Nature, Concept and Purpose of Agency
is engaged in the business of importation and
Agency; 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 like selling, buying,
manufacturing, and transporting.—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. 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 like selling, buying,
manufacturing, and transporting. Its purpose is to extend the personality of the principal
or the party for whom another acts and from whom he or she derives the authority to act.
It is said that the basis of agency is representation, that is, the agent acts for and on
behalf of the principal on matters within the scope of his authority and said acts have the
same legal effect as if they were personally executed by the principal. By this legal fiction,
the actual or real absence of the principal is converted into his legal or juridical presence
—qui facit per alium facit per se.
EUROTECH INDUSTRIAL TECHNOLOGIES, INC., petitioner, vs. EDWIN CUIZON and ERWIN
CUIZON, respondents.
521 SCRA 584 | G.R. No. 167552
April 23, 2007
Ponente: CHICO-NAZARIO, J.
NATURE OF CASE
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
BRIEF
Before Us is a petition for review by certiorari assailing the Decision of the Court of
Appeals dated 10 August 2004 and its Resolution dated 17 March 2005 in CA-G.R. SP No.
71397 entitled, “Eurotech Industrial Technologies, Inc. v. Hon. Antonio T. Echavez.” The
assailed Decision and Resolution affirmed the Order dated 29 January 2002 rendered by
Judge Antonio T. Echavez ordering the dropping of respondent EDWIN Cuizon (EDWIN) as
a party defendant in Civil Case No. CEB-19672.
FACTS
Eurotech Industrial Technologies, Inc.
distribution of various European industrial equipment for customers here in the
Philippines. It has as one of its customers Impact Systems Sales (“Impact Systems”) which
is a sole proprietorship owned by respondent ERWIN Cuizon (ERWIN). Respondent EDWIN
is the sales manager of Impact Systems and was impleaded in the court a quo in said
capacity.
Petitioner sold to Impact Systems various products. Subsequently, respondents sought to
buy from petitioner one unit of sludge pump valued at P250,000.00 with respondents
making a down payment of fifty thousand pesos (P50,000.00). When the sludge pump
arrived from the United Kingdom, petitioner refused to deliver the same to respondents
without their having fully settled their indebtedness to petitioner. Thus, respondent
EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of
Assignment of receivables in favor of petitioner on the respondent's receivables from
Toledo Power Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND
(P365,000.00) PESOS as payment for the purchase of one unit of Selwood Spate 100D
Sludge Pump.
Following the execution of the Deed of Assignment, Eurotech delivered to respondents
the sludge pump. Allegedly unbeknownst to petitioner, respondents, despite the
existence of the Deed of Assignment, proceeded to collect from Toledo Power Company .
Alarmed by this development, petitioner made several demands upon respondents to pay
their obligations and as a result, respondents were able to make partial payments to
petitioner. Petitioner’s counsel sent respondents a final demand letter but respondents
failed to abide by said final demand letter, thus, petitioner instituted a complaint for sum
of money, damages, with application for preliminary attachment against herein
respondents before the Regional Trial Court of Cebu City.
The trial court granted petitioner’s prayer for the issuance of writ of preliminary
attachment. Respondent EDWIN filed his Answer wherein he admitted the sale
transactions entered into by Impact Systems and petitioner, however, disputed the total
amount of Impact Systems’ indebtedness to petitioner. By way of special and affirmative
defenses, respondent EDWIN alleged that he is not a real party in interest in this case as
he was acting as mere agent of his principal, which was the Impact Systems, in his
transaction with petitioner and the latter was very much aware of this fact.
Petitioner filed a Motion to Declare Defendant ERWIN in Default with Motion for
Summary Judgment. The trial court granted petitioner’s motion to declare respondent
ERWIN in default “for his failure to answer within the prescribed period despite the
opportunity granted”but it denied petitioner’s motion for summary judgment in its Order
of 31 August 2001 and scheduled the pre-trial of the case on 16 October 2001. However,
the conduct of the pre-trial conference was deferred pending the resolution by the trial
court of the special and affirmative defenses raised by respondent EDWIN. After the filing
of respondent EDWIN’s Memorandum in support of his special and affirmative defenses
and petitioner’s opposition thereto, the trial court rendered its assailed Order dated 29
January 2002 dropping respondent EDWIN as a party defendant in this case.
Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the
Court of Appeals which, however, affirmed the decision of the lower court and also
denied the petitioner’s motion for reconsideration. Hence, the present petition.
ISSUE/s of the CASE
Whether respondent EDWIN exceeded his authority when he signed the Deed of
Assignment thereby binding himself personally to pay the obligations to petitioner.
ACTION OF THE COURT
RTC’s Ruling
Rendered its assailed Order dropping respondent EDWIN as a party defendant in this
case.
CA's Ruling
Affirmed the decision of the lower court and denied the motion for reconsideration
SC’s Ruling
Denied the petition
COURT RATIONALE ON THE ABOVE CASE
No.
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. 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 like selling, buying, manufacturing, and transporting. Its
purpose is to extend the personality of the principal or the party for whom another acts
and from whom he or she derives the authority to act. It is said that the basis of agency is
representation, that is, the agent acts for and on behalf of the principal on matters within
the scope of his authority and said acts have the same legal effect as if they were
personally executed by the principal. By this legal fiction, the actual or real absence of the
principal is converted into his legal or juridical presence—qui facit per alium facit per se.
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; (4) the agent
acts within the scope of his authority.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not
personally liable to the party with whom he contracts. The same provision, however,
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. We hold that respondent EDWIN does not
fall within any of the exceptions contained in this provision.
We likewise take note of the fact that in this case, petitioner is seeking to recover both
from respondents ERWIN, the principal, and EDWIN, the agent. It is well to state here that
Article 1897 of the New Civil Code upon which petitioner anchors its claim against
respondent EDWIN “does not hold that in case of excess of authority, both the agent and
the principal are liable to the other contracting party.” To reiterate, the first part of Article
1897 declares that the principal is liable in cases when the agent acted within the bounds
of his authority. Under this, the agent is completely absolved of any liability. The second
part of the said provision presents the situations when the agent himself becomes liable
to a third party when he expressly binds himself or he exceeds the limits of his authority
without giving notice of his powers to the third person. However, 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.
As we declare that respondent EDWIN acted within his authority as an agent, who did not
acquire any right nor incur any liability arising from the Deed of Assignment, it follows
that he is not a real party in interest who should be impleaded in this case. A real party in
interest is one who “stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit.” In this respect, we sustain his exclusion as a
defendant in the suit before the court a quo.
SUPREME COURT RULING
WHEREFORE, premises considered, the present petition is DENIED and the Decision dated
10 August 2004 and Resolution dated 17 March 2005 of the Court of Appeals in CA-G.R.
SP No. 71397, affirming the Order dated 29 January 2002 of the Regional Trial Court,
Branch 8, Cebu City, is AFFIRMED.

Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu City,
for the continuation of the proceedings against respondent ERWIN CUIZON.
SO ORDERED.
Rallos vs. Felix Go Chan & Sons Realty Corp., 81 SCRA 251
Facts:
Concepcion and Gerundia Rallos were sisters and registered co-owners of the parcel of
land in issue. They executed a special power of attorney in favor of their brother, Simeon
Rallos, authorizing him to sell such land for and in their behalf.
After Concepcion died, Simeon Rallos sold the undivided shares of his sisters Concepcion
and Gerundia to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. New
TCTs were issued to the latter.
Petitioner Ramon Rallos, administrator of the Intestate Estate of Concepcion filed a
complaint praying (1) that the sale of the undivided share of the deceased Concepcion
Rallos in lot 5983 be unenforceable, and said share be re-conveyed to her estate; (2) that
the Certificate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation be
canceled and another title be issued in the names of the corporation and the "Intestate
estate of Concepcion Rallos" in equal undivided; and (3) that plaintiff be indemnified by
way of attorney's fees and payment of costs of suit.
Issues:
Whether or not the sale fell within the exception to the general rule that death
extinguishes the authority of the agent.
Held/Ratio:
Yes the sale is void. The court held that no one may contract in the name of another
without being authorized by the latter, or unless he has by law a right to represent him
(Art. 1317 of the Civil Code).
Simon’s authority as agent was extinguished upon Concolacion’s death. The sale did not
fall under the exceptions to the general rule that death ipso jure extinguishes the
authority of the agent.
Art. 1930 inapplicable since SPA in favor of Simon Rallos was not coupled with interest
and Art. 1931 inapplicable because Rallos knew of principal Concepcion’s death. For Art
1931 to apply, both requirements must be present Laws on agency, the terms of which
are clear and unmistakable leaving no room for an interpretation contrary to its tenor,
should apply, the law provides that death of the principal ipso jure extinguishes the
authority of the agent to sell rendering the sale to a third person in good faith
unenforceable unless at the agent had no knowledge of the principal’s death at that time
(exception under Art. 1931).
Dispositive:
CA Decision reversed, CFI decision affirmed. Sale was null and void.
Court discussed relevant principles first:
Relationship of Agency (concept arising from principles under Art 1317 and 1403)- one
party, caged the principal (mandante), authorizes another, called the agent (mandatario),
to act for and in his behalf in transactions with third persons.
- derivative in nature, power emanating from principal
- agent’s acts are acts of the principal 
Essential Elements:
(1) there is consent, express or implied of the parties to establish the relationship;
(2) the object is the execution of a juridical act in relation to a third person;
(3) the agents acts as a representative and not for himself, and
(4) the agent acts within the scope of his authority. 
Extinguishment:
Generally: among others, by the death, civil interdiction, insanity or insolvency of the
principal or of the agent - death of the principal effects instantaneous and absolute
revocation of the authority of
Exceptions: Art. 1930 - if it has been constituted in the common interest of the latter and
of the agent, or in the interest of a third person who has accepted the stipulation in his
favor. 
Art. 1931 - agent acted without knowledge of the principal’s death and that the third
person was in good faith (both these requirements should be present).
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 a 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; (4)
the agent acts within the scope of his authority.
Loadmasters vs Glodel
LOADMASTERS CUSTOMS SERVICES, INC., petitioner, vs.
GLODEL BROKERAGE CORPORATION and R&B INSURANCE CORPORATION, respondents.
G.R. No. 179446
January 10, 2011
Mendoza, J.
NATURE OF CASE
Petition for review on certiorari under Rule 45 of the August 24, 2007 decision of the
Court of Appeals which held petitioner Loadmasters Customs Services,
Inc. (Loadmasters) liable to respondent Glodel Brokerage Corporation (Glodel) in the
amount of P1,896,789.62 representing the insurance indemnity which R&B Insurance
Corporation (R&B Insurance) paid to the insured-consignee, Columbia Wire and Cable
Corporation (Columbia).
FACTS
On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor
of Columbia to insure the shipment of 132 bundles of electric copper cathodes against All
Risks. On August 28, 2001, the cargoes were shipped on board the vessel Richard Rey
from Isabela, Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the cargoes
from the pier and the subsequent delivery to its warehouses/plants. Glodel, in turn,
engaged the services of Loadmasters for the use of its delivery trucks to transport the
cargoes to Columbias warehouses/plants in Bulacan and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by its
employed drivers and accompanied by its employed truck helpers. Six (6) truckloads of
copper cathodes were to be delivered to Balagtas, Bulacan, while the other six (6)
truckloads were destined for Lawang Bato, Valenzuela City. The cargoes in six truckloads
for Lawang Bato were duly delivered in Columbias warehouses there. Of the six (6) trucks
en route to Balagtas, Bulacan, however, only five (5) reached the destination. One (1)
truck, loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo.
Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered but without the
copper cathodes. Because of this incident, Columbia filed with R&B Insurance a claim for
insurance indemnity in the amount of P1,903,335.39. After the requisite investigation and
adjustment, R&B Insurance paid Columbia the amount of P1,896,789.62 as insurance
indemnity.
third person; (3) the agent acts as a representative and not for himself; (4) the agent acts
within the scope of his authority.
Accordingly, there can be no contract of agency between the
parties. Loadmasters never represented Glodel. Neither was it ever authorized to make
such representation. It is a settled rule that the basis for agency is representation, that is,
the agent acts for and on behalf of the principal on matters within the scope of his
authority and said acts have the same legal effect as if they were personally executed by
the principal. On the part of the principal, there must be an actual intention to appoint or
an intention naturally inferable from his words or actions, while on the part of the agent,
there must be an intention to accept the appointment and act on it. Such mutual intent is
not obtaining in this case.

R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and
Glodel before the Regional Trial Court, Branch 14, Manila (RTC), docketed as Civil Case No.
02-103040. It sought reimbursement of the amount it had paid to Columbia for the loss of
the subject cargo. It claimed that it had been subrogated to the right of the consignee to
recover from the party/parties who may be held legally liable for the loss.
ACTION OF THE COURT
Regional Trial Court rendered a decision holding Glodel liable for damages for the loss of
the subject cargo and dismissing Loadmasters counterclaim for damages and attorneys
fees against R&B Insurance.
SUPREME COURT RULING
WHEREFORE, judgment is rendered declaring petitioner Loadmasters Customs Services,
Inc. and respondent Glodel Brokerage Corporation jointly and severally liable to
respondent R&B Insurance Corporation for the insurance indemnity it paid to consignee
Columbia Wire & Cable Corporation and ordering both parties to pay, jointly and
severally, R&B Insurance Corporation a] the amount of P1,896,789.62 representing the
insurance indemnity; b] the amount equivalent to ten (10%) percent thereof for attorneys
fees; and c] the amount of P22,427.18 for litigation expenses.

Court of Appeals held that Loadmasters is likewise held liable to Glodel in the amount
of P1,896,789.62 representing the insurance indemnity Glodel has been held liable to R&B
Insurance Corporation, considering that Loadmasters is an agent of Glodel.

Hence, this petition.

ISSUE/s of the CASE

Whether Loadmasters be legally considered as an Agent of respondent Glodel?

COURT RATIONALE ON THE ABOVE CASE

No. There exists no principal-agent relationship between Glodel and
Loadmasters, as erroneously found by the CA. Article 1868 of the Civil Code provides: 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 a 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
ESSENTIAL REQUISITES/ELEMENTS OF AGENCY (Week No. 6)
G.R. No. 151319             November 22, 2004
MANILA MEMORIAL PARK CEMETERY, INC., petitioner,  payment, it allowed her to continue to receive postdated checks from Atty. Linsangan,
vs.
PEDRO L. LINSANGAN, respondent.
BRIEF: This is a petition for review assailing the Decision of the Court of Appeals dated 22
June 2001, and its Resolution dated 12 December 2001 in CA G.R. CV No. 49802 entitled
"Pedro L. Linsangan v. Manila Memorial Cemetery, Inc. et al.," finding Manila Memorial
Park Cemetery, Inc. (MMPCI) jointly and severally liable with Florencia C. Baluyot to
respondent Atty. Pedro L. Linsangan.
FACTS:
Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the Holy
Cross Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former owner
of a memorial lot under Contract No. 25012 was no longer interested in acquiring the lot
and had opted to sell his rights subject to reimbursement of the amounts he already paid.
The contract was for P95,000.00. Baluyot reassured Atty. Linsangan that once
reimbursement is made to the former buyer, the contract would be transferred to him.
Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the amount to be
reimbursed to the original buyer and to complete the down payment to MMPCI. Baluyot
issued handwritten and typewritten receipts for these payments. Baluyot verbally advised
Atty. Linsangan that Contract No. 28660 was cancelled for reasons the latter could not
explain, and presented to him another proposal for the purchase of an equivalent
property. He refused the new proposal and insisted that Baluyot and MMPCI honor their
undertaking. For the alleged failure of MMPCI and Baluyot to conform to their agreement,
Atty. Linsangan filed a Complaint for Breach of Contract and Damages against the former.
For its part, MMPCI alleged that Contract No. 28660 was cancelled conformably with the
terms of the contract because of non-payment of arrearages. MMPCI stated that Baluyot
was not an agent but an independent contractor, and as such was not authorized to
represent MMPCI or to use its name except as to the extent expressly stated in the
Agency Manager Agreement.
ISSUE: Whether or not a contract of agency exists between Baluyot and MMPCI.
 
ACTIONS OF THE COURT:
RTC: The trial court held MMPCI and Baluyot jointly and severally liable. 13 It found that
Baluyot was an agent of MMPCI and that the latter was estopped from denying this
agency, having received and enchased the checks issued by Atty. Linsangan and given to it
by Baluyot. While MMPCI insisted that Baluyot was authorized to receive only the down
which it in turn consistently encashed.14
CA: The Court of Appeals affirmed the decision of the trial court. It upheld the trial court's
finding that Baluyot was an agent of MMPCI at the time the disputed contract was
entered into, having represented MMPCI's interest and acting on its behalf in the dealings
with clients and customers.
Hence, MMPCI is considered estopped when it allowed Baluyot to act and represent
MMPCI even beyond her authority. 20 The appellate court likewise found that the acts of
Baluyot bound MMPCI when the latter allowed the former to act for and in its behalf
and stead. While Baluyot's authority "may not have been expressly conferred upon her,
the same may have been derived impliedly by habit or custom, which may have been an
accepted practice in the company for a long period of time." 21 Thus, the Court of Appeals
noted, innocent third persons such as Atty. Linsangan should not be prejudiced where the
principal failed to adopt the needed measures to prevent misrepresentation.
Furthermore, if an agent misrepresents to a purchaser and the principal accepts the
benefits of such misrepresentation, he cannot at the same time deny responsibility for
such misrepresentation.
MMPCI filed its Motion for Reconsideration, but the same was denied for lack of merit.
SC: We find for the petitioner MMPCI. Decisions of CA and RTC are hereby REVERSED AND
SET ASIDE.
RULING: 
Yes. 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.33 Thus, the elements of agency are (i) consent, express or implied, of the parties to
establish the relationship; (ii) the object is the execution of a juridical act in relation to a
third person; (iii) the agent acts as a representative and not for himself; and (iv) the agent
acts within the scope of his authority. 34
In an attempt to prove that Baluyot was not its agent, MMPCI pointed out that under its
Agency Manager Agreement; an agency manager such as Baluyot is considered an
independent contractor and not an agent. 35However, in the same contract, Baluyot as
agency manager was authorized to solicit and remit to MMPCI offers to purchase
interment spaces belonging to and sold by the latter. 36 Notwithstanding the claim of EUROTECH INDUSTRIAL TECHNOLOGIES, INC.,
MMPCI that Baluyot was an independent contractor, the fact remains that she was
authorized to solicit solely for and in behalf of MMPCI. As properly found both by the - versus -
trial court and the Court of Appeals, Baluyot was an agent of MMPCI, having
represented the interest of the latter, and having been allowed by MMPCI to represent EDWIN CUIZON and ERWIN CUIZON,
it in her dealings with its clients/prospective buyers.
G.R. No. 167552
Nevertheless, contrary to the findings of the Court of Appeals, MMPCI cannot be bound
by the contract procured by Atty. Linsangan and solicited by Baluyot.
Nature:

Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces
obtained on forms provided by MMPCI. The terms of the offer to purchase, therefore, are
Before Us is a petition for review by certiorari  assailing the Decision of the Court of
contained in such forms and, when signed by the buyer and an authorized officer of
Appeals dated 10 August 2004 and its Resolution dated 17 March 2005 in CA-G.R. SP No.
MMPCI, becomes binding on both parties.
71397 entitled, Eurotech Industrial Technologies, Inc. v. Hon. Antonio T. Echavez. The
assailed Decision and Resolution affirmed the Order dated 29 January 2002 rendered by
Judge Antonio T. Echavez ordering the dropping of respondent EDWIN Cuizon (EDWIN) as
Dispositive portion: WHEREFORE, the instant petition is GRANTED. The Decision of the
a party defendant in Civil Case No. CEB-19672.
Court of Appeals dated 22 June 2001 and its Resolution dated 12 December 2001 in CA-
G.R. CV No. 49802, as well as the Decision in Civil Case No. 88-1253 of the Regional Trial
Court, Makati City Branch 57, are hereby REVERSED and SET ASIDE. The Complaint  in Civil
FACTS:
Case No. 88-1253 is DISMISSED for lack of cause of action. No pronouncement as to costs.
From January to April 1995, petitioner sold to Impact Systems various products allegedly
amounting to P91,338.00 pesos. Subsequently, respondents sought to buy from petitioner
one unit of sludge pump valued at P250,000.00 with respondents making a down
payment of P50,000.00.  When the sludge pump arrived from the United Kingdom,
petitioner refused to deliver the same to respondents without their having fully settled
their indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto
de Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in
favor of petitioner. Impact systems is owed by ERWIN Cuizon.

Despite the existence of the Deed of Assignment, respondents proceeded to collect from
Toledo Power Company the amount of P365,135.29.  Alarmed by this development,
petitioner made several demands upon respondents to pay their obligations. As a result,
respondents were able to make partial payments to petitioner. On 7 October 1996,
petitioner's counsel sent respondents a final demand letter wherein it was stated that as
of 11 June 1996, respondents' total obligations stood at P295,000.00 excluding interests
and attorney's fees.  Because of respondents' failure to abide by said final demand letter,
petitioner instituted a complaint for sum of money, damages, with application for
preliminary attachment against herein respondents

Nature, concept and purpose of agency By way of special and affirmative defenses, respondent EDWIN alleged that he is not a
real party in interest in this case. According to him, he was acting as mere agent of his
principal, which was the Impact Systems, in his transaction with petitioner and the latter
was very much aware of this fact.
Issue:
Whether respondent Edwin Cuizon, as agent of Impact System sales is not personally
liable because he has neither acted beyond the scope of his agency nor did he participate
in the perpetuation of a fraud.
Actions of the courts:
RTC- Ordered the dropping of the defendant Edwin Cuizon as party defendant.
CA- Affirmed the decision of the RTC.
SC- Petition denied, affirms the order of the RTC.
Rationale:
 In a contract of agency, a person binds himself to render some service or to do something
in representation or on behalf of another with the latters consent. 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 like selling, buying, manufacturing, and transporting. Its
purpose is to extend the personality of the principal or the party for whom another acts
and from whom he or she derives the authority to act. It is said that the basis of agency is
representation, that is, the agent acts for and on behalf of the principal on matters within
the scope of his authority and said acts have the same legal effect as if they were
personally executed by the principal. By this legal fiction, the actual or real absence of the
principal is converted into his legal or juridical presence  qui facit per alium facit per se.
 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; (4) the agent
acts within the scope of his authority.
In this case, the parties do not dispute the existence of the agency relationship between
respondents ERWIN as principal and EDWIN as agent. The only cause of the present
dispute is whether respondent EDWIN exceeded his authority when he signed the Deed of
Assignment thereby binding himself personally to pay the obligations to
petitioner. Petitioner firmly believes that respondent EDWIN acted beyond the authority
granted by his principal and he should therefore bear the effect of his deed pursuant to
Article 1897 of the New Civil Code. The court disagrees on this matter.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not
personally liable to the party with whom he contracts. The same provision, however,
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. We hold that respondent EDWIN does not
fall within any of the exceptions contained in this provision.
We likewise take note of the fact that in this case, petitioner is seeking to recover both
from respondents ERWIN, the principal, and EDWIN, the agent. It is well to state here that
Article 1897 of the New Civil Code upon which petitioner anchors its claim against
respondent EDWIN does not hold that in case of excess of authority, both the agent and
the principal are liable to the other contracting party. To reiterate, the first part of Article
1897 declares that the principal is liable in cases when the agent acted within the bounds
of his authority. Under this, the agent is completely absolved of any liability. The second
part of the said provision presents the situations when the agent himself becomes liable
to a third party when he expressly binds himself or he exceeds the limits of his authority
without giving notice of his powers to the third person. However, 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.
 
As we declare that respondent EDWIN acted within his authority as an agent, who did not
acquire any right nor incur any liability arising from the Deed of Assignment, it follows
that he is not a real party in interest who should be impleaded in this case. A real party in
interest is one who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit.In this respect, we sustain his exclusion as a
defendant in the suit before the court a quo.
SC RULING:
WHEREFORE, premises considered, the present petition is DENIED and the Decision
dated 10 August 2004 and Resolution dated 17 March 2005 of the Court of Appeals in CA-
G.R. SP No. 71397, affirming the Order dated 29 January 2002 of the Regional Trial Court,
Branch G.R. No. 130148. December 15, 1997 . SECOND DIVISION . REGALADO
Doctrine:
Elements of Agency
 Whether or not the CA erred in ruling that the petitioners are not agents of the
In a contract of agency, one binds oneself to render some service or to do something in respondents.
representation or on behalf of another, with the latter’s consent or authority;
ACTION OF THE COURT
Declarations of agents alone are generally insufficient to establish the fact or extent of RTC: In favor of Bartolome
their authority. CA: Affirmed.
SC: Affirmed

Tuazon vs. Heirs of Ramos

COURT RATIONALE ON THE ABOVE CASE
MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P. TUAZON, Spouses ANASTACIO and
No. The petition is unmeritorious.
MARY T. BUENAVENTURA, Petitioners,
vs.
In a contract of agency, one binds oneself to act as the representative of another with the
HEIRS OF BARTOLOME RAMOS, Respondents.
latter’s authority or consent. Since the basis of agency is representation, there must be an
actual intention on the part of the principal to appoint and an intention on the part of the
G.R. No. 156262
agent to accept the appointment and act on it. Absent such mutual intent, there is
July 14, 2005
generally no agency. The declarations of the agents alone are insufficient to establish the
Ponente: PANGANIBAN, J.:
fact or extent of their authority. The burden to prove the existence of agency lies on the
person alleging it which in the present case, the petitioners failed to do so by their
actions. The petitioners filed a suit against Evangeline Santos for the dishonored checks
NATURE OF CASE on their own names. This act on their part negates their claim that they were acting as
mere agents for Ramos. If, as they claim, they were mere agents of respondent, they
PETITION for review on certiorari of a decision of the Court of Appeals. instead should have filed the suit on behalf of their alleged principal in accordance with
Section 2 of Rule 3 of the Rules on Civil Procedure.

SUPREME COURT RULING

FACTS

Respondents alleged that on certain dates, spouses Maria and Leonilo Tuazon purchased WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
cavans of rice from their predecessor-in-interest, Bartolome Ramos. Only a portion of the petitioners.
purchased cavans of rice was paid. The checks that spouses Tuazon issued for payment of
the unpaid portion were dishonored. Respondents alleged that since spouses Tuazon
anticipated that they would be sued, they made fictitious sales of their properties. For
their defense, spouses Tuazon denied buying from Bartolome and that it was his wife,
Magdalena, who they bought the product from. They alleged that Maria was Magdalena’s
agent, and they argued that the real buyer of the cavans of rice was Evangeline Santos.
According to them, it was Evangeline who issued the checks and that Maria received
these checks in good faith before indorsing them over to Ramos.

ISSUE/s of the CASE

Week 7
Essential Requisite/Elements (Art. 1318) of Agency
It is a settled rule that persons dealing with an assumed agent are bound at their peril, if
they would hold the principal liable,to ascertain not only the fact of agency but also the
nature and extent of authority, and in case either is controverted, the burden of proof is
upon them to establish it.
YU ENG CHO VS. PAN AMERICAN
SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners,
vs.
PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLD SERVICES, INC., JULIETA
CANILAO and CLAUDIA TAGUNICAR, respondents.
G.R. No. 123560
March 27, 2000
Puno, J:
NATURE OF CASE
PETITION for review on certiorari of a decision of the Court of Appeals.
BRIEF
This petition for review seeks a reversal of the 31 August 1995 Decision1 and 11 January
1998 Resolution2 of the Court of Appeals holding private respondent Claudia Tagunicar
solely liable for moral and exemplary damages and attorney’s fees, and deleting the trial
court’s award for actual damages.
FACTS
Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. In connection
with business, he travels from time to time to Malaysia, Taipei and Hongkong. Plaintiffs
bought plane tickets from defendant Tagunicar who represented herself to be an agent of
defendant Tourist World Services, Inc. (TWSI). The destinations are Hongkong, Tokyo, San
Francisco, U.S.A., for the amount of P25,000 per computation of said defendant
Tagunicar. The purpose of this trip is to go to Fairfield, New Jersey, U.S.A. to buy 2 lines of
infrared heating system processing textured plastic article.
Only the passage from Manila to Hongkong, then to Tokyo, were confirmed. Flight 002
from Tokyo to San Francisco was on “RQ” status, meaning “on request.” Per instruction of
Tagunicar, plaintiffs returned after a few days for the confirmation of the Tokyo-San
Francisco segment of the trip. After calling up Canilao of TWSI, defendant Tagunicar told
plaintiffs that their flight is now confirmed all the way. Thereafter, she attached the
confirmation stickers on the plane tickets. Plaintiffs left for Hongkong Upon their arrival in
Tokyo, they called up Pan-Am office for reconfirmation of their flight to San Francisco.
Said office, however, informed them that their names are not in the manifest.
In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises, Inc.
cancelled Yu Eng Cho’s option to buy the two lines of infra-red heating system. The
agreement was for him to inspect the equipment and make final arrangements with the
said company. From this business transaction, plaintiff Yu Eng Cho expected to realize a
profit of P300,000 to P400,000.
Canilao denied having confirmed the Tokyo-San Francisco segment of plaintiffs’ flight
because flights then were really tight because of the on-going strike at Northwest Airlines.
Neither TWSI nor Pan-Am confirmed the flight and never authorized Tagunicar to attach
the confirmation stickers. In fact, the confirmation stickers used by defendant Tagunicar
are stickers exclusively for use of Pan-Am only.
A complaint for damages was filed by petitioners against private respondents Pan
American ‘World Airways, Inc. (Pan Am), Tourist World Services, Inc. (TWSI), Julieta
Canilao (Canilao), and Claudia Tagunicar (Tagunicar) for expenses allegedly incurred such
as costs of tickets and hotel accommodations when petitioners were compelled to stay in
Hongkong and then in Tokyo by reason of the non-confirmation of their booking with Pan-
Am.
ISSUE/s of the CASE
Whether Tagunicar is an independent travel solicitor and not a duly authorized agent or
representative of either Pan Am or TWSI.
ACTION OF THE COURT
RTC: Held the defendants jointly and severally liable, except Canilao.
CA: Rendered judgment modifying the amount of damages awarded, holding private
respondent Tagunicar solely liable therefor, and absolving respondents Pan Am and TWSI
from any and all liability. Tagunicar is an independent travel solicitor and is not a duly
authorized agent or representative of either Pan Am or TWSI.
SC: CA judgment affirmed.
COURT RATIONALE ON THE ABOVE CASE
No. 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; (4) the agent acts
within the scope of his authority. It is a settled rule that persons dealing with an assumed
agent are bound at their peril, if they would hold the principal liable, to ascertain not only G.R. No. 76931             May 29, 1991
the fact of agency but also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to establish it. There is nothing in the ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner, 
records to show that respondent Tagunicar has been employed by Pan Am as its agent. vs.
COURT OF APPEALS and AMERICAN AIR-LINES INCORPORATED, respondents.
The declarations of the agent alone are generally insufficient to establish the fact or
extent of his authority. In addition, as between the negative allegation of respondents
G.R. No. 76933             May 29, 1991
Canilao and Tagunicar that neither is an agent nor principal of the other, and the
affirmative allegation of petitioners that an agency relationship exists, it is the latter who
have the burden of evidence to prove their allegation, failing in which, their claim must AMERICAN AIRLINES, INCORPORATED, petitioner, 
necessarily fail. vs.
COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL REPRESENTATIVES,
SUPREME COURT RULING INCORPORATED,respondents.

WHEREFORE, the decision appealed from is hereby AFFIRMED. Cost against petitioners. Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service and Hotel
Representatives, Inc.
SO ORDERED. Sycip, Salazar, Hernandez & Gatmaitan for American Airlines, Inc.

Ponente: PADILLA, J.
_________________________________________________________________________
_______

NATURE OF THE CASE

Appeal
BRIEF

This case is a consolidation of two (2) petitions for review on certiorari of a

decision1 of the Court of Appeals in CA-G.R. No. CV-04294, entitled "American Airlines,
Inc. vs. Orient Air Services and Hotel Representatives, Inc." which affirmed, with
modification, the decision2 of the Regional Trial Court of Manila, Branch IV, which
dismissed the complaint and granted therein defendant's counterclaim for agent's
overriding commission and damages.

FACTS
On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American
Air), an air carrier offering passenger and air cargo transportation in the Philippines, and
Orient Air Services and Hotel Representatives (hereinafter referred to as Orient Air),
entered into a General Sales Agency Agreement (hereinafter referred to as the
Agreement), whereby the former authorized the latter to act as its exclusive general sales
agent within the Philippines for the sale of air passenger transportation.
 On 11 May 1981, American Air by itself undertook the collection of the proceeds
of tickets sold originally by Orient Air alleging that Orient Air had reneged on its
obligations under the Agreement by failing to promptly remit the net proceeds of sales for
the months of January to March 1981 in the amount of US $254,400.40, and terminated
forthwith the Agreement.
Court of Appeals
AFFIRMED the findings of the court a quo on their material points but
with some modifications with respect to the monetary awards granted.

Complaint (Plaintiff – American Air):

Motion for Reconsideration (PLAINTIFF)
American Air instituted suit against Orient Air with the Court of First
Instance of Manila, Branch 24, for Accounting with Preliminary Attachment or Assailing the substance thereof and arguing for its reversal.
Garnishment, Mandatory Injunction and Restraining Order averring the aforesaid
basis for the termination of the Agreement as well as therein defendant's
DENIED
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
Partial Motion for Reconsideration (DEFENDANT)
and prejudice of plaintiff."

Answer with counterclaim(Defendant – Orient Air):
Defendant Orient Air denied the material allegations of the complaint
with respect to plaintiff's entitlement to alleged unremitted amounts, contending
that after application thereof to the commissions due it under the Agreement,
plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions.
Further, the defendant contended that the actions taken by American
Air in the course of terminating the Agreement as well as the termination itself
were untenable, Orient Air claiming that American Air's precipitous conduct had
occasioned prejudice to its business interests.
ACTION OF THE COURT
Regional Trial Court
Ruled in FAVOR of DEFENDANT
termination made by the plaintiff as affecting the GSA
agreement is illegal and improper and order the plaintiff to reinstate
defendant as its general sales agent for passenger tranportation in the
Philippines in accordance with said GSA agreement;
pay balance and damages
prayed for the restoration of the trial court's ruling with respect to the
monetary awards.
DENIED: affirmation of trial court’s monetary award.
GRANTED: rate of exchange should be equivalent to Philippine
Peso
Both parties appealed the aforesaid resolution and decision of the respondent
court, Orient Air as petitioner in G.R. No. 76931 and American Air as petitioner in G.R. No.
76933. By resolution10 of this Court dated 25 March 1987 both petitions were
consolidated, hence, the case at bar.
ISSUES
The principal issue for resolution by the Court is the extent of Orient Air's right to the 3%
overriding commission. It is the stand of American Air that such commission is based only
on sales of its services actually negotiated or transacted by Orient Air, otherwise referred
to as "ticketed sales." As basis thereof, primary reliance is placed upon paragraph 5(b) of
the Agreement which, in reiteration, is quoted as follows:
In addition to the above commission, American will pay Orient Air Services an
overriding commission of 3% of the tariff fees and charges for all sales of
transportation over American's services by Orient Air Services or itssub-
agents. (Emphasis supplied)
SUPREME COURT RULING
It is a well settled legal principle that in the interpretation of a contract, the
entirety thereof must be taken into consideration to ascertain the meaning of its
provisions. The various stipulations in the contract must be read together to give effect to
all.
 After a careful examination of the records, the Court finds merit in the
contention of Orient Air that the Agreement, when interpreted in accordance with the
foregoing principles, entitles it to the 3% overriding commission based on total revenue,
or as referred to by the parties, "total flown revenue."
Any ambiguity in a contract, whose terms are susceptible of different
interpretations, must be read against the party who drafted it.
SUPREME COURT DECISION
WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision and
resolution of the respondent Court of Appeals, dated 27 January 1986 and 17 December
1986, respectively. Costs against petitioner American Air.
SO ORDERED.

AAs the designated exclusive General Sales Agent of American Air, Orient Air was
responsible for the promotion and marketing of American Air's services for air passenger
transportation, and the solicitation of sales therefor. In return for such efforts and
services, Orient Air was to be paid commissions of two (2) kinds: first, a sales agency
commission, ranging from 7-8% of tariff fares and charges from sales by Orient Air when
made on American Air ticket stock; and second, an overriding commission of 3% of tariff
fares and charges for all sales of passenger transportation over American Air services. It is
immediately observed that the precondition attached to the first type of commission does
not obtain for the second type of commissions. The latter type of commissions would
accrue for sales of American Air services made not on its ticket stock but on the ticket
stock of other air carriers sold by such carriers or other authorized ticketing facilities or
travel agents. To rule otherwise, i.e., to limit the basis of such overriding commissions to
sales from American Air ticket stock would erase any distinction between the two (2)
types of commissions and would lead to the absurd conclusion that the parties had
entered into a contract with meaningless provisions. Such an interpretation must at all
times be avoided with every effort exerted to harmonize the entire Agreement.

An additional point before finally disposing of this issue. It is clear from the records that
American Air was the party responsible for the preparation of the Agreement.
Consequently, any ambiguity in this "contract of adhesion" is to be taken "contra
proferentem", i.e., construed against the party who caused the ambiguity and could have
avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code
provides that the interpretation of obscure words or stipulations in a contract shall not
favor the party who caused the obscurity. To put it differently, when several
interpretations of a provision are otherwise equally proper, that interpretation or
construction is to be adopted which is most favorable to the party in whose favor the
provision was made and who did not cause the ambiguity. We therefore agree with the
respondent appellate court's declaration that:
JOSE BORDADOR and LYDIA BORDADOR, petitioners,
vs.
BRIGIDA D. LUZ, ERNESTO M. LUZ and NARCISO DEGANOS, respondents.
_____________________________________________________________
BRIEF:
Appeal by certiorari, petitioners assail the judgment of the CA affirming the adjudication
of the Regional Trial Court of Malolos, Bulacan which found private respondent Narciso
Deganos liable to petitioners for actual damages, but absolved respondent spouses
Brigida D. Luz and Ernesto M. Luz of liability. Petitioners likewise belabor the subsequent
resolution of the Court of Appeals which denied their motion for reconsideration of its
challenged decision.
FACTS:
Petitioners Bordador spouses were engaged in the business of purchase and sale of
jewelry, while respondent Brigida Luz was their regular customer. Respondent Narciso
Deganos, Luz's brother, received several piecesof jewelry from the Bordadors amounting
to P382,816.00, which items were indicated in 17 receipts covering the same--11 of the
receipts stated that they were received by Deganos for a certain Evelyn Aquino, while the
remaining 6indicated that they were received by Deganos for Luz.
Deganos was supposed to sell the items at a profit and remit the proceeds and return the
unsold items to the Bordadors. Deganos remitted only P53,207.00. He neither paid the
balance of the sales proceeds, nor did he return any unsold item to the Bordadors, which
led them to file an action for recovery of a sum of money and damages against Deganos
and Luz with the RTC. The Bordadors claimed thatDeganos acted as the agent of Luz when
he received the items of jewelry, and because he failed to pay for the same, Luz, as
principal, became solidarily liable with him.
Deganos asserted that it was he alone who was involved in the transaction with
the Bordadors; that he neither acted as agent for nor was he authorized to act as an agent
by Luz, notwithstanding the fact that 6 of the receipts indicated that the items were
received by him for Luz. He added that he never delivered any of the items to Luz. Luz
corroborated the claims of Deganos.
The RTC found that only Deganos was liable to the Bordados. It further found that it was
petitioner Lydia Bordador who indicated in the receipts that the items were received by
Deganos for Evelyn Aquino and for Luz. It said that it was "persuaded that Brigida D. Luz
was behind Deganos," but because there was no memorandum to this effect, the
agreement between the parties was unenforceable under the Statute of Frauds. Absent
the required memorandum or any written document connecting Luz with the subject
receipts or authorizing Deganos to act on her behalf, the alleged agreement between
the Bordadors and Luz was unenforceable.
The Bordadors elevated the case to the CA which affirmed said judgment, hence the
instant petition.
ISSUE:
Whether Luz is liable to the Bordadors for the latter's claim for money and damages
despite the fact that Luz did not sign any of the subject receipts or authorized Deganos to
receive the items of jewelry on her behalf
HELD:
No, Luz is not liable to the Bordadors.
The basis for agency isrepresentation. Here, there is no showing that Luz consented to the
acts ofDeganos or authorized him to act on her behalf, much less with respect to
theparticular transactions involved. The Bordadors' attempt to foist liability on Luzthrough
the supposed agency relation with Deganos is groundless and ill-advised.
Besides, it wasgrossly and inexcusably negligent of the Bordadors to entrust to Deganos,
notonce or twice but on at least 6 occasions as evidenced by 6 receipts, severalpieces of
jewelry of substantial value without requiring a written authorizationfrom his alleged
principal. A person dealing with an agent is put upon inquiryand must discover upon his
peril the authority of the agent
DISPOSITIE PORTION:
WHEREFORE, no error having been committed by the Court of Appeals in affirming the
judgment of the court a quo, its challenged decision and resolution are hereby AFFIRMED
and the instant petition is DENIED, with double costs against petitioners
Essential requisites/ elements
Agency; 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, while on the part of the agent, there must be an intention to accept the
appointment and act on it; One factor which most clearly distinguishes agency from other
legal concepts is control—one person (the agent) agreeing to act under the control or
direction of another (the principal).

An authorization given to another containing the phrase “for and in our behalf” does not
necessarily establish an agency, as ultimately, what is decisive is the intention of the
parties, and the use of the words “sold and endorsed” means that the parties intended a
contract of sale, and not an agency.
APEX VS. SOUTHEAST MINDANAO GOLD MINING CORP. (WEEK 7)
TOPIC: ESSENTIAL REQUISITES OF AGENCY/AGENCY VS. ASSIGNMENT
DOCTRINE:
Elements 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.
The concept of agency is distinct from assignment. In agency, the agent acts not on his
own behalf but on behalf of his principal. While in assignment, there is total transfer or
relinquishment of right by the assignor to the assignee.
APEX MINING CO., INC., BALITE COMMUNAL PORTAL MINING COOPERATIVE, and THE
MINES ADJUDICATION BOARD AND ITS MEMBERS, et al., petitioners,
vs.
SOUTHEAST MINDANAO GOLD MINING CORP., the mines adjudication board (MAB),
provincial mining regulatory board (PMRB-DAVAO), et al., respondents
---------------------------------------------------------------
G.R. No. No. 152613 & No. 152628, 152619-20 & 152870-71
June 23, 2006
Ponente: CHICO-NAZARIO, J.:
Nature of Case:
Petition for review
Brief:
This is an instant Petitions for Review on Certiorari under Rule 45 of the Rules of Court
filed by Apex, Balite and MAB of the Court of Appeals Decision in upholding the validity
and continuous existence of EP 133.
Facts:

The case involves the “Diwalwal Gold Rush Area” (Diwalwal), a rich tract of mineral land
located inside the Agusan-Davao-Surigao Forest Reserve in Davao del Norte and Davao
Oriental.
On March 10, 1986, Marcopper Mining Corporation (MMC) was granted an Exploration
Permit (EP 133) by the Bureau of Mines and Geo-Sciences (BMG). A long battle ensued
between Apex and MMC with the latter seeking the cancellation of the mining claims of
Apex on the ground that such mining claims were within a forest reservation and thus the
acquisition on mining rights should have been through an application for a permit to
prospect with the Bureau of Forest Development (BFD) and not through registration of a
DOL with the BMG. When it reached the SC in 1991, the Court ruled against Apex holding
that the area is a forest reserve and thus it should have applied for a permit to prospect
with the BFD.
On February 16 1994, MMC assigned all its rights to EP 133 to Southeast Mindanao Gold
Mining Corporation (SEM), a domestic corporation which is alleged to be a 100%-owned
subsidiary of MMC. Subsequently, BMG registered SEM’s Mineral Production Sharing
Agreement (MPSA) application and the Deed of Assignment. Several oppositions were
filed. The Panel of Arbitrators created by the DENR upheld the validity of EP 133.
Undaunted by the PA ruling, the adverse claimants appealed to the Mines Adjudication
Board (MAB). In a Decision dated 6 January 1998, the MAB considered erroneous the
dismissal by the PA of the adverse claims filed against MMC and SEM over a mere
technicality of failure to submit a sketch plan. It argued that the rules of procedure are
not meant to defeat substantial justice as the former are merely secondary in importance
to the latter. The decision of the Panel of Arbitrators is hereby VACATED and a new one
entered in the records of the case. Dissatisfied, SEM appealed to the Court of Appeals.
Action of the Court/s:
Court of Appeals- upheld the decision of the PA of DENR banking on the premise that the
SEM is the agent of MMC and therefore the transfer of EP 133 was valid. That SEM did not
violate the condition #6 in the EP 133 stating that the permit shall be for the exclusive use
and benefit of the permittee or his duly authorized agents and shall be used for mineral
exploration purposes only and for no other purpose.
SC- reversed the decision of CA. It ruled that SEM is not an agent of MMC. Therefore,
transfer to non-agent is violate of the terms and condition #6 of the EP.
Issues:
Whether or not SEM is an agent of MMC to warrant the valid transfer of EP 133.
Rationale:
Condition number 6 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, records are bereft of any evidence
showing that the former is the duly authorized agent of the latter. For a contract of
agency to exist, it is essential that the principal consents that the other party, the agent,
shall act on its behalf, and the agent consents so as to act. SEM did not claim nor submit
proof that it is the designated agent of MMC to represent the latter in its business
dealings or undertakings. SEM cannot, therefore, be considered as an agent of MMC
which can use EP 133 and benefit from it. 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.
Furthermore, the concept of agency is distinct from assignment. In agency, the agent acts
not on his own behalf but on behalf of his principal. While 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.
The Court did not lend recognition to the Court of Appeals’ theory that SEM, being a 100%
subsidiary of MMC, is automatically an agent of MMC.
Supreme Court Ruling:
The Court hereby REVERSES and SETS ASIDE the Decision of the Court of Appeals, dated
13 March 2002, 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.
VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF APPEALS and CONSOLIDATED
SUGAR CORPORATION, respondents.
333 SCRA 663 | G.R. No. 117356
June 19, 2000
Ponente: QUISUMBING, J.
NATURE OF CASE
PETITION for review on certiorari of a decision of the Court of Appeals.
BRIEF
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the decision of the Court of Appeals dated February 24, 1994, in CA-G.R. CV No. 31717, as
well as the respondent court’s resolution of September 30, 1994 modifying said decision.
Both decision and resolution amended the judgment dated February 13, 1991, of the
Regional Trial Court of Makati City, Branch 147, in Civil Case No. 90-118.
FACTS
St. Therese Merchandising (STM) regularly bought sugar from petitioner Victorias Milling
Co., Inc., (VMC). In the course of their dealings, petitioner issued several Shipping
List/Delivery Receipts (SLDRs) to STM as proof of purchases. Dated October 16, 1989,
SLDR No. 1214M covers 25,000 bags of sugar where each bag contained 50 kilograms and
priced at P638.00 per bag. The transaction it covered was a direct sale and also contains
an additional note which reads: “subject for (sic) availability of a (sic) stock at NAWACO
(warehouse).”
STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in SLDR
No. 1214M for P14,750,000.00. That same day, CSC wrote petitioner that it had been
authorized by STM to withdraw the sugar. Enclosed in the letter were a copy of SLDR No.
1214M and a letter of authority from STM authorizing CSC to withdraw for and in our
behalf the refined sugar covered by Shipping List/Delivery Receipt-Refined Sugar (SDR)
No. 1214 in the total quantity of 25,000 bags.
STM issued 16 checks in the total amount of P31,900,000.00 with petitioner as payee in
payment of 50,000 bags covering SLDR No. 1214M and SLDR No. 1213.
CSC surrendered SLDR No. 1214M to the petitioner’s NAWACO warehouse and was
allowed to withdraw sugar. However, after 2,000 bags had been released; petitioner
refused to allow further withdrawals of sugar against SLDR No. 1214M. CSC then inform ed
VMC that SLDR No. 1214M had been “sold and endorsed” to it but that it had been
refused further withdrawals of sugar from petitioner’s warehouse. Petitioner replied that
it could not allow any further withdrawals of sugar against SLDR No. 1214M because STM
had already withdrawn all the sugar covered by the cleared checks. CSC sent petitioner a
letter demanding the release of the balance of 23,000 bags. Seven days later, petitioner
reiterated that all the sugar corresponding to the amount of STM’s cleared checks had
been fully withdrawn and hence, there would be no more deliveries of the commodity to
STM’s account. Petitioner also noted that CSC had represented itself to be STM’s agent as
it had withdrawn the 2,000 bags against SLDR No. 1214M “for and in behalf” of STM.
CSC filed a complaint for specific performance against Defendants Teresita Ng Sy (doing
business under the name of St. Therese Merchandising) and herein petitioner to deliver
the 23,000 bags covered by SLDR No. 1214M. Since the former could not be served with
summons, the case proceeded only against the latter.
ISSUE/s of the CASE
Whether CSC was an agent of STM and hence, estopped to sue upon SLDR No. 1214M as
an assignee.
ACTION OF THE COURT
RTC’s Ruling
Trial court rendered its judgment favoring private respondent CSC
CA's Ruling
Affirmed the decision of the lower court and denied the motion for reconsideration. The
defendant-appellant failed to sufficiently establish the existence of an agency relation
between plaintiff-appellee and STM. The fact alone that it (STM) had authorized
withdrawal of sugar by plaintiff-appellee “for, and in our (STM’s) behalf should not be
eyed as pointing to the existence of an agency relation.
SC’s Ruling
Denied the petition
COURT RATIONALE ON THE ABOVE CASE
 WHEREFORE, the instant petition is DENIED for lack of merit. Costs against petitioner. SO
No, CSC was not STM’s agent. ORDERED.

The Court found from the records that petitioner raised this issue for the first time on
appeal. It is settled that an issue which was not raised during the trial in the court below
could not be raised for the first time on appeal as to do so would be offensive to the basic
rules of fair play, justice, and due process. Nonetheless, the Court of Appeals opted to
address this issue, hence, now a matter for our consideration.
Petitioner heavily relies upon STM’s letter of authority allowing CSC to withdraw sugar
against SLDR No. 1214M to show that the latter was STM’s agent. The Civil Code defines a
contract of agency as follows:
“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.”

It is clear from Article 1868 that the basis of agency is representation. On the part of the
principal, there must be an actual intention to appoint or an intention naturally inferable
from his words or actions; and on the part of the agent, there must be an intention to
accept the appointment and act on it, and in the absence of such intent, there is generally
no agency. One factor which most clearly distinguishes agency from other legal concepts
is control; one person—the agent—
agrees to act under the control or direction of another—the principal. Indeed, the very
word “agency” has come to connote control by the principal. The control factor, more
than any other, has caused the courts to put contracts between principal and agent in a
separate category.

In the instant case, it appears plain to us that private respondent CSC was a buyer of the
SLDFR form, and not an agent of STM. Private respondent CSC was not subject to STM’s
control. 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. That the authorization given to CSC contained the phrase “for and in our
(STM’s) behalf” did not establish an agency. Ultimately, what is decisive is the intention of
the parties. 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 STM and CSC
intended a contract of sale, and not an agency. Hence, on this score; no error was
committed by the respondent appellate court when it held that CSC was not STM’s agent
and could independently sue petitioner.

SUPREME COURT RULING

DOMINION VS. CA (WEEK 7) Facts:

TOPIC: ESSENTIAL REQUISITES OF AGENCY Mr. Guevarra filed a civil case for sum of money against Dominion Insurance Corp.
(Dominion) for the amount advanced by former in his capacity as manager of defendant
DOCTRINE: to satisfy certain claims filed by defendant’s client.

a. 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 basis for agency is representation. On the part of the principal, there
must be an actual intention to appoint or an intention naturally inferrable 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.
b. The principal is not liable for the expenses incurred by the agent in the following
cases:
The pre-trial was always postponed, and during one of the pre-trial conference dominion
failed to arrive therefore the court declared them to be in default. Dominion filed several
Motions to Lift Order of Default but was always denied by the court. The RTC rendered its
decision making Dominion liable to repay Mr. Guevarra for the sum advanced and other
damages and fees. Dominion appealed but CA affirmed the decision of RTC and denied
the appeal of Dominion.
Action of the Court/s:
RTC- rendered judgement against the petitioner, thereby ordering the petitioner to pay.

"(1) If the agent acted in contravention of the principal’s instructions, unless the latter CA- affirmed RTC’s decision
should wish to avail himself of the benefits derived from the contract;
SC- modify the CA’s decision as to the amount the petitioner is liable to pay.
"xxx xxx xxx"

DOMINION INSURANCE CORPORATION, petitioner,

vs. Issue(s):
COURT OF APPEALS, RODOLFO S. GUEVARRA, and FERNANDO AUSTRIA, respondents.
--------------------------------------------------------------- (1) Whether respondent Mr. Guevarra acted within his authority as agent for petitioner,
G.R. No. 2962 and
February 27, 1907 (2) Whether respondent Mr. Guevarra is entitled to reimbursement of amounts he paid
Ponente: PARDO, J.: out of his personal money in settling the claims of several insured.

Nature of Case: Rationale:

Appeal via Certiorari
(1) No. Mr. Guevarra violated the instructions enunciated in the Memorandum of
Brief:
This is an appeal via certiorari from the decision of the Court of Appeals affirming the
decision of the Regional Trial Court, Branch 44, San Fernando, Pampanga, which ordered
petitioner Dominion Insurance Corporation (Dominion) to pay Mr. Rodolfo S. Guevarra
(Mr. Guevarra) the sum of P156,473.90 representing the total amount advanced by Mr.
Guevarra in the payment of the claims of Dominion’s clients.
Management Agreement with respect to manner of payment of claims.
The Special Power of Attorney executed between Mr. Guevarra and the petitioner
corporation would show both parties intended to enter into a principal-agent
relationship. Despite the word "special" in the title of the document, the contents
revealed that what was constituted was actually a general agency.
A general power permits the agent to do all acts for which the law does not require a
special power. The payment of claims is not an act of administration. The settlement
 of claims is not included among the acts enumerated in the Special Power of
Attorney, neither is it of a character similar to the acts enumerated therein.

However, the Memorandum of Management Agreement between the same parties

authorized Mr. Guevarra to pay the claim of the insured, but the payment shall come
from the revolving fund or collection in his possession. Mr. Gueverra should not have
paid the insured through his own capacity.

(2) Yes. Not under the law of agency but under the law on obligation and contracts.
(3) Having deviated from the instructions of the principal, the expenses that respondent
Mr. Guevarra incurred in the settlement of the claims of the insured may not be
reimbursed from petitioner Dominion. This conclusion is in accord with Article 1918,
Civil Code, which states that:

"The principal is not liable for the expenses incurred by the agent in the following cases:

"(1) If the agent acted in contravention of the principal’s instructions, unless the
latter should wish to avail himself of the benefits derived from the contract;

“xxx xxx xxx

However, while the law on agency prohibits Mr. Guevarra from obtaining reimbursement,
his right to recover may still be justified under the general law on obligations and
contracts (solutio indebiti).

Article 1236, second paragraph, Civil Code, provides:

"Whoever pays for another may demand from the debtor what he has paid, except that if
he paid without the knowledge or against the will of the debtor, he can recover only
insofar as the payment has been beneficial to the debtor."

Supreme Court Ruling:

IN VIEW WHEREOF, the SC denied the Petition. However, it modified the decision of the
Court of Appeals as to the amount deducting the amount of revolving fund in possession
of Mr. Guevarra from the total amount he paid in his capacity.