allotment to Lincallo of 45% of the
Dispositive:
royalties due from the corporation.
CA decision affirmed.
5. 4 months later, Lincallo, Marquez, and Congressman
Manguerrra, as owners, leased certain mining claims to
Cabarrus, who transferred to Marinduque Iron Mines Agents his
rights under the lease contract.
29
6. Another contract was executed by the lessors, wherein 43% of
the royalties due from Marinduque Iron Mines were agreed upon
to be paid by Lincallo.
7. From 1939 to 1952, Jimena repeatedly reminded Gold Star
Mining and Marinduque Iron Mines of his interest over the mining
claims assigned by Lincallo and demanded payment of his 1/2
share in the royalties to be paid to Lincallo. Both ignored Jimenas
demands.
8. Jimena also demanded payment of his 1/2 share from Lincallo
which Lincallo promised to settle but failed.
9. A month after he promised to settle his account with Jimena, he
transferred 35 of his 45% share in the royalties due from Gold
Star to Tolentino.
10. Jimena then filed a suit against Lincallo, Gold Star, Marinduque
Iron Mines, and Tolentino for recovery of his advances and his
1/2 share in the royalties.
11. TC and CA ordered all the defendants to pay Jimena.
12. In this petition, Gold Star argues that Jimena has no cause of
action against it as there is no privity of contract between them.
1. While there is no privity of contract, the common subject-matter
supplies the juridical link.
2. It can also be said that Lincallo, in transferring the mining claims
to Gold Star (without disclosing that Jimena was a co-owner,
although Gold Star knew) acted as Jimena's agent with respect
to Jimena's share of the claims.
3. In such case, Jimena has an action against Gold Star, pursuant
to Art 1883, which provides that the principal may sue the person
with whom the agent dealt with in his own name, when the
transaction involves things belonging to the principal.
LORCA v. DINEROS (February 28 1958)
Bengzon, J. | 103 Phil. 122 | Parties: Sub-agent
Petitioner: LORETO LORCA
Respondents: JOSE S. DINEROS
Summary: Respondent sues the Deputy Sheriff for disregarding his third-
party claim over a property subject to execution and proceeding with the
auction. Court rules that the Deputy is not liable, having acted merely as
agent of the Sheriff.
Doctrine: The Sheriff is liable to third persons on the acts of his deputy, in
the same manner that the principal is responsible for the acts of his
agent.
● The Sheriff is liable to third persons on the acts of his deputy, in
the same manner that the principal is responsible for the acts of
his agent.
Ratio (Issue 2)
● Appellant argues that the lower court could have simply included
the Sheriff as party defendant.
● However, what should have been done was not "inclusion" as
plaintiff asked, nor "exclusion". It was "substitution" of the deputy
by the Sheriff. Anyway, the word "may" in Sec. 11 of (then) Rules
implies discretion of court; there was no indication of abuse of
such.
DENIED.

Facts
● Pursuant to a writ of execution issued in a civil case, Dineros, as
Deputy Sheriff and in the name of the Sheriff, sold at public
auction to Bermejo and Suero the property attached therein,
disregarding the third-party claim of Lorca who asserted. This suit
for damages is the result of said auction sale.
● Dineros denied liability, averring that he had merely acted for and
on behalf of Provincial Sheriff Cabaluna. Meanwhile, appellant
insists that Dineros was responsible in view of Sec. 334, (then)
Revised Admin. Code[1] and Sec. 15, Rule 39, (then) Rules of
Court[2].
[1] Right of Bonded Officer to Require Bond from Deputy or assistant. – A
sheriff or other accountable official may require any of his deputies or
assistants, not bonded in the fidelity fund, to give an adequate personal
bond as security against loss by reason of any wrongdoing on the part of
such deputy or assistant. xxx
[2] xxx and in case the sheriff or attaching officer is sued for damages as
a result of the attachment xxx

Issues
1. Is there a cause of action against the Deputy Sheriff? NO
2. Should the complaint be dismissed? YES

Ratio (Issue 1)
● In light of Section 330, Administrative Code, the above provisions
apply where the deputy acts in his own name or is guilty of active
malfeasance or possibly where he exceeds the limits of his
agency. It is clear from the certificate of sale attached to the
complaint that Dineros acted all the time in the name of the Ex-
Officio Provincial Sheriff of Iloilo, and no allegations of
misfeasance are made.

30
Serona v. CA (Nov. 18, 2002)
Ynares-Santiago | GR No. 130423 | Parties to the Contract: Sub-Agent
SUMMARY:
Serona received jewellery from Quilatan to be sold on commission basis
but was to either remit the proceeds or return the jewellery if it wasn’t
sold. She failed to do either, apparently because she gave the jewellery
to Labrador to be sold on commission basis and the person who
eventually bought the jewellery absconded before paying. The court ruled
that though Serona wasn’t prohibited from appointing a sub-agent, having
done so without the express authority of her principal, she was liable for
the sub-agent’s acts and therefore liable for the value of the lost jewellery.
DOCTRINE:
the law on agency allows the appointment by an agent of a substitute or
sub-agent in the absence of an express agreement to the contrary
between the agent and principal
An agent who is not prohibited from appointing a sub-agent but does so
without express authority is responsible for the acts of the sub-agent
FACTS
1. from July to September 1992, Leonida Quilatan would deliver
jewellery to Virgie Serona to be sold on commission basis. By oral
agreement, Serona would remit payment or return the jewellery
to Quilatan if not sold within 30 days from receipt of the items.
2. Serona failed to pay and was made to execute an
acknowledgment receipt indicating their agreement and total
amount due (P567,750) signed by Serona and a witness, Rufino
Navarette
3. apparently Serona failed to pay because she had entrusted the
jewellery to a Marichu Labrador for the latter to sell on a
commission basis but was not able to collect from Labrador.
Quilatan did not know this
4. Quilatan demanded payment and eventually filed a complaint
against Serona for estafa. Serona calmed that she failed to settle
her obligation because Labrador failed to pay her for the
jewellery. Labrador confirmed that she received the jewellery but
claimed that she sold it to a person who absconded without
paying her.
5. RTC found Serona guilty of estafa. the CA affirmed.
31
ISSUES and HELD
1. w/n the elements of estafa were established by the prosecution
(Serona: she neither abused the confidence reposed upon her by
Quilatan nor converted or misappropriated the jewellery) — NO
2. w/n giving the jewellery to a sub-agent for sale on commission
basis and under the same terms upon which it was entrusted to
her violated her undertaking with Quilatan
3.
RATIO
1. she did not commit estafa by delivering the jewellery to a sub-
agent for sale on commission basis. this fact alone is not
sufficient ground for holding that she disposed of the jewellery
as if it were hers
a. The second element of misappropriation or conversion
is lacking. Elements of estafa through misappropriation
or conversion are as follows: (1) that the money, good or
other personal property is received by the offender in
trust, or on commission, or for administration, or under
any other obligation involving the duty to make delivery
of, or to return, the same; (2) that there be
misappropriation or conversion of such money or
property by the offender or denial on his part of such
receipt; (3) that such misappropriation or conversion or
denial is to the prejudice of another; and (4) that there
is a demand made by the offended party on the offender
b. the law on agency allows the appointment by an agent
of a substitute or sub-agent in the absence of an express
agreement to the contrary between the agent and
principal.
c. the appointment of Labrador as Serona’s sub-agent was
not expressly prohibited by Quilatan. Such a limitation
was not stated in the acknowledgment receipt, neither
is there proof that she was verbally forbidden to do so.
this cannot therefore constitute abuse of confidence.
d. the essence of estafa is the appropriation or conversion
of money or property to the prejudice of the owner. this
pertains to the using or disposing of another’s property
as if it were one’s own or of devoting it to a purpose
 different from that agreed upon. HERE, the inability of
Serona to return the jewellery or proceeds was due to
the failure of Labrador to abide by her agreement as
sub-agent.
e. Labrador herself admitted that she received the
jewellery from Serona and sold it to a third person. She
also acknowledged her indebtedness to Serona,
negating any criminal intent on the part of Serona.
There’s no showing that Serona derived any personal
benefit from or conspired with Labrador to deprive
Quilatan of the jewellery. there cannot be estafa in this
case.
f. An accused acquitted of estafa may still be held civilly
liable. An agent who is not prohibited from appointing a
sub-agent but does so without express authority is
responsible for the acts of the sub-agent. Serona is
liable to pay Quilatan the value of the unpaid pieces of
jewelry.

DISPOSITIVE
WHEREFORE, the petition is GRANTED. The decision of the Court of
Appeals in CA-G.R. CR No. 17222 dated April 30, 1997 and its resolution
dated August 28, 1997 are REVERSED and SET ASIDE. Petitioner Virgie
Serona is ACQUITTED of the crime charged, but is held civilly liable in the
amount of P424,750.00 as actual damages, plus legal interest, without
subsidiary imprisonment in case of insolvency

32
 D. Capacity of Principal
JOSE A. SANTOS Y DIAZ v. ANATOLIO BUENCONSEJO, ET AL. (June 23,
1965)
Concepcion, J. | GR No. L-20136 | Capacity of the principal
DOCTRINE: A special power of attorney authorizing a person to act on
behalf of the children of another cannot vest in the said attorney any
property right in his own name.
Buenconsejo had no authority to execute said power of attorney, because
their father is still alive and, in fact, he and his wife opposed the petition
of Santos. Lastly, Santos could have acquired no more than the share pro
indiviso of Anatolio.
DISPOSITIVE
WHEREFORE, the order appealed from is hereby affirmed, with treble
costs against petitioner-appellant Jose A. Santos y Diaz. It is so ordered.

FACTS
1. A parcel of land was originally owned in common by Anatolio
Buenconsejo to the extent of ½ undivided portion and Lorenzo E. Capacity of Agent
Bon and Santiago Bon to the extent of the other ½.
2. Subsequently, a Certificate of Sale executed by the Provincial F. Distinction from other contracts
Sheriff of Albay, transferred and conveyed to one Atty. Ziga,
awardee in the corresponding auction sale conducted by said
Sheriff in connection with the execution of the decision of the
Juvenile Delinquency and Domestic Relations Court in separate
Civil Case.
3. Through redemption, such award was transferred and conveyed
to the herein petitioner in his capacity as Attorney-in-fact of the
children of Anatolio Buenconsejo.
4. Relying upon this power of attorney and redemption made by
him, Santos (the petitioner) now claims to have acquired the
share of Anatolio Buenconsejo.
5. As the alleged present owner of said share, Santos caused a
subdivision plan of said land and wants a certificate of title be
issued in his name exclusively for said subdivision.
6. The RTC held untenable the petitioner’s claim.

ISSUES and HELD

WON the petitioner, as an attorney-in-fact, adjuducate to himself a share
in the subject parcel of land -- (NO)

RATIO
The Court, upheld the decision of the trial court that the said special
power of attorney authorized him to act on behalf of the children of
Anatolio Buenconsejo, and, hence, it could not have possibly vested him
any property right in his own name. Moreover the children of Anatolio

33
ANTONIO VALEROSO AND ALLAN LEGATONA V. SKYCABLE CORPORATION
J. Del Castillo
FACTS:
● This case arose from a Complaint for illegal dismissal, non-
payment of 13th month pay, separation pay and illegal deduction
filed by petitioners against SkyCable on 25 Feb. 2009 before the
Labor Arbiter. The Complaint was amended to include
regularization and payment of moral and exemplary damages as
additional causes of action.
● Valeroso and Legatona alleged that they started working on 1
Nov. 1998 and 13 July 1998, respectively, as account executives
tasked to solicit cable subscriptions for SkyCable, as evidenced
by Certifications issued by Michael De la Cuesta, (Sky’s Sales
Territory Manager).
● As shown in their payslips for the years 2001-06, they received
commissions ranging from P15k to 530k each upon reaching a
specific quota every month and an allowance of P6,5k to P7k per
month.
● From being direct hires of SkyCable, they were transferred on 1
Jan. 2007 to Skill Plus Manpower Services sans any agreement
for their transfer.
● Feb. 2009: they were informed that their commissions would be
reduced due to the introduction of prepaid cards sold to cable
subscribers resulting in lower monthly cable subscriptions.
● Dismayed, they notified their manager, Pasta, of their intention
to file a labor case with the NLRC, which they did on 25 Feb.
2009. Pasta then informed them that they will be dropped from
the roster of its account executives, which act, petitioners
claimed, constitutes unfair labor practice.
● Further, petitioners claimed that they did not receive 13th month
pay for 2006 and were underpaid of such benefit for the years
2007 and 2008; and that in Jan. 2008, Legatona signed a
Release and Quitclaim in consideration of the amount of P25k
as loyalty bonus from SkyCable.
● SkyCable claimed that it did not terminate the services of
petitioners for there was never an ER-EE relationship to begin
with. It averred that in 1998, SkyCable (then Central CATV, Inc.)
engaged petitioners as independent contractors under a Sales
Agency Agreement.
34
● In 2007, SkyCable decided to streamline its operations and
instead of contracting with numerous independent account
executives such as petitioners, SkyCable engaged the services of
an independent contractor, Armada Resources & Marketing
Solutions, Inc. (Armada, for brevity; formerly Skill Plus Manpower
Services) under a Sales Agency Agreement. As a result,
petitioners' contracts were terminated but they, together with
other sales account executives, were referred for transfer to
Armada. Petitioners then became EEs of Armada. In 2009,
SkyCable and Armada again entered into a Sales Agency
Agreement, wherein petitioners were again tasked to solicit
accounts/ generate sales for SkyCable.
● SkyCable insisted that in hiring petitioners and Armada as
independent contractors, it engaged in legitimate job contracting
where no ER-EE relation exists between them.
● In an affidavit, De la Cuesta stated that the certifications he
issued are not employment certifications but are mere
accommodations, requested by petitioners themselves, for their
credit card and loan applications. Moreover, Armada's President,
Navasa, in his affidavit, verified that Armada is an independent
contractor which selected and engaged the services of
petitioners, paid their compensation, exercised the power to
control their conduct and discipline or dismiss them. Therefore,
when petitioners filed their Complaint in Feb. 2009, they were
EEs of Armada and as such, had no COA against SkyCable.
● Petitioners assailed the allegation that they were EEs of Armada,
claiming that they were directly hired, paid and dismissed by
SkyCable. They cited the following as indicators that they are
under the direct control and supervision of SkyCable: 1)
SkyCable's officers supervise their area of work, monitor them
daily, update them of new promos and installations they need to
work on, inform them of meetings and penalize them for non-
attendance, ask them to train new agents/account executives,
and inform them of new prices and expiration dates of product
promos; 2) SkyCable's supervisors delegate to them authority to
investigate, campaign against and legalize unlawful cable
connections; 3) SkyCable's supervisors monitor their quota
production and impose guaranteed charges as penalty for failing
to meet their quota; and 4) SkyCable consistently gives trophies
to award them of their outstanding performance.
● Labor Arbiter: LA dismissed the Complaint since petitioners failed
to establish by substantial evidence that SkyCable was their ER.
LA observed that petitioners failed to identify and specify the
person who allegedly hired them, paid their wages and exercised
supervision and control over the manner and means of
performing their work. There was neither any evidence to prove
that Pasta, who allegedly dismissed them, is an officer of
SkyCable with an authority to dismiss them.
● National Labor Relations Commission: Petitioners filed an appeal
with the NLRC attributing reversible error on the LA in dismissing
their Complaint on the ground of no ER-EE relationship. NLRC
reversed the LA's ruling. It found that petitioners are regular EEs
of SkyCable having performed their job as account executives for
more than one year, even if not continuous and merely
intermittent, and considering the indispensability and continuing
need of petitioners' tasks to the business. The NLRC observed
that there was no evidence that petitioners have substantial
capitalization or investment to consider them as independent
contractors. On the other hand, the certifications and the pay
slips presented by petitioners constitute substantial evidence of
ER-EE relationship. NLRC held that upon termination of the Sales
Agency Agreement with Armada in 2009, petitioners were
considered dismissed without just cause and due process.
SkyCable filed a MR which was denied.
● Court of Appeals: SkyCable filed a Petition for Certiorari with the
CA, attributing grave abuse of discretion on the part of the NLRC
in holding it liable for the alleged illegal dismissal of petitioners.
CA granted SkyCable's Petition for Certiorari and reversed the
NLRC Decision. The CA sustained the LA's finding that there was
no evidence to substantiate the bare allegation of ER-EE
relationship between the parties. Petitioners moved for
reconsideration, but this was denied by the CA.
● Petitioners maintain that SkyCable failed to discharge the burden
of disproving the ER-EE relationship through competent evidence
of independent contractorship. They assert that the nature of
their work and length of service with SkyCable made them
regular EEs as defined in Art. 280 of the Labor Code and that
consequently, the CA gravely erred in dismissing their Complaint
for illegal dismissal against SkyCable.
35
ISSUE: WON the petitioners were employees of SkyCable—NO, an ER-EE
relationship is absent in this case. The Petition has no merit.
RATIO:
● Considering the conflicting findings of fact by the Labor Arbiter,
the NLRC and the CA, the SC is impelled to reexamine the records
and resolve this factual issue.
● To prove the claim of an ER-EE relationship, the following should
be established by competent evidence: (1) the selection and
engagement of the EE; (2) the payment of wages; (3) the power
of dismissal; and (4) the ER's power to control the EE with respect
to the means and methods by which the work is to be
accomplished. Among the four, the most determinative factor in
ascertaining the existence of ER-EE relationship is the "right of
control test." Under this control test, the person for whom the
services are performed reserves the right to control not only the
end to be achieved, but also the means by which such end is
reached.
● The evidence presented by petitioners did not prove their claim
that they were EEs of SkyCable. The certifications issued by De
la Cuesta are not competent evidence of ER-EE relation as these
merely certified that SkyCable had engaged the services of
petitioners without specifying the true nature of such
engagement. These documents did not certify that petitioners
were EEs but were only issued to accommodate petitioners'
request for loan applications, which fact was not refuted by
petitioners.
● As for the pay slips presented, it appears that only the pay slips
for the years 2001 to 2006 were submitted. No pay slips for the
years material to this case (2007-09) were submitted. It is
undisputed that petitioners were transferred to Armada in 2007,
thus, we cannot give much credence to the pay slips issued
before this period.
● SC further finds no merit in petitioners' assertion that SkyCable's
control over them was demonstrated. "[Guidelines indicative of
labor law 'control' do not merely relate to the mutually desirable
result intended by the contractual relationship; they must have
the nature of dictating the means and methods to be employed
in attaining the result.”
● Here, we find that SkyCable's act of regularly updating petitioners
of new promos, new price listings, meetings and trainings of new
 account executives; imposing quotas and penalties; and giving
commendations for meritorious performance do not pertain to
the means and methods of how petitioners were to perform and
accomplish their task of soliciting cable subscriptions. At most,
these indicate that SkyCable regularly monitors the result of
petitioners' work but in no way dictate upon them the manner in
which they should perform their duties. Absent any intrusion by
SkyCable into the means and manner of conducting petitioners'
tasks, bare assertion that petitioners' work was supervised and
monitored does not suffice to establish ER-EE relationship.
● Reliance by petitioners on the case of Francisco v. NLRC is
misplaced. There, the Court adopted a two-tiered test in order to
determine the true relationship between the ER and EE. This two-
tiered test, which involves: "(1) the putative ER's power to control
the EE with respect to the means and methods by which the work
is to be accomplished; and (2) the underlying economic realities
of the activity or relationship," has been made especially
appropriate in cases where there is no written agreement to base
the relationship on and where the various tasks performed by the
worker brings complexity to the relationship with the ER. Thus, in
addition to the control test, the totality of the economic
circumstances of the worker is taken into light to determine the
existence of employment relationship.
● Here, there is a written contract, i.e., the Sales Agency
Agreement, which served as the primary evidence of the nature
of the parties' relationship. In this duly executed and signed
agreement, petitioners and SkyCable unequivocally agreed that
petitioners' services were to be engaged on an agency basis as
sales account executives and that no ER-EE relationship is
created but an independent contractorship. It is therefore clear
that the intention at the time of the signing of the agreement is
not to be bound by an ER-EE relationship.
● At any rate, even if we are to apply the two-tiered test
pronounced in the Francisco case, there can still be no
ER-EE relationship since, as discussed, the element of
control is already absent. Indeed, "[t]he presence of
[the] power of control is indicative of an employment
relationship while the absence thereof is indicative of
independent contractorship."unequivocally states their
intention" to be strictly bound by independent
contractorship.
36
● Petitioner Legatona, in fact, in his Release and
Quitclaim, acknowledged that he was performing sales
activities as sales agent/independent contractor and
not an EE of SkyCable. In the same token, De la Cuesta
and Navasa, made sworn testimonies that petitioners
are EEs of Armada which is an independent contractor
engaged to provide marketing services for SkyCable.
● Moreover, evidence on record reveal the existence of
independent contractorship between the parties. As mentioned,
the Sales Agency Agreement provided the primary evidence of
such relationship. "While the existence of ER-EE relationship is a
matter of law, the characterization made by the parties in their
contract as to the nature of their juridical relationship cannot be
simply ignored, particularly in this case where the parties' written
contract
● Neither can we subscribe to petitioners' contention that they are
considered regular EEs of SkyCable for they perform functions
necessary and desirable to the business operation of SkyCable
in consonance with Art. 280, LC, We have held that “Art. 280 is
not the yardstick for determining the existence of an employment
relationship because it merely distinguishes between two kinds
of EEs, i.e., regular EEs and casual EEs, for purposes of
determining [their rights] to certain benefits, [such as] to join or
form a union, or to security of tenure. Art. 280 does not apply
where the existence of an employment relationship is in dispute,”
as in this case.
● The legal relation of petitioners as sales account executives to
SkyCable can be that of an independent contractor. There was
no showing that SkyCable had control with respect to the details
of how petitioners must conduct their sales activity of soliciting
cable subscriptions from the public.
● In Abante, Jr. v. Lamadrid Bearing & Parts Corporation,
Abante, a commission salesman who pursued his selling
activities without interference or supervision from
SkyCable company and relied on his own resources to
perform his functions, was held to be an independent
contractor.
● Similarly, in Sandigan Savings & Loan Bank, Inc. v.
NLRC, Anita Javier was also held to be an independent
contractor as the Court found that Sandigan Realty
Development Corporation had no control over her
 conduct as a realty sales agent since its only concern or
interest was in the result of her work and not in how it
was achieved.
● SC sustains the CA's factual findings and conclusion and
accordingly, find no cogent reason to overturn the dismissal of
petitioners' Complaint against SkyCable.

WHEREFORE, the Petition is DENIED. The November 11, 2011 Decision

and May 18, 2012 Resolution of the Court of Appeals in CA-G.R. SP No.
116296 are AFFIRMED. SO ORDERED.

37
CESAR C. LIRIO vs. WILMER D. GENOVIA (November 23, 2011)
PERALTA, J | G.R. No. 169757 | Distinctions from other contracts (lease
of services)
SUMMARY:
Wilmer Genovia was hired by Cesar Lirio as studio manager for Celkor
Recording Studio which he owns. Shortly after hiring, he was asked to
assist the petitioner to produce an album for his 15-year old daughter,
Celine Mei Lirio. Lirio verbally promised to him to be given additional
compensation as composer and arranger of the album on top of what he’s
currently receiving as monthly salary. Genovia reminded Lirio a few times
for the draft of the contract for his additional services and compensation
to no avail. The album was completed and finally aired in February 2002.
Upon another reminder re his additional compensation, things turned
sour between the two when they did not agree on the compensation that
Genovia should receive for the additional services he rendered. He was
then verbally terminated and instructed not to report for work by Lirio.
Genovia filed a complaint for illegal dismissal against the latter. Lirio
asserted that no EE-ER relationship exists between them and what they
have in fact is one of informal partnership. LA ruled in favor of Genovia
but it was reversed by NLRC. CA reinstated LA’s ruling. SC affirmed CA.
DOCTRINE:
Elements to determine the existence of an employment relationship
are:(a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employer's power to
control the employee's conduct.
>>No specific mention of concept related to agency but I guess we can
look at the elements in EE-ER relationship which are not necessarily
present in a contract of agency.
FACTS:
1. Wilmer Genovia was hired on August 15, 2001 as studio
manager by petitioner Lirio, owner of Celkor Ad Sonicmix
Recording Studio (Celkor). He was employed to manage and
operate Celkor and to promote and sell the recording studio's
services to music enthusiasts and other prospective clients. He
received a monthly salary of ₱7,000.00.
2. Subsequently, petitioner approached him and told him about his
project to produce an album for his 15-year-old daughter, a
former talent of ABS-CBN Star Records. Petitioner instructed
38
respondent that his work on the album as composer and
arranger would only be done during his spare time, since his
other work as studio manager was the priority.
3. Before the end of September 2001, he reminded petitioner
about his compensation as composer and arranger of the album
to no avail. Respondent worked until the completion of the
album in February 22, 2002. In February 26, 2002, he reminded
Lirio once again about the contract on his compensation as
composer and arranger but he was told that he’s not deserving
of high compensation. He was informed that he’ll only receive
20% of the net profit (rather than the gross sales of the album)
and that his monthly salary will still be deducted from it. Genovia
objected and subsequently, terminated from work
4. Genovia filed for a complaint for llegal dismissal, non-payment
of commission and award of moral and exemplary damages.
5. Genovia provided as evidence his Payroll certified as correct by
Lirio as well as Petty Cash Vouchers evidencing his receipt of
payroll payments from Celkor.
6. On the other hand, Lirio interposed as defense that there was
no EE-ER relationship existed between them and instead, they
agreed to be partners in producing his daugther’s album. They
agreed to: 1) Lirio to provide all the financing, equipment and
recording studio; (2) Celine Mei Lirio shall sing all the songs; (3)
Genovia shall act as composer and arranger of all the lyrics and
the music of the five songs he already composed and the revival
songs; (4) petitioner shall have exclusive right to market the
album; (5) petitioner was entitled to 60% of the net profit, while
respondent and Celine Mei Lirio were each entitled to 20% of
the net profit; and (6) respondent shall be entitled to draw
advances of ₱7,000.00 a month, which shall be deductible from
his share of the net profits and only until such time that the
album has been produced. That they are informal partners
under Article 1767 of the Civil Code.
7. LA ruled in favor or Genovia. NRLC reversed LA saying that
Genovia failed to show EE-ER relationship on the basis of the
four fold test. CA reinstated LA’s decision with modification as to
award of damages.
ISSUES and HELD: WON EE-ER relationship existed between the parties?
YES
RATIO:
• The elements to determine the existence of an employment
relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employer’s power to control the employee’s conduct.
The most important element is the employer’s control of the
employee’s conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish it.
• Documentary evidence presented by respondent showed that
petitioner hired respondent as an employee and he was paid
monthly wages of ₱7,000.00. Petitioner wielded the power to
dismiss as respondent stated that he was verbally dismissed by
petitioner, and respondent, thereafter, filed an action for illegal
dismissal against petitioner. The power of control refers merely
to the existence of the power. It is not essential for the employer
to actually supervise the performance of duties of the employee,
as it is sufficient that the former has a right to wield the power.
• On the other hand, Lirio's so-called existence of a partnership
agreement was not substantiated and his assertion thereto, in
the face of complainant's evidence, constitute but a self-serving
assertion, without probative value, a mere invention to justify the
illegal dismissal.
• It is a well-settled doctrine, that if doubts exist between the
evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter. It is a time-
honored rule that in controversies between a laborer and his
master, doubts reasonably arising from the evidence, or in the
interpretation of agreements and writing should be resolved in
the former’s favor.
• DISPOSITIVE WHEREFORE, the petition is DENIED. The Decision
of the Court of Appeals is AFFIRMED

39
Gregorio Tongko v. Manufacturer’s Life Insurance Co. and Renato Vergel
de Dios (June 29, 2010)
Brion | GR No. 167622 | Distinctions from Other Contracts – Lease of
Services/Employment
SUMMARY: Tongko was an Agent of ManuLife. Eventually he got promoted
and became Regional Sales Manager with additional administrative roles
and recruiting functions. Eventually he was terminated so he filed with the
NLRC for illegal dismissal. LA said there was no EER so the case was
dismissed but NLRC reversed and said there was EER. CA reverted to the
LA Ruling but was reversed by the SC. This case is the MR of the SC
decision that said EER exists. The SC here says that it was an agency
because there’s a distinction between “control” as exercised in the Labor
Code for an Employer-employee relation compared to the “control” of a
principal over an agent in the case of a contract of Agency. In this case,
there’s another layer added as it is the agent of an insurance company
meaning the Insurance Code also comes into effect together with the Civil
Code for Agency.
DOCTRINE: when an insurance company has exercised control over its
agents so as to make them their employees, the relationship between the
parties, which was otherwise one for agency governed by the Civil Code
and the Insurance Code, will now be governed by the Labor Code. The
reason for this is simple – the contract of agency has been transformed
into an employer-employee relationship.
FACTS
1. Contractual relation between Tongko and Manulife:
2. 1st phase (1977): Career Agent’s Agreement
a. “It is understood and agreed that the Agent is an
independent contractor and nothing contained herein
shall be construed or interpreted as creating an
employer-employee relationship between the Company
and the Agent.”
b. Duties: canvassing for applications for group policies
and other products of the company
c. PROVISION FOR TERMINATION: for any breach or
violation of the Agreement by giving written notice to the
agent w/in 15days from discovery of breach.
3. 2nd phase (1983): Became Unit Manager, then Branch Manager
(1990), then Regional Sales Manager (1996)
40
a. Tongko’s gross earnings consisted of commissions,
persistency income, and management overrides. Since
the beginning, Tongko consistently declared himself
self-employed in his income tax returns
4. Eventually, P’s Region was found to be the lowest performer (on
a per Manager basis) in terms of recruiting agents w/c was
central to the company’s objectives
a. i.e., Manulife’s goal to become a major agency-led
distribution company in the Philippines
5. Manulife terminated Tongko’s Agency Agreement through
written letter
6. Tongko filed illegal dismissal with NLRC è the threshold issue is
the existence of an employment relationship. A finding that none
exists renders the question of illegal dismissal moot; a finding
that an employment relationship exists, on the other hand,
necessarily leads to the need to determine the validity of the
termination of the relationship.
a. TONGKO: says EER(Employer-employee relationship)
between him and Manulife è was assigned definite
place in Manulife offices, Manulife provided for
equipment used, also paid him. Also required to follow 3
codes of conduct
b. MANULIFE: no fixed salary, paid thru commissions;
Tongko even declared himself to be self-employed and
consistently paid taxes as such è NLRC has no
jurisdiction
7. LA Said no EER, NLRC REVERSED and said it was illegal
dismissal.
8. CA REVERTED TO LA RULING à SC Nov. 2008 found for EER and
REVERSED CA è Hence this MR
ISSUES and HELD
WON the decision contravenes rules in contract law and agency? (whether
an agency or an employment relationship exists) YES. There is an agency
in this case
RATIO
• Insurance industry here so Insurance Code primarily governs
o The Insurance Code does not wholly regulate the
"agency" that it speaks of, as agency is a civil law matter
governed by the Civil Code. Thus, at the very least, three
 sets of laws – namely, the Insurance Code, the Labor
Code and the Civil Code – have to be considered in
looking at the present case.
o The Labor Code concept of "control" has to be compared
and distinguished with the "control" that must
necessarily exist in a principal-agent relationship.
• INSURANCE CODE: the agent must, as a matter of qualification,
be licensed and must also act within the parameters of the
authority granted under the license and under the contract with
the principal. The agent is limited in the way he offers and
negotiates for the sale of the company’s insurance products, in
his collection activities, and in the delivery of the insurance
contract or policy.
o Rules regarding the desired results (e.g., the required
volume to continue to qualify as a company agent, rules
to check on the parameters on the authority given to the
agent, and rules to ensure that industry, legal and
ethical rules are followed) are built-in elements of
control specific to an insurance agency and should not
and cannot be read as elements of control that attend
an employment relationship governed by the Labor
Code.
• CIVIL CODE: "person [who] 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."
• The employer controls the employee both in the results and in
the means and manner of achieving this result. The principal in
an agency relationship, on the other hand, also has the
prerogative to exercise control over the agent in undertaking the
assigned task based on the parameters outlined in the pertinent
laws.
• Under the general law on agency as applied to insurance, an
agency must be express in light of the need for a license and for
the designation by the insurance company. è IN THIS CASE: the
agreement fulfills this requirement.
• By the Agreement’s express terms, Tongko served as an
"insurance agent" for Manulife, not as an employee.
o Agreement’s characterization of the relationship is not
conclusive BUT it cannot simply be brushed aside
because it embodies their intent at the time they
41
entered the Agreement, and they were governed by this
understanding throughout their relationship. è AT THE
VERY LEAST, an aid to determining the nature.
o as a matter of Insurance Code-based business practice,
an agency relationship prevails in the insurance industry
for the purpose of selling insurance. The Agreement, by
its express terms, is in accordance with the Insurance
Code model when it provided for a principal-agent
relationship, and thus cannot lightly be set aside nor
simply be considered as an agreement that does not
reflect the parties’ true intent. This intent, incidentally,
is reinforced by the system of compensation the
Agreement provides, which likewise is in accordance
with the production-based sales commissions the
Insurance Code provides.
• Throughout his career, his role as insurance agent never
changed; at most he was labeled as a “leading agent”
o Other agents also operated under their own agreements
o NO OTHER AGREEMENTS WERE SUBMITTED
o His role was always to sell Manulife’s insurance
policies/products
• ESTOPPEL: he always declared himself as an independent agent
in considering his tax returns
• CONTROL: The best evidence of control – the agreement or
directive relating to Tongko’s duties and responsibilities – was
never introduced as part of the records of the case.
o IN THIS CASE: Tongko was left practically alone to do his
business
o Tongko’s “evidence of control” was really just codes of
conduct that Manulife imposes on its agents è The mere
presentation of codes or of rules and regulations,
however, is not per se indicative of labor law control as
the law and jurisprudence teach us
o Manulife’s codes of conduct, all of which do not intrude
into the insurance agents’ means and manner of
conducting their sales and only control them as to the
desired results and Insurance Code norms, cannot be
used as basis for a finding that the labor law concept of
control existed between Manulife and Tongko.
• Labor =/= Agency RE: Control
 o Labor: nature of dictating the means or methods to be for reconsideration and, accordingly, DISMISS Tongko’s petition. No
employed in attaining the result costs.
o Agency: coordinative standards (sales target, etc)
methodology is left undefined
• Tongko was given administrative functions as Manager BUT the
Agreement was never altered è no proof of such additional roles
except for affidavits

DISPOSITIVE: WHEREFORE, considering the foregoing discussion, we

REVERSE our Decision of November 7, 2008, GRANT Manulife’s motion

42
NIELSON AND CO. v. LEPANTO CONSOLIDATED MINING CO. (1968)
Zaldivar, J. | GR No. L-21601 | Distinctions from other contracts

SUMMARY:
Lepanto and Nielson entered into a management contract over Lepanto’s mines. After a disagreement, Lepanto unilaterally revoked the contract, prompting
Nielson to file this complaint for damages. SC ultimately decided in favor of Nielson.
In this MR, Lepanto advanced a new theory – that the management contract was actually a contract of agency, which meant it had the right to unilaterally
revoke it as principal. SC ruled in favor of Nielson, but reversed its decision only with respect to the sums to be paid by Lepanto.

DOCTRINE:
Contract of Agency Contract of Lease of Services

In both contracts, one party binds himself in service to the other party.

Basis is representation Basis is employment

Agent represents the principal Lessor (of services) does not represent the
employer

Preparatory contract Not in preparation for other contracts

Agent is destined to perform juridical acts Lessor may only perform material (non-juridical)
between the principal and third persons acts for the employer

1
FACTS (#1-8 are from the main case; the issue on agency is in the MR)
1. Jan. 30, 1937: Plaintiff-appellee Nielson & Co. Inc. and
defendant-appellant Lepanto Consolidated Mining Co. entered
into an operating agreement whereby Nielson operated and
managed the mining properties owned by Lepanto, for a
management fee of P2,500.00 a month and 10% participation
fee in the net profits resulting from the operation of the mining
properties, for a period of 5 years.
2. 1941: The parties agreed to renew the contract for another
period of 5 years; in the meantime, the Pacific War broke out in
December 1941.
3. Jan. 1942: Operation of the mining properties was disrupted
because of the war. The mill, power plant, supplies on hand,
equipment, concentrates on hand and mines, were destroyed.
The Japanese forces occupied and operated the mines during
the war.
4. After the mining properties were liberated from the Japanese
forces, Lepanto took possession thereof and embarked in
rebuilding and reconstructing the mines and mill.
a. Shortly after the mines were liberated, a disagreement
arose between Nielson and Lepanto over the status of
the operating contract which expired in 1947.
b. 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
affecting the work of mining and milling.
5. Jun. 26, 1948: The mines resumed operation under the
exclusive management of Lepanto.
6. Feb. 6, 1958: Nielson brought an action against Lepanto to
recover certain sums of money representing damages allegedly
suffered by it in view of Lepanto’s refusal to comply with the
terms of the management contract.
7. TC dismissed the complaint.
8. The SC reversed the TC decision. It held that the war suspended
the contract by virtue of the force majeure clause, and that the
intention of the parties regarding the meaning and usage of the
2
force majeure clause meant the extension of the same for a
period equivalent to the suspension.
9. In this motion for reconsideration, Lepanto advances a new
theory. It now asserts that the management contract in question
is a contract of agency; thus, it had the right to revoke and
terminate the said contract under the law of agency pursuant to
Art. 1733 of the Old Civil Code (now Art. 1920, NCC).
ISSUES and HELD
WON the management contract between Nielson and Lepanto was a
contract of agency --- No.
RATIO
• The management contract was a contract of lease of services.
o Agency: One person binds himself to render some
service or do something for the account or at the request
of another. (Art. 1920, NCC)
o Lease of service: One of the parties binds himself to
make or construct something or to render a service to
the other for a price certain. (Art. 1544, NCC)
o Here, 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.
• In the performance of this principal undertaking, Nielson was not
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 minerals, but the contract also
provides that Nielson could not make any purchase, or sell the
minerals, without the prior approval of Lepanto.
o 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.
• The annual report for 1936 and from Par. XI of the management
contract showed 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.
• According to Par. XI of the management contract, Lepanto could
not terminate the agreement at will.
o Lepanto could terminate or cancel the agreement by
giving notice of termination 90 days in advance only in
the event that Nielson should prosecute in bad faith and
not in accordance with approved mining practices.
Lepanto could not terminate the agreement if Nielson
should cease the operation and development of the
mining properties by reason of acts of God, strike, and
other causes beyond the control of Nielson.

DISPOSITIVE SC decision reversed (only with respect to the sums to be

paid by Lepanto – instead of stock dividends, all damages shall now be
paid by Lepanto to Nielson in cash).

3
Sevilla vs. CA
Sarmiento, J. | G.R. nos. L-41182-3 | April 15, 1988
Facts:
• A contract was made between Segundina Nuguera (Nuguera),
the Tourist World Service, Inc., and the Sps Sevilla (the Spouses)
for the lease of Nuguera’s property in Manila as a branch office
of the Tourist World Service. The same would be run by Lina
Sevilla, and that in the contract, she held herself solidarily liable
with the Tourist World Service for the prompt payment of monthly
rental. She shared the 7% commissions given by airplane
companies, giving Tourist World Service the 3% and retaining the
4% for herself.
• Tourist World Service caught hold of the information that Lina
Sevilla was connected to a rival firm. Since the branch was
anyhow losing, the TWS decided to close down the office.
o Resolutions from its board of directors directed the
abolishment of the office of the manager and vice-
president in the said branch, as well as the authorization
of the corporate secretary to receive the properties of
the same branch. To effectuate these resolutions, the
corporate secretary went to the branch after working-
hours and padlocked the premises to ‘protect company
interests’.
o When neither Lina nor her employes could enter the
office, a complaint was filed by the Spouses against TWS
and Nuguera with a prayer for the issuance of
mandatory preliminary injunction.
o For apparent lack of interest of the parties, the TC
dismissed the case. This was appealed by Nuguera, and
eventually the Spouses re-filed the case. Both were
heard jointly.
• RTC held for TWS on the premise that TWS was the true lessee
of the office and that consequently, it was within its prerogative
to terminate the lease and padlock the premises.
• CA affirmed the decision of the RTC. Hence, this petition.
Held:
• The Court first determined the relationship of Lina and TWS. It
concluded that Lina Sevilla is not an employee of TWS.
4
• Determining the relationship first is important because if it turns
out that Lina is an employee, then it means that the Courts have
no jurisdiction over the case.
• Using the control test and the existing economic conditions
prevailing between the parties, it was determined that Lina is not
an employee of TWS.
o Lina was not the subject of control;
o She was solidarily liable with TWS with regard to the
monthly rentals;
o Not on the payroll; she earned compensation in
fluctuating amounts depending on her booking
successes.
• However, there is no partnership between Lina and TWS (as Lina
argued). She is, instead, an agent of TWS.
o A joint venture, including a partnership, presupposes
generally a parity of standing between join co-venturers
or partners, in which each party has an equal proprietary
interest in the capital or property contributed and where
each party exercises equal rights in the conduct of the
business.
o Lina recognized that there was no such relation between
them (Sevilla and TWS) and said in a letter that it’s TWS’
right to stop the operation of its branch office.
o Agencyà renders service in representation or on behalf
of another.
o But the agency between the two is something that
cannot be revoked at will because it is one coupled with
an interest or that the agency was created for the
mutual interest of the agent and principal.
o Lina (who was a prominent social figure at the time—
socialite?) was a bona fide travel agent herself, and that
her interest was not solely on the commissions she had
but to the very subject matter of the power of
management delegated to her.
She also personally assumed personal obligation in the
operation thereof, holding herself solidarily liable with
TWS for the rentals. And even after TWS stopped the
operations of its branch, Lina continued the business
using her own name.
 • TWS cannot on its own padlock the premises of the office for as
was said before, Lina had acquired a personal stake in the
business and that she was also part of the contract to the rentals
of the office.
• The Court pointed out the malevolent designs of TWS to
permanently shut down the operations of Lina’s branch office in
light of (the rumor) that she was in contact with a rival firm.
o TWS justified the shutting down as poor sales, but no
evidence was shown as to this effect.
o There is also the surreptitious after-work-hours
padlocking incident.
o For these reasons, TWS is liable to pay moral damages
to Lina (or to the Spouses). Added also are exemplary
damages and nominal/temperate damages.

Petition Granted; Decision (of the CA) Reversed.

5
DEGAÑOS V. PEOPLE (2013)
LABRADOR, J | GR No. L-18223-24 |
SUMMARY: This was a motion for new trial due to the discovery of new
evidence filed by Damaso Perez. He claimed that the movant did not know
about the Power of Atty. used by Ramon Racelis à signed and used by him
to claim loans for the Republic Armored Car Service Corp and Republic
Credit Corp. In the MFR, the Power of Atty was presented. It was not
mentioned whether this was the exact document used. The issue is W/N
the power of Atty gave Racelis authority to secure the loans? YES. Racelis
was authorized to negotiate for loans with other institutions. The
document stated that, “Atty in fact Racelis, may deem proper and
convenient to my interests…and execute any and all docs he deems
requisite and necessary in order to obtain such loans, always having in
mind best interest” As agent of Damaso Perez, Racelis signed the docs
for the loans by using “Damaso Perez by Ramon Racelis”. Perez agreed
to be solidarily liable for the loans.
DOCTRINE: Where principal was bound by contract of loan executed by
his agent; Case at Bar.—Where in accordance with a power of attorney
executed by the principal, the agent was authorized to negotiate for a loan
or various loans with banking institutions, financing or insurance
companies etc., m such sum or sums, aforesaid agent may deem proper
and convenient to the interest of the principal, such general power of
attorney was held sufficient authority for the agent to obtain the credits
subject of the case at bar
Facts:
• The Office of the Provincial Prosecutor of Bulacan charged
Brigida luz and Narciso Degaños in the RTC of Malolos, Bulacan
with estafa.
• They allegedly received from the Spouses Jose and Lydia
Bordador gold and pieces of jewelry worth Php 438, 702.00,
which they were to pay in cash. If they could not do so, they
should pay it after 1 month or return the unsold jewelry within the
said period. Lydia delivered the said jewelry starting sometime in
1986, as evidenced by several documents entitled Katibayan at
Issues:
Kasunduan.
• Everytime Narciso Degaños got jewelry from her, he signed the
receipts in her presence. They were able to pay only up to a
certain point. Despite repeated demands, the accused failed and
6
refused to pay and return the subject jewelry. As of October
1998, the total obligation of the accused amounted to Php 725,
000.00.
• Accused Brigida Luz claimed that sometime in 1987, she already
paid the principal amount of her indebtedness, but she refused
to pay the interest because the same was allegedly excessive. In
1998, Jose Bordador brought a ledger to her and asked her to
sigh the same. The ledger contains a list of her supposed debt to
the private complaints. She refused to sign it because they were
not her debts, but her brother’s (Deganos). She even asked the
private complainants why they gave so many pieces of jewelry
and gold bars to Deganos without her permission, and told them
that she has no participation in the transactions covered by the
subject Kasunduan and Katibayan receipts.
• Accused Narciso Deganos claimed that initially, he was given a
gold bracelet and necklace to sell. He was able to sell the same
and paid the private complainants with the proceeds thereof.
Since then, he started conducting similar business transactions
with the private complainants, which are usually covered by
receits denominated as Kasunduan and Katibayan. All of the
receipts were issued by the Bordadors and was signed by him.
The phrase “for Brigida Luz” and for “Everly Aquino” were written
on the receipts so that in case he fails to pay for the items
covered therein, the Bordadors would have someone to collect
from. However, he categorically admitted that he is the only one
who was indebted to the private complainants. He also claimed
that he already made partial payments, including Php 20,000,
hich wa contributed by his siblings and which amount was
delivered by Luz to the Bordadors.
• The RTC found Deganos guilty as charged and sentenced him to
20 years of reclusion temporal. Luz was acquitted for
insufficiency of evidence.
• Deganos assailed his conviction before the CA, which affirmed
the conviction but lowered the penalty. Hence, the instant appeal
instituted by Deganos.
• WoN the CA erred in NOT finding the agreement between
Bordador and Deganos as one of sale on credit- NO.
 o Pet: His agreement as embodied in the Kasunduan at
Katibayan was a sale on credit, not a consignment to sell
on commission basis.
o SC: The transaction was an agency, not a sale on credit.
Plainly, the transaction was a consignment under the
obligation to account for the proceeds of the sale, or to
return the unsold items. As such he was the agent of the
complainants in the sale to others of the items listed in
the Kasunduan. Contrary to petitioner’s contention,
there was no sale on credit because the ownership of
the items did not pass to him.
• WoN the CA erred in NOT finding that novation had converted the
liability of the accused into a civil one- NO.
o Pet: His partial payments to the complainants novated his
contract with the respondents from agency to loan, thereby
converting his liability from criminal to civil. His failure to
complete payments prior to the filing of the complaint-
affidavit by the complainants notwithstanding, the fact that
the complainants later required him to make a formal
proposal before the barangay authorities on the payment of
the balance of his outstanding obligations confirmed that
novation had occurred.
o SC: Novation is not a ground under the law to extinguish
criminal liability. The role of novation may only be either to
prevent the rise of criminal liability, or to cast doubt on the
true nature of the original basic transaction, whether or not
it was such that the breach of the obligation would not give
rise to penal responsibility, as when money loaned is made
to appear as a deposit, or other similar disguise is resorted
to.
o Although the novation of a contract of agency to make it one
of sale may relieve an offender from an incipient criminal
liability, that did not happen here, for the partial payments
and the proposal to pay the balance the accused made
during the barangay proceedings were not at all
incompatible with his liability under the agency that had
already attached. Rather than converting the agency to sale,
therefore, he even thereby confirmed his liability as the sales
agent of the complainants.

Ruling: CA decision affirmed.

7
Angeles v. PNR (August 31, 2006)
Garcia, J. | GR No. 150128 | Distinctions from Other Contracts; Sale
SUMMARY: Petitioners-spouses allege that they are the proper party/ies
to sue respondent, being the parties-in-interest to institute and pursue
their case of complaint for specific performance and damages against the
respondents. Decisive in this case is the interpretation of the power of
attorney in question, which the Court decided evinced that the female
spouse was a mere agent or representative, and not the assignee, of the
person who had executed the document.
DOCTRINE: Normally, the agent has neither rights nor liabilities as against
the third party; he cannot thus sue or be sued on the contract xxx The
legal situation is, however, different where an agent is constituted as an
assignee. In such a case, the agent may, in his own behalf, sue on a
contract made for his principal, as an assignee of such contract. The rule
requiring every action to be prosecuted in the name of the real party-in-
interest recognizes the assignment of rights of action and also recognizes
that when one has a right assigned to him, he is then the real party-in-
interest and may maintain an action upon such claim or right.
FACTS
1. On May 5, 1980, respondent informed Gaudencio Romualdez
that it has accepted his offer to buy scrap / unserviceable rails
amounting to Php 96,600.
2. Romualdez then sent a letter to PNR’s Purchasing Agent, the
letter of which stated Lizette Angeles (petitioner) was authorized
to be his lawful representative in withdrawing the said
equipment.
3. However, in the same letter, the wording was such as to express
a “waiver of rights, interests, and participation” in favor of Lizette.
4. PNR suspended the withdrawal of the rails by reason of
suspected pilferage of PNR scrap properties in Tarlac.
5. Petitioners-spouses Angeles filed a suit against PNR for specific
performance and damages.
6. Lizette died pending resolution of the case, who was substituted
by her heirs and her husband.
7. RTC dismissed the complaint for lack of cause of action, finding
the petitioners-spouses as not being the parties-in-interest.
Lizette was deemed a mere agent or representative, not an
assignee. The CA affirmed the RTC Decision.
ISSUES and HELD
8
1. WoN Lizette was an assignee of Gaudencio Romualdez – NO
2. WoN she therefore could sue PNR - NO
RATIO
1.a. The Court scrutinized the letter and found she was to act as a
“representative” of Romualdez.
1.b. The Court stressed it doesn’t matter how the agent is called or
designated, or the parties in an agency relation.
1.c. The letter clearly stated Romualdez authorized Lizette Angeles to be
his “lawful representative.”
1.d. Petitioners contest this, stressing the “waiver” part of the letter; the
Court however points out the phrase “For this reason,” which precedes
the “waiver.” The said phrase could only refer to the authorization of
Lizette to be the agent/representative of Romualdez. Therefore, the
“waiver” was only a capacitation of Lizette in furtherance of her purpose
as agent to withdraw the subject rails. The Court here uses as basis Art.
1374 providing a rule of construction.
1.e. Applying Art. 1371, the subsequent acts of the parties were analyzed,
where still Lizette Angeles was identified or affirmed to be a mere agent
or representative of San Juanico Enterprises (presumably belonging to
Romualdez, then.)
1.f. Petitioner assails the document as not being a special power of
attorney since it was not in the form of one. The Court declares this
argument as being specious, as clearly no law mandates a form or
method of execution for a valid power of attorney.
1.g. “(A power of attorney’s) purpose is not to define the authority of the
agent xxx but to evidence the authority of the agent to third parties with
whom the agent deals.
DISPOSITIVE: WHEREFORE, the petition is DENIED and the assailed
decision of the CA is AFFIRMED. Costs against the petitioner. SO
ORDERED.
Victoria Milling Co., Inc. v. CA and Consolidated Sugar Corporation June
19, 2000
Quisumbing, J. | G.R. No. 117356 | Agency or Sale
Doctrine: The question of whether 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.
FACTS:
1. St. Therese Merchandising (STM) regularly bought sugar from
Victorias Milling Co.(VMC), Inc. In the course of their dealings,
Victorias Milling issued several Shipping List/Delivery Receipts
(SLDRs) to St. Therese Merchandising as proof of purchases.
Among these was SLDR No. 1214M which covers 25,000 bags of
sugar. Each bag contained 50 kilograms and priced at P638.00 per
bag. The transaction it covered was a direct sale.
2. On October 25, 1989, St. Therese Merchandising sold to
Consolidated Sugar Corp (CSC). its rights in SLDR No. 1214M for
P14,750,000.00. CSC issued checks in payment. That same day,
CSC wrote Victorias Milling that it had been authorized by St.
Therese Merchandising to withdraw the sugar covered by SLDR No.
1214M.
3. CSC surrendered SLDR No. 1214M to Victorias Milling’s NAWACO
warehouse and was allowed to withdraw sugar. However, after
2,000 bags had been released, Victorias Milling refused to allow
further withdrawals of sugar against SLDR No. 1214M because,
according to it, St. Therese Merchandising had already withdrawn
all the sugar covered by the cleared checks.
ISSUE/Held: WON the contract was one of agency or sale? Sale
Ratio:
1. Victorias Milling heavily relies upon St. Therese Merchandising’s
letter of authority allowing Consolidated Sugar Corp. to withdraw
sugar against SLDR No. 1214M to show that the latter was St.
Therese Merchandising’s agent. The pertinent portion of said letter
reads: “This is to authorize Consolidated Sugar Corporation or its
representative to withdraw for and in our behalf” the refined sugar
covered by SDR No. 1214
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2. Art. 1868. By the contract of agency 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.
3. 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.
4. Victorias Milling failed to sufficiently establish the existence of an
agency relation between Consolidated Sugar Corp. and St. Therese
Merchandising. The fact alone that St. Therese Merchandising had
authorized withdrawal of sugar by CSC. “for and in our behalf”
should not be eyed as pointing to the existence of an agency
relation. Further, CSC has shown that the 25,000 bags of sugar
covered by the SLDR No. 1214M were sold and transferred by St.
Therese Merchandising to it. A conclusion that there was a valid
sale and transfer to Consolidated Sugar Corp. may, therefore, be
made thus capacitating Consolidated Sugar Corp. to sue in its own
name, without need of joining its imputed principal St. Therese
Merchandising as co-plaintiff.
5. CSC was a buyer of the SLDR form, and not an agent of STM.
Consolidated Sugar Corp. was not subject to St. Therese
Merchandising’s control. That no agency was meant to be
established by the CSC and STM is clearly shown by CSC’s
communication to petitioner that SLDR No. 1214M had been “sold
and endorsed” to it. The use of the words “sold and endorsed”
means that St. Therese Merchandising and CSC intended a
contract of sale, and not an agency.
Dispositive: WHEREFORE, the instant petition is DENIED for lack of merit.
Costs against petitioner.
Hahn v CA (Jan. 22, 1997)
Mendoza, J. | GR No. 113074 | Distinctions from other contracts: Sale
Summary: Hahn is the authorized exclusive dealer of BMW in the
Philippines. BMW wanted to convert his contract to a standard BMW
importer or terminate his exclusive dealership. Hahn refused and filed a
complaint for specific performance to compel BMW to continue with the
exclusive dealership. BMW moved to dismiss on the ground that
jurisdiction cannot be acquired over it by service of summons through DTI
since it is a foreign corporation, not doing business in the Philippines. SC
held that Hahn's arrangement with BMW is an agency and therefore it is
doing business in the Philippines and can be served summons through
DTI. (See Ratio for details of their arrangement)
Doctrine: In an agency to sell, an agent receives commission upon the
successful conclusion of a sale. Whereas, a broker earns his pay merely
by bringing the buyer and the seller together, even if no sale was made.
Facts:
1. Hahn is the authorized exclusive dealer of BMW in the Philippines
but with no formal contract.
2. BMW informed Hahn, in a letter, of its dissatisfaction with various
aspects of his business, such as decline in sales, deteriorating
services, inadequate showroom and warehouse facilities, and
failure to comply with the standards for an exclusive BMW dealer.
3. BMW expressed willingness to continue business relations on
the basis of a "standard BMW importer" contract, otherwise,
BMW would terminate Hahn's exclusive dealership.
4. Hahn refused and BMW terminated the exclusive dealer
relationship.
5. Hahn filed a complaint for specific performance and damages
against BMW to compel it to continue the exclusive dealership.
6. Summons and copies of the complaint were served on BMW
through the Dept. of Trade and Industry pursuant to Rule 14 Sec
14, on the ground that it was a foreign corporation doing
business in the Philippines. These were sent by DTI to BMW via
registered mail.
7. BMW moved to dismiss the case, contending that the TC did not
acquire jurisdiction over it through the service of summons on
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DTI because BMW is a foreign corporation and it was not doing
business in the Philippines.
8. BMW also contended that Hahn was not its agent because he
assembled and sold BMW cars and products without the
participation of BMW and that he also sold other products. BMW
claims that Hahn was a middleman transacting business in his
own name and on his own account.
9. TC deferred the resolution of the Motion to Dismiss.
10. BMW filed a petition for certiorari with the CA and the CA ruled
that TC committed grave abuse of discretion is deferring
resolution of the motion to dismiss.
11. CA ruled that the BMW was not doing business in the country and
therefore jurisdiction over it could not be acquired through
service of summon on DTI.
12. CA ruled that Hahn was a mere broker and not an agent, that he
acted in his own name and on his own account and
independently of BMW based on the fact that he invested his own
money and resources in establishing BMW's goodwill in the
Philippines.
Issue and Held: WON Hahn is the agent or distributor of BMW in the
Philippines (to determine if BMW is doing business in the Philippines)?
Yes
Ratio:
1. Hahn claimed he took orders for BMW cars and transmitted them
to BMW. Upon receipt of the orders, BMW fixed the down
payment and pricing charges, notified Hahn of the scheduled
production month for the orders, and reconfirmed the orders by
signing and returning to Hahn the acceptance sheets. Payment
was made by the buyer directly to BMW. Title to the cars passed
directly to the buyer and Hahn does not pay the purchase price
of BMW cars sold.
2. Hahn received a commission equal to 14% of the purchase price
upon the invoicing of a vehicle order by BMW. Upon confirmation
in writing that the cars had been registered in the Philippines and
serviced by him, he received additional 3% of the purchase price.
3. He also performed after-sale services, for which he received
reimbursement from BMW.
4. All orders were on invoices and forms of BMW.
 5. The Court held that this arrangement shows an agency. An agent
receives commission upon successful conclusion of a sale. While
a broker earns his pay by bringing the buyer and the seller
together, even if no sale was made.
6. In addition, BMW has held out Hahn as its exclusive distributor
in the Philippines.
7. Therefore, BMW is doing business in the Philippines through its
agent Hahn.

Dispositive: Decision of CA reversed and remanded to the TC for further

proceedings.

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LIM v. PEOPLE (November 21 1984)
Relova, J. | G.R. No. L-34338 | Sale vs. Agency to Sell
Petitioner: Lourdes Valerio Lim
Respondents: The People
Summary: Lim proposed to sell Ayroso’s tobacco; in turn Lim was to
receive the overprice for which she could sell them. Ayroso failed to pay
in full and return the goods. As a defense in the estafa case, Lim argues
that the agreement was a contract of sale, not of agency to sell. Court
disagrees, saying that there was no transfer of ownership from Ayroso to
Lim.
Doctrine: The fact that appellant received the tobacco to be sold at P1.30
per kilo and the proceeds to be given to complainant as soon as it was
sold, strongly negates transfer of ownership of the goods to the petitioner.
The agreement constituted her as an agent with the obligation to return
the tobacco if the same was not sold.
Facts
● Appellant went to the house of Ayroso and proposed to sell the
latter’s tobacco. Ayroso agreed to sell her tobacco consisting of
615 kilos at P1.30 a kilo. The appellant was to receive the
overprice for which she could sell them. The written agreement
states that the proceed will be given to Ayroso as soon as it was
sold.
● Ofthe total value of P799.50, appellant had paid to Ayroso only
P240.00, and this was paid on three different times. Ayroso’s
sister testified that she had gone to the house of appellant
several times, but Lim often eluded her; and that the 'camarin' of
the appellant was empty.
● As no further amount was paid, Ayroso filed a complaint for
estafa. Trial court found Lim guilty. CA affirmed. Hence this
appeal.
Issues - Held
1. WON the CA was right in holding that the agreement fixed a
period such that the obligation was immediately demandable as
soon as the tobacco was sold? YES
2. Whether the receipt/agreement is a contract of agency to sell, or
a contract of sale of the subject tobacco between petitioner and
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the complainant thereby precluding criminal liability of Lim?
CONTRACT OF AGENCY TO SELL
Ratio (Issue 1)
● Petitioner’s theory is that the obligation does not fix a period, but
from its nature and the circumstances it can be interred that a
period was intended; hence the only action that can be
maintained is a petition to ask the court to fix the duration
thereof.
● Court: It is clear in the agreement that the proceeds of the sale
of the tobacco should be turned over to the complainant as soon
as the same was sold, or, that the obligation was immediately
demandable as soon as the tobacco was disposed of. Hence,
Article 1197 NCC does not apply.
Ratio (Issue 2)
● Alternatively, petitioner argues that she was not an agent
because the agreement does not say that she would be paid the
commission if the goods were sold.
● Court: Aside from the fact that Ayroso testified that the appellant
asked her to be her agent in selling the tobacco, the appellant
herself admitted that there was an agreement that upon the sale
of the tobacco she would be given something. The appellant is a
businesswoman, and it is unbelievable that she would go to the
extent of going to Ayroso’s house and take the tobacco with a
jeep which she had brought if she did not intend to make a profit
out of the transaction.
● The fact that appellant received the tobacco to be sold at P1.30
per kilo and the proceeds to be given to complainant as soon as
it was sold, strongly negates transfer of ownership of the goods
to the petitioner. The agreement constituted her as an agent with
the obligation to return the tobacco if the same was not sold.
DENIED.
Chua Ngo v. Universal trading Co., Inc. (September 19, 1950)
Bengzon | No. L-2870 | Distinctions from other Contracts: Sale
SUMMARY:
Chua Ngo entered into a contract with UTC for the acquisition of 300
boxes of oranges. While in transit, 180 boxes were lost so Chua Ngo sued
UTC to recover the price paid in advance. UTC refused to pay alleging that
it merely acted as an agent in purchasing the oranges. the SC held,
however, that circumstances revealed the transaction to be one of sale.
This being the case, Chua Ngo was entitled to repayment for the lost
boxes.
FACTS
1. Chua Ngo and UTC entered into a contract for the sale of 300
boxes of oranges (and onions but this was later deleted) to be
acquired from a supplier in the USA.
2. UTC wrote Chua Ngo 2 letters informing him that the contract for
oranges (and onions) had been confirmed by the supplier and
asking for the deposit of 65% of the price.
3. Chua Ngo delivered to UTC the price of 300 boxes of Sunkist
oranges and UTC ordered the boxes from Gabuardi Company.
The goods were loaded in good condition, marked “UTC Manila”
and shipped to Manila from San Francisco but 180 boxes were
lost in transit and never delivered.
4. Chua Ngo sued UTC to recover the price he paid in advance but
UTC refused to pay, alleging it merely acted as agent of Chua Ngo
in purchasing the oranges. Chua Ngo argued that he bought the
oranges from UTC and was therefore entitled to the return of the
price of the undelivered fruit.
a. note that UTC paid in its own name to Gabuardi
Company and made claims for the lost oranges to the
steamship company and the insurance company that
insured the shipment. Also, UTC received no
commission for its transaction with Chua Ngo.
5. the trial court ruled in favor of Chua Ngo
ISSUES and HELD
1. did UTC merely agree to buy for and on behalf of Chua Ngo or did
it agree to sell the oranges? — it was a sale
2. who should suffer the loss of the 180 boxes? — UTC
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RATIO
1. the circumstances of record indicate a sale:
a. no commission was paid
b. the contract says that “if balance is not paid within 48
hours of notification, merchandise may be resold by the
UTC and the deposit forfeited — “resold” implies the
goods had been sold to Chua Ngo and the forfeiture of
the deposit is incompatible with a contract of agency
c. after executing the contract wherein the oranges were
quoted at $6.30/box, UTC placed a order for purchase
of the same ranges with Gabuardi company at $6/box —
if UTC was an agent, it could not mark up the prices the
way that it did. since good faith is presumed, the
conclusion is that UTC did so because it was acting as
an independent purchaser from Gabuardi Company
d. UTC charged Chua Ngo P218.87 for the 3.5% sales tax
— implies that their transaction was a sale
e. if the purchase of the oranges had been made on behalf
of Chua Ngo, all claims for losses against the insurance
company and shipping company should’ve been
assigned to Chua Ngo. Here, UTC pressed the claims for
itself
2. because the goods were sold “FOB San Francisco” the loss
should be borne by UTC because the goods were considered as
delivered to the purchaser at San Francisco on board the vessel.
this is why UTC was trying to recover the loss from the steamship
company and insurer.
DISPOSITIVE
In view of the foregoing, the appealed judgment for plaintiff in the sum of
P3,882.60 is affirmed, with costs,
THE SHELL COMPANY OF THE PHILIPPINES, LTD. v. FIREMEN'S
INSURANCE COMPANY OF NEWARK, NEW JERSEY COMMERCIAL
CASUALTY INSURANCE CO., SALVADOR SISON, PORFIRIO DE LA FUENTE
and THE COURT OF APPEALS (January 29, 1957)
Padilla, J. | GR No. L-8169 | Distinction from other contracts;
independent contractor
SUMMARY: A Plymouth car was brought to a Shell station for servicing. As
the car was being lower from a hydraulic lift, it swung and subsequently
fell. The insurance company was subrogated to the rights of the car owner
and filed and action for collection of sum of money against the company
Shell. CFI dismissed the complaint. The CA and SC found that the
circumstances reveal that the operator was a mere agent of its principal
Shell, thus the petitioner was held liable for the damage caused to the
car.
DOCTRINE: The act of [an] agent or his employees acting within the scope
of his authority is the act of the principal, the breach of the undertaking
by the agent is one for which the principal is answerable.
The Court is not bound to rely upon the name or title given by the
contracting parties, should there be a controversy as to what they really
had intended to enter into, but the way the contracting parties do or
perform their respective obligations stipulated or agreed upon. Should
such performance conflict with the name or title given the contract by the
parties, the former must prevail over the latter.
FACTS:
1. A Plymouth car owned by Salvador P. Sison was brought to the
Shell Gasoline and Service Station, located at the corner of
Marqués de Comillas and Isaac Peral Streets, Manila, for
washing, greasing and spraying.
2. The operator of the station, having agreed to do service upon
payment of P8.00, the car was placed on the hydraulic lifter
under the direction of the personnel of the station.
3. According to Sison, after lifting the car through the hydraulic lifter
and washing the same, the next thing to do was to grease it.
However, the greasemen could not reach shelf of the right front
fender, thus they were to lower the car.
4. While it was being lowered, Sison saw the car swinging until it
fell.
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5. The case was immediately reported to the Manila Adjustor
Company, the adjustor for the Firemen's Insurance Company and
the Commercial Casualty Insurance, Company, as the car was
insured.
6. After the car was restored to running condition, the vehicle was
delivered to Sison who made assignment of his rights to recover
damage in favor of the two insurance companies amounting to
P1,651.38, the cost of the repairs.
7. The respondents filed an action for recovery of sum of money,
based on alleged negligence of the petitioners.
8. The CFI dismissed the complaint.
9. The CA reversed the ruling of the CFI and held that the operator
of the gasoline and service station was an agent of the Shell
Company.
ISSUES and HELD: WON the operator of the gas station is an agent of
Shell and not an independent contractor-- (YES)
RATIO:
1. The Court affirmed the decision of CA’s findings that:
a. the operator owed his position to the company and the
latter could remove him or terminate his services at will;
b. the service station belonged to the company and bore
its tradename and the operator sold only the products
of the company;
c. the equipment used by the operator belonged to the
company and were just loaned to the operator and the
company took charge of their repair and maintenance;
d. an employee of the company supervised the operator
and conducted periodic inspection of the company's
gasoline and service station;
e. the price of the products sold by the operator was fixed
by the company and not by the operator;
2. The Court also emphasized that they are not bound to rely upon
the name or title given by the contracting parties, should there
be a controversy as to what they really had intended to enter into,
but the way the contracting parties do or perform their respective
obligations stipulated or agreed upon. Should such performance
conflict with the name or title given the contract by the parties,
the former must prevail over the latter.
 3. It was admitted by the operator of the gasoline and service
station that the car was carefully and centrally placed on the
platform of the lifter and the fall of the car were the result of the
jerking and swaying of the lift when the valve was released, and
that the jerking was due to some accident and unforeseen
shortcoming of the mechanism itself, which caused its faulty or
defective operation or functioning.
4. It is to be noted that the company undertook to "answer and see
to it that the equipment are in good running order and usable
condition and the CA found that the Company's mechanic failed
to make a thorough check up.
5. As the act of the agent or his employees acting within the scope
of his authority is the act of the principal, the breach of the
undertaking by the agent is one for which the principal is
answerable.

DISPOSITIVE
WHEREFORE, the judgment under review is affirmed, with costs against
the petitioner.

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