MORTGAGE.

ANTICHRESIS
ATTY. REYAINE A. MENDOZA
 MORTGAGE
IS A CONTRACT WHEREBY THE DEBTOR SECURES TO THE CREDITOR
THE FULFILLMENT OF A PRINCIPAL OBLIGATION, IMMEDIATELY
MAKING IMMOVABLE PROPERTY OR REAL RIGHTS OVER IMMOVABLE
PROPERTY ANSWERABLE TO THE PRINCIPAL OBLIGATION IN CASE IT
IS NOT COMPLIED WITH AT THE TIME STIPULATED
 OBJECTS OF REAL MORTGAGE (ART. 2124)

1. IMMOVABLES
2. ALIENABLE REAL RIGHTS OVER IMMOVABLES
FUTURE PROPERTY CANNOT BE OBJECT OF MORTGAGE; HOWEVER, A STIPULATION SUBJECTING
TO THE MORTGAGE IMPROVEMENTS WHICH THE MORTGAGOR MAY SUBSEQUENTLY ACQUIRE,
INSTALL OR USE IN CONNECTION WITH REAL PROPERTY ALREADY
 KINDS OF MORTGAGE
1. VOLUNTARY – CONSTITUTED BY THE WILL OF THE OWNER OF THE PROPERTY ON WHICH IT
IS CREATED
2. LEGAL – REQUIRED BY LAW TO BE EXECUTED IN FAVOR OF CERTAIN PERSONS:
a. PERSONS IN WHOSE FAVOR THE LAW ESTABLISHES A MORTGAGE HAVE NO OTHER RIGHT THAN
TO DEMAND THE EXECUTION AND RECORDING OF THE DOCUMENT IN WHICH THE MORTGAGE IS
FORMALIZED (ARTICLE 2125)
b. THE BONDSMAN WHO IS TO BE OFFERED IN VIRTUE OF A PROVISION OF LAW OR OF A JUDICIAL
ORDER SHALL HAVE TO THE QUALIFICATIONS PRESCRIBED IN ART 2056 (INTEGRITY, CAPACITY TO
c. BIND HIMSELF, AND SUFFICIENT PROPERTY TO ANSWER THE OBLIGATION), AN IN OTHER LAWS
(ARTICLE 2082) IF THE PERSON BOUND TO GIVE A BOND SHOULD NOT BE ABLE TO DO SO, A
PLEDGE OR MORTGAGE CONSIDERED SUFFICIENT TO RECOVER HIS OBLIGATION SHALL BE
ADMITTED IN LIEU THEREOF (ARTICLE 2083)

3. EQUITABLE – ONE WHICH, ALTHOUGH LACKING THE PROPER FORMALITIES OF A

MORTGAGE, SHOWS THE INTENTION OF THE PARTIES TO MAKE THE PROPERTY AS A
SECURITY FOR A DEBT.
 ESSENTIAL REQUISITES OF MORTGAGE
1. CONSTITUTED TO SECURE THE FULFILLMENT OF A PRINCIPAL OBLIGATION.
2. MORTGAGOR MUST BE THE ABSOLUTE OWNER OF THE THING MORTGAGED.
3. THE PERSONS CONSTITUTING THE MORTGAGE HAVE FREE DISPOSAL OF THE PROPERTY; IN THE
ABSENCE THEREOF, THEY SHOULD BE LEGALLY AUTHORIZED FOR THE PURPOSE. (ARTICLE 2085)
4. CANNOT EXIST WITHOUT A VALID OBLIGATION. (ART. 2086 CF 2052)
5. WHEN THE PRINCIPAL OBLIGATION BECOMES DUE, THE THING IN WHICH THE MORTGAGE
CONSISTS MAY BE ALIENATED FOR PAYMENT TO THE CREDITOR. (ART. 2087)
6. MUST APPEAR IN A PUBLIC DOCUMENT DULY RECORDED IN THE REGISTRY OF PROPERTY, TO BE
VALIDLY CONSTITUTED. (ART. 2125)
- IN A LEGAL MORTGAGE, THE PERSONS IN WHOSE FAVOR THE LAW ESTABLISHES A
MORTGAGE HAVE THE RIGHT TO DEMAND THE EXECUTION AND RECORDING OF A
DOCUMENT FORMALIZING THE MORTGAGE. (ART. 2125, PAR. 2)
 EFFECTS
1. CREATES REAL RIGHTS, A LIEN INSEPARABLE FROM THE
PROPERTY MORTGAGED, ENFORCEABLE AGAINST THE
WHOLE WORLD.
2. CREATES MERELY AN ENCUMBRANCE.
 LAWS GOVERNING MORTGAGE

1. NEW CIVIL CODE.

2. PD 1952.
3. REVISED ADMINISTRATIVE CODE.
4. RA 4882, REGARDING ALIENS BECOMING MORTGAGEES
5. ACT 3135, AS AMENDED
6. PROPERTY REGISTRATION DECREE
7. GENERAL BANKING ACT OF 2000
 EFFECTS OF A MORTGAGE

1. IT CREATES A REAL RIGHT, A LIEN INSEPARABLE FROM THE PROPERTY

MORTGAGED
2. IF A PERSON IS THE FIRST MORTGAGEE OVER A PROPERTY SOLD IN AN
AUCTION SALE BY THE SECOND MORTGAGEE, THE ONLY RIGHT LEFT TO HIM
IS TO COLLECT HIS MORTGAGE CREDIT FROM THE PROCEEDS OF THE SALE
(BY VIRTUE OF MERGER OF RIGHTS, ART 1275).
3. THE FIRST MORTGAGEE HAS SUPERIOR RIGHTS OVER JUNIOR MORTGAGEES
/ ATTACHING CREDITORS
 IMPORTANT POINTS FOR MORTGAGE
1. AS A GENERAL RULE, THE MORTGAGOR RETAINS POSSESSION OF THE PROPERTY. HE MAY
DELIVER SAID PROPERTY TO THE MORTGAGEE WITHOUT ALTERING THE NATURE OF THE
CONTRACT OF MORTGAGE.
2. IT IS NOT AN ESSENTIAL REQUISITE THAT THE PRINCIPAL OF THE CREDIT BEARS INTEREST, OR THAT
THE INTEREST AS COMPENSATION FOR THE USE OF THE PRINCIPAL AND THE ENJOYMENT OF ITS
FRUITS BE IN THE FORM OF A CERTAIN PERCENTAGE THEREOF.
3. MORTGAGE CREATES AN ENCUMBRANCE OVER THE PROPERTY, BUT OWNERSHIP OF THE
PROPERTY IS NOT PARTED WITH. IT MERELY RESTRICTS THE MORTGAGOR’S JUS DISPONENDI
OVER THE PROPERTY. THE MORTGAGOR MAY STILL SELL THE PROPERTY, AND ANY STIPULATION
TO THE CONTRARY IS VOID (ART. 2130)
4. MORTGAGE EXTENDS TO THE NATURAL ACCESSIONS, TO THE IMPROVEMENTS OF GROWING
FRUITS AND THE RENTS OR INCOME NOT YET RECEIVED WHEN THE OBLIGATION BECOMES DUE,
INCLUDING INDEMNITY FROM INSURANCE, AND / OR AMOUNT RECEIVED FROM EXPROPRIATION
FOR PUBLIC USE (ART. 2127)
 IMPORTANT POINTS FOR MORTGAGE
REGISTRATION – MINISTERIAL ACT BY WHICH DEED, CONTRACT OR INSTRUMENT IS SOUGHT TO
BE INSCRIBED IN THE OFFICE OF THE REGISTER OF DEEDS AND ANNOTATED AT THE BACK OF THE
CERTIFICATE OF TITLE COVERING THE LAND SUBJECT OF THE DEED, TITLE, OR CONTRACT
SAMANILLA V CAJUCOM: A MORTGAGE, WHETHER REGISTERED OR NOT, IS BINDING BETWEEN
THE PARTIES, REGISTRATION BEING NECESSARY ONLY TO MAKE THE SAME VALID AGAINST THIRD
PERSONS (ART. 2125, CC).
REGISTRATION ONLY OPERATES AS A NOTICE OF THE MORTGAGE TO OTHERS, BUT NEITHER
ADDS TO ITS VALIDITY NOR CONVERT AN INVALID MORTGAGE INTO A VALID ONE BETWEEN THE
PARTIES.
 INCIDENTS OF REGISTRATION OF MORTGAGE
1. MORTGAGEE IS ENTITLED TO REGISTRATION OF MORTGAGE AS A MATTER OF RIGHT.
2. PROCEEDINGS FOR REGISTRATION DO NOT DETERMINE VALIDITY OF THE MORTGAGE OR ITS
EFFECT
3. REGISTRATION IS WITHOUT PREJUDICE TO BETTER RIGHTS OF THIRD PARTIES.
4. MORTGAGE DEED, ONCE DULY REGISTERED, FORMS PART OF THE RECORDS FOR THE
REGISTRATION OF THE MORTGAGED PROPERTY.
5. MORTGAGE BY A SURVIVING SPOUSE OF HIS/HER UNDIVIDED SHARE IN THE CONJUGAL
PROPERTY CAN BE REGISTERED.
 EFFECTS OF THE INVALIDITY OF MORTGAGE ON THE
PRINCIPAL OBLIGATION
1. PRINCIPAL OBLIGATION REMAINS VALID.
2. MORTGAGE DEED REMAINS EVIDENCE OF A PERSONAL OBLIGATION.
 FORECLOSURE OF MORTGAGE
IS THE REMEDY AVAILABLE TO THE MORTGAGEE BY WHICH HE SUBJECTS THE MORTGAGED
PROPERTY TO THE SATISFACTION OF THE OBLIGATION SECURED BY THE MORTGAGE.
• IN GENERAL: AN ACTION FOR FORECLOSURE OF A MORTGAGE IS LIMITED TO THE AMOUNT
MENTIONED IN THE MORTGAGE, EXCEPT WHEN THE MORTGAGE CONTRACT INTENDS TO
SECURE FUTURE LOANS OR ADVANCEMENTS
• BLANKET MORTGAGE / DRAGNET– MORTGAGE THAT SUBSUMES ALL DEBTS OF PAST OR
FUTURE ORIGIN
• MORTGAGE MAY BE USED AS A “CONTINUING SECURITY” WHICH SECURES FUTURE
ADVANCEMENTS AND IS NOT DISCHARGED BY THE REPAYMENT OF THE AMOUNT IN THE
MORTGAGE
• ALIENATION OR ASSIGNMENT OF MORTGAGE CREDIT IS VALID EVEN IF IT IS NOT REGISTERED
 FORECLOSURE OF MORTGAGE

ACCELERATION CLAUSE, OR THE STIPULATION STATING THAT ON

THE OCCASION OF THE MORTGAGOR’S DEFAULT, THE WHOLE SUM
REMAINING UNPAID AUTOMATICALLY BECOMES DUE AND
DEMANDABLE, IS ALLOWED

KINDS OF FORECLOSURE
1. JUDICIAL FORECLOSURE
2. EXTRAJUDICIAL FORECLOSURE
 FORECLOSURE OF MORTGAGE
RULE 68, ROC:
• MAY BE AVAILED OF BY BRINGING AN ACTION IN THE PROPER COURT WHICH HAS JURISDICTION OVER
THE AREA WHEREIN THE REAL OR PERSONAL (IN CASE OF CHATTEL MORTGAGE) PROPERTY INVOLVED OR
A PORTION THEREOF IS SITUATED.
• IF THE COURT FINDS THE COMPLAINT TO BE WELL-FOUNDED, IT SHALL ORDER THE MORTGAGOR TO PAY
THE AMOUNT DUE WITH INTEREST AND OTHER CHARGES WITHIN A PERIOD OF NOT LESS THAN 90 DAYS
NOR MORE THAN 120 DAYS FROM THE ENTRY OF JUDGMENT. IF THE MORTGAGOR FAILS TO PAY AT THE
TIME DIRECTED, THE COURT, UPON MOTION, SHALL ORDER THE PROPERTY TO BE SOLD TO THE HIGHEST
BIDDER AT A PUBLIC AUCTION.
• UPON CONFIRMATION OF THE SALE BY THE COURT, ALSO UPON MOTION, IT SHALL OPERATE TO DIVEST
THE RIGHTS OF ALL PARTIES TO THE ACTION AND TO VEST THEIR RIGHTS TO THE PURCHASER SUBJECT TO
SUCH RIGHTS OF REDEMPTION AS MAY BE ALLOWED BY LAW.
• BEFORE THE CONFIRMATION, THE COURT RETAINS CONTROL OF THE PROCEEDINGS
• EXECUTION OF JUDGMENT SUBJECT TO APPEAL BUT NOT ANNULMENT
• THE FORECLOSURE OF THE PROPERTY IS COMPLETED ONLY WHEN THE SHERIFF’S CERTIFICATE IS
EXECUTED, ACKNOWLEDGED AND RECORDED
 PROCEEDS OF FORECLOSURE MORTGAGE

THE PROCEEDS OF THE SALE SHALL BE APPLIED TO THE PAYMENT OF THE:

a. COSTS OF THE SALE;
b. AMOUNT DUE THE MORTGAGEE;
c. CLAIMS OF JUNIOR ENCUMBRANCERS OR PERSONS HOLDING SUBSEQUENT MORTGAGES
IN THE ORDER OF THEIR PRIORITY; AND
d. BALANCE, IF ANY SHALL BE PAID TO THE MORTGAGOR.
 NATURE OF JUDICIAL FORECLOSURE PROCEEDINGS

1. QUASI IN REM ACTION. HENCE, JURISDICTION MAY BE

ACQUIRED THROUGH PUBLICATION.
2. FORECLOSURE IS ONLY THE RESULT OR INCIDENT OF THE
FAILURE TO PAY DEBT.
3. SURVIVES DEATH OF MORTGAGOR.
 EXTRAJUDICIAL FORECLOSURE

1. APPLIES TO MORTGAGES WHERE THE AUTHORITY TO FORECLOSE IS GRANTED TO THE

MORTGAGEE.
2. AUTHORITY IS NOT EXTINGUISHED BY DEATH OF MORTGAGOR OR MORTGAGEE. THIS IS AN
AGENCY COUPLED WITH INTEREST.
3. PUBLIC SALE SHOULD BE MADE AFTER PROPER NOTICE TO THE PUBLIC, OTHERWISE IT IS A
JURISDICTIONAL DEFECT WHICH COULD RENDER THE SALE VOIDABLE.
4. THERE IS NO NEED TO NOTIFY THE MORTGAGOR. PROPER NOTICE CONSISTS OF:
A. POSTING NOTICE IN THREE PUBLIC PLACES AND / OR
B. PUBLICATION IN NEWSPAPER OF GENERAL CIRCULATION
C. PURPOSE OF NOTICE IS TO OBTAIN THE BEST BID FOR THE FORECLOSED PROPERTY
 EXTRAJUDICIAL FORECLOSURE

5. SURPLUS PROCEEDS OF FORECLOSURE SALE BELONG TO THE MORTGAGOR.

6. DEBTOR (WHO MUST BE A NATURAL PERSON) HAS THE RIGHT TO REDEEM THE PROPERTY SOLD
WITHIN 1 YEAR FROM AND AFTER THE DATE OF SALE.
 NATURE OF POWER OF FORECLOSURE IN EXTRAJUDICIAL
SALE

1. CONFERRED FOR MORTGAGEE’S PROTECTION.

2. AN ANCILLARY STIPULATION.
3. A PREROGATIVE OF THE MORTGAGEE
 RIGHT OF MORTGAGEE TO RECOVER DEFICIENCY

1. MORTGAGEE IS ENTITLED TO RECOVER DEFICIENCY.

2. IF THE DEFICIENCY IS EMBODIED IN A JUDGMENT IT IS REFERRED TO AS DEFICIENCY
JUDGMENT.
3. ACTION FOR RECOVERY OF DEFICIENCY MAY BE FILED EVEN DURING REDEMPTION PERIOD
4. ACTION TO RECOVER PRESCRIBES AFTER 10 YEARS FROM THE TIME THE RIGHT OF ACTION
ACCRUES.
 EFFECT OF INADEQUACY OF PRICE IN FORECLOSURE
SALE
1. WHERE THERE IS RIGHT TO REDEEM, INADEQUACY OF PRICE IS IMMATERIAL BECAUSE THE
JUDGMENT DEBTOR MAY REDEEM THE PROPERTY.
EXCEPTION: WHERE THE PRICE IS SO INADEQUATE AS TO SHOCK THE CONSCIENCE OF
THE COURT, TAKING INTO CONSIDERATION THE PECULIAR CIRCUMSTANCES.
2. PROPERTY MAY BE SOLD FOR LESS THAN ITS FAIR MARKET VALUE, UPON THE THEORY THAT THE
LESSER THE PRICE THE EASIER IT IS FOR THE OWNER TO REDEEM.
3. THE VALUE OF THE MORTGAGED PROPERTY HAS NO BEARING ON THE BID PRICE AT THE PUBLIC
AUCTION, PROVIDED THAT THE PUBLIC AUCTION WAS REGULARLY AND HONESTLY CONDUCTED.
 WAIVER OF SECURITY BY CREDITOR

1. MORTGAGEE MAY WAIVE RIGHT TO FORECLOSE HIS MORTGAGE AND MAINTAIN A

PERSONAL ACTION FOR RECOVERY OF THE INDEBTEDNESS.
2. MORTGAGEE CANNOT HAVE BOTH REMEDIES
 REDEMPTION

IT IS A TRANSACTION BY WHICH THE MORTGAGOR REACQUIRES THE PROPERTY WHICH MAY

HAVE PASSED UNDER THE MORTGAGE OR DIVESTS THE PROPERTY OF THE LIEN WHICH THE
MORTGAGE MAY HAVE CREATED
 KINDS OF REDEMPTION
a. EQUITY OF REDEMPTION: IN JUDICIAL FORECLOSURE OF REAL ESTATE MORTGAGE UNDER THE ROC, IT IS
THE RIGHT OF THE MORTGAGOR TO REDEEM THE MORTGAGED PROPERTY BY PAYING THE SECURED DEBT
WITHIN THE 120 DAY PERIOD FROM ENTRY OF JUDGMENT OR AFTER THE FORECLOSURE SALE, BUT BEFORE
THE SALE OF THE MORTGAGED PROPERTY OR CONFIRMATION OF SALE
- FORMAL OFFER TO REDEEM PRESERVES THE RIGHT OF REDEMPTION, E.G., BY FILING AN ACTION
TO ENFORCE THE RIGHT TO REDEEM
a. RIGHT OF REDEMPTION: IN EXTRAJUDICIAL FORECLOSURE OF REAL ESTATE MORTGAGE, THE RIGHT OF THE
MORTGAGOR TO REDEEM THE PROPERTY WITHIN A CERTAIN PERIOD AFTER IT WAS SOLD FOR THE
SATISFACTION OF THE DEBT.
- FOR NATURAL PERSONS: ONE YEAR FROM THE REGISTRATION OF THE TCT
- FOR JURIDICAL PERSONS: THREE MONTHS FROM THE FORECLOSURE
- FORMAL OFFER TO REDEEM MUST BE WITH TENDER OF REDEMPTION PRICE TO PRESERVE RIGHT OF
REDEMPTION NOTE: THERE IS NO RIGHT OF REDEMPTION IN PLEDGE AND CHATTEL MORTGAGE.
 MEDIDA VS CA

THE RULE UP TO NOW IS THAT THE RIGHT OF A PURCHASER AT A FORECLOSURE SALE IS MERELY
INCHOATE UNTIL AFTER THE PERIOD OF REDEMPTION HAS EXPIRED WITHOUT THE RIGHT BEING
EXERCISED. THE TITLE TO LAND SOLD UNDER MORTGAGE FORECLOSURE REMAINS, IN THE
MORTGAGOR OR HIS GRANTEE UNTIL THE EXPIRATION OF THE REDEMPTION PERIOD AND
CONVEYANCE BY THE MASTER'S DEED
 ANTICHRESIS

ANTICHRESIS IS A CONTRACT WHEREBY THE CREDITOR ACQUIRES

THE RIGHT TO RECEIVE THE FRUITS OF AN IMMOVABLE OF THE
DEBTOR, WITH THE OBLIGATION TO APPLY THEN TO THE PAYMENT
OF THE INTEREST, IF OWING, AND THEREAFTER TO THE PRINCIPAL OF
THE CREDIT (ART 2132)
 CHARACTERISTICS OF ANTICHRESIS

1. ACCESSORY CONTRACT – IT SECURES THE PERFORMANCE OF A PRINCIPAL OBLIGATION

2. FORMAL CONTRACT – IT MUST BE IN A SPECIFIED FORM TO BE VALID (ART. 2134)
 SPECIAL CHARACTERISTICS

1. IT CAN COVER ONLY THE FRUITS OF AN IMMOVABLE PROPERTY

2. DELIVERY OF THE IMMOVABLE IS NECESSARY FOR THE CREDITOR TO RECEIVE THE FRUITS;
DELIVERY IS NOT AN ESSENTIAL REQUISITE OF THE VALIDITY OF A CONTRACT
3. AMOUNT OF PRINCIPAL AND INTEREST MUST BE SPECIFIED IN WRITING
4. EXPRESS AGREEMENT THAT DEBTOR WILL GIVE POSSESSION OF THE PROPERTY TO CREDITOR
AND THAT THE LATTER WILL APPLY THE FRUITS TO THE INTEREST FIRST, IF ANY, SECOND TO
THE PRINCIPAL OF HIS CREDIT
 SPECIAL CHARACTERISTICS

THE OBLIGATION TO PAY INTEREST IS NOT OF THE ESSENCE OF THE CONTRACT OF ANTICHRESIS;
THERE BEING NOTHING IN THE CODE TO SHOW THAT ANTICHRESIS IS ONLY APPLICABLE TO
SECURING THE PAYMENT OF INTEREST-BEARING LOANS. ON THE CONTRARY, ANTICHRESIS IS
SUSCEPTIBLE OF GUARANTEEING ALL KINDS OF OBLIGATIONS, PURE OR CONDITIONAL
 OBLIGATIONS OF ANTICHRETIC CREDITOR
1. TO PAY TAXES AND CHARGES ON THE ESTATE, INCLUDING NECESSARY EXPENSES. CREDITOR MAY
AVOID SAID OBLIGATION BY:
A. COMPELLING DEBTOR TO REACQUIRE ENJOYMENT OF THE PROPERTY
B. BY STIPULATION TO THE CONTRARY
2. TO APPLY ALL THE FRUITS, AFTER RECEIVING THEM, TO THE PAYMENT OF INTEREST, IF OWING, AND
THEREAFTER TO THE PRINCIPAL
3. TO RENDER AN ACCOUNT OF THE FRUITS TO THE DEBTOR

4. TO BEAR THE EXPENSES NECESSARY FOR ITS PRESERVATION AND REPAIR

 REMEDIES OF CREDITOR IN CASE OF NON PAYMENT
OF DEBT

1. ACTION FOR SPECIFIC PERFORMANCE

2. PETITION FOR THE SALE OF THE REAL PROPERTY AS IN A FORECLOSURE OF MORTGAGES
UNDER RULE 68 OF THE RULES OF COURT
A. THE PARTIES, HOWEVER, MAY AGREE ON AN EXTRAJUDICIAL FORECLOSURE IN THE
SAME MANNER AS THEY ARE ALLOWED IN CONTRACTS OF MORTGAGE AND PLEDGE
(TAVERA V. EL HOGAR FILIPINO, INC. 68 PHIL 712)
B. A STIPULATION AUTHORIZING THE ANTICHRETIC CREDITOR TO APPROPRIATE THE
PROPERTY UPON THE NON-PAYMENT OF THE DEBT WITHIN THE AGREED PERIOD IS
VOID (ART. 2088)
 CHATTEL MORTGAGE

CHATTEL MORTGAGE IS A CONTRACT BY VIRTUE OF WHICH A PERSONAL PROPERTY IS

RECORDED IN THE CHATTEL MORTGAGE REGISTER AS SECURITY FOR THE PERFORMANCE OF AN
OBLIGATION.

IF THE MOVABLE, INSTEAD OF BEING RECORDED, IS DELIVERED TO THE CREDITOR, IT IS PLEDGE

AND NOT CHATTEL MORTGAGE.
 AFFIDAVIT OF GOOD FAITH

AN OATH IN A CONTRACT OF CHATTEL MORTGAGE WHEREIN THE PARTIES "SEVERALLY SWEAR

THAT THE MORTGAGE IS MADE FOR THE PURPOSE OF SECURING THE OBLIGATION SPECIFIED IN
THE CONDITIONS THEREOF AND FOR NO OTHER PURPOSES AND THAT THE SAME IS A JUST AND
VALID OBLIGATION AND ONE NOT ENTERED INTO FOR THE PURPOSE OF FRAUD.
 EFFECT OF REGISTRATION

1. CREATES REAL RIGHTS

2. ADDS NOTHING TO MORTGAGE.

NOTE: REGISTRATION OF ASSIGNMENT OF MORTGAGE IS NOT REQUIRED.

 RIGHT OF REDEMPTION OF MORTGAGE
1. WHEN THE CONDITION OF A CHATTEL MORTGAGE IS BROKEN, THE FOLLOWING MAY EXERCISE
REDEMPTION:
A. MORTGAGOR.
B. PERSON HOLDING A SUBSEQUENT MORTGAGE.
C. SUBSEQUENT ATTACHING CREDITOR.
2. AN ATTACHING CREDITOR WHO SO REDEEMS SHALL BE SUBROGATED TO THE RIGHTS OF THE
MORTGAGEE AND ENTITLED TO FORECLOSE THE MORTGAGE IN THE SAME MANNER AS A
MORTGAGEE.
3. REDEMPTION IS MADE BY PAYING OR DELIVERING TO THE MORTGAGEE THE AMOUNT DUE ON
SUCH MORTGAGE AND THE COSTS AND EXPENSES INCURRED BY SUCH BREACH OF CONDITION
BEFORE THE SALE.
 FORECLOSURE OF CHATTEL MORTGAGE

1. PUBLIC SALE.
2. PRIVATE SALE – THERE IS NOTHING ILLEGAL, IMMORAL OR AGAINST PUBLIC ORDER IN AN
AGREEMENT FOR THE PRIVATE SALE OF THE PERSONAL PROPERTIES COVERED BY CHATTEL
MORTGAGE
 PERIOD TO FORECLOSE

1. AFTER 30 DAYS FROM THE TIME OF THE CONDITION IS BROKEN.

2. THE 30-DAY PERIOD IS THE MINIMUM PERIOD AFTER VIOLATION OF THE MORTGAGE
CONDITION FOR THE CREDITOR TO CAUSE THE SALE AT PUBLIC AUCTION WITH AT LEAST 10
DAYS NOTICE TO THE MORTGAGOR AND POSTING OF PUBLIC NOTICE OF TIME, PLACE, AND
PURPOSE OF SUCH SALE, AND IS A PERIOD OF GRACE FOR THE MORTGAGOR, TO
DISCHARGE THE OBLIGATION.
3. AFTER THE SALE AT PUBLIC AUCTION, THE RIGHT OF REDEMPTION IS NO LONGER AVAILABLE
TO THE MORTGAGOR.
 APPLICATION OF PROCEEDS OF SALE
1. COSTS AND EXPENSES OF KEEPING AND SALE.
2. PAYMENT OF THE OBLIGATION.
3. CLAIMS OF PERSONS HOLDING SUBSEQUENT MORTGAGES IN THEIR ORDER.
4. BALANCE, IF ANY, SHALL BE PAID TO THE MORTGAGOR, OR PERSON HOLDING RIGHTS
UNDER HIM.
 RIGHT OF MORTGAGEE TO RECOVER DEFICIENCY

1. WHERE MORTGAGE FORECLOSED: CREDITOR MAY MAINTAIN ACTION FOR DEFICIENCY

ALTHOUGH THE CHATTEL MORTGAGE LAW IS SILENT ON THIS POINT, BECAUSE A CHATTEL
MORTGAGE IS GIVEN ONLY AS A SECURITY AND NOT AS PAYMENT OF THE DEBT.
2. WHERE MORTGAGE CONSTITUTED AS SECURITY FOR PURCHASE OF PERSONAL PROPERTY
PAYABLE IN INSTALLMENTS: NO DEFICIENCY JUDGMENT CAN BE ASKED AND ANY CONTRARY
AGREEMENT SHALL BE VOID.
3. WHERE MORTGAGED PROPERTY SUBSEQUENTLY ATTACHED AND SOLD: MORTGAGEE IS
ENTITLED TO DEFICIENCY JUDGMENT IN AN ACTION FOR SPECIFIC PERFORMANCE.
 CONCURRENCE AND PREFERENCE OF CREDIT

CONCURRENCE OF CREDIT IMPLIES POSSESSION BY TWO OR MORE CREDITORS OF EQUAL

RIGHT OR PRIVILEGES OVER THE SAME PROPERTY OR ALL OF THE PROPERTY OF A DEBTOR.

PREFERENCE OF CREDIT IS THE RIGHT HELD BY A CREDITOR TO BE PREFERRED IN THE PAYMENT

OF HIS CLAIM ABOVE OTHER OUT OF THE DEBTOR’S ASSETS.
 THE DEBTOR IS LIABLE WITH ALL HIS PROPERTY, PRESENT AND FUTURE, FOR THE
FULFILLMENT OF HIS OBLIGATIONS
EXEMPTED PROPERTY SUBJECT TO EXEMPTIONS PROVIDED BY LAW:
A. PRESENT PROPERTY:
- FAMILY HOME. (ARTS. 152, 153 AND 155, CC)
- RIGHT TO RECEIVE SUPPORT, AS WELL AS MONEY OR PROPERTY
OBTAINED BY SUCH SUPPORT, SHALL NOT BE
LEVIED UPON ON ATTACHMENT OR EXECUTION. (ART. 205, CC)
- SEC. 13, RULE 39, ROC.
- SEC 118, PUBLIC LAND ACT. (CA 141, AS AMENDED)
B. FUTURE PROPERTY: A DEBTOR WHO OBTAINS A DISCHARGE FROM HIS DEBTS
ON ACCOUNT OF INSOLVENCY, IS NOT LIABLE FOR THE UNSATISFIED CLAIMS OF
GENERAL HIS CREDITORS WITH SAID PROPERTY. (SEC. 68 AND 69, INSOLVENCY LAW, ACT
1956)
PROVISIONS C. PROPERTY IN CUSTODIA LEGIS AND OF PUBLIC DOMINION.
 2. INSOLVENCY SHALL BE GOVERNED BY THE INSOLVENCY LAW. (ACT 1956,
AS AMENDED)
3. EXEMPTION OF CONJUGAL PROPERTY OR ABSOLUTE COMMUNITY OR
PROPERTY, PROVIDED THAT:
A. PARTNERSHIP OR COMMUNITY SUBSISTS.
B. OBLIGATIONS OF THE INSOLVENT SPOUSE HAVE NOT
REDOUNDED TO THE BENEFIT OF THE FAMILY.
4. IF THERE IS CO-OWNERSHIP, AND ONE OF THE CO-OWNERS IS THE
INSOLVENT DEBTOR, HIS UNDIVIDED SHARE OR INTEREST IN THE PROPERTY
SHALL BE POSSESSED BY THE ASSIGNEE IN INSOLVENCY PROCEEDINGS
BECAUSE IT IS PART OF HIS ASSETS.

GENERAL 5. PROPERTY HELD BY THE INSOLVENT DEBTOR AS A TRUSTEE OF AN

EXPRESS OR IMPLIED TRUST, SHALL BE EXCLUDED FROM THE INSOLVENCY

PROVISIONS PROCEEDINGS
 CLASSIFICATION OF CREDITS

1. SPECIAL PREFERRED CREDITS. (ART. 2241 AND 2242, CC)

A. CONSIDERED AS MORTGAGES OR PLEDGES OF REAL OR PERSONAL PROPERTY OR
LIENS WITHIN THE PURVIEW OF LEGAL PROVISIONS GOVERNING INSOLVENCY.
B. TAXES DUE TO THE STATE SHALL FIRST BE SATISFIED.
2. ORDINARY PREFERRED CREDITS (ART. 2244) – PREFERRED IN THE ORDER GIVEN BY LAW.
3. COMMON CREDITS (ART. 2245) – CREDITS OF ANY OTHER KIND OR CLASS, OR BY ANY
OTHER RIGHT OR TITLE NOT COMPRISED IN ARTS. 2241- 2244 SHALL ENJOY NO PREFERENCE.
 PREFERENCE OF CREDITS

1. CREDITS WHICH ENJOY PREFERENCE WITH RESPECT TO SPECIFIC MOVABLES EXCLUDE ALL
OTHERS TO THE EXTENT OF THE VALUE OF THE PERSONAL PROPERTY TO WHICH THE
PREFERENCE REFERS.
2. IF THERE ARE 2 OR MORE CREDITS WITH RESPECT TO THE SAME SPECIFIC MOVABLE
PROPERTY, THEY SHALL BE SATISFIED PRO RATA, AFTER THE PAYMENT OF DUTIES, TAXES AND
FEES DUE THE STATE OR ANY SUBDIVISION THEREOF
3. THOSE CREDITS WHICH ENJOY PREFERENCE IN RELATION TO SPECIFIC REAL PROPERTY OR
REAL RIGHTS EXCLUDE ALL OTHERS TO THE EXTENT OF THE VALUE OF THE IMMOVABLE OR
REAL RIGHT TO WHICH THE PREFERENCE REFERS.
 PREFERENCE OF CREDITS

4. THERE ARE 2 OR MORE CREDITS WITH RESPECT TO THE SAME SPECIFIC REAL PROPERTY OR REAL RIGHTS, THEY SHALL
BE SATISFIED PRO RATA, AFTER THE PAYMENT OF THE TAXES AND ASSESSMENT OF THE TAXES AND ASSESSMENTS
UPON THE IMMOVABLE PROPERTY OR REAL RIGHT.
5. THE EXCESS, IF ANY, AFTER THE PAYMENT OF THE CREDITS WHICH ENJOY PREFERENCE WITH RESPECT TO SPECIFIC
PROPERTY, REAL OR PERSONAL, SHALL BE ADDED TO THE FREE PROPERTY WHICH THE DEBTOR MAY HAVE, FOR THE
PAYMENT OF OTHER CREDITS.
6. THOSE CREDITS WHICH DO NOT ENJOY ANY PREFERENCE WITH RESPECT TO SPECIFIC PROPERTY, AND THOSE
WHICH ENJOY PREFERENCE, AS TO THE AMOUNT NOT PAID, SHALL BE SATISFIED ACCORDING TO THE FOLLOWING
RULES:
- ORDER ESTABLISHED BY ART 2244
- COMMON CREDITS REFERRED TO IN ART 2245 SHALL BE PAID PRO RATA REGARDLESS OF DATES
AGENCY
 DEFINITION OF AGENCY

BY THE CONTRACT OF AGECY:

1. A PERSON (AGENT) BINDS HIMSELF
2. TO RENDER SOME SERVICE OR TO DO SOMETHING IN REPRESENTATION OR ON BEHALF OF
ANOTHER (PRINCIPAL
3. WITH THE CONSENT OR AUTHORITY OF THE LATTER
 PURPOSE OF AGENCY

THE PURPOSE OF AGENCY IS TO EXTEND THE PRINCIPAL’S PERSONALITY

• 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.
• THE RELATIONSHIP CAN ONLY BE EFFECTED WITH THE CONSENT OF THE PRINCIPAL, WHICH
MUST NOT BE, IN ANY WAY, BE COMPELLED BY LAW OR BY ANY COURT
 WHAT ACTS MAY BE AUTHORIZED
GENERAL RULE:
WHAT A MAN MAY DO IN PERSON, HE MAY DO THRU ANOTHER
EXCEPTIONS:
a. PERSONAL ACTS
b. CRIMINAL ACTS
c. UNLAWFUL ACTS
 THEORY OF IMPUTED KNOWLEDGE
GENERAL RULE:
FOR KNOWLEDGE OF AGENT TO BE IMPUTED TO THE PRINCIPAL, THERE MUST BE:
a. ACTUAL NOTICE TO THE AGENT
b. THE NOTICE MUST PERTAIN TO A MATTER OF FACT AND NOT OF LAW
c. THE FACT MUST BE WITHIN THE SCOPE OF THE AGENT’S AUTHORITY
EXCEPTIONS:
a. AGENT’S INTERESTS ARE ADVERSE TO THOSE OF THE PRINCIPAL;
b. AGENT’S DUTY IS NOT TO DISCLOSE INFORMATION
c. 3RD PERSON CLAIMING THE BENEFIT OF THE RULE COLLUDES WITH THE AGENT TO DEFRAUD THE
PRINCIPAL
 THEORY OF IMPUTED KNOWLEDGE
THE THEORY OF IMPUTED KNOWLEDGE ASCRIBES THE KNOWLEDGE OF THE AGENT, TO THE
PRINCIPAL, NOT THE OTHER WAY AROUND. THE KNOWLEDGE OF THE PRINCIPAL CAN’T BE
IMPUTED TO ITS AGENT (SUNACE INT’L MAGT. SERVICES V. NLRC)
 CHARACTERISTICS OF AGENCY
1. CONSENSUAL: PERFECTED BY MERE CONSENT
2. NOMINATE: HAS ITS OWN NAME
3. PREPARATORY: PURPOSE IS THE EXECUTION OF A JURIDICAL ACT IN RELATION TO A THIRD
PERSON
4. PRINCIPAL: CAN STAND BY ITSELF WITHOUT NEED OF ANOTHER CONTRACT
5. BILATERAL: GIVE RISE TO RECIPROCAL RIGHTS AND OBLIGATIONS
6. FIDUCIARY: SINCE IT IS BASED ON TRUST AND CONFIDENCE
 ESSENTIAL ELEMENTS
1. CONSENT, EXPRESS OR IMPLIED, OF THE PARTIES TO ESTABLISH THE RELATIONSHIP
2. OBJECT IS THE EXECUTION OF A JURIDICAL ACT IN RELATION TO A THIRD PERSON
3. AGENT ACTS AS A REPRESENTATIVE AND NOT FOR HIMSELF
4. AGENT ACTS WITHIN THE SCOPE OF HIS AUTHORITY
 INTENT TO ESTABLISH AGENCY ESSENTIAL

GENERAL RULE::
1. ON THE PART OF THE PRINCIPAL THERE MUST BE AN INTENTION TO APPOINT OR AN
INTENTION NATURALLY INFERABLE FROM HIS WORDS OR ACTIONS; AND
2. ON THE PART OF THE AGENT, THERE MUST BE AN INTENTION INFERABLE FROM WORDS OR
DEEDS TO ACCEPT THE APPOINTMENT AND ACT ON IT.
EXCEPTION:
1. AGENCY BY ESTOPPEL; AND
2. AGENCY BY OPERATION OF LAW
 AGENCY BY ESTOPPEL

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. (LITONJUA VS. ETERNIT CORPORATION, G.R. NO. 144806)
 APPARENT AUTHORITY

• IT IMPOSES LIABILITY, NOT AS THE RESULT OF THE REALITY OF A CONTRACTUAL RELATIONSHIP, BUT
RATHER BECAUSE OF THE ACTIONS OF A PRINCIPAL OR AN EMPLOYER IN SOMEHOW MISLEADING
THE PUBLIC INTO BELIEVING THAT THE RELATIONSHIP OR THE AUTHORITY EXISTS.
• THE PRINCIPAL IS BOUND BY THE ACTS OF HIS AGENT WITH THE APPARENT AUTHORITY WHICH HE
KNOWINGLY PERMITS THE AGENT TO ASSUME, OR WHICH HE HOLDS THE AGENT OUT TO THE
PUBLIC AS POSSESSING. THE QUESTION IN EVERY CASE IS WHETHER THE PRINCIPAL HAS BY HIS
VOLUNTARY ACT PLACED THE AGENT IN SUCH A SITUATION THAT A PERSON OF ORDINARY
PRUDENCE, CONVERSANT WITH BUSINESS USAGES AND THE NATURE OF THE PARTICULAR BUSINESS,
IS JUSTIFIED IN PRESUMING THAT SUCH AGENT HAS AUTHORITY TO PERFORM THE PARTICULAR ACT
IN QUESTION. (PROFESSIONAL SERVICES INC. VS. AGANA, G.R. NO. 126297)
 APPARENT AUTHORITY

• ONE WHO CLOTHES ANOTHER WITH APPARENT AUTHORITY AS HIS AGENT, AND HOLDS HIM
OUT TO THE PUBLIC AS SUCH, CANNOT BE PERMITTED TO DENY THE AUTHORITY OF SUCH
PERSON TO ACT AS HIS AGENT, TO THE PREJUDICE OF INNOCENT THIRD PARTIES DEALING
WITH SUCH PERSON IN GOOD FAITH. (MACKE V CAMPS, 1907)
 CAPACITY OF THE PARTIES

• THE PRINCIPAL MUST BE CAPACITATED TO GIVE CONSENT.

• THE AGENT MUST HAVE THE CAPACITY TO ENTER INTO CONTRACTS ALTHOUGH HE/SHE MAY
NOT HAVE THE CAPACITY TO ENTER INTO THE PARTICULAR CONTRACT SUBJECT OF THE
AGENCY
• HOWEVER, AS BETWEEN THE PRINCIPAL AND THE AGENT, THE AGENT CAN SET UP HIS
INCAPACITY PROVIDED HE IS NOT ESTOPPED. [PARAS, CIVIL CODE OF THE PHILIPPINES
ANNOTATED]
 DETERMINATION OF EXISTENCE OF AGENCY

FACT OF EXISTENCE
IF RELATIONS THAT CONSTITUTE AGENCY EXIST, THERE IS AGENCY REGARDLESS OF WHETHER OR
NOT THE PARTIES UNDERSTOOD THE EXACT NATURE OF THE RELATION.
NO PRESUMPTION OF EXISTENCE
1. GENERAL RULE: AGENCY MUST EXIST AS A FACT.
2. EXCEPTIONS:
- WHEN AGENCY ARISES IPSO JURE B. TO PREVENT UNJUST ENRICHMENT INTENTION OF THE
PARTIES TO CREATE— THE NATURE OF THE CONTRACT DEPENDS ON THE INTENTION OF
THE PARTIES AS GATHERED FROM THEIR WORDS AND ACTIONS AND THE CIRCUMSTANCES
OF THE CASE. AS BETWEEN PRINCIPAL AND 3RD PERSON, HOWEVER, AGENCY MAY EXIST
WITHOUT THE EXPRESS CONSENT OF THE AGENT.
 KEELER RULE (HARRY KEELER ELECTRIC V. RODRIGUEZ,
1922)
1. AGAINST THE PRINCIPAL, THE THIRD PARTY HAS THE OBLIGATION TO DETERMINE EXISTENCE
AND SCOPE OF AGENCY AND HAS THE BURDEN OF PROOF IN CASE THE PRINCIPAL DENIES
IT
2. AGAINST THE AGENT, THE THIRD PERSON DEALS WITH HIM AT HIS OWN PERIL. A THIRD
PERSON MAY REQUIRE THE PRESENTATION OF THE POA OR THE PRINCIPAL’S INSTRUCTIONS
AS REGARDS THE AGENCY (ART. 1902)
3. THE PERSON DEALING WITH THE AGENT MUST ALSO ACT WITH ORDINARY PRUDENCE AND
REASONABLE DILIGENCE. IF HE KNOWS OR HAS GOOD REASON TO BELIEVE THAT THE
AGENT IS EXCEEDING HIS AUTHORITY, HE CANNOT CLAIM PROTECTION.
 KINDS OF AGENCY

• AS TO MANNER OF CREATION
1. EXPRESS
a. AGENT HAS BEEN ACTUALLY AUTHORIZED BY THE PRINCIPAL
b. AGENCY MAY BE ORAL OR IN WRITING, UNLESS THE LAW REQUIRES A SPECIFIC FORM. [ART. 1869, CC]
2. IMPLIED
a. ON THE PART OF THE PRINCIPAL:
- FROM HIS ACTS HIS SILENCE OR LACK OF ACTION;
- HIS FAILURE TO REPUDIATE THE AGENCY KNOWING THAT ANOTHER PERSON IS ACTING ON HIS BEHALF
WITHOUT AUTHORITY [ART. 1869, CC]
B. ON THE PART OF THE AGENT:
- FROM HIS ACTS WHICH CARRY OUT THE AGENCY;
- FROM HIS SILENCE OR INACTION ACCORDING TO THE CIRCUMSTANCES [ART. 1870, CC]
 KINDS OF AGENCY

ACCEPTANCE OF THE AGENCY:

• BETWEEN PERSONS WHO ARE PRESENT
- PRINCIPAL DELIVERS HIS POWER OF ATTORNEY TO THE AGENT; AND
- AGENT RECEIVES IT WITHOUT OBJECTION [ART. 1871, CC]
• BETWEEN PERSONS WHO ARE ABSENT:
GENERAL RULE:
- ACCEPTANCE CANNOT BE IMPLIED FROM THE SILENCE OF THE AGENT
EXCEPTIONS
i. WHEN THE PRINCIPAL TRANSMITS HIS POA TO THE AGENT, WHO RECEIVES IT WITHOUT ANY OBJECTION;
ii. WHEN THE PRINCIPAL ENTRUSTS TO HIM BY LETTER OR TELEGRAM A POA WITH RESPECT TO THE BUSINESS
IN WHICH HE IS HABITUALLY ENGAGED AS AN AGENT, AND HE DID NOT REPLY TO THE LETTER [ART. 1872,
CC]
 KINDS OF AGENCY

• AS TO MANNER OF CREATION
3. AGENCY BY ESTOPPEL
• IF A PERSON SPECIALLY INFORMS ANOTHER OR STATES BY PUBLIC ADVERTISEMENT THAT HE
HAS GIVEN A POWER OF ATTORNEY TO A THIRD PERSON, THE LATTER BECOMES A DULY
AUTHORIZED AGENT, EVEN IF PREVIOUSLY THERE WAS NEVER A MEETING OF MINDS BETWEEN
THEM.
• THE POWER SHALL CONTINUE TO BE IN FULL FORCE UNTIL THE NOTICE IS RESCINDED IN THE
SAME MANNER IN WHICH IT WAS GIVEN. [ART. 1869, CC]
 KINDS OF AGENCY

• AS TO MANNER OF CREATION
3. AGENCY BY ESTOPPEL
• IN LITONJUA, JR. V. ETERNIT CORP. (2006), THE FOLLOWING MUST BE PRESENT FOR AGENCY
BY ESTOPPELS TO EXIST:
a. THE PRINCIPAL MANIFESTED A REPRESENTATION OF THE AGENT’S AUTHORITY OR
KNOWINGLY ALLOWED THE AGENT TO ASSUME SUCH AUTHORITY;
b. THE THIRD PERSON, IN GOOD FAITH, RELIED UPON SUCH REPRESENTATION;
c. RELYING UPON SUCH REPRESENTATION, SUCH THIRD PERSON HAS CHANGED HIS POSITION
TO HIS DETRIMENT.
 KINDS OF AGENCY

• AS TO FORMALITIES
GENERAL RULE:
AGENCY MAY BE ORAL OR IN WRITING [ART. 1869, CC]
EXCEPTIONS
a. WHEN THE LAW REQUIRES A SPECIFIC FORM [ART. 1869, CC]
b. SALE OF A PIECE OF LAND OR ANY INTEREST THEREIN:
• WHEN A SALE OF A PIECE OF LAND OR ANY INTEREST THEREIN IS THROUGH AN AGENT, THE
AUTHORITY OF THE LATTER SHALL BE IN WRITING; OTHERWISE, THE SALE SHALL BE VOID. [ART.
1874, CC]
• IT IS NOT NECESSARY THAT THE REAL PROPERTY TO BE SOLD BE PRECISELY DESCRIBED IN THE
WRITTEN AUTHORITY OF THE AGENT. IT IS SUFFICIENT IF THE AUTHORITY IS SO EXPRESSED AS TO
DETERMINE WITHOUT DOUBT THE LIMITS OF THE AGENT’S AUTHORITY. [JIMENEZ V RABOT, 1918]
 KINDS OF AGENCY

• AS TO CAUSE OR CONSIDERATION
AGENCY MAY BE ONEROUSE OR GRATUITOUS A
a. GENERAL RULE—AGENCY IS PRESUMED TO BE FOR COMPENSATION [ART. 1875, CC]
b. EXCEPTION—THERE IS PROOF TO THE CONTRARY [ART. 1875, CC]
 KINDS OF AGENCY

• AS TO EXTENT OF BUSINESS COVERED

1. UNIVERSAL— A UNIVERSAL AGENT IS ONE AUTHORIZED TO DO ALL ACTS FOR HIS PRINCIPAL
WHICH CAN LAWFULLY BE DELEGATED TO AN AGENT. [SIASAT V. IAC (1985)]
2. GENERAL— IT COMPRISES ALL THE BUSINESS OF THE PRINCIPAL [ART. 1876, CC]
3. SPECIAL— IT COMPRISES ONE OR MORE SPECIFIC TRANSACTIONS [ART. 1876, CC]
 KINDS OF AGENCY

• AS TO AUTHORITY CONFERRED
1. AGENCY MAY BE COUCHED IN GENERAL OR SPECIFIC TERMS
A. COUCHED IN GENERAL TERMS [ART. 1877, CC)
IF COUCHED IN GENERAL TERMS, IT COMPRISES ONLY ACTS OF ADMINISTRATION, EVEN IF:
• THE PRINCIPAL STATES THAT HE WITHHOLDS NO POWER; OR
• HE STATES THAT THE AGENT MAY EXECUTE SUCH ACTS AS HE MAY CONSIDER APPROPRIATE;
OR
• THE AGENCY SHOULD AUTHORIZE A GENERAL AND UNLIMITED MANAGEMENT
B. COUCHED IN SPECIFIC TERMS—AUTHORIZING ONLY THE PERFORMANCE OF SPECIFIC
ACT/ACTS
 KINDS OF AGENCY

• AS TO AUTHORITY CONFERRED
2. POWER OF ATTORNEY
WRITTEN AUTHORIZATION TO AN AGENT TO PERFORM SPECIFIED ACTS IN BEHALF OF HIS
PRINCIPAL WHICH ACTS, WHEN PERFORMED, SHALL HAVE BINDING EFFECT ON THE PRINCIPAL [2
AM. JUR. 30]
PURPOSE:
NOT TO DEFINE THE AGENT’S AUTHORITY, BUT TO EVIDENCE SUCH AUTHORITY TO 3RD PARTIES
INTERPRETATION:
GENERAL RULE: POWER OF ATTORNEY SHOULD BE STRICTLY CONSTRUED
EXCEPTION: WHEN STRICT CONSTRUCTION WILL DESTROY THE VERY PURPOSE OF THE POWER
 KINDS OF AGENCY

• AS TO AUTHORITY CONFERRED
SPECIAL POWER OF ATTORNEY
A SPECIAL POWER OF ATTORNEY IS AN AUTHORITY GRANTED BY THE PRINCIPAL TO THE AGENT
WHERE THE ACT FOR WHICH IT IS DRAWN IS EXPRESSLY MENTIONED. [STRONG V. REPIDE, 1906]

A SPECIAL POWER CAN BE INCLUDED IN A GENERAL POWER OF ATTORNEY, EITHER BY GIVING

AUTHORITY FOR ALL ACTS OF A PARTICULAR CHARACTER OR BY SPECIFYING THEREIN THE
ACT/TRANSACTION FOR WHICH A SPECIAL POWER IS NEEDED. [TOLENTINO]
 KINDS OF AGENCY

• AS TO NATURE AND EFFECTS

1. OSTENSIBLE OR REPRESENTATIVE—AGENT ACTS IN THE NAME AND REPRESENTATION OF THE
PRINCIPAL
2. SIMPLE OR COMMISSION—AGENT ACTS IN HIS OWN NAME BUT FOR THE PRINCIPAL’S
ACCOUNT
3. AGENCY BY ESTOPPEL—THERE IS NO AGENCY, AND THE ALLEGED AGENT SEEMED TO
HAVEAPPARENT OR OSTENSIBLE, BUT NOT REAL, AUTHORITY TO REPRESENT ANOTHER
 KINDS OF AGENCY

• AS TO KINDS OF PRINCIPAL
1. PRINCIPAL MAY BE:
a. DISCLOSED
b. PARTIALLY DISCLOSED—THIRD PERSONS ARE UNAWARE OF PRINCIPAL’S IDENTITY C.
UNDISCLOSED—AGENT ACTS IN HIS OWN NAME
 KINDS OF AGENCY

• AS TO KINDS OF PRINCIPAL
GENERAL RULE [ART. 1883, CC]
IF THE PRINCIPAL IS UNDISCLOSED (AGENT ACTS IN HIS OWN NAME):
a. THE AGENT IS THE ONE DIRECTLY BOUND IN FAVOR OF THE PERSON WITH WHOM HE HAS
CONTRACTED, AS IF THE TRANSACTION WERE HIS OWN
b. THE PRINCIPAL HAS NO RIGHT OF ACTION AGAINST THE PERSONS WITH WHOM THE AGENT
HAS CONTRACTED; NEITHER HAVE SUCH PERSONS AGAINST THE PRINCIPAL.
 KINDS OF AGENCY

• AS TO KINDS OF PRINCIPAL
EXCEPTION [ART. 1883, CC]
a. WHEN THE CONTRACT INVOLVES THINGS BELONGING TO THE PRINCIPAL
b. EXCEPTION QUALIFIED BY NATIONAL BANK V AGUDELO, 1933
FOR THE PRINCIPAL TO BE BOUND BY THE ACT OF AN AGENT WHO CONTRACTED IN HIS
[AGENT’S] OWN NAME, IT IS NOT SUFFICIENT THAT THE CONTRACT INVOLVED THINGS
BELONGING TO THE PRINCIPAL. THE AGENT SHOULD ALSO HAVE ACTED WITHIN HIS SCOPE OF
AUTHORITY. [NATIONAL BANK V AGUDELO, 1933; RURAL BANK OF BOMBON V CA, 1992]
 KINDS OF AGENCY

• AS TO KINDS OF PRINCIPAL
AGENT MAY STILL BE SUED EVEN IF PRINCIPAL IS UNDISCLOSED AND CONTRACT INVOLVED
THINGS BELONGING TO THE PRINCIPAL.
EVEN IF THE PRINCIPAL IS UNDISCLOSED AND THE CONTRACT INVOLVED THINGS BELONGING
TO THE PRINCIPAL, THE THIRD PERSON WHO CONTRACTED WITH THE AGENT HAS A RIGHT OF
ACTION NOT ONLY AGAINST THE PRINCIPAL BUT ALSO AGAINST THE AGENT, WHEN THE RIGHTS
AND OBLIGATIONS WHICH ARE THE SUBJECT MATTER OF THE LITIGATION CANNOT BE LEGALLY
AND JURIDICALLY DETERMINED WITHOUT HEARING BOTH OF THEM. IN SUCH CASE, THE AGENT
BEING A NECESSARY PARTY TO THE FULL AND COMPLETE DETERMINATION OF THE CASE WHICH
ORIGINATED FROM HIS ACT SHOULD BE INCLUDED IN THE CASE AS DEFENDANT. [BEAUMONT V
PRIETO, 1921]
 OBLIGATIONS OF THE AGENT
• TO CARRY OUT THE AGENCY
• TO ACT WITHIN THE SCOPE OF HIS AUTHORITY
• TO ADVANCE NECESSARY FUNDS IV. TO ACT IN ACCORDANCE WITH INSTRUCTIONS
• TO PREFER PRINCIPAL’S INTEREST OVER PERSONAL INTEREST
• NOT TO LOAN TO HIMSELF WITHOUT PRINCIPAL’S CONSENT
• TO RENDER ACCOUNT AND DELIVER THINGS RECEIVED BY VIRTUE OF AGENCY VIII.TO BE
RESPONSIBLE FOR SUBSTITUTES
• TO PAY INTEREST X. TO ANSWER FOR HIS FRAUD/NEGLIGENCE
• SPECIAL OBLIGATIONS OF FACTOR/COMMISSION AGENTS
 TO CARRY OUT THE AGENCY

• OBLIGATION TO CARRY OUT THE AGENCY HE ACCEPTED [ART. 1884, CC]—

1. THE AGENT IS BOUND BY HIS ACCEPTANCE TO CARRY OUT THE AGENCY OWN
2. HE SHALL BE LIABLE FOR DAMAGES THAT THE PRINCIPAL MAY SUFFER DUE TO HIS
NONPERFORMANCE [ART. 1884, CC] EXCEPTION: AN AGENT SHALL NOT CARRY OUT AN
AGENCY IF ITS EXECUTION WOULD MANIFESTLY RESULT IN LOSS OR DAMAGES TO THE
PRINCIPAL. [ART. 1888, CC]
 TO CARRY OUT THE AGENCY

• OBLIGATION TO FINISH BUSINESS BEGAN ON PRINCIPAL’S DEATH [ART. 1884, CC]

THE AGENT MUST FINISH THE BUSINESS ALREADY BEGUN ON THE DEATH OF THE PRINCIPAL,
SHOULD DELAY ENTAIL ANY DANGER
 TO CARRY OUT THE AGENCY

• OBLIGATION SHOULD HE DECLINE THE AGENCY [ART. 1885, CC]—

1. HE IS BOUND TO OBSERVE THE DILIGENCE OF A GOOD FATHER OF A FAMILY IN THE
CUSTODY AND PRESERVATION OF THE GOODS FORWARDED TO HIM BY THE OWNER UNTIL
THE LATTER SHOULD APPOINT AN AGENT OR TAKE CHARGE OF THE GOODS
2. HOWEVER, THE OWNER MUST ACT AS SOON AS PRACTICABLE EITHER BY APPOINTING AN
AGENT OR BY TAKING CHARGE OF THE PROPERTY
 TO CARRY OUT THE AGENCY

• OBLIGATION TO CONTINUE AGENCY SHOULD HE WITHDRAW [ART. 1929, CC]

THE AGENT, EVEN IF HE SHOULD WITHDRAW FROM THE AGENCY FOR A VALID REASON, MUST
CONTINUE TO ACT UNTIL THE PRINCIPAL HAS HAD REASONABLE OPPORTUNITY TO TAKE THE
NECESSARY STEPS TO MEET THE SITUATION.
 TO ACT WITHIN THE SCOPE OF HIS AUTHORITY

• AUTHORITY IS THE POWER OF THE AGENT TO AFFECT THE LEGAL RELATIONS OF HIS PRINCIPAL
BY ACTS DONE IN ACCORDANCE WITH THE PRINCIPAL’S MANIFESTATIONS OF CONSENT
 TO ACT WITHIN THE SCOPE OF HIS AUTHORITY

• WHEN AGENT ACTING WITHIN THE SCOPE OF HIS AUTHORITY

1. WHEN HE IS PERFORMING ACTS WHICH ARE CONDUCIVE TO THE ACCOMPLISHMENT OF THE
PURPOSE OF THE AGENCY [ART. 1881, CC]
2. IF THE AGENCY HAS BEEN PERFORMED IN A MANNER MORE ADVANTAGEOUS TO THE PRINCIPAL
THAN THAT SPECIFIED BY HIM [ART. 1882, CC]
3. INSOFAR AS THIRD PERSONS, WHEN THE AGENT’S ACT IS WITHIN THE TERMS OF THE POWER OF
ATTORNEY, AS WRITTEN, EVEN IF THE AGENT HAS IN FACT EXCEEDED THE LIMITS OF HIS
AUTHORITY ACCORDING TO AN UNDERSTANDING BETWEEN THE PRINCIPAL AND THE AGENT.
[ART. 1900, CC]
 TO ACT WITHIN THE SCOPE OF HIS AUTHORITY

1. A 3RD PERSON WITH WHOM THE AGENT WISHES TO CONTRACT ON BEHALF OF THE
PRINCIPAL MAY REQUIRE THE PRESENTATION OF A POWER OF ATTORNEY OR THE
PRINCIPAL’S INSTRUCTIONS [ART. 1902, CC]
2. THE SCOPE OF THE AGENT’S AUTHORITY IS WHAT APPEARS IN THE WRITTEN TERMS OF THE
POWER OF ATTORNEY. WHILE THIRD PERSONS ARE BOUND TO INQUIRE INTO THE EXTENT
OR SCOPE OF THE AGENT’S AUTHORITY, THEY ARE NOT REQUIRED TO GO BEYOND THE
TERMS OF THE WRITTEN POWER OF ATTORNEY. [SIREDY ENTERPRISES, INC. V CA, 2002]
 TO ACT WITHIN THE SCOPE OF HIS AUTHORITY

EFFECT WHEN AGENT ACTS WITHIN THE SCOPE OF HIS AUTHORITY

1. GENERAL RULE— THE AGENT WHO ACTS AS SUCH IS NOT PERSONALLY LIABLE TO THE PARTY
WITH WHOM HE CONTRACTS
2. EXCEPTIONS:
a. IF HE EXPRESSLY BOUND HIMSELF [ART. 1897, CC]
b. IF HE EXCEEDS THE LIMITS OF HIS AUTHORITY WITHOUT GIVING SUCH PARTY SUFFICIENT NOTICE
OF HIS POWERS [ART. 1897, CC]
c. IF HE ACTED IN HIS OWN NAME; EXCEPT IF THE CONTRACT INVOLVES THINGS BELONGING TO
THE PRINCIPAL [ART. 1883, CC]
 TO ADVANCE NECESSARY FUNDS

• GENERAL RULE:
THE AGENT IS BOUND TO ADVANCE NECESSARY FUNDS, SHOULD THERE BE A STIPULATION TO
DO SO.
• EXCEPTION: WHEN THE PRINCIPAL IS INSOLVENT
 TO ACT IN ACCORDANCE WITH PRINCIPAL’S
INSTRUCTIONS
• OBLIGATION TO ACT IN ACCORDANCE WITH PRINCIPAL’S INSTRUCTIONS
IN THE EXECUTION OF THE AGENCY, THE AGENT SHALL ACT IN ACCORDANCE WITH THE
INSTRUCTIONS OF THE PRINCIPAL. [ART. 1887, CC]
• OBLIGATION IN THE ABSENCE OF INSTRUCTIONS
AGENT SHALL DO ALL THAT A GOOD FATHER OF A FAMILY WOULD DO, AS REQUIRED BY THE
NATURE OF THE BUSINESS [ART. 1887, CC]
 TO ACT IN ACCORDANCE WITH PRINCIPAL’S
INSTRUCTIONS
• EFFECT WHEN AGENT ACTS IN ACCORDANCE WITH PRINCIPAL’S ORDERS
PRINCIPAL CANNOT SET UP THE IGNORANCE OF THE AGENT AS TO CIRCUMSTANCES WHEREOF
HE HIMSELF WAS, OR OUGHT TO HAVE BEEN AWARE [ART. 1899, CC]
 TO PREFER INTEREST OF PRINCIPAL OVER PERSONAL
INTEREST
• RULE IN CASE OF CONFLICT OF INTEREST
1. GENERAL RULE:
THE AGENT SHALL BE LIABLE FOR DAMAGES IF, THERE BEING A CONFLICT BETWEEN HIS
INTERESTS AND THOSE OF THE PRINCIPAL, HE SHOULD PREFER HIS OWN. [ART. 1889, CC]
2. EXCEPTIONS:
a. THE PRINCIPAL WAIVES THE BENEFIT OF THE RULE, PROVIDED HE DOES SO WITH FULL
KNOWLEDGE OF THE FACTS.
b. THE INTERESTS OF THE AGENT ARE SUPERIOR, EX., AGENCY COUPLED WITH AN INTEREST.
 TO PREFER INTEREST OF PRINCIPAL OVER PERSONAL
INTEREST
• AGENT PROHIBITED FROM PURCHASING PROPERTY OF PRINCIPAL
1. GENERAL RULE— THE AGENT CANNOT ACQUIRE BY PURCHASE, EVEN AT A PUBLIC OR
JUDICIAL AUCTION, EITHER IN PERSON OR THROUGH THE MEDIATION OF ANOTHER
PROPERTY WHOSE ADMINISTRATION OR SALE MAY HAVE BEEN ENTRUSTED TO THEM.
2. EXCEPTION— THE PRINCIPAL HAS CONSENTED TO THE PURCHASE. [ART. 1491(2), CC]
 RENDER ACCOUNTS AND DELIVER THINGS RECEIVED
BY VIRTUE OF THE AGENCY
• OBLIGATION TO ACCOUNT AND DELIVER [ART. 1891, CC]
EVERY AGENT IS BOUND TO:
1. RENDER AN ACCOUNT OF HIS TRANSACTIONS; AND
2. DELIVER TO THE PRINCIPAL WHATEVER HE MAY HAVE RECEIVED BY VIRTUE OF THE AGENCY,
EVEN THOUGH IT MAY NOT BE OWING TO THE PRINCIPAL.
• EFFECT OF FAILURE TO COMPLY
IF HE FAILS TO DO SO OR USES THE MONEY/PROPERTY FOR HIS OWN USE, THE AGENT IS
LIABLE FOR ESTAFA [ART. 315, RPC]
 RENDER ACCOUNTS AND DELIVER THINGS RECEIVED
BY VIRTUE OF THE AGENCY
• CONTRARY STIPULATION VOID
EVERY STIPULATION EXEMPTING THE AGENT FROM THE OBLIGATION TO RENDER AN ACCOUNT
SHALL BE VOID [ART. 1891, CC]
• WHEN NOT APPLICABLE (LIM)—
1. A RIGHT OF LIEN EXISTS IN FAVOR OF THE AGENT.
2. THE AGENT OR BROKER INFORMED THE PRINCIPAL OF THE GIFT OR BONUS OR PROFIT HE
RECEIVED FROM THE VENDEE, AND THE PRINCIPAL DID NOT OBJECT
3. IF THE AGENT OR BROKER ACTED ONLY AS A MIDDLEMAN WITH THE TASK OF MERELY
BRINGING TOGETHER THE VENDOR AND VENDEE (DOMINGO V DOMINGO)
 TO BE RESPONSIBLE FOR SUBSTITUTES

• THE AGENT SHALL BE RESPONSIBLE FOR THE ACTS OF HIS SUBSTITUTE:

1. WHEN HE WAS NOT GIVEN THE POWER TO APPOINT ONE; OR
2. WHEN HE WAS GIVEN SUCH POWER, BUT WITHOUT DESIGNATING THE PERSON, AND THE
PERSON APPOINTED WAS NOTORIOUSLY INCOMPETENT OR INSOLVENT.
 TO BE RESPONSIBLE FOR SUBSTITUTES

• THE AGENT MAY APPOINT A SUBSTITUTE IF THE PRINCIPAL HAS NOT PROHIBITED HIM FROM
DOING SO. ALL ACTS OF THE SUBSTITUTE APPOINTED AGAINST THE PROHIBITION OF THE
• PRINCIPAL SHALL BE VOID PRINCIPAL MAY ALSO BRING AN ACTION AGAINST THE SUBSTITUTE
WITH RESPECT TO THE OBLIGATIONS WHICH THE LATTER HAS CONTRACTED UNDER THE
SUBSTITUTION. [ART. 1893, CC]
 TO PAY INTEREST

• THE AGENT OWES INTEREST ON:

1. THE SUMS HE HAS APPLIED TO HIS OWN USE FROM THE DAY ON WHICH HE DID SO
2. THOSE WHICH HE OWES AFTER THE EXTINGUISHMENT OF THE AGENCY
 TO ANSWER FOR HIS NEGLIGENCE OR FRAUD

• THE AGENT IS RESPONSIBLE NOT ONLY FOR FRAUD, BUT ALSO FOR NEGLIGENCE
• LIABILITY SHALL BE JUDGED WITH MORE OR LESS RIGOR BY THE COURTS, ACCORDING TO
WHETHER THE AGENCY WAS OR WAS NOT FOR A COMPENSATION
 SPECIAL OBLIGATIONS OF FACTOR/COMMISSION
AGENTS
DEFINITION
• ONE WHOSE BUSINESS IS TO RECEIVE & SELL GOODS FOR A COMMISSION, AND IS
ENTRUSTED BY THE PRINCIPAL WITH ITS POSSESSION [MECHEM ON AGENCY]
• OBLIGATIONS OF A COMMISSION AGENT
1. FOR GOODS RECEIVED [ART. 1903, CC]
a. HE SHALL BE RESPONSIBLE FOR THE GOODS RECEIVED BY HIM IN THE TERMS AND
CONDITIONS AND AS DESCRIBED IN THE CONSIGNMENT
b. TO AVOID LIABILITY, HE SHOULD MAKE A WRITTEN STATEMENT OF THE DAMAGE AND
DETERIORATION SUFFERED BY THE SAME UPON RECEIVING THEM
 SPECIAL OBLIGATIONS OF FACTOR/COMMISSION
AGENTS
2. WHEN HANDLING GOODS OF THE SAME KIND AND MARK WITH DIFFERENT OWNERS [ART.
1904, CC]
HE SHOULD DISTINGUISH THE GOODS BY COUNTERMARKS, AND DESIGNATE THE MERCHANDISE
RESPECTIVELY BELONGING TO EACH PRINCIPAL.
3. NOT TO SELL ON CREDIT WITHOUT EXPRESS CONSENT [ART. 1905, CC]
THE COMMISSION AGENT CANNOT, WITHOUT THE EXPRESS OR IMPLIED CONSENT OF THE
PRINCIPAL, SELL ON CREDIT. SHOULD HE DO SO:
A. THE PRINCIPAL MAY DEMAND FROM HIM PAYMENT IN CASH
B. BUT THE COMMISSION AGENT SHALL BE ENTITLED TO ANY INTEREST OR BENEFIT,
WHICH MAY RESULT FROM SUCH SALE
 SPECIAL OBLIGATIONS OF FACTOR/COMMISSION
AGENTS
4. TO INFORM THE PRINCIPAL OF SALE MADE ON CREDIT, IF AUTHORIZED TO DO SO [ART. 1906,
CC]
a. SHOULD THE COMMISSION AGENT, WITH AUTHORITY OF THE PRINCIPAL, SELL ON CREDIT, HE
SHALL SO INFORM THE PRINCIPAL, WITH A STATEMENT OF THE NAMES OF THE BUYERS
b. SHOULD HE FAIL TO DO SO, THE SALE SHALL BE DEEMED TO HAVE BEEN MADE FOR CASH
INSOFAR AS THE PRINCIPAL IS CONCERNED.
 SPECIAL OBLIGATIONS OF FACTOR/COMMISSION
AGENTS
5. TO INDEMNIFY PRINCIPAL FOR DAMAGES FOR FAILURE TO COLLECT THE CREDITS OF HIS
PRINCIPAL WHEN THEY FALL DUE [ART. 1908, CC]
GENERAL RULE: THE COMMISSION AGENT WHO DOES NOT COLLECT THE CREDITS OF HIS
PRINCIPAL AT THE TIME WHEN THEY BECOME DUE AND DEMANDABLE SHALL BE LIABLE FOR
DAMAGES
EXCEPTION IF: HE PROVES THAT HE EXERCISED DUE DILIGENCE FOR THAT PURPOSE
 SPECIAL OBLIGATIONS OF FACTOR/COMMISSION
AGENTS
6. WHEN HE RECEIVES A GUARANTEE COMMISSION (DEL CREDERE COMMISSION) [ART. 1907,
CC]
a. BEAR THE RISK OF COLLECTION
b. PAY THE PRINCIPAL THE PROCEEDS OF THE SALE ON THE SAME TERMS AGREED UPON WITH
THE PURCHASER
 LIABILITIES OF THE AGENT

• LIABILITY TO THIRD PERSONS

• LIABILITY TO THE PRINCIPAL
• LIABILITY OF TWO OR MORE AGENTS
 LIABILITY TO THIRD PERSONS

• AGENT NOT PERSONALLY LIABLE AS A GENERAL RULE

• GENERAL RULE AN AGENT WHO ACTS AS SUCH IS NOT PERSONALLY LIABLE TO THE PARTY WITH
WHOM CONTRACTS [ART. 1897, CC]
• EXCEPTIONS
1. WHEN HE ACTS IN HIS OWN NAME, EXCEPT WHEN THE CONTRACT INVOLVES THINGS
BELONGING TO THE PRINCIPAL [ART. 1883, CC]
2. IF HE EXPRESSLY BINDS HIMSELF [ART. 1897, CC]
3. IF HE EXCEEDS THE LIMITS OF HIS AUTHORITY WITHOUT GIVING SUCH PARTY SUFFICIENT NOTICE
OF HIS POWERS [ART. 1897, CC]
 LIABILITY TO THIRD PERSONS

• WHEN AN AGENT CONTRACTS IN HIS OWN NAME AND WITHOUT THE EXPRESS AUTHORITY
OF HIS PRINCIPAL, THE OBLIGATION SO CONTRACTED BY HIM IS PERSONAL AND IS NOT
BINDING ON HIS PRINCIPAL. [PNB V. AGUDELO]
• BUT THIRD PERSONS CANNOT SET UP THE FACT THAT THE AGENT HAS EXCEEDED HIS POWERS
IF THE PRINCIPAL HAS RATIFIED, OR HAS SIGNIFIED HIS WILLINGNESS TO RATIFY THE AGENT’S
ACTS [ART. 1901, CC]
 LIABILITY TO THIRD PERSONS

4. UNDER ART. 1898, CC

a. AGENT CONTRACTS IN THE NAME OF THE PRINCIPAL;
b. HE EXCEEDS THE SCOPE OF HIS AUTHORITY;
c. PARTY WITH WHOM HE CONTRACTED WITH IS AWARE OF THE LIMITS OF HIS POWERS; AND
d. THE AGENT UNDERTOOK TO SECURE THE PRINCIPAL’S RATIFICATION.
UNDER ART. 1898, CC, THE CONTRACT SHALL BE VOID IF THE PRINCIPAL DOES NOT RATIFY THE
CONTRACT AND THE PARTY WITH WHOM THE AGENT HAS CONTRACTED IS AWARE OF THE
LIMITS OF THE POWERS GRANTED BY THE PRINCIPAL.
 LIABILITY TO THIRD PERSONS
AGENT LIABLE FOR DAMAGES TO THIRD PERSONS UNDER ART. 1916 & 1917, CC
1. WHEN TWO PERSONS CONTRACT WITH REGARD TO THE SAME THING, ONE OF THEM WITH
THE AGENT AND THE OTHER WITH THE PRINCIPAL;
2. THE TWO CONTRACTS ARE INCOMPATIBLE WITH EACH OTHER
3. THE AGENT ACTED IN BAD FAITH
4. AGENT SHALL BE LIABLE FOR DAMAGES TO THIRD PERSON WHOSE CONTRACT MUST BE
REJECTED
 LIABILITY TO THE PRINCIPAL

• AGENT IS LIABLE FOR DAMAGES

1. DUE TO NON-PERFORMANCE OF AGENCY— THE AGENT IS LIABLE FOR THE DAMAGES WHICH,
THRU HIS NON-PERFORMANCE, THE PRINCIPAL MAY SUFFER [ART. 1884, CC]
2. FOR PREFERRING PERSONAL INTEREST TO THAT OF PRINCIPAL— THE AGENT SHALL BE LIABLE FOR
DAMAGES IF, THERE BEING A CONFLICT BETWEEN HIS INTERESTS AND THOSE OF THE PRINCIPAL,
HE SHOULD PREFER HIS OWN. [ART. 1889, CC]
3. DAMAGES DUE TO HIS WITHDRAWAL [ART. 1928, CC]
THE AGENT MUST INDEMNIFY THE PRINCIPAL FOR ANY DAMAGE THAT THE PRINCIPAL MAY SUFFER BY
REASON OF THE WITHDRAWAL OF THE AGENT;
 LIABILITY TO THE PRINCIPAL

EXCEPTION:
THE AGENT SHOULD BASE HIS WITHDRAWAL UPON THE IMPOSSIBILITY OF CONTINUING THE
PERFORMANCE OF THE AGENCY WITHOUT GRAVE DETRIMENT TO HIMSELF.
 LIABILITY TO THE PRINCIPAL

LIABILITY OF AGENT FOR ACTS OF SUBSTITUTE UNDER ART. 1892, CC

THE AGENT SHALL BE RESPONSIBLE FOR THE ACTS OF THE SUBSTITUTE:
1. WHEN HE WAS NOT GIVEN THE POWER TO APPOINT ONE; OR
2. WHEN HE WAS GIVEN SUCH POWER, BUT WITHOUT DESIGNATING THE PERSON, AND THE
PERSON APPOINTED WAS NOTORIOUSLY INCOMPETENT OR INSOLVENT.
 LIABILITY TO THE PRINCIPAL

• PRINCIPAL MAY BRING AN ACTION AGAINST THE SUBSTITUTE WITH RESPECT TO THE
OBLIGATIONS WHICH HE HAS CONTRACTED UNDER THE SUBSTITUTION. [ART 1893, CC]
• ALL ACTS OF THE SUBSTITUTE APPOINTED AGAINST THE PROHIBITION OF THE PRINCIPAL IS
VOID. [ART 1893, CC]
• RESPONSIBILITY FOR FRAUD OR NEGLIGENCE
THE AGENT IS RESPONSIBLE NOT ONLY FOR FRAUD, BUT ALSO FOR NEGLIGENCE, WHICH SHALL
BE JUDGED WITH MORE OR LESS RIGOR BY THE COURTS, ACCORDING TO WHETHER THE
AGENCY WAS OR WAS NOT FOR COMPENSATION. [ART. 1909, CC]
 LIABILITY TO THE PRINCIPAL

• INTEREST UNDER ART. 1896, CC

THE AGENT OWES INTEREST ON:
1. THE SUMS HE HAS APPLIED TO HIS OWN USE FROM THE DAY ON WHICH HE DID SO
2. THOSE WHICH HE OWES AFTER THE EXTINGUISHMENT OF THE AGENCY
a. IF HE CONVERTED FOR PERSONAL USE, HIS LIABILITY IS WITHOUT PREJUDICE TO A CRIMINAL
ACTION THAT MAY BE BROUGHT AGAINST HIM.
b. IF FOR THE SUM HE OWES AFTER EXTINGUISHMENT, DEMAND IS NOT NECESSARY BECAUSE THE
AGENT IS REQUIRED TO DELIVER TO THE PRINCIPAL WHATEVER HE MAY HAVE RECEIVED BY VIRTUE
OF THE AGENCY. [ART 1891, CC]
 LIABILITY OF TWO OR MORE AGENTS

• LIABILITY IS JOINT AS A GENERAL RULE [ART. 1894, CC]

• GENERAL RULE: RESPONSIBILITY OF TWO OR MORE AGENTS, EVEN THOUGH THEY HAVE BEEN
APPOINTED SIMULTANEOUSLY, IS JOINT
• EXCEPTION: SOLIDARITY IS EXPRESSLY STIPULATED
 LIABILITY OF TWO OR MORE AGENTS

• LIABILITY OF TWO OR MORE AGENTS [ART. 1895, CC]

IF SOLIDARITY HAS BEEN AGREED UPON, EACH OF THE AGENTS IS RESPONSIBLE FOR:
1. THE NON-FULFILLMENT OF AGENCY; AND
2. FOR THE FAULT OR NEGLIGENCE OF HIS FELLOWS AGENTS, EXCEPT: WHEN THE FELLOW
AGENTS ACTED BEYOND THE SCOPE OF THEIR AUTHORITY IN CASE OF FAULT OR
NEGLIGENCE.
 OBLIGATIONS OF THE PRINCIPAL

• TO COMPLY WITH THE OBLIGATIONS CONTRACTED BY THE AGENT

• TO ADVANCE NECESSARY SUMS AND REIMBURSE THE AGENT
• TO INDEMNIFY AGENT FOR DAMAGES
• TO PAY THE AGENT’S COMPENSATION
• BE SOLIDARILY LIABLE
 OBLIGATIONS OF THE PRINCIPAL
GENERAL RULE: THE ACT OF THE AGENT IS THE ACT OF THE PRINCIPAL
PRINCIPAL IS BOUND BY THE ACTS OF HIS AGENT. HE HAS AN OBLIGATION TO DEAL FAIRLY AND
IN GOOD FAITH WITH HIS AGENT
SPECIFIC OBLIGATIONS OF THE PRINCIPAL
1. TO COMPLY WITH THE OBLIGATIONS CONTRACTED BY THE AGENT
2. TO ADVANCE NECESSATY SUMS AND REIMBURSE THE AGENT
3. TO INDEMNIFY AGENT FOR DAMAGES
4. TO PAY THE AGENT’S COMPENSATION
5. BE SOLIDARILY LIABLE
 TO COMPLY WITH THE OBLIGATIONS CONTRACTED
BY THE AGENT
OBLIGATIONS PRINCIPAL IS BOUND TO COMPLY WITH
1. OBLIGATIONS WHICH THE AGENT MAY HAVE CONTRACTED WITHIN THE SCOPE OF HIS
AUTHORITY [ART. 1910, CC]
PRINCIPAL IS DIRECTLY LIABLE TO CREDITOR FOR DEBT INCURRED BY AGENT ACTING WITHIN THE
SCOPE OF HIS AUTHORITY. THAT THE AGENT ALSO BOUND HIMSELF PERSONALLY DOES NOT
RELIEVE PRINCIPAL FROM LIABILITY IF THE DEBT WAS INCURRED FOR HIS BENEFIT. [TUASON V.
OROZCO]
 TO COMPLY WITH THE OBLIGATIONS CONTRACTED
BY THE AGENT
OBLIGATIONS PRINCIPAL IS BOUND TO COMPLY WITH
2. OBLIGATIONS WHICH THE AGENT MAY HAVE CONTRACTED BEYOND THE SCOPE OF HIS
AUTHORITY BUT WERE RATIFIED EXPRESSLY OR TACITLY BY THE PRINCIPAL [ART. 1910, CC]
CONDITIONS FOR RATIFICATION
a. THE PRINCIPAL MUST HAVE CAPACITY AND POWER TO RATIFY.
b. THE ACT MUST BE DONE IN BEHALF OF THE PRINCIPAL
c. HE MUST RATIFY THE ACTS IN ITS ENTIRETY
d. THE ACT MUST BE CAPABLE OF RATIFICATION E. HE MUST HAVE HAD KNOWLEDGE OF
MATERIAL FACTS
 TO COMPLY WITH THE OBLIGATIONS CONTRACTED
BY THE AGENT
OBLIGATIONS PRINCIPAL IS BOUND TO COMPLY WITH
3. WHEN AN AGENT ACTS IN HIS OWN NAME, BUT THE CONTRACT INVOLVES THINGS
BELONGING TO THE PRINCIPAL, THE CONTRACT MUST BE CONSIDERED AS ENTERED INTO
BETWEEN THE PRINCIPAL AND THE THIRD PERSON. [ART. 1883, CC; SY-JUCO AND VIARDO V SY-
JUCO, 1920]
4. THE PRINCIPAL IS SOLIDARILY LIABLE WITH THE AGENT WHO HAS EXCEEDED HIS AUTHORITY IF
THE FORMER ALLOWED THE LATTER TO ACT AS THOUGH HE HAD FULL POWER. [ART. 1911, CC]
5. IF TWO PERSONS CONTRACT SIMULTANEOUSLY WITH AGENT & PRINCIPAL FOR THE SAME
THING: A. CONTRACT OF PRIOR DATE PREVAILS B. IF APPLICABLE, FOLLOW THE RULE ON DOUBLE
SALES IN ART. 1544, CC. [ART. 1916, CC]
 TO ADVANCE NECESSARY SUMS AND REIMBURSE THE
AGENT
• OBLIGATION TO ADVANCE SUMS [ART. 1912, CC]
THE PRINCIPAL MUST ADVANCE TO THE AGENT, SHOULD THE LATTER SO REQUEST, THE SUMS
NECESSARY FOR THE EXECUTION OF THE AGENCY.
• OBLIGATION TO REIMBURSE [ART. 1912, CC]
1. SHOULD THE AGENT HAVE ADVANCED SUMS, THE PRINCIPAL MUST REIMBURSE HIM EVEN IF THE
BUSINESS OR UNDERTAKING WAS NOT SUCCESSFUL, PROVIDED THE AGENT IS FREE FROM ALL
FAULT.
2. THE REIMBURSEMENT SHALL INCLUDE INTEREST ON THE SUMS ADVANCED, FROM THE DAY ON
WHICH THE ADVANCE WAS MADE.
 TO ADVANCE NECESSARY SUMS AND REIMBURSE THE
AGENT
• EXCEPTIONS TO OBLIGATION TO REIMBURSE [ART.1918] (FCKS)
1. WHEN THE EXPENSES WERE DUE TO THE FAULT OF THE AGENT;
2. 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;
3. WHEN THE AGENT INCURRED THEM WITH KNOWLEDGE THAT AN UNFAVORABLE RESULT
WOULD ENSUE, IF THE PRINCIPAL WAS NOT AWARE THEREOF;
4. WHEN IT WAS STIPULATED THAT THE EXPENSES WOULD BE BORNE BY THE AGENT, OR THAT
THE LATTER WOULD BE ALLOWED ONLY A CERTAIN SUM.
TO ADVANCE NECESSARY SUMS AND REIMBURSE THE
AGENT
• UNDER ART. 1236(2), CC:
“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.”
 TO ADVANCE NECESSARY SUMS AND REIMBURSE THE
AGENT
• AGENT’S RIGHT TO RETAIN IN PLEDGE OBJECT OF AGENCY SHOULD PRINCIPAL FAIL TO REIMBURSE
HIM
1. THE AGENT MAY RETAIN IN PLEDGE THE THINGS WHICH ARE THE OBJECT OF THE AGENCY UNTIL
THE PRINCIPAL:
a. EFFECTS THE REIMBURSEMENT SET FORTH IN ART. 1912, CC; AND
b. PAYS INDEMNITY SET FORTH IN ART. 1913, CC
2. BUT AGENT IS NOT ENTITLED TO THE EXCESS IN CASE THE THING WAS SOLD TO SATISFY HIS CLAIM,
AND THE PROCEEDS ARE MORE THAN HIS CLAIM [ARTS. 2115, 2121, CC]. ALSO HE MUST POSSESS
THE THING LAWFULLY IN HIS CAPACITY AS AGENT [2 C.J.S. 457]
 TO INDEMNIFY THE AGENT FOR DAMAGES

• OBLIGATION TO PAY INDEMNITY FOR DAMAGES [ART. 1913, CC]

THE PRINCIPAL MUST INDEMNIFY THE AGENT FOR ALL THE DAMAGES WHICH THE EXECUTION OF
THE AGENCY MAY HAVE CAUSED THE LATTER, WITHOUT FAULT OR NEGLIGENCE ON HIS PART
THE AGENT’S HAS THE RIGHT TO RETAIN IN PLEDGE THE OBJECT OF THE AGENCY SHOULD
PRINCIPAL FAIL TO PAY THE INDEMNITY SET FORTH IN ART. 1913, CC.
 TO PAY THE AGENT’S COMPENSATION

• AGENCY IS PRESUMED TO BE FOR A COMPENSATION, UNLESS THERE IS PROOF TO THE

CONTRARY. [ART. 1875, CC]
 TO PAY THE AGENT’S COMPENSATION

• GENERAL RULE ON COMMISSION

THE AGENT MUST BE THE EFFICIENT PROCURING CAUSE IN ORDER TO BE ENTITLED TO
COMPENSATION [INLAND REALTY V. COURT OF APPEALS]. HIS EFFORTS MUST HAVE RESULTED IN
FINDING A READY, ABLE AND WILLING BUYER OF THE GOODS.
• BUT FOR EQUITY PURPOSES, COMMISSION MAY BE GRANTED IF THE AGENT, EVEN IF HE IS NOT
THE PROCURING CAUSE, NONETHELESS TOOK DILIGENT STEPS TO BRING BACK THE PARTIES
WHICH LED TO THE CONSUMMATION OF THE SALE [PRATS V. COURT OF APPEALS]
 TO PAY THE AGENT’S COMPENSATION

• COMPENSATION OF BROKERS
SINCE THE BROKER’S ONLY JOB IS TO BRING TOGETHER THE PARTIES TO A TRANSACTION, IT
FOLLOWS THAT IF THE BROKER DOES NOT SUCCEED IN BRINGING THE MIND OF THE PURCHASER
AND THE VENDOR TO AN AGREEMENT WITH REFERENCE TO THE TERMS OF A SALE, HE IS NOT
ENTITLED TO A COMMISSION. [ROCHA V PRATS, 1922]
 TO PAY THE AGENT’S COMPENSATION

• DOCTRINE OF PROCURING CAUSE

• WHEN A PARTY IS NOT THE EFFICIENT PROCURING CAUSE IN BRINGING ABOUT A SALE, HE IS
NOT ENTITLED TO THE STIPULATED BROKER’S COMMISSION. [INLAND REALTY V CA, 1997]
• IF THE PRINCIPAL BREAKS OFF FROM NEGOTIATIONS WITH A BUYER BROUGHT BY THE AGENT
IN ORDER TO DELIBERATELY DEAL LATER WITH THE BUYER PERSONALLY, THIS IS EVIDENT BAD
FAITH. IN SUCH CASE, JUSTICE DEMANDS COMPENSATION FOR THE AGENT. [INFANTE V
CUNANAN, 1953]
 TO BE SOLIDARILY LIABLE

• WITH AGENT, IF AGENT ACTED BEYOND SCOPE OF AUTHORITY AND PRINCIPAL ALLOWED HIM TO
ACT AS THOUGH HE HAD FULL POWERS
EVEN WHEN THE AGENT HAS EXCEEDED HIS AUTHORITY, THE PRINCIPAL IS SOLIDARILY LIABLE WITH
THE AGENT IF THE FORMER ALLOWED THE LATTER TO ACT AS THOUGH HE HAD FULL POWERS. [ART.
1911, CC]
• WITH PERSON WHO APPOINTED AN AGENT WITH HIM FOR A COMMON TRANSACTION
IF TWO OR MORE PERSONS HAVE APPOINTED AN AGENT FOR A COMMON TRANSACTION OR
UNDERTAKING, THEY SHALL BE SOLIDARILY LIABLE TO THE AGENT FOR ALL THE CONSEQUENCES OF
THE AGENCY. [ART. 1915, CC]
 EXTINGUISHMENT OF AGENCY

1. EXPIRATION OF THE PERIOD FOR WHICH IT WAS CONSTITUTED

2. DEATH, CIVIL INTERDICTION, INSANITY, INSOLVENCY
3. WITHDRAWAL OF THE AGENT
4. ACCOMPLISHMENT OF THE OBJECT OF THE AGENCY
5. REVOCATION
6. DISSOLUTION OF THE FIRM/CORP. WHICH ENTRUSTED/ACCEPTED THE AGENCY
 EXPIRATION OF THE PERIOD FOR WHICH THE
AGENCY WAS CONSTITUTED
• IF CREATED FOR FIXED PERIOD, EXPIRATION OF THE PERIOD EXTINGUISHES AGENCY EVEN IF
THE PURPOSE WAS NOT ACCOMPLISHED
• IF NO TIME IS SPECIFIED, ART. 1197 SHALL APPLY. THE COURTS MAY FIX THE PERIOD “AS
UNDER THE CIRCUMSTANCES HAVE BEEN PROBABLY CONTEMPLATED BY THE PARTIES”.
• PERIOD MAY BE IMPLIED FROM TERMS OF AGREEMENT, PURPOSE OF AGENCY, AND THE
CIRCUMSTANCES OF THE PARTIES
 DEATH. CIVIL INTERDICTION. INSANITY. INSOLVENCY

• DEATH EXTINGUISHES AGENCY

GENERAL RULE: DEATH EXTINGUISHES AGENCY EXCEPTIONS:
1. AGENCY COUPLED WITH AN INTEREST A. INTEREST COMMON TO PRINCIPAL AND AGENT; OR B.
INTEREST OF A 3RD PERSON WHO HAS ACCEPTED THE STIPULATION IN HIS FAVOR. [ART. 1930,
CC]
2. ANYTHING DONE BY THE AGENT, WITHOUT KNOWLEDGE OF THE DEATH OF THE PRINCIPAL OR
OF ANY OTHER CAUSE WHICH EXTINGUISHES THE AGENCY, IS VALID AND FULLY EFFECTIVE WITH
RESPECT TO 3 RD PERSONS WHO MAY HAVE CONTRACTED WITH HIM IN GOOD FAITH. [ART.
1931, CC]
3. AGENT MUST FINISH BUSINESS ALREADY BEGUN ON THE DEATH OF THE PRINCIPAL, SHOULD
DELAY ENTAIL ANY DANGER. [ART. 1884, CC]
 DEATH. CIVIL INTERDICTION. INSANITY. INSOLVENCY

• OBLIGATION OF HEIRS OF AGENT UPON AGENT’S DEATH [ART. 1932, CC

1. THEY MUST NOTIFY THE PRINCIPAL OF THE AGENT’S DEATH
2. THEY SHOULD ADOPT SUCH MEASURES AS THE CIRCUMSTANCES MAY DEMAND IN THE
INTEREST OF THE PRINCIPAL IN THE MEANTIME.
3. THE LAW DOES NOT IMPOSE A DUTY ON THE PRINCIPAL’S HEIRS TO NOTIFY THE AGENT OF
THE PRINCIPAL’S DEATH. [RALLOS VS FELIX GO CHAN]
 WITHDRAWAL OF THE AGENT

• GENERAL RULE: AGENT MAY WITHDRAW FROM THE AGENCY BY GIVING DUE NOTICE TO THE
PRINCIPAL [ART. 1928, CC]
• BUT: IF THE PRINCIPAL SHOULD SUFFER ANY DAMAGE BY REASON OF THE WITHDRAWAL, THE
AGENT MUST INDEMNIFY HIM;
• EXCEPTION: IF THE AGENT BASED HIS WITHDRAWAL UPON THE IMPOSSIBILITY OF
CONTINUING PERFORMANCE OF THE AGENCY WITHOUT GRAVE DETRIMENT TO HIMSELF. [ART.
1928, CC]
 WITHDRAWAL OF THE AGENT

• THE AGENT, EVEN IF HE SHOULD WITHDRAW FROM THE AGENCY FOR A VALID REASON, MUST
CONTINUE TO ACT UNTIL THE PRINCIPAL HAS HAD REASONABLE OPPORTUNITY TO TAKE THE
NECESSARY STEPS TO MEET THE SITUATION. [ART. 1929, CC]
 ACCOMPLISHMENT OF THE OBJECT OF THE AGENCY

• BETWEEN PRINCIPAL AND AGENT, THE FULFILMENT OF THE PURPOSE FOR WHICH AGENCY
WAS CREATED IPSO FACTO TERMINATES AGENCY EVEN IF IT BE EXPRESSLY MADE IRREVOCABLE.
IF THE PURPOSE HAS NOT BEEN ACCOMPLISHED, THE AGENCY CONTINUES INDEFINITELY FOR
AS LONG AS THE INTENT TO CONTINUE IS MANIFESTED THROUGH WORDS OR ACTIONS OF
THE PARTIES
 REVOCATION

• PRINCIPAL MAY REVOKE THE AGENCY AT WILL AS A GENERAL RULE

• GENERAL RULE: THE PRINCIPAL MAY REVOKE THE AGENCY AT WILL, AND COMPEL THE AGENT
TO RETURN THE DOCUMENT EVIDENCING THE AGENCY.
• SUCH REVOCATION MAY BE EXPRESS OR IMPLIED. [ART. 1920, CC]
 REVOCATION

• EXCEPTIONS:
1. THE RIGHT OF THE PRINCIPAL TO TERMINATE THE AUTHORITY OF HIS AGENT IS ABSOLUTE AND
UNRESTRICTED, EXCEPT ONLY THAT HE MAY NOT DO SO IN BAD FAITH [DANON V BRIMO, 1921]
2. AGENCY IS COUPLED WITH AN INTEREST [ART. 1927, CC]
a. A BILATERAL CONTRACT DEPENDS UPON IT
b. IT IS THE MEANS OF FULFILLING AN OBLIGATION ALREADY CONTRACTED;
c. PARTNER IS APPOINTED MANAGER OF A PARTNERSHIP IN THE CONTRACT OF PARTNERSHIP AND
HIS REMOVAL FROM THE MANAGEMENT IS UNJUSTIFIABLE