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AGENCY 2009 (PASCUAL)

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I. Nature, Form and Kinds

3.

Basis

A.

ARTICLE 1868

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.

Rallos v. Felix Go Chan (MAI) January 31, 1978 Muoz Palma, J. FACTS: Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of land known as Lot No. 5983. In 1954, they executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf the aforementioned parcel of land. On March 1955, Concepcion Rallos died. On September 1955, Simeon Rallos sold the undivided shares of his sisters in lot 5983 to Felix Go Chan and Sons Realty Corporation. The deed of sale was registered and the previous TCT was cancelled. On May 1956, Ramos Rallos, as administrator of the Intestate Estate of Concepcion Rallos, filed a complaint with the CFI of Cebu, praying (1) that the sale of the undivided share of the deceased Concepcion Rallos be declared unenforceable, and said share be reconveyed to her estate; (2) that the TCT issued in the name of Felix Go Chan and Sons Realty Corporation be cancelled; and (3) that the plaintiff be indemnified by way of attorneys fees and payment of costs of suit. The trial court rendered judgment declaring the deed of sale null and void, insofar as the one-half pro-indiviso share of Concepcion Rallos in the property in question, and sentencing Juan Borromeo, the administrator of the estate of Simeon Rallos, to pay Felix Go Chan and Sons Realty Corporation the sum representing the price of one-half of the lot. The appellate court reversed the decision and sustained the sale. ISSUE: Whether or not the sale of the agent of the principals property after the latters death is valid HELD: NO. The general rule in Article 1919 of the NCC is that death is one of the causes for the extinguishment of agency. There being an integration of the personality of the principal into that of the agent, it is not possible for the representation to continue once the death of either is established. There are certain exceptions, however, Article 1931 being one of them. Under this provision, an act done by the agent after the death of the principal is valid and effective if two conditions concur: (1) the agent acted without knowledge of the death of the principal; and (2) that the third person who contracted with the agent acted in good faith. But because it was established that Simeon Rallos had knowledge of the death of his principal when he made the sale, Article 1931 will not apply. The general rule shall apply then that any act of an agent after the death of his principal is void ab initio. Simeon Rallos act

1. 2.

Definition Nature

Orient Air Services & Hotel Rep. v CA (GEN) May 29, 1991 Padilla, J. FACTS: American Airlines Inc. (AAI) and Orient Air Services and Hotel Representatives (Orient Air) entered into a General Sales Agency Agreement authorizing the latter to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation. Due to the alleged failure of Orient Air to promptly remit the net proceeds of sales for 6 months, AAI undertook the collection of the proceeds of tickets sold originally by Orient Air and terminated the agency agreement. AAI then instituted suit against Orient Air with CFI of Manila for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order. The CFI of Manila ruled in favor of Orient Air and dismissed the complaint. It then ordered AAI to reinstated Orient Air as its general sales agent for passenger transportation in the Philippines. The IAC affirmed with modifications the findings of CFI of Manila. ISSUE: WON the lower court may compel AAI to extend its personality to Orient Air? HELD: NO. It would be violative of the principles and essence of agency, defined by law as a contract whereby a person binds himself to another to render some service or to do something in representation or on behalf of another WITH THE CONSENT OR AUTHORITY OF THE LATTER. In an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. Such a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court.

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of selling the share of Concepcion after her death is therefore null and void. AGENCY: The relationship of agency is whereby one party, called the principal (mandante), authorizes another, called the agent (mandatario), to act for and in his behalf in transactions with third persons. The essential elements of agency are: (1) there is consent, express or implied of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agents acts as a representative and not for himself, and (4) the agent acts within the scope of his authority. Agency is basically personal representative, and derivative in nature. The authority of the agent to act emanates from the powers granted to him by his principal; his act is the act of the principal if done within the scope of the authority. Qui facit per alium facit se. "He who acts through another acts himself". Victoria Milling v. CA (ROG) Bordador v. Luz (TOFF) Caram v. Laureta (REG) 1981 FACTS: In 1945, Mata conveyed a parcel of land in favor of Laureta (first vendee). The deed of absolute sale was unregistered because it was not acknowledged before a notary public or any authorized officer. However, Mata delivered possession to Lauereta, as well as an Owners Duplicate Original (wth!) certificate of title. In 1947, the same land was sold by Mata to Caram through his representatives Irespe and Aportadera. The deed of sale was acknowledged by Attorney. Aportadera. Aportadera and Arcilla filed with the CFI of Davao a petition for the issuance of a new Owners Duplicate of Original Certificate alleging as ground the loss of said title. It was granted. The second sale was later registered in the Registry of Deeds. Petitioner contends that Irespe was merely a broker or intermediary with the task to make the payment to Mata; and that Aportadera merely acted as a notary public. ISSUES: 1) WON Irespe and Aportadera served as agents of Caram. (YES) 2) WON the two were in bad faith. (YES) 3) WON Caram, as principal, is deemed also in bad faith. (YES) HELD: 1. The facts of record show that Mata, the vendor, and Caram, the second vendee had never met. During the trial, Mata testified that he knows Attorney. Aportadera but did not know Caram. Thus, the sale of the property could have only been through Caram's representatives, Irespe and Aportadera.

2.

When Leaning Mansaca narrated to Attorney. Aportadera the circumstances under which his property had been sold to Laureta, he must have included in the narration the sale of the land of Mata, for the two properties had been sold on the same occassion and under the same circumstances. Irespe, who was the witness in most of the cases filed by Attorney. Aportadera in his capacity as Provincial Fiscal of Davao against Laureta, must have known of the purchases of lands made by Laureta. Even if Irespe and Aportadera did not have actual knowledge of the first sale, still their actions have not satisfied the requirement of good faith. Bad faith is not based solely on the fact that a vendee had knowledge of the defect or lack of title of his vendor. Irespe and Aportadera had knowledge of circumstances which ought to have put them an inquiry. Both of them knew that Mata's certificate of title together with other papers pertaining to the land was taken by soldiers under the command of Col. Laureta. Also, at the time of the second sale, Laureta was already in possession of the land. Irespe and Aportadera should have investigated the nature of Laureta's possession. Caveat emptor.

3.

Applying the principle of agency, Caram as principal, should also be deemed to have acted in bad faith.

Effect: as if no there was no registration at all Air France v CA, Jose Gana (ABBY) Dec. 29, 1983 Melencio Herrera FACTS: The Ganas purchased from Air France through Imperial Travels, a duly authorized agent, 9 open dated tickets for a Manila/Osaka/Tokyo/Manila. The expiry date was May 8, 1970. Jose Gana sought the assistance of Teresita Manucdoc, a secretary of the company where Jose Gana worked, to procure the extension of the validity of their tickets. Manucdoc talked with Lee Ella, Manager of the Philippine Travel Bureau. She was told that they would have to pay fare differentials and that the extension is impossible. The GANAS scheduled their departure for May 7 and on May 6, Teresita again asked for Lee Ellas help in the revalidation. She was told that it would only be valid until May 8 and no longer valid for the rest of the trip after that. However, Ella attached revalidation stickers on the

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tickets (revalidated by the Philippine Travel Bureau), without informing Air France. The Ganas departed and but the airlines refused to honor their tickets at the start of the Osaka/Tokyo leg. The GANAS had to purchase new tickets at readjusted rates and arrived at Manila on different dates. TC-Air France. CA- Ganas. SC-Air France ISSUES: 1. WON Ella acted beyond his powers as travel agent? YES 2. WON notice to Manucdoc is notice to the Ganas? YES HELD: The GANAS cannot defend by contending lack of knowledge of those rules since the evidence bears out that Teresita, who handled travel arrangements for the GANAS, was duly informed by travel agent Ella of the advice of Reno, the Office Manager of Air France, that the tickets in question could not be extended beyond the period of their validity without paying the fare differentials and additional travel taxes brought about by the increased fare rate and travel taxes. To all legal intents and purposes, Teresita was the agent of the Ganas and notice to her of the rejection of the request for extension of the validity of the tickets was notice to Gana as her principal. The circumstances that AIR FRANCE personnel at the ticket counter in the airport allowed the GANAS to leave is not tantamount to an implied ratification of travel agent Ella's irregular actuations. The validating stickers that Ella affixed on his own merely reflect the status of reservations on the specified flight and could not legally serve to extend the validity of a ticket or revive an expired one. The conclusion is inevitable that the GANAS brought upon themselves the predicament they were in for having insisted on using tickets that were due to expire in an effort, perhaps, to beat the deadline and in the thought that by commencing the trip the day before the expiry date, they could complete the trip even thereafter. It should be recalled that AIR FRANCE was even unaware of the validating SAS and JAL. stickers that Ella had affixed spuriously. Consequently, Japan Air Lines and AIR FRANCE merely acted within their contractual rights when they dishonored the tickets on the remaining segments of the trip and when AIR FRANCE demanded payment of the adjusted fare rates and travel taxes for the Tokyo/Manila flight.

5.

Essential Elements of Contract of Agency

Rallos v. Felix Chan, supra

6.

Characteristics of an Agency Contract

Smith vs. Lopez (EARLA) September 30, 1905 Torres, J. FACTS: Nicasio Lopez, as administrator of the house owned by his two daughters, contracted the services of Philippine Gas Light Company for the installation of a water system, urinals, closets, shower baths, and drain pipes in the house at 142 Calle Dulumbayan, Santa Cruz Manila. This was done pursuant to the order of the Board of Health. The Company, with Smith and Reyes as proprietors, incurred a total of P4020 Mexican currency; P750 of which was already paid, leaving a balance of P3270. Failing to pay, Smith and Reyes instituted an action to recover the P3270 plus interest, from the sisters, Jacinta and Ignacia Lopez de Pineda. As a defense, the sisters claimed, among others, that they are not liable for the sum demanded since the works done by Smith were done without the authority or consent of the sisters. The CFI ruled in favor of Smith and ordered the Lopez sisters to pay P2717.40 local currency. ISSUE: WON Nicasio Lopez is the agent of his two daughters? Yes. HELD: Nicasio is the administrator of the property of the defendant. Pursuant to the order of the Board of Health, he contracted the services of the Phil. Gas Light Company for the installation of certain fixtures. Accordingly, he did all these voluntarily. Thus, although there was no express consent given by the sisters, through a valid power of attorney, there was an IMPLIED power, because the sisters did not object to the work being done on the house, which benefited them in the end. There was a quasi-contract which created certain reciprocal obligations between them and the plaintiffs. Moreover, it is presumed from their failure to object to the work being done that they were approving it, thereby ratifying the act of their father, as though he acted under an express power from them. It cannot also be denied that they have benefited from the work done by Smith, et al: The house was not improved by said work. Likewise, If it were not undertaken by the plaintiffs, the Board of Health would have undertaken the same work at the

4.

Purpose

Orient Air Services v CA, supra

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expense of the sisters. Thus, it is only just that they be ordered to pay the cost of the work and the value of the materials used. Thomas v. Pineda (JANCES) Severino v. Severino (JILL) January 16, 1923 Ostrand, J. FACTS; Melecio Severino owned a land, by which brother Guillermo served as administrator. Upon the death of Melecio, Guillermo continued occupation of the land, and in a cadastral proceeding successfully had the land Titled in his favor, considering that he has possessed it for 30 years. This action now is brought by the natural daughter and sole heir of Melecio, Fabiola Severino, to compel defendant Guillermo to convey the lands in her favor. Meanwhile, administratrix of Melecios estate, Felicitas Villanueva, also intervened so the land will be conveyed in the estates name. Defendant argues that the land was owned in common by their father and did not solely belong to Melecio and that his Title is indefeasible under the Land Registration Act. ISSUE: WON defendant Guillermo has rights over the property? NO. HELD: The relation of an agent to a principal is fiduciary, and the agent is estopped from acquiring or asserting Title adverse to the principal. His position is analogous to a trustee, and that whatever he does inures to the benefit of the cestui que vie. In Gilbert v. Hewetson, a trustee or agent is utterly disabled from acquiring for his own any property committed in his custody. This is entirely independent of the fact whether any fraud has intervened. No fraud in fact need be show. The rule stands on moral obligation to refrain from placing ones self in conflicts of self-interest and integrity. It seeks to remove the temptation that might arise out of ones relation to serve anothers interest for his own benefit. Here, while the legal title of Guillermo is not questioned, it must be deemed as to inure to the benefit of the estate of Melecio Severino, as the cestui que vie with superior equitable right. It must be noted that the property shall inure to the ESTATES benefit and not to the daughter who brought the action since it is the estate who will apportion all the claims. Moreover, the legitimacy of Fabiola as a natural child is also being questioned. Dumaguin v. Reynolds (ALAIN) Palma v Cristobal (GEN) Dec. 11, 1946 Perfecto, J. FACTS: In 1909, after registration proceedings, OCT was issued in the names of petitioner and his wife Luisa. After the latters death, a new certificate of title was issued only in the name of petitioner. The parcel of land is a community property held by petitioner in trust for the real owners (respondent). The registration was made in accordance with an understanding between the co-owners of the confidence they reposed upon the petitioner and his wife. It was only after the death of Luisa and after petitioners subsequent marriage that trouble on religious matters arose between petitioner and respondent. Petitioner then sought to eject respondent from the land. This was dismissed and another complaint was filed, wherein the petitioner prays that he be declared the owner of the land. ISSUE: WON petitioner may be declared the owner of the land? HELD: NO. The registration of the property in the name of the trustees in possession thereof, must be deemed to have been effected for the benefit of the cestui que trust. Whether or not there is bad faith or fraud in obtaining a decree with respect to a registered property, the same does not belong to the person in whose favor it was issued, and the real owners would be entitled to recover the ownership of the property so long as the same has not been transferred to a third person who has acquired it in good faith and for valuable consideration. Thus, the petitioner, being a trustee, does not acquire the land registered in his name. Araneta v. del Paterno (MAI) August 22, 1952 Tuason, J. FACTS: Paz Tuason de Paterno is the registered owner of a parcel of land, which was subdivided into lots. Most of these lots were occupied by lessees who had contracts of lease that would expire at a certain time, and carried a stipulation giving the lessees a right of first refusal in case the lots were to be sold. In 1940 and 1941, Paz Tuason obtained from Jose Vidal several loans, and constituted a mortgage on the property to secure the debt. In 1943, she obtained additional loans upon the same security. She decided to sell the whole property to Gregorio Araneta, Inc. The day after the agreement was signed, Paz Tuason offered to Vidal a check in full

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settlement of her mortgage obligation but Vidal refused to accept it or cancel the mortgage. Gregorio Araneta instituted the case to compel Paz Tuason to deliver to the former a clear title of the lots. One of the objections made against the sale is that Jose Araneta, president of Gregorio Araneta Inc., was also the agent of Paz Tuason. ISSUE: Whether or not Gregorio Araneta was the agent of Paz Tuason HELD: NO. Article 1459 of the Spanish Civil Code provides: The following persons cannot take by purchase, even at a public or judicial auction, either in person or through mediation of another: 2. An agent, any property of which the management or sale may have been entrusted to him; However, in the opinion of Manresa, an agent (in the sense of Article 1459) is one who accepts anothers representation to perform in his name certain acts of more or less transcendency. The ban of paragraph 2 of Article 1459 connotes the idea of trust and confidence. To come under this prohibition, the agent must be in a fiduciary relation with his principal. Tested by this standard, Jose Araneta was not an agent within the meaning of Article 1459. He was nothing more than a go-between or middleman between Paz Tuason and Gregorio Araneta, Inc. to bring them together to make the contract themselves. Jose Araneta was not authorized to make a binding contract for Paz Tuason. He had no power or discretion, which he could abuse to his advantage and to the owners prejudice. Allied Free Workers v. Compania Maritima (ROG) Far Eastern Export v. Lim Tech Suan (TOFF) 1955 Montemayor, J. FACTS: FEEIC agent Delizalde went to the store of Suan to sell textile which offer was thereafter agreed upon. Delizalde later on returned with buyers order and a document signifying payment be done by Confirmed Irrevocable Letter of Credit among others. In accordance with this, Suan established a letter of credit in favor of Frenkel International Corporation. When the textile arrived at Manila, Suan complained to FEEIC of the inferior quality of the textile and had them examined, where a report was submitted by the examining body. Upon instructions by FEEIC, Suan deposited goods with the United Warehouse Corp. but subsequently withdrew 15 cases of textile to offer them for sale. The net direct loss was P11,476.66. A complaint for damages representing difference in price between textile ordered and received, unrealized profits and cost of suit was instituted against FEEIC. FEEIC set up that it only acted as broker in the transaction and took no further action after placement of order as defense. It averred that the cargo was directly taken by Suan from Frenkel. The trial court acquitted FEEIC but the Court of Appeals reversed decision based on its ruling on Velasco v. Universal Trading Co. ISSUE: WON FEEIC could act as agent of both Suan and Frenkel. HELD: NO. An agent could not serve two masters at the same time. The same agent could not very well act as agent for local buyers because the interest of its foreign principal and those of the buyer would be a direct conflict. FEEIC was clearly an agent of Frenkel. As per the facts: Suan was merely to be commissioning FEEIC to procure for him the merchandise in question. Furthermore, the price of the merchandise bought was paid for by Suan by means of an irrevocable letter of credit in favor of Frenkel. Judgment of Court of Appeals affirmed.

7.

Parties/Capacity

Mendoza v. De Guzman*

8.

Distinguished relations

from

other

juridical

Sevilla v. CA (REG) 1998 FACTS: Tourist World Service, Inc. (TWS) leased the premises belonging to Noguera for the formers use as a branch office. Petitioner Sevilla held herself solidarily liable with the party of the part for the prompt payment of the monthly rental. When the branch office was opened, it was run by Sevilla payable to TWS by any airline. For any fare brought in on the efforts of Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the TWS. Sevilla was paid no salaries. She even shared in the expenses of maintaining the office, paid for the salary of an office secretary and other sundry expenses. Later Tourist World considered closing down its office because of business losses and news that Sevilla was then connected with a rival firm. Thus, an employee of TWS went to the branch and padlocked its premises. Sevilla filed a complaint claiming damages brought about by TWSs revocation of their relationship.

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Trent, J. ISSUE: 1) WON Sevilla was just an employee of TWS, and as such was bound by the acts of her employer. (NO) 2) WON Sevilla was an agent of TWS and thus entitled to damages because TWS revoked such relationship. (YES) HELD: 1. Sevilla was not subject to control by the private respondent TWS either as to the result of the enterprise or as to the means used in connection therewith. FACTS: Merritt undertook and agreed with the defendant to build for the defendant a costly edifice in the city of Manila at the corner of Calle Rosario and Plaza del Padre Moraga. In the contract it was agreed between the parties thereto, that Uy Chaco at any time, upon certain contingencies, before the completion of said edifice could take possession of said edifice in the course of construction and of all the materials in and about said premises acquired by Merritt for the construction of said edifice.Fressel delivered to Merritt at the said edifice in the course of construction certain materials of the value of P1,381.21Uy Chaco took possession of the incomplete edifice in course of construction together with all the materials on said premises including the materials delivered. Neither Meritt nor Uy Chaco paid for the materials even after extrajudicial demand. The appellants insist that the above quoted allegations show that Merritt acted as the agent of the defendant in purchasing the materials in question and that the defendant, by taking over and using such materials, accepted and ratified the purchase, thereby obligating itself to pay for the same. ISSUE: Fressels allegation That in pursuance of the contract between Merritt and the defendant, Merritt acted as the agent for defendant in the acquisition of the materials from plaintiffs. W/N Meritt acted as an agent for Uy Chaco and Sons Held: NO. Meritt is an independent contractor. Where one party to a contract was authorized to do work according to his own method and without being subject to the other partys control, except as to the result of the work, he is an independent contractor and not an agent. The fact that "the defendant entered into a contract with one E. Merritt, where by the said Merritt undertook and agreed with the defendant to build for the defendant a costly edifice" shows that Merritt was authorized to do the work according to his own method and without being subject to the defendant's control, except as to the result of the work. He could purchase his materials and supplies from whom he pleased and at such prices as he desired to pay. Again, the allegations that the "plaintiffs delivered the Merritt . . . . certain materials (the materials in question) of the value of P1,381.21, . . . . which price Merritt agreed to pay," show that there were no contractual relations whatever between the sellers and the defendant. The mere fact that Merritt and the defendant had stipulated in their building contract that the latter could, "upon certain contingencies," take possession of the incompleted building and all materials on the ground, did not change Merritt from an independent contractor to an agent. In the

Under the contract of lease covering the Tourist Worlds Ermita office, she had bound herself in solidum as and for rental payments. A true employee cannot be made to part with his own money in pursuance of his employer's business, or otherwise, assume any liability thereof. Sevilla was not under the control of TWS "as to the means used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities. She was not in the company's payroll. For her efforts, she retained 4% in commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then, who earns a fixed salary usually, she earned compensation in fluctuating amounts depending on her booking successes. 2. Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions.

An agency that has been created for mutual interest, of the agent and the principal cannot be revoked at will. Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is not to the commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the power of management delegated to her.

Fressel v Mariano Uy Chaco Sons & Co. (ABBY) March 3, 1916

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absence of a statute creating what is known as mechanics' liens, the owner of a building is not liable for the value of materials purchased by an independent contractor either as such owner or as the assignee of the contractor. Victoria Milling v CA, supra As a result, the company instituted an estafa case against Duran for allegedly misrepresenting himself as the owner of the property when he sold the same to Gutierrez. During trial, the defense presented Orense as witness, where he stated that the sale was done with his knowledge and consent. By virtue of his testimony, confirming that he gave his nephew authority to convey the subject land, Duran was acquitted of the criminal charges against him. The Company then demanded that Orense execute the proper deed of conveyance of the property sold. The CFI thereafter ruled in its favor and ordered that a delivery of the property be done, through a public instrument. ISSUE: WON Duran is the agent of Orense? Yes. HELD: The sworn statement of Orense during the trial of the estafa case confirmed and ratified the sale of his property effected by his nephew. The initial sale made by Duran was indeed null and void, but it became perfectly valid and cured of the defect of nullity by the confirmation solemnly made by Orense, upon his stating under oath to the judge that he himself consented to the making of the said sale. Thus, Orenses ratification produced the effect of an express authorization to make the said sale. Lopez v. Rosario (JANCES) Mache v. Campos (JILL) February 27. 1907 Carson, J. FACTS: Plaintiffs BH Macke & WH Chandler sold to Ricardo Flores, on the alleged order of his principal (defendant Camps), several bills of goods at the Washington Caf. Flores acknowledged receipt of goods and made payments; however, he reserved payment of the balance upon the return of the principal Camps. Plaintiffs then investigated the true status of Flores and found out that he is the business manager of defendants Caf. That in the contract of lease of the building where Washington Caf is placed, he signed as the managing agent. Defendant Camps meanwhile alleges that he did not receive the goods and so will not pay the balance. ISSUE: WON Camps is liable for the balance? HELD: YES. In the absence of proof, SC found that Flores in the agent of Camps; he even signed as managing agent. 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

9.

Knowledge of agent imputed to principal

Art. 1821. Notice to any partner of any matter relating to partnership affairs, and the knowledge of the partner acting in the particular matter, acquired while a partner or then present to his mind, and the knowledge of any other partner who reasonably could and should have communicated it to the acting partner, operate as notice to or knowledge of the partnership, except in the case of fraud on the partnership, committed by or with the consent of that partner.

B.

Article 1869

Art. 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. 1. Oral, express 2. Implied a. acts or conduct of principal Gutierrez Hermanos vs. Orense (EARLA) December 4, 1914 Torres, J. FACTS: Engracio Orense is the original owner of a parcel of land in Guinobatan, Albay. On February 14, 1907, Jose Duran, the nephew of Orense, sold the land for P1500 to Gutierrez Hermanos, with Orenses knowledge and consent. The sale was embodied in a public instrument, and contained a provision giving Duran a right to repurchase within a period of 4 years. Thereafter, by a contract of lease executed between Gutierrez and Duran, Orense continued occupying the land. After the lapse of 4 years stipulated for the redemption of the property, Gutierrez asked that Orense deliver the property to the company and pay rentals for the use of the property. Orense however, refused to do so. Orense claimed that the sale was void for having been done without his authority, either written or verbal. He further alleged that he did not intentionally and deliberately performed acts as would lead Gutierrez Hermanos that he authorized his nephew to enter into the contract of sale.

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the prejudice of innocent third persons. The authority of the agent must be presumed to include all the necessary and usual means of carrying his agency into effect. Moreover, there is sufficient proof that Flores did receive the goods, thereby making Camps liable. Linan v. Puno (ALAIN) Dominion Insurance Corp. v CA (GEN) Feb. 6, 2002 Pardo, J. FACTS: Rodolfo Guevarra claimed to have advanced P156, 473.90 in his capacity as a manager of Dominion Insurance Corp. to satisfy certain claims filed by the petitioners clients. He then instituted a complaint for sum of money against the petitioner. The petitioner denied any liability to plaintiff and asserted a counterclaim of P249,672.53, representing premium that Guevarra failed to pay. The RTC ruled in favor of Guevarra and ordered the petitioner to pay him the sum he claims. The CA affirmed the decision of the RTC. ISSUE: WON Guevarra acted within his authority as agent for petitioner? HELD: NO. The Special Power of Attorney entered into by petitioner and Guevarra would show that they intended to enter into a principal-agent relationship. Despite the word special in the document, the contents reveal that what was constituted was actually a general agency. The agency comprises all the business of the principal but couched in general terms; hence it is limited only to acts of administration. Thus, the general agency constituted does not warrant the payment or settlement of claims as they specifically require a Special Power of Attorney as provided by Art. 1878 of the Civil Code. But as provided by the Memorandum of Management Agreement, Guevarra was authorized to pay the claim but the payment shall come from the revolving fund or collection in his possession. Having deviated from the instructions of the principal, the expenses that Guevarra incurred in the settlement of the claims of the insured may not be reimbursed from Dominion in accordance with Art. 1918 of the Civil Code. Nevertheless, under Art. 1236, to the extent that the obligation of the petitioner has been extinguished, Guevarra may demand for reimbursement from his principal. b. silence or lack of action Conde v. CA (MAI) December 5, 1982 Melencio Herrera, J. FACTS: 7 April 1938. Margarita Conde, Bernardo Conde and the petitioner Dominga Conde, as heirs of Santiago Conde, sold with right of repurchase, within ten (10) years from said date, a parcel of agricultural land to Casimira Pasagui, married to Pio for P165.00. "Pacto de Retro Sale" provided that after 10 yrs. If land is not repurchased a new agreement shall be made between the parties and in no case title and ownership shall be vested in the hand of the party of the SECOND PART (the Alteras). Three years after Cadastral Court adjudicated land to the Alteras "subject to the right of redemption by Dominga Conde, within ten (10) years counting from April 7, 1983, after returning the amount of P165.00 and the amounts paid by the spouses in concept of land tax Neither of the vendees-a-retro, Pio Altera nor Casimira Pasagui, was a signatory to the deed. Conde maintains that because Pio Altera was very ill at the time, Paciente Cordero executed the deed of resale for and on behalf of his father-in-law. Conde further states that she redeemed the property with her own money as her co-heirs were bereft of funds for the purpose. 30 June 1965 Pio Altera sold lot to the Sps Ramon Conde and Catalina T. Conde (private respondents). Dominga contends that land was repurchased in 1945 and filed a case against Paciente Cordero and his wife Nicetas Altera, Ramon Conde and his wife Catalina T. Conde, and Casimira Pasagui Pio Altera having died in 1966), for quieting of title to real property and declaration of ownership. Domingas Evidence: Paciente Cordero signed the Memorandum of Repurchase in representation of his father-in-law Pio Altera, who was seriously sick on that occasion, and of his mother-in-law who was in Manila at the time, and that Cordero received the repurchase price of P65.00. TC: Dominga was ordered to vacate property CA: Upheld TC-petitioner Neither of the vendees-a-retro signed the "Memorandum of Repurchase", and that there was no formal authorization from the vendees for Paciente Cordero to act for and on their behalf. ISSUE: WON there was an implied agency HELD: Yes. From the execution of the repurchase document in 1945, possession, which heretofore had been with the Alteras, has been in the hands of Dominga. Land taxes have also been paid for by Dominga, yearly from 1947 to 1969 inclusive. If, as

AGENCY 2009 (PASCUAL)


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opined by both the TC and the Appellate Court, petitioner had done nothing to formalize her repurchase, by the same token, neither have the vendees-a-retro done anything to clear their title of the encumbrance therein regarding petitioner's right to repurchase. No new agreement was entered into by the parties as stipulated in the deed of pacto de retro, if the vendors a retro failed to exercise their right of redemption after ten years. If, as alleged, petitioner exerted no effort to procure the signature of Pio Altera after he had recovered from his illness, neither did the Alteras repudiate the deed that their son-in-law had signed. Thus, an implied agency must be held to have been created from their silence or lack of action, or their failure to repudiate the agency. Possession of the lot in dispute having been adversely and uninterruptedly with petitioner from 1945 when the document of repurchase was executed, to 1969, when she instituted this action, or for 24 years, the Alteras must be deemed to have incurred in laches. That petitioner merely took advantage of the abandonment of the land by the Alteras due to the separation of said spouses, and that petitioner's possession was in the concept of a tenant, remain bare assertions without proof. Catalina is not buyer in good faith since the tenyear period had lapsed in 1965 and there was no annotation of any repurchase by Domingo, neither had the title been cleared of that encumbrance. The purchasers were put on notice that some other person could have a right to or interest in the property. It behooved Ramon Conde and Catalina Conde to have looked into the right of redemption inscribed on the title, and particularly the matter of possession, which, as also admitted by them at the pre-trial, had been with petitioner since 1945. Altera and Catalinas must be held bound by the clear terms of the Memorandum of Repurchase that he had signed wherein he acknowledged the receipt of P165.00 and assumed the obligation to maintain the repurchasers in peaceful possession should they be "disturbed by other persons". The imperatives of substantial justice, and the equitable principle of laches brought about by private respondents' inaction and neglect for 24 years, loom in petitioner's favor. c. failure to repudiate a. As to nature Conventional Legal Art. 1803. When the manner of management has not been agreed upon, the following rules shall be observed: indorsed two checks to Queano amounting to P95,000 each. To secure the loan, Queano executed a Deed of Real Estate Mortgage and surrendered to Naguiat her duplicates of titles covering the mortgage. The mortgage was notarized and a promissory note for P200,000 with interest of 12% per annum was given by Queano. She also issued a Security Bank check payable to Naguiat. Upon presentment of the check, the Security Bank check was dishonored for insufficiency of funds. A month after, Queano received a letter from Naguiat demanding settlement of the loan. Queano and a certain Reubenfeldt (who was alleged to be Naguiats agent) met with Naguiat to manifest that Queano did not receive the proceeds of the loan as the checks were retained by Reubenfeldt. Naguiat applied for extrajudicial foreclosure of the mortgage but the same was declared null and void. On appeal, the CA affirmed the decision of the trial court. Among the issues raised by Naguiat is the admissibility of the representations of Reubendfeldt insisting that she was not her agent. ISSUE: WON Reubenfeldt was Naguiats agent. HELD: YES. Evidence showed that Naguiat instructed Reubenfeldt to withhold the checks pending the delivery of additional collateral by Queano. He served as agent of Naguiat on the loan application of Queanos friend as to whom Queano came to know of Naguiat. Furthermore, she also drew a check for the sum of P220,000 payable to Naguiat to cover for Queanos liability. As a consequence of the interaction between Naguiat and Reubenfeldt, Queano was impressed that she was Nagiats agent and Naguiat did not do anything to correct that. The rule states that one who clothes another with apparent authority as his agent and holds him out in the public as such cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of third parties dealing in good faith. The CA correctly used the rule on agency by estoppel. Judgment affirmed. Professional Services v. Agana (REG) 3. Other kinds Dela Rosa v. Hidalgo (ROG) Naguiat v. CA (TOFF) 2003 Tinga, J. FACTS: Queano applied with Naguiat a loan of P200,000 which was eventually granted. Naguiat

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(1) All the partners shall be considered agents and whatever any one of them may do alone shall bind the partnership, without prejudice to the provisions of Article 1801. (2) None of the partners may, without the consent of the others, make any important alteration in the immovable property of the partnership, even if it may be useful to the partnership. But if the refusal of consent by the other partners is manifestly prejudicial to the interest of the partnership, the court's intervention may be sought. Art. 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his non-performance, the principal may suffer. Art. 1885. In case a person declines an agency, 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. Art. 1929. 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. 1931. Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith. Art. 1932. If the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the latter. b. As to consideration Gratuitous Special

d. As to management Couched in general terms

Art. 1877. An agency couched in general terms comprises only acts of administration, even if the principal should state that he withholds no power or that the agent may execute such acts as he may consider appropriate, or even though the agency should authorize a general and unlimited management. Specific terms attorney are

Art. 1878. Special powers of necessary in the following cases:

Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. c. Onerous

(1) To make such payments as are not usually considered as acts of administration; (2) To effect novations which put an end to obligations already in existence at the time the agency was constituted; (3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired; (4) To waive any obligation gratuitously; (5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; (6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; (7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration; (8) To lease any real property to another person for more than one year; (9) To bind the principal to render some service without compensation; (10) To bind the principal in a contract of partnership; (11) To obligate the principal as a guarantor or surety; (12) To create or convey real rights over immovable property; (13) To accept or repudiate an inheritance; (14) To ratify or recognize obligations contracted before the agency; (15) Any other act of strict dominion. e. As to manner of appointment Direct Indirect, appointment through another f. As to nature and effects

As to extent of transaction General

Art. 1876. An agency is either general or special.

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Ostensible or representative Simple or commission

4. Forms of Agency a. Contract Art. 381. When a person disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property, the judge, at the instance of an interested party, a relative, or a friend, may appoint a person to represent him in all that may be necessary. b. Articles (see below) Art. 1874. 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. 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract.

(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; (2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof; (b) A special promise to answer for the debt, default, or miscarriage of another; (c) An agreement made in consideration of marriage, other than a mutual promise to marry; (d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum; (e) An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein; (f) A representation as to the credit of a third person. (3) Those where both parties are incapable of giving consent to a contract. 5. Presumption of Agency a. General rule Harry Keeler Electric (EARLA) November 11, 1922 Johns, J. Co. vs. Rodriguez

Art. 1358. The following must appear in a public document: (1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein a governed by Articles 1403, No. 2, and 1405; (2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains; (3) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person; (4) The cession of actions or rights proceeding from an act appearing in a public document. All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by Articles, 1403, No. 2 and 1405 Art. 1403. The following contracts unenforceable, unless they are ratified: are

FACTS: Harry Keeler is engaged in the electrical business and is selling the Matthews plant in the Philippine Islands. One day, A.C Montelibano went to the office of Harry Keeler and told him that he could find purchasers of the Matthews plant. Keeler agreed with the understanding that for every customer that he could find or any plant that he could sell, he would be given a 10% commission if the sale was consummated. Pursuant to this agreement, Montelibano was able to negotiate the sale of the the Matthews plant between Keeler and

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Rodriguez. After the machine had been installed, Rodriguez paid the purchase price of P2513.55 to Montelibano, without the knowledge of Keeler. Keeler alleged that it was his employee Cenar who installed the equipment in defendants premises. Moreover, Keeler also claimed that it was Cenar who gave him the statement of account totaling P2563.95. Cenar did not make any effort to collect the money since he was assured by Rodriguez that he will pay it in Manila. On the other hand, Rodriguez alleged that he paid the purchase price to Montelibano, since he was the one who sold, delivered and installed the electrical plant; that he was the one who presented the account; that he was assured by Montelibano that he was authorized to collect the value of the plant. The lower court decided in favor of Rodriguez, holding that Montelibano was an agent authorized to collect the purchase price. ISSUE: WON Montelibano was the agent of Harry Keeler. HELD: No. According to the Court, there is nothing in the receipt issued by Montelibano that would indicate that he was authorized by Keeler to collect the money. Accordingly, what was contained therein were his personal receipt and personal signature. There were no more indications of his authority. Moreover, the Court also ruled that the receipt presented in evidence by Rodriguez actually shows that it was Cenar who gave the statement of accounts to him; otherwise, there would have been no need to incur shipping costs of P81.60 if it was Montelibano who installed the plant in his premises. In sum, there was no evidence that Keeler ever delivered any statement to Montelibano or that he was ever authorized to receive the money. It is a settled principle in agency that a person dealing with an agent must be careful in ascertaining the fact of the agency and the nature and extent of authority of the agent. Accordingly, In approaching the consideration of the inquiry whether an assumed authority exists in a given case, there are certain fundamental principles which must not be overlooked. Among these are, as has been seen, (1) that the law indulges in no bare presumptions that an agency exists: it must be proved or presumed from facts; (2) that the agent cannot establish his own authority, either by the representations or by assuming to exercise it; (3) that an authority cannot be established by mere rumor or general reputation; (4) that even a general authority is not an unlimited one; and (5) that every authority must find its ultimate source in some act or omission of the principal. Thus, when Rodriguez paid to Montelibano, he did so at his own peril. He is therefore, still liable to pay Keeler the amount of the electric plant. b. Exceptions to the rule Art. 1803. When the manner of management has not been agreed upon, the following rules shall be observed: (1) All the partners shall be considered agents and whatever any one of them may do alone shall bind the partnership, without prejudice to the provisions of Article 1801. (2) None of the partners may, without the consent of the others, make any important alteration in the immovable property of the partnership, even if it may be useful to the partnership. But if the refusal of consent by the other partners is manifestly prejudicial to the interest of the partnership, the court's intervention may be sought Compana Maritima v. Limson (JANCES)

6. Authority presumed

of

attorney

to

appear

is

Sec. 21. Authority of attorney to appear. - An attorney is presumed to be properly authorized to represent any cause in which he appears, and no written power of attorney is required to authorize him to appear in court for his client, but the presiding judge may, on motion of either party and on reasonable grounds therefor being shown, require any attorney who assumes the right to appear in a case to produce or prove the authority under which he appears, and to disclose, whenever pertinent to any issue, the name of the person who employed him, and may thereupon make such order as justice requires. An attorney wilfully appearing in court for a person without being employed, unless by leave of the court, may be punished for contempt as an officer of the court who has misbehaved in his official transactions.chan robles virtual law library Sec. 22. Attorney who appears in lower court presumed to represent client on appeal. - An attorney who appears de parte in a case before a lower court shall be presumed to continue representing his client on appeal, unless he files a formal petition withdrawing his appearance in the appellate court.

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Issue: W/N the Motion for New Trial should be granted since Attorney. Manalo who was supposed to defend APC effectively denied said petitioner of its day in court. NO! Held: Axiomatic is the rule that "negligence of counsel binds the client." The basis is the tenet that an act performed by counsel within the scope of a "general or implied authority" is regarded as an act of the client. While the application of this general rule certainly depends upon the surrounding circumstances of a given case, there are exceptions recognized by this Court: "(1) where reckless or gross negligence of counsel deprives the client of due process of law; (2) when its application will result in outright deprivation of the clients liberty or property; or (3) where the interests of justice so require." Woefully none of these exceptions apply herein. Thus, the Court cannot "step in and accord relief" to petitioner, even if it may have suffered by reason of its own arrant fatuity. The negligence of petitioner and that of its counsel are concurrent. Attorney. Manalo is an employee, not an outsider hired by petitioner on a retainer basis. In fact, he is the officer-in-charge of its Legal Department. There is no showing that he was not authorized to exercise the powers of the corporation or to transact its business, particularly the handling of its legal affairs. Besides, it is presumed that the ordinary course of business has been followed. Therefore, counsels corporate acts are supposed to be known and assented to by petitioner. First, the Receipt/Agreement was entered into by respondent and petitioner, which was represented by its agent Attorney. Manalo. As an agent, he rendered service to, and did something in representation or on behalf of, his principal and with its consent and authority. It cannot be denied that, on its part, there was an actual intent to appoint its counsel; and, on the latters part, to accept the appointment and "act on it." Thus, the general principles of agency govern its relationship with its officers or agents, subject to the articles of incorporation, bylaws and other relevant provisions of law. Moreover, the Receipt/Agreement is not a promise to pay that "amounts to an offer to compromise and requires a special power of attorney or the express consent of

Sec. 23. Authority of attorneys to bind clients. Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeals, and in all matters of ordinary judicial procedure. But they cannot, without special authority, compromise their client's litigation, or receive anything in discharge of a client's claim but the full amount in cash. Air Phil Corp. (ALAIN) Panganiban J. Facts: v. International Business

APC was in need of the services of a business establishment to ferry its B-737 airplane. It engaged the services of IBAPSI as its agent to look for and engage, for APC, a business enterprise to ferry the airplane. IBASPI did engage the services of Universal Weather & Aviation, Inc. (UWAI). UWAI sent its Billings to APC, through IBASPI, in the total amount of US$65,131.55 for its services for the ferry of the airplane. But APC repeatedly failed to pay its account. Exasperated, UWAI blamed IBASPI. IBASPI was impelled to pay UWAI. IBASPI demanded refund of the amount advanced to UWAI. But still, no payment was effected by API. IBASPI demanded the payment of said amount plus 10% commission. APC finally made its first partial payment of P200,000.00 to IBASPI with a simultaneous Receipt/Agreement executed by IBASPI and APC, the latter, through Attorney. Manolito A. Manalo, Officer-in-Charge of the Legal Department of APC. After this partial payment, no other payments were executed by APC. APC refused to pay its balance with IBASPI. IBASPI sued APC in court. However, the counsel of APC filed at least three motions to extend filing of petitioners Answer; did not appear during the scheduled pretrials; and failed to file petitioners pretrial Brief. Court ordered IBASPI to pay the balance, the 10% commission and attorneys fees. APC submits that CA erred in upholding the ruling of the RTC despite the fact that the gross negligence, incompetence and dishonesty of APCs former counsel, Attorney. Manolito A. Manolo, have effectively denied APC of its day in court. APC further contended that Attorney. Manalo was not authorized to execute the Receipt/Agreement in behalf of petitioner APC. Thus APC asked for Motion for New Trial.

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petitioner." A compromise agreement is "a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced." No such reciprocal concessions were made in this case. Thus, the Receipt/Agreement is but an outright admission of petitioner of its obligation, after making partial payment, to pay the balance of its account. And even if we were to consider the same as a compromise, from its nature as a contract, the absence of an SPA does not render it void, but merely unenforceable. PETITION DENIED. Pittsburgh Plate v. Director of Patents (GEN) March 29, 1974 Castro, J. FACTS: On Nov. 5, 1962, the law firm of Lichauco, Picazo and Agcaoili filed with the Philippine Patent Office a petition for extension of 30 days within which to file in behalf of the petitioner a notice of opposition to the respondent's application for registration of "Solex Bluepane" as trademark for its glass products. The plea was made pursuant to a cablegram from Langner, Parry, Card and Langner International Patent and Trademark Agents, USA, asking that the respondent's application be opposed. The extension was granted. An unverified notice of opposition to the trademark application was filed by Lichauco, Picazo and Agcaoili before the Patent Office which authorizes the filing of such a notice provided it is verified by the opposer within 60 days thereafter. On the same day, the same counsel filed a duly authenticated power of attorney executed by the petitioner on Nov. 12, 1962 in favor of the former for the prosecution of its opposition. Thereafter petitioner's verified opposition to the respondent's application was filed. The Director of Patents issued a resolution dismissing the petitioner's opposition on the ground that on Nov. 5, 1962 when petitioner's counsel asked for an extension of time to file a notice of opposition, the said counsel was not yet authorized by the petitioner to file the said pleading as the power of attorney was executed only on Nov. 12, 1962. ISSUE: WON the law firm was authorized to represent the petitioner before the Philippine Patent Office on Nov. 5, 1962 when the former pleaded for an extension of time to register the petitioners opposition to the respondents application? HELD: YES. Petitioner does not deny, as in fact it asserted in writing, that the said law firm was authorized to represent it by virtue of the powers it had vested upon Langner, et al., a correspondent of Lichauco, Picazo and Agcaoili, to handle all foreign trademark matters affecting the petitioner. It bears emphasis that the relationship between counsel and client is strictly a personal one. It is a relationship the creation of which courts and administrative tribunals cannot but recognize on the faith of the client's word, especially when no substantial prejudice is thereby caused to any third party. Petitioner, who claims to be adversely affected by the respondent's trademark application, seasonably informed the Director of Patents that its counsel had the authority to represent it before the latter's office. There is no valid reason to interpose chevaux-de frise1 upon that claim and deny the petitioner its basic right to be heard. C. Articles 1870 to 1872 Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances. Art. 1871. Between persons who are present, the acceptance of the agency may also be implied if the principal delivers his power of attorney to the agent and the latter receives it without any objection. Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except: (1) When the principal transmits his power of attorney to the agent, who receives it without any objection; (2) When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram. 1. compulsory a. Express b. Implied i.
1

Acceptance,

not

from the acts of the agent which carry out the agency;

Etymology: French, literally, horse from Friesland 1 : a defense consisting typically of a timber or an iron barrel covered with projecting spikes and often strung with barbed wire 2 : a protecting line (as of spikes) on top of a wall usually used in plural

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ii. from his silence or inaction where the present persons are From the 10th day of October, 1903, the date of the said fraudulent purchase by the defendant, until the 27th day of July, 1909, the defendant retained said shares in his possession or under his control and after the rendition of said judgment of April 29, 1904, collected the dividends earned by said shares for the years 1905, 1906, 1907, and 1908 at the rate of 6 per cent per annum, amounting to a total of P19,200, which sum the defendant retained and refused to pay over to the plaintiff. ISSUE: Whether or not the agreement entered into between him and the plaintiff through her counsel released him from all responsibility in connection with the transaction relating to the stock HELD: NO. There is nothing in the written discharge which could properly be given the legal effects which the appellant in this case assigns to it. It is a discharge of a judgment and nothing more. Being such, it reaches no further than the terms of the judgment itself. It is to be presumed that an instrument satisfying a debt or obligation manifested in another instrument extends no further than the terms of the instrument which manifests the obligation to be discharged, unless, from the terms of the instrument, it is clear that the parties intended something more. So far as the record discloses, at the time this satisfaction was executed nothing whatever occurred between the parties relative to the dividends on the stock which formed the subject-matter of that judgment, nor did anything transpire as to any other relations between the parties than those embraced within the judgment itself. There was nothing in the conduct of the parties, or in their relations or attitudes, from which it could be implied or inferred that they were dealing with aught else than the judgment itself. There is no basis, then, for the contention of the appellant unless it be found in the wording of that instrument itself. A power of attorney is an instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts on behalf of the principal. Except as may be required by statute, a power of attorney is valid although no notary public intervened in its execution. Lim Pin v. Liao Tan (ROG) FACTS: A compromise agreement between Lim Pin represented by son George Hung and Liao Tan was made incident to an unlawful detainer complaint filed by Tan against Pin. On hearing, Lim Pin was absent. Her son George Hung who attended with his mother all previous hearings was present together with counsel. Liao and counsel were also

Art. 1871. Between persons who are present, the acceptance of the agency may also be implied if the principal delivers his power of attorney to the agent and the latter receives it without any objection. where absent the persons are

Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except: (1) When the principal transmits his power of attorney to the agent, who receives it without any objection; (2) When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram. 2. Power of attorney; definition, purpose Notarization needed Strong v. Gutierrez Repide (MAI) February 21, 1912 Moreland, J. FACTS: Prior to October 10, 1903, the plaintiff, Eleanor Erica Strong, was the owner of 800 shares of the capital stock of the Philippine Sugar Estates Development Company, Limited, of the par value of P100 each. On October 10, 1903, the defendant, Francisco Gutierrez Repide, by means subsequently found and adjudged to have been fraudulent, obtained possession of said shares and thereafter alleged to be the owner thereof. The CFI of Manila subsequently held that the sale of these shares was made without the authority of Mrs. Strong, that she never ratified the sale but repudiated it as soon as she learned of it, that this sale was induced by fraud on the part of the defendant, and therefore was a fraudulent sale. This judgment was, on appeal to the Supreme Court of the Philippine Islands, reversed, and plaintiff's complaint dismissed on the merits. Thereupon, plaintiff prosecuted an appeal to the Supreme Court of the United States, which court, on the 3rd of May, 1909, rendered its judgment, reversing the decision of the Supreme Court of the Philippine Islands and affirming the judgment of the trial court.

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present. Through court's initiative the compromise agreement was formulated and executed. A motion for reconsideration was filed by Lim Pin assailing the compromise agreement: 1) that she never authorized her son nor her counsel on record (Attorney. Pastor Mamaril) to enter into such compromise agreement and 2) that had she been present when said agreement was prepared; she would not have acceded thereto. Tan filed opposition to MR and prayed that son George Hung and Attorney. Pastor P. Mamaril be cited for contempt" in the event they should belatedly deny that George Hung was duly authorized by his mother to enter into the compromise agreement. TC: MR denied George Hung cited for contempt of court. Writ to execute issued. Lim Pin: Judge should not have allowed her son George Hung and her then counsel, Attorney. Pastor Mamaril in her absence to enter into compromise agreement with Tan. Considering that such compromise agreement would impose onerous obligations upon her, such as a tremendous increase of rentals in the premises being leased from Tan from P1,500.00 a month to P5,000.00 a month and that said agreement contained admissions by her, the respondent Judge should have required a written authority and power of attorney from her son and counsel. ISSUE: WON Judge shouldve required written authority and Power of attorney before allowing Lim's son and counsel to act on her behalf on compromise agreement? NO HELD: 1) Power of attorney need not be written but authority must be duly established by evidence. Art. 1878 NCC: a special power of attorney is necessary to compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired. Section 23 of Rule 138 on Attorneys and Admission to the Bar governs the authority of attorneys to bind their clients and provides that "Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeal, and in an matters of ordinary Judicial Procedure, but they cannot, without special authority, compromise their clients' litigation or receive anything in discharge of their clients' claims but the full amount in cash." The requirements of a special power of attorney in Article 1878 of the Civil Code and of a special authority in Rule 138 of the Rules of Court refer to the nature of the authorization and not its form. The requirements are met if there is a clear mandate from the principal specifically authorizing the performance of the act. Mandate may be oral or written BUT vital that it must be express. If the special authority is not written it must be duly established by evidence other than mere assertion of counsel. 2) Judge considered evidence before allowing son to execute agreement on mom's behalf. Here, it was shown that Judge took necessary precautionary measures and acted on the basis of satisfactory evidence when he allowed the compromise agreement to be executed by George Hung the petitioner's son. Prior to hearing, Lim Pin had repeatedly asked court to approve her proposal for monthly increase of 500php + that increases be pegged at that rate till monthly rental reaches 5k. on Dec 1977. But at the time, Tan not amenable to it, but Tan later changed her mind so court later asked George to execute agreement. There were other reasons which led the lower court to a finding that George Hung had the full authority to enter into the compromise. The court itself observed during the earlier hearings and it is not disputed that ... defendant Lim Pin could not decide on anything without first consulting her son." George Hung's later denial that he never manifested his authority to represent his mother was rejected by the court. As a matter of fact, this sudden turnabout of George Hung led the court to cite him for contempt. He was fined Two Hundred Pesos. The citation for contempt was never appealed. 3) Even assuming George acted without authority, agreement would not be void, merely unenforceable, and capable of being ratified. The compromise agreement was ratified by the petitioner when a few days after the promulgation of the questioned judgment and before the filing of a motion for reconsideration, she filed a Motion To Withdraw Deposits, a consignation case pending before the same court between the same parties. Such motion's expressly stated purpose was to withdraw deposit made in order implement compromise agreement. Lim Pin vs. Liao Tan (ALAIN) 15 July 1982 Facts:

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Spouses Conchita Liao Tan and Tan Cho Hua alleged in their complaint for unlawful detainer that the plaintiff Conchita Liao Tan, as owner of a parcel of registered land with improvements located at Francisco Street, Caloocan City, had leased a portion of it, more particularly known as 91 Francisco Street, Caloocan City to defendant Lim Pin on a month to month basis but that the latter starting April, 1977 had not paid the agreed rental stipulated for such month and the succeeding months thereafter. And that despite demand, the defendant refused to vacate the leased premises. Defendant Lim Pin, filed her Answer denying the material allegations of the complaint and protesting the alleged highly "unconscionable and unreasonable" increase of rental demanded by plaintiffs. On the scheduled October 19, 1977 hearing, defendant Lim Pin was absent. Her son George Hung who attended with his mother all the previous hearings was present together with the defendant's counsel. Plaintiff Conchita Liao Tan together with her counsel was also present. Through the initiative of the court a quo, the subject compromise agreement was formulated and executed and it finally became the basis of the October 19, 1977 judgment. The aforesaid judgment was the subject of a motion for reconsideration filed on October 28, 1977 by defendant Lim Pin on the following grounds: 1) that she never authorized her son nor her counsel on record (Attorney. Pastor Mamaril) to enter into such compromise agreement and 2) that had she been present when said agreement was prepared, she would not have acceded thereto. Petitioner argues that the respondent Judge should not have allowed her son George Hung and her then counsel, Attorney. Pastor Mamaril in her absence to enter into the October 19, 1977 compromise agreement with the private respondent Conchita Liao Tan assisted by her counsel. Said agreement contained admissions by petitioner, the respondent Judge should have required a written authority and power of attorney from her son and counsel. Her objections to the validity of the compromise agreement are premised on Article 1878 of the Civil Code and Rule 138, Section 23 of the Rules of Court. 19, 1977 compromise agreement in the absence of the petitioner. NO. HELD: Article 1878 is found in Title X of the Civil Code on Agency. It states that a special power of attorney is necessary to compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired. Section 23 of Rule 138 on Attorneys and Admission to the Bar governs the authority of attorneys to bind their clients and provides that "Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeal, and in an matters of ordinary Judicial Procedure, but they cannot, without special authority, compromise their clients' litigation or receive anything in discharge of their clients' claims but the full amount in cash."

The requirements of a special power of attorney in Article 1878 of the Civil Code and of a special authority in Rule 138 of the Rules of Court refer to the nature of the authorization and not its form. The requirements are met if there is a clear mandate from the principal specifically authorizing the performance of the act. As early as 1906, this Court in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be either oral or written, the one vital thing being that it shall be express. And more recently, We stated that, if the special authority is not written, then it must be duly established by evidence: ... the Rules require, for attorneys to compromise the litigation of their clients, a special authority. And while the same does not state that the special authority be in writing the Court has every reason to expect that, if not in writing, the same be duly established by evidence other than the selfserving assertion of counsel himself that such authority was verbally given him. Whereupon the following took place: (1) The court asked George Hung whether he was willing to enter into the compromise agreement and whether he had the authority of his mother to enter into such a compromise agreement; (2) The defendant's counsel confirmed in open court the assurance of George Hung that he had the full authority of his mother to enter into a compromise agreement: (3)

Issue: Whether the respondent Judge committed grave abuse of discretion in allowing the October

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After the formulation of the compromise agreement the Judge explained in Tagalog to both parties, including George Hung its terms and conditions after which the same was reduced into writing; (4) George Hung willingly signed the compromise agreement, the terms and conditions of which were those originally proposed by the petitioner herself. Hung was all the while assisted by their counsel. PETITION DISMISSED. 3. 1872; Exceptions General rule in Art. Abuella manifested that hell only stay in the house until end of the year 1986 and offered the tractor as security. In order for him to pay his obligations sooner, he asked Calibo to help him look for buyers. In January 1987, a new tenant occupied the house and Calibo moved the tractor to his fathers garage also in the same city. Even after demands, Mike failed to pay his arrears; he only assured Calibo that the tractor would stand as guarantee to his payment. When Pablo Abuella tried to get the tractor from Calibo, he tried to negotiate with him and offered to write a check in payment of the rentals and postdated checks to cover the other expenses but still had to verify with Mike. Calibo would only accept the latter if Pablo would execute a promissory note in his favor to cover the remaining expenses. The two did not agree. Pablo Abuella instituted an action for replevin, claiming ownership of the tractor and seeking to recover possession thereof from petitioner Both the trial court and the CA ruled in favor of Abuella. Mike Abuella could not have validly pledged the subject tractor to petitioner since he was not the owner thereof, nor was he authorized by its owner to pledge the tractor. ISSUE: WON there was an implied principal-agent relationship between Pablo and Mike HELD: No. Pablo Abuella categorically stated that the tractor was only left to Mike for safekeeping; not to be pledged or alienated. Mike acted without authority or consent from Pablo. Article 1869 states that there would only be implied agency is the person is acting within the authority granted to him by the principal. Article 1911 mandates that the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers. Again, in view of Pablos lack of knowledge of Mikes pledging the tractor without any authority from him, it shows that Pablo could not have allowed the Mike to pledge the tractor as if he had full powers to do so. Petition denied. CA decision affirmed. Linan v. Puno (REG) Johnson, J. 1915 FACTS: Linan was the owner of a certain parcel of land. In 1908, he executed a document which conferred upon Puno the power, duties and obligations to purchase, sell, collect and pay, as well as sue and be sued before any authority, appear before the courts of justice and administrative officers in any proceeding or business concerning the good administration and advancement of his interests. In 1911, Puno, for the sum of P800, sold and delivered said parcel of land to the other defendants. Petitioner alleges

Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except: (1) When the principal transmits his power of attorney to the agent, who receives it without any objection; (2) When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram. 4. to Art. 1872 Differentiate Art. 1871

Art. 1871. Between persons who are present, the acceptance of the agency may also be implied if the principal delivers his power of attorney to the agent and the latter receives it without any objection. Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except: (1) When the principal transmits his power of attorney to the agent, who receives it without any objection; (2) When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram. 5. Calibo v. CA (TOFF) J. Quisumbing FACTS: Mike Abuella, private respondents son leased the house of Calibo for residential purposes. Pablo Abuella left the tractor with his son for safekeeping. Rent and other expenses were initially paid but subsequently defaulted in payment thereof. When confronted by Calibo, Mike Cases

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that the said document he executed did not confer upon the Puno the power to sell the land and prayed that the sale be set aside; that the land be returned to him, together with damages. Lower court found for Puno. ISSUE: WON the document did not give Puno authority to sell the land. HELD: YES. There seems to be no good reason for saying that Puno had authority to administer and not to sell when "to sell" was as advantageous to the plaintiff in the administration of his affairs as "to administer." To hold that the power was "to administer" only when the power "to sell" was equally conferred would be to give to special words of the contract a special and limited meaning to the exclusion of other general words of equal import. Whenever it is possible, effect is to be given to every word and clause used by the parties. It is to be presumed that the parties said what they intended to say and that they used each word or clause with some purpose and that purpose is, if possible, to be ascertained and enforced. Likewise, there was no allegation on proof that Puno acted in bad faith or fraudulently in selling the land. It will be presumed that he acted in good faith and in accordance with his power as he understood it also the one who made the previous payments. A witness, one Galmes, the lessor of the building said that Flores also signed as a witness on the sublease contract as managing agent, which Jose Camps also signed. Camps now says that the foregoing facts are not sufficient to establish the fact that he received the goods for which payment is demanded. ISSUE: WoN Camps is estopped from proclaiming that Ricardo Flores was not his agent HELD: Yes. Flores was apparently in charge of the business, performing the duties usually entrusted to managing agent, leave little room for doubt that he was there as authorized agent of the defendant. One who clothes another 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 and in the following presumptions or deductions, which the law expressly directs to be made from particular facts, are deemed conclusive: "Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out such declaration, act, or omission, be permitted to falsify it" and unless the contrary appears, the authority of an agent must be presumed to include all the necessary and usual means of carrying his agency into effect. Rallos vs. Yangco (EARLA) Sept 27, 1911 Moreland, J. FACTS: On November 27, 1907, Teodoro Yangco sent a letter to Florentino Rallos, offering Yangco his services. Accordingly, he has just opened a shipping and commission department for buying and selling tobacco leaf and other native products in his steamship office in Manila. He expressly indicated in his letter that Florentino Collantes will act for and in his behalf in transacting with Rallos. He further stated that he has given Collantes a power of attorney, notarized by Mr. Rodriguez. On February 1909, Rallos sent to Collantes 218 bundles of tobacco in the leaf to be sold on commission. After deducting the commission (P206.96) from the total amount of P1744, Rallos is entitled to P1537.08. It appears that at the time Rallos gave the tobacco to Collantes, he was not the agent of Yangco anymore, Yangco having severed his relationship with Collantes. This fact however was not known to nor communicated with Rallos. As a result, when

D. Article 1873 Art. 1873. 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 thereby becomes a duly authorized agent, in the former case with respect to the person who received the special information, and in the latter case with regard to any person. The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given. 1. Effects of special information

Macke v. Camps (ABBY) Feb 12, 1907 Carson, J. FACTS: B.H. Macke and W.H. Chandler are partners and sold to Jose Camps of the Washington Caf various bills of goods amounting to P351.50 but he only received P174. Macke made a demand but Camps failed to pay. Macke said that Ricardo Flores the business manager of the hotel bar restaurant signed the receipt and that Flores was

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Rallos tried to collect from Yangco the P1537.08, Yangco refused to pay him the amount, on the basis that Collantes was already acting on his behalf at the time he collected the 218 bundles of tobacco. ISSUE: WON Yangco is still liable to pay Rallos the amount of P1537. HELD: Yes. Having advertised the fact that Collantes was his agent and having given them a special invitation to deal with such agent, it was the duty of the defendant on the termination of the relationship of principal and agent to give due and timely notice thereof to the plaintiffs. Failing to do so, he is responsible to them for whatever goods may have been in good faith and without negligence sent to the agent without knowledge, actual or constructive, of the termination of such relationship. For his failure to inform Rallos of the termination of the agency relationship with Collantes, Yangco is liable. 2. 3. agency Effect of Public Advertisement Agency by estoppel v. implied FACTS: Cosmic, through its General Manager, executed a Special Power of Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact: x x x to initiate, institute and file any court action for the ejectment of third persons and/or squatters of the entire lot 9127 and 443 and covered by TCT Nos. 37648 and 37649, for the said squatters to remove their houses and vacate the premises in order that the corporation may take material possession of the entire lot, and for this purpose, to appear at the pre-trial conference and enter into any stipulation of facts and/or compromise agreement so far as it shall protect the rights and interest of the corporation in the aforementioned lots. Estrada, by virtue of her power of attorney, instituted an action for the ejectment of private respondent Isidro Perez and recover the possession of a portion of Lot No. 443 before the RTC of Dagupan. Later, Estrada entered into a Compromise Agreement with Perez, wherein the latter agreed to pay the portion being occupied by him and to deliver the sum of P26,640. The RTC approved the Compromise Agreement. However, it was not executed within the 5-year period from date of the finality of the judgment allegedly due to the failure of petitioner to produce the owners duplicate copy of the title needed to segregate from Lot No. 443 the portion sold by Estrada to Perez under the compromise agreement. Cosmic asserts that it was only upon the revival of the judgment that it came to know of the compromise agreement between Estrada and Perez. Hence, it sought to annul the decision of the trial court alleging that it was void because Estrada had no authority to dispose of the property but merely confined to file an ejectment case in order that the corporation may take material possession of the entire lot. Moreover, a board resolution was needed for the disposition of the property. The CA dismissed the complaint. ISSUE: WON Estrada was authorized to sell the property? HELD: NO. The authority granted Estrada under the special power of attorney was explicit and exclusionary. Nowhere in this authorization was Estrada granted expressly or impliedly any power to sell the subject property nor a portion thereof. Neither can a conferment of the power to sell be validly inferred from the specific authority to enter into a compromise agreement because of the explicit limitation fixed by the grantor that the compromise entered into shall only be so far as it

Macke v. Camps, supra Naguiat v. CA (JANCES) 4. Manner of termination

E. Article 1874: Exception to the general rule that agents authority may be oral or written Art. 1874. 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. 1. Applicability; relate to Art. 1403 (2e) Art. 1403. The following contracts unenforceable, unless they are ratified: are

2(e): An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein; 2. Repurchase 3. Cases: Lim v. CA (ALAIN) Cosmic Lumber v. CA (GEN) Nov. 29, 1996 Bellosillo, J.

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shall protect the rights and interest corporation in the aforementioned lots. of the the latter's son was married to her daughter, for the sum of P77,216.00. Nieves Cruz subsequently sought to rescind the contract of sale with the private respondents. ISSUE: Whether or not the agreement enforceable or can be proved under the law is

Alienation by sale of an immovable certainly cannot be deemed protective of the right of petitioner to physically possess the same, more so when the land was being sold for a price of P80.00 per square meter, very much less than its assessed value of P250.00 per square meter, and considering further that petitioner never received the proceeds of the sale. By selling to Perez a portion of petitioners land through a compromise agreement, Estrada acted without or in obvious authority. The sale ipso jure is consequently void. So is the compromise agreement. *Other issue on agency: It may be argued that petitioner knew of the compromise agreement since the principal is chargeable with and bound by the knowledge of or notice to his agent received while the agent was acting as such. But the general rule is intended to protect those who exercise good faith and not as a shield for unfair dealing. Hence there is a wellestablished exception to the general rule as where the conduct and dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal the facts in controversy. The logical reason for this exception is that where the agent is committing a fraud, it would be contrary to common sense to presume or to expect that he would communicate the facts to the principal. Rodriguez vs. Court of Appeals (MAI) August 29, 1969 Castro, J. FACTS: On December 31, 1958, by virtue of a document denominated "Kasunduan" written in the vernacular and ratified before Notary Public Lazaro C. Ison of that locality, Nieves Cruz, authorized the spouses Atanacio Valenzuela, and Maximina Victorio and Liberate Santos to sell a certain parcel of land of about 44,634 square meters belonging to her. Nieves Cruz and her children, however, collected from the agents, either thru Maximina Victorio or thru Salud G. de Leon, daughter of Liberate Santos, various sums of money during the period from July 3, 1959 up to September 3, 1961, all of which were duly receipted for by Nieves Cruz and/or her children and in which receipts it is expressly stated that said amounts were "bilang karagdagan sa ipinagbili naming lupa sa kanila (additional payments for the land we sold to them). Nieves Cruz then sold the property in question to Barbara Lombos Rodriguez, her "balae" because

HELD: YES. The fact that Atanacio Valenzuela, et al. were agents of Nieves Cruz under the agency agreement of December 31, 1958 is not material, for if it is true that Nieves Cruz did agree to sell to her agents the real estate subject of the agency, her consent to the agreement took the transaction out of the prohibition contained in article 1491(2) of the Civil Code. Neither are articles 1874 and 1878(5) and (12) of the Civil Code relevant, for they refer to sales made by an agent for a principal and not to sales made by the owner personally to another, whether that other be acting personally or through a representative. Thus, the agreement is valid. The parties to the agency agreement subsequently entered into a new and different contract by which the landowner, Nieves Cruz, verbally agreed to sell her interest in the litigated real estate to Atanacio Valenzuela, et al. and this was established by certain facts, such as: [1] Salud de Leon testified that it was she who had the oral agreement with Nieves Cruz for the purchase by Atanacio Valenzuela, et al. of the litigated property and, as found by the respondent Court, Salud de Leon was the representative of Atanacio Valenzuela, et al., not of Nieves Cruz; [2] Cruzs acceptance of the sums of money given by the private respondents and her subsequent issuance of receipts for these sums; [3] the sale was established and recognized in the land registration proceedings where the certificates of title bear the annotation of the aforesaid right of Atanacio Valenzuela, et al. Pertinent provisions: Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: xxx (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; Art. 1874. 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. Katigbak v. Tai Hing (ROG) 1928

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FACTS: Ejap was owner of land with Torrens Title that was subject to a mortgage lien in favor of Phil National Bank. Po Tecsi executed a general power of attorney in favor of brother Ejap empowering latter to perform on his behalf as his lawful agent, the following: "to buy, sell, or barter, assign, or admit in acquittance, or in any other manner to acquire or convey all sorts of property, real and personal, businesses and industries, credits rights and actions... for whatever prices and conditions he may stipulate, paying and receiving payment in cash or in instalments and execute the proper instruments..." Po Tecsi executed instrument of indebtedness to his brother Ejap for price of property which latter sold to him. Ejap executed a 2nd mortgage on such land to Limjenco. Later he sold land to bother Po Tecsi subject to same encumbrances. Ejap, using power given by his brother, sold absolutely and forever to Katigbak the land, mentioning only the mortgage to PNB without recording either his power of attorney or sale in proper certificate of title. Po Tecsi remained in possession of land and leased land to Uy Chia for 5 years. Lease was recorded in title. Po Tecsi complained to his brother that he had been after him so much for the forwarding of he rents of the property and explaining his precarious financial condition, that he did not collect the rents for himself, and promised to remit the balance after having paid all expenses of repairs and cleaning up together with vouchers so he could not blame him for anything. Po Tecsi answered that he had sent a draft of P2k and was surprised that Ejap claimed such rent and that if Ejap wanted to lease property to Smith Bell he should not do so without first consulting him, bec if someone offered a higher rent he wanted to exercise his right to lease it. Mortgage on land was cancelled. Po Tecsi died. His son, Sun Suy, submitted to Ejap a liquidation of accounts showing rents collected on property. Sun was delayed in rental payments and begged Ejap to let him pay later. Ejap assigned credit against Tecsi to his son Sun Boo. Katigbak sold property to Sun Boo. Latter notified Sun Suy. Sun Boo now seeks recovery of rent against Tai Hing Co. And members of such company Sun Suy. Sun Suy: Ejap not authorized under power executed by Tecsi to sell land coz it was executed before Ejap sold land to his brother Tecsi. ISSUE: WON Ejap had authority to sell land to Katigbak under POA executed by Tecsi even though such POA was executed even before Tecsi had bought land from Ejap? YES HELD: 1) Ejap had authority. Power here was general and authorizes Ejap to sell any kind of realty "belonging" (pertenezcan) to the principal. The use of subjunctive "pertenezcan" (might belong) and not the indicative "pertenecen" (belong) means that Po Tecsi meant not only the property he had at the time of execution but also what he might afterwards have. 2) Power of attorney not recorded in registry still binds principal to acknowledge acts performed by Ejap. While its true that power of attorney not recorded in registry of deeds is ineffective in order that an agent or attorney in fact may validly perform acts in the name of his principal, and any act performed by agent by virtue of power is ineffective against 3rd person who, in good faith, may have acquired a right, it does however, bind principal to acknowledge acts performed by his attorney in fact regarding said property. Here, while its true that non-registration of POA by Po Tecsi prevents sale made by Ejap to Katigbak from being recorded in registry of deeds, its not ineffective to compel Tecsi to acknowledge said sale. Sale was not fraudulent even if power and sale not recorded in registry. Record shows that Po Tecsi was aware of sale as shown by several letter complaining of pressing demands of his bro Ejap to send him rents of land, his promises to send them and remittance were tacit acknowledgment that he occupied land no longer as owner but only as lessee. Linan, supra (TOFF) Strong, supra (REG) J. Tracey 1906 FACTS: Mrs. Strong was the owner of 800 shares of capital stock of the Phil. Sugar Estates Development Company. The shares were purchased by the respondent through a broker who dealt with Strongs agent, Jones, who had the script on this possession and who made the sale without the knowledge of Strong. Previous to the sale was a conversation between petitioner and respondent where the former told the latter, speaking of her shares, not to part with them until I got their face value. Jones had been acting gratuitously as agent of Strong, not only under a written power special in terms to collect money, but also as general agent managing all her business. Even before the sale

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mentioned, there had been an occasion where Jones without special instruction sold other stocks owned by Strong, understanding that the act was within the scope of his general agency. Strong alleges that Jones, as her agent, did not have the power to sell or deliver her stocks. ISSUE: WON selling the shares was within the authority of the agent Jones. HELD: NO. The only evidence of the agency was the conversation between Strong and Jones. Gathering from it, the power may have been general or special, express or merely assumed. This would lead, however, to the assumption prohibited by Art. 1713. The general management of the property did not necessitate incidentally the sale of stock. Therefore, there is no proof of an effective power given Jones to dispose of the stock. Acts of agents beyond their authority are null. Third persons who deal with them at their own peril and are bound to inquire as to the extent of the power of the agent with whom they contract. In this case, defendant is not shown to have made any inquiry, but apparently relied unquestioningly upon Joness assumption of authority and took risk in so doing. Pascual v Realty Investment Inc. (ABBY) May 12, 1952 J. Bautista The purpose of this action is to enforce an alleged verbal agreement to sell to the plaintiff a parcel of land which is claimed to have been occupied by the plaintiff as at tenant since 1912, it appearing that under the statute of frauds said verbal agreement cannot be enforced, nor evidence thereon presented, because it has not been made in writing, nor does it appear in a note or memorandum, as required by said statute (Rule 123, section 21 (e), Rules of Court).

ISSUE: W/N Pascuals allegation takes his case out of the operation of the statute of frauds. (If yes then Realty is compelled to execute the deed of sale)

HELD: No, this is not one of the exceptions. While it is alleged that plaintiff has occupied the land since 1912, there is nothing alleged therein to the effect that he has taken possession thereof in view of a supposed verbal contract he had with the defendant to purchase it, nor is there any allegation that he has made improvements thereon because and as a consequence of said supposed contract to sell. This case having been dismissed on a mere motion to dismiss, the merits of the order of the court can only be gauged upon a consideration of the allegations appearing in the complaint, and upon no other.

FACTS: Ramon Pascual filed an action to compel Realty Investment to sell to him the land that he is occupying. He alleges that he has been occupying the 450 sq.m. of land since 1912 while it was still under Angela Tuasons administration. When it was sold to Realty in 1941, he said that he offered to buy it at P15/sqm. He failed to perfect the sale because Realty increased the price to P25 hence this action. Realty filed a motion to dismiss and was granted.

CFI basis: An agreement to sell real property should be made in writing, or at least it should appear in a note or a memorandum, in order that a suit based thereon may be enforceable, the present action cannot be maintained and should be dismissed. For our purposes apply 1403 also. The point is W/N the sale to be enforceable, must be in writingYES!

Where a parol contract of sale is adduced not for the purpose of enforcing it, but as a basis of the possession of the person claiming to be the owner of the land, the statute of frauds is not applicable (Almirol et al., vs. Monserrat, 48 Phil., 67), in the same way that it does not apply to contracts which are either totally or partially performed upon the theory that there is a wide field for the commission of frauds in executory contracts which only prevented by requiring them to be in writing, a fact which is reduced to a minimum in executed contracts because the intention of the parties become apparent by their execution). Pascuals situation does not here obtain for the reason that the complaint does not contain the requisite allegations. On the contrary, it alleges that plaintiff occupied the land as a tenant since 1912. Raet vs. CA (EARLA) September 17, 1998 Mendoza, J.

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FACTS: In 1984, the Sps. Raet and Sps. Mitra paid Amparo Gatus P40k and P35k, respectively, after negotiations regarding the sale of Gatus rights in certain units in Las Villas de Sto Nino in Meyacauayan, Bulacan. This subdivision was developed by the Phil-Ville Development and Housing Corporation (PVDHC), primarily for parties qualified to obtain loans from GSIS. In 1985, the two spouses applied directly to PVDHC for the purchase of units in the subdivision. They then looked for GSIS members who can act as accommodation parties by allowing them to use their policies, for the purpose of enabling the two spouses to buy units in the subdivision. The PVDHC would then allow them to buy units after the GSIS approved the loan applications of their proxies. The two spouses then presented the GSIS policies of Ernesto Casidsid (for Raets) and Edna Lim (for Mitras) and paid PDVHC P32,653 and P27k, respectively. However, the loan applications of Casidsid and Lim were disapproved by GSIS, thus prompting PVDHC to inform petitioners to look for other sources of financing. But in the meantime, they were allowed to occupy the units initially granted to them. On November 10, 1988, for failure of the petitioners to look for alternative sources of financing, PVDHC ordered them to vacate the premises. The spouses however refused to heed the order. An ejectment case was then filed against them before the MTC Meycauayan, which, in its decision dated May 24, 1991, ordered them to vacate the premises. On the other hand, a complaint for estafa was filed against Gatus. The complaint was however dismissed on the ground that Gatus never represented herself to be the agent of PVDHC. The spouses filed another complaint before the RTC Malolos for the recovery of the supplemental costs they had paid PVDHC. This was however dismissed by the RTC on the ground of lack of jurisdiction. Another case was then filed to the HLURB in 1991 a complaint for specific performance and damages against Gatus and PVDHC. The Arbiter then ruled in favor of the spouses and ordered them to reimburse the amounts paid by the spouses to them. The Arbiter also found that Gatus was an agent of PVDHC. On appeal, the Board Commissioner ruled that the case has already been decided by the ejectment case in the MTC. Upon elevation to the Office of the President, it sustained the decision of the Arbiter. But on appeal to the CA, the case was dismissed without prejudice to their right to proceed against Gatus. ISSUE: WON Gatus was an agent of PVDHC. HELD: No. Gatus was not the agent of private respondent PVDHC. The dismissal of the criminal case for estafa against Gatus proves that she is not an agent of PVDHC, especially since it was found therein that she never represented herself to be an agent of PVDHC. Moreover, Art. 1874 of the Civil Code requires for the validity of a sale involving land that the agent should have an authorization in writing, which Gatus did not possess. Petitioners knew from the beginning that Gatus was negotiating with them in her own behalf, and not as an agent of private respondent PVDHC. There is, therefore, no basis in fact for the finding of the Housing and Land Use Arbiter that Gatus was the agent of private respondent PVDHC with respect to the transactions in question. *In this case, the SC also said that there were no perfected contracts of sale, since the purchase price and the payment schemes have not been agreed upon. At most, there was only a proposed contract to sell. Jimenez v. Rabot (JANCES) City-Lite Realty Corp. v. CA (JILL) February 10, 2000 J. Bellosillo FACTS: Respondent FP Holdings was selling its land, also known as the Violago Property (its a subdivision in QC now), to the general public via sales brochures. Its agent, Meldin Roy/Metro Drug transacted with City-Lite for the sale of the front portion of the land, provided that City-Lite would put into writing its acceptance with the terms and conditions. After City-Lite conveyed their agreement into writing, FP Holdings refused to execute the corresponding Deed of Sale, prompting City-Lite to register an adverse claim in the Title. FP Holdings then filed a Petition for the cancellation of the adverse claim with the RTC QC but this was dismissed by a finding that there is sufficient ground for the adverse claim. City-Lite now sued FP Holdings for specific performance (execution of Deed of Sale). Pending this case, FP Holdings transferred the property to View Master, forcing City-Lite to again annotate a notice of lis pendens over the new Title of View Master. The trial court rendered a decision favorable to City-Lite, but this was reversed by the Court of Appeals on the ground that there was no perfected contract of sale since there was no definite agreement as to the manner of payment.

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ISSUE: WON a contract of sale was perfected? NO. RATIO: Under Art. 1874, when a sale of a piece of land or any interest therein is made by an agent, the authority of the latter must be made in writing; otherwise, the sale shall be void. Here, the authority of Meldin Roy/Metro Drug was just established by testimonies and evidences: (1) admissions of Roy/Metro Drug; (2) sales brochure specifying Roy to be a contact person; (c) the guard at the property saying Roy/Metro Drug are authorized agents; and (d) common knowledge among brokers. Roy/Metro Drug therefore was merely a contact person. Moreover, the President of FP Holdings, in a memorandum, merely requested Metro Drugs assistance in referring to us buyers for the property. Please proceed to hold preliminary negotiations with interested buyers and endorse formal offers to us for final evaluation and appraisal. This only meant that the task of Roy/Metro Drug was to look for buyers, but the final evaluation of the offers shall be made only by FP Holdings. In this case, the transaction was finalized only by Roy. Other testimonies even said that Roy/Metro Drug was a mere broker whose task is to bring parties together for a possible transaction. Given these circumstances, the sale is declared null and void, with no legal effects. F. General Rule Article 1875: The to negotiate the sale of property to Dominador Lee, a client of Borbon. In the authority given by Medrano to Borbon it stated that: For your labor and effort in finding a purchaser thereof, I hereby bind myself to pay you a commission of 5% of the total purchase price to be agreed upon by the buyer and seller. Respondents Flor, Borbon and Josefina Antonio arranged for an ocular inspection of the property together with Lee which never materialized. Instead, Lee was instructed to get in touch with Medranos daughter, Teresa Ganzon, regarding the property. Antonio called Lee to make a follow-up of the latters visit to the property. Lee informed her that he already purchased the property and had made a down payment of P1M. The remaining balance was to be paid upon approval of the incorporation papers. Lee further was surprised that the respondents had not yet received their commission. A deed of sale was executed. Since its consummation, respondents asked from the petitioners for their commission or 5% of the purchase price. The petitioners refused to pay and offered a measly sum of P5,000 each. Hence, the respondents filed an action against petitioners. The trial court ruled in favor of the respondents. The petitioners were ordered to pay jointly and severally the 5% brokers commission to the respondents. It ruled that the sale of the property could not have been possible without the representation and intervention of the respondents. The Court of Appeals affirmed the decision of the trial court. ISSUE: WON the respondents are entitled to their commission HELD: YES. Respondents were instrumental in the sale of the property to Lee. Without their intervention, no sale could have been consummated. The respondents were the only ones who knew about the property for sale and were responsible in leading a buyer to its consummation. All these circumstances lead to the inescapable conclusion that the respondents were the procuring cause of the sale. When there is a close, proximate and causal connection between the brokers efforts and the

Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. 1. Exceptions 2. When is an agent entitled to compensation: General rule 3. Measure of compensation: General Rule 4. Double Agency: General Rule 5. Cases Medrano v Court of Appeals (GEN) Feb. 18, 2005 Callejo, Sr., J. FACTS: Bienvenido Medrano, the Vice-Chairman of Ibaan of Rural Bank owned by the Medrano family, asked Estela Flor, a cousin-in-law, to look for a buyer of a foreclosed asset of the bank. The property was a 17-ha mango plantation (P2.2M) located in Ibaan, Batangas. Flor advised Pacita Borbon, a licensed real estate broker, that Medrano owned a mango plantation which was up for sale. Borbon told Flor to confer with Medrano and to give them a written authority

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principals sale of his property, the broker is entitled to a commission. Moreover, despite the lack of participation in the negotiations as required in the letter of authority, respondents are still entitled to their commission. The clear intention is to reward the respondents for procuring a buyer for the property. Before negotiating a sale, a broker must first bring in a prospective buyer. A broker earns his pay by merely bringing the buyer and the seller together even if no sale is eventually made. The essential feature of a brokers conventional employment is merely to procure a purchaser for a property ready, able, and willing to buy at the price and on the terms mutually agreed upon by the owner and the purchaser. And it is not a prerequisite to the right to compensation that the broker conduct the negotiations between the parties after they have been brought into contact with each other through his efforts. Notes: Broker one who is engaged, for others, on a commission negotiating contracts relative to property with the custody of which he has no concern; the negotiatior between other parties, never acting in his own name but in the name of those who employed him; he is strictly a middleman and for some purposes the agent of both parties. National Brewery & Allied Industries Labor Union v. San Miguel Brewery Inc. (MAI) December 27, 1963 Bautista Angelo, J. Facts: The National Brewery and Allied Industries Labor Union of the Philippines (PAFLU)filed before the Court of First Instance of Manila against the San Miguel Brewery, Inc. a complaint alleging that: as per their CBA, San Miguel agreed to pay the basic daily rates of those workers within the bargaining unit who may participate in the Labor Day parade held on May 1st of every year. However, said company refused to pay the basic wages for the day of the union members who participated in the parade. The complaint prayed for the payment of the wages of those union members, and damages. The company in its answer set up special and affirmative defenses. Among the latter, the company alleged that (a) the union has no cause of action against the company, and (b) the court has no jurisdiction over the subject matter of the action. With respect to the first ground, the company contends that the union is not the real party in interest but the individual members whose right to recover the one day's wage is personal to them. Issue: Whether or not the union can file the action in behalf of its members Held: YES. The complaint filed by the union comes under the jurisdiction of the court a quo for the same is based upon the collective bargaining agreement concluded between the union and the company and the basis of the right which is sought to be enforced is the agreement itself and not the wages to be collected. The wages accrued mainly on the strength of an agreement entered into between the union and the company. The action then may be brought in the name of the union that has obliged itself to secure those wages for these members. The union is the party with whom or in whose name the collective bargaining agreement in question has been entered into for the benefit of its members and, in line with the above rule, the union may sue thereon without joining the members for whose benefit the action has been presented. Disposition: proceedings. Case remanded for further

Macondray v. Sellner (ROG) Feb. 2, 1916 J. Carson Facts: Sellner, a real estate broker, sold land to Macondray. Formal deed of sale not executed until delivery of a Torrens title. In the meantime, land was flooded by high tides and Macondray became highly dissatisfied with its purchase. When final transfer was made company informed Sellner that land as wholly unsuited for use as a coal-yard, for which it had been bought and requested him to find another purchaser. Both parties had an understanding that Sellner was to have as commission for getting a purchaser anything over amount which he could get. Sellner found another buyer Barretto. A formal deed of sale was executed together with Torrens which was delivered to Sellner by Company. Barretto agreed to accept land if upon examination, title and deed be satisfactory. Sellner retained the Torrents title but left deed of sale with Barretto with understanding that if both were satisfactory, latter would just issued check to former. A few days later Barretto was detained by typhoon on his way to Tayabas so his return was delayed. During his absence, company advised Sellner that latter must consummate sale and collect money without delay upon Barretto's return. All the while company kept asking Sellner to speed up in closing the deal but Barretto could not immediately do so coz he was indisposed from his trip. Barretto arrived Saturday and promised he'd

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get to checking the docs in a day or two. By Monday, Company gave an ultimatum. -Young, Company's general manager then formally notified Sellner that unless purchase price was paid before 5pm of that afternoon deal was off. Barretto then asked Sellner to turn over the Torrens title which latter did but latter would only receive the check 36hrs later, Wednesday morning. Upon receipt of check, Sellner immediately tendered to Co but Co's manager refused to accept and filed this action claiming that sale had been "cancelled" upon failure of Selner to turn over price. Issue: WON sale be cancelled on ground of late delivery of purchase price? NO WON Macondray entitled to damages from real estate broker Sellner? NO Held: Court's preliminaries: -No reason given by Company for delivery of price at certain hour other than that manager had been annoyed by delays or changed mind about selling because he found a better deal or land worth more than he offered. -As to value of land--no real diff actual and true market value of land. Witness Company provided was of a rival real estate broker, who had never been on the land but claimed familiarity with general location. Such witness insufficient to establish such fact. It may be that land has speculative value higher than actual market value at time of sale but the question of fact ruled upon is the actual market value at time of sale and NOT speculative value. -Market value = price which property will bring in a fair-market after fair and reasonable efforts have been made to find a purchaser who will give the highest price for it. 2. Macondray no cause of action to file for damages v Sellner its real estate agent. -Measure of damages recoverable from real estate agent = actual market value of property, title to which had been lost as a result of the sale. This is damages which company has a right to should he choose to ratify sale and recoup from agent any loss resulting from latter's alleged unauthorized consummation of the sale. -Company still liable to real estate agent in event that former terminate negotiations, for the amount of commission, which former agreed to pay latter upon his agency contract. Market value of land = 18k of this company received 17k leaving a bal of 1,717 unpaid. The commission agreed upon was all over 17k which Sellner would secure from property---allowing Sellner this commission, and offsetting it against the unpaid balance, Macondray not entitled to money judgment against Sellner. -At the time fixed by manager of Co for the termination of the negotiations, Sellner had already earned the commissions agreed upon, and could not be deprived thereof by arbitrary action of Co in declining to execute the contract of sale for some reason personal to itself. 3. Real estate agent already entitled to commission at moment he finds a buyer willing to take the property. -The business of a real estate broker or agent is generally only to find a purchaser, and RULE IS in absence of an express contract between broker and his principal, the implication generally is that the broker becomes entitled to the usual commissions whenever he brings to his principal a party who is able and willing to take the property and enter into a valid contract upon the terms then named by the principal although the particulars may be arranged and matter negotiated and completed between the principal and the purchaser directly. 4. Rights of real estate broker should be protected from arbitrary revocation of agency without remuneration for his services rendered in finding a buyer prior to revocation. -It would be injustice to permit principal to withdraw authority after efforts made by agent in finding a buyer after principal reaps the benefit of the agent's labors. This would make the contract an unconscionable one would offer a premium for fraud by enabling one of the parties to take advantage of his own wrong. 5. Macondray cannot cancel or rescind agreement for sale on sole ground that price not paid at hour designated in letter. Company could not validly terminate negotiations at the time and then decline to sell land to Barretto, who had accepted offer of sale, subject only to examination of docs of title and stood ready to pay price upon delivery of deed of sale and other necessary docs of title. -Time does not appear to be the essence of the contract. The agreement to sell was made without any express stipulation as to time within which purchase price was to be paid, except that purchaser reserved right to examine docs of title before paying, though it was understood that sale was for cash upon delivery of docs of title executed in due form. -While seller has right to couple agreement with stipulation to pay at certain day hour minute HERE there was no such stipulation. Time may be and often the essence of contract but absence of stipulation here shows that intention of parties was to allow reasonable time for examination of docs so

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vendor cant now arbitrarily demand payment at specified time. -IN absence of stipulation, it will be implied that time to pay = reasonable time dependent on circumstances of case. -this rule also applies to time within which any condition precedent is to be performed, or within which contingency upon which transaction depends is to happen and to performance of various acts by parties to precede conveyance or payment. Lim v. Saban (TOFF) Perez de Tagle v. Luzon Surety (REG) Quijano v. Esguerra (ABBY) JM Tuason vs. Collector of Internal Revenue (EARLA) June 30, 1960 Labrador, J. Facts: JM Tuason and Varsity Hills, Inc., as owner of 5 parcels of land entered into a contract whereby it ceded the said lands to JM Tuason for the purpose of having it surveyed, platted, monumented, and otherwise developed into a subdivision. Aside from the customary brokers duties (recommending sales prices of lots (Sec. 3), signing contracts of sale or lease, or contracts to sell, releases of mortgage (Sec. 4), collecting sales prices or other accounts due the Owner (Sec. 7), organizing offices and personnel to attend to the work relating to all the above (Sec. 8)), it was also tasked to undertake the laying out of parks, playgrounds, the construction of streets, culverts, pavements, sewage system, drainage, the installation of utilities. As payment for its service, it was stipulated that it shall be given 8% administration fee, in addition to the 10% commission it is entitled to. As a result of this transaction, the Collector of Internal Revenue assessed against the petitioner the broker's tax on the 8 per cent received by the latter as "administration fee" in the amount of P8,724.84, representing the broker's percentage tax and surcharge thereon. It paid the amount under protest, and immediately sought refund of the said amount. The CIR however, denied its request, which was affirmed by the CTA. The CTA ratiocinated that the prestation is indivisible, hence, the administration fee given to JM Tuason is only part of the whole transaction - that the activities of the petitioner of subdividing the property or collecting accounts, which petitioner denominated `acts of administration' are not in fact detached, distinct, nor transcendental to the brokerage relationship created by aforesaid contract, but rather acts which are merely incidental to the primary purpose for which the agreement was entered into. ISSUE: WON it is entitled to a tax refund. HELD: NO. The so-called administration fee corresponds to the incidental duties of a broker in the sale of real property. The only duty that is separate and distinct from that of a broker is the obligation to build roads, parks, sewage system, etc. But all the others are necessary parts of the work of a broker. A broker engaged in the sale of real estate is not limited to bringing vendor and vendee together and arranging the terms and conditions of a sale of real estate. As sales of real estate must be in writing the preparation of the documents is part of the functions of the broker. So the only function entrusted to petitioner under the contract which may not be embraced in those of a broker, is that of constructing the subdivision, as above explained and detailed out. It follows, therefore, that the parties have agreed on giving compensation denominated administration fees for services which may well be included in the duties of a broker. But the duty of developing the subdivision, with its lots, streets, playgrounds, sewage, etc. is also a necessary incident to the duty of selling the lands subject of the contract. The lands must be subdivided into residential lots, with streets laid out, before said lots can be sold. And while this work may be entrusted to another, the parties have seen fit to have the same entrusted to the petitioner. Moreover, although JM Tuason may be regarded as a contractor, insofar as the buildings of infrastructures is concerned, it failed however to show which portion of the administration fee is specifically designated for such service. People v Castillo (JANCES) June 16, 2000 J. Pardo Facts: The victim engaged in real estate business. The spouses Castillo were both her sales agents on commission basis. Prior to her kidnapping, a certain Albert Gutierrez called and represented that he was interested in buying a property sold by the victim. The spouses Castillo were the ones who referred the property to Mr. Gutierrez. When the victim met with Albert Gutierrez, she found out that it was really Malapayon. She was brought to a safe house, were Gonzales was the one who watched over her and held her captive at gunpoint. The spouses Castillo also went to the safe house and were able to walk the premises freely. TC: Malapayon and Gonzales guilty of illegal possession of fire arms. ALL guilty of kidnapping with ransom. Only the spouses Castillo, Abello and Gonzales appealed.

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Issue: WON accused-appellants participated as conspirators HELD: The spouses Castillo were conspirators. Mercedita was the one who referred Malapayon to the victim. However, Malapayon never mentioned that he was referred by the Castillos, which is suspicious as it is common practice for a buyer to inform the seller who referred him. Also, the Castillos being agents working on commission, should have also informed their principal of the referral, them having to gain upon such referral should the buyer proceed with the acquisition. Lastly, both Castillos were able to freely enter and exit the safe house. With regard to Abello, his explanation that he was there to do a painting job is tenable. Malapayon confirmed this by stating that at that time he hired helpers to paint the apartment. This defense was also not rebutted by the prosecution. Concerning Gonzales, his defense that he too was hired to do a painting job cannot give way to his acquittal. He was the one who guarded the victim. By doing so, he concurred with the criminal design of the principals and performed an act indispensable to the crimes commission. Disposition: appeals of spouses Gonzales denied. Abello acquitted. Castillo and Thus, Inland and de los Reyes formally demanded their 5% brokers commission, which was denied by Araneta, Inc. on the ground that the claim has no factual or legal basis. Inland and de los Reyes claimed that a letter dated October 28, 1976 was signed by Araneta II, renewing their authority to act as sales agent for a period of 30 days from said date. They also asserted that a broker is automatically entitled to the stipulated commission merely upon securing for, and introducing to, the seller the particular buyer who ultimately purchases from the former the object of the sales, regardless of the expiration of the brokers contact of agency and authority to sell. Trial court and CA ruled in favor of Araneta, Inc. ISSUE: W/N Inland and de los Reyes are entitled to the brokers commission. NO. RATIO: 1. The alleged letter extending the authority 30 more days from October 28, 1976 is a blatant lie. Inland and de los Reyes failed to attach a certified copy of this letter. Thus, their contract already expired thirty days from its last renewal on December 2, 1975. 2. On the claim of automatic brokers commission, this is devoid of merit. From September 16, 1975 to January 1, 1976, when Inlands authority to sell was subsisting, if at all, petitioners had nothing to show that they actively served their principals interests, pursued to sell the shares in accordance with their principals terms and conditions, and performed substantial acts that proximately and causatively led to the consummation of the sale to Stanford of Araneta, Inc.s shares. Danon v. Brimo (MARK) Sept. 12, 1921 J. Johnson FACTS: Defendant Antonio A. Brimo, in a conversation with the plaintiff Julio Danon, informed the latter that he (Brimo) desired to sell his factory, the Holland American Oil Co., for the sum of P1,200,000. He agreed and promised to pay to the plaintiff a commission of 5 per cent provided the latter finds a buyer that will buy said factory for the said amount. No definite period of time was fixed within which the plaintiff should effect the sale. There was likewise another broker (Sellner) who was negotiating the sale of said property. Sellner, the other broker referred to, had found a purchaser who ultimately bought the factory for P1,300,000. For that reason Mr. Prieto, the

Inland Realty Investment v. CA (ALAIN) June 9, 1997 Hermosisisima, Jr., J.: FACTS: On September 16, 1975, defendant corporation (Araneta, Inc.) thru its co-defendant Asst. Gen. Mgr. Eduque, granted to Inland Realty Investment Service, Inc. (Inland) represented by one Roman de los Reyes (entitled to of the claim asserted which is 5% brokers commission) a 30day authority to sell its shares stock in another corporation. Inland was able to find a prospective buyer, the Stanford Microsystems, Inc., but the offer of said buyer was rejected by Araneta, Inc. Thus, Inland looked for other buyers and found two more prospective ones. The authority was extended several times: first on Oct. 2, 1975, for 30 days from the said date, the second on Oct. 28, 1975 for 30 days from said date, and on Dec. 2, 1975 for 30 days from the said date. On July 8, 1977 or 1 year and 5 months after the last extension granted to Inland, the shares of stock were finally sold to Standford Microsystems, Inc.

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would be purchaser found by the plaintiff, never came to see Mr. Brimo to perfect the proposed negotiation. Danon filed an action to recover the sum of P60,000, alleged to be the value of services rendered by him, as broker, to the defendant. done proves of use and benefit to the principal. o The rule however must be taken with one important and necessary limitation. If the efforts of the broker are rendered a failure by the fault of the employer; if capriciously he changes his mind after the purchaser, ready and willing, and consenting to the prescribed terms, is produced; or if the latter declines to complete the contract because of some defect of title in the ownership of the seller, some unremoved incumbrance, some defect which is the fault of the latter, then the broker does not lose his commissions. And that upon the familiar principle that no one can avail himself of the nonperformance of a condition precedent, who has himself occasioned its nonperformance. This limitation is not an exception to the general rule affecting the broker's right for it goes on the ground that the broker has done his duty, that he has brought buyer and seller to an agreement, but that the contract is not consummated and fails though the after-fault of the seller. o NO STIPULATED PERIOD. Where no time for the continuance of the contract is fixed by its terms either party is at liberty to terminate it at will, subject only to the ordinary requirements of good faith. Usually the broker is entitled to a fair and reasonable opportunity to perform his obligation, subject of course to the right of the seller to sell independently. But having been granted him, the right of the principal to terminate his authority is absolute and unrestricted, except only that he may not do it in bad faith, and as a mere device to escape the payment of the broker's commissions. Although Danon could probably have effected the sale of the defendant's factory had not the defendant sold it to someone else, he is not entitled to the commissions agreed upon because he had no intervention whatever the sale in question. It must be borne in mind that no definite period was fixed by the defendant within which the plaintiff might effect the sale of its factory. Nor was the plaintiff given by the defendant the exclusive agency of such sale. Therefore, the plaintiff cannot complain of the defendant's conduct in selling the property through another agent before the plaintiff's efforts were crowned with success. "One who has employed a broker can himself sell the

ISSUES WON Danon is entitled to the commission agreed upon. NO. RATIONALE Plaintiff is not entitled to the commission.The most that can be said as to what the plaintiff had accomplished is, that he had found a person who might have bought the defendant's factory if the defendant had not sold it to someone else. The evidence does not show that the Santa Ana Oil Mill had definitely decided to buy the property in question at the fixed price of P1,200,000. The board of directors of said corporation had not resolved to purchase said property; and even if its president could legally make the purchase without previous formal authorization of the board of directors, yet said president does not pretend that he had definitely and formally agreed to buy the factory in question on behalf of his corporation at the price stated. It is undisputed that plaintiffs services did not any way contribute towards bringing about the sale of the factory in question. He was not "the efficient agent or the procuring cause of the sale."

Sibbald vs Betlehem Iron Co o The duty assumed by the broker is to bring the minds of the buyer and seller to an agreement for a sale, and the price and terms on which it is to be made, and until that is done his right to commissions does not accrue. o It follows, as a necessary deduction from the established rule, that a broker is never entitled to commissions for unsuccessful efforts. The risk of a failure is wholly his. The reward comes only with his success. The broker may devote his time and labor, and expend his money with ever so much of devotion to the interest of his employer, and yet if he fails, if without effecting an agreement or accomplishing a bargain, he abandons the effort, or his authority is fairly and in good faith terminated, he gains no right to commissions. He loses the labor and effort which was staked upon success. And in such event it matters not that after his failure, and the termination of his agency, what he has

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property to a purchaser whom he has procured, without any aid from the broker." Fiege and Brown v Smith, Bell & Co and Cowper (GEN) March 7, 1992 Johns, J. FACTS: Cowper was an employee of Smith, Bell & Co. which was engaged in the sale of machinery and equipment for the use of manufacturers of coconut oil. Under the terms of the Harden Contract, Cowper and plaintiff Fiege were entitled to receive half of the profits received from the sale of machinery to Mr. Schmidt. Later, the plaintiffs were associated with Cowper, and they entered into a contract with the Company. They were to seek to buyers for the machinery which were acceptable to the Company and that the prices were to be fixed by the plaintiffs, as brokers. In the contract, it was stipulated that the plaintiffs as brokers were to receive one-half of the difference between the cost of the machinery and equipment laid down in Manila and the prices at which they were sold to buyers secured by the brokers. The plaintiffs were able to secure orders for machinery and equipment, which were delivered to and accepted by the Company. The defendant imported all of the specified machinery but that it has failed and refused to make any settlement with the plaintiffs or to render any accounting of the cost of the machinery, or to make any payment, either in full or on account, of the services rendered. The plaintiffs allege that when the contracts were signed by the Company with the buyers, their services were completed and are entitled to recover P35,000. The defendants on the other hand allege that aside from the P2,000 paid by one of the buyers, no other payments have been made on the respective contracts by any of the other purchasers which were secured by the plaintiffs. Until such payments have been made, the Company cannot ascertain net profits. The trial court rendered a judgment for the plaintiffs for P6,511.17, the only amount admitted by the defendant as commission for the sale of the machinery. ISSUES: WON the plaintiffs are entitled to their compensation HELD: NO. The plaintiffs and Cowper and the Company were to divide equally the profits of each contract, and the plaintiffs are entitled to one-half of the profits out of each contract, and until such time as the company made a profit on a given contract, plaintiffs commission was not earned as to that contract. There was no profit through the mere signing of the contract by the purchaser and its acceptance by the company. There would not be any profit until the purchaser paid all the money and complied with his contract. Until such time as the company realized a profit on the contracts, there was nothing to share or divide. No payment was tendered before October 15, 1919, the date of the filing of the complaint. Ramos vs. CA and Calanoc (MAI) April 04, 1975 Makalintal, C.J. Facts: FIMCO entered into several contracts with local merchants for the resale to them of certain imported goods. One such contract was concluded with Mrs. Salustiana Dee, or Wellington & Co., in the amount of $1,333.000.00 or P2,666,000.00. Cesario P. Calanoc instituted this action, claiming that Emerito M. Ramos of FIMCO had engaged his services to procure purchasers for the imported goods and that he was directly instrumental in bringing about the contracts in question, and thus, he was entitled to the agreed commissions of 2% on the contract with Wellington & Co. and 1% on those with the International Mercantile Co. Jose Ang Uco testified that he introduced Mrs. Salustiana Dee to Calanoc as a prospective buyer of imported merchandise. Together, the three of them went to Mr. Recto of the Equitable Bank who explained to Mrs. Dee about the banking procedure involved in the transaction. Thereafter, he and the plaintiff Calanoc were in frequent communication with Mrs. Dee until the latter went directly to Ramos and closed the contract in question without their presence. Mrs. Dee had agreed to pay him a 2% commission on the transaction. Issue: Whether or not Calanoc was entitled to a fixed commission Held: NO. The contract between Ramos and Calanoc is quite explicit: the arrangement was for Calanoc to sell the merchandise to any buyer at a mark-up price of 23% over the invoice value of the importation and any overprice successfully collected above the stated 23% would accrue to Calanoc as his commission. The amount of such commission was therefore fluid, depending upon the overprice

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obtained above the 23% mark-up price of the invoice value set by Ramos. Nothing in the agreement guaranteed Calanoc a fixed commission, which depended upon the overprice the buyer would pay. And it is a fact, undisputed by Calanoc that what Ramos received in the Wellington & Co. transaction in excess of his original 23% mark-up price was only P13,330.00 and not P53,320.00, the amount claimed and awarded by the trial court and the Court of Appeals. While it is true, as Calanoc claims, that he informed petitioner that Mrs. Dee had already agreed to pay the 25% premium, there is absent in the records of the case any evidence to show that Mrs. Dee confirmed such agreement with petitioner and that the latter could have bound her to it. Petitioner had fixed for himself a 23% mark-up, allowing anything over that amount as commission. If Mrs. Dee changed her mind and refused to pay the 25% premium, and paid only 23-1/2%, that was her prerogative; petitioner had neither the duty nor the right to compel her to contract for more than what she was willing to pay, when she was ready to meet his price. latter replied that he had not received any written offer from SSS during the 60day period of the exclusive authority nor during its extension. Doronilla wrote to SSS renewing his offer to sell revising his original offer of P4 per sqm to P3.25. SSS passed a resolution NO. 636 making a counter offer of Php3.25 per sq m subject to an appraisal of the property and to submit a report thereon. After a favorable appraisal report of the Toples & Harding SSS passed Res no. 738 approving purchase of the land for Php3.25 or for total of P9.7m. Deed of Sale was executed. Doronilla received the full purchase price. Prats then demanded payment of his professional fee. TC: ordered Doronilla to pay CA: reversed. Issue: WON Prats was not the efficient procuring cause in bringing about the sale of Doronila's land to SSS? YES Held: 1. Doronilla's offer to sell land to SSS was formally accepted only on June 1968 after the exclusive authority in favor of Prats had expired. The CA's factual finding that Prats not the efficient procuring cause in bringing about the sale are final. Prats was not categorical that it was through his efforts that the meeting between SSS Administrator Teodoro and Doronilla took place. He refers to a phone call he made a few days before May 29, 1968 but in the conversation he had with Mr. Teodoro, the latter requested him NOT to be present in the meeting. It is manifest that SSS officials never wanted to be in any way guided by, or mediated by Prats relative to the negotiation for purchase of property. The meeting was done independently and not by virtue of Prat's efforts. 2. In equity, court notes that Prats had diligently taken steps to bring back together Doronilla and SSS and therefore grants him 100k by way of compensation for his efforts and assistance in the transaction. . Among others: He wrote to the Office of Presidential Housing Commission offering the land and wrote a follow up letter which was answered by Commission suggesting that property be offered directly to SSS. Sale was perfected only at the price offered by Doronila when he alone was dealing exclusively with buyer long before Prats came along but Prats efforts were instrumental in bringing them together again and finally consummating the sale although sale finalized after expiration of Prats' extended exclusive authority.

Pratts v. CA (ROG) 1978 Facts: This complaint for sum of money filed by Prats, doing business under name of Philippine Real Estate Exchange, against Doronila and PNB. Doronila was registered owner of 300hectares of land. He wrote to SSS Chair offering his property to SSS at P4 per square meter (per sqm). There were several counter offers made as to the price. Doronilla requested certification from Board of Realtor regarding the actual prices of his real estate raw-land properties. The Board replied that the fair market value of raw land is P3-P3.50 per sqm. Current prices before reaching Doronilla's property range from 6-7 per sqm. Doronilla granted an exclusive option and authority to Prats to sell former's property. Commission will be 10% based on P2.10 per sqm or at any price finally agreed upon. Doronilla asked SSS to return all papers related to his property in view of the exclusive option granted to Prats. SSS asked for a meeting with Doronilla but latter asked that SSS meet with Philippine Real Estate Exchange instead because Doronilla had given exclusive option to it. Prats gave notice to Doronilla that SSS had agreed to purchase the land. The

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Manotok Brothers v. CA (MARK) April 7, 1993 J. Campos, Jr. **Um Mark, I dont recall assigning this to you. Sorry! FACTS: Petitoner Manotok Brothers Inc was the owner of a certain parcel of land and building which were formerly leased by the city of Manila and used by Claro M. Recto High School. By means of lettter dated July 5, 1966, petitioner authorized respondent Salvador Saligumba to negotiate with the city of Manila the sale of aforementioned property. In the same writing petitoner agreed to pay respondent 5% commisssion in the event the sale is consummated. Petitoner exended respondents authority to sell several times. Within the extended period, the city of Manila passed Ordinace No. 6603 appropriating the sum of P410,816 for the prurchase of Manotok Brothers property. Said ordinance however was signed by the mayor only on May 17, 1968, three days after the lapse of respondents extended authority. Sale was consummated. Notwithstanding the realization of the sale, Saligumba never received any commission. Consequently, he filed a complaint against petioner. ISSUES WON Saligumba is entitled to the 5% agents commission. YES. RATIONALE In Prats vs CA, the SC awarded a sum of money to agent-claimant in view of his assistance and efforts in the transaction, although he was not the efficient procuring cause in bringing about the sale and notwithsatnding the expiration of his authority. In the case at bar, respondent Saligumba is the efficient procuring cause for without his efforts the municipality would not have anything to pass and the Mayor would not have anything to approve. It is clear therefore from the foregoing authority that respondent is entitled to the commission. 1952 FACTS: Lora was authorized by defendants Varela to negotiate the sale of their share or interest in a parcel of land on Plaza Goiti, Manila. He and real estate broker Marquez agreed to work together for the sale of the property. They found a ready, willing, and able buyer, which accepted defendants' price and terms, but that thereafter defendants, without any justifiable reason, refused to carry out the sale and execute the necessary deed. As a consequence, petitioners failed to receive the commission which they were entitled to receive. Defendants argued that petitioner Marquez had no cause of action because they never dealt with Marquez, directly or indirectly. ISSUE: WON Marquez is entitled to be paid his commission. YES. RULING: Lora and Marquez acted jointly in rendering services to defendants under Lora's contract (of agency), and the same questions of law and fact govern their claims. The Rules of Court do not require the existence of privity of contract between Marquez and the defendants as required under the common law. All that petitioners demand is that Marquez has a material interest in the subject of the action, the right to share in the broker's commission to be paid Lora under the latter's contract, which right Lora does not deny. This is sufficient to justify the joinder of Marquez as a party plaintiff, even in the absence of privity of contract between him and the defendants. Infante v. Cunanan, Mijares, CA (ABBY) Aug. 31, 1953 J. Bautista Angelo Facts: Consejo Infante owned 2 parcels of land with a house in Taft Manila. Infante contracted the services of Cunanan and Mijares to look for a buyer. The selling price was for P30,000, buyer must assume mortgage on the property; 5% commission on selling price. Cunanan and Mijares found a buyer, Pio S. Noche and introduced him to Infante. She informed them that she was no longer interested in selling the property and succeeded in making them sign a document stating therein that the written authority she had given them was already can-celled. It turns out that Infante dealt with Noche directly and sold the property for P31,000. The respondents found out and instituted an action for recovery of the commission when she refused to give the respondents anything.

Distinguished from Danon vs Brimo: The case of Danon is not in point. In that case, claimantagent fully comprehended the possibility that he may not realize the agents commission as he was informed that another agent was also negotiating the sale and thus, compensation will pertain to the one who finds a purchaser and eventually effects the sale.

LG Marquez v. Valera (REG) J. Labrador

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Infante said she procured their services but only for P1,200, only on condition that they buy her a property somewhere in Taft Avenue to where she might transfer after selling her property. Defendant avers that while plaintiffs took steps to sell her property as agreed upon, they sold the property at Taft Avenue to another party and because of this failure it was agreed that the authority she had given them be cancelled Respondents claim that while they agreed to cancel the written authority given to them, they did so merely upon the verbal assurance given by petitioner that, should the property be sold to their own buyer, Pio S. Noche, they would be given the commission agreed upon. True, this verbal assurance does not appear in the written cancellation, Exhibit 1, and, on the other hand, it is disputed by petitioner, but respondents were allowed to present oral evidence to prove it, and this is now assigned as error in this petition for review. LC found for the Cunanan and Mijares ordering Infante to pay them P2,500 w/ legal interest. CA affirmed LC without ac-cording to the party prejudiced the reward which is due him. This is the situation in which respondents were placed by petitioner. Petitioner took advantage of the services rendered by respondents, but believing that she could evade payment of their commission, she made use of a ruse by inducing them to sign the deed of cancellation Exhibit 1. This act of subversion cannot be sanctioned and cannot serve as basis for petitioner to escape payment of the commission agreed upon. Goduco vs. CA and Maria Castro (EARLA) Feb 28, 1964 Paredes, J. Facts: Herminia Goduco instituted a complaint against Maria Castro for recovery of sums of money as commission due her for the sale of a land in Paranaque. She alleged that the buyer indicated in the deed of sale, Sostenes Campillo, was a mere dummy, and that Castro was the real buyer of the property. She further claimed that when the purchase price of P150k was paid to the seller, the amount of P7500 as her commission was deducted from it. This particular information was allegedly given to her by the son of the owner of the property, Dr. Francisco. On the other hand, Castro alleged that she was not the real buyer in the transaction. She also alleged that Goduco repeatedly offered her certain pieces of property to purchase, but she refused since her properties were already levied at that time. After trial, the trial court dismissed the complaint. The CA thereafter affirmed this decision, saying that the claims of Goduco are merely based on conjectures and surmises. ISSUE: WON Goduco is entitled to the commission. HELD: No. The SC agreed with the CA that there is not one iota of evidence presented to support Goducos claim. Her reference to the case of Marvel Bldg Corp vs. Saturnino David is misplaced. Although that case ruled that the stockholders in the corporation were mere dummies of Maria Castro, the same conclusion could not be applied in the case at bar. This is especially so, since the deed of sale categorically states that the buyer is Campillo, and not Castro. The fact that the heirs of Castro registered an adverse claim in the said property could not support plaintiffs claim, since this was not put in issue in this case and should therefore be ventilated in the proper forum. Assuming arguendo that Goduco was authorized to sell the land, it does not automatically entitle her to a commission from the buyer. At most, the owner of the property and the one who promised to give her a commission should be the one liable to

Issue: WoN Infante was liable to pay Cunanan and Mijares commission despite the written cancellation of authority signed by the respondents. Held: Yes. Petition denied There is enough justification for the conclusion reached by the lower court as well as by the Court of Appeals to the effect that respondents are entitled to the commission originally agreed upon. It is a fact found by the Court of Appeals that after petitioner had given the written authority to respondents to sell her land for the sum of P30,000, respondents found a buyer in the person of one Pio S. Noche who was willing to buy the property under the terms agreed upon, and this matter was immediately brought to the knowledge of petitioner. But the latter, perhaps by way of strategem, advised respondents that she was no longer interested in the deal and was able to prevail upon them to sign a document agreeing to the cancellation of the written authority. That petitioner had changed her mind even if respondents had found a buyer who was willing to close the deal, is a matter that would not give rise to a legal consequence if respondents agree to call off the transaction in deference to the request of the petitioner. But the situation varies if one of the parties takes advantage of the benevolence of the other and acts in a manner that would promote his own selfish interest. This act is unfair as would amount to bad faith. This act cannot be sanctioned

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pay the same and to whom the claim should have been directed. And even assuming that Castro was the real buyer, the claim did not accrue automatically against her, but against the person who promised her a commission. Domingo v Domingo (JANCES) Oct. 29, 1971 J. Makasiar Facts: Vicente Domingo executed an exclusive contract of agency with Gregorio Domingo. The contract was to last for 30 days. It was stated that Vicente authorized Gregorio to sell his lot with a commission of 5% on the total price. Gregorio would still be entitled to the commission if Vicente or anyone else sold the property within the 30 day period or if the property is sold by Vicente within 3 months from the termination of the agency to a purchaser previously submitted by Gregorio during the continuance of the agency. Gregorio authorized Purisima to look for a buyer, promising of the 5% commission. Gregorio then submitted that Oscar de Leon wanted to buy the property. The latter paid P1000 earnest money to Vicente and gave P1000 as gift to Gregorio. Gregorio did not inform Vicente of this P1000 propina/gift. However, Vicente persuaded Oscar to buy the property from him directly at P104,000 (as opposed to the P109,000 previously agreed upon). Gregorio found out that the property was sold the Amparo Diaz, wife of Oscar de Leon. He then demanded the 5% commission from Vicente. TC: Vicente should pay Gregorio and Purisima. CA affirmed. Amparo Diaz being the wife of Oscar de Leon, the sale by Vicente of his property is practically a sale to Oscar since husband and wife have common interests. Vicente having died, his heirs appealed. Issue: WON the failure on the part of Gregorio to disclose to Vicente the payment to him by Oscar of the P1000 gift constitutes fraud as to cause forfeiture of his commission. [YES] HELD: The duties and liabilities of a broker to his employer are those which an agent owes to his principal. Art 1891 provides that an agent is bound to render an acct of his transactions and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal. Art 1909 provides that an agent is responsible not only for fraud but also for negligence. Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee, without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission from his principal, even if the principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage. By taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a position wholly inconsistent with that of being an agent for his principal, who has a right to treat him, insofar as his commission is concerned, as if no agency had existed. The fact that the principal may have been benefited by the valuable services of the said agent does not exculpate the agent who has only himself to blame for such a result by reason of his treachery or perfidy. Art 1891 will not apply if the agent acted only as a middleman with the task of merely bringing together the vendor and the vendee, who themselves will negotiate on the terms and conditions of the transaction. In this case however, Gregorio was not merely a middleman of Vicente and Oscar. He was the broker of Vicente ONLY. G. Article 1876, 1877

Art. 1876. An agency is either general or special. The former comprises all the business of the principal. The latter, one or more specific transactions. Art. 1877. An agency couched in general terms comprises only acts of administration, even if the principal should state that he withholds no power or that the agent may execute such acts as he may consider appropriate, or even though the agency should authorize a general and unlimited management. 1. Classes of Agency: General, Special, Universal Siasat v. IAC (MARK) Oct. 10, 1985 J. Gutierrez, Jr. FACTS Sometime in 1974, respondent Teresita Nacianceno succeeded in convincing officials of the then Department of Education and Culture to purchase without public bidding, one million pesos worth of national flags for the use of public schools throughout the country. The respondent was able to expedite the approval of the purchase by hand-carrying the different indorsements from one office to another, so

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that by the first week of September, 1974, all the legal requirements had been complied with, except the release of the purchase orders. HELD Yes. Nacianceno is a general agent. RATIONALE There are several kinds of agents. To quote a commentator on the matter: An agent may be (1) universal: (2) general, or (3) special. A universal; agent is one authorized to do all acts for his principal which can lawfully be delegated to an agent. So far as such a condition is possible, such an agent may be said to have universal authority. (Mec. Sec. 58). A general agent is one authorized to do all acts pertaining to a business of a certain kind or at a particular place, or all acts pertaining to a business of a particular class or series. He has usually authority either expressly conferred in general terms or in effect made general by the usages, customs or nature of the business which he is authorized to transact. An agent, therefore, who is empowered to transact all the business of his principal of a particular kind or in a particular place, would, for this reason, be ordinarily deemed a general agent. (Mec Sec. ,30). A special agent is one authorized to do some particular act or to act upon some particular occasion. lie acts usually in accordance with specific instructions or under limitations necessarily implied from the nature of the act to be done. (Mec. Sec. 61) (Padilla, Civil Law The Civil Code Annotated, Vol. VI, 1969 Edition, p. 204).

When Nacianceno was informed by the Chief of

the Budget Division that the purchase orders could not be released unless a formal offer to deliver the flags in accordance with the required specifications was first submitted for approval, she contacted the owners of the United Flag Industry. The next day, after the transaction was discussed, a document was drawn up authorizing Nacianceno to represent United Flag Industry to deal with any entity or organization, private or government, in connection with the marketing of Uniteds products-flags and its accessories, subject to 30% commission. On October 16, 1974, the first delivery of 7,933 flags was made by the United Flag Industry. The following day the respondent's authority to represent the United Flag Industry was revoked by petitioner Primitivo Siasat. After receiving the payment for the first delivery, tendered the amount of P23,900.00 or five percent (5%) of the amount received to the respondent as payment of her commission. The latter refused to accept the said amount insisting on the 30% commission agreed upon. The respondent, however, was prevailed upon to accept the same because of the assurance of the petitioners that they would pay the commission in full after they delivered the other half of the order. Respondent Nacianceno later on learned that petitioner Siasat had already received payment for the second delivery of 7,833 flags. When she confronted the petitioners, they vehemently denied receipt of the payment, at the same time claiming that the respondent had no participation whatsoever with regard to the second delivery of flags and that the agency had already been revoked. The respondent originally filed a complaint with the Complaints and Investigation Office in Malacaang but when nothing came of the complaint, she filed an action in the Court of First Instance of Manila to recover the following commissions: 25%, as balance on the first delivery and 30%, on the second delivery. CFI ruled in favor of respondent. CA affirmed.

One does not have to undertake a close scrutiny of the document embodying the agreement between the petitioners and the respondent to deduce that the 'latter was instituted as a general agent. Indeed, it can easily be seen by the way general words were employed in the agreement that no restrictions were intended as to the manner the agency was to be carried out or in the place where it was to be executed. The power granted to the respondent was so broad that it practically covers the negotiations leading to, and the execution of, a contract of sale of petitioners' merchandise with any entity or organization. 2. Couched in general terms; acts of administration

ISSUES WON Nacianceno is entitled to the commission despite the absence of specific authorization for the sale of 15,666 Philippine flags to DECS.

Veloso v CA (GEN)

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Aug. 21, 1996 Torres, Jr., J. FACTS: Francisco Veloso owned a parcel of land in Tondo, Manila. A TCT was issued in his name but later on it was cancelled and another one was issued in the name of the private respondents. Petitioner alleged that he was the absolute owner of the property and that he never authorized anybody, not even his wife, to sell it. He alleged that he was in possession of the title but when his wife, Irma, left for abroad, he found out that his copy was missing. After verifying with the Register of Deeds, he found that the transfer of property was supported by a General Power of Attorney. Petitioner denied executing the power of attorney and alleged that his signature was falsified. He contends that the sale and transfer of the property was null and void. Private respondent, Aglaloma Escario, on the other hand alleged that she was a buyer in good faith and denied any knowledge of irregularity. She relied on the general power of attorney of Irma which was sufficient in form and substance and was duly notarized. The general power of attorney stated that: To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and hereditaments or other forms of real property, more specifically TCT No. 49138, upon such terms and conditions and under such covenants as my said attorney shall deem fit and proper. The trial court ruled that Escario was the lawful owner of the property as she was deemed an innocent purchaser for value. The general power of attorney was held to be valid and sufficient for the purpose. It ruled that there was no need for a special power of attorney when the special power was mentioned in the general one. The Court of Appeals affirmed in toto the ruling of the trial court. ISSUE: WON the general power of attorney was valid and regular HELD: YES. While the power of attorney was denominated as general, a perusal revealed that it stated an authority to sell. There was no need to execute a separate and special power of attorney since the general power of attorney had expressly authorized the agent or attorney-in-fact the power to sell the subject property. The special power of attorney can be included in the general power when it is specified Facts: Max Leonard Tornow is the sole owner of the business carried on in Berlin and Manila under the name of Gemann & Co. On February 5, 1900, he executed in Berlin an instrument, constituting Fernando Kammerzell as his true and lawful attorney with full power to enter the firm name of Germann & Co. in the Commercial Registry of the city of Manila as a branch of the house of Germann & Co. in Berlin, it being the purpose of this power to invest said attorney will full legal powers and authorization to direct and administer in the city of Manila for us and in our name a branch of our general commercial business of important and exportation, for which purpose he may make contracts of lease and employ suitable assistants, as well as sign every kind of documents, accounts, and obligations connected with the business which may be necessary, take charge in general of the receipt and delivery of merchandise connected with the business, sign all receipts for sums of money and collect them and exact their payment by legal means, and in general execute all the acts and things necessary for the perfect carrying on of the business committed to his charge in the same manner as we could do ourselves if we were present in the same place. On October 27, 1900, Fernando Kammerzell executed a general power for suits, purportedly as a substitution to the instrument executed by Tornow. This instrument was authenticated by a notary with the formalities required by the domestic laws. The other was not so authenticated. therein the act or transaction for which the special power is required. It is not the denomination that matters but the extent of the power/s contemplated upon the agent or attorney-in-fact. Escario was an innocent purchaser for value. She relied on the power of attorney presented by Irma, petitioners wife. Being the wife of the owner, and having with her the title of the property, there was no reason for Escario not to believe in her authority. Moreover, the power of attorney was notarized and carried with the presumption of due execution. A purchaser in good faith is one who buys property of another, without notice that some other person has a right to, or interest in such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other person in the property. Macke v. Camps, supra Germann & Co. vs. Donaldson, Sim & Co. (Mai) November 11, 1901 Ladd, J.

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Issue: Whether or not the original power can be construed as conferring upon Kammerzell authority to institute or defend suits for the recovery of money Held: YES. It appears to be expressly and specially authorized by the clause conferring the power to exact the payment of sums of money by legal means. This must mean the power to exact the payment of debts due the concern by means of the institution of suits for their recovery. The main object of the instrument is clearly to make Kammerzell the manager of the Manila branch of the plaintiffs business, with the same general authority with reference to its conduct which his principal would himself possess if he were personally directing it. It can not be reasonably supposed, in the absence of very clear language to that effect, that it was the intention of the principal to withhold from his agent a power so essential to the efficient management of the business entrusted to his control as that to sue for the collection of debts. Yu Chuck v. Kong Li Po (ROG) Cited Corpus Juris: In the absence of express limitations, a manager has authority to hire an employee for such period as is customary or proper. But unless he is expressly authorized he cant make a contract of employment for a long future period, such as for 3 years although contract not rendered invalid by mere fact that employment extends beyond term of manager's own employment. While Chen as general manager of Kong Li Po, had implied authority to bind corp by a reasonable and usual contract of employment with Yu Chuck such contract here cannot be so considered. The term of employment is unusually long and conditions are so onerous that possibility of corp being thrown into insolvency is expressly contemplated in contract. This fact should have put Yu Chuck upon inquiry as to extent of business manager's authority. 2. Evidence does not support contention that contract was impliedly ratified by corp. It is merely based on fact that Kim Hua, president of corp for 1920, admitted on stand that he saw Yu Chuck work as printers in the office but he denied any knowledge of existence of contract and said it was never presented to him nor the Board. Before a contract may be ratified, knowledge of its existence must be brought to parties who have authority to ratify it. No such knowledge shown here. A ratification by Pres would have been no avail either because in order to validate a contract, ratification by the board of directors was necessary. Fact that pres was required by by-laws to sign docs evidencing contracts of the corp, does not mean he had power to make the contracts. 3. Notice given by a Chen Yu Man posted in the newspaper making null and void all contracts not signed by TC Chen did not lead Yu Chuck to think Chen had authority to make contract. Notice was published a month after contract was entered into. Evidence also shows that Chen Yu Man and Chen is one and the same person. The notice confers no special powers, but is only an assertion by Chen that he would recognize no contracts not duly signed by him. NO evidence to show that notice ever brought to attention of officers of corp. Tropical Homes v. Villaluz (TOFF) Insular Drug v. PNB (REG) J. Malcolm 1933 FACTS: U.E. Foerster, a salesman and collector of Insular Drug for the Islands of Panay and Negros. was instructed to take the checks for the drug company to the Iloilo branch of the Chartered Bank of India, Australia and China and deposit the amounts to the credit of the drug company. Instead, Foerster deposited the checks, including those of four people, with the Iloilo branch of the PNB, in his personal account. The amount of the checks were subsequently withdrawn by U. E., Foerster and Carmen E. de Foerster (the formers wife). The drug company investigated the transactions of Foerster. Upon the discovery of anomalies, Foerster committed suicide. The bank argued that the fraud was not proved, and that Foerster had implied authority to indorse all checks made out in the name of the Insular Drug Co. ISSUE: WON PNB is liable. YES. RULING: As to the first argument, no such special defense was relied upon by the bank in the trial court. As to the second, a salesman with authority to collect money belonging to his principal does not have the implied authority to indorse checks received in payment. Any person taking checks made payable to a corporation, which can act only

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by agent does so at his peril, and must same by the consequences if the agent who indorses the same is without authority. That the bank acted in good faith does not relieve it from responsibility. Even so, the Bank was not even in good faith. The bank could tell by the checks themselves that the money belonged to the Insular Drug Co., Inc., and not to Foerster or his wife or his clerk. When the bank credited those checks to the personal account of Foerster and permitted Foerster and his wife to make withdrawals without there being made authority from the drug company to do so, the bank made itself responsible to the drug company for the amounts represented by the checks. Soriano v. People (ABBY) March 19, 1951 J. Jugo Facts: Federico Soriano was charged and convicted with the crime of theft of 1 Cyclix electric motor, 1 lantern slide projector including accessories. Because of the disturbance caused by the war, the Eagle Cinema Co.,(owner of the materials) was indebted to the Saenz for rents due on account of the lease; and that appellant in the exercise of the powers conferred upon him could have sued said debtor to foreclose the mortgage executed by the Eagle Cinema Co., Inc., in favor of his principals. The items were seized by Soriano and later found at his house after having repeatedly denied any knowledge of the equipment and accessories of the Cine and declined any responsibility for their loss. Defense of Soriano - With regard to the "taking," appellant contends that he did not execute this element of theft because being an attorney-in-fact of the heirs of Saenz, he acted for his principals, and for all intents and purposes of the power conferred upon him, he was the principal himself and, naturally, he could not steal something belonging to him under the principle that "Rei nostrae furtum facera non pos sumus". The power of attorney clearly empowered the appellant "to ask, demand, sue for, recover, collect and receipt for any and all sums of money . . . and other things of value of whatever nature or kind," and gave him "full power to do anything requisite and necessary to be done in the premises as fully as I (Emilia Saenz) could if personally present, hereby ratifying and confirming all that my said attorney and substitute attorney shall lawfully do or cause to be done by virtue hereof." But the CA affirmed the conviction for theft citing firstly, that when he took, as he finally admitted to have taken, the lantern slide projector and the "Cyclix" motor generator from the Eagle-Theater, he did not really act in behalf and representation of this principals, for otherwise he would not have repeatedly denied having taken said properties and insinuated that they had been taken by the Japanese; and secondly, that even his principals could not have taken and appropriated said properties for themselves without previous and proper action in court, because no mortgage creditor can foreclose the property mortgage to him without judicial proceedings. Issue: WoN the taking was an act of administration Held: No, it was theft. Conviction affirmed. It is clear that said power of attorney did not authorize the petitioner to take away the projector and the generator, hiding them in his house and denying to the owner and the police authorities that he had them in his possessions, which was an illegal act, not covered by his power-of-attorney. He was authorized only to ask, take, sue for, recover, collect, etc., sums of money, debts, dues, accounts and other things which were or might thereafter be due, etc., to his principal Emilia Saenz. This authority referred mainly to the collection of the rents of the building rented by the Eagle Cinema Co., Inc. The projector and the generator were not due or owing to Emilia Saenz. It is not to be supposed that Saenz herself would have denied the possession of those articles. It is was the purpose of the petitioner only to protect those instruments from looting, there is o reason why he should have concealed them from the owner and denied having them. Even though the equipment, including those articles, were mortgaged to Sanez to guarantee the payment of the rents due on the building, yet there had been no foreclosure and neither she nor the petitioner had the authority to take away and conceal those articles from the owner or the police authorities. The Eagle Cinema Co., Inc., had the right to possess said articles. As to the element of intent, it is clear that when the petitioner carried away and concealed from the owner and the police authorities the above-mentioned articles, he acted with intent of gain. Intent is a mental state, the existence of which is shown by the overt acts of a person, which in the present case unmistakably point to that intent. vs. Washington Sycip

Antonio Goquilay (Earla) July 26, 1960

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Reyes, JBL Facts: Antonio Goquilay and Tan Sin An entered into a general commercial partnership under the partnership name Tan Sin An and Antonio C. Goquilay for the purpose of dealing in real estate. Embodied in their agreement is the stipulation that Tan has the exclusive management of the partnership, while Goquilays role is limited to examining the book of accounts of the partnership. It was further stipulated that the partnership shall have a life of 10 years, and the death of either one of the partners will not result to the dissolution of the partnership, but both parties, by mutual agreement, can decide to terminate the partnership before the expiration of the period. Thereafter, Goquilay executed in favor of Tan a general power of attorney stipulating that Tan shall act as his Manager in the partnership for the whole period of the partnership. The partnership eventually bought 3 parcels of lands, while Tan bought 46 parcels. These 49 lots were later mortgaged to Banco Hipotecario de Filipinas for the payment of ~53k obligation, payable within 8 years. During the lifetime of the partnership, Tan died, and he was thereafter succeeded by his wife, Kong Chai Pin and his 4 minor children. Eventually, a certain Sing Yee and Cuan Co., upon request of Yutivo Sons Hardware Co. (which advanced the downpayment and the amortization for the purchase of the 49 lots), paid the remaining balance of the mortgage debt. These two entities eventually filed their respective claims in the probate court, as a result of which, Kong Chai Pin sought permission from the Court to sell these lands for settling the debts of Tan and the partnership. These lands were then sold to Washington Sycip and Betty Lee, who then executed a Deed of Transfer in favor of Insular Development Co.. After learning about the sale, Goquilay, as the surviving partner of the partnership filed an action to annul the sale made to Sycip and Lee. The SC in a separate decision ordered the case to be remanded for new trial due to non-inclusion of indispensable parties. On remand, the lower court dismissed the amended complaint. Hence, this petition. ISSUE: WON the sale executed in favor of Sycip and Lee is valid. HELD: Yes. The Court preliminarily held that Kong Chai Pin, as the widow of the Tan, did not succeed her husband in the administration of the partnership. Antonio Goquiolay conferred upon Tan Sin An the exclusive management of the business, such power, premised as it is upon trust and confidence, was a mere personal right that terminated upon Tan's demise. The provision in the articles stating that "in the event of death of any one of the partners within the 10-year term of the partnership, the deceased partner shall be represented by his heirs", could not have referred to the managerial right given to Tan Sin An; more appropriately, it related to the succession in the proprietary interest of each partner. The covenant that Antonio Goquiolay shall have no voice or participation in the management of the partnership, being a limitation upon his right as a general partner, must be held coextensive only with Tan's right to manage the affairs, the contrary not being clearly apparent. Since the Articles of co-partnership provided for the continuatin of the firm notwithstanding the death of one of the partners, the heirs of the deceased, by never repudiating or refusing to be bound under the said provision in the articles, became individual partners with Antonio Goquiolay upon Tan's demise. Kong Chai Pin, by her affirmative actions manifested her intent to be bound by the partnership agreement not only as a limited partner, but also as a limited partner as well. In fact, by selling the land, she was actually acting as a managing partner. The Court further held that the sale was valid, inasmuch as it was made by a partner. Accordingly, strangers dealing with a partnership have the right to assume, in the absence of restrictive clauses in the co-partnership agreement, that every general partner has power to bind the partnership, specially those partners acting with ostensible authority. The latter may rightfully assume that the contracting partner was duly authorized to contract for and in behalf of the firm and that, furthermore, he would not ordinarily act to the prejudice of his co- partners. In this case, the records show that Goquilay did not contest the sale made to Sycip and Lee; it was only after the deed of conveyance was executed did he make his protest known. His opposition then came too late. H. Article 1878: acts of strict dominion or ownership Art. 1878. Special powers of necessary in the following cases: attorney are

(1) To make such payments as are not usually considered as acts of administration; (2) To effect novations which put an end to obligations already in existence at the time the agency was constituted; (3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an

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action or to abandon a prescription already acquired; (4) To waive any obligation gratuitously; (5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; (6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; (7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration; (8) To lease any real property to another person for more than one year; (9) To bind the principal to render some service without compensation; (10) To bind the principal in a contract of partnership; (11) To obligate the principal as a guarantor or surety; (12) To create or convey real rights over immovable property; (13) To accept or repudiate an inheritance; (14) To ratify or recognize obligations contracted before the agency; (15) Any other act of strict dominion 1. form 2. cases Home Insurance v. US Lines (JANCES) Veloso v. CA, supra Cosmic Lumber v. CA (MARK) Nov. 29, 1996 Bellosillo, J. FACTS COSMIC LUMBER CORPORATION through its General Manager executed on 28 January 1985 a Special Power of Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact x x x to initiate, institute and file any court action for the ejectment of third persons and/or squatters of the entire lot 9127 and 443 and covered by TCT Nos. 37648 and 37649, for the said squatters to remove their houses and vacate the premises in order that the corporation may take material possession of the entire lot, and for this purpose, to appear at the pre-trial conference and enter into any stipulation of facts and/or compromise agreement so far as it shall protect the rights and interest of the corporation in the aforementioned lots. Villamil-Estrada, by virtue of her power of attorney, instituted an action for the ejectment of private respondent Isidro Perez and recover the possession of a portion of Lot No. 443 before the Regional Trial Court of Dagupan. On 25 November 1985, she entered into a Compromise Agreement with respondent Perez, the one of the terms of which follows: 2. That to buy peace said defendant pays unto the plaintiff through herein attorney-in-fact the sum of P26,640.00 computed at P80.00/square meter; On 27 November 1985 the Compromise Agreement was approved by the trial court and judgment was rendered in accordance therewith. Although the decision became final and executory it was not executed within the 5year period from date of its finality allegedly due to the failure of petitioner to produce the owners duplicate copy of Title No. 37649 needed to segregate from Lot No. 443 the portion sold by the attorney-in-fact, Paz G. Villamil-Estrada, to private respondent under the compromise agreement. Thus on 25 January 1993 respondent filed a complaint to revive the judgment.

Petitioner asserts that it was only when the

summons for the revival of judgment was served upon it that it came to know of the compromise agreement entered into between Paz G. Villamil-Estrada and respondent Isidro Perez. Forthwith, upon learning of the fraudulent transaction, petitioner sought annulment of the decision of the trial court before respondent Court of Appeals.

ISSUE WON Villamil-Estrada has the authority to sell the property of Cosmic. NO. RATIONALE The authority granted Villamil-Estrada under the special power of attorney was explicit and exclusionary: for her to institute any action in court to eject all persons found on Lots Nos. 9127 and 443 so that petitioner could take material possession thereof, and for this purpose, to appear at the pre-trial and enter into any stipulation of facts and/or compromise agreement but only insofar as this was protective of the rights and interests of petitioner in the property. Nowhere in this authorization was Villamil-Estrada granted expressly or impliedly any power to sell the subject property nor a portion thereof.

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Neither can a conferment of the power to sell be validly inferred from the specific authority to enter into a compromise agreement because of the explicit limitation fixed by the grantor that the compromise entered into shall only be so far as it shall protect the rights and interest of the corporation in the aforementioned lots. In the context of the specific investiture of powers to VillamilEstrada, alienation by sale of an immovable certainly cannot be deemed protective of the right of petitioner to physically possess the same, more so when the land was being sold for a price of P80.00 per square meter, very much less than its assessed value of P250.00 per square meter, and considering further that petitioner never received the proceeds of the sale. When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document. reasonable amounts. However, the petitioners refused and threatened the workers with bodily harm. Hence, the Corporation filed with the CFI of Bulacan a complaint for injunction and damages against the petitioners. The trial court directed the issuance of a writ of injunction and suggested the relocation of the boundaries of the Corporations claims in relation to the properties of the petitioners. It named a Commissioner to conduct a survey plan on relocation and to submit a report to the court. The trial court also directed the parties to send their representatives to the place of the survey. The Commissioners report was approved by the trial court. In a subsequent amendment of the complaint of the Corporation, it alleged that the petitioners were willing to sell their properties for P10/sq.m. but when it offered to pay only P0.90/sq.m., the petitioners stated that they were wiling to go to trial on the issue of what would be the reasonable price. The counsels of the parties conferred among themselves on the possibility of terminating the case by compromise, as the defendants were willing to sell the properties at reasonable prices. Hence, the counsels executed a Compromise Agreement to determine the prices. The trial court approved the Agreement and enjoined the parties to comply with the terms and conditions. Pursuant to the terms, the counsels of both parties submitted the names of the persons designated by them as their commissioners. The trial court later appointed the commissioners. The Commissioners submitted to the court a Consolidated Report regarding the applicable unit prices. However, the Corporations counsel, Attorney. Ventura, filed a manifestation in Court stating that the Board of Directors did not approve the Compromise Agreement entered into by the counsels. Petitioners filed an answer to Attorney. Venturas manifestation praying that the court ignore and disregard the manifestation. It alleged that when the Court inquired if the lawyers of the Corporation were duly authorized to enter into a compromise agreement, the lawyers answered in the affirmative. The trial court rendered a decision upholding the Agreement. The petitioners then filed a motion for execution which the trial court granted. However, upon an opposition of the Corporation, the trial

Vicente v Geraldez (GEN) July 31, 1973 Antonio, J. FACTS: Hi Cement Corporation acquired a Placer Lease Contract from Banahaw Shale Mining Association. The lease contract covered two mining claims over 51 ha of land. Included in the mining claims were the three parcels of land owned by the petitioners. On several occasions, the Corporation informed the petitioners, thru its representatives, of the its acquisition of the placer mining claims. The Corporation requested the petitioners to allow its workers to enter their lands to explore and develop the claims, with the promise to pay the petitioners

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court reversed its decision and set aside the motion for execution. It held that the Agreement was contrary to law because the lawyers had no special power of attorney as required by Art. 1878 of the Civil Code. ISSUE: WON the Compromise Agreement is valid HELD: NO. Art. 1878 of the Civil Code and Rule 138, Sec. 23 of the Rules of Court specifically require that a special power of attorney be had when entering into a compromise agreement. The Compromise Agreement between the parties was signed only by the parties respective lawyers but it was not disputed that the lawyers of the Corporation had not submitted to the Court any written authority from their client to enter into a compromise. Also, it has been held that an officer or an agent of the corporation has no power to compromise or settle a claim by or against the corporation, except to the extent that such power is given to him either expressly or by reasonable implication from circumstance. It is thus necessary to ascertain whether the Board of Directors of the Corporation had authorized its lawyers to enter into the Compromise Agreement. But as presented by evidence, the counsels categorically deny that they ever represented to the court that they were authorized to enter into a compromise. Nowhere does it appear that the Corporations lawyers ever made such a representation. Also, contrary to petitioners claims, Attorney. Cardenas, as administrative manager of the corporation, did not tacitly ratify the agreement entered into by the parties. He had no authority to ratify. It has been held that ratification must be by the officer or governing body having authority to make such contract, and must be with full knowledge. Lastly, the counsels of the Corporation have not demonstrated any act or declaration of the corporation amounting to false representation or concealment of material facts calculated to mislead the petitioners. Hence, the doctrine of estoppel cannot be used against them. Petition dismissed. PNB v. Maximo Sta. Maria (MAI) August 29, 1969 Teehankee, J. Facts: Two sugar crop loans were obtained by defendant Maximo Sta. Maria from plaintiff bank under a special power of attorney, executed in his The fact that Maximo presented to the plaintiff bank Valeriana's additional special power of attorney expressly authorizing him to borrow money, aside from the authority to mortgage executed by Valeriana together with the other defendants-appellants also in Maximo's favor, lends support to our view that the bank was not satisfied with the authority to mortgage alone. For favor by his six brothers and sisters to mortgage a 16-odd hectare parcel of land, jointly owned by all of them. Said SPA indicated that the sibling constitute and appoint Dr. MAXIMO STA. MARIA as their true and lawful attorney of and in their place, name and stead to mortgage, or convey as security to any bank, company or to any natural or juridical person, their undivided shares over a certain parcel of land together with the improvements thereon. In addition, Valeriana Sta. Maria alone also executed in favor of her brother, Maximo, a special power of attorney to borrow money and mortgage any real estate owned by her. By virtue of the two above powers, Maximo Sta. Maria applied for two separate crop loans with the plaintiff bank. As security for the two loans, Maximo Sta. Maria executed in his own name in favor of plaintiff bank two chattel mortgages on the standing crops, guaranteed by surety bonds for the full authorized amounts of the loans executed by the Associated Insurance & Surety Co., Inc. as surety with Maximo Sta. Maria as principal. The trial court ruled in favor of PNB. Issue: Whether or not the special power of attorney issued by the siblings authorized Sta. Maria to borrow money Held: NO. Plaintiff bank has not made out a cause of action against defendants-appellants (except Valeriana), so as to hold them liable for the unpaid balances of the loans obtained by Maximo under the chattel mortgages executed by him in his own name alone. In the early case of Bank of P.I. vs. De Coster, the Court, in holding that the broad power of attorney given by the wife to the husband to look after and protect the wife's interests and to transact her business did not authorize him to make her liable as a surety for the payment of the pre-existing debt of a third person, cited the fundamental construction rule that where in an instrument powers and duties are specified and defined, that all of such powers and duties are limited and confined to those which are specified and defined, and all other powers and duties are excluded. This is but in accord with the disinclination of courts to enlarge an authority granted beyond the powers expressly given and those which incidentally flow or derive therefrom as being usual or reasonably necessary and proper for the performance of such express powers.

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otherwise, such authority to borrow would have been deemed unnecessary and a surplusage. And having failed to require that Maximo submit a similar authority to borrow, from the other defendants-appellants, plaintiff bank, which apparently was satisfied with the surety bond for repayment put up by Maximo, cannot now seek to hold said defendants-appellants similarly liable for the unpaid loans. Director of Public Works v. Sing Juco (ROG) (1929) Facts: Title to land was owned by de La Rama, Tanbootien, Sing Juco and Sing Bengco. Rama's interest was subsequently transferred to Echaus. Owners mortgaged the land to PNB to secure credit of P170k. Indebtedness has not been satisfied. Land is located on Point Llorente at mouth of Iloilo River and of so low level that it is subject to frequent flooding. In 1921 Phil Govt was planning harbor improvements in this vicinity, requiring extensive dredging by Bureau of Public Works in mouth of said river. Such dredging made necessary for Director of Public Works to find a place of deposit for dirt and mud taken from place dredged. As land was low and accessible the material deposited on such property. A contract was made between Dir. Public Works (representing the Phil Govt) and 4 owners Rama, Sing Juco, Tanboontien and Sing Bengco where owners would pay to have material to be deposited on their land. Dir Public Works required a bond in penal amount of P150k to be supplied by owners, conditioned for payment of amount due from owners. Bond was executed; one of names appearing on it was Casa Viuda de Tan Toco purporting to be signed by de la Rama. After Dir made substantial compliance it demanded payment but none was made so now it seeks the amount due the Government from the original owners and from sureties. PNB was made a party defendant as having interest under its prior mortgage upon property, while Echaus was made defendant as successor in interest of De La Rama and tan Ong widow of Tan Toco. Complaint sought to enforce the Government's lien and that property should be sold "subject to the first mortgage in favor of the PNB". Owner: Govt had not complied with contract in that dredged material deposited had not been sufficient in quantity to raise level of land above high water therefore owners not obligated to pay for the filling operation. Issue: WON Govt had complied with oblig therefore it is entitled to payment for the filling? YES WON Widow of Tan Toco is bound by suretyship? NO Held: 1. Contract did not obligate government to raise the land on which the dredged material was deposited to any specified level. It only obligated itself to place upon land the material which should be dredged from mouth of Iloilo River in course of improvement done by Govt near that place. In indorsement of Director, accepted by owners, it was made clear that Bureau did not undertake to furnish material to complete the filling of land to any specified level. Allegation that because parts filled were still subject to flooding during rains and that owners were unable to sell land and therefore entitled to damages untenable because no breach done by Govt. 2. Tan Ong Sze not bound by contract of suretyship. Contract purports to be signed by de la Rama, acting for defendants under a power of attorney. But the Govt has not shown a power of attorney that would authorize creation, by attorney-in-fact, of an obligation in nature of suretyship binding upon principal. 2 Powers of Attorney conferred by Tan Ong Sze upon De La Rama presented by Govt does not confer upon de la Rama the power to bind principal by a contract of suretyship. The clauses relate more to the execution of contracts relating to property. The more general words, under rule of ejusdem generis, refer to contracts of like character. Power to execute a contract of so exceptional a nature as a contract of suretyship or guaranty cant be inferred from general words contained in these powers. In Art. 1827: guaranty not presumed but must be express and cant be extended beyond its specified limits. By analogy a power of attorney to execute a contract of guaranty SHOULD NOT BE inferred from vague or general words, especially when such words have their origin and explanation in particular power of a wholly different nature. TC erred in judgment against Tan Ong Sze upon bond. BA Finance v. CA (TOFF) Melendrez v. CA (REG) Per Curiam 1989 FACTS: The complainants (petitioners) accused a certain Pineda of estafa. The respondent Attorney. Decena was the private prosecutor of the said

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case. Without the knowledge and consent of complainants, the respondent "settled" the estafa case amicably for P2,000.00. He informed complainants of the amicable "settlement" and of the P500.00 advance payment he received only after petitioner Narciso Melendrez had confronted him about these matters. And respondent never turned over to complainants the P500.00. ISSUE: WON a lawyer can enter into an amicable settlement with the other party without the knowledge and consent of his client. RULING: NO. Respondent, as a lawyer, is presumed to be aware of the rule that lawyers cannot "without special authority, compromise their clients' litigation or receive anything in discharge of a client's claim, but the full amount in cash.. Respondent's failure to turn over to complainants the amount given by accused Pineda as partial "settlement" of the estafa case underscores his lack of honesty and candor in dealing with his clients. Phil. Aluminum v. FASGI (ABBY) Facts: FASGI Enterprises Incorporated ("FASGI"), an American Corporation entered into an agreement wherein PAWI Fratelli Pedrini Sarezzo S.P.A. ("FPS"), an Italian corporation and woud manufacture and deliver 8,594 wheels to them for purchase, importation and distributorship. FASGI found the shipment to be defective and was not in compliance with requirements. FASGI sought for a rescission of the distributorship agreement and for refund of payments in the US Courts. They won but PAWI failed to open Letters of Credit in favor of FASGI allegedly due to Central Bank "inquiries and restrictions," prompting FASGI to pursue its complaint for damages against PAWI before the California district court. In the interim, the parties, realizing the protracted process of litigation, resolved to enter into another arrangement, this time entitled "Supplemental Settlement Agreement," on 26 November 1980. This was entered into by the American lawyer for PAWI. Basically, PAWI would refund and FASGI would return the shipments. FASGI returned 2 shipments all the while waiting for LCs from PAWI but to no avail. FASGI sought to enforce the judgement in the Philippine Courts in RTC Makati. PAWI contends that the Supplemental Settlement Agreement was entered into by Attorney. Ready without authority and therefore is not enforceable. Verily, in this jurisdiction, it is clear that an attorney cannot, without a client's authorization, settle the action or subject matter of the litigation even when he honestly believes that such a settlement will best serve his client's interest. Issue: WoN the SSAgreement was validly entered into by Attorney. Ready. Held: Yes. CA affirmed against PAWI In the instant case, the supplemental settlement agreement was signed by the parties, including Mr. Thomas Ready, on 06 October 1980. The agreement was lodged in the California case on 26 November 1980 or two (2) days after the pre-trial conference held on 24 November 1980. If Mr. Ready was indeed not authorized by PAWI to enter into the supplemental settlement agreement, PAWI could have forthwith signified to FASGI a disclaimer of the settlement. Instead, more than a year after the execution of the supplemental settlement agreement, particularly on 09 October 1981, PAWI President Romeo S. Rojas sent a communication to Elena Buholzer of FASGI that failed to mention Mr. Ready's supposed lack of authority. On the contrary, the letter confirmed the terms of the agreement when Mr. Rojas sought forbearance for the impending delay in the opening of the first letter of credit under the schedule stipulated in the agreement. It is an accepted rule that when a client, upon becoming aware of the compromise and the judgment thereon, fails to promptly repudiate the action of his attorney, he will not afterwards be heard to complain about it. Nor could PAWI claim any prejudice by the settlement. PAWI was spared from possibly paying FASGI substantial amounts of damages and incurring heavy litigation expenses normally generated in a full-blown trial. PAWI, under the agreement was afforded time to reimburse FASGI the price it had paid for the defective wheels. PAWI, should not, after its opportunity to enjoy the benefits of the agreement, be allowed to later disown the arrangement when the terms thereof ultimately would prove to operate against its hopeful expectations. Additional issue: PAWI assailed not only Mr. Ready's authority to sign on its behalf the Supplemental Settlement Agreement but denounced likewise his authority to enter into a stipulation for judgment before the California court on 06 August 1982 on the ground that it had by then already terminated the former's services. For his part, Mr. Ready admitted that while he did receive a request from Manuel Singson of PAWI to withdraw from the motion

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of judgment, the request unfortunately came too late. In an explanatory telex, Mr. Ready told Mr. Singson that under American Judicial Procedures when a motion for judgment had already been filed a counsel would not be permitted to withdraw unilaterally without a court order. From the time the stipulation for judgment was entered into on 26 April 1982 until the certificate of finality of judgment was issued by the California court on 07 September 1982, no notification was issued by PAWI to FASGI regarding its termination of Mr. Ready's services. If PAWI were indeed hoodwinked by Mr. Ready who purportedly acted in collusion with FASGI, it should have aptly raised the issue before the forum which issued the judgment in line with the principle of international comity that a court of another jurisdiction should refrain, as a matter of propriety and fairness, from so assuming the power of passing judgment on the correctness of the application of law and the evaluation of the facts of the judgment issued by another tribunal. Lim Pin vs. Liao Tan (EARLA) July 20, 1982 Gutierrez, Jr., J. Facts: Sps Liao Tan and Tan Cho Hua owned a certain real property in Caloocan, which it leased to Lim Pin for Php1500 per month. Due to Lim Pins refusal to pay 5k monthly rental, the Sps filed an unlawful detainer case against Lim Pin. After several postponements (Sept 1, Sept 14, Sept 27), the parties, in their Oct 19 hearing, upon the initiative of the Court a quo, approved the Compromise Agreement entered into by the parties. Lim Pin was not present that time, but she was represented by her son, George Hung, who always accompanied her in previous hearings. On the other hand, Liao Tan and her counsel were present during the said hearing and agreed with the terms of the Compromise Agreement, which provided that the monthly rental shall increase by P500 a month, until it reaches P5k. However, Lim Pin was not agreeable to the Agreement. Hence, she instituted another action, asking that the Agreement be declared null and void, contending that her son does not have the power to represent her, considering the lack of written power-of-attorney. ISSUE: WON George Hung is the agent of Lim Pin. HELD: YES. The requirement of special power of attorney in Art 1878 (with regard to entering into compromise agreements, etc for agents) and Sec 23, Rule 138 (with regard to compromising the clients litigation) does not refer to the form, but merely refer to the nature of authorization. The requirements are met if there is a clear mandate from the principal specifically authorizing the performance of the act; such a mandate may be either oral or written, the one vital thing being that it shall be express and duly established by evidence. The records show that Judge Cancio took the necessary precautions in allowing Hung to enter into the Agreement with Liao Tan. Moreover, the fact that, on previous hearings, Liao could not decide anything without first consulting her son clearly shows that he had full authority to do so. Even assuming that the Hung was not an authorized agent, the contract, being merely unenforceable, was ratified by the act of filign the Ex-Parte Motion to Withdraw Deposits, alleging in her petition that there is another case pending between the same parties to which the parties have agreed to enter into a compromise agreement. San Juan Structural and Steel v CA (JANCES) Facts: San Juan Structural and Steel Fabricators Inc. entered into an agreement with Motorich Sales Corporation for the transfer of the latters parcel of land to the former. Nenita Gruenberg, Motorichs treasurer, was the one who entered the agreement for Motorich. She was, however, not authorized by the board of directors. There is also no evidence that she represented that she was authorized. San Juan Structural and Steel made a downpayment of P100,000. However, the transfer did not push through despite repeated demands made by San Juan Structural and Steel. Ruling: RTC dismissed. CA dismissed. Nenita to refund the down payment of 100,000 given by San Juan Structural and Steel. Issue: WON sale is valid [NO] HELD: Motorich cannot be bound by the contract because it never authorized the sale. The general principles of agency govern the relation between the corporation and its officers or agents, subject to the article of incorporation, bylaws, or relevant provisions of law. Consequently, Selling is foreign to a corporate treasurers function. Neither is real estate sale shown to be a normal business activity of Motorich since its primary purpose is marketing, distribution, export and import in relation to a general merchandising business. Moreover, Art 1874 states that a sale of a piece of land through an agent must be in writing. Nenita was not authorized. Neither is there any proof that Motorich ratified, expressly or impliedly, the contract.

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Rural Bank of Caloocan v. CA (ALAIN) April 21, 1981 De Catro, J.: FACTS: Maxima Castro, a 70 year-old lady who can not read and write the English language since she only finished 2nd grade, needed money in the amount of P3,000.00 to invest in the business of spouses Valencia. Castro, accompanied by spouses Valencia, went to the Rural Bank of Caloocan to apply for an industrial loan. Severino Valencia arranged everything about the loan and also supplied the personal data required for Castros application. Few days later, when the loan was approved, Castro, again accompanied by spouses Valencia, signed a promissory note corresponding to her loan in favor of the bank. On the same day, Valencia spouses also obtained from the bank an equal amount of P3,000.00. They signed a promissory note corresponding to their loan in favor of the bank and had Castro affixed thereon her signature as co-maker. The two loans were also secured by a real-estate mortgage on Castros house and lot. Unable to satisfy the obligation covering the two promissory notes, a notice of sheriffs sale on her property was addressed to Castro. Problems and issues started to come-out. Castro learned for the first time that the mortgage contract was for P6,000.00 and not only P3,000.00 the amount she loaned. It was also her first time to realize that she was made to sign as co-maker of the promissory note and claimed that this was done without her being consent. Eventually, her property was successfully sold by the sheriff. Castro filed a suit. Trial court, affirmed by CA, declared the promissory note making Castro as comaked invalid because this was obtained by fraud perpetrated on her by the Valencias who has abused her confidence, taking advantage of her old age and ignorance of her financial need. The decision relieved Castro of any liability to the promissory note (partially) and the mortgage contract was deemed valid up to the amount of P3,000.00 only (her personal loan to the bank). It was also declared that the Rural Bank return to the highest bidder the purchase price it paid for the mortgaged property at the public auction. ISSUE: (for our purposes) Who between Castro and the bank should suffer the consequences of the fraud perpetrated by the Valencias. HELD: The bank was as much guilty, as Castro was, of negligence in giving consent to the contracts. RATIO: The Bank argue that Castros act of holding the Valencias as her agent led the bank to believe that they were authorized to speak and bind her. She cannot now be permitted to deny the authority of the Valencias to act as her agent. The authority of the Valencias was only to followup Castros loan application with the bank. They were not authorized to borrow for her. This is apparent from the fact that Castro went to the bank to sign the promissory note for her loan of P3,000.00. if her act had been understood by the Bank to be a grant of an authority to the Valencias to borrow in her behalf, it should have required a special power of attorney executed by Castro in their favor. Since the bank did not, We can rightly assume that it did not entertain the notion, that the Valencia spouses were in any manner acting as an agent of Castro. The bank should have exercised due care and prudence by making proper inquiry if Castros consent to the mortgage was without taint or defect. I. Articles 1879, 1880

Art. 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell. Art. 1880. A special power to compromise does not authorize submission to arbitration. 1. cases National Bank v Tan Ong Sze (GEN) Sept. 2, 1929 Johns, J. FACTS: Tan Ong Sze vested Tan Buco, attorney-in-fact, the power for me and in name to sign, seal and execute, and as my act deed, deliver any lease, any other deed conveying (of) any real or personal property. her my and for

Tan Buco loaned P300,000 from the National Bank. He then executed a promissory note and a real estate mortgage over a property in Iloilo owned by the defendant to secure the loan. When no part of the defendant has been paid, the Bank filed a complaint and prayed that the property be foreclosed and that the proceeds be applied to the satisfaction of the debt. The lower court rendered judgment in favor of the Bank. Upon appeal, the defendant alleged that Tan

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Buco had no authority to borrow money and mortgage her properties. ISSUE: WON Tan Buco had the authority to borrow money and execute the promissory note and mortgage defendants real property HELD: NO. Under the American Jurisprudence: 1. Cyclopedia of Law and Procedure: - that the authority to borrow money, conferred on an agent, must be created by express terms or necessarily implied from the nature of the agency, for authority to borrow money is one of the most dangerous powers a principal can confer upon an agent 2. Hawxhurst v Rathgeb: - The words sell and transfer are of no broader signification that the words sell and convey used with reference to a conveyance of real estate; and the latter, employed as the operative words in a power to convey land, do not carry authority to mortgage or otherwise dispose of the property. 3. Campbell v Foster Home Association: - A power to mortgage land is not included in a power of attorney to sell and convey, uncoupled with any interest in the land or the fund. 4. Golinsky v Allison - A power of attoney, like any other instrument, is to be construed according to the natural import of its language; and the authority which the principal has conferred upon his agent is not to be extended by implication beyond the natural and ordinary significance of the terms in which that authority has been given. No authority of any court has been cited and none will ever be found holding that a power to sign, seal and execute, and as my act and deed, deliver, any lease, any other deed for conveying (of) any real or personal property or any similar language, standing alone and within itself, carries with it or implies the power to borrow money or to execute a real mortgage to secure the payment of a debt. Appeal granted. Decision reversed and set aside. of the lower court Negros, consisting in lots Nos. 61 and 207 of the cadastral survey of Bacolod, Occidental Negros, together with the improvement thereon. On December 22, 1920, Amparo A. Garrucho executed a document whereby she conferred upon her brother Mauro A Garrucho a special power of attorney sufficiently broad in scope to enable him to sell, alienate, mortgage or otherwise encumber, in the manner and form he might deem convenient, all her real estate situated in the municipalities of Murcia and Bago, Occidental Negros. Nothing in the aforesaid powers of attorney expressly authorized Mauro A. Garrucho to contract any loan nor to constitute a mortgage on the properties belonging to the respective principals, to secure his obligations. Subsequently, Mauro A. Garrucho executed in the favor of the Philippine National bank several mortgages on Agudelos properties to secure the payment of credits, loans, commercial overdrafts, etc., together with interest thereon, which he might obtain from the bank, issuing the corresponding promissory notes to that effect. The mortgage deeds, as well as the corresponding promissory notes, were executed in Mauro A. Garrucho's own name and signed by him in his personal capacity, authorizing the mortgage creditor, the Philippine National Bank, to take possession of the mortgaged properties, by means of force if necessary, in case he failed to comply with any of the conditions stipulated therein Issue: Whether or not Garrucho acted within the authority given to him in obtaining the mortgages Held: NO. A promissory note and two mortgages executed by the agent for and on behalf of his principal, in accordance with a power of attorney executed by the principal in favor of the agent, are valid, and as provided by article 1727 of contracted by the agent; but a mortgage on real property of the principal not made and signed in the name of the principal is not valid as to the principal. The records do not show that the loan obtained by Mauro A. Garrucho, evidenced by the promissory note, was for his principal Paz Agudelo y Gonzaga. The special power of attorney, does not authorize Mauro A. Garrucho to constitute a mortgage on the real estate of his principal to secure his personal obligations. Therefore, in doing so by virtue of the document, he exceeded the scope if his authority and his principal is not liable for his acts PNB v. Sta. Maria, supra

PNB v. Paz Agudelo y Gonzaga, et al. (MAI) Villareal, J. Facts: On November 9, 1920, Paz Agudelo y Gonzaga executed in favor of her nephew, Mauro A. Garrucho, a document conferring upon him a special power of attorney sufficiently broad in scope to enable him to sell, alienate and mortgage in the manner and form he might deem convenient, all her real estate situated in the municipalities of Murcia and Bacolod, Occidental

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Rodriguez v. Pamintuan & De Jesus (ROG) Bicol Savings v. CA (TOFF) of P42,490.95, it filed claims for payments on the said fidelity guarantee bond but Ker & Co. denied and refused indemnification and payment. To enforce its claims, Bay View instituted its complaint at the TC Ker & Co. justified its denial of the claims of plaintiff-appellant on various reasons, such as non-compliance with the conditions stipulated in the insurance policy; non-presentation of evidence regarding the various charges of dishonesty and misrepresentation against Tomas E. Ablaza and non-production of the documents to prove the alleged loss. Ker & Co. likewise averred that it was merely an agent and- as such it was not liable under the policy. (Guys this is procedure so its sort of complicated if we are not there yet) Ker filed a request for admission that it was Phoenix Assurance that actually issued and renewed the policy, and later denied the claim. When Bay View failed to make any answer to the request for admission within the period prescribed by the rules, Ker & Co. filed a Motion to Dismiss on Affirmative Defense, dated July 6, 1966, insisting that since under Sec. 2, Rule 26 of the Rules of Court, plaintiffappellant was deemed to have impliedly admitted each of the matters enumerated in the request for admission, it followed that the proper party in interest against whom plaintiff-appellant might have a claim was the principal Phoenix Assurance Co. (Phoenix) and not the agent Ker & Co. Bay View filed an opposition arguing that the proper remedy, under the circumstances was not to dismiss the complaint but to amend it in order to bring the necessary or indispensable parties to the suit. Ker & Co. filed a reply to the opposition reiterating its stand that since it merely acted as an agent, the case should be dismissed and plaintiff-appellant should file the necessary action against the principal Phoenix. Plaintiff. Bay View filed a Motion for Leave to Admit Amended Complaint, attaching copy of the complaint, as amended, this time impleading Phoenix as party defendant. On August 16, 1966, Ker filed their joint answer to the amended complaint. Again, Ker & Co., Ltd., argued that it was merely an agent and therefore not liable under the policy. On the other hand, Phoenix, averred that under Condition 8 of the insurance policy, plaintiffappellant was deemed to have abandoned its claim in view of the fact that it did not ask for an arbitration of its claim within twelve (12) months from June 22, 1965 the date of receipt of the denial of the claim.

J.

Articles 1881, 1882

Art. 1881. The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. Art. 1882. The limits of the agent's authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. 1. distinguish between power 2. kinds of authority 3. cases Tan Tiong Teck v. SEC (REG) Avancea 1939 FACTS: Tan Tiong Gong purchased and sold shares of stock through respondent Cua Oh & Co. as his broker. It was alleged that the respondent purchased shares of stock for P3,649.86 and sold others for P2,385, without the consent or authority of the petitioner ISSUE: WON transactions effected by the respondent are null and void with respect to the petitioner because they were not consented or authorized by the latter. RULING: NO. The Securities and Exchange Commission, after going into evidence, reached the conclusion that the petitioner failed to establish his contention. The appeal from the resolution of the Commission is based upon a pure question of fact, and the factual findings of the commission is final under section 35 of Commonwealth Act No. 83. Bay View Hotel v. Ker & Co., and Phoneix Assurance Co. Ltd. (ABBY) Facts: Bay View Hotel secured a fidelity guarantee bond from Ker & Co., Ltd., for its accountable employees against acts of fraud and dishonesty whose principal is Phoenix Assurance. One of the EES, Tomas E. Ablaza, while acting in his capacity as cashier, was discovered by plaintiff-appellant to have had a cash shortage and unremitted collections in the total amount authority and

Issue: WoN the TC was right to dismiss the case against both Ker & Co., and Phoenix Assurance

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Held: Dismissed against Ker & Co. Remanded as to Phoenix Assurance Admission is in the nature of evidence and its legal effects were already part of the records of the case and therefore could be availed of by any party even by one subsequently impleaded. The amendment of the complaint per se cannot set aside the legal effects of the request for admission since its materiality has not been affected by the amendment. If a fact is admitted to be true at any stage of the proceedings, it is not stricken out through the amendment of the complaint. To allow a party to alter the legal effects of the request for admission by the mere amendment of a pleading would constitute a dangerous and undesirable precedent. The legal effects of plaintiff- appellant's failure to answer the request for admission could and should have been corrected below by its filing a motion to be relieved of the consequences of the implied admission with respect to respondent Phoenix. Since an agent may do such acts as may be conducive to the accomplishment of the purpose of the agency, admissions secured by the agent within the scope of the agency ought to favor the principal. This has to be the rule, for the act or declarations of an agent of the party within the scope of the agency and during its existence are considered and treated in turn as the declarations, acts and representations of his principal and may be given in evidence against such party. But the motion for summary judgment was filed after the complaint had been amended and answer thereto had been filed. The issues, therefore, with respect to Phoenix had already been likewise joined. Moreover, a reading of the said motion for summary judgment, more particularly the prayer thereof, shows that Phoenix did join Ker & Co. in moving for the dismissal of the case and prayed "that the present action be dismissed as against Ker & Co., Ltd., because being purely and simply the agent of the insurer, it is not liable under the policy and as against the Phoenix Assurance Co., Ltd. because by failing to seek an arbitration within twelve months from the date of its receipt of the denial of its claim on June 22, 1965, plaintiff Bay View Hotel, Inc., is deemed under condition 8 of ,, the policy, to have abandoned its claim against said defendant phoenix Assurance Co., Ltd." But under Condition 8, arbitration is only as to amount of the claim so the Court held that the action may proceed against Phoenix. As to appellee Ker & Co., Ltd., however, there appears to be no serious contradiction as to the fact that it merely acted as the agent of its principal, Phoenix. Considering that there was full disclosure of such agency since the insurance policy was actually issued by Phoenix, We find no error in the dismissal of the case against said defendant Ker & Co., Ltd. Esperanza vs. Catinding (EARLA) March 30, 1914 Carson, J. Facts: The land subject of this litigation was originally the owner and possessor of the land. When he died, this land was given to his daughter, Venancia Catmon, who together with her husband, Ramon Catinding and 4 children (Andrea, et al) lived in the property for many years. When Venancia died, Ramon married Sabina Butron and came to live in the property for several years. In 1898, they sold the land to Baltazar Bullo who was buying the land in favor of his grandson, Florentino Esperanza. To rectify the mistakes made in the original deed, they went before the Justice of the Peace in 1904 and executed another deed of sale. Because they could not take possession of the said property, Luis Esperanza and Baltazar Bullo as apoderados (attorneys-in-fact) of Florentino Esperanza filed an action to recover a certain piece of land in Surigao. They alleged that Andrea Catinding was unlawfully depriving them of Florentinos property. They further assert that the land was entered upon by Ramon Catinding and Sabina Butron while it was yet unclaimed and uncultivated land; that it was first cultivated by them and that their title in the land was by reason of this original occupancy. The trial court dismissed their complaint on the ground that the evidence presented failed to prove the claim of the plaintiffs. Even the witnesses they presented contradicted their claim that Catinding and Butron were the original occupant of the property. As a matter of fact, their witnesses categorically stated that the land in question formerly belonged to Julian Catmon. ISSUE: WON they can recover the land. HELD: No. The SC agreed with the conclusions of fact reached by the trial court, saying that the plaintiffs were not even able to prove by a preponderance of evidence the claims ventilated in the action. The record strongly revealed that Ramon only came into possession of the land by reason of his wifes ownership, and not through original occupancy. However, it modified the decision of the trial court, dismissing it, not based on merits but based on procedural grounds. Accordingly, the case was not brought in the name of the real party in interest, but only in the name of the apoderados.

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Ang v Fulton Fire Insurance (JANCES) Facts: Sally Ang insured her P & S Department Store to Fulton Fire Insurance. Her store consisted mainly of dry goods. Soon after, the goods were destroyed by fire. The plaintiffs executed a claim form. Their claim was however denied subsequent to the filing of charge for arson against Paulo Ang. There received the denial of the claim on April 19, 1956. Mr. Ang was, however, acquitted of the crime. The spouses Ang, then brought an action against the Paramount Surety & Insurance Company on May 11, 1956. It was dismissed without prejudice on September 3, 1957. They then brought an action against Fulton Fire Insurance on May 5, 1958. Fulton Fire Insurance alleges that since paragraph 13 of the policy states that if the claim is made and rejected but no action is commenced within 12 months after such rejection, all benefits under the policy would be forfeited, the spouses Ang can no longer claim the benefits of the policy. Ruling: CFI Plaintiffs committed a procedural mistake in first suing the agent instead of principal but the mistake being merely procedural, decision was rendered in favor of plaintiffs. Issue: WON the action should be dismissed [YES] HELD: The condition contained in the insurance policy is not merely a procedural requirement. The condition is an important matter, essential to a prompt settlement of claims against insurance companies, as it demands that insurance suits be brought by the insured while the evidence as to the origin and cause of destruction have not yet disappeared. It is in the nature of a condition precedent to the liability of the insurer, or in other terms, a resolutory cause, the purpose of which is to terminate all liabilities in case the action is not filed by the insured within the period stipulated. The bringing of the action against Paramount Surety cannot have legal effect except that of notifying the agent of the claim. Disposition: Judgment set aside. Case dismissed. K. Article 1883 1. disclosed v. undisclosed partially disclosed principal 2. genera rule; exception 3. cases principal,

Commercial Bank v. Republic Armored Car Services Corp. al (MARK) FACTS Defendants were given credit accommodation by Commercial Bank in the form of an overdraft line to which they drew regularly certain amounts. Demands were made for the payment of the drawings but defendants have failed to pay the amounts demanded. Commercial Bank thus filed complaints against them.

Defendants in their answer admit the opening

of the credit line in their favor and that demands for the indebtedness were made upon them, but allege as special defenses that the directors and officers of the defendant corporation deliberately defrauded and mismanaged the said corporation breach of trust in order to deprive Damaso Perez of his control and majority interest in the defendant corporation, as a result of which fraud, mismanagement and breach of trust the defendants suffered tremendous losses; that the amounts drawn by defendant corporation upon the credit line were received and used by the former directors and officers and same constitute part of the funds of the defendant corporation misapplied and mismanaged by said former officers and directors of said corporation.

ISSUES WON the obligation of the defendants-appellants to pay for the amount due under the overdraft line ceases due to the misappropriations on mismanagement of the funds of the corporation by the directors and employees thereof. NO. RATIONALE The obligation of the defendants-appellants to pay for the amount due under the overdraft line is not in any way qualified; there is no statement that the responsibility of the defendants-appellants for the amount taken on overdraft would cease or be defeated or reduced upon misappropriations on mismanagement of the funds of the corporation by the directors and employees thereof. The special defense is, therefore, a sham defense.

Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent.

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party by his agents does not relieve said party from the responsibility that he had contracted to third persons, especially in the case at bar where the written agreement contains no limitation to defendants-appellants' liability. Ortega v Bauang Farmers Cooperative (GEN) Dec. 29, 1959 Montemayor, J. FACTS: Ortega sold and delivered to defendant 2,643 kilos of flue-cured Virginia leaf tobacco at P7,136.10. The defendant paid Ortega 2 installments leaving a balance of P3,136.10. In spite of repeated demands made, the defendant has failed and refused to pay. Ortega filed an action against the defendant to collect payment. The defendant admitted the allegations of the complaint but set up the affirmative defense: That the tobacco leaf it bought was shipped and delivered to and received by the ACCFA (Agricultural Credit and Cooperative Financing Administration), in accordance with an agency contract entered into between ACCFA as principal, and the defendant Bauang FACOMA, as agent, for the purchase of local Virginia leaf tobacco; and That final liquidation had not been made between principal and agent. Shortly after filing its answer, defendant filed a "Motion to Bring in Third Party Defendant," attaching thereto its "Third Party Complaint" against the ACCFA praying that judgment be rendered against it for all sums that may be adjudged against defendant in favor of the plaintiff. The trial court, finding the ACCFA to be a necessary party in the case, granted the motion to bring it as a third-party defendant. However, it later ordered that the third-party complaint be stricken out because it was filed without leave of court. The CFI of La Union ordered the defendant to pay Ortega the sum of P3,136.10, with legal interest from the date of the filing of the complaint, plus costs. ISSUE: WON the defendant acted in behalf of ACCFA? HELD: YES. Although at the time of the purchase of the tobacco in question, the attention of the plaintiff was not called to the existence of the agency agreement between the ACCFA and the Bauang FACOMA, there is reason to believe that he actually knew that agency and that the tobacco leaf was purchased not on account of the Bauang FACOMA, but actually for the ACCFA, which is the agency of the Government charged with the purchase of Virginia leaf tobacco, in the implementation of the policy of the Government to buy all Virginia leaf tobacco grown locally, for purposes of aiding Virginia tobacco growers and to foster the tobacco industry. The FACOMA (Farmers Cooperative and Marketing Association) as its name implies, is concerned mainly, if not exclusively, in the sale and marketing of the agricultural produce of the farmers. It is not engaged in the buy and sell business for profit. The P4,000.00 sum total of the two installments of P1,325.00 and P2,675.00 delivered to plaintiff on account of the total purchase price of P7,136.10 was actually paid by ACCFA itself. Art. 1883 is not applicable because the agent, the defendant, did not act in its name, but rather acted in behalf of the principal, ACCFA. Appealed decision set aside. PNB v. Agudelo, supra Sy Juco v. Sy Juco (MAI) January 12, 1920 Avancea, J. Facts: In 1902, Santiago Sy-juco was appointed by the Vicente and Cipriane Sy-juco as administrator of their property and the former acted as such until June 30, 1916, when his authority was cancelled. The plaintiffs are defendant's father and mother who allege that during his administration the defendant Santiago acquired the property claimed in the complaint in his capacity as plaintiffs' administrator with their money and for their benefit. The trial court ordered Santiago to return the properties in question, which he bought in his name. Issue: Whether or not the plaintiffs have a cause of action Held: YES. From the rule established in article 1717 of the Civil Code that, when an agent acts in his own name, the principal shall have no right of action against the person with whom the agent has contracted, cases involving things belonging to the principal are excepted. According to this exception (when things belonging to the principal are dealt with) the agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name (Decision of the Supreme Court of Spain, May 1, 1900). This means that in the case of this exception the agent's apparent representation yields to the principal's true representation and that, in reality and in effect, the contract must be

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considered as entered into between the principal and the third person; and, consequently, if the obligations belong to the former, to him alone must also belong the rights arising from the contract. The money with which the launch was bough having come from the plaintiff, the exception established in article 1717 is applicable to the instant case. Disposition: Supreme Court affirms the appealed decision. All the properties in question, except the casco No. 2545 which is owned by the defendant by virtue of a sale, must be returned to the plaintiffs, who are the owners of such properties. Phil. Bank of Commerce v. Aruego (ROG) (1981) Facts: PBC filed action for sum of money P35k plus interest until fully paid and commission of 3/8% for every 30d plus attorney's fees 10% of total amount. Complaint contains 22 causes of action referring to 22 transactions between them. Sum represents cost of printing of "World Current Events", a periodical published by Aruego. Aruego had a credit accommodation from PBC. For every printer, the printer, Encal Press collected cost by drawing draft against PBC, draft being sent later to Aruego for acceptance. As added security, PBC also required Aruego to execute a trust receipt in favor of bank. -MTD filed by Aruego: when bills of exchange were presented to him for acceptance, the amounts had already been paid by PBC to Encal without former's knowledge or consent. -Aruego's defense: a) he signed the bills of exchange in a representative capacity as Pres of Phil. Education Foundation Company, publisher of World Current Events and Decision Law Journal. b) He signed not as principal debtor but as accommodation or additional party. Issue: WON Arguego's defense is valid? NO Held: 1. -first defense: sec. 20 Negotiable Instruments Law: Where instrument contains or a person adds his signature words indicating he signs for or on behalf of a principal or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent or as filing a representative character, without disclosing his principal, does not exempt him from personal liability. -Draft here shows that nowhere has he disclosed that he was signing as a representative of the Philippine Education Foundation. He is therefore personally liable for the drafts he accepted. 2. -Accommodation party = one who signed the instrument as maker, drawer, indorser, without receiving value and for purpose of lending his name to some other person. In lending his name to accommodated party, accommodation party is in effect a surety for latter. He lends name to enable accommodated party to obtain credit -A drawee is primarily liable. Aruego should not have signed as an acceptor / drawee. In doing so, he became primarily liable for draft. Nicolas v. Bormacheco (TOFF) Arroyo v. Granada (REG) J. Moreland 1911 FACTS: Felix Granada was indebted to Blas Gerona, with the debt made while both were still alive. A suit was commenced by Ignacio Arroyo as the administrator of Gerona of the recovery of this debt, and that final and amicable settlement was arranged between him and defendants. was not complied with by Matias Granada, and as a settlement of that, an arrangement was made between him and Ignacio Arroyo, whereby Matias Granada executed a mortgage as security for the payment. However, Granada failed to comply again. In 1907, Jose M. Arroyo, son of Ignacio and a lawyer, and with the full power of attorney from his father to transact his affairs, entered into a settlement with Granada whereby the latter would, instead of paying money, would transfer a piece of land, which Granada said was first quality land, good for the raising of sugar cane and rice. Experts testified later that the lands were of low quality. Trial court found that the documents in question were executed by means of false and fraudulent representations of the defendants in this case and ordered their annulment and cancellation. ISSUE: WON petitioner Jose M. Arroyo had an interest in the case. RULING: NO. Jose M. Arroyo, as apoderado, has absolutely no interest in this litigation. He has absolutely no right to bring the defendant into court or put him to the expense of a litigation. The real and only party in interest is Ignacio Arroyo. Under articles 114 and 122 of the Code of Civil Procedure he should be plaintiff. A judgment for or against Jose M. Arroyo personally or as apoderado in no way binds or affects Ignacio.

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As a necessary result a decision in this case is utterly futile. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to said contract. An agent, in his own behalf, may bring an action founded on a contract made for his principal, as an assignee of such contract. Petitioners, however, have not shown that they are assignees of their principals to the subject contracts. While they alleged that they made advances and that they suffered loss of commissions, they have not established any agreement granting them "the right to receive payment and out of the proceeds to reimburse [themselves] for advances and commissions before turning the balance over to the principal[s]." Restatement: Unless otherwise agreed, an agent who has or who acquires an interest in a contract which he makes on behalf of his principal can, although not a promisee, maintain such action thereon maintain such action thereon as might a transferee having a similar interest. It does not appear that petitioners are beneficiaries of a stipulation pour autrui under the second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds of Absolute Sale "clearly and deliberately" conferring a favor to any third person. That petitioners did not obtain their commissions or recoup their advances because of the non-performance of the contract did not entitle them to file the action below against respondent NHA. As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the contracts of sale, they do not, under substantive law, possess the right they seek to enforce. Therefore, they are not the real parties-in-interest in this case. Petitioners not being the real parties-ininterest, any decision rendered herein would be pointless since the same would not bind the real parties-ininterest. Now, on the merits of the case NHA: The cancellation was based on the negation of the cause arising from the realization that the lands, which were the object of the sale, were not suitable for housing. The NHA was justified in canceling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent.

Uy & Roxas v. CA, Hon. Robert Balao, NHA (ABBY) Facts: William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by the owners thereof. By virtue of such authority, petitioners offered to sell the lands, located in Tuba, Tadiangan, Benguet to respondent National Housing Authority (NHA) to be utilized and developed as a housing project. The NHA paid for the 5 parcels but after a test was done, the remaining 3 parcels were found to be unsuitable for housing or any civil structures. The NHA cancelled the contract and offered P1.225M to the landowners. Uy and Roxas found a complaint for damages and the RTC said the cancellation of the contract was justified but still awarded the P1.225M damages. The CA reversed the RTC since there was "sufficient justifiable basis" in cancelling the sale, "it saw no reason" for the award of damages. The CA also noted that petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial court. The damages prayed for were intended not for the benefit of their principals but to indemnify petitioners for the losses they themselves allegedly incurred as a result of such termination. These damages consist mainly of "unearned income" and advances. They brought the action in their own name and in their own behalf.

Issue: WoN the agents have a cause of action against the NHA suing in their own name.

Held: No. Petition dismissed. Petitioners are not parties to the contract of sale between their principals and NHA. They are mere agents of the owners of the land subject of the sale. As agents, they only render some service or do something in representation or on behalf of their principals.

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Assuming that petitioners are parties, assignees or beneficiaries to the contract of sale, they would not be entitled to any award of damages. being reverse." Hence, he can have no right of action against the buyer. Moreover, Awads claim that Filma is not a buyer in good faith and had knowledge of the condition under which the merchandise was entrusted to Chua Lioc, was not supported by evidence. Awad v. Filma Mercantile (MARK) *Mark, promise hindi ito assigned sayo dun sa email ko. Sorry! FACTS Early in the month of September, 1924, the plaintiff, doing business in the Philippine Islands under the name of E. Awad & Co., delivered certain merchandise of the invoice value of P11,140 to Chua Lioc, a merchant operating under the name of Hang Chua Co. in Manila, said merchandise to be sold on commission by Chua Lioc. Representing himself as being the owner of the merchandise, Chua Lioc sold it to the defendant Filma Mercantile. The merchandise so purchased was delivered to the defendant, who immediately offered it for sale. D. J. Awad, in behalf of E. Awad & Co., wrote a letter to the defendant corporation advising it that, inasmuch as the merchandise belonged to E. Awad & Co., the purchase price should be paid to them. Filma in its answer stated that they received the goods from Chua Lioc hence payment is due to Chua Lioc. The complaint in the present action was filed on November 26, 1924, the plaintiff demanding payment of the same sum of P11,140 for which action had already been brought against Chua Lioc. The defendant, its answer, set up as special defense that it brought the merchandise in good faith and without any knowledge whether of the person from whom or the condition under which the said merchandise had been acquired by Chua Lioc or Hang Chuan Co.; that the defendant therefore had acquired title to the merchandise purchased; that the balance of P6,657.52, now in the hands of the defendant had been attached in the two actions brought on September 18, and October 7, respectively, and garnishment served upon the defendant, who therefore, holds the money subject to the orders of the court in the cases abovementioned, but which sum the defendant is able and willing to pay at any time when the court decides to whom the money lawfully pertains.

Awadv. Filma Mercantile (EARLA) Dec 24, 1926 Ostrand, J. Facts: E. Awad & Co. delivered to Chua Lioc (operating under the name of Hang Chuan Co.) certain merchandise in the amount of P11,140. Chua Lioc, representing himself as the owner of the merchandise sold them to Filma Mercantile for a total of P12,155.60. After deducting Chua Lioc debts to Filma and to the Phil. Manufacturing Co. (which Filma agreed to pay), Filma is still indebted to Chua Lioc in the amount of P6,657.52. Thereafter, E. Awad obtained authorization from Chua Lioc to collect the P11,140 due it. Filma however refused to directly pay to E. Awad the purchase price. Subsequently, the Phil. Trust Company brought an action against Chua Lioc for the payment of P1,036.36. As a result, the balance due from Filma was attached in that action. This balance was further attached in another action instituted by E. Awad for the payment of P11,140. E. Awad then filed a separate action against Filma, for the payment of the purchase price. Filma however averred that it was a buyer in good faith. It further alleged that it was holding the balance of P6657.52 (having been attached in two separate cases) subject to the orders of the court. The trial court dismissed the complaint on the ground that the plaintiff was only entitled to payment of the sum of P6,657.52, but which sum the defendant had the right to retain subject to the orders of the court in the two separate cases. ISSUE: WON E. Awad can collect from Filma. HELD: No. According to the Court, the law applicable to the case is well settled. Article 246 of the Code of Commerce reads as follows: "When the agent transacts business in his own name, it shall not be necessary for him to state who is the principal and he shall be directly liable, as if the business were for his own account, to the persons with whom he transacts the same, said persons not having any right of action against the principal, not the latter against the former, the liabilities of the principal and of the agent to each other always

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ISSUES WON Awad Mercantile. NO. can recover from Filma all that was in his power, even if the condition has not been fulfilled in reality. Smith, Bell & Co was able to deliver the goods even though the conditions for delivery were not completely fulfilled. [No agency concept expressly discussed in case. My guess why Mr. Sotelo was the one ordered to accept and receive the goods: (1) he was notified by Smith Bell of the arrival of the goods and yet he did not inform Manila Oil Co. it is his duty as the manager of the company to inform his principal. (2) he was the only one who appealed judgment, intervenor Manila Oil Co. did not] Disposition: Mr. Sotelo Matti is sentenced to accept and receive from plaintiff the tanks, expellers, and motors in question. Smith Bell v. Sotto Matti (MARK) *MARK! Di rin ito assigned sayo. Andami mong ginawa :) FACTS In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente Sotelo, entered into contracts whereby the former obligated itself to sell, and the latter to purchase from it, two steel tanks, two expellers, and two electric motors. As to the delivery of which stipulation was made, couched in these words: "Approximate delivery within ninety days. This is not guaranteed." The tanks arrived at Manila on April 27, 1919, the expellers on Oct 18, 1918, and motors on February 27, 1919. The plaintiff corporation notified Mr. Sotelo of the arrival of the goods but Mr. Sotelo refused to receive them. Smith, Bell and Co. brought suit against Mr. Sotelo. The latters defense was that he made the contracts in question as manager of the Manila Oil Refining and By-Products Co. Manila Oil Co. intervened and alleged that it was notified by Smith Bell of the arrival only in May 1919. Ruling: CFI: absolved defendants insofar as the tanks and motors were concerned but ordered them to receive the expellers. Smith Bell and Sotelo Matti appealed the judgment. Issue: WON Sotelo Matti can be ordered to receive and pay for the goods [YES] HELD: The term which the parties attempted to fix were so uncertain that one cannot tell just whether those articles could be brought to Manila or not. The obligations were conditional. In cases like this, the obligor will be deemed to have sufficiently performed his part of the obligation, if he has done The tanks arrived at Manila on the 27th of April, 1919: the expellers on the 26th of October, 1918; and the motors on the 27th of February, 1919. The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of these goods, but Mr. Sotelo refused to receive them and to pay the prices stipulated. The plaintiff defendant. brought suit against the

RATIONALE Article 246 of the Code of Commerce reads as follows: When the agent transacts business in his own name, it shall not be necessary for him to state who is the principal and he shall be directly liable, as if the business were for his own account, to the persons with whom he transacts the same, said persons not having any right of action against the principal, nor the latter against the former, the liabilities of the principal and of the agent to each other always being reserved. Smith Bell & Co. v Sotelo Matti (JANCES) Facts: In August 1918, Smith, Bell & Co and Sotelo Matti entered into contracts whereby the former obligated itself to sell and deliver 2 steel tanks, 2 expellers and 2 electric motors. The tanks were to be delivered within 3-4 months, the expellers Sept 18 or as soon as possible, and the motors within 90 days (but not guaranteed). In all the contracts, it was stated that the seller was not responsible for delays caused by fires, riots on land or on sea, strikes or other causes known as force majeure. Note also that the contracts were executed at the time of the world war.

In their answer, the defendant, Mr. Sotelo, and


the intervenor, the Manila Oil Refining and By-Products Co., Inc., denied the plaintiff's allegations as to the shipment of these goods and their arrival at Manila, the notification to the defendant, Mr. Sotelo, the latter's refusal to receive them and pay their price, and the good condition of the expellers and the motors, alleging as special defense that Mr. Sotelo had made the contracts in question as manager of the intervenor, the Manila Oil Refining and By-Products Co., Inc which fact was known to the plaintiff, and that "it was only in May, 1919, that it notified the intervenor that said tanks had arrived, the motors and the expellers having arrived incomplete and long after the date stipulated."

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As a counterclaim or set-off, they also allege that, as a consequence of the plaintiff's delay in making delivery of the goods, which the intervenor intended to use in the manufacture of cocoanut oil, the intervenor suffered damages Hongkong Island Company, Ltd., Maritime Agencies & Services Inc, and Macondray Company, Inc. Principal Issue: Who should be held liable for the loss or damaged cargos? In order to answer this, the nature of the charter must first be identified whether it is a demise or bareboat charter, a time charter or a voyage charter. According to the court, the agreement entered into (Uniform General Charter) in the cases at bar should be considered. A voyage charter being a private carriage, the parties may freely contract respecting liability for damage to the goods and other matters. The basic principle is that the responsibility for cargo loss falls on the one who agreed to perform the duty involved. This is true in the present cases where the charterer was responsible for loading, stowage and discharging at the ports visited, while the owner was responsible for the care of the cargo during the voyage. As the bags were in good order when received in the vessel, the presumption is that they were damaged or lost during the voyage as a result of their negligent improper stowage. FOR THIS THE SHIP OWNER SHOULD BE LIABLE (so its agent, Macondray is liable, but action has prescribed). Secondary ISSUE (for our purposes): W/N the charterers agent is liable considering the finding of the court that the other goods were damaged or lost during the unloading, and unloading was the principal duty of the charterer according to the Uniform General Charter? NO. Ratio: The charterer assumed this activity under the charter party. However, the liability imposable against Transcontinental cannot be borned by Maritime, which as a mere agent, is not answerable for injury caused by its principal. It is a well-settled principle that the agent shall be liable for the act or omission of the principal only if the latter is undisclosed. The agent may be held liable if it represented the vessel when it took charge of the unloading of the cargo and issued cargo receipts in its own name. It should have also received and processed claims against the vessel for the losses/damages sustained by the cargo. If this is the case, the charterers agent is also considered a ship agent and so should be held to be solidarily liable with its principal. The charterer in this case did not represent itself as a carrier and indeed assumed responsibility only for the unloading of the cargo, i.e. after the goods were already outside the custody of the vessel. In supervising the unloading of the cargo and issuing

ISSUES WON the intervenor has a cause of action against plaintiff due to the alleged delay in the delivery of the machineries. NO. RATIONALE When an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted, or such persons against the principal. In such case, the agent is directly liable to the person with whom he has contracted, as if the transaction were his own (Art. 1717, Civil Code).

Maritime Agencies & Services v. CA (ALAIN) July 12, 1990 J. Cruz FACTS: Transaction: shipment of bagged urea from USSR to the Philippines, so need to charter a motor vessel Motor vessel: named Hongkong Island Owner of vessel: Hongkong Island Shipping Co. Charterer: Transcontinental Fertilizer Company of London Consignee in the Philippines: Atlas Fertilizer Company (Manila and Cebu) Insurer of goods: Union Insurance Society of Canton, Ltd (against all risks) Charterers agent: Maritime Agencies & Services, Inc. Owners agent: Macondray Company, Inc. The parties signed for this purpose a Uniform General Charter. But problem occurred in the transaction. Trial court found out that upon receipt of goods, 1,383 bags were damaged or lost on board the vessel before unloading of the shipment. There were also goods that were damaged or lost during unloading. Consignee filed a formal claim, and after its claims rejected, went to Insurer Union, which on demand paid the total indemnity pursuant to the insurance contract. Thus, as subrogee of the consignee, Union filed complaint for reimbursement against

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Daily Operations Report and Statement of Facts indicating and describing the day-to-day discharge of the cargo, Maritime acted in representation of the charterer and not of the vessel. It thus cannot be considered a ship agent. As a mere charterers agent, it cannot be held solidarily liable with the Transcontinental for the losses/damages to the cargo outside the custody of the vessel. Notably, Transcontinental was disclosed as the charterers principal and there is no question that Maritime acted within the scope of its authority. II. Obligations of the Agent Only Surety Co perfected its appeal. Central Bank did not appeal while ATACO failed to perfect its appeal. CA: ruled against Bank and modified judgment as to surety's liability hence this appeal by bank to SC. CA found Bank negligent in having stopped collecting from Bureau the moneys falling due in favor of principal debtor ATACO before the debt was fully collected, thereby allowing such funds to be taken and exhausted by other creditors to the prejudice of the surety, and held that Bank's negligence resulted in exoneration of Manila Surety. PNB: Power of attorney obtained from ATACO was merely an additional security in its favor and it was the duty of surety, and not that of the creditor, to see to it that obligor fulfills his obligation, and that the creditor owed the surety no duty of active diligence to collect any sum from the principal debtor. Issue: WON PNB exercised due diligence in collecting from Bureau of Public Works? NO Held: 1. Bank liable fro neglect in collecting money due to principal debtor. PNB's argument totally misses the point. CA did not hold it liable for negligence for failing to collect from the principal debtor but for its neglect in collecting the sums due to debtor from the Bureau, contrary to its duty as holder of an exclusive and irrevocable power of attorney to make such collections, since an agent is required to act with the care of a good father of a family and becomes liable for the damages which the principal may suffer through his nonperformance. Bank's power was expressly made irrevocable such that Bureau could very well refuse to pay to principal debtor itself, and a fortiori reject any demands by surety. 2. Even assuming power of attorney was mere additional security, Bank still precluded from recovering from surety. By allowing assigned funds to be exhausted without notifying the surety, PNB deprived surety of any possibility of recoursing against that security. PNB thereby exonerated surety pursuant to Art. 2080 of CC. Letter of demand no bearing here since letter was addressed to ATACo and funds were to come from elsewere. As to letter of demand on Bureau, it does not appear that any reply was made nor that demand was pressed nor that debtor or the surety were ever apprised that paymnet was not being made. Fact remains that because of PNB's inactivity the other creditors were enabled to

A.

Article 1884: General obligations (GEN)

and

specific

Art. 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his non-performance, the principal may suffer. He must also finish the business already begun on the death of the principal, should delay entail any danger. 1. Effects of acceptance of agency PNB v. Manila Surety (ROG) 1965 Facts: PNB had opened a letter of credit and advanced thereon $120k to Edgington Oil for 8k tons of hot asphalt. Of this amount, 2k tons worth $279k were released and delivered to Adams & Taguba Corp (ATACO) under a trust receipt guaranteed by Manila Surety up to amount of P75k. To pay for the asphalt, ATACO constituted the Bank its assignee and attorney-in-fact to receive and collect from the Bureau of Public Works the amount out of funds payable to the assignor under Purchase Order No. 71947. Ataco delivered to the Bureau of Public Works and the latter accepted asphalt worth P431k. Of this amount the Bank regularly collected but the bank subsequently ceased to collect for unexplained reasons, until its investigators found that more moneys were payable to ATACO from the Public Works office, because latter had allowed another creditor to collect funds due to ATACO under the same purchase order, to a total of P311k. Its demands on the principal debtor and the Surety having been refused, the bank sued both in CFI to recover balance of P158k plus interest and costs. CFI: ruled for PNB.

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collect P173k when balance due to PNB was only P158k. Finding of negligence by CA is not only conclusive on SC but also fully supported by evidence. British Airways vs. Court of Appeals (Mai) January 29, 1998 Romero, J. Facts: On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the services of a certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a ticket from British Airways. Since British Airways had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay on board British Airways. Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his clothing and personal effects, confident that upon reaching Hongkong, the same would be transferred to the British Airways flight bound for Bombay. that the contract was one of continuous air transportation from Manila to Bombay. Well-settled is the rule that an agent is also responsible for any negligence in the performance of its function and is liable for damages which the principal may suffer by reason of its negligent act. Hence, the Court of Appeals erred when it opined that British Airways, being the principal, had no cause of action against PAL, its agent or sub-contractor.

Also, it is worth mentioning that both British Airways and PAL are members of the International Air Transport Association (IATA), wherein member airlines are regarded as agents of each other in the issuance of the tickets and other matters pertaining to their relationship. Therefore, in the instant case, the contractual relationship between British Airways and PAL is one of agency, the former being the principal, since it was the one which issued the confirmed ticket, and the latter the agent. A carrier like PAL, acting as an agent of another carrier, is also liable for its own negligent acts or omission in the performance of its duties. Accordingly, to deny British Airways the procedural remedy of filing a third-party complaint against PAL for the purpose of ultimately determining who was primarily at fault as between them, is without legal basis.

Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from the British Airways representatives, he was told that the same might have been diverted to London. After patiently waiting for his luggage for one week, British Airways finally advised him to file a claim by accomplishing the Property Irregularity Report.

B.

Article 1885: Effect when person declines agency (ABBY)

Mahtani subsequently filed a complaint for damages and attorneys fees against British Airways and Mr. Gumar. British Airways, in turn, filed a third-party complaint against PAL. The trial court ruled in favor of Mahtani and dismissed the third-party complaint against PAL. The Court of Appeals affirmed the decision, stating that British Airways had no cause of action against PAL. Issue: Whether or not the dismissal of the thirdparty complaint against PAL was valid Held: NO. The contract of air transportation was exclusively between Mahtani and British Airways, the latter merely endorsing the Manila to Hongkong leg of the formers journey to PAL, as its subcontractor or agent. In fact, the fourth paragraph of the Conditions of Contracts of the ticket issued by British Airways to Mahtani confirms

Art. 1885. In case a person declines an agency, 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. Obligation: 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. Owner must as far as practicable: 1. appoint an agent 2. take charge of the goods

C.

Article 1886: Exception to the general rule that the principal must advance to the agent the sums necessary for the execution of the agency (EARLA)

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Art. 1886. Should there be a stipulation that the agent shall advance the necessary funds, he shall be bound to do so except when the principal is insolvent. Exception exception to the parties from the year 1900, plaintiff transmitted weekly or fortnightly, according to circumstances, a specific statement of the transactions effected, as well as, semiannually, a general account of the business done during the six months last elapsed, and that defendant, after an examination of such semiannual account together with its details and vouchers, and after some objections thereto had been explained, was accustomed to prove the same. This was the produre carried on for more than nine years during which Oria Hermanos & Co. from time to time approved each one of the 17 account that were presented to it, and upon Gutierrez Hermanos closing the current account from January to June, 1909, it also presented to defendant a general detailed account, which, nothwithstanding that no objection whatever was made to it, was not approved. Therefore the complaint was filed that initiated this litigation. ISSUE: Whether or Not Gutierrez Hermanos actually bound itself to present to Oria Hermanos and Co., besides the semiannual accounts rendered, a general account comprising all the business undertaken between 1900 and June, 1909, on which latter date it was considered by Gutierrez Hermanos as terminated. HELD: The allegation made by defendant relative to this point had not been substantiated by any evidence whatever, and therefore there is no reason nor legal ground whereby plaintiff could be compelled to present that general account requested in the first cross-complaint. It is, in our opinion, appropriate it insert hereinafter what the trial court, in the judgment rendered, says with respect to this matter: "If commission agents be obliged to render to their principals itemized accounts, supported by vouchers, of the sums they collect as commission and of the transactions effected by them in relation with their principals, as often as the latter may desire, in cases where there arises some trouble, some difference of opinion or a conflict of interests, or where the commission agents close the account, as occurs in the case at bar because the principals did not pay what they were owing or because, instead of the debt being diminished, it was increased, the commission contract would become an inexhaustible and never ending source of litigation and of claims without number, a formidable arm for spiteful principals against which it would be insufficient to oppose an arsenal of vouchers such as might be treasured by the most prescient commission agent, because there could be avoided neither the brother resulting from their necessary examination, nor the heavy expenses and loss of time that are the inevitable accompaniment of this class of work."

D.

Article 1887 (JANCES)

Art. 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the principal. In default thereof, he shall do all that a good father of a family would do, as required by the nature of the business. 1. Effect of violation of principals instructions 2. Instructions v. authority 3. Rule in absence of instructions 4. When departure is justified 5. Cases Gutierrez Hermanos v. Oria Hermanos (ALAIN) March 30, 1915 Torres, J.: FACTS: ALLEGATIONS by defendant ORIA HERMANOS & CO.: By reason of mercantile relations and the opening of a mutual current account from May 1, 1900, the plaintiff (Gutierrez Hermanos) had obligated itself periodically to send to the defendant firm a memorandum or statement of the current account, and further obligated itself, in case the said mercantile relations should be finally terminated, to present a general and complete account, duly supported by vouchers and other proofs; that plaintiff, Gutierrez Hermanos, had contended itself by sending to Oria Hermanos and Co. some memoranda or abstracts of account, accepted by defendant as such "abstract of account," without the latter's having waived its right to demand the presentation, as agreed upon, of the vouchers and other proofs upon the closing of the current account, a stipulation which Gutierrez Hermanos had failed to comply with. Defendant therefore prayed that the plaintiff, Gutierrez Hermanos, be sentenced to render and present the said final account, duly accompanied by vouchers, in conformity with the agreement made. PLAINTIFFS ALLEGATIONS: Gutierrez Hermanos denied in its answer the allegations made by Oria Hermanos & Co. in its crosscomplaint, and set forth that, in consequence of the mutual current account opened between the

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When an account has been presented or rendered and has been approved by the party whom it concerns or interests, it is not proper to revise it, unless it should be proved that in its approval there was deceit, fraud, or error seriously prejudicial to the party who gave such approval. Arts. 1265 and 1266, Civil Code.) In the decision rendered in the case of Pastor vs. Nicasio, (6 Phil. Rep., 152), the following doctrine was laid down; When accounts of the agent to the principal are once approved by the principal, the latter has no right to ask afterwards for a revision of the same or for a detailed account of the business, unless he can show that there was fraud, deceit, error or mistake in the approval of the accounts facts not proven in this case. The record does not show it to have been duly proven that upon Oria Hermanos & Co. giving its approval to the 17 accounts presented by Gutierrez Hermanos there was deceit, fraud, or mistake prejudicial to the former's interests. For the sole reason that Gutierrez Hermanos, upon closing the current account with Oria Hermanos & Co. was obliged, certainly an unwarranted obligation, to render a general account comprehensive of all the business transacted between both parties during more than nine years, and there being no proof of the alleged agreement between them, it would be improper to hold that the plaintiff is obliged to render and present a general account in the sense requested by Oria Hermanos & Co. in its first crosscomplaint. PNB v. Manila Surety & Fidelity Co., supra

F.

Article 1889 (JILL)

Art. 1889. 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 1. Rule on conflict of interest The rule is that the agent is not permitted, without the knowledge and consent of the principal, to assume two distinct characters in the same transaction for himself and pretending to act for the principal. The agent will be liable for damages if, there being a conflict, he chooses his own than those of the principal. However, if the principal chooses to waive the benefit and he does so with knowledge of facts, the rule will not apply. The rule will not also apply if the agents interests are superior (e.g. he has a security interest in the goods; he will be exposed to great physical risks). The rule does not distinguish whether the agency is onerous or gratuitous. The basis for the rule is the fiduciary relationship between the principal and agent, with the latter expected to observe utmost good faith and loyalty towards his principal. The rule should also preclude an agent from temptations (to engage in selfdealing). This rule is preventive, not remedial justice. 2. Cases Aboitiz v. De Silva (MARK) Facts: Aboitiz sold his shares in G. & R. Aboitiz and Viuda e Hijos de P. Aboitiz, partnership to the De Silvas. There was an unpaid balance of 159,000. Aboitiz filed a complaint to recover said amount. Defendants maintains that their liability under the "Hipoteca-Venta" had, with the plaintiff's implied consent, been transferred to Aboitiz & Co. ISSUE: WON defendants liability under the "Hipoteca-Venta" had, with the plaintiff's implied consent, been transferred to Aboitiz & Co. Held: No There is nothing in this contention. It is true that the three defendants transferred all the assets and liabilities of G. & R. Aboitiz to the corporation Aboitiz & Co., and that at the time at least two of the defendants, Guillermo and Vidal Aboitiz, held a general power of attorney

E.

Article 1888: When agent shall not carry out agency (JILL)

Art. 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal. (n) The agent should not carry out the agency if its execution will manifestly result in a loss or damage to the principal. The reason is that the agent is a mere extension of the personality of the principal. His duty is to render service FOR THE BENEFIT of the principal and not to act to his detriment. Moreover, agent must exercise due diligence in carrying out the agency.

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from the plaintiff. But, in the first place, the defendants appear to have acted for themselves only and none of them pretended to act on behalf of Ramon Aboitiz; in the second place, the defendant's liability under the "Hipoteca-Venta" was a personal and individual liability, while the transfer in question related to the business of the partnership of G. & R. Aboitiz; and, in the third place, the defendants who held powers of attorney could not represent both themselves and their principal in a transaction involving the shifting of the liability from themselves to another party. Neither does the fact that the plaintiff subsequently accepted payments on the "Hipoteca-Venta Account" from Aboitiz & Co. work a novation. Novation is never presumed. Unless it is clearly shown either by express agreement of the parties or by acts of equivalent import, this defense will never be allowed. other people have given the company assurances that they can handle the Japanese sales, therefore, the company have decided to leave the agency for that company open for a time.

Meanwhile,

Barton embarked for San Francisco and upon arriving at that port, he entered into an agreement with Ludvigsen & McCurdy, whereby the said firm was constituted a subagent and given the sole selling rights for the bituminous limestone products of the company for a period of 1 year. an earlier voyage during the same year to Australia, Barton had already made an agreement with Frank B. Smith of Sydney, whereby the latter was to act as the plaintiffs sales agent for limestone products of the company. Later, the same agreement was extended for a period of one year.

Upon

In

Severino v. Severino, supra Barton vs. Leyte Asphalt & Mineral Oil Co. (ANJ S.) (Note: The case has too many facts irrelevant to our topic. I decided not to include in the digest the facts that are irrelevant so as not to confuse us. Thanks.) Facts: James D. Barton, an American citizen residing in the City of Manila, was given by Leyte Asphalt & Mineral Oil Co. the sole and exclusive sales agency for the sale of their bituminous limestone and other asphalt products in the countries of Australia, New Zealand, Tasmania, Saigon, India, Sumatra, Java, China and Hong Kong until May 1, 1922, and until May 1, 1921 in Siam and the Straits Settlements of US. It was also stipulated in the letter of authority that should the sales of Barton in the US reach 5,000 tons on or before May 1, 1921, he would be awarded the sole rights for the said territory for an additional 1 year and should his sales in the second year reach or exceed 10,000 tons, he would be given the option to renew the agreement for the said territory on the same terms for an additional 2 years. Further, it was stated that should his sales equal or exceed 10,000 in the year ending October 1, 1921, or 20,000 tons by May 1,1922, then the contract will automatically be continued for an additional of 3 years. Very soon after the contract became effective, Barton requested the company to give him a similar selling agency for Japan. To this request, the company through its president, Anderson, replied that at that moment, they do not feel like giving him the same authority until he can make some large sized sales there, because some

Tokio, Japan, Barton came in contact with H. Hiwatari. In a letter, Hiwatari speaks of himself as if he had been appointed exclusive sales agent for Barton in Japan, but no document expressly appointing him such is in evidence. Barton then received a letter from Ludvigsen & McCurdy that it might enter an order for 6,000 tons of bituminous limestone. In turn, Barton informed the company to be prepared to ship the products. Anderson, however, informed him that the company, with its current facilities, wouldnt be able to handle big contracts. Barton expressed surprise at this and told Anderson that he had not only that particular order from San Francisco but other orders for large quantities to be shipped to Australia and Shanghai. Subsequently, Barton informed the company at different dates to prepare shipments to US and Australia, and later on, to Japan.

It will be noted that in connection with the letters

(totaling to 4) sent by Barton to the company informing the latter to prepare shipments, no mention was made of the names of the persons, or firms, for whom the shipments were really intended. The obvious explanation that occurs in connection with this is that the plaintiff did not care to reveal the fact that the orders originated from his own subagents in San Francisco and Sydney. The company, in its reply to one of Bartons letter, stated that no orders can be entertained unless cash has been actually deposited with either the International Banking Corporation or the Chartered Bank of India, Australia, and China, at Cebu. To this, Barton, in turn, replied questioning the right of the company to insist upon cash deposit in Cebu prior to the filling of the orders. In conclusion, Barton gave some more orders for shipment to Australia in the quantities of 5,000

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tons, and 10,000, and stated that he would arrange for deposits to be made on these additional shipments if the company will signify its ability to fulfill the orders. Again, no name was mentioned as the purchaser, or purchasers, of these intended consignments. Barton then instituted in the CFI of Manila, an action to recover from Leyte Asphalt & Mineral Oil Co., Ltd., as damages for breach of contract, the sum of $318,563.30 and to secure a judicial pronouncement to the effect that the plaintiff be entitled to an extension of the terms of the sales agencies specified in the contract. The Trial Court absolved the company from 4 of the 6 causes of action set forth in the complaint. For the two remaining causes of action, the court adjudged the company liable to pay Barton the sum of $202,500 (equivalent to 405,000php) as damages. From this judgment, the company appealed. Issue: WON the company is liable to pay Barton damages for breach of contract. Held/Ratio: No.

G.

Article 1890 (JESSA)

Art. 1890. If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been authorized to lend money at interest, he cannot borrow it without the consent of the principal. 1. Reason for allowing agent to be the lender

The original contract by which the plaintiff was appointed sales agent for a limited period of time in Australia and the US contemplated that he should find reliable and solvent buyers who should be prepared to obligate themselves to take the quantity of bituminous limestone contracted for upon terms consistent with the contract. These conditions were not met by the taking of these orders from Bartons own subagents, which was as if the plaintiff had bought for himself the commodity which he was authorized to sell to others.

The agent cannot, without special power of attorney, loan or borrow money (See Art 1878[7]). If the agent is expressly empowered to borrow money, he may himself be the lender at the current rate of interest o REASON: There is no danger of the principal suffering any damage since the current rate of interest would have to be paid in any case if the loan were obtained from a third person If the agent is authorized to lend money at interest, he cannot be the borrower without the consent of the principal o REASONS: the agent may prove to be a bad debtor; possible conflict of interest; prejudicial to the principal

H.

Article 1891 (BAMBI)

Article 267 of the Code of Commerce declares that no agent shall purchase for himself or for another that which he has ordered to sell. The law has placed its ban upon a brokers purchasing from his principal unless the latter with full knowledge of all the facts and circumstances acquiesces in such course; and even then the brokers action must be characterized by utmost good faith. A sale made by a broker to himself without the consent of the principal is ineffectual whether the broker has been guilty of fraudulent conduct or not. Dispositive: Judgment Reversed. Malcolm, J., dissenting: Nowhere in the contract was the plaintiff prohibited to secure subagents. The majority decision misses out on the point that the only objection of the company when the orders were communicated was related to the manner of payment.

Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal. Every stipulation exempting the agent from the obligation to render an account shall be void. (1720a) RULE: It is the duty of the agent to ACCOUNT FOR and to DELIVER to the principal ALL money and property which may have come into his hands or of a sub-agent appointed by him BY VIRTUE OF or AS A RESULT of the agency. 1. Duty to render account 2. Criminal liability of agent Two obligations of an agent under Art. 1981 Obligation to render accounts Agent must disclose to the principal the following:

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1. Source of profits of agency All profits of the agency belong to the principal, regardless of whether profit is the result of the performance or violation of the agency. o Rationale for rule: It is the principal who assumes responsibility for the transaction. Also, the agent cannot be permitted to derive advantage from his own default Secret profit agent may have received An agent who takes secret profit is guilty of breach of his loyalty to the principal and forfeits his right to collect commission. o Regardless of benefit/injury to the principal, usage/custom, or gratuitous nature of the agency. o Unlike a servant or messenger who only has physical possession

Agent has autonomous right to retain possession of goods/proceeds (i.e., when principal fails to reimburse him for advances or indemnify him for damages suffered without his fault) o Unlike a bank teller who, as mere a custodian/keeper of funds received, has no independent right to retain.

2.

Other notes Any stipulation exempting the agent from his obligation to render accounts (par. 1 of 1891) is void. (par 2. of 1891). Rationale for rule: Stipulation contrary to par. 1 encourages fraud and is contrary to public policy. It is in the nature of a waiver of an action for future fraud, thus void. If agent fails to deliver and instead converts for his own use the money of property belonging to the principal, the agent is liable for estafa. Agent also cannot subtract from his collections the commission due him.

Exemptions to obligation to account: If agent acted only as a middleman with the task of merely bringing together the vendor and vendee, who themselves thereafter will negotiate the terms and conditions of the transaction. If agent informed principal of gift/bonus/profit he received from vendee and principal did not object thereto. When right of lien exists in favor of agent (i.e. Article 19142; Sec. 37, Rule 138, ROC3) Obligation to turn over proceeds Obligation to render an accounting and report of collections presupposes the duty of simultaneously turning over collections. Nature of agents possession goods/proceeds received in agency of

Domingo v. Domingo (REX) FACTS On June 2, 1956 Vicente Domingo granted Gregorio Domingo, a real estate broker, the exclusive agency to sell a lot with an area of about 88k square meters at the rate of 2 pesos per sqm, with a 5% commission of the total price if sold by Vicente or anyone else during the 30 day duration of the agency or if the property is sold by Vicente within three months from the agencys termination to a buyer submitted by Gregorio during the continuance of the agency with notice to Vicente. This contract was in triplicate, 1 copy given to Vicente, the original and another copy with Gregorio. The next day, Gregorio authorized one Teofilo Purisima to look for a buyer, promising him half of the 5% commission. Purisima later then introduced Oscar de Leon to Gregorio as a prospective buyer. De Leon submitted a written offer much lower than 2 pesos per sqm, at 1.2 pesos per sqm. Vicente directed Gregorio to ask De Leon to raise his offer. After several conferences between Gregorio and De Leon, the latter raised his offer to 109k, to which Vicente agreed by signing on it. Upon demand of Vicente, Oscar issued a 1k check as earnest money, after which Vicente gave 300 pesos to Gregorio.

Agent has physical and juridical possession

Art. 1914. The agent may retain in pledge the things which are the object of the agency until the principal effects the reimbursement and pays the indemnity set forth in the two preceding articles. (1730)
3

Sec. 37. Attorneys' liens. - An attorney shall have a lien upon the funds, documents and papers of his client which have lawfully come into his possession and may retain the same until his lawful fees and disbursements have been paid, and may apply such funds to the satisfaction thereof. He shall also have a lien to the same extent upon all judgments for the payment of money, and executions issued in pursuance of such judgments, which he has secured in a litigation of his client, from and after the time when he shall have caused a statement of his claim of such lien to be entered upon the records of the court rendering such judgment, or issuing such execution, and shall have caused written notice thereof to be delivered to his client and to the adverse party; and he shall have the same right and power over such judgments and executions as his client would have to enforce his lien and secure the payment of his just fees and disbursements.

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De Leon confirmed his former offer to pay for 1.20 pesos per sqm, and Vicente asked for an additional 1k as earnest money, which De Leon promised to deliver. The original 109k offer signed by Vicente was amended to the effect that De Leon will vacate about September his house and lot at QC which is part of the purchase price, and again amended to December. Pursuant to his promise to Gregorio, De Leon gave him a gift or propina of 1k for succeeding in persuading Vicente to sell his lot at a lower price. This gift was not disclosed by Gregorio to Vicente. De Leon also never paid the additional 1k earnest money. By August the deed of sale still hadnt been executed. De Leon then told Gregorio that he did not receive his money from his brother in the US, for which reason he was giving up the negotiations and the amounts he had already paid and given. Gregorio then sensed something fishy, so he went to Vicente and read the 5% commission part of the contract. Vicente grabbed the contract and tore it to pieces, but Gregorio did not react as he still had another copy. Gregorio then proceeded to the QC Register of Deeds where he learned that a deed of sale had been executed by Amparo Diaz, De Leons wife, over their house and lot on the purchase price of Vicentes property. Upon learning this, he demanded in writing his commission on the sale price of 109k. He talked to De Leon who told him that Vicente went to him and asked him to eliminate Gregorio in the transaction and that he would sell his property for 104k only. Gregorio then went to court, where the CA, in affirming the TC, sentenced Vicente to pay Gregorio and Purisima their commissions, plus moral and exemplary damages with attorneys fees and costs. Vicentes heirs now seek the reversal of this decision. ISSUES 1. WON the failure of Gregorio to disclose the gift by De Leon constitutes fraud as to cause forfeiture of the commission 2. WON Vicente should be liable to Purisima HELD/RATIO 1. YES. The CA was wrong in not finding this fraudulent. Article 1891s second paragraph is a new addition designed to stress the highest loyalty required of an agent, voiding any stipulation exempting the agent from the duty and liability of rendering an account of transactions received by virtue of the agency, even if the amount is not due to the principal. Article 1909 of the CC makes the agent liable not only for fraud, but also negligence, whether the agency was gratuitous or for price or reward. These provisions demand the utmost good faith by the agent to his principal. An agent who takes a secret profit without revealing this to his principal is guilty of a breach of loyalty, and forfeits his right to collect the commission, even if the principal does not suffer any injury by reason of such breach of fidelity, or even gains from it: the rule is to prevent possible damage. By taking such profit or bonus, the agent assumes a position wholly inconsistent with that of being an agent for his principal. Gregorios acceptance of De Leons monetary gift corrupted his duty to serve Vicentes interests only, and he succeeded in persuading Vicente in selling the property at a much lower price than the original. The duty of the agent in 1891 will not apply if the agent acted only as middleman, tasked only with bringing the vendor and vendee together. Neither will it apply if he informs his principal of the bonus or gift he received and his principal did not object. Here, Gregorio was not merely a middleman, and Vicente was not told of the gift. The fact that the wife of De Leon is now the buyer in the deed of sale does not matter, since De Leon himself would still be the buyer both in law and in fact, his consent being needed as administrator of the conjugal assets of the house which was part of the purchase price.

2. No. Only Gregorio would be liable, since


Purisima is his sub-agent alone. He should get his half share of whatever amounts Gregorio received from the agency with Vicente (300 from Vicente, 1000 from de Leon, 1,300 total), which amounts to 650 pesos. The SC also rewards moral damages to Vicente by 1k and attorneys fees in the same amount. CA reversed. Severino v. Severino, supra Ojinaga v. Estate of Perez (EVA) U.S. v. Kiene (TOPE) 1907 Facts: Kiene was an insurance agent.

On account of his employers, China Mutual Life Insurance Company, P1,539.20, was paid to him, which he failed and refused to turn over to them.

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Hence, he was convicted of the crime of estafa in the CFI which sentenced him to be imprisoned in Bilibid. During the trial, accused offered no evidence on his own behalf and rest his appeal substantially upon the alleged failure of the prosecution to establish the existence of a duty or obligation imposed on the defendant to turn over his principal the funds which he is charged with appropriating to his own use. Defendant contends that the trial court erroneously admitted in evidence a certain document purporting to be a contract of agency signed by the defendant. The name of the accused is attached to this document, and one of the witnesses, the district agent of the Insurance Company, stated that it was the contract of agency it purported to be, but failed to state specifically that the signature attached thereto was the signature of the defendant, though he declared that he knew his signature and had seen him write it on various occasions.

Court found prejudicial to and it is assignments objections.

no error in the proceedings the real rights of the accused, unnecessary to discuss the of error based on these

Guzman v Court of Appeals (GEN) July 31, 1956 Reyes, J.B.L., J FACTS: Jonathan Guzman was a traveling sales agent of New Life Commercial, selling various La Tondena wine in a truck together with a driver and a helper. He made cash sales amounting to P4,873.62 in Aparri, Cagayan. He informed the driver that P2,840.50 was stolen and reported the matter to the police. Meanwhile, on their way home, they were stopped by authorities requesting Guzman to execute an affidavit regarding the alleged theft. Guzman instructed the driver to deliver P1,630 in cash and P403.12 in check to the manager, Enrique Go. Go reported the matter to the police and Guzman was subsequently questioned. The latter requested that Go defer the filing of the complaint and that he promised to refund the amount lost. However, Guzman was still prosecuted for theft for the unreturned amount of P804.70. ISSUE: WON Guzman was liable for theft HELD: NO. An agent, unlike a servant or messenger, has both the physical and juridical possession of the goods received in agency, or the proceeds thereof, which takes the place of the goods after their sale by the agent. His duty to turn over the proceeds of the agency depends upon his discharge, as well as the result of the accounting between him and the principal; and he may set up his right of possession as against that of the principal until the agency is terminated. As the accused converted to his own use proceeds of sales of merchandise delivered to him as agent, which he received in trust for and under obligation to deliver and turn over to his principal, he is guilty of the crime of estafa. This has been the consistent ruling of the Court in cases where a sales agent misappropriates or fails to turn over to his principal proceeds of things or goods he was commissioned or authorized to sell for the latter. The information failed to allege the essential element of misappropriation or conversion to the prejudice of another; hence the accused must be acquitted of the crime of theft. Chua-Burce vs. Court of Appeals (MAI) April 27, 2000 Quisumbing, J.

ISSUE: WoN defendant is obliged to return the amount in question to his principal. HELD: YES.

Court: its not anymore necessary to review the action of the court in admitting the alleged document in evidence, because the obligation of the defendant to deliver the funds in question to his employers is determined by the provision of article 1720 of the Civil Code: "Every agent is bound to give an account of his transactions and to pay to the principal all that he may have received by virtue of the agency, even though what has been received is not owed to the principal." Since nothing to the contrary appears in the record, and the existence of the agency and the collection of the funds on account of the principal having been established, the obligation to deliver these funds to the principal must be held to have been imposed upon the agent by virtue of the contract of agency. Appellant, however, contented that the court erred in admitting in evidence a certain letter written by the defendant wherein he admitted the collection of certain funds on account of his principal. Court said that the execution of this letter was conclusively established, and that it was properly admitted, being pertinent and material to the issue in the case. There were other objections to the admission of certain testimony at the trial of the case, but

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Facts: On August 16, 1985, Ramon Rocamora, the Manager of Metrobank, requested Fructuoso Peaflor, Assistant Cashier, to conduct a physical bundle count of the cash inside the vault, which should total P4,000,000.00, more or less. During this initial cash count, they discovered that there was a shortage of P150,000.00. The One Hundred Peso bills actually counted was P3,850,000.00 as against the balance of P4,000,000.00 in the Cash in Vault (CIV) Summary Sheet, or a total shortage of P150,000.00. The next day, to determine if there was actually a shortage, a re-verification of the records and documents of the transactions in the bank was conducted. There was still a shortage of P150,000.00. Four investigations were conducted and these investigations concluded that there was a shortage of P150,000.00, and the person primarily responsible was the banks Cash Custodian, Cristeta Chua-Burce. A criminal case for estafa was filed against ChuaBurce, while a civil case for sum of money and damages w/ preliminary attachment and garnishment was filed against petitioner and her husband. The trial court rendered a consolidated decision finding petitioner (a) guilty of estafa under Article 315 (1) (b) of the Revised Penal Code in the criminal case, and (b) liable for the amount of P150,000.00 in the civil case. Issue: Whether or not the elements of estafa through conversion or misappropriation were proven beyond reasonable doubt Held: NO. The first element [that personal property is received in trust, on commission, for administration or under any other circumstance involving the duty to make delivery of or to return the same, even though the obligation is guaranteed by a bond] is absent. When the money, goods, or any other personal property is received by the offender from the offended party (1) in trust or (2) on commission or (3) for administration, the offender acquires both material or physical possession and juridical possession of the thing received. Juridical possession means a possession which gives the transferee a right over the thing which the transferee may set up even against the owner. In this case, petitioner was a cash custodian who was primarily responsible for the cash-in-vault. Her possession of the cash belonging to the bank is akin to that of a bank teller, both being mere bank employees. There is an essential distinction between the possession by a receiving teller of funds received from third persons paid to the bank, and an agent who receives the proceeds of sales of merchandise delivered to him in agency by his principal. In the former case, payment by third persons to the teller is payment to the bank itself; the teller is a mere custodian or keeper of the funds received, and has no independent right or title to retain or possess the same as against the bank. An agent, on the other hand, can even assert, as against his own principal, an independent, autonomous, right to retain money or goods received in consequence of the agency; as when the principal fails to reimburse him for advances he has made, and indemnify him for damages suffered without his fault. Petitioner herein being a mere cash custodian had no juridical possession over the missing funds. Hence, the element of juridical possession being absent, petitioner cannot be convicted of the crime of estafa under Article 315, No. 1 (b) of the Revised Penal Code.

I.

Articles 1892, 1893 (ROG)

Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for the acts of the substitute: (1) When he was not given the power to appoint one; (2) When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent. All acts of the substitute appointed against the prohibition of the principal shall be void. (1721) Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution. 1. Relation among principal, agent, and sub-agent 2. General rule: Agent may appoint substitute 3. Consequence of lack of prohibition 4. Effects of substitution Sub-agent defined: a person to whom agent delegates as his agent, the performance of an act for the principal which the agent has been empowered to perform through his representative.

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Power of agent to appoint sub-agent or substitute allowed. Agent here is a principal with respect to the substitute. Law allows such substitution for reasons of convenience and practical utility. Principal need not fear prejudice as he has right of action not only against agent but also against substitute with respect to obligation which latter has contracted under the substitution. This right of action against substitute is an exception to general rule that contracts are binding only between the contracting parties. Relation among principal, agent and sub-agent: 1. Sub-agent appointed by agent on latter's sole account- sub agent a stranger to principal who originally gave life to agency. 2. Sub-agent appointed by agent with authority from principal- where agent authorized to appoint sub-agent, relation of principal and agent, exists between principal and sub-agent. 3. Effect of death of principal/agent if authority of sub-agent proceeds from principal, death of agent who appointed him does not affect his authority. Effects of substitution Substitution prohibited - when substitution is appointed by agent against the express prohibition of principal agent exceeds limits of his authority thus acts of substitute will be void. Substitution authorized - if agent given power to appoint, substitution has effect of releasing agent from responsibility unless person appointed is notoriously incompetent or insolvent because this would be abuse of principal's confidence. Substitution not authorized, but not prohibited substitution valid if it is beneficial to principal because agency has been executed. 5. Cases Macias & Co. v. Warner Bros. (REG) J. Johns 1922 FACTS: Respondent was the resident agent of insurance companies The China fire Insurance Company, Ltd., The Yang-Tsze Insurance Association, Ltd., and The State Assurance Co., Ltd. which are all foreign companies. Respondent served as the agent of petitioner for the acquisition of several insurance policies. Fire occurred sometime in 1919, in the building in which the goods covered by the insurance policies were stored. Petitioner made a claim for damages under its policies against respondent. Held: Found Not Guilty on the Estafa charge but sentenced to pay the civil liability of the value of the unreturned jewelry. Petitioner did not ipso facto commit the crime of estafa through conversion or misappropriation by delivering the jewelry to a sub-agent for sale on commission basis. We are unable to agree with the lower courts conclusion that this fact alone is sufficient ground for holding that petitioner disposed of the jewelry "as if it were hers, thereby committing conversion and a clear breach of trust." The law on agency in our jurisdiction allows the appointment by an agent of a substitute or subagent in the absence of an express agreement to the contrary between the agent and the principal. ISSUE: WON respondent was a mere agent and thus not liable for the loss. RULING: YES. Warner, Barnes & Co., was just an agent of the insurance companies. It did not make any contract with the petitioner, and is not liable to the plaintiff on any contract, either as principal or agent. For such reason, petitioner is not entitled to recover its losses from Warner, Barnes & Co., either as principal or agent. There is no breach of any contract with the plaintiff by Warners, Barnes & Co., either as agent or principal, for the simple reason that Warner as agent or principal, never made any contract, oral or written, with the plaintiff. Serona v. CA (ABBY) 2002 J. Ynares-Santiago Facts: Leonida Quilatan delivered pieces of jewelry to petitioner Virgie Serona to be sold on commission basis. By oral agreement of the parties, Serona shall remit payment or return the pieces of jewelry if not sold to Quilatan, both within 30 days from receipt of the items. Serona had earlier entrusted the jewelry to one Marichu Labrador for the latter to sell on commission basis. Petitioner was not able to collect payment from Labrador, which caused her to likewise fail to pay her obligation to Quilatan. Quilatan sent a demand letter to Serona but she failed to pay the principal. Labrador says that she sold some of the jewelry to a 3rd person who did not pay her. Serano is charged with estafa and is now appealing to have the decision of the TC reversed. Issue: WoN Serona is liable for the acts of her subagent Labrador

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In the case at bar, the appointment of Labrador as petitioners sub-agent was not expressly prohibited by Quilatan, as the acknowledgment receipt, does not contain any such limitation. Neither does it appear that petitioner was verbally forbidden by Quilatan from passing on the jewelry to another person before the acknowledgment receipt was executed or at any other time. Thus, it cannot be said that petitioners act of entrusting the jewelry to Labrador is characterized by abuse of confidence because such an act was not proscribed and is, in fact, legally sanctioned. In the case at bar, it was established that the inability of petitioner as agent to comply with her duty to return either the pieces of jewelry or the proceeds of its sale to her principal Quilatan was due, in turn, to the failure of Labrador to abide by her agreement with petitioner. Notably, Labrador testified that she obligated herself to sell the jewelry in behalf of petitioner also on commission basis or to return the same if not sold. In other words, the pieces of jewelry were given by petitioner to Labrador to achieve the very same end for which they were delivered to her in the first place. Consequently, there is no conversion since the pieces of jewelry were not devoted to a purpose or use different from that agreed upon. Similarly, it cannot be said that petitioner misappropriated the jewelry or delivered them to Labrador "without right." Aside from the fact that no condition or limitation was imposed on the mode or manner by which petitioner was to effect the sale, it is also consistent with usual practice for the seller to necessarily part with the valuables in order to find a buyer and allow inspection of the items for sale. The agents to whom personal property was entrusted for sale, conclusively proves the inability to return the same is solely due to malfeasance of a subagent to whom the first agent had actually entrusted the property in good faith, and for the same purpose for which it was received; there being no prohibition to do so and the chattel being delivered to the subagent before the owner demands its return or before such return becomes due, we hold that the first agent can not be held guilty of estafa by either misappropriation or conversion. The abuse of confidence that is characteristic of this offense is missing under the circumstances. An agent who is not prohibited from appointing a sub-agent but does so without express authority is responsible for the acts of the sub-agent. Considering that the civil action for the recovery of civil liability arising from the offense is deemed instituted with the criminal action, petitioner is liable to pay complainant Quilatan the value of the unpaid pieces of jewelry. People v. Flores (EARLA) Lorca v. Dineros (JANCES) February 28, 1958 J. Bengzon Facts: In another civil case, Dineros as Deputy Sheriff and in name of sheriff, pursuant to the writ of execution, sold the property involved in that case, disregarding third party claim of Lorca. Lorca then instituted action for damages against Dineros. Ruling: CFI - action dismissed. Responsibility should be attributed to the sheriff, not his deputy. Issue: WON Dineros as Deputy Sheriff is liable for damages HELD: Sec 334 of the Revised Admin Code, which states that deputies may be required to give adequate personal bond as security against loss, is applicable only when the deputy acts in his own name or is guilty of active malfeasance or where he exceeds the limits of his agency. In this case, the certificate of sale clearly shows that Dineros acted in the name of the Ex-Officio Provincial Sheriff. The Sheriff is the one liable to third persons on the acts of his deputy, in the same manner that the principal is responsible for the acts of his agent, that is why he is required to post a bond for the benefit of whom it may concern under Sec 330 of the Revised Admin Code. Disposition: Judgment affirmed. Marquez v. Varela (ALAIN) December 24, 1952 Labrador, J.: FACTS: Plaintiff Gutierrez Lora was authorized by defendants (spouses Varela) to negotiate the sale of their share or interest in a parcel of land on Plaza Goiti, Manila, and having meet his co-plaintiff L. G. Marquez, a real estate broker, both of them agreed to work together for the sale of defendant's property; that they found a ready, willing, and able buyer, which accepted defendants' price and terms, but that thereafter defendants, without any justifiable reason, refused to carry out the sale and execute the necessary deed therefore; and that as a consequence plaintiffs failed to receive the commission which they were entitled to receive. Thus, plaintiffs filed complaint. Objection was filed by the defendants. Objection to the complaint, however, is not that Marquez has no right to share in the compensation to be paid Lora, whom defendants had directly engaged, but that Marquez can not join in this action and enforce therein his rights directly

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against the defendants, evidently because defendants never dealt with Marquez, directly or indirectly, or, in other words, that both Marquez and his services were not known to dismiss show that such in fact was the objection ISSUE: Is there a cause of action in favor of Marquez against the defendants? Held: It is not denied that Lora, if he rendered the service alleged in the complaint, would have a right to be paid compensation for the service he rendered jointly with Marquez. He acted as a broker, and a broker is entitled to a commission for his services. There is no prohibition in law against the employment of a companion to look for a buyer; neither is it against public policy. Neither was there even any implied understanding between Lora and the defendants that no part of the compensation to which Lora would be entitled to receive could be paid to any companion or helper of Lora. Marquez's right to compensation can not, therefore, be disputed under the operative facts set forth in the complaint. Under section 6 of Rule 3, "All persons in whom . . . any right to relief in respect to or arising out of the same transaction . . . is alleged to exist, whether jointly, severally, or in the alternative, may, . . . join as plaintiffs . . . where any question of law or fact common to all such plaintiffs . . . may arise in the action; Plaintiff Marquez, in the case at bar, clearly falls under the above rule. He is entitled to be paid his commission out of the very contract of agency between Lora and the defendants; Lora and he acted jointly in rendering services to defendants under Lora's contract, and the same questions of law and fact govern their claims. The rules do not require the existence of privity of contract between Marquez and the defendants as required under the common law; all that they demand is that Marquez has a material interest in the subject of the action, the right to share in the broker's commission to be paid Lora under the latter's contract, which right Lora does not deny. This is sufficient to justify the joinder of Marquez as a party plaintiff, even in the absence of privity of contract between him and the defendants. fellow agents acted beyond the scope of their authority. 1. Rule when 2 agents appointed independently

Municipal Council of Iloilo vs. Evangelista (ANJ S.) Facts: Tan Ong Sze Vda. De Tan Toco was awarded by the CFI of Iloilo 42,966.40php for the strip of land belonging to her that was taken by the Municipal Council to widen a public street.

After

the case was remanded to the court of origin, and the judgment rendered therein had become final and executory, Attorney. Jose Evangelista (Tan Ong Szes counsel in the expropriation case), in his own behalf and as counsel for the administratrix of Attorney. Jose Ma. Arroyos intestate estate (who was the previous counsel of Tan Ong Sze in this case), filed a claim in the same case for professional services rendered by them, which the court, acting with the consent of Tan Ong Sze, fixed at 15% of the amount of the judgment. At the hearing of the said claim, Philippine National Bank (PNB) and a representative of the late Antero Soriano appeared. PNB prayed that the amount of the judgment be turned over to it because the land taken over had been mortgaged to the bank. The representative of the late Antero (previous counsel of Tan Ong in other cases concerning her other properties), on the other hand, claimed the amount of the judgment as it had been assigned to Antero by the attorney-in-fact of Tan Ong Sze, Tan Boon Tiong. Antero, in turn, assigned the said credit to Maurico Cruz & Co., Inc.

After

J.

Articles 1894, 1895 (MARK)

hearing all the adverse claims on the amount of the judgment, the court ordered that the attorneys lien in the amount of 15% of the judgment, be recorded in favor of Attorney Jose Evangelista, in his behalf and as counsel for the administratrix of Attorney. Jose Ma. Arroyo, and directed the Municipality of Iloilo to file an action of interpleading against the adverse claimants, PNB, Antero Soriano, Mauricio Cruz & Co., Jose Evangelista and Jose Arroyo at the CFI of Iloilo. Iloilo: declared the deed of assignment of credit executed by Tan Ong Sze, through her attorney-in-fact Tan Boon Tiong, in favor of the late Antero Soriano was valid; likewise, the assignment executed by Antero Soriano in favor of Mauricio Cruz & Co was declared valid. Tan Ong Sze was also ordered to deposit said sum in a local bank within the period of 90 days from the time the judgment shall become final, at the disposal of Mauricio Cruz & Co., and in case that Tan Ong shall not make such deposit in the

CFI

Art. 1894. The responsibility of two or more agents, even though they have been appointed simultaneously, is not solidary, if solidarity has not been expressly stipulated. (1723) Art. 1895. If solidarity has been agreed upon, each of the agents is responsible for the non-fulfillment of agency, and for the fault or negligence of his fellows agents, except in the latter case when the

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manner indicated, said amount shall bear the legal interest of 6% per annum from the date when Tan Ong shall fail to make the deposit within the period set forth, until fully paid. Tan Ong filed an appeal. Issue: independently, the consent of one will not be required to validate the acts of the other unless that appears positively to have been the principals intention. Dispositive: Decision Affirmed in its entirety. K. Article 1896 (JESSA)

1.

WON Tan Boon Tiong, as attorney-in-fact of Tan Ong, was empowered by his principal to make an assignment of credits, rights, and interests, in payment of debts for professional services rendered by lawyers for Tan Ong. 2. WON the failure of the other attorney-in-fact of Tan Ong, Tan Montano, to consent to the deed of assignment, the latter being also authorized to pay in the name and behalf of the principal, all her debts and the liens and encumbrances on her property, invalidates the assignment of credits by Tan Boon Tiong to the late Antero. Held / Ratio: 1.Yes, he was empowered. In Paragraph VI of the power of attorney executed by Tan Ong in favor of Tan Boon Tiong, Tan Boon Tiong is authorized to employ and contract the services of lawyers upon such conditions as he may deem convenient, to take charge of any actions necessary or expedient for the interests of his principal, and to defend suits brought against her. This power necessarily implies the authority to pay for the professional services thus engaged. In the present case, the assignment made by Tan Boon Tiong in favor of Attorney Antero for professional services rendered in other cases in the interest of Tan Ong and her coheirs, was that credit which she had against the municipality of Iloilo, and such assignment was equivalent to the payment of the amount of said credit to Antero for professional services.

Art. 1896. The agent owes interest on the sums he has applied to his own use from the day on which he did so, and on those which he still owes after the extinguishment of the agency. Two distinct cases contemplated here: 1) sums belonging to the principal which the agent applied to his own use agent is liable for interest by way of compensation or indemnity (not to be confused with interest for delay) interest shall be computed from the day on which the agent did so (applied to own use) agents liability is without prejudice to a criminal action that may be brought against him because of conversion 2) sums which the agent still owes the principal after the expiration of the agency general rule: there is no liability for interest on sums which have not been converted for agents use exception: the agent who is found to owe the principal sums after the extinguishment of the agency is liable for interest interest shall be computed from the date the agency is distinguished Mendezona v. C. Viuda de Goitia (BAMBI) March 11, 1930 Villamor, J. Facts: Benigno Goitia was representative and attorney-in-fact of plaintiffs Leonor Mendezona and Valentina Izaguirre Y Nazabal in the jointaccount partnership known as the "Tren de Aguadas." As he was also manager of the partnership at that time and because plaintiffs lived in Spain, Goitia collected the dividends due plaintiffs. Prior to 1915, Benigno Goitia remitted to plaintiffs their dividends every year.

2.

With regard to the failure of the other attorney-in-fact of Tan Ong, Tan Montano, to consent to the deed of assignment, the latter being also authorized to pay, in the name and behalf of the principal, all her debts and the liens and encumbrances on her property, the very fact that different letters of attorney were given to each of these two representatives shows that it was not the principals intention that they should act jointly in order to make their acts valid. Furthermore, the appellant was aware of that assignment and she not only did not repudiate it, but she continued employing Attorney. Antero Soriano to represent her in court. The Court is of the opinion and so holds that when a person appoints two attorneys-in-fact

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However, from 1915 until his death in 1926, he failed to remit any dividends to plaintiffs. When Goitia died, counsel for both plaintiffs filed their claims with the committee of claims and appraisal of Goitias estate. COMMITTEE disapproved plaintiffsclaims. Plaintiffs appealed to trial court. During trial, it was found that from 1915 to 1926, Benigno Goitia indeed failed to remit and account for the dividends he received in behalf of plaintiffs. Thus, trial court directed respondent Encarnacion C. Vda, de Goitia, who was judicial administratrix of her husbands estate, to render a judicial account of: 1. The intestate estate of the deceased Benigno Goitia and 2. The amounts collected by her husband as attorney-in-fact and representative of the plaintiffs. After hearing, TRIAL COURT ordered respondent to pay the P13,140 to Mendezona and P5,256 to Izaguirre, noth amounts with legal interest from the date of filing of the complaint. The amounts were based chiefly on the testimonies of Ruperto Santos, Benigno Goitias successor as manager of the partnership, and Ramon Salinas, a stockholder of the company. Issues4/Held: 1. WON trial court had jurisdiction to admit the amended complaints, which claimed a greater amount than was claimed before the committee.5 YES. Section 776 of the Code of Civil Procedure provides that upon the lodging of such appeal with the clerk, the disputed claim shall stand for trial in the same manner as any other action in the Court of First Instance, the creditor being deemed to be the plaintiff, and the estate the defendant, and pleading as in other actions shall be filed. Considering the distance that separated the plaintiffs from their attorney-in-fact and that the latter failed to supply them with data from 1915 to 1926, it is natural that they had to resort to calculating the amounts due them from their stocks in "Tren de Aguadas." To deny them the right to amend their complaint in accordance with section 776, when they had secured more definite information as to the amounts due them, would be an injustice, especially since this action
4 5

arises from trust relations between plaintiffs and the deceased Goitia.

the

2. WON plaintiffs are the real parties in


interest. YES. Benigno Goitia recognized that plaintiffs owned shares in the partnership. The companys balance sheet also contains plaintiffsnames are shareholders. Furthermore, respondent failed to file a demurrer on the ground of misjoinder of parties. In accordance with Sec. 93 of the Code of Civil Procedure, respondent is deemed to have waived any objection on this ground.

3. WON trial court had power to order


defendant to render an account of dividends supposed to have been received by her deceased husband. YES. The purpose of the order was to give respondent an opportunity of showing what amounts her husband received on account of the appellees' stock. The complaint demanded the return of these amounts alleged to have been received by respondents deceased husband so it was necessary to determine whether such amounts were really received or not.

4. WON respondent is liable for interest


on the amounts allegedly due. YES. According to Article1724 of the (Old) Civil Code, an agent shall be liable for interest upon any sums he may have applied to his own use, from the day on which he did so, and upon those which he still owes, after the expiration of the agency, from the time of his default. A.L. Ammen Transportation Margallo (REX) Co. vs De

FACTS: In February 1926, A.L. Ammen Transportation Company applied for a certificate of public convenience with the Public Service Commission (PSC) to operate an autotruck service between all principal points of Albay, Camarines, and Sorsogon. At the time of the decision, Ammen was already plying a route between Legaspi and Banquerohan. Later, the PSC granted a similar certificate to Felipe Lotivio to operate an autotruck service between Legaspi and Manito, a farther destination. This was approved, although the road was not constructed yet. For value and consent and approval of the PSC, Ammen purchased and acquired the rights which had been granted to Lotivio for the said service. A month before Lotivio applied for his certificate, Maria de Margallo (De Margallo) applied for the same certificate to operate an autobus line

Excludes Evidence-related issues. Plaintiffs only asked for annual dividends before the committee whereas the amended complaint in the trial court asked for ordinary and extraordinary dividends.

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between Legaspi and Manito. This application was set for hearing November of that year. When the case was called upon, it was postponed, the reason being that the road over which the license was sought was not yet constructed. Notably, however, in Lotivios application, which was approved, the road had also not yet been constructed. It would take more than 2 years for her application to be finally granted. What happened was that, although De Margallos application was earlier than Lotivios by one month, Lotivio was granted his certificate more than two years before De Margallo was granted hers. This is compounded by the fact that De Margallo was not notified or a party of Lotivios hearing. Now Lotivios rights on his certificate are now held by Ammen, which in any case had already been granted a certificate plying a route 40 percent of the way between Legaspi and Manito (Legaspi and Banquerohan), and was rendering good and efficient services without complaint from the public. Ammen now contests the license granted to de Margallo by the PSC. ISSUE: WON Lotivios license is legally binding on de Margallo HELD/RATIO NO. Although the court gives Ammen the right to operate between Legaspi and Banquerohan, as they had the earliest application and service, the story is different on the road between Banquerohan and Manito had not yet been constructed. Ideally, De Margallo will have acquired rights before Lotivio by virtue of her prior filing to operate between Banquerohan and Manito. Since she was not a party to Lotivios hearing and was not served notice, none of her rights will be divested on the granting of Lotivios certificate. However the court is not disposed to define the legal rights of either party because the roads had not yet been constructed between Banquerohan and Manito. As for the Legaspi and Banquerohan route, an exclusive certificate should be issued to Ammen to operate between these two points. Decision reversed. exceeds the limits of his authority without giving such party sufficient notice of his powers. 1. General rule; exception Duties and liabilities of agent to third persons The rule is that the principal is responsible for the acts of the agent done within the scope of his authority and should bear any damage caused to third persons (Art 1910) 1. In general The duties of an agent to third persons and his corresponding liabilities must be considered with reference to the character of his act as to whether it is authorized or unauthorized, and also with reference to the nature of liability which it sought to assert as being in contract or tort. 2. Unauthorized assumption of agency One who unauthorizedly assume to act for another is guilty of a wrong, and is liable for the damage to those dealing with him in reliance on his assumed authority in that they are deprived of the benefit of the principal. Of course, if no damages have been sustained, no liability for the agents false assumption of authority exists. 3. Nature of liability A purported agent will be held personally liable as principal on a contract executed without authority if the contract contains apt words to bind him personally, or if such was the intention of the parties. HOWEVER, in the absence of an apt expression or intention, the nature of his liability is the subject of some divergence in judicial opinion: a. In some jurisdictions, in the absence of statute, the purported agent is held liable as principal on the contract itself, based, it has been said on the theory that since the contact was intended to bind someone, it must necessarily bind the purported agent even if the principal is unaffected. b. According to the weight of authority, the purported agent is not liable on the contract itself, for the reason that there has been no intention to bind the agent, and to hold that he is bound would, in effect, create a new contract for the parties. Of course, if there is a statute, the purported agent will be held liable on the contract itself. Torts cases Agency is no defense to action against an agent based upon commission of tort, his

L.

Article 1897 (TOPE)

Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or

4.

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liability being neither increased nor decreased by the fact of his agency. If the tort is committed by the agent within the scope of his authority, both the principal and the agent are liable. 5. Where duty violated owed solely to the principal An agent is liable to third persons for injury resulting from his misfeasance or malfeasance, meaning by these terms, the breach of a duty owed to third persons generally independent of the particular duties imposed by his agency. But an agent is generally not liable to third persons for injury resulting to nonfeasance, meaning by that term, the omission of the agent to perform a duty owed solely to his principal by reason of his agency. When agent may incur personal liability An agent who acts as such within the scope of his authority represents the principal so that his contract is really the principals. Hence, the agent is not personally liable to the party with whom he contracts unless he expressly binds himself or he exceeds the limits of his authority without giving such party sufficient notice of his powers or by his acts incurs liabilities of a principal under the contract. When the agent expressly binds himself, he thereby obligates himself personally and by his own act. When the agent exceeds authority, he really acts without authority and, therefore, the contract is unenforceable against the principal unless the latter ratifies the act. o The agent becomes personally liable because by his wrong or omission, he deprives the third person wit whom he contracts of any remedy against the principal. o Inasmuch as the non-disclosure of the limits agency carries with it the implication that a deception was perpetuated on the unsuspecting client, the provisions on Arts. 19, 20, and 21 come into play. o That the agent exceeded his authority must be proved by the principal if he denies liability, or by third person if he wants to hold the agent personally liable, on that ground. Third partys liabilities toward agent. Four main instances in which a third party subjects himself to liability at the hands of an agent: o Where the agent contracts in his own name for an undisclosed principal, in which case, the agent may sue the third party to enforce the contract; Where the agent possesses a beneficial interest in the subject matter of the agency. Where the agent pays money of his principal to third party by mistake or under the contract which proves subsequently to be illegal, the agent being ignorant with respect to its illegal nature; and Where the third party commits a tort against the agent. 2. Cases DBP v. CA (EVA) 1994 Quaison, J. Facts: Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for a loan of P500K with DBP Basilan. As the principal mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool). The MRI premium was deducted by DBP from the approved loan of P300K and credited this [less 10% service fee] to the MRI Pool Account on Aug. 20, 1987. Dans was also made to accomplish and submit the "MRI Application for Insurance" and the "Health Statement for DBP MRI Pool." On Sept. 3, 1987 Dans died of cardiac arrest. On Sept. 23, 1987 the DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage, being over the acceptance age limit of 60 years at the time of application.

DBP apprised Candida Dans of the disapproval of her late husband's MRI application. The DBP offered to refund the premium of P1,476.00 which the deceased had paid, but Candida Dans refused to accept the same, demanding payment of the face value of the MRI or an amount equivalent to the loan. She, likewise, refused to accept an ex gratia6 settlement of P30K, which the DBP later offered. Respondent Estate, through Candida Dans as administratrix, filed a complaint for Collection of Sum of Money with Damages against DBP and DBP MRI Pool TC rendered a decision in favor of the Estate and against DBP. The DBP MRI Pool, however, was absolved from liability, after the trial court found no privity of contract between it and the deceased. The trial court declared DBP in

(Latin) as a favor

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estoppel for having led Dans into applying for MRI and actually collecting the premium and the service fee, despite knowledge of his age ineligibility. the necessary license, its agents here are personally liable under Art. 1897 for contracts made in behalf. ISSUE: WON Primateria Phils, Baylin and Crame may be held personally liable HELD: NO. There is no proof that as agents they exceeded the limits of their authority. The principal, who should be the one to raise the point, never raised it, denied its liability on the ground of excess of authority. Art. 1897 does not hold that in cases of excess of authority, both the agent and the principal are liable to the other contracting party. Benguet Consolidated Union (MAI) March 27, 1968 Bengzon, J.P., J. v. BCI Employees

CA affirmed TC decision in toto.

ISSUE: WON DBP should be held liable? HELD. YES, but for a reduced amount. In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second as an insurance agent. As an insurance agent, DBP is not authorized to accept applications for MRI when its clients are more than 60 years of age. Knowing all the while that Dans was ineligible for MRI coverage because of his advanced age, DBP exceeded the scope of its authority when it accepted Dan's application for MRI by collecting the insurance premium, and deducting its agent's commission and service fee. Art. 1897 applies. The liability of an agent who exceeds the scope of his authority depends upon whether the third person is aware of the limits of the agent's powers. There is no showing that Dans knew of the limitation on DBP's authority to solicit applications for MRI. If the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on the agent and he (third person) has been deceived by the nondisclosure thereof by the agent, then the latter is liable for damages to him. Philippine Products v Primateria Anonyme Pour Le Commerce (GEN) Nov. 29, 1965 Bengzon, C.J. Societe

Facts: Benguet Consolidated, Inc., is a domestic corporation engaged in the mining industry with respondents Stanley Willimont, Eugene Kneebone, C.W. Herold, G.N. Wright, O.M. Westerfield, A.P. Davidson and William Johnson as its officers. Respondent BCI Employees and Workers Union (PAFLU) is a legitimate labor union while respondent Donaciano Andrada is a member thereof. On August 28, 1954, Andrada and several others petitioned the respondent company that they be given the rates of pay as prescribed in the collective bargaining contrac, and petitioner company, in compliance thereto made the necessary salary adjustment with the exception of complainant Andrada who, although he was reclassified from clerk second class to clerk first class, did not receive any corresponding increase in his pay. Andrada also declared that on or about August 26, 1967, on the occasion of a grievance meeting concerning the adjustment of his wages, Eugene Kneebone, one of the respondent herein, said to him, "am spending much of my time for your complaint. My time is precious. I tell you that as long as I am still connected with Benguet Consolidated, Inc., this office cannot give you any change of classification whatsoever"; That Mr. Kneebone further said, "By representing your grievance to the union, you are cutting your neck entirely, and I tell you to think it over or retract your complaint"; that complaint again met Mr. Kneebone who said to him, "The question with you is, you are too vocal of your union activities. Had you shut your mouth, your case should not have happened like that." The lower court ordered the petitioners to implement the salary scale with respect to the

FACTS: Primateria Zurich (respondent), through Alexander Baylin, entered into an agreement with Philippine Products Company (PPC) whereby the latter undertook to buy Copra in the Philippines for the account of Primateria Zurich. PPC shipped copra to foreign countries pursuant to the instructions of Primateria Zurich, through Primateria Phils, with Baylin and Jose Crame as officers. The total amount due to petitioner was P31,009.71. PPC filed a complaint against Primateria Zurich, Primateria Phils, Baylin and Crame to recover the amount due. The trial court rendered a judgment holding Zurich liable but absolved Baylin and Crame. PPC appealed the decision as regards the dismissal of the three defendants. PPC alleges that Zurich is a foreign corporation under Sec. 68 of the Corporation Law; and since it has transacted business in the Philippines without

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daily wage of complainant Donaciano S. Andrada from 1954 until his wage reaches the level as embodied in the collective bargaining agreements between the Benguet-Balatoc Workers Union, the complainant labor organization, and the respondent company." Issue: Whether or not petitioners were liable for discriminating against Andrada Held: YES. First, what was charged was not discrimination committed in 1954 alone but rather continuing acts of discrimination committed "starting 1954" as alleged in par. 3 of the complaint for unfair labor practice. The charge of discrimination, consisting in petitioners' refusal to implement the proper salary scale as to respondent Andrada is adequately supported by the following findings of the court a quo. In August, 1954, Andrada's category was changed to clerk first class but he received no salary adjustment unlike the other employees. In 1955, after he was transferred to the Purchasing Department and was assigned to perform the work done by one Ramon Alvia who held the category of bodeguero (with a higher pay rate) respondent Andrada still received no corresponding pay increase. In July, 1962, there was a general pay hike but Andrada was not benefitted. Second, the militant union activity, involved is not Andrada's having been elected as Union District Governor and Steward and his actuations as such, but rather Andrada's having sought the help of his union in pursuing what he believed was his right to salary adjustment. It should be noted that the damaging statement on this score imputed to copetitioners Stanley Willimont and Eugene Kneebone by respondent Andrada in his testimony to which the court a quo gave credence, were never denied or controverted by them. And it is unquestionable that the seeking of the union's help by one of its members in connection with the latter's correct wages constitutes proper union activity. Agency related: (just a guess because theres really nothing in this case about agency) Mr. Willimont and Mr. Kneebone are agents of the petitioner company. Whatever they said is considered to be acts of discrimination by the petitioner company, because they are acting as mere agents. Therefore, they are not personally liable for those statements. NPC v. National Merchandising Corp (ROG) 1982 Facts: This case is about the recovery of liquidated damages from a seller's agent that allegedly exceeded its authority in negotiating the sale. NPC and National Merchandising Corp (Namerco) of Manila, as the representative of the International Commodities Corp of New York City, executed in Manila a contract for the purchase by NPC from the New York firm of 4k long tons of crude sulfur for it s Maria Cristina Fertilizer Plant in Iligan City. On that same date a performance bond for P90k was executed by Domestic Insurance CO in favor of NPC to guarantee the seller's obligations. It was stipulated in the contract of sale that seller would deliver sulfur at Iligan City within 60days from notice of establishment in its favor of a letter of credit for $212k and that failure to effect delivery would subject seller and it surety to payment of liquidated damages at rate of 2/5 of 1% of the full contract price for the first 30 days of default and 4/5 of 1% for every day thereafter until complete delivery is made. NPC advised John Sycip, president of Namerco of the opening of a letter of credit in favor of Inter Commodities which would expire on Jan 31, 1957. Notice of the letter of credit was received by cable by the New York firm on Nov 15, 1956. Thus the deadline for the delivery of the sulfur was Jan 15, 1957. The New York supplier was not able to deliver the sulfur due to its inability to secure shipping space. During period from Jan20-26, 1957 there was a shutdown of the NPC's fertilizer plant because there was no sulfur. Nor fertilizer was produced. NPC's general manager advised Namerco and Domestic Insurance that under Art. 9 of the contract of sale "nonavailability of bottom or vessel" was not a fortuitous event that would excuse non-performance and that NPC would resort to legal remedies to enforce its rights. Govt Corporate Counsel in his letter to Sycip rescinded the contract of sale due to New York supplier's non-performance of its obligations. He also demanded from Namerco payment of P360k as liquidated damages. He explained that time was of the essence of the contract. A similar demand also made upon the surety. NPC sued the New York firm, Namerco and Domestic Insurance Co for recovery of stipulated liquidated damages. TC: dismissed case as to New York firm for lack of jurisdiction coz it was not doing business in the Philippines. Namerco and Domestic Insurance contend that delivery of sulfur was conditioned on availability of a vessel to carry the shipment and that Namerco acted within scope of its authority as agent in signing the contract of sale.

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Issue: WON Namerco and Domestic Insurance liable for liquidated damages? YES Held: 1. Namerco acted beyond its authority as agent of New York firm. Documentary evidence belies these contentions. The invitation to bid issued by NPC provides that nonavailability of a steamer to transport the sulfur is a ground for payment of liquidated damages in case of non-performance by seller. Namerco's bid or offer is even more explicit. It provides that it was "responsible for availability of bottom or vessel" and that it "guarantees the availability of bottom or vessel to ship the quantity of sulfur within the time specified in this bid". In the contract of sale itself, item 15 of the invitation to bid is reproduced in Art. 9 which provides that "it is clearly understood that in no event shall seller be entitled to an extension of time or be exempt from payment of liquidated damages herein specified fro reason of lack of bottom or vessel". It is true that New York corp in its cable to Namerco stated that sale was subject to availability of a steamer. However, Namerco did not disclose that cable to NPC and contrary to its principal's instruction; it agreed that nonavailability of a steamer was not a justification for nonpayment of liquidated damages. TC rightly concluded that Namerco acted beyond bounds of its authority because it violated its principal's cabled instructions. 2. Namerco liable to NPC for damages. Defendants: it was incumbent upon NPC to inquire into extent of agent's authority and for its failure to do so, it could not claim any liquidated damages which were provided for merely to make seller more diligent in looking for a steamer to transport the sulfur. NPC: Namerco should have advised NPC of the limitations on its authority to negotiate the sale. SC: TC correct that Namerco liable for damages because under Art. 1987 of NCC the agent who exceeds the limits of his authority without giving the party with whom he contracts sufficient notice of his powers is personally liable to such party. The truth is that even before the contract of sale was signed Namerco was already aware that its principal was having difficulties in booking shipping space. In a cable one day before the contract of sale was signed, the New York supplier advised Namerco that latter should not sign the contract unless Namerco wished to responsibility for the shipment. assume sole

Sycip, Namerco's president replied that he had no choice but to finalize the contract of sale because the NPC would forfeit Namerco's bidder's bond of P45k posted by Domestic Insurance if the contract was not formalized. Three days later the New York firm cabled Namerco that it did not consider itself bound by contract that Namerco signed on its own responsibility. It informed Namerco in its letters that since latter acted contrary to its instructions, former disclaimed responbility for the contract and that responsibility for the sale rested on Namerco. 3. Rule that every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of agent would apply if principal is sought to be held liable on the contract entered into by the agent BUT It is not so in this case. Here it is the agent that is sought to be held liable on a contract of sale which was expressly repudiated by the principal because the agent took chances, it exceeded its authority and in effect, it acted in its own name. Agent who exceeds limits of his authority is personally liable and the third person who contracts with the agent in such a case would be defrauded if he would not be allowed to sue the agent 3. Stipulation for liquidated damages is enforceable even if executed by agent in excess of his authority. Art. 1403 "contract entered into in name of another person by one who has acted beyond his powers is unenforceable" refers to unenforceability against the principal. HERE, the contract containing stipulation not being enforced against principal but against agent and its surety. Namerco never disclosed to NPC the cabled instructions of its principal. For that reason and because Namerco exceeded its authority, it virtually acted in its own name and not as agent and is therefore bound by contract of sale which however is not enforceable against principal. If Namerco is bound under contract of sale, then it follows it is bound by stipulation for liquidated damages. National Bank v. Welch (REG) J. Street 1923

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FACTS: La Compaa Naviera, a shipping company, was instituted in Manila in 1918. Among its shareholders was respondent Welch, Fairchild & Co. La Compaia Naviera applied to the Philippine National Bank for a loan of $125,000. with which to purchase a boat called Benito Juarez. It was the president of Welch which helped in the transfer of the Benito Juarez to Philippine registry. However, the vessel needed repairs before it could be dispatched; and it became impracticable to deliver the bill of sale and insurance policy that were required by PNB in San Francisco at the time the money was needed to effect the transfer. So, Welch in Manila, addressed a letter on August 8, 1918, to the PNB, requesting it to cable its correspondent in San Francisco to release the money and make payment for the vessel without requiring the delivery of the bill of sale or policy of insurance, and that La Compaia would just deliver the bill of sale and insurance policy later. The Bank acceded. After the repair of the Benito Juarez, it was insured by Welch & Co. for $150,000 and was dispatched to the Philippines. A few months after, the vessel encountered a storm off Hawaii and became a total loss. The proceeds of the insurance came to the hands of Welch, Fairchild & Co. in Manila and has been applied by Welch, Fairchild & Co. in part satisfaction of indebtedness incurred by La Compaa to it (instead of paying the bank). This disposition of the insurance money was made with the tacit approval of La Compaa. ISSUE: WON PNB has a cause of action against respondent. RULING: YES. While it is true that an agent who acts for a revealed principal in the making of a contract does not become personally bound to the other party in the sense that an action can ordinarily be maintained upon such contract directly against the agent, yet that rule clearly does not control in this case; for even conceding that the obligation created by the letter of August 8, 1918, was directly binding only on the principal, and that in law the agent may stand apart therefrom, yet one who has intervened in the making of a contract in the character of agent cannot be permitted to intercept and appropriate the thing which the principal is bound to deliver, and thereby make performance by the principal impossible. The agent in any event must be precluded from doing any positive act that could prevent performance on the part of his principal. This much, ordinary good faith towards the other contracting party requires. The situation before us in effect is one where, notwithstanding the promise held out jointly by principal and agent in the letter of August 8, the two have conspired to make an application of the proceeds of the insurance entirely contrary to the tenor of said letters. Albert v. University Publishng (ABBY) 1965 J. Bengzon Facts: Mariano Albert sued University Publishing alleged inter alia that defendant was a corporation duly organized and existing under the laws of the Philippines; that on July 19, 1948, defendant, through Jose M. Aruego, its President, entered into a contract with plaintifif; that defendant had thereby agreed to pay plaintiff P30,000.00 for the exclusive right to publish his revised Commentaries on the Revised Penal Code and for his share in previous sales of the book's first edition; that defendant had undertaken to pay in eight quarterly installments of P3,750.00 starting July 15, 1948; that per contract failure to pay one installment would render the rest due; and that defendant had failed to pay the second installment. UPC admitted its corporate existence, the execution and terms of the contract, but that it was Albert who breached the contract by failing to deliver his manuscript and filed a counterclaim. It is not hard to decipher why "University Publishing Co., Inc.," through counsel, would not want Jose M. Aruego to be considered a party to the present case: should a separate action be now instituted against Jose M. Aruego, the plaintiff will have to reckon with the statute of limitations. Corporation by estoppels not invoked nor applicable. The estate of Albert (dead already) say that UPC was not registered with the SEC and that he acted not on behalf of UPC but on his own and that he should be the real party defendant. Issue: WoN the real party defendant is Aruego or UPC Held: Aruego Jose M. Aruego, acting as representative of a non-existent principal, was the real party to the contract sued upon; that he was the one who reaped the benefits resulting from it, so much so that partial payments of the consideration were made by him; that he violated its terms, thereby precipitating the suit in question; and that in the litigation he was the real defendant. A person acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges and obligations and

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becomes personally liable for contracts entered into or for other acts performed as such agent. Parties to a suit are "persons who have a right to control the proceedings, to make defense, to adduce and cross-examine witnesses, and to appeal from a decision" (67 C.J.S. 887) and Aruego was, in reality, the person who had and exercised these rights. Clearly, then, Aruego had his day in court as the real defendant; and due process of law has been substantially observed. would be entitled to 30% of the net income accruing from the harvest of any crop. The alleged corporation did not comply with said obligation. Salvatierra filed with the CFI a complaint against PFPC for accounting, rescission and damages. The corporation defaulted and the court rendered judgment in favor of Salvatierra. The court issued a writ of execution and the three parcels of land under the name of Rufuerzo were attached because no property of PFPC was found available. Rufuerzo filed a motion claiming that the decision was null and void since there was no allegation of his personal liability. The court granted the motion and released his land from attachment. Hence, this petition by Salvatierra. Held. The failure of Salvatierra to specify Rufuerzos personal liability was due to the fact that Salvatierra was under the impression that PFPC, represented by Rufuerzo was a duly registered corporation, but subsequently, inquiry with the SEC yielded otherwise. While as a general rule, a person who has contracted of dealt with an association in such a way as to recognize its existence as a corporate body is estopped from denyng the same in an action arising out of such transaction or dealing. Yet, this doctrine is inapplicable where fraud takes a part in said transaction. Here Rufuerzo gave no confirmation of denial as to PFPCs juridical personality and Salvatierra was made to believe that the corporation was duly organized. The grant of separate juridical personality to corporations refer merely to registered corporations and cannot be made applicable to the liability of members of an unincorporated association. Since an organization which, before law, in non-existent and has no personality and would be incompetent to act and appropriate for itself the power and attributes of a corporation, it cannot create agents or confer authority on another to act in its behalf, thus, those who act or purport to act as its representatives or agents do so without authority and at their own risk. A person acting or purporting to act in behalf of a corporation which has no valid existence assumes such privileges and obligations and becomes personally liable for contracts entered into or for other acts performed as such agent. Here, Rufuerzo as president of the unregistered corporation was the spirit behind the consummation of the lease contract. Thus, his liability cannot be limited or restricted to that imposed upon corporate SHs. In acting on behalf of a corporation, which he knew to be unregistered, he assumes the risk of reaping the consequential

Dy Peh v. CIR (EARLA) PNB v. Ritratto Group (JANCES) July 31, 2001 J. Kapunan Facts: PNB-IFL, subsidiary of PNB extended a letter of credit in favor of Ritratto Inc. to secured real estate mortgages constituted over 4 parcels of land in Makati. Ritratto was not able to pay, thus PNB-IFL moved to foreclose the mortgages. Ritratto filed complaint for injunction with prayer for issuance of writ of preliminary injunction. Petitioner filed a motion to dismiss complaint for injunction on grounds of failure to state a cause of action and absence of any privity between the petitioner and respondents. Ruling: RTC issued writ of preliminary injunction; denied motion to dismiss. PNB-IFL is a wholly owned subsidiary of defendant Philippine National Bank, the suit against the defendant PNB is a suit against PNB-IFL. CA affirmed Issue: WON PNB is the real party-in-interest [NO] HELD: PNB was sued because it acted as an attorney-in-fact of PNB-IFL in initiating the foreclosure proceedings. A suit against an agent cannot without compelling reasons be considered a suit against the principal. Respondents committed the mistake of filing the case against the wrong party. They do not have a cause of action against the petitioner as the latter is not privy to the contract the provisions of which respondents seek to declare void. Disposition: petition granted. Macias & Co. v. Warner Bros., supra Salvatierra v. Garlitos (ALAIN) Facts: Salvatierra owned a parcel of land in Leyte. She entered into a contract of lease with Philippine Fibers Producers Co., Inc. allegedly a corporation duly organized and existing under the Philippine laws, as represented by its President Rufuerzo. The land will be leased for ten years and the lessor

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damages or resultant rights, if any arising from the transaction. Sec. 21 Corporation by estoppel All persons who assume to act as a corporation knowing it to be without authority to do shall be liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof; Provided, however, that when any such ostensible corporation is sued on any transaction entered by it as a corporation or any tort committed by it as such, it shall not be allowed to use a defense its lack of corporate personality. Tuason v. Orozco (MARK) Facts: Juan de Vargas y Amaya, the defendant's husband, executed a power of attorney to Enrique Grupe, authorizing him, among other things, to dispose of all his property, and particularly of a certain house and lot known as No. 24 Calle Nueva, Malate, Manila. He was also authorized to mortgage the house for the purpose of securing the payment of any amount advanced to his wife, Dolores Orozco de Rivero, who, inasmuch as the property had been acquired with funds belonging to the conjugal partnership, was a necessary party to its sale or incumbrance. On the 21st of January, 1890, Enrique Grupe and Dolores Orozco de Rivero obtained a loan from plaintiff Tuazon secured by a mortgage on the property referred to in the power of attorney. In the caption of the instrument evidencing the debt it is stated that Grupe and Dolores Orozco appeared as the parties of the first part and Gonzalo Tuason, the plaintiff, as the party of the second part; that Grupe acted for himself and also in behalf of Juan Vargas by virtue of the power granted him by the latter, and that Dolores Orozco appeared merely for the purpose of complying with the requirement contained in the power of attorney. Said instrument was duly recorded in the Registry of Property, Tuazon filed an action to recover the debt. Issue: WON Orozco is liable. Held: Yes. The appellant claims that the instrument is evidence of a debt personally incurred by Enrique Grupe for his own benefit, and not incurred for the benefit of his principal, Vargas, as alleged in the complaint. As a matter of fact, Grupe, by the terms of the agreement, bound himself personally to pay the debt. The appellant's contention however, can not be sustained. The agreement, so far as that amount is concerned, was signed by Grupe as attorney in fact for Vargas. Pursuant to instructions contained in the power of attorney the money was delivered to Varga's wife, the defendant in this case. To secure the payment of the debt, Varga's property was mortgaged. His wife likewise took part in the execution of the mortgage as required in the power of attorney. A debt thus incurred by the agent is binding directly upon the principal, provided the former acted, as in the present case, within the scope of his authority. The fact that the agent has also bound himself to pay the debt does not relieve from liability the principal for whose benefit the debt was incurred. The individual liability of the agent constitutes in the present case a further security in favor of the creditor and does not affect or preclude the liability of the principal. In the present case the latter's liability was further guaranteed by a mortgage upon his property. The law does not provide that the agent can not bind himself personally to the fulfillment of an obligation incurred by him in the name and on behalf of his principal. On the contrary, it provides that such act on the part of an agent would be valid.

M.

Article 1898 (ANJ)

Article 1898. If the agent contracts in the name of the principal, exceeding the scope f his authority, and the principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook to secure the principals ratification. 1. Reason why agent is liable Article 1910, par.2 states that if the agent acts in excess of his authority, even if he contracts in the name of the principal, the agent is the one personally liable unless there is subsequent ratification by the principal. 2. Status of contracts entered into by an agent in excess of his authority The rule that a contract entered into by one who has acted beyond his powers shall be unenforceable (Arts.1317, par 2; 1403 [1]), refers to the unenforceability of the contract against the principal, and does not apply where the action is against the agent himself, for contracting in excess of the limits of his authority. The contract, which is unenforceable as against the principal, is void as between the agent and the third person, and consequently, not legally binding. 3. Effect of ratification

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If ratification is becomes liable. obtained, then the principal when he from Warner, Barnes and Co., Ltd., as agent of the insurance company in the Philippines Warner having refused to pay the claim, on April 17, 1947, plaintiff instituted the present action. American President Lines, in a letter dated November 25, 1946, agreed to pay to the plaintiff the amount of P476.17 under its liability in the bill of lading When this offer was rejected, the claim was finally settled in the amount of P1,021.25 As a result, the amount claimed in the complaint as the ultimate liability of Warner under the insurance contract was reduced to P717.82 only. CFI: ordered Warner, as agent of Westchester Fire Insurance Company of New York, to pay to the plaintiff the sum of P727. 82 with legal interest thereon from the filing of the complaint until paid, and the costs

4. Liability of agent exceeds authority

The liability of an agent who exceeds the scope of his authority depends upon WON the third person is aware of the limits of the agents power. The agent is not bound or liable for damages in case he gave notice of his powers to the third person, nor in a case where the third person is aware of the limits of the powers granted by the principal. If the agent promised or undertook to secure the principals ratification and failed, he is personally liable. If ratification is becomes liable. obtained, then the principal

5. Cases Lorca v. Dineros, supra Salonga v. Warner (JESSA) January 31, 1951 Bautista Angelo, J. Facts: On August 28, 1946, Westchester Fire Insurance Company of New York entered into a contract with Gamboa whereby said company insured one case of rayon yardage which said Gamboa shipped from San Francisco, California, on steamer Clovis Victory, to Manila and consigned to Salonga. According to the contract of insurance, the insurance company undertook to pay to the sender or her consignee the damages that may be caused to the goods shipped subject to the condition that the liability of the company will be limited to the actual loss which the insured may suffer not to the exceed the sum of P2,000 The ship arrived in Manila on September 10, 1946. On October 7, the shipment was examined by C. B. Nelson and Co., marine surveyors, at the request of the plaintiff, and in their examination the surveyors found a shortage in the shipment in the amount of P1,723,12. On October 9, plaintiff filed a claim for damages in the amount of P1,723.12 against the American President Lines, agents of the ship Clovis Victory, demanding settlement When apparently no action was taken on this claim, plaintiff demanded payment thereof

Issue: Main issue: WON the trial court erred in holding that Warner, as agent of Westchester Fire Insurance Company of New York, United States of America, is responsible upon the insurance claim subject to the suit Sub-issues: (1) WON Warner has no contractual relation with either the plaintiff or his consignor (2) WON Warner is not the real party in interest against whom the suit should be brought (3) WON a judgment for or against an agent in no way binds the real party in interest. Held: YES (the main issue answering the sub-issues) is answered by

1. YES. It is a well known rule that a contractual


obligation or liability, or an action ex-contractu, must be founded upon a contract, oral or written, either express or implied. If there is no contract, there is no corresponding liability, and no cause of action may arise therefrom. This is what is provided for in article 1257 of the Civil Code. This article provides that contracts are binding upon the parties who make them and their heirs, excepting, with respect to the latter, where the rights and obligations are not transmissible, and when the contract contains a stipulation in favor of a third person, he may demand its fulfillment if he gives notice of his acceptance before it is revoked. Warner has not taken part, directly or indirectly, in the contract in question. The evidence shows that Warner did not enter into any contract either with the plaintiff or his consignor Gamboa. The contract of marine insurance was made and executed only by and between the Westchester Fire Insurance Company of New York and Gamboa. The contract was entered in New York. There is nothing therein

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which may affect, in favor or adversely, Warner, the fulfillment of which may be demanded by or against it. That contract is purely bilateral, binding only upon Gamboa and the insurance company. When the lower court, therefore, imposed upon Warner an obligation which it has never assumed, either expressly or impliedly, or when it extended to Warner the effects of a contract which was entered into exclusively by and between the Westchester Fire Insurance Company of New York and Gamboa, the error it has committed is evident. This is contrary to law. There is no material variance between this case and the case of E. Macias and Co. vs. Warner, Barnes and Co. in so far as the principle herein considered is concerned. Both cases involve similar facts which call for the application of a similar ruling. In both cases the issue is whether an agent, who acts within the scope of his authority, can assume personal liability for a contract entered into by him in behalf of his principal. And in the Macias case we said that the agent did not assume personal liability because the only party bound was the principal. And in this case this principle acquires added force and effect when we consider the fact that Warner did not sign the contract as agent of the foreign insurance company as Warner did in the Macias case. The Macias case, therefore, is on all fours with this case and is decisive of the question under consideration. 2. YES. Section 2, Rule 3 of the Rules of Court requires that "every action must be prosecuted in the name of the real party in interest." A corollary proposition to this rule is that an action must be brought against the real party in interest, or against a party which may be bound by the judgment to be rendered therein. The real party in interest is the party who would be benefited or injured by the judgment, or the "party entitled to the avails of the suit". In the case at bar, Warner is sued upon in its capacity as agent of Westchester Fire Insurance Company of New York in spite of the fact that the insurance contract has not been signed by it. Warner did not assume any obligation thereunder either as agent or as a principal. It cannot, therefore, be made liable under said contract, and hence it can be said that this case was filed against one who is not the real party in interest. While Warner is a settlement and adjustment agent of the foreign insurance company and that as such agent it has the authority to settle all the losses and claims that may arise under the policies that may be issued by or in behalf of said company in accordance with the instructions it may receive from time to time from its principal, it cannot be that as such adjustment and settlement agent, Warner has assumed personal liability under said policies, and, therefore, it can be sued in its own right. An adjustment and settlement agent is no different from any other agent from the point of view of his responsibility, for he also acts in a representative capacity. Whenever he adjusts or settles a claim, he does it in behalf of his principal, and his action is binding not upon himself but upon his principal. And here again, the ordinary rule of agency applies. It, therefore, clearly appears that the scope and extent of the functions of an adjustment and settlement agent do not include personal liability. His functions are merely to settle and adjusts claims in behalf of his principal if those claims are proven and undisputed, and if the claim is disputed or is disapproved by the principal, like in the instant case, the agent does not assume any personal liability. The recourse of the insured is to press his claim against the principal. 3. YES. An action is brought for a practical purpose, nay to obtain actual and positive relief. If the party sued upon is not the proper party, any decision that may be rendered against him would be futile, for it cannot be enforced or executed. The effort that may be employed will be wasted. Such would be the result of this case if it will be allowed to proceed against Warner, for even if a favorable judgment is obtained against it, it cannot be enforced because the real party is not involved. Warner cannot be made to pay for something it is not responsible. PNB v Bagamaspad and Ferrer (BAMBI) June 29, 1951 Montemayor, J. Facts: Due to the acute food shortage resulting from the Pacific War, President Roxas instructed PNB to extend crop loans to farmers to enable them to rehabilitate their farms.

In compliance, PNB passed a resolution authorizing the granting of special crop loans to bona fide food producers, landowners or their tenants, under special conditions. Thereafter, rules and regulations in the granting of said loans were issued. Two circulars about the rules were distributed and a conference was held for the banks employees, which included defendants Bernardo Bamaspad and Bienvenido Ferrer. Bagamspad and Ferrer were then Agent and Assistant Agent, respectively, of PNBs Cotabato Agency. Ferrer personally received the circulars and attended the conference. From July 1946 to March 1947, the Cotabato Agency, under the management of defendants, granted loans to 5,000 borrowers in the total amount of P8.5 million.

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Due to heavy loan disbursements and exhaustion of funds, the Cotabato Agency, on several ocassions, had to obtain additional cash from the Zamboanga Agency The central office repeatedly emphasized to defendants strict compliance with the rules and regulations in granting loans, especially in making sure that the borrowers were qualified. Central office also informed defendants that the additional funds from the Zamboana Agency is for the second installments of crop loans only and not for granting new loans. However, defendants, according to PNB, violated such instructions and even acted negligently by releasing loans to unqualified borrowers. Thus, PNB instructed defendants were to discontinue granting new crop loans in a telegram dated November 26, 1946. Notwithstanding such instruction, defendants still extended new special crop loans. In 1948, PNB sued defendants to recover the uncollected balance of crop loans alleged to have been improperly released by defendants. PNB also sued the defaulting borrowers. TRIAL COURT ordered defendants to pay PNB the uncollected balance of crop loans, which amounted to P699, 803.57. CA certified case to SC in view of the amount involved. Defendants allowed intermediaries to intervene in the granting of special crop loans, contrrary to PNBs rules. Defendants released loans without the approval of the loan board.

3. WON PNB, in suing the defaulting borrowers, ratified defendants acts. NO. Ordinarily, a principal who collects either judicially or extrajudicially a loan made by an agent without authority, thereby ratifies the said act of the agent. In the present case, however, in filing suits against some of the borrowers to collect at least part of the unauthorized loans, there was no intention on the part of PNB to ratify the acts of appellants. Such act of the banks will even benefit defendants because their financial liability will be decreased if the bank can recover from the defaulting borrowers. 4. WON the action was premature because there is no showing that the defaulting borrowers are insolvent. NO. It is not necessary for the plaintiff Bank to first go against the individual borrowers, exhaust all remedies against them and then hold the defendants liable only for the balance which cannot be collected. Air France v. CA, supra Cervantes v. CA (TOFF) DBP v. CA, supra

Issues and Held: 1. WON defendants violated banks instructions in extending new special crop loans after receiving PNBs telegram of November 26, 1946. YES. It may be that there was no such express instruction directly ordering the defendants to stop granting new special crop loans. However, defendants should have gathered that idea from the central offices letters. That defendant understood this clearly was evidenced by the fact that Bagamaspad, in one of his letters to the central office, asked still entertain new applicants on Special Crop Loans. 2. WON defendants acted with extreme laxity, negligence, and carelessness in granting said new special crop loans. YES. SC agrees with the trial court that ll precautions to protect the interest of the Philippine National Bank as the principal of the defendants were thrown overboard. This is evidenced by the following facts: Defendants released large loans to 103 borrowers who were neither landowners or tenants but were merely applicants for the purchase of public lands.

N.

Article 1899 (REX)

Article 1899. If a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was, or ought to have been, aware. Nepomuceno v. Heredia (TOFF)

O.

Article 1900 (TOPE)

Art. 1900. So far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if such 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. Scope of persons agents authority as to third

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Includes not only the actual authorization conferred upon the agent by his principal but also that which has apparently or impliedly been delegated to him. 1. Where the authority not in writing Every person dealing with an agent is put in inquiry and must discover upon his peril, if he would hold the principal liable, not only the fact of the agency but the nature and extent of authority of the agent. One must act with ordinary prudence and reasonable diligence to ascertain whether the agent is acting and dealing with him within the scope of his powers. The fact that one is dealing with an agent whether the agency be general or special, should be a danger signal. The mere opinion of an agent as to the extent of his powers will not bind the principal who may act on the presumption that third persons dealing with his agent will not be negligent to ascertain the extent of his authority as well as the existence of the agency. rule of law or to dispense with a formality required (as in Statute of Frauds) Where it is sought to vary an essential quality of the agency relationship The general rule requires that the principal must have notice of the alleged custom before the agents acts, in accordance therewith, may bind the principal. But in the ff cases, principal deemed to have notice of a given usage, even though he did not in fact have such notice: Where the principal and the agent reside in the same community, the usage is definite and well-known, and the agent has no notice that he is to act to the contrary; and Where the agent is authorized to deal in a particular market or exchange (upon the ground that the principal , as a reasonable man, must have anticipated that such usages were likely to prevail and, therefore, in the absence of any contrary intention, must have authorized the dealing in contemplation of them). By necessity Actually, an agency can never be created by necessity; what is created is additional authority in agent appointed and authorized before the emergency arose. The existence of an emergency or other unusual conditions may operate to invest in an agent appointed and authorized to meet the agency, provided: The emergency really exists; The agent is unable to communicate with the principal;

Methods of broadening and restricting agents authority A principal may assume rights and incur liabilities in respect of his agents acts or transactions other than those for which express authorization has been given and an agents authority may be enlarged or restricted in a number of ways: o By implication Authority extends to acts and transactions incidental to what have been expressly authorized. o By usage and custom (may enlarge as well as restrict) Agents authorization may not, however, be enlarged through usage and custom in the following four classes of cases: Where it is sought to vary the terms of an express authorization, as where the agent appointed to sell for credit; Where it is sought thereby to dispense with a legal requirement enacted for the principals benefit; Where it is sought thereby to change a

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The agents enlarged authority is exercised for the principals protection; and The means adopted are reasonable under the circumstances By certain doctrines Of apparent authority (Art. 1911) Of liability by estoppel (ibid) Of ratification (Art. 1910) are additional methods by which authorization may be created. By the rule of ejusdem generis. A method for stating the rule that where in an instrument of any kind, an enumeration of specific matters is followed by a general phrase, the general phrase is held to be limited in scope by the specific matters. For the agents own benefit.o As to this aspect, the weight of authority says YES, principal is liable, if the agent acted for his own benefit and even if the agent acted within the authority given.

Eugenio v CA and Pepsi Cola Bottling Co. (EVA) 1994 Regalado, J. FACTS

Responsibility of principal where agent acted with improper motives. General rule The motive of the agent in entering into a contract with a third person is immaterial. Where a written authority given to an agent covers the thing done by him on behalf of the principal, it is not competent to the court to look into the mind of the agent, and if he had applied his authority for his own ends, to hold that the principal is not bound. Exceptions Where the third person knew that the agent was acting for his private benefit (that the principal is not liable) Where the owner is seeking recovery of personal property which he has been unlawfully deprived. Principals responsibility for agents misrepresentation. Within the scope of agents authority.o A principal is subject to liability for loss caused to another by the others reliance upon a deceitful representation of an agent in the course of his employment if the representation is authorized, or within the implied authority of the agent to make for the principal, or apparently authorized by him or not to make the representation Beyond the scope of agents authority.o Principal not bound by the misrepresentation of the agent.

Nora Eugenio was a dealer of the softdrinks product of respondent company while her husband Alfredo used to be a route manager of Pepsi7. Pepsi filed a complaint for a collection of sum of money against the Eugenio spouses alleging an outstanding account of P94,651 representing balances both from the Quezon City and Muntinlupa plants where Nora maintains a regular charge account with them. During trial, the Eugenio spouses presented four Trade Provisional Receipts (TPRs) allegedly issued and received by them from Pepsis current route manager Jovencio Estrada of its Malate Warehouse showing payments in the total amount of P80,500. The Eugenios contend that had the amounts in the TPRs been credited on their favor, they would not be indebted to Pepsi but it is the latter who would be indebted to them in the sum of P3,546 representing overpayment. TC ruled for Pepsi. CA affirmed. ISSUE: WON the TPRs are sufficient evidence to prove Sps Eugenios payment of their accountabilities to Pepsi? HELD: YES. CA judgment annulled and set aside; Pepsi ordered to pay back petitioners overpayment. RATIO

The TPRs presented in evidence are disputably presumed as evidence of payments made on the accounts of the Eugenios. There are presumptions juris tantum in law that private transactions have been fair and regular and that the ordinary course of business has been followed. In this case, Pepsi failed to rebut the aforestated presumptions. (Pepsi failed to present Estrada as witness; it also submitted in evidence falsified documents).

Even assuming arguendo that Pepsis cashier never received the amounts reflected
Prior to the instant case, Alfredo filed an illegal dismissal case against Pepsi which was decided in his favor.

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in the TPRs, it still failed to prove that Estrada, who is duly authorized agent with respect to the Eugenio spouses, did not receive those amounts from the latter. In so far as the customers are concerned, for as long as they pay their obligations to the sales representative of the private respondent using the latter's official receipt, said payment extinguishes their obligations. Otherwise, it would unreasonably cast the burden of supervision over its employees from Pepsi to its customers. The substantive law is that payment shall be made to the person in whose favor the obligation has been constituted, or his successor-in-interest or any person authorized to receive it [Art. 1240,CC]. As far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if such 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 his agent. Ch. Veloso and Rosales v La Urbana and Del Mar (GEN) Nov. 3, 1933 Imperial, J. FACTS: Petitioner Corazon Ch. Veloso owned undivided portions of 5 parcels of land in Manila. Defendant Del Mar forged 2 powers of attorney purporting to have been executed by the petitioner spouses conferring upon him authority to mortgage the petitioners participation in the properties. These powers of attorney were duly registered in the office of the Register of Deeds. Del Mar proceeded in mortgaging the petitioners participations to La Previsora Filipina. Subsequently, he cancelled the mortgage and transferred it to La Urbana which granted him a loan of P13,475. He delivered the owners duplicates of the certificates of title to La Urbana. However, Del Mar violated the conditions of the mortgage which prompted La Urbana to foreclose the mortgages. Petitioners filed a criminal action against Del Mar for the fraudulent transactions which resulted into his eventual conviction. The trial court also held that pursuant to Art. 1714 (Old Civil Code) and Torrens Act, the forged powers of attorney were null and void and could not prejudice the rights of the petitioners. ISSUE: WON La Urbana should be liable for damages HELD: YES. Inasmuch as Del Mar is not the registered owner of the mortgaged properties and inasmuch as the appellant was fully aware of the fact that it was dealing with him on the strength of the alleged powers of attorney purporting to have been conferred upon him by the plaintiff, it was his duty to ascertain the genuineness of the instruments and not rely absolutely and exclusively upon the fact that the powers of attorney appeared to have been registered. In view of its failure to proceed in this manner, it acted negligently and should suffer the consequences and damages resulting from the transactions. Safic Alcan vs. Imperial Vegetable Oil Co. Inc. (MAI) March 28, 2001 Ynares Santiago, J. Facts: On July 1, 1986 and September 25, 1986, Safic Alcan placed purchase orders with IVO(Imperial) for 2,000 long tons of crude coconut oil, valued at US$222.50 per ton, covered by Purchase Contract Nos. A601446 and A601655, respectively, to be delivered within the month of January 1987. Private respondent, however, failed to deliver the said coconut oil and, instead, offered a "wash out" settlement, whereby the coconut oil subject of the purchase contracts were to be "sold back" to IVO at the prevailing price in the international market at the time of wash out. Thus, IVO bound itself to pay to Safic the difference between the said prevailing price and the contract price of the 2,000 long tons of crude coconut oil, which amounted to US$293,500.00. IVO failed to pay this amount despite repeated oral and written demands. The contracts performed in 1985, on one hand, and the 1986 contracts subject of this case, on the other hand, differed in that under the 1985 contracts, deliveries were to be made within two months. This, as alleged by Safic, was the time needed for milling and building up oil inventory. Meanwhile, the 1986 contracts stipulated that the coconut oil were to be delivered within period ranging from eight months to eleven to twelve months after the placing of orders. The coconuts that were supposed to be milled were in all likelihood not yet growing when Dominador Monteverde sold the crude coconut oil. As such, the 1986 contracts constituted trading in futures or in mere expectations. Issue: Whether or not IVO's President, Dominador Monteverde, validly entered into the 1986 contracts for and on behalf of IVO Held: NO. It can be clearly seen from IVO's By-laws that Monteverde had no blanket authority to bind IVO to any contract. He must act according to the instructions of the Board of Directors. Even in instances when he was authorized to act according

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to his discretion that discretion must not conflict with prior Board orders, resolutions and instructions. The evidence shows that the IVO Board knew nothing of the 1986 contracts and that it did not authorize Monteverde to enter into speculative contracts. In fact, Monteverde had earlier proposed that the company engage in such transactions but the IVO Board rejected his proposal. Since the 1986 contracts marked a sharp departure from past IVO transactions, Safic should have obtained from Monteverde the prior authorization of the IVO Board. Safic can not rely on the doctrine of implied agency because before the controversial 1986 contracts, IVO did not enter into identical contracts with Safic. The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. In the case of Bacaltos Coal Mines v. Court of Appeals, we elucidated the rule on dealing with an agent thus: Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of the agent's authority, and his ignorance of that authority will not be any excuse. Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but also the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it. The most prudent thing petitioner should have done was to ascertain the extent of the authority of Dominador Monteverde. Being remiss in this regard, petitioner can not seek relief on the basis of a supposed agency. Harry Keeler v. Rodriguez, supra BPI v. De Coster (ROG) 1925 Facts: BPI alleges that for value, Gabriela de Coster having consent and permission of her husband, and he acting as her agent, defendants made promissory note to BPI for P292k which also provided that in the event of a suit or action, defendants should pay further sum of P10k, as attorney's fees. To secure payment thereof, Jean Poizat and JM Poizat & Co. executed a chattel mortgage to BPI on the steamers Roger Poizat and Gabrielle Poizat, with machinery and materials belonging to Poizat Vegetable Oil Mills. Gabriela Coster and husband acknowledged and delivered to BPI a mortgage on real property and such real property was subject to a prior mortgage in favor of La Orden de Domincios or PP Predicadores dela Provincia del Sanitsimo Rosario (La Orden) hence it is made a party defendant. Promissory is long past due and owing. CFI: ruled against Gabriela, Poizat to be solidarily liable for P292k but such amount defendants have not paid. BPI now prays for an order to direct sheriff to take immediate possession of property described in the chattel mortgage and sell it. -La Orden: prays that its credit be also taken into account when 2nd mortgage is foreclosed. Gabriela, Poizat and Poizat Co declared in default for failure to appear or answer. CFI: granted BPI and that Dominican Fathers should have judgment for amount of their claim and property be sold and proceeds applied. Through her attorney, Gabriela filed motion alleging: she is legit wife of Poizat, she had been absent from Phils and living in Paris till 1924 when she returned to Manila; at tiem of filing of complaint and issuance of summons she was not in the Phils; that summons were delivered by sheriff to her husband and that through latter's malicious negligence, default was taken and judgment entered; that she never had any knowledge for the amounts; no knowledge of actual facts till 1924 when through the local newspapers, she learned that a default judgment been made against her; when she first found out, she was unable to obtain rendition of accounts, because her husband had left the Phils 2 days previous and gone to Hong Kong; that she went to HK and learned that her hubby had left there under a false name and had gone to Singapore from whence he went to other places unknown to her; that she then returned to Manila; and that in 1924, she came into possession of docs showing the illegality of the notes and mortgage in question. Gabriela's defense: involves validity of order of Dominican Fathers in this, that their mortgage does not guarantee any loan made to her; it is a security only given for a credit of a 3rd person; mortgage executed without marital consent of wife; Husband no authority to make her liable as surety on debt of a 3rd person. As to notes to BPI: a) it does not represent any money paid to Gabriela by BPI b) it is exclusively the personal debt of Jena Poizat and his company, c) it was executed by her husband, because BPI desired more security for payment of her husband's debt to the bank, d) it was executed in excess of powers given to husband under his power of attorney, e) it was executed as a result of collusion between bank and her husband for purpose of making her liable for oblig of 3rd person.

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As to mortgage: a) it was executed to secure a void oblig b)it does not guarantee any loan made to her c)it was executed without express marital consent which law requires, d) executed through collusion. Prayer: annul judgment and case be reopened and be permitted to file answer and case be tried on the merits. --DENIED. Issue: WON Gabriala bound by promissory notes and mortgage signed by her husband on her behalf? NO Held: 1. Service of Gabriela's summons made to husband's residence NOT valid therefore court never acquired jurisdiction. It is expressly admitted by BPI that since 1908 to 1924, wife was residing in City of Paris. Residence of wife in Paris was for 16 years. Residence of wife would continue to remain to be that of husband's if where in the ordinary course of business wife is absent from husband's residence on a pleasure trip or for business or to visit friends or relatives. But HERE, that is not so. For 16 years residence of husband was in City of Manila and residence of wife was in City of Paris. Since residence of hubby not the usual place of residence of wife, the substituted service made is null and void and by such service court never acquired jurisdiction over Gabriela's person. 2. The contention that under husband's power of attorney, he was the general agent of wife with authroity to accept service of process for her and in her name not valid. Nothing in record to show that husband accepted service of nay process for wife or as her agent, or that he was acting for or representing her in his failure and neglect to appear or answer. 3. Husband was with no authority to sign the promissory note on behalf of wife Gabriela. Gabriel: Under the power of attorney, husband had no authority for and on behalf of wife to execute a joint and several note or to make her liable as an accommodation maker. Debt was a preexisting debt of husband and Company to which she was not a party and so she had no legal oblig to pay. She never borrowed any money from BPI nor ever had dealing with it nor was she indebted to BPI. Record shows there is no evidence to show wife was a party to notes nor was she under any legal liability to pay them. Notes were merely additional security for the different debts of husband. At the time notes were executed, husband was attorney in fact for wife and bank knew or should have known nature and extent of his authority and limitation upon his power. Power of attorney does not contain any provisions giving husband authority to make wife liable as surety for payment of preexisting debt of a 3rd person. Par 5 of Power of attorney authorizes husband for and in name of wife "to loan or borrow sums of money or fungible things, etc". = should be construed to mean that husband had power only to loan his wife's money and to borrow money for or on account of his wife as her agent and attorney in fact. That does not carry with it or imply that he had legal right to make wife liable as surety for preexisting debt of 3rd person. 4. While power of attorney authorizes husband to accept notices and summons, there is no proof to show husband accepted service of any notice or summons in the action on behalf of bank and even so, if he had, it would not be a defense to open up and vacate a judgment. Fact that agent failed and neglected to perform his duties and to represent the interests of his principal is not a bar to the principal obtaining legal relief for the negligence of her agent, provided that application such a relief is duly and properly made. ***Whole purpose and intent of power of attorney was to empower and authorize husband to look after and protect wife's interests and for her and in her name to transact any and all of her business. But nowhere does it provide or authorize him to make her liable as a surety for the payment of the preexisting debt of a 3rd person. Husband no authority to sign note on behalf of wife therefore, as to her, the note is void for want of power of her husband to execute it. Same is true for the real mortgage to the bank. Judgment: Lower court decision vacated and as to bank case remanded to lower court with leave for wife to file answer to BPI's cause of action and have case tried on merits. Bacaltos Coal Mines v. CA (REG) J. Davide 1995 FACTS: In an Authorization, petitioner Bacaltos authorized Savellon, to use the coal operating contract of Bacaltos Coal Mine of which he is the proprietor, for any legitimate purpose that it may serve and particularly: (1) to acquire purchase orders; (2) to engage in trading; (3) to collect all receivables due or in arrears; (4) to extend to any person or company by substitution the same extent of authority that is granted to Rene

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Savellon; (5) in connection with the preceeding paragraphs to execute and sign documents, contracts, and other pertinent papers. In 1988, a Trip Charter Party was executed between Bacaltos Coal Mines (represented by Savellon) and San Miguel. The agreement was that for Php 650,000 to be paid within seven days after the execution of the contract, it "lets, demises" the vessel to charterer SMC "for three round trips to Davao." The vessel was able to make only one trip, so SMC filed an action for specific performance. Petitioners alleged that Savellon was not their Chief Operating Officer and that the powers granted to him are only those clearly expressed in the Authorization which do not include the power to enter into any contract with SMC. ISSUE: WON Savellon was duly authorized by the petitioners to enter into the Trip Charter Party. RULING: NO. The broadest scope of Savellon's authority is limited to the use of the coal operating contract and the clause cannot contemplate any other power not included in the enumeration or which are unrelated either to the power to use the coal operating contract or to those already enumerated. In short, while the clause allows some room for flexibility, it can comprehend only additional prerogatives falling within the primary power and within the same class as those enumerated. There is no evidence at all that Bacaltos Coal Mines as a coal mining company owns and operates vessels, and even if it owned any such vessels, that it was allowed to charter or lease them. Also, the Authorization is not a general power of attorney. It is a special power of attorney for it refers to a clear mandate specifically authorizing the performance of a specific power and of express acts subsumed therein. Furthermore, had SMC exercised due diligence and prudence, it should have known in no time that there is absolutely nothing on the face of the Authorization that confers upon Savellon the authority to enter into any Trip Charter Party. 1. Effects of ratification and expression of willingness to ratify If the principal does not ratify the acts of the agent it is unenforceable and he is not bound by it. If the principal ratifies the acts of the agent, i.e. authorizes, receives benefits, the THIRD PERSON cannot set up the fact that the agent has exceeded his authority. The THRID PERSON may be compelled to abide by his contract. The ratification shall have a retroactive effect. It is only the PRINCIPAL NOT THE AGENT who may stamp the imprimatur of ratification. Before ratification by the principal or expression of willingness on his part to ratify, the third person may repudiate the acts of the agent. 2. Implied ratification Where a person acts for another who accepts or retains the benefits or proceeds of his effort with knowledge of the material facts surrounding the transaction, the latter mus be DEEMED to have ratified the methods employed. Principle of Principal may not accept the benefits of the transaction and repudiate the burdens. 3. Cases Commission on Public Highways v San Diego (EARLA) Rafferty v. Province of Cebu (JANCES) December 29, 1928 Johns Facts: An instrument was executed by plaintiff, by and through his agent and attorney-in-fact, in which the said agent undertook to convey title of the plaintiff to 6700 sq. meters of a lot for a consideration of P226. The part of the lot was to be expropriated within the provincial park. Plaintiff received and accepted the P226 consideration. Plaintiff, however, contends that the agent had no authority to execute the instrument in question. Ruling: CFI dismissed plaintiffs complaint; judgment for defendants cross-complaint. Issue: WON the instrument executed is valid [YES] HELD: If it be true that the agent had no authority to execute the instrument, the plaintiff ought not to have accepted and receipted for its consideration. Having received the consideration, he could not wait for fifteen years to rescind and

P.

Article 1901 (ABBY)

Art. 1901. A third person 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.

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set it aside upon the ground of fraud. The actions of the defendant after the instrument was executed in taking possession of the land and making improvements thereon were open and notorious and were a matter of common knowledge and were known or legally should have been known to the plaintiff. Disposition: judgment of lower court affirmed. Sta. Catalina v. Espitero (ALAIN) CA: the alleged question of whether petitioner was granted an extension of the option to buy the property; whether such option, if any, extended the lease or whether petitioner actually paid the alleged P300,000.00 to Fidela Dizon, as representative of private respondents in consideration of the option and, whether petitioner thereafter offered to pay the balance of the supposed purchase price, are all merely incidental and do not remove the unlawful detainer case private respondent filed before the RTC an action for Specific Performance and Fixing of Period for Obligation with prayer for the issuance of a restraining order pending hearing on the prayer for a writ of preliminary injunction (it sought to compel the execution of a deed of sale pursuant to the option to purchase and the receipt of the partial payment, and to fix the period to pay the balance) Unable to secure an injunction, private respondent also filed a complaint for Annulment of and Relief from Judgment with injunction and damages dismissed the complaint for annulment on the ground of res judicata, and the writ of preliminary injunction previously issued was dissolved two cases were the after consolidated before the RTC (both dismissed) CA: concluded that there was a perfected contract of sale between the parties on the leased premises and that pursuant to the option to buy agreement, private respondent had acquired the rights of a vendee in a contract of sale opined that payment by private respondent of P300,000.00 as partial payment for the leased property, which petitioners accepted (through Alice A. Dizon) and for which an official receipt was issued, was the operative act that gave rise to a perfected contract of sale, and that for failure of petitioners to deny receipt thereof, private respondent can therefore assume that Alice A. Dizon, acting as agent of petitioners, was authorized by them to receive the money in their behalf

Q.

Article 1902 (MARK)

Art. 1902. A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney, or the instructions as regards the agency. Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown them. 1. Effects of private or secret instructions upon third persons Dizon v CA (JESSA) January 28, 2003 Ynares-Santiago, J. Facts:

These involve two consolidated petitions seeking to set aside and annul the decisions and resolutions of respondent Court of Appeals essentially, the facts are: Overland Express Lines, Inc. (lessee) entered into a Contract of Lease with Option to Buy with petitioners (lessors) involving a 1,755.80 square meter parcel of land term of the lease was for one (1) year commencing from May 16, 1974 up to May 15, 1975.

During this period, private respondent was granted an option to purchase for the amount of P3,000.00 per square meter. the lease shall be on a per month basis with a monthly rental of P3,000.00 For failure of private respondent to pay the increased rental of P8,000.00 per month effective, petitioners filed an action for ejectment MTC: private respondent to vacate the leased premises and to pay the sum of P624,000.00 representing rentals in arrears and/or as damages in the form of reasonable compensation for the use and occupation of the premises during the period of illegal detainer

Issue (relevant): WON there was a perfected contract of sale Held: NONE. There was no perfected contract of sale between petitioners and private respondent. Private respondent argued that it delivered the

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check of P300,000.00 to Alice A. Dizon who acted as agent of petitioners pursuant to the supposed authority given by petitioner Fidela Dizon, the payee thereof. Private respondent further contended that petitioners' filing of the ejectment case against it based on the contract of lease with option to buy holds petitioners in estoppel to question the authority of petitioner Fidela Dizon. It insisted that the payment of P300,000.00 as partial payment of the purchase price constituted a valid exercise of the option to buy. Under Article 1475 of the New Civil Code, "the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts." Thus, the elements of a contract of sale are consent, object, and price in money or its equivalent. It bears stressing that the absence of any of these essential elements negates the existence of a perfected contract of sale. Sale is a consensual contract and he who alleges it must show its existence by competent proof. In an attempt to resurrect the lapsed option, private respondent gave P300,000.00 to petitioners (thru Alice A. Dizon) on the erroneous presumption that the said amount tendered would constitute a perfected contract of sale pursuant to the contract of lease with option to buy. There was no valid consent by the petitioners (as co-owners of the leased premises) on the supposed sale entered into by Alice A. Dizon, as petitioners' alleged agent, and private respondent. The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. As provided in Article 1868 of the New Civil Code, there was no showing that petitioners consented to the act of Alice A. Dizon nor authorized her to act on their behalf with regard to her transaction with private respondent. The most prudent thing private respondent should have done was to ascertain the extent of the authority of Alice A. Dizon. Being negligent in this regard, private respondent cannot seek relief on the basis of a supposed agency. In Bacaltos Coal Mines vs. Court of Appeals, SC explained the rule in dealing with an agent: Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of the agent's authority, and his ignorance of that authority will not be any excuse. Persons dealing with an assumed agency, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but also the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it. Toyota Shaw, Inc. V CA (BAMBI) May 23, 1995 Davide, Jr., J. Facts: Luna L. Sosa wanted to purchase a Toyota Lite Ace so he and his son, Gilbert, went to Toyota Shaws office and met Popong Bernardo, a sales representative of Toyota. Sosa emphasized to Bernardo that he needed the Lite Ace not later than June 17, 1989 because he, his family, and a balikbayan guest would use it on June 18 for a trip to Marinduque where he would celebrate his birthday. He added that if he does not arrive in his hometown with the new car, he would become a laughing stock. Bernardo assured Sosa that a unit would be ready for pick up at 10:00 a.m. on June 17.

Bernardo then signed a document entitled Agreement Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc, stipulating that: o All necessary documents will be submitted to Toyota Shaw (Popong Bernardo) upon arrival of Mr. Sosa from Marinduque. o The downpayment of P100,000.00 will be paid by Mr. Sosa on June 15. o The vehicle will be released for pick-up on June 17. o It was also agreed upon by the parties that the balance of the purchase price would be paid by credit financing through B.A. Finance. On June 15, Sosa and Gilbert went to Toyota to deliver the downpayment of P100,000.00.

They met Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) 928, on which Gilbert signed under the subheading conforme. In this document, the spaces provided for delivery terms were not filledup. Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved said VSP. On June 17, Bernardo called Gilbert to inform him that the vehicle would not be ready for pick up at 10:00 a.m. but instead at 2:00 p.m. that same day.

At 2:00 p.m., Sosa and Gilbert met Bernardo at the latters office. After waiting for about an hour, Bernardo told them that the car

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could not be delivered because nasulot ang unit ng ibang malakas. Toyota contends: o The Lite Ace was not delivered to Sosa because B.A. Finance disapproved Sosas credit financing application. o A particular unit had already been earmarked for Sosa but could not be released due to the uncertainty of payment of the balance of the purchase price. o Toyota gave Sosa the option to purchase the unit by paying the full purchase price in cash but Sosa refused. o Toyota returned the downpayment to Sosa upon his request. Thereafter, Sosa sent two letters to Toyota demanding the refund of downpayment as well as the payment of damages. Toyota refused to accede to the Sosas demands. Sosa filed a complaint against Toyota for damages under Articles 19 and 21 of the Civil Code in the total amount of P1,230,000.00. TRIAL COURT held that o The Agreement between Mr. Sosa and Popong Bernardo, was a valid perfected and contract of sale Toyota which bound Toyota to deliver the vehicle to Sosa. o Toyota acted in bad faith in selling the car to another person. o Bernardo, as an authorized sales executive of Toyota Shaw, was the latters agent and thus bound Toyota Shaw. o Therefore, Toyota should pay Sosa moral and exemplary damages as well as attorneys fees, compensation for Sosa and his lawyers transportation fare, and the costs of the suit. CA affirmed in toto. Issue and Held: 1. WON there was a perfected contract of sale. NO. Article 1475 of the Civil Code specifically provides that the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. The Agreement is not a contract of sale because it imposed no obligation on the part of Toyota to transfer ownership and no correlative obligation on the part of Sosa to pay therefor a price certain. This is true notwithstanding the provision on the downpayment of P100,000.00 because such provision made no specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on installment basis. Nothing was mentioned about the full purchase price and the manner the installments were to be paid. The rule is that a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. This is so because disagreement on the manner of payment is tantamount to a failure to agree on the price. Moreover, the "Agreement" shows the absence of a meeting of minds between Toyota and Sosa. For one thing, Sosa did not even sign it. It was clear from the title of the document, Agreement between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc that Sosa was not dealing with Toyota but with Bernardo who not misrepresent that he had authority to sell Toyota vehicles.. Sosa knew Bernardo was only an agent and it was incumbent upon Sosa to act with ordinary prudence and reasonable diligence to know the extent of Bernardo's authority as an agent. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. At most, the transaction only reached the negotiation stage of a contract of sale with the execution of the VSP. The VSP was a mere proposal which was aborted when BA Finance disapproved Sosas credit financing application. It created no demandable right in favor of Sosa for the delivery of the vehicle to him, and its non-delivery did not cause any legally indemnifiable injury. Siredy Enterprises, Inc. vs. CA (REX) FACTS: Siredy Enterprises, Inc. (Siredy) is the owner and developer of Ysmael Village, a subdivision in Bulacan. Its president is Ismael Yanga. In its Articles of Incorporation, Siredys primary corporate prupose is to acquire and develop lands, erect buildings and houses thereon, and sell, lease, or otherwise dispose the said properties to buyers. Sometime before October 1978, Yanga executed an undated Letter of Authority in favor of Hermogenes Santos. In this letter, Yanga constituted in Santos to do and execute, among other things, the authority of negotiating and entering into contract/s to build Housing Units in Ysmael Village.

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On October 15, 1978, Santos entered into a deed of agreement with Conrado de Guzman. In this deed, it expressly stated that Santos was representing Siredy, while De Guzman was referred to as the contractor and Siredy was the principal. For almost 12 years, until April 1990, De Guzman constructed 26 residential units in Ysmael Village. 13 were fully paid, but the other 13 remained unpaid. The total price exceeded 400k, verified correct and signed by Santos. De Guzman then tried to collect this from Siredy, but failed. Thus he instituted an action for specific performance against Siredy, Yanga, and Santos, who all denied liability. During the trial, Santos disappeared. Siredy in its defense presented testimonial evidence that Siredy had no contract with De Guzman and had not authorized Santos to enter into a contract with anyone to build houses in the said village. The TC ruled in favor of Siredy, saying that the deed of agreement was between De Guzman and Santos only, and held that Siredy and Yanga cannot be held liable. Santos was ordered to pay the amount and the case against Siredy and Yanga was dismissed. Upon appeal, the CA reversed, saying that the Letter of Authority clearly constituted Santos as Siredys agent. Consequently Siredy cannot deny liability for the contract between Santos and De Guzman, and there was no need for Yanga himself to be a signatory to it, in order to be bound. Siredy now appeals to the SC, the relevant argument in this case that Santos instructions were only to SELL the lots and not build houses. ISSUE: WON there was an agency (YES) WON assuming Santos was an agent, Siredy is liable under the Deed of Agreement (YES) HELD/RATIO A reading of the Letter of Agreement between Yanga and Santos undoubtedly constitutes Santos as an agent. There are express stipulations contained therein, and it was on the authority of this document that De Guzman transacted business with Santos in the first place. As to Siredys defense that it was only interested in selling the lots, it does not matter. First of all, its Articles of Incorporation show that it undertakes construction of buildings and houses. Such Articles, coupled with the Letter of Authority, is sufficient to have given De Guzman reason to believe that Santos was duly authorize to represent Siredy. Secondly, even assuming that Santos mandate was only to sell the lots as Siredy asserts, Siredy is still bound to pay De Guzman. De Guzman is a third party to the agency who had no knowledge of the specific instructions between principal and agent. What De Guzman saw was the Letter of Authority, and the scope of the agents authority is what appears written therein. Third persons may be bound to inquire into the extent or scope of the agents authority, but they are not required to go beyond the terms of the written power of attorney. Third persons cannot be adversely affected by an understanding between principal and agent of limits of that authority. In the same way, third persons need not concern themselves with instructions given by the principal to his agent outside of the written power of attorney. As to the contention that the Letter of Authority was defective and needed reformation, this does not warrant consideration, especially with Yanga being an MD and a businessman. That the present case is in effect a revocation of the Letter of Authority is also erroneous. As for an alleged violation by De Guzman of the Deed of Agreement, it was only brought as an issue on appeal and was not raised in the courts below. PETITION DENIED, CA AFFIRMED.

R.

Article 1903 (TOPE)

Art. 1903. The commission agent shall be responsible for the goods received by him in the terms and conditions and as described in the consignment, unless upon receiving them he should make a written statement of the damage and deterioration suffered by the same. Definition Factor or commission agent One whose business is to receive and sell goods for a commission Entrusted by the principal with the possession of goods to be sold, and usually selling in his own name. May act on his own name or in that of the principal

Ordinary agent Need not have the possession of the goods of his principal, while the commission agent must be in possession

Liability of commission agent as to goods received

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If the commission agent received goods consigned to him, he is responsible for any damage or deterioration suffered by the same in the terms and conditions and as described in the consignment. The phrase in the terms and conditions and as described in the consignment refers to the quantity, quality, and physical condition of the goods. To avoid liability, the commission agent should make a written statement of the damage or deterioration if the goods received by him do not agree with the description in the consignment. Issue: Whether or not Pablo Tiongson can claim the entire 924 cavans and 31 kilos of palay Held: NO. The 778 cavans and 38 kilos of palay belonging to the plaintiff Urbano Santos, having been mixed with the 1,026 cavans and 9 kilos of palay belonging to the defendant Pablo Tiongson in Jose C. Bernabe's warehouse; the sheriff having found only 924 cavans and 31 1/2 kilos of palay in said warehouse at the time of the attachment thereof; and there being no means of separating form said 924 cavans and 31 1/2 of palay belonging to Urbano Santos and those belonging to Pablo Tiongson, the following rule prescribed in article 381 of the Civil Code for cases of this nature, is applicable: Art. 381. If, by the will of their owners, two things of identical or dissimilar nature are mixed, or if the mixture occurs accidentally, if in the latter case the things cannot be separated without injury, each owner shall acquire a right in the mixture proportionate to the part belonging to him, according to the value of the things mixed or commingled. The number of kilos in a cavan not having been determined, we will take the proportion only of the 924 cavans of palay which were attached and sold, thereby giving Urbano Santos, who deposited 778 cavans, 398.49 thereof, and Pablo Tiongson, who deposited 1,026 cavans, 525.51, or the value thereof at the rate of P3 per cavan. Montelibano v. Bacolod-Murcia Milling (ROG) 1954 Facts: Montelibano et al are sugar planter, member of Bacolod Murcia or assignees of sugar planter. They have contracts with Bacolod (Central) for the delivery of their sugar cane to the sugar mill of Central for milling and processing into sugar. Sugar cane delivered by each planter was to be divided between planter and Central this way: 60% for planter, 40% for Central. Central was to provide planter from time to time as the milling progressed with info as to share of sugar that planter was entitled to receive, give planter quedans or warehouse receipts therefor. After the milling, and for period of 90days, Central was to keep sugar in its warehouse free of charge, and planter to pay 5centavos per picul /month for storage aside. At time of Japanese occupation of Negros Occidental on May 1942 there were on deposit at Central's warehouse 664k piculs of sugar, of which 128k belonged to Montelibano et al, 284k to Central and the balance to planters not parties here. In '43, Japanese Military Admin designated Fidel Henares president of Sugar Planters' Assoc with authority to "contract, deliver, to receive

S.

Article 1904 (GEN)

Art. 1904. The commission agent who handles goods of the same kind and mark, which belong to different owners, shall distinguish them by countermarks, and designate the merchandise respectively belonging to each principal. Santos v. Bernabe (MAI) November 6, 1929 Villareal, J. Facts: Urbano Santos deposited in Jose Bernabes warehouse 778 cavans and 38 kilos of palay while Pablo Tiongson deposited in the same warehouse 1,026 cavans and 9 kilos of the same grain. On March 20, 1928, Pablo Tiongson filed with the Court of First Instance of Bulacan a complaint against Jose C. Bernabe, to recover from the latter the 1,026 cavans and 9 kilos of palay deposited in the defendant's warehouse. At the same time, the application of Pablo Tiongson for a writ of attachment was granted, and the attachable property of Jose C. Bernabe, including 924 cavans and 31 1/2 kilos of palay found by the sheriff in his warehouse, were attached, sold at public auction, and the proceeds thereof delivered to said defendant Pablo Tiongson, who obtained judgment in said case. It does not appear that the sacks of palay of Urbano Santos and those of Pablo Tiongson, deposited in Jose C. Bernabe's warehouse, bore any marks or signs, nor were they separated one from the other. Urbano Santos contends that Pablo Tiongson cannot claim the 924 cavans and 31 kilos of palay attached by the defendant sheriff as part of those deposited by him in Jose C. Bernabe's warehouse, because, in asking for the attachment thereof, he impliedly acknowledged that the same belonged to Jose C. Bernabe and not to him.

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payments, to pay various accounts to members of Assoc; to open accounts, to contract overdraft accounts with bank of Taiwan, and perform such other powers as may be necessary in the premises. Japanese Military Admin issued regulation governing purchases of sugar by Military Admin by virtue of which, upon purchase of sugar by Admin, any claim of PNB or any other enemy corp thereto shall automatically be cancelled, and sugar thus purchased deposited as new "Regenesis a/c" in the name of buyer, Bank of Taiwan. Planters or owners of sugar were authorized, if they chose, to borrow funds from the Bank of Taiwan. As per Admin regulations, checks in payment of sugar bought shall be Bank of Taiwan checks which however were to be deposited with said bank and set off against mortgages on old crop loans of planters as Farmer Rehabilitation Funds. New crop loans could be granted within limits of the proceeds of their sugar sold. Mitsui Bussan Kaisha Ltd. notified president of Planters' Assoc that it was buying all the sugar of the planters, whether they could be located or not. Warehouse orders for release of sugar he had sold were issued at the request of the president of the Planters' Assoc. From the time Kaisha made purchases, it began withdrawing sugar from Central in sacks. Withdrawals were made but without indication as to whose sugar each withdrawal was being made. As the sugar belonging to the planters and that of Central were mixed up, and there being nothing to show what buyer was withdrawing, it could not be determined whose sugar had been actually sold or withdrawn. At time of liberation, there were about 150k piculs sugar but such was impounded by US Enemy Property Custodian but was finally released. Parties agreed that 60% be provisionally assigned to them to be prorated among them accdg to sugar they had on deposit with Central prior to military occupation. After liberation and before this proration, Montelibano withdrew from warehouse some 12k piculs. Montelibano: This present action now is predicated on claim that Central has already been fully paid for its share of sugar as it had sold during 1943 to 1945 some 284k piculs in excess of 175 piculs of its own share and had received total price of P2.4m so that sugar remaining pertained exclusively them. TC: sugar remaining at time of liberation was already purchased by Military Admin but it could not withdraw same coz of advent of liberation; as sugar were all mixed up, none of owners could claim exclusive ownership. This the parties had already accepted and carried out by the proration. The taking of sugar belonging to Montelibano and Central was an act of confiscation by Japanese which was legal valid from which no recourse may be had against Jap Govt or against Central. Action was dismissed Issue: who are the legal owners of the sugar remaining at Central's warehouse at time of liberation? Held: The determination of nature or validity of act of Japanese Military Admin in purchasing Montelibano's sugar from president of the planters whom it appointed without the planters or owners consent is absolutely immaterial; whether the act of purchase was an act of confiscation of enemy property by military occupant or one of requisition, or one of voluntary sale, is beside the fundamental issue, which is stated above. Irrespective of the legality or illegality of purchase of plaintiff's sugar (by Japanese Military Admin) the fact remains that in consequence thereof of warehouse orders for release of Montelibano's sugar were issued and sugar actually taken from the warehouse. Also by sale of Central's sugar, release were authorized to the purchase and withdrawals made. As to the sugar remaining, title thereto remained in the original owners, because ownership of personal property sold is not transferred until actual delivery--non nudis pactis, sed traditione dominia rerum transferuntur. As sugar of the planters and of Central were stored together in a single mass it's absolutely impossible physically or legally, to determine whose sugar it was that remained after the withdrawals. There is no legal basis for planters' position that as taking of sugar was without their consent, and that of Central's was with its consent, all that remained was theirs. The only solution is that the mass remaining must pertain to original owners in proportion of the original amounts owned by each of them.

T.

Article 1905 (REG)

Art. 1905. The commission agent cannot, without the express or implied consent of the principal, sell on credit. Should he do so, the principal may demand from him payment in cash, but the commission agent shall be entitled to any interest or benefit, which may result from such sale. If sale is made without authority, the principal is given two alternatives: 1. require payment in cash; but the interest or benefit from the sale on credit shall belong to the agent since

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the principal cannot be allowed to enrich himself at the agents expense ratify the sale on credit and have all the risks and advantages to himself Art. 1906. 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. Should he fail to do so, the sale shall be deemed to have been made for cash insofar as the principal is concerned. (n) Art. 1907. Should the commission agent receive on a sale, in addition to the ordinary commission, another called a guarantee commission, he shall bear the risk of collection and shall pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser. (n) Art. 1908. 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, unless he proves that he exercised due diligence for that purpose.

2.

Green Valley Poultry v. IAC & Squibb (ABBY) 1984 J. Abad Santos Facts: Green Valley was appointed as the noexclusive distributor of verinary products of Squibb in northern Luzon. Squibb filed a suit to collect on goods delivered but unpaid. Green Valley claimed that the contract with Squibb was a mere agency to sell; that it never purchased goods from Squibb; that the goods received were on consignment only with the obligation to turn over the proceeds, less its commission, or to return the goods ff not sold, and since it had sold the goods but had not been able to collect from the purchasers thereof, the action was premature. Upon the other hand, Squibb claimed that the contract was one of sale so that Green Valley was obligated to pay for the goods received upon the expiration of the 60-day credit period. Green Valley was ordered by the CA to pay the sum of P48,374.74 plus P96.00 with interest at 6% per annum from the filing of this action; plus attorney's fees in the amount of P5,000.00 and to pay the costs to Squibb. Issue: 1.WoN it is a contract of sale or a contract to sell. 2. WoN Green Valley is liable to pay the unsold products Held: According to the SC: We do not have to categorize the contract. Whether viewed as an agency to sell or as a contract of sale, the liability of Green Valley is indubitable. Adopting Green Valley's theory that the contract is an agency to sell, it is liable because it sold on credit without authority from its principal. The Civil Code has a provision exactly in point. It reads: Art. 1905. The commission agent cannot, without the express or implied consent of the principal, sell on credit. Should he do so, the principal may demand from him payment in cash, but the commission agent shall be entitled to any interest or benefit, which may result from such sale.

V.

Article 1909 (JANCES)

Art. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation. MBTC vs. CA (ALAIN) Feb 18, 1991 Cruz, J. FACTS: In January 1979, a certain Eduardo Gomez opened an account with Golden Savings and deposited over a period of two months 38 treasury warrants with a total value of P1,755,228.37. They were all drawn by the Philippine Fish Marketing Authority and purportedly signed by its General Manager and countersigned by its Auditor. Six of these were directly payable to Gomez while the others appeared to have been indorsed by their respective payees, followed by Gomez as second indorser. On various dates between June 25 and July 16, 1979, all these warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account No. 2498 in the Metrobank branch in Calapan, Mindoro. They were then sent for clearing by the branch office to the principal office of Metrobank, which forwarded them to the Bureau of Treasury for special clearing. More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times to ask whether the warrants had been cleared. She was told to wait. Accordingly, Gomez was meanwhile not allowed to withdraw from his account. Later, however, "exasperated" over

U.

Article 1906-1908 (EARLA)

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Gloria's repeated inquiries and also as an accommodation for a "valued client," the petitioner says it finally decided to allow Golden Savings to withdraw from the proceeds of the warrants. Withdrawals were made on July 9, 1979, July 13, 1979, and July 16, 1979. In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account, eventually collecting the total amount of P1,167,500.00 from the proceeds of the apparently cleared warrants. On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of Treasury on July 19, 1979, and demanded the refund by Golden Savings of the amount it had previously withdrawn, to make up the deficit in its account. The demand was rejected. Metrobank then sued Golden Savings in the Regional Trial Court of Mindoro. ISSUE: W/N until such time as Metrobank is actually paid, its obligation is that of a mere collecting agent which cannot be held liable for its failure to collect on the warrants. HELD: Metrobank exhibited extraordinary carelessness. The amount involved was not trifling more than one and a half million pesos (and this was 1979). There was no reason why it should not have waited until the treasury warrants had been cleared; it would not have lost a single centavo by waiting. Yet, despite the lack of such clearance and notwithstanding that it had not received a single centavo from the proceeds of the treasury warrants, as it now repeatedly stresses it allowed Golden Savings to withdraw not once, not twice, but thrice from the uncleared treasury warrants in the total amount of P968,000.00. Its reason? It was "exasperated" over the persistent inquiries of Gloria Castillo about the clearance and it also wanted to "accommodate" a valued client. It "presumed" that the warrants had been cleared simply because of "the lapse of one week." To gloss over its carelessness, Metrobank would invoke the conditions printed on the dorsal side of the deposit slips through which the treasury warrants were deposited by Golden Savings with its Calapan branch. The conditions read as follows: Kindly note that in receiving items on deposit, the bank obligates itself only as the depositor's collecting agent, assuming no responsibility beyond care in selecting correspondents, and until such time as actual payment shall have come into possession of this bank, the right is reserved to charge back to the depositor's account any amount previously credited, whether or not such item is returned. This also applies to checks drawn on local banks and bankers and their branches as well as on this bank, which are unpaid due to insufficiency of funds, forgery, unauthorized overdraft or any other reason. (Emphasis supplied.) According to Metrobank, the said conditions clearly show that it was acting only as a collecting agent for Golden Savings and give it the right to "charge back to the depositor's account any amount previously credited, whether or not such item is returned. This also applies to checks ". . . which are unpaid due to insufficiency of funds, forgery, unauthorized overdraft of any other reason." It is claimed that the said conditions are in the nature of contractual stipulations and became binding on Golden Savings when Gloria Castillo, as its Cashier, signed the deposit slips. Doubt may be expressed about the binding force of the conditions, considering that they have apparently been imposed by the bank unilaterally, without the consent of the depositor. Indeed, it could be argued that the depositor, in signing the deposit slip, does so only to identify himself and not to agree to the conditions set forth in the given permit at the back of the deposit slip. We do not have to rule on this matter at this time. At any rate, the Court feels that even if the deposit slip were considered a contract, the petitioner could still not validly disclaim responsibility thereunder in the light of the circumstances of this case. In stressing that it was acting only as a collecting agent for Golden Savings, Metrobank seems to be suggesting that as a mere agent it cannot be liable to the principal. This is not exactly true. On the contrary, Article 1909 of the Civil Code clearly provides that Art. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged 'with more or less rigor by the courts, according to whether the agency was or was not for a compensation. Tan Tiong Teck v. SEC (MARK) British Airways v. CA, supra Domingo v. Domingo, supra Austria vs. CA (ANJ) Facts: Maria G. Abad received from Guillermo Austria one pendant with diamonds valued at 4,500phph to be sold on commission basis or to be returned

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on demand. Said transaction was acknowledged in a receipt dated Jan 30, 1961. On Feb 1,1961, while walking home to her residence in Mandaluyong, Abad was said to have been accosted by two men, one of whom hit her on the face, while the other snatched her purse containing cash and pieces of jewelry, which included the pendant. The incident became a subject of a criminal case for robbery filed in the CFI of Rizal. As Abad failed to return the jewelry or pay its value despite demands, Austria filed an action against her and her husband for recovery of the pendant or of its value, and damages before the CFI of Manila. The Abads set up the defense that the alleged robbery had extinguished their obligation. obligor must be free of participation in, or aggravation of, injury to the creditor.

It

must be noted that in Article 11748, the emphasis of the provision is on the event, not on the factors responsible for them. To avail of the exemption granted in law, it is not necessary that the persons responsible for the occurrence should be found or punished; it would only be sufficient to establish that the unforeseeable event, the robbery in this case, did take place without any concurrent fault on the debtors part, and this can be done by preponderant evidence. To require in the present action for the prior conviction of the culprits in the criminal case in order to establish the robbery as a fact, would be to demand proof beyond reasonable doubt.

Trial Court ruled in favor of Austria, ordering the

Abads to jointly and severally pay the sum of 4,500, with legal interests, plus 450 for attorneys fees, and costs. It was held that the Abads failed to prove the fact of the robbery, or, if indeed it was committed, that Maria Abad was guilty of negligence when she went home without any companion, given that it was already getting dark and she was carrying a large amount of cash and valuables on the day in question, and such negligence did not free her from liability for damages. Abads appealed to the Court of Appeals, which rendered a decision in favor of the defendants, ruling that the facts of the robbery and Maria Abads possession of the pendant on that day had been duly established. The CA declared the Abads were not responsible for the loss of the jewelry on account of a fortuitous event, and relieved them from liability for damages.

2. No, Maria Abad is not guilty of concurrent or contributory fault or negligence.

As stated

in Article 11709, in order to completely exonerate the obligor from liabilities, such obligor must be free of any concurrent or contributory fault or negligence. 1961, when the robbery in question did take place, criminality had not by far reached the level attained in the present day (1971). Given this, Maria Abad could not be held negligent. Should the incident had happen at present time, where there is high incidence of crimes against persons and property, that renders travel after nightfall a matter to be sedulously avoided without suitable precaution and protection, the conduct of Maria, carrying jewelry of considerable value, would be negligent per se and would not exempt her from responsibility in the case of a robbery.

In

The

Issues: 1.WON the alleged robbery falls under the category of fortuitous event and relieved the obligor from his obligation under the contract of agency (consignment of goods for sale), pursuant to Article 1174 of the Civil Code, even though there has been no final judgment of conviction in the robbery case. 2.WON Abad, as an agent, is guilty of concurrent or contributory fault or negligence, making her liable for damages. Held/Ratio: 1. Yes, the robbery was a fortuitous event that relieved the Abads from liability. To constitute a fortuitous event that would exempt a person from responsibility, it is necessary that (1) the event must be independent of the human will (or rather, of the debtors or obligors); (2) the occurrence must render it impossible for the obligor to fulfill the obligation in a normal manner; and that (3) the

Dispositive: Petition for review DISMISSED. III. A. Obligations of Principal Article 1910 (EVA)

Article 1910. 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. 1174. Except in cases expressly specified by law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable. 9 Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.

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GENERAL OBLIGATIONS: 1. Contractual obligations duties and liabilities of the principal are primarily based upon the contract and the validity of the contract between them. 2. To deal with the agent fairly and in good faith. SPECIFIC OBLIGATIONS: 1. To comply with the obligations which the agent may have contracted within the scope of his authority and in the name of the principal; 2. To advance to the agent, should the latter so request, the sums necessary for the execution of the agency; 3. To reimburse the agent of all the advances made by him, provided the agent is free from fault; 4. To indemnify the agent for all the damages which the execution of the agency may have caused the latter without the fault or negligence on his part; and 5. To pay the agent the compensation agreed upon, or if no compensation was specified, the reasonable value of the agents services. Note: Even if 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 [Estoppel]. LIABILITY OF THE PRINCIPAL TO THIRD PERSONS General Rule: Where the relation of agency legally exists, the principal will be liable to third persons for ALL the acts committed by the agent in his behalf in the course and within the actual or apparent scope of his authority, and this is not altered by the fact that the agent also may be liable, nor by the fact that some of the acts are to the principals advantage while the others to his disadvantage. Reason for the Rule o For express and implied agency the act of agent is the act of principal o For apparent authority and agency by estoppel to prevent fraud upon innocent third parties LIABILITY OF THIRD PERSONS TO PRINCIPAL An agent is the instrumentality of the principal whose primary design is to obtain rights against third parties. The principals rights are the third parties liabilities.

2.

3.

In tort. The third persons tort liability to the principal, insofar as the agent is involved in tort, arises in three factual situations: (a) Where the third person damages or injures property or interest of the principal in the possession of the agent; (b) Where the third person colludes with the agent to injure or defraud the principal; and (c) Where the third person induces the agent to violate the contract with the principal to betray the trust reposed b him by the principal.; In respect to property received. An agent does not have legal title to property entrusted to his possession by the principal. In the absence of law or the possession of the agent of apparent authority or circumstances working on estoppels against the principal, the latter may recover property from the agents transferee. fide holders of negotiable

Exception: bona instruments.

LIABILITY OF PRINCIPAL FOR TORT OF AGENT General Rule: The principal is civilly liable to third persons for torts of an committed at the principals direction or in the course of within the scope of the agents employment. Reason for liability: based on the principle that he who acts through another does it himself. Note: Agent is also liable he is SOLIDARILY liable with the principla to third persons and so such third persons may sue both. TEST of liability (Motivation-deviation test) The bounds of the agents authority are not the limits of the principals tort liability, but rather the scope of employment which may or may not be within the bound of authority; hence, wider in scope. But an act is not necessarily done within the scope of employment by reason merely of the fact that it is done during the employment. Two factors must concur for liability to be imposed: 1. satisfactory evidence that the employee in doing the act, in doing of which the tort was committed, was motivated in part, at least, by desire to serve his employer; AND 2. satisfactory evidence that the act, in doing of which the tort is committed, was not an extreme deviation from the normal conduct of the employee. Article 1910, par. 1: When agent acts in a representative capacity, the principal is evidently liable

1.

In contract. A third person is liable to the principal upon contracts entered into by his agent, in the same manners as though the contract were entered into by the principal himself. This proposition results from the representative nature of agency.

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Article 1910, par. 2: When agent exceeded his authority, the principal is not bound unless he RATIFIES that act of the agent expressly or impliedly. RATIFICATION is the adoption or the affirmance by a person of a prior act which did not bind him, but which was done or professed to be done on his account thus giving effect to the acts as if originally authorized. Act of ratification purely voluntary: principal has option to ratify or not. Conditions for ratification (1) The principal must have the capacity or power to ratify; (2) He must have knowledge of material facts; o knowledge must be full, complete and actual. o material facts are those which reasonably ought to be known by the principal, having in mind the time, place, circumstances and the situation of the parties. (3) He must ratify the acts in its entirety; (4) The act must be capable of ratification; and o those which may be authorized (i.e. valid), voidable acts, and unrevoked acts (ratification of unauthorized contract must be done before it is revoked by the other contracting party. o acts which are absolutely void cannot be ratified. (5) The act must be done in behalf of the principal. General rule: Ratification has RETROACTIVE effect. Exceptions: (1) Where to do so would be to defeat the rights of third parties which have accrued between the time of the making of the unauthorized contract and the time of ratification. (2) Where to do so would be to render wrongful an otherwise rightful act or omission which has taken place during the intervening period. (3) Where to do so would be to allow the circumvention of a rule of law formulated for the interest of public policy. (4) If the third person has withdrawn from the contract. Domingo v. Robles (Bambi) March 18, 2005 Panganiban, J. Facts: Petitioner Norma Domingo and her husband, Valentino Domingo owned a parcel of lot in a subdivision in Marikina. Because her husband failed to come up with enough money to finish the construction of a house on the said lot, petitioner decided to dispose of the property. Flor Bacani, petitioners friend, volunteered to act as petitioners agent in selling the lot. Petitioner gave Bacani their owners copy of the TCT, which was later said to have been lost. In the petition for its reconstitution, petitioner gave Bacani all her receipts of payment for real estate taxes. At the same time, Bacani asked petitioner to sign what she recalled was a record of exhibits. Thereafter, petitioner never saw Bacani again. When petitioner visited the lot, she was surprised to see respondent Yolanda Robles and her family starting to build a house on the subject lot. Upon verification with the Register of Deeds, she found out that the reconstituted TCT had already been cancelled with the registration of a Deed of Absolute Sale in favor of the Robleses. On the Deed were the signatures of petitioner and her husband. Claiming that she did not know the Robleses and that the signatures on the Deed were forged, petitioner filed a case to have the Deed of Aboslute Sale nullified and for the reconveyance of the property. The Robleses, for their part claimed that they were buyers in good faith. According to them: o The subject lot was offered to them by Flor Bacani, as the agent of the owners; o When they were already prepared to buy the lot, Bacani introduced to them the supposed owners and agreed on the sale; o Thereafter, Bacani presented a Deed of Absolute Sale which had the signatures of petitioner and her husband, and the owners copy of the TCT. o At that meeting, Robles paid full purchase price. o Sometime later, Robles contracted to sell the lot for P250,000. When only P20,000 remained unpaid, her buyers stopped payment because Robles was notified that petitioner is suing her. RTC dismissed the complaint. CA affirmed in toto and held that petitioner failed to disprove that the Robleses were purchasers in good faith.

Issues and Held:

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1. WON the sale in favor of the Robleses was valid. YES. A notarized instrument enjoys a prima facie presumption of authenticity and due execution. To overcome that presumption, clear and convincing evidence must be presented. Forgery cannot be presumed. Hence, it was incumbent upon petitioner to prove it. This petitioner failed to do. Petitioner also failed to convince the trial court that the person with whom Robles transacted was in fact not her husband. She only alleged that her husband was out of the country at the time of the sale. However, bare allegations, unsubstantiated by evidence, are not equivalent to proof. Furthermore, the sale was admittedly made with the aid of Bacani, petitioners agent, who had with him the original of the owners duplicate Certificate of Title to the property, free from any liens or encumbrances. The registered owner who places in the hands of another an executed document of transfer of registered land effectively represents to a third party that the holder of such document is authorized to deal with the property. 2. WON the Robleses are buers in good faith. PRESUMED TO BE YES. In the absence of a finding of fraud and a consequent finding of authenticity and due execution of the Deed of Absolute Sale, a discussion of whether respondents were purchasers in good faith is wholly unnecessary. Without a clear and persuasive substantiation of bad faith, a presumption of good faith in their favor stands.

Limketkai & Sons Milling v. CA (REX) Rural Bank of Milaor v. Ocfemia, 325 SCRA 99 (JESSA) Facts: On April 10, 1996, Rural Bank was declared in default on motion of the respondents for failure to file an answer within the reglementary-period after it was duly served with summons On April 26, 1996, bank filed a motion to set aside the order of default with objection thereto filed by respondents On June 17, 1996, an order was issued denying bank's motion to set aside the order of default On July 31, 1996, respondents filed a motion to set case for hearing.

The bank did not file any opposition and so respondents were allowed to present their evidence ex-parte.

A certiorari case was filed by the bank with the Court of Appeals but the petition was denied in a decision and the same is now final. The evidence presented by the respondents through the testimony of Nio, one of the respondents in this case, shows that: she is the daughter of Francisca Ocfemia, a co-respondent in this case, and the late Renato Ocfemia (deceased) the parents of her father, Renato Ocfemia, were Juanita Arellano Ocfemia and Felicisimo Ocfemia her other co-respondents Rowena O. Barrogo, Felicisimo Ocfemia, Renato Ocfemia, Jr. and Winston Ocfemia are her brothers and sisters Nio knows the five (5) parcels of land which are located in Bombon, Camarines Sur and that they are the ones possessing them which were originally owned by her grandparents, Juanita Arellano Ocfemia and Felicisimo Ocfemia. During the lifetime of her grandparents, respondents mortgaged the said five (5) parcels of land and two (2) others to the bank as shown by the Deed of Real Estate Mortgage and the Promissory Note The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia were not able to redeem the mortgaged properties consisting of seven (7) parcels of land and so the mortgage was foreclosed and thereafter ownership thereof was transferred to the bank. Out of the seven (7) parcels that were foreclosed, five (5) of them are in the possession of the respondents because these five (5) parcels of land were sold by the bank to the parents of Nio as evidenced by a Deed of Sale executed in January 1988 The aforementioned five (5) parcels of land subject of the deed of sale, have not been, however transferred in the name of the parents of Nio after they were sold to her parents by the bank because according to the Assessor's Office the five (5) parcels of land, subject of the sale, cannot be transferred in the name of the buyers as there is a need to have the document of sale registered with the Register of Deeds of Camarines Sur. Nio went to the Register of Deeds of Camarines Sur with the Deed of Sale in order to have the same registered. The Register of Deeds, however, informed her that the document of sale cannot be registered without a board resolution of bank. Nio then went to the bank, showed to if the Deed of Sale, the tax declaration and receipt of tax payments and requested the

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bank for a board resolution so that the property can be transferred to the name of Renato Ocfemia the husband of petitioner Francisca Ocfemia and the father of the other respondents having died already. The bank refused her request for a board resolution and made many alibis: She was told that the bank had a new manager and it had no record of the sale; She was asked and she complied with the request of the bank for a copy of the deed of sale and receipt of payment; The president of the bank told her to get an authority from her parents and other respondents and receipts evidencing payment of the consideration appearing in the deed of sale; She complied with said requirements and after she gave all these documents, Nio was again told to wait for two (2) weeks because the bank would still study the matter. After two (2) weeks, Nio returned to the bank and she was told that the resolution of the board would not be released because the bank had no records from the old manager. Because of this, Nio wrote to the bank inquiring why no action was taken by the board of the request for the issuance of the resolution considering that the bank was already fully paid for the consideration of the sale since January 1988 as shown by the deed of sale itself After several days from receipt of the letter when Nio went to the bank again and reiterated her request, the manager of the bank told her that they could not issue the required board resolution as the bank had no records of the sale. Because of this, this petition is filed The respondents are interested in having the property transferred to their names because their mother and co-petitioner, Francisca Ocfemia, is very sickly and they want to mortgage the property for the medical expenses of Francisca Ocfemia. The illness of Francisca Ocfemia began after her husband died and her suffering from arthritis and pulmonary disease already became serious before December 1995. Nio declared that her mother is now in serious condition and they could not have her hospitalized for treatment as they do not have any money and this is causing the family sleepless nights and mental anguish, thinking that their mother may die because they could not submit her for medication as they do not have money. RTC: granted the petition CA: affirmed Issue: WON the bank manager was authorized by the bank to sign on its behalf Held: YES. In failing to file its answer specifically denying under oath the Deed of Sale, the bank admitted the due execution of the said contract. Such admission means that it acknowledged that the manager was authorized to sign the Deed of Sale on its behalf. The bank acknowledged, by its own acts or failure to act, the authority of the manager to enter into binding contracts. After the execution of the Deed of Sale, respondents occupied the properties in dispute and paid the real estate taxes due thereon. If the bank management believed that it had title to the property, it should have taken some measures to prevent the infringement or invasion of its title thereto and possession thereof. Likewise, the manager had previously transacted business on behalf of the bank, and the latter had acknowledged her authority. A bank is liable to innocent third persons where representation is made in the course of its normal business by an agent like the manager, even though such agent is abusing her authority. Clearly, persons dealing with her could not be blamed for believing that she was authorized to transact business for and on behalf of the bank.

On January 15, 1996 the bank answered respondents' lawyer's letter informing the latter that the request for board resolution had already been referred to the board of directors of the bank with another request that the latter should be furnished with a certified machine copy of the receipt of payment covering the sale between the respondents and the bank This request of the bank was already complied with by Nio even before she brought the matter to her lawyer. On January 23, 1996 respondents lawyer wrote back the branch manager of the bank informing the latter that they were already furnished the receipts the bank was asking for and that the respondents wanted already to know the stand of the bank whether the board would issue the required board resolution as the deed of sale itself already showed that the respondents were clearly entitled to the land subject of the sale The manager of the bank received the letter which was served personally to him and the latter told Nio that since he was the one himself who received the letter he would not sign anymore a copy showing him as having already received said letter

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Board of Liquidators v. Kalaw: Settled jurisprudence has it that where similar acts have been approved by the directors as a matter of general practice, custom, and policy, the general manager may bind the company without formal authorization of the board of directors. In varying language, existence of such authority is established, by proof of the course of business, the usages and practices of the company and by the knowledge which the board of directors has, or must be presumed to have, of acts and doings of its subordinates in and about the affairs of the corporation. So also, authority to act for and bind a corporation may be presumed from acts of recognition in other instances where the power was in fact exercised. Thus, when, in the usual course of business of a corporation, an officer has been allowed in his official capacity to manage its affairs, his authority to represent the corporation may be implied from the manner in which he has been permitted by the directors to manage its business. Notwithstanding the putative authority of the manager to bind the bank in the Deed of Sale, the bank has failed to file an answer to the petition below within the reglementary period. Thus, the bank is estopped from questioning the authority of the bank manager to enter into the contract of sale. If a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds the agent out to the public as possessing the power to do those acts; thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent's authority. Unquestionably, petitioner has authorized Tena to enter into the Deed of Sale. Accordingly, it has a clear legal duty to issue the board resolution sought by respondent's. China Airlines v. Chiok (MARK) Facts: On September 18, 1981, Daniel Chiok purchased from China Airlines a passenger ticket for air transportation covering ManilaTaipei-Hongkong-Manila. Said ticket was exclusively endorseable to Philippine Airlines. Subsequently, on November 21, 1981, Chiok took his trip from Manila to Taipei using [the] CAL ticket. Before he left for said trip, the trips covered by the ticket were pre-scheduled and confirmed by the former. When he arrived in Taipei, he went to the CAL office and confirmed his Hongkong to Manila trip on board PAL Flight No. PR 311. The CAL office attached a yellow sticker appropriately indicating that his flight status was OK. When Chiok reached Hongkong, he went to the PAL office and sought to reconfirm his flight back to Manila. The PAL office confirmed his return trip on board Flight No. PR 311 and attached its own sticker. o On November 24, 1981, Chiok proceeded to Hongkong International Airport for his return trip to Manila. However, upon reaching the PAL counter, Chiok saw a poster stating that PAL Flight No. PR 311 was cancelled because of a typhoon in Manila. He was then informed that all the confirmed ticket holders of PAL Flight No. PR 311 were automatically booked for its next flight, which was to leave the next day. o On November 25, 1981, Chiok went to the airport. Lok called the attention of Carmen Chan, PALs terminal supervisor, and informed the latter that Chioks name was not in the computer list of passengers. Subsequently, Carmen informed Chiok that his name did not appear in PALs computer list of passengers and therefore could not be permitted to board PAL Flight No. PR 307. o Chiok then decided to use another CAL ticket with No. 297:4402:004:370:5 and asked if this ticket could be used to book him for the said flight. He was, once again, booked and confirmed, this time on board PAL Flight No. PR 311 scheduled to depart that evening. Later, Chiok went to the PAL check-in counter and it was Carmen who attended to him. As this juncture, Chiok had already placed his travel documents, including his clutch bag, on top of the PAL check-in counter. Thereafter, Carmen directed PAL personnel to transfer counters. In the ensuing commotion, Chiok some of his personal belongings. Subsequently, he was placed on stand-by and at around 7:30 p.m., PAL personnel informed him that he could now check-in. Chiok filed a complaint for damages.

ISSUE: WON CAL is liable. Held: Yes. It is significant to note that the contract of air transportation was between petitioner and respondent, with the former endorsing to PAL the Hong Kong-to-Manila segment of the journey. Such contract of carriage has always been treated in this jurisdiction as a single operation. This jurisprudential rule is supported by the Warsaw Convention, to which the Philippines is a party, and by the existing

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practices of the International Air Transport Association. In American Airlines v. Court of Appeals, the court have noted that under a general pool partnership agreement, the ticket-issuing airline is the principal in a contract of carriage, while the endorsee-airline is the agent. In the instant case, following the jurisprudence cited above, PAL acted as the carrying agent of CAL. In the same way that we ruled against British Airways and Lufthansa in the aforementioned cases, we also rule that CAL cannot evade liability to respondent, even though it may have been only a ticket issuer for the Hong Kong-Manila sector. It is a well-established rule that 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 and in the honest belief that he is what he appears to be. It is evident from the records that by his own acts and admission, petitioner held out Tiu Huy Tiac to the public as the manager of his store. More particularly, petitioner explicitly introduced Tiu Huy Tiac to Bernardino Villanueva, respondent's manager, as his (petitioner's) branch manager as testified to by Bernardino Villanueva. Secondly, Lilian Tan, who has been doing business with petitioner for quite a while, also testified that she knew Tiu Huy Tiac to be the manager of petitioner's Sto. Cristo, Binondo branch. This general perception of Tiu Huy Tiac as the manager of petitioner's Sto. Cristo store is even made manifest by the fact that Tiu Huy Tiac is known in the community to be the "kinakapatid" (godbrother) of petitioner. Petitioner's unexplained delay in disowning the transactions entered into by Tiu Huy Tiac despite several attempts made by respondent to collect the amount from him, proved all the more that petitioner was aware of the questioned commission was tantamount to an admission by silence. In a futile attempt to discredit Villanueva, petitioner alleges that the former's testimony is clearly self-serving inasmuch as Villanueva worked for private respondent as its manager. Court said, The argument that Villanueva's testimony is self-serving and therefore inadmissible on the lame excuse of his employment with private respondent utterly misconstrues the nature of "'self-serving evidence" and the specific ground for its exclusion. Petitioner cites Villanueva's failure, despite his commitment to do so on cross-examination, to produce the very first invoice of the transaction between petitioner and private respondent as another ground to discredit Villanueva's testimony. Court: it was petitioner's counsel himself who withdrew the reservation to have Villanueva produce the document in court. In the same manner, petitioner assails the credibility of Lilian Tan by alleging that Tan was part of an intricate plot to defraud him. However, petitioner failed to substantiate or prove that the subject transaction was designed to defraud him. Moreover, petitioner's unexplained delay in disowning the transactions entered into by Tiu

Cuison v. CA, 227 SCRA 391 (TOPE) Facts: Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and sale of newsprint, bond paper and scrap while Private respondent Valiant Investment Associates, on the other hand, is a partnership duly organized and existing under the laws. From December 4, 1979 to February 15, 1980, respondent delivered various kinds of paper products amounting to P297,487.30 to a certain Lilian Tan of LT Trading. The deliveries were made by respondent pursuant to orders allegedly placed by Tiu Huy Tiac who was then employed in the Binondo office of petitioner. It was likewise pursuant to Tiac's instructions that the merchandise was delivered to Lilian Tan. Upon delivery, Lilian Tan paid for the merchandise by issuing several checks payable to cash at the specific request of Tiu Huy Tiac. In turn, Tiac issued 9 postdated checks to private respondent as payment for the paper products. Unfortunately, sad checks were later dishonored by the drawee bank. Respondent made several demands upon petitioner to pay for the merchandise in question, claiming that Tiu Huy Tiac was duly authorized by petitioner as the manager of his Binondo office, to enter into the questioned transactions with private respondent and Lilian Tan. Respondent filed an action against petitioner for the collection of P297,487.30 representing the price of the merchandise. Trial court dismissed. Court of Appeals reversed. Issue: Whether or not Tiu Huy Tiac possessed the required authority from petitioner sufficient to hold the latter liable for the disputed transaction. Held: YES.

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Huy Tiac despite several attempts made by respondent to collect the amount from him, proved all the more that petitioner was aware of the questioned commission was tantamount to an admission by silence under Rule 130 Section 23 of the Rules of Court. All of these point to the fact that at the time of the transaction Tiu Huy Tiac was admittedly the manager of petitioner's store in Sto. Cristo, Binondo. Consequently, the transaction in question as well as the concomitant obligation is valid and binding upon petitioner. By his representations, petitioner is now estopped from disclaiming liability for the transaction entered by Tiu Huy Tiac on his behalf. It matters not whether the representations are intentional or merely negligent so long as innocent, third persons relied upon such representations in good faith and for value. Tiu Huy Tiac, therefore, by petitioner's own representations and manifestations, became an agent of petitioner by estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon (Article 1431, Civil Code of the Philippines). Petitioner is liable for the transaction entered into by Tiu Huy Tiac on his behalf. Thus, even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to fact as though he had full powers (Article 1911 Civil Code), as in the case at bar. Petition DENIED WHI constructed a warehouse. Said warehouse was leased by Ponderosa Leather Goods Company subject to a monthly rental of 300,000 php. In the meantime, WHI complained to Roberto Roxas that the vehicles of RECCI were parked on a portion of the property over which WHI had been granted a right of way. Roxas promised to look into the matter. Dy and Roxas discussed the need of WHI to buy a 500-square-meter portion of the other but Roxas died soon thereafter. The WHI demanded that the RECCI sell a portion of the other lot for its beneficial use otherwise the appropriate action would be filed against it. RECCI rejected the demand of WHI. On June 17, 1992, the WHI filed a complaint against the RECCI with the Regional Trial Court of Makati, for specific performance and damages.

ISSUE: WON Roxas Electric is bound by the provisions of the deed of absolute sale granting to the WHI beneficial use and a right of way over a portion of the other lot. Held: No. Generally, the acts of the corporate officers within the scope of their authority are binding on the corporation. However, under Article 1910 10of the New Civil Code, acts done by such officers beyond the scope of their authority cannot bind the corporation unless it has ratified such acts expressly or tacitly, or is estopped from denying them. Evidently, Roxas was not specifically authorized under the said resolution to grant a right of way agree to sell to the petitioner a portion thereof. Neither may such authority be implied from the authority granted to Roxas to sell on such terms and conditions which he deems most reasonable and advantageous. Under paragraph 12, Article 1878 of the New Civil Code, a special power of attorney is required to convey real rights over immovable property. Article 1358 of the New Civil Code requires that contracts which have for their object the creation of real rights over immovable property must appear in a public document. The petitioner cannot feign ignorance of the need for Roxas to have been specifically authorized in writing by the Board of Directors to be able to validly grant a right of way and agree to sell a portion of the adjacent lot. The rule is that if the act of the agent is one which requires
10

Woodchild Holdings v. Roxas Electric (MARK) Facts: The respondent Roxas Electric and Construction Company, Inc. (RECCI), formerly the Roxas Electric and Construction Company, was the owner of two parcels of land. On May 17, 1991, the respondents Board of Directors approved a resolution authorizing the corporation, through its president, Roberto B. Roxas, to sell the lots at a price, and under such terms and conditions, which he deemed most reasonable and advantageous to the corporation. He was likewise authorized to execute, sign, and deliver the pertinent sales documents and receive the proceeds of the sale for and on behalf of the company. Petitioner WHI bought one of the lots and a portion of the other. It was stipulated in the Deed of Sale that the vendor agrees, in the event that the right of way is insufficient for the vendees use (ex entry of a 45-foot container), to sell additional square meters from its current adjacent property.

Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly.

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authority in writing, those dealing with him are charged with notice of that fact. For the principle of apparent authority to apply, the petitioner was burdened to prove the following: (a) the acts of the respondent justifying belief in the agency by the petitioner; (b) knowledge thereof by the respondent which is sought to be held; and, (c) reliance thereon by the petitioner consistent with ordinary care and prudence. In this case, there is no evidence on record of specific acts made by the respondent showing or indicating that it had full knowledge of any representations made by Roxas to the petitioner that the respondent had authorized him to grant to the respondent an option to buy a portion of the other lot or to create a burden or lien thereon, or that the respondent allowed him to do so. defendants are willing to sell their respective properties; 2. That this Honorable Court authorizes the plaintiff and the defendants to appoint their respective commissioners, that is, one for the plaintiff and one for each defendant;xxx TC approved the Compromise Agreement and enjoined the parties to comply with its terms and conditions. The Commissioners thus appointed submitted a Consolidated Report regarding the recommended unit prices which the court approved. However, Atty. Ventura, one of Corporations counsel, filed a manifestation to the court that the Board of Directors did not approve of the Compromise Agreement. Petitioner Bernabe asked the court to ignore Atty. Venturas manifestation, saying that when the court inquired from the parties and their respective lawyers if all the attorneys appearing in the case had been duly authorized and/or empowered to enter into a compromise agreement, and the three lawyers for the Corporation answered in the affirmative it was Atty. Ventura himself who prepared the draft of the Compromise Agreement in his own handwriting and was the first to sign the agreement one of the three lawyers for the plaintiff, Atty. Florentino V. Cardenas, who also signed the Compromise Agreement, was the official representative and executive official, of corporation that the nomination plaintiff of Mr. Larry G. Marquez as its Commissioner pursuant to the Compromise Agreement, was a clear indication of the Corporation's tacit approval of the terms and conditions of the Compromise Agreement, if not an implied ratification of Atty. Ventura's acts. On MR, the TC declared the Agreement contrary to law. ISSUE: WON the Compromise Agreement is valid HELD: NO First, the lawyers who entered the Compromise Agreement have no SPA in violation of Art. 1878 CC and Rule 138, Sec. 23 ROC. Contrary to the petitioners contention, Atty. Cardenas, as administrative manager of the Corporation, did not tacitly ratify the agreement entered into by the parties as he has no authority to do so.

PNB v. Bagamaspad, 89 Phil 365 (IVY) Vicente v. Geraldez, 52 SCRA 210 (EVA) 1973 Antonio, J. Relate ruling to: Liability of principal to thirdpersons/principal ratified the unauthorized acts of his agent/full and complete knowledge by ratifier of material facts essential FACTS: HI Cement Corporation acquired from Banahaw Shale Mining Association a Placer Lease Contract covering 2 mining claims; this included three parcels of land owned by Petitioners Vicente, Bernabe and Angeles. The Corporation, several occasions, informed the petitioners, of its acquisition aforesaid placer mining claims which included the areas occupied by them. It also requested them to allow its workers to enter the area in question for exploration, development and extraction of minerals therefrom, promising to pay them reasonable amounts as damages, but they refused to allow entry of the Corporations representatives. Hence, the Corporation filed a complaint for injunction and damages against petitioners. TC issued a writ of injuction and named Commissioners to conduct a survey and plan on the suggested relocation of the boundaries of the Corporations claim. Subsequently, the respective counsels conferred among themselves the possibility of terminating the case by compromise. For this purpose, they executed and submitted for court approval a Compromise Agreement which contains: 1. That the plaintiff is willing to buy the properties subject of litigation, and the

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To ratify the unauthorized acts of an agent and make it binding on the corporation, it must be shown that the governing body or officer authorized to ratify had full and complete knowledge of all the material facts connected to the transaction. The petitioner failed to do this. Ratification by a corporation cannot be made by the same person who wrongfully assumed the power to make the contract. Manila Park Cemetery v. Linsangan (JESSA) Facts: Sometime in 1984, Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the Holy Cross Memorial Park owned by MMPCI According to Baluyot, a former owner of a memorial lot 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. Sometime in March 1985, Baluyot informed Atty. Linsangan that he would be issued a new contract covering the subject lot in the name of the latter. Atty. Linsangan protested, but Baluyot assured him that he would still be paying the old price of P95,000.00 with P19,838.00 credited as full down payment leaving a balance of about P75,000.00. Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase a lot for the amount of P19,838.00. Contract has a listed price of P132,250.00. Atty. Linsangan objected to the new contract price, as the same was not the amount previously agreed upon. To convince Atty. Linsangan, Baluyot executed a document confirming that while the contract price is P132,250.00, Atty. Linsangan would pay only the original price of P95,000.00 Baluyot wrote Atty Linsangan saying that while the offer to purchase under the contract states that the total price of P132,250.00, the undertaking is to pay only the total sum of P95,000.00 under the old price By virtue of this letter, Atty. Linsangan signed the contract As requested by Baluyot, Atty. Linsangan issued 12 postdated checks of P1,800.00 each in favor of MMPCI. The next year, Atty. Linsangan again issued 12 postdated checks in favor of MMPCI. Baluyot verbally advised Atty. Linsangan that the contract 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. TC: MMPCI and Baluyot jointly and severally liable 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 payment, it allowed her to continue to receive postdated checks from Atty. Linsangan, which it in turn consistently encashed. CA: affirmed RTC 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; 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

Issue: 1. WON MMCI is liable 2. WON there is ratification 3. WON the contract was validly entered into by MMCI and Atty Linsangan Held: 1. 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. 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. As properly found both by the 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 it in her dealings with its clients/prospective buyers.

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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. 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 contained in such forms and, when signed by the buyer and an authorized officer of MMPCI, becomes binding on both parties. The Offer to Purchase duly signed by Atty. Linsangan, and accepted and validated by MMPCI showed a total list price of P132,250.00. Likewise, it was clearly stated therein that "Purchaser agrees that he has read or has had read to him this agreement, that he understands its terms and conditions, and that there are no covenants, conditions, warranties or representations other than those contained herein." By signing the Offer to Purchase, Atty. Linsangan signified that he understood its contents. That he and Baluyot had an agreement different from that contained in the Offer to Purchase is of no moment, and should not affect MMPCI, as it was obviously made outside Baluyot's authority. To repeat, Baluyot's authority was limited only to soliciting purchasers. She had no authority to alter the terms of the written contract provided by MMPCI. The document/letter "confirming" the agreement that Atty. Linsangan would have to pay the old price was executed by Baluyot alone. Nowhere is there any indication that the same came from MMPCI or any of its officers. It is a settled rule that persons dealing with an 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. The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make such an inquiry, he is chargeable with knowledge of the agent's authority and his ignorance of that authority will not be any excuse. The ignorance of a person dealing with an agent as to the scope of the latter's authority is no excuse to such person and the fault cannot be thrown upon the principal. A person dealing with an agent assumes the risk of lack of authority in the agent. He cannot charge the principal by relying upon the agent's assumption of authority that proves to be unfounded. The principal, on the other hand, may act on the presumption that third persons dealing with his agent will not be negligent in failing to ascertain the extent of his authority as well as the existence of his agency. In the instant case, it has not been established that Atty. Linsangan even bothered to inquire whether Baluyot was authorized to agree to terms contrary to those indicated in the written contract, much less bind MMPCI by her commitment with respect to such agreements. Even if Baluyot was Atty. Linsangan's friend and known to be an agent of MMPCI, her declarations and actions alone are not sufficient to establish the fact or extent of her authority. Atty. Linsangan as a practicing lawyer for a relatively long period of time when he signed the contract should have been put on guard when their agreement was not reflected in the contract. More importantly, Atty. Linsangan should have been alerted by the fact that Baluyot failed to effect the transfer of rights earlier promised, and was unable to make good her written commitment, nor convince MMPCI to assent thereto, as evidenced by several attempts to induce him to enter into other contracts for a higher consideration. As properly pointed out by MMPCI, as a lawyer, a greater degree of caution should be expected of Atty. Linsangan especially in dealings involving legal documents. He did not even bother to ask for official receipts of his payments, nor inquire from MMPCI directly to ascertain the real status of the contract, blindly relying on the representations of Baluyot. A lawyer by profession, he knew what he was doing when he signed the written contract, knew the meaning and value of every word or phrase used in the contract, and more importantly, knew the legal effects which said document produced. He is bound to accept responsibility for his negligence. 2. NONE. Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority. The substance of the doctrine is confirmation after conduct, amounting to a substitute for a prior authority. Ordinarily, the principal must have full knowledge at the time of ratification of all the material facts and circumstances relating to the unauthorized act of the person who assumed to act as agent. Thus, if material facts were suppressed or unknown, there can be no valid ratification and this regardless of the purpose or lack thereof in concealing such facts and regardless of the parties between whom the question of ratification may arise. Nevertheless, this principle does not apply if the principal's ignorance of the material facts and circumstances was willful, or that the principal chooses to act in ignorance of the facts. However, in the absence of circumstances putting a reasonably prudent man on inquiry, ratification cannot be implied as against the principal who is ignorant of the facts.

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A perusal of Baluyot's Answer reveals that the real arrangement between her and Atty. Linsangan was for the latter to pay a monthly installment of P1,800.00 whereas Baluyot was to shoulder the counterpart amount of P1,455.00 to meet the P3,255.00 monthly installments as indicated in the contract. Thus, every time an installment falls due, payment was to be made through a check from Atty. Linsangan for P1,800.00 and a cash component of P1,455.00 from Baluyot. However, it appears that while Atty. Linsangan issued the postdated checks, Baluyot failed to come up with her part of the bargain. This was supported by Baluyot's statements in her letter to Mr. Clyde Williams, Jr., Sales Manager of MMPCI, two days after she received the copy of the Complaint. In the letter, she admitted that she was remiss in her duties when she consented to Atty. Linsangan's proposal that he will pay the old price while the difference will be shouldered by her. She likewise admitted that the contract suffered arrearages because while Atty. Linsangan issued the agreed checks, she was unable to give her share of P1,455.00 due to her own financial difficulties. Baluyot even asked for compassion from MMPCI for the error she committed. Atty. Linsangan failed to show that MMPCI had knowledge of the arrangement. As far as MMPCI is concerned, the contract price was P132,250.00, as stated in the Offer to Purchase signed by Atty. Linsangan and MMPCI's authorized officer. The down payment of P19,838.00 given by Atty. Linsangan was in accordance with the contract as well. Payments of P3,235.00 for at least two installments were likewise in accord with the contract, albeit made through a check and partly in cash. In view of Baluyot's failure to give her share in the payment, MMPCI received only P1,800.00 checks, which were clearly insufficient payment. In fact, Atty. Linsangan would have incurred arrearages that could have caused the earlier cancellation of the contract, if not for MMPCI's application of some of the checks to his account. However, the checks alone were not sufficient to cover his obligations. If MMPCI was aware of the arrangement, it would have refused the latter's check payments for being insufficient. It would not have applied to his account the P1,800.00 checks. Moreover, the fact that Baluyot had to practically explain to MMPCI's Sales Manager the details of her "arrangement" with Atty. Linsangan and admit to having made an error in entering such arrangement confirm that MMCPI had no knowledge of the said agreement. It was only when Baluyot filed her Answer that she claimed that MMCPI was fully aware of the agreement. The acts of the agent beyond the scope of his authority do not bind the principal unless the latter ratifies the same. It also bears emphasis that when the third person knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person was aware of such limits of authority, he is to blame and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal's ratification. 3. YES. The contract was validly entered into both by MMPCI and Atty. Linsangan. By affixing his signature in the contract, Atty. Linsangan assented to the terms and conditions thereof. When Atty. Linsangan incurred delinquencies in payment, MMCPI merely enforced its rights under the said contract by canceling the same. Being aware of the limits of Baluyot's authority, Atty. Linsangan cannot insist on what he claims to be the terms of contract. The agreement, insofar as the P95,000.00 contract price is concerned, is void and cannot be enforced as against MMPCI. Neither can he hold Baluyot liable for damages under the same contract, since there is no evidence showing that Baluyot undertook to secure MMPCI's ratification. At best, the "agreement" between Baluyot and Atty. Linsangan bound only the two of them. As far as MMPCI is concerned, it bound itself to sell its interment space to Atty. Linsangan for P132,250.00 under contract, and had in fact received several payments in accordance with the same contract. If the contract was cancelled due to arrearages, Atty. Linsangan's recourse should only be against Baluyot who personally undertook to pay the difference between the true contract price of P132,250.00 and the original proposed price of P95,000.00. To surmise that Baluyot was acting on behalf of MMPCI when she promised to shoulder the said difference would be to conclude that MMPCI undertook to pay itself the difference, a conclusion that is very illogical, if not antithetical to its business interests. B. Article 1911 (REX)

Article 1911. 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. Lustan v. CA, 266 SCRA 663 (JESSA) Facts: Lustan is the registered owner of a parcel of land petitioner leased the property to Parangan for a term of 10 years and an annual rent of P1,000.00 During the period of lease, Parangan was regularly extending loans in small amounts to

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petitioner to defray her daily expenses and to finance her daughter's education petitioner executed an SPA in favor of Parangan to secure an agricultural loan from PNB with the aforesaid lot as collateral a second SPA was executed by petitioner, by virtue of which, Parangan was able to secure 4 additional loans the last three loans were without the knowledge of herein petitioner and all the proceeds therefrom were used by Parangan for his own benefit (but these encumbrances were duly annotated on the certificate of title) petitioner signed a Deed of Pacto de Retro Sale in favor of Parangan which was superseded by the Deed of Definite Sale which petitioner signed upon Parangan's representation that the same merely evidences the loans extended by him unto the former For fear that her property might be prejudiced by the continued borrowing of Parangan, petitioner demanded the return of her certificate of title. Instead of complying with the request, Parangan asserted his rights over the property which allegedly had become his by virtue of the aforementioned Deed of Definite Sale. [Under said document, petitioner conveyed the subject property and all the improvements thereon unto Parangan absolutely for and in consideration of the sum of Seventy Five Thousand (P75,000.00) Pesos] Aggrieved, petitioner filed an action for cancellation of liens, quieting of title, recovery of possession and damages against Parangan and PNB RTC: Deeds of Sale (with pacto de retro and absolute) are null and void equitable mortgage CA: reversed at bench, the evidence is sufficient to warrant a finding that petitioner and Parangan merely intended to consolidate the former's indebtedness to the latter in a single instrument and to secure the same with the subject property. Even when a document appears on its face to be a sale, the owner of the property may prove that the contract is really a loan with mortgage by raising as an issue the fact that the document does not express the true intent of the parties. In this case, parol evidence then becomes competent and admissible to prove that the instrument was in truth and in fact given merely as a security for the repayment of a loan. Art. 1602, (6), in relation to Art 1604 provides that a contract of sale is presumed to be an equitable mortgage in any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. That the case clearly falls under this category can be inferred from the circumstances surrounding the transaction as herein set forth: Petitioner had no knowledge that the contract she signed is a deed of sale. The contents of the same were not read nor explained to her so that she may intelligibly formulate in her mind the consequences of her conduct and the nature of the rights she was ceding in favor of Parangan. Petitioner is illiterate and her condition constrained her to merely rely on Parangan's assurance that the contract only evidences her indebtedness to the latter. When one of the contracting parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former. Settled is the rule that where a party to a contract is illiterate or cannot read or cannot understand the language in which the contract is written, the burden is on the party interested in enforcing the contract to prove that the terms thereof are fully explained to the former in a language understood by him. This burden has not been satisfactorily discharged.

Issues: A. WON the Deed of Definite Sale is in reality an equitable mortgage B. WON petitioner's property is liable to PNB for the loans contracted by Parangan by virtue of the special power of attorney Held:

1. YES. A contract is perfected by mere

consent. More particularly, a contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. This meeting of the minds speaks of the intent of the parties in entering into the contract respecting the subject matter and the consideration thereof. If the words of the contract appear to be contrary to the evident intention of the parties, the latter shall prevail over the former. In the case

2. YES. Third persons who are not parties to a

loan may secure the latter by pledging or mortgaging their own property. So long as valid consent was given, the fact that the loans were solely for the benefit of Parangan would not

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invalidate the mortgage with respect to petitioner's property. In consenting thereto, even granting that petitioner may not be assuming personal liability for the debt, her property shall nevertheless secure and respond for the performance of the principal obligation. C. It is admitted that petitioner is the owner of the parcel of land mortgaged to PNB on five (5) occasions by virtue of the Special Powers of Attorney executed by petitioner in favor of Parangan. Petitioner argues that the last three mortgages were void for lack of authority. She totally failed to consider that said Special Powers of Attorney are a continuing one and absent a valid revocation duly furnished to the mortgagee, the same continues to have force and effect as against third persons who had no knowledge of such lack of authority as provided in Article 1921 of the Civil Code [Art. 1921. If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof.] The SPA by petitioner in favor of Parangan duly authorized the latter to represent and act on behalf of the former. Having done so, petitioner clothed Parangan with authority to deal with PNB on her behalf and in the absence of any proof that the bank had knowledge that the last three loans were without the express authority of petitioner, it cannot be prejudiced thereby. As far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority if such 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 the understanding between the principal and the agent. The SPA particularly provides that the same is good not only for the principal loan but also for subsequent commercial, industrial, agricultural loan or credit accommodation that the attorney-in-fact may obtain and until the power of attorney is revoked in a public instrument and a copy of which is furnished to PNB. 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 (Article 1911, Civil Code). The mortgage directly and immediately subjects the property upon which it is imposed. The property of third persons which has been expressly mortgaged to guarantee an obligation to which the said persons are foreign, is directly and jointly liable for the fulfillment thereof; it is therefore subject to execution and sale for the purpose of paying the amount of the debt for which it is liable. However, petitioner has an unquestionable right to demand proportional indemnification from Parangan with respect to the sum paid to PNB from the proceeds of the sale of her property in case the same is sold to satisfy the unpaid debts. Articles 1912, 1913, 1914 (ANGELA)

Art. 1912. The principal must advance to the agent, should the latter so request, the sums necessary for the execution of the agency. Should the agent have advanced them, the principal must reimburse him therefor, even if the business or undertaking was not successful, provided the agent is free from all fault. The reimbursement shall include interest on the sums advanced, from the day on which the advance was made. Obligations of principal to the agent under this Article:

1.

Obligation to advance funds. The agent is bound by his acceptance to carry out the agency; on the other hand, the principal is under obligation to provide the means with which it execute the agency. In the absence of stipulation that the agent shall advance the necessary funds, the principal must advance to the agent the sums necessary for the execution of the agency; otherwise, he cannot held the liable for damages which he may incurred by the latters non-performance.

2.

Obligation to reimburse agent for funds advance by latter. An agency is for the principals benefit. In case the agent advanced the sums necessary for the execution of the agency, whether in his own initiative or by stipulation, the said advances must be reimbursed by the principal with INTEREST from the day the advance was made. Demand is not necessary in order that delay on part of the principal shall exist. Such obligation is founded on the implied promise to repay since the proper execution of the agency involves an implied request on part of the principal to incur the necessary expenses.

Moreover, the obligation is NOT affected even if the undertaking turns out to be unsuccessful. Art. 1913. The principal must also 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. (1729)

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A. C. D.

Where damages caused by the execution of the agency principal is liable. Where damages is caused by wrongful acts of third persons principal not liable if he is not responsible for such third persons. Where agent acted upon his own account no obligation to indemnify since no agency exists in the legal sense.

Art. 1914. The agent may retain in pledge the things which are the object of the agency until the principal effects the reimbursement and pays the indemnity set forth in the two preceding articles. Right of agent to retain in pledge object of agency an example of a legal pledge (i.e. imposed by law, as opposed to contractual pledges). NATURE of agents right of lien: (1) Right limited to the subject matter of the agency it is a specific, not a general lien. (2) Right requires the possession, custody, control or disposing power of the agent of the subject matter. (3) Right generally only in favor of agent (not to be extended to a sub-agent in the absence of ratification by the principal of subagents acts). Albaladejo v. Phil. Refining, 48 Phil 556 (TOPE) FACTS: Albaladejo y Cia. was engaged in the buying and selling of copra. Visayan Refining Co was engaged in manufacture coconut oil. On August 28, 1918, the plaintiff made a contract with the Visayan wherein the former bind itself to sell to the latter (Visayan) all the Copra it will buy in Albay. Pursuant to this agreement the plaintiff, during the year therein contemplated, bought copra extensively for the Visayan Refining Co. At the end of said year both parties found themselves satisfied with the existing arrangement, and they therefore continued by tacit consent to govern their future relations by the same agreement. This situation affairs remained until July 9, 1920, when the Visayan Refining Co. closed down its factory at Opon, Cebu and withdrew from the copra market. When the contract was originally made, Albaladejo y Cia. apparently had only one commercial establishment, i.e., that at Legaspi;

but the large requirements of the Visayan Refining Co. for copra appeared so far to justify the extension of the plaintiff's business that during the course of the next two or three years it established some 20 agencies, or subagencies, in various ports and places of the Province of Albay and neighboring provinces. After the Visayan Refining Co. had ceased to buy copra, as above stated, of which fact the plaintiff was duly notified, the supplies of copra already purchased by the plaintiff were gradually shipped out and accepted by the Visayan Refining Co. In the course of the next 8 or 10 months the accounts between the two parties were liquidated. The last account rendered by the Visayan Refining Co. to the plaintiff was for the month of April, 1921, and it showed a balance of P288 in favor of the defendant. Under date of June 25, 1921, the plaintiff company addressed a letter from Legaspi to the Philippine Refining Co. (which had now succeeded to the rights and liabilities of the Visayan Refining Co.), expressing its approval of said account. In this letter no dissatisfaction was expressed by the plaintiff as to the state of affairs between the parties; but about six weeks thereafter the present action was begun. The cause of action was hinged from the clause in the contract which says that Visayan was obligated to provide transportation for the copra collected by the plaintiff and deposited for shipment at various places. To quote the allegation: That, from the month of September, 1918, until the month of June, 1920, the plaintiff opportunely advised the Visayan of the stocks that the former had for shipment, and, from time to time, requested the Visayan to send vessels to take up said stocks; but that the Visayan culpably and negligently allowed a great number of days to elapse before sending the boats for the transportation of the copra to Opon, Cebu TC said theres no negligence on part of Visayan in providing for the transportation, hence they did not cause the shrinkage of the copra. Court said Visayan was still liable and the fact that it paid an amount of P15,610.41 does not mean it already paid its liability for the amount was for another claim. Plaintiff then claimed that its expense in maintaining and extending its organization for the purchase of copra in the period between July, 1920, to July, 1921, were incurred at the instance and request of the defendant, or upon

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any promise of the defendant to make the expenditure good. Court said a careful examination of the evidence, mostly of a documentary character, is, in our opinion, convincing that the supposed liability does not exist. Plaintiff then advanced its contention is advanced that the contract between the plaintiff and the Visayan Refining Co. created the relation of principal and agent between the parties, and the reliance is placed upon article 1729 of the Civil Code which requires the principal to indemnify the agent for damages incurred in carrying out the agency. Issue: Was an agency relationship created? Held: NO. The relation between the parties was not that of principal and agent in so far as relates to the purchase of copra by the plaintiff. It is true that the Visayan Refining Co. made the plaintiff one of its instruments for the collection of copra; but it is clear that in making its purchases from the producers the plaintiff was buying upon its own account and that when it turned over the copra to the Visayan Refining Co., pursuant to that agreement, a second sale was effected. In paragraph 3 of the contract it is declared that during the continuance of this contract the Visayan Refining Co. would not appoint any other agent for the purchase of copra in Legaspi; and this gives rise indirectly to the inference that the plaintiff was considered its buying agent. Court said that the use of this term in one clause of the contract cannot dominate the real nature of the agreement as revealed in other clauses, no less than in the caption of the agreement itself. In some of the trade letters also the various instrumentalities used by the Visayan Refining Co. for the collection of copra are spoken of as agents. Court said that this designation was evidently used for convenience; and it is very clear that in its activities as a buyer the plaintiff was acting upon its own account and not as agents, in the legal sense, of the Visayan Refining Co. The title to all of the copra purchased by the plaintiff undoubtedly remained in it until it was delivered by way of subsequent sale to said company. Appealed judgment will therefore be affirmed D. Articles (MARK) 1915, 1916, 1917, 1918

Art. 1915. 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. (1731) Art. 1916. When two persons contract with regard to the same thing, one of them with the agent and the other with the principal, and the two contracts are incompatible with each other, that of prior date shall be preferred, without prejudice to the provisions of Article 1544. (n) Art. 1917. In the case referred to in the preceding article, if the agent has acted in good faith, the principal shall be liable in damages to the third person whose contract must be rejected. If the agent acted in bad faith, he alone shall be responsible. (n) Art. 1918. 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; (2) When the expenses were due to the fault of the agent; (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. De Castro v. CA, 384 SCRA 607 (IVY) Sta. Romana v. Imperio, 15 SCRA 625 (IVY) IV. A. Modes of Extinguishment Articles 1919, 1920 (IVY)

Art. 1919. Agency is extinguished: (1) By its revocation; (2) By the withdrawal of the agent; (3) By the death, civil interdiction, insanity or insolvency of the principal or of the agent; (4) By the dissolution of the firm or corporation which entrusted or accepted the agency; (5) By the accomplishment of the object or purpose of the agency; (6) By the expiration of the period for which the agency was constituted. (1732a) Art. 1920. 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. Perez v. PNB, 17 SCRA 833 (IVY)

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Bicol Savings and Loan Assoc. v CA (GEN) March 31, 1989 Melencio-Herrera, J. FACTS: Juan de Jesus was the owner of a parcel of land in Naga City. He executed a Special Power of Attorney in favor of his son, Jose de Jesus: "To negotiate, mortgage my real property in any bank either private or public entity preferably in the Bicol Savings Bank, Naga City, in any amount that may be agreed upon between the bank and my attorney-in-fact." Jose de Jesus obtained a loan of P20,000 from petitioner bank. To secure payment, he executed a deed of mortgage on the real property referred to in the Special Power of Attorney. Then, Juan de Jesus died. Jose failed to pay the loan. Hence the bank extrajudicially foreclosed the mortgage. In the subsequent public auction, the mortgaged property was sold to the bank as the highest bidder to whom a Provisional Certificate of Sale was issued. Private respondents failed to redeem the property within one year from the date of the registration of the Provisional Certificate of Sale. Hence, a Definite Certificate of Sale was issued in favor of the bank. They negotiated with the bank for the repurchase of the property. But no agreement was reached. The bank subsequently sold the properties to third parties. Private respondents filed a Complaint with the CFI of Naga City for the annulment of the foreclosure sale or for the repurchase by them of the property. It dismissed the case, ruling that the title of the bank over the mortgaged property had become absolute upon the issuance and registration of the said deed in its favor. CA reversed the ruling of the CFI. It applied Article 1879 and stated that since the special power to mortgage granted to Jose de Jesus did not include the power to sell, the foreclosure proceedings and auction sale held were null and void because the Special Power of Attorney given by Juan de Jesus to Jose de Jesus was merely to mortgage his property, and not to extrajudicially foreclose the mortgage and sell the mortgaged property in the said extrajudicial foreclosure. The bank should have resorted to judicial foreclosure. ISSUE: WON the agent-son exceeded the scope of his authority in agreeing to a stipulation in the mortgage deed that petitioner bank could extrajudicially foreclose the mortgaged property. HELD: NO. The sale proscribed by a special power to mortgage under Article 1879 is a voluntary and independent contract, and not an auction sale resulting from extrajudicial foreclosure, which is precipitated by the default of a mortgagor. Absent that default, no foreclosure results. The stipulation granting an authority to extrajudicially foreclose a mortgage is an ancillary stipulation supported by the same cause or consideration for the mortgage and forms an essential or inseparable part of that bilateral agreement The power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection. That power survives the death of the mortgagor. The right of the mortgagee bank to extrajudicially foreclose the mortgage after the death of the mortgagor Juan de Jesus, acting through his attorney-in-fact, Jose de Jesus, did not depend on the authorization in the deed of mortgage executed by the latter. That right existed independently of said stipulation and is clearly recognized in Section 7, Rule 86 of the Rules of Court, which grants to a mortgagee three remedies that can be alternatively pursued in case the mortgagor dies, to wit: (1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription, without right to file a claim for any deficiency. It matters not that the authority to extrajudicially foreclose was granted by an attorney-in-fact and not by the mortgagor personally. The stipulation in that regard, although ancillary, forms an essential part of the mortgage contract and is inseparable therefrom. No creditor will agree to enter into a mortgage contract without that stipulation intended for its protection. Barretto v. Santa Marina, 20 Phil 440 (MAI) Diolosa v. CA, 130 SCRA 350 - ROG Danon v. Brimo, 44 Phil 133, supra Wylie v. Marine National Bank, 42 Phil 133 TOFF Sevilla v. CA, 160 SCRA 171, supra Valenzuela v. CA, 190 SCRA 1 - REG Florentino v. Sandiganbayan, 202 SCRA 309 -EARLA CMS Logging v. CA, 211 SCRA 374, supra Valera v. Velasco, 51 Phil 695 - JANCES March 13, 1928 J. Villa-Real

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Facts: Plaintiff appointed defendant as his attorney-in-fact with authority to manage his property consisting of usufruct of real property in Manila. In the liquidation of the accounts made my defendant, plaintiff was revealed to owe defendant P1100. Misunderstanding arose between them, thus the defendant brought suit against the plaintiff. Judgment was rendered in favor of defendant. The sheriff then levied upon the plaintiff's right of usufruct, sold it at public auction and adjudicated it to the defendant in payment of all of his claim. Plaintiff sold his right of redemption to a person but recovered the same after some time. After which, his right of redemption was sold by the sheriff at a public auction to Vallejo due to judgment rendered against plaintiff in another civil case. Vallejo then sold this right to defendant Velasco. Plaintiff then filed a complaint against Velasco alleging that the sale of the right to redemption to Velasco was null and void since Velasco was still his agent, there being no express renunciation. Ruling: CFI dismissed complaint; no right of action. Issue: WON the agency was terminated despite lack of express renunciation [YES} HELD: When the agent filed a complaint against his principal for recovery of a sum of money arising from the liquidation of the accounts between them in connection with the agency, Federico Valera could not have understood otherwise than that Miguel Velasco renounced the agency; because his act was more expressive than words and could not have caused any doubt. The fact that an agent institutes an action against his principal for the recovery of the balance in his favor resulting from the liquidation of the accounts between them arising from the agency, and renders and final account of his operations, is equivalent to an express renunciation of the agency, and terminates the juridical relation between them. Disposition: Judgment appealed from affirmed. B. Articles 1921, 1922, 1923 ALAIN agency from the day on which notice thereof was given to the former agent, without prejudice to the provisions of the two preceding articles. Effect of revocation in relation to third persons:

1.

2.

Agent authorized to contract with specified persons (1921) The reason for the law is obvious. Since the third persons have been made to believe by the principal that the agent is authorized to deal with them, they have a right to presume that the representation continues to exist in the absence of notification by the principal. Of course, notice is not required if the third persons already know of the revocation. Agent authorized to contract with public in general In case the agent has general powers (as when the agent has been appointed to manage a business), innocent third persons dealing with the agent will not be prejudiced b the revocation before they had knowledge thereof. In this case, however, the fact that the revocation was advertised in a newspaper of general circulation would be sufficient warning to third persons.

Under Article 1921, the notice of revocation must be personal; under Article 1922, it may be personal. Revocation by appointment of new agent:

1.

Implied revocation of previous agency. There is implied revocation of the previous agency when the principal appoints a new agent for the same business or transaction provided there is no incompatibility. But the revocation does not become effective as between the principal and the agent until it is in some way communicated to the latter. There is no implied revocation where the appointment of another agent is not incompatible with the continuation of a like authority in the first agent, or the first agent is not given notice of the appointment of the new agent.

Art. 1921. If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof. (1734) Art. 1922. If the agent had general powers, revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation. Notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons. (n) Art. 1923. The appointment of a new agent for the same business or transaction revokes the previous

2.

Substitution of counsel of record. No substitution of counsel of record is allowed unless the following essential requisites of a valid substitution of counsel concur: a. There must be a written request for substitution; b. It must be filed with the written consent of the client; c. It must be with the written consent of the attorney to be substituted; and

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d. In case, the consent of the attorney to be substituted cannot be obtained, there must be at least a proof of notice,that the motion for substitution was served on him in the manner prescribed by the Rules of Court. Lustan v. CA, 266 SCRA 683, supra Rammani v. CA, 196 SCRA 731 ALAIN Central Surety vs Hodges (JESSA) Facts: Prior to January 15, 1954, lots had been sold by C. N. Hodges to Vicente M. Layson, for the sum of P43,000.90, payable on installments. As of January 15, 1954, the outstanding balance of Layson's debt, after deducting the installments paid by him prior thereto, amounted to P15,516.00. In order that he could use said lots as security for a loan he intended to apply from a bank, Layson persuaded Hodges to execute in his favor a deed of absolute sale over the properties, with the understanding that he would put up a surety bond to guarantee the payment of said balance. Accordingly, Layson executed, in favor of Hodges, a promissory note for P15,516.00, with interest thereon at the rate of 1% per month, and the sum of P1,551.60, for attorney's fees and costs, in case of default in the payment of the principal or interest of said note. To guarantee the same, on January 23, 1954, the petitioner through the manager of its branch office in Iloilo, Mrs. Rosita Mesa, executed in favor of Hodges the surety bond, which was good for 12 months from the date thereof. When Layson defaulted in the discharge of his aforesaid obligation, Hodges demanded payment from the petitioner, which, despite repeated extensions of time granted thereto, at its request, failed to honor its commitments under the surety bond. On October 24, 1955, Hodges commenced, the present action against Layson and petitioner herein, to recover from them, jointly and severally, the sums of P17,826.08, representing the principal and interest due up to said date, and P1,551.60, as attorney's fees. Having failed to file its answer within the reglementary period, the petitioner was, on January 18, 1956, declared in default. When the case was called for trial, insofar as Layson was concerned, the latter did not appear, and Hodges was allowed to introduce his evidence. Thereafter, said motion was denied, and upon presentation of the evidence of Hodges against herein petitioner, judgment was rendered against the latter as prayed for in the complaint. Thereupon, petitioner filled a motion for reconsideration and a motion for relief under Rule 38. RTC later set aside its decision against the petitioner and admitted its answer, attached to the motion to set aside the order of default. In its answer, petitioner disclaimed liability under the surety bond in question, upon the ground (a) that the same is null and void, it having been issued by Mrs. Rosita Mesa after her authority therefor had been withdrawn on March 15, 1952; (b) that even under her original authority Mrs. Mesa could not issue surety bonds in excess of P8,000.00 without the approval of petitioner's main office which was not given to the surety bond in favor of Hodges; and (c) that the present action is barred by the provision in the surety bond to the effect that all claims and actions thereon should be filed within three (3) months from the date of its expiration on January 23, 1955 RTC: Central Surety ordered to pay Hodges P8000 Hodges appealed insofar as limiting his award to P8000 and upon the ground that the trial court had erred in holding petitioner liable under a contract entered into by its agent in excess of her authority CA: petitioner was liable on a bond issued by an agent petitioner has appealed to SC, alleging that the CA has erred in finding that petitioner was liable on a bond issued by an agent whose authority had already been withdrawn and revoked (this is predicated upon the fact that prior to when the surety bond involved in this case was executed, petitioner herein had withdrawn the authority of its branch manager Mrs. Rosita Mesa, to issue surety bonds)

Issues: 1. WON the surety bond issued by Mesa is valid 2. WON Article 1922 is applicable Held: 1. YES Said surety bond is valid. In the first place, there appears to be no showing that the revocation of authority was made known to the public in general by publication, nor was Hodges notified of such revocation despite the fact that he was a regular client of the firm. Secondly, some surety bonds issued by Mrs. Mesa in favor of Hodges after her authority had allegedly been curtailed, were honored by the Central Surety despite the fact that these were not reported to the

RTC: rendered a partial decision against Layson (petitioner having, in the meantime, filed a motion to set aside the order of default, which motion was still pending resolution)

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main office at the time of their issuance. These accounts were paid and by these acts, Central Surety ratified Mrs. Mesa's unauthorized acts and as such it is now estopped from setting forth Mrs. Mesa's lack of authority to issue surety bonds. It has been held that although the agent may have acted beyond the scope of his authority, or may have acted without authority at all, the principal may yet subsequently see fit to recognize and adopt the act as his own. Ratification being a matter of assent to and approval of the act as done on account of the person ratifying any words or acts which show such assent and approval are ordinarily sufficient. Moreover, the relocation of agency does not prejudice third persons who acted in good faith without knowledge of the revocation. 2. YES Indeed, Article 1922 of our Civil Code provides: If the agent had general powers, revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation. Notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons. It is not disputed that petitioner has not caused to be published any notice of the revocation of Mrs. Mesa's authority to issue surety bonds on its behalf, notwithstanding the fact that the powers of Mrs. Mesa, as its branch manager in Iloilo, were of a general nature, for she had exclusive authority, to represent petitioner herein, not with a particular person, but with the public in general, "in all the negotiations, transactions, and business in wherein the Company may lawfully transact or engage on subject only to the restrictions specified in their agreement, copy of which was attached to petitioner's answer. Contrary to petitioner's claim, Article 1922 applies whenever an agent has general powers, not merely when the principal has published the same, apart from the fact that the opening of petitioner's branch office amounted to a publication of the grant of powers to the manager of said office. Then, again, by honoring several surety bonds issued in its behalf by Mrs. Mesa, petitioner induced the public to believe that she had authority to issue such bonds. As a consequence, petitioner is now estopped from pleading, particularly against a regular customer thereof, like Hodges, the absence of said authority. Dy Buncio & Co., Inc. v Ong Guan Can (JESSA) FACTS Ong Guan Can JR. as agent of Ong Guan Can sells the rice mill and camarin for p13,000 and gives as power of attorney dated May 23, 1928. A copy of this public instrument is attached to the deed and recorded with the deed in the office of the Registry of Deeds in Capiz Dy Buncio (as creditor) claims that that the property belongs to its judgment creditor, Ong Guan Can, thus can be subject to execution. Defendants Juan Tong and Puan Giok Eng claim as owner and lessee of the owner by virtue of a deed dated July 31, 1931, by Ong Guan Can, Jr. CFI Capiz held that the deed was invalid and that the property was subject to the execution which has been levied on said properties by the judgment creditor of the owner. Juan Tong and Pua Giok appealed.

ISSUE: WON the deed of July 31, 1931 is valid. HELD: NO. The 1928 power of attorney is not a general power of attorney but a limited one and does not give the express power to alienate the properties in question. Petioners claim that the that this defect is cured by Exh.1, which purports to be a general power of attoney given to the same agent in 1920. The making and accepting of a new power of attorney, whether it enlarges or decreases the power an agent under a prior power of attorney, must be held to supplant and revoke the latter provided there is INCONSISTENCY or incompatibility. If the new appointment with the limited powers does not revoke the general power of attorney, the execution of the second power of attorney would be a mere futile gesture. The title of Ong Guan Can not having been divested by the so-called deed of July 31, 1931, his properties are subject to attachment and execution. Garcia v. de Manzano, 39 Phil 577 ANGELA 1919 Moir, J. FACTS Narciso gave a general power of attorney to his son, Angel L. Manzano on the 9th of February, 1910, and on the 25th of March a second general power-of-attorney to his wife, Josefa Samson.

Angel, acting under his GPA sold Narcisos half interest to the steamer San Nicolas, and mortgaged 3 parcels of land in Antimonan to Juan Garcia. Upon Narcisos death, Josefa was named administratrix to Narcisos properties.

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Garcia brought action against Narcisos Estate to foreclose the mortgage. ISSUES [as raised in Josefas counterclaim] 1. WON the power of attorney of Josefa revoked that of Angel? 2. WON Angels GPA authorize her to sell the boat ? HELD/RATIO: 1. NO Art. 1735 [now 1923a] provides: The appointment of a new agent for the same business produces a revocation of the previous agency from the day on which notice was given to the former agent, excepting the provisions of the next preceding article. There is no proof in the record that the first agent, the son, knew of the power-of-attorney to his mother. It was necessary for the defendants to prove that the son had notice of the second power-of-attorney. As they have not done so, and it must be considered that Angel L. Manzano was acting under a valid power-ofattorney from his father which had not been legally revoked on the date of the sale of the half interest in the steamer to the Garcia. 2. YES. The power-of-attorney does not expressly state that the agent may sell the boat, but a power so full and complete authoring the sale of real property, must necessarily carry with it the right to sell a half interest in a small boat. The record further shows the sale was necessary in order to get money or a credit without which it would be impossible to continue the business which was being conducted in the name of Narciso L. Manzano and for his benefit. Santana-Cruz v. CA, 361 SCRA 520 - JESSA Facts: Juanson-Cuizon, representing private respondents (the heirs of the late Valeriana Marilao), filed against petitioner and Concepcion, a Complaint for Revival/Execution of Judgment After Lapse of Five Years RTC:in favor of the plaintiffs and against the defendants Francisco Santana and the Heirs of Catalina Reyes, ordering the latter to reconvey in favor of the plaintiffs, as Heirs of Valeriana Marilao CA: affirmed in toto petitioner filed an Omnibus Motion, praying that the Complaint be dismissed on the ground that it failed to state a cause of action, that it was barred by the statute of limitations, and that it be expunged from the records of the case for having been filed by a person not authorized to practice law RTC: denied modified: Register of Deeds is ordered to cancel the Transfer Certificate of Title and all the resultant titles derived therein and in lieu thereof, the corresponding new transfer certificates of title be issued in the name of the petitioners petitioner filed a Petition for Certiorari and Prohibition with a Prayer for the Issuance of a Temporary Restraining Order with the Court of Appeals alleging that the court a quo acted with grave abuse of discretion CA: granted petition subsequently reversed and set aside RTCs orders Atty. Julian S. Yap who filed his appearance as counsel for private respondents, also filed a Motion for Reconsideration, which, among others, stated that private respondents, some of whom have died and are succeeded by their heirs, had revoked the authority of their Attorney-in-Fact, Patrocinia J. Cuizon, to represent them CA received another Motion for Reconsideration filed by the counsel of record, Atty. Raul A. Mora, for private respondents petitioner filed her Opposition stating among others, that she received two (2) motions for reconsideration of private respondents filed by different counsels, and that she was bound to treat Atty. Raul A. Mora as private respondents' counsel of record as she had not received any notice of proper substitution of private respondents' counsel CA: denied the motion for reconsideration filed by Atty Mora subsequently granted

Issues: 1. WON Atty Mora may be substituted by Atty. Julian S. Yap merely from the filing of a formal appearance by the latter 2. WON CA erred in granting the motion for reconsideration of Atty Mora Held: 1. The private respondents filed with the CA 2 separate motions for reconsideration through 2 counsels, namely, Atty. Raul A. Mora and Atty. Julian S. Yap. The motion for reconsideration filed by Atty. Yap stated, among others, that due to acts inimical to their interests, the private respondents had revoked the authority of Attorney-in-Fact Patrocinia Juanson-Cuizon to represent them and through their newly designated Attorneys-in-Fact decided to take over from her the conduct of the instant case and to retain Atty. Julian S. Yap as their counsel considering that Atty. Raul A. Mora

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was the personal counsel of Patrocinia JuansonCuizon.CA stated that "there is no showing that all the private respondents have revoked the authority granted to Patrocinia Juanson-Cuizon." Be that as it may, a revocation of authority of Patrocinia Juanson-Cuizon as Attorney-in-Fact of private respondents heirs of Valeriana Marilao, who are recognized as the real parties in interest in this case, should not affect Atty. Raul A. Mora, who remains counsel of record of private respondents absent a valid substitution of counsel. Atty. Raul A. Mora may not be presumed substituted by Atty. Julian S. Yap merely from the filing of a formal appearance by the latter. No substitution of counsel of record is allowed unless the following essential requisites of a valid substitution of counsel concur: (1) there must be a written request for substitution; (2) it must be filed with the written consent of the client; (3) it must be with the written consent of the attorney to be substituted; and (4) in case the consent of the attorney to be substituted cannot be obtained, there must be at least a proof of notice that the motion for substitution was served on him in the manner prescribed by the Rules of Court. In the Supplemental Motion for Reconsideration filed by Atty. Raul A. Mora with the Court of Appeals, he stated that the heirs of Valeriana Marilao never dismissed him nor replaced him as their counsel, thus, the appearance of Atty. Julian S. Yap was improper. In petitioner's Opposition, she stated that she received 2 motions for reconsideration from private respondents filed by different counsels, and was bound to treat Atty. Raul A. Mora as private respondents' counsel of record as she had not received any notice of proper substitution of private respondents' counsel. In the absence of compliance with the essential requirements for valid substitution of the counsel of record, Atty. Mora, the court can safely presume that he is responsible for the conduct of the case. The rule is intended to ensure the orderly disposition of cases. 2. NO. CA did not err in acting on the motion for reconsideration of private respondents, which was seasonably filed through their counsel of record, Atty. Raul A. Mora and received by the Court. In fact, the respondent court should have acted only on the said motion for reconsideration. The inadvertence on the part of the respondent court and the delay in sewing the original copy of said motion for reconsideration in the rollo of the case should not prejudice the legal interest of private respondents who were under the proper representation and charge of their counsel of record, Atty. Raul A. Mora. To set things straight, inasmuch as Atty. Yap had no authority to represent private respondents, absent a valid substitution of their counsel, the motion for reconsideration filed by him is deemed a mere scrap of paper. C. Artciles 1924, 1925 - REX

Art. 1924. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. (n) Art. 1925. When two or more principals have granted a power of attorney for a common transaction, any one of them may revoke the same without the consent of the others CMS Logging v. CA (TOPE) 1992 J. Nocon Facts: Petitioner CMS is a forest concessionaire engaged in the logging business, while private respondent DRACOR is engaged in the business of exporting and selling logs and lumber. On August 28, 1957, CMS and DRACOR entered into a contract of agency whereby the former appointed the latter as its exclusive export and sales agent for all logs that the former may produce, for a period of five (5) years. One of the provisions indicated that DRACOR was to handle all negotiations. 6 months before the CoAgency was about to expire CMS president went to Tokyo and found out that DRACOR sold CMS logs through Shinko Trading and earned a commission of $1 per 1000 bd. Ft. of logs. CMS claimed that this commission paid to Shinko was in violation of the agreement and that it (CMS) is entitled to this amount as part of the proceeds of the sale of the logs. CMS contended that since DRACOR had been paid the 5% commission under the agreement, it is no longer entitled to the additional commission paid to Shinko as this tantamount to DRACOR receiving double compensation for the services it rendered. CMS later shipped and sold directly to Japanes buyers without the help of DRACOR. DRACOR counterclaims for the commissions on these transactions. CA found no evidence that Shinko collected the commissions Issue: 1. WoN Shinko received the commissions 2. WoN DRACOR is entitled to the commissions on the Direct Sales of CMS to Japanese buyers Held:

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1. Petition unmeritorious, no evidence. The finding of fact was only based on a summary from CMS itself. Moreover, even if it was shown that Shinko did in fact receive the commissions in question, CMS is not entitled thereto since these were apparently paid by the buyers to Shinko for arranging the sale. This is therefore not part of the gross sales of CMS's logs. 2. No. We find merit in CMS's contention that the appellate court erred in holding that DRACOR was entitled to its commission from the sales made by CMS to Japanese firms. The principal may revoke a contract of agency at will, and such revocation may be express, or implied, and may be availed of even if the period fixed in the contract of agency as not yet expired. As the principal has this absolute right to revoke the agency, the agent can not object thereto; neither may he claim damages arising from such revocation, unless it is shown that such was done in order to evade the payment of agent's commission. In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms. Yet, during the existence of the contract of agency, DRACOR admitted that CMS sold its logs directly to several Japanese firms. This act constituted an implied revocation of the contract of agency under Article 1924 of the Civil Code, which provides: Art. 1924 The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. Since the contract of agency was revoked by CMS when it sold its logs to Japanese firms without the intervention of DRACOR, the latter is no longer entitled to its commission from the proceeds of such sale and is not entitled to retain whatever moneys it may have received as its commission for said transactions. Neither would DRACOR be entitled to collect damages from CMS, since damages are generally not awarded to the agent for the revocation of the agency, and the case at bar is not one falling under the exception mentioned, which is to evade the payment of the agent's commission. D. Article 1926 - MARK FACTS: Ong Guan Can, Jr. executed on behalf of the Ong Guan Can, the deed covering the sale of a rice-mill and camarin, in favor of buyers who relied upon a 1928 power of attorney attached to the deed, but which turned out was not a general power of attorney but a limited one and [did] not give the express power to alienate the properties in question. The creditors of Ong Guan Can sought to have the sale declared void. But the buyers, defendants Juan Tong and Pua Giok Eng claimed that they were the owners and lessees of the property. Defendants claimed that the defect in the sons authority to sell on behalf of the father was cured by an earlier 1920 general power of attorney given to the same agent [son] by the father. The CFI of Capiz held that the deed was invalid and that the property was subject to the execution which has been levied on the properties by the judgment creditor of the owner. ISSUE: WON the deed of sale was invalid HELD: YES. The sale is void. The making and accepting of a new power of attorney, whether it enlarges or decreases the power of the agent under a prior power of attorney, must be held to supplant and revoke the latter when the two are inconsistent. If the new appointment with limited powers does not revoke the general power of attorney, the execution of the second power of attorney would be a mere futile gesture. Since the title of Ong Guan Can has not been divested by deed of sale, his properties are subject to attachment and execution. Garcia v. de Manzano, 39 Phil 577 - MAI E. Article 1927 - ROG

Art. 1927. An agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. New Manila Lumber Co. v. Republic - TOFF Bacaling v. Muya, 380 SCRA 714 - REG National Sugar Trading v. PNB, 396 SCRA 528 - EARLA Sevilla, supra Del Rosario v. Abad, 104 Phil 648 - ABBY 1958; Padilla Facts:

Art. 1926. A general power of attorney is revoked by a special one granted to another agent, as regards the special matter involved in the latter. Dy Buncio & Co., Inc. v Ong Guan Can (GEN) Oct. 2, 1934 Hull, J.

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Plaintiffs are the children and heirs of Tiburcio del Rosario. Del Rosario was a grantee of a homestead patent in Nueva Ecija. The Certificate was issue Feb 11, 1937. He obtained a loan from Primitivo Abad Feb 24, 1937 (remember the 5 yr prohibition from encumbrance rule) for P2000 at 12% pa payable Dec 1941. The security for the payment was the improvement on the parcel of land. An irrevocable special power of attorney was also executed authorizing Abad to sell and convey the parcel of land. December 1945 Tiburcio died leaving the mortgage debt unpaid. Later, Primitivo sold the land to his son Teodorico Abad for P1. Title now registered in Teodoricos name. Del Rosario heirs filed suit for recovery and possession of the land. opportunity to take the necessary steps to meet the situation. Right of the agent to withdraw: Just as the principal may revoke generally the agency at will, the agent may likewise renounce or withdraw from the agency at any time, without the consent of the principal, even in violation of the latters contractual rights; subject to liability for breach of contract or for tort.

1.

2.

Issue: 1. WoN Power of Attorney created an agency coupled with an interest 2. WoN the land was sold validly Held: No. The power of attorney executed by the homesteader in favor of Abad did not create an agency nor did it clothe the agency with irrevocable character. A mere statement in the power of attorney that it is coupled with an interest is not enough. In what does such interest consist must be stated in the power of attorney. The mortgage has nothing to do with the power of attorney and may be foreclosed by the mortgagee upon the failure of the mortgagor to comply with his obligation. As the agency was not coupled with an interest, it was terminated upon the death of the principal, and the agent could no longer validly convey the land. Hence, the sale was null and void. Granting that the PoA in question was valid it would subject the land to an encumbrance. (executed within 5 yrs after issuance of the patent, the same is null and void.) Macondray, supra Coleongco v. Claparols, 10 SCRA 577 - JANCES F1. Articles 1928, 1929 ALAIN

Without just cause The reason for the indemnity imposed by law is that the agent fails in his obligation and as such, he answers for losses and damages occasioned by the nonfulfillment. With just cause If the agent withdraws from the agency for a valid reason, as when the withdrawal is based on the impossibility of continuing with the agency without grave detriment to himself, or is due to a fortuitous event, the agent cannot be held liable.

Obligation of agent to continue to act after withdrawal: The purpose of the law is to prevent damage or prejudice to the principal. The law reconciles the interests of the agent with those of the principal, and if permits the withdrawal of the agent, it is on the condition that no damage results to the principal, and if the agent desires to be relieved of the obligation of making reparation when he withdraws for a just cause, he must continue to act so that no injury may be caused to the principal. F2. Articles 1930, 1931, 1932 EVA

Dela Pena v. Hidalgo (ANGELA) (This case is supra and rather complicated so Ill just include the relevant details) The CASE was instituted by the heirs of Jose Gomiz y Dela Pea to recover sums of money from Federico Hidalgo which he allegedly owes the estate of Jose representing unremitted accounts during the administration of Federico of the properties of Jose Gomiz y Dela Pea. FACTS In 1887, Federico Hidalgo took charge of administration of Jose Gomiz y Dela Peas properties by virtue of a power of attorney executed by the latter in favor of 4 agents (Federico included) before he embarked for Spain. After several years of agency, Federico Hidalgo wrote to Jose Gomiz requesting him to designate a person to substitute him in the

Art. 1928. The agent may withdraw from the agency by giving due notice to the principal. If the latter should suffer any damage by reason of the withdrawal, the agent must indemnify him therefor, unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself. (1736a) Art. 1929. The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable

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position because one of those appointed in the power of attorney had died and the others did not wish to take charge of the administration of Gomiz properties. Gomiz did not answer Federicos letters nor did he approve or object to Federicos accounts nor did he appoint or designate another person to substitute Federico. In 1894, Federico was obliged to embark for Spain for health reasons. On preparing for his departure, he rendered the accounts of the administration. Federico also informed Gomiz of his intended departure from the Philippines and of his turning over the administration to his cousin Antonio Hidalgo, upon whom he conferred a GPA. But because he deemed such GPA to be insufficient, he also asked Gomiz to send a new SPA in favor or Antonio. When Antonio died, Francisco Hidalgo took Antonios place. Gomiz died without having said anything regarding the substitution of agents ISSUE: WON there was valid renunciation of the agency. HELD: YES. Under the circumstances of the case, it is reasonable to conclude that the agency was duly terminated. Although Federico did not use the words renouncing the agency, such words were undoubtedly understood and accepted by the principal because if the lapse of nearly 9 years up to time of principals death, he never interrogated the renouncing agent and disapproved what he had done nor the power conferred to the substituting agent. The agent who was obliged to leave his charge for a legitimate cause and who duly informed his principal, is released and freed from the results and the consequences of the substitute agent it was with the consent, even tacit of the principal. The agent is not required to sacrifice his health, life, and his own interests, if it is shown that it was impossible for him to continue the discharge of his duties. Rallos v. Felix Go Chan, supra Blondeau v. Nano (BAMBI) Facts: An action was brought in the Court of First Instance of Manila to foreclose a mortgage alleged to have been made by the defendants Agustin Nano and Jose Vallejo to the plaintiff Angela Blondeau, bearing date November 5, 1931, to secure the payment of the sum of P12,000, and covering property situated on Calle Georgia, Manila. Nano, purporting to represent both defendants, after filing an answer, was found in contempt of court. The other defendant Vallejos defense was that his signature to the mortgage was a forgery. Following the trial, judgment was rendered against Nano but not against Vallejo. Hence, this appeal.

Issue: WoN there was a valid mortgage contract executed in favor of Blondeau. YES. The purported signature of the defendant Vallejo to the mortgage was not a forgery. It needs to be recalled that the mortgage was executed in the home of the plaintiffs, and that of those present, the principal plaintiff Angela Blondeau and her husband Fernando de la Cantera, together with the instrumental witness Pedro Jimenez Zoboli, identified Vallejo as the person who signed the document. Upon its face, the mortgage appears to be regular and to have been duly executed and accepted by Vallejo on November 5, 1931. Moreover, Agustin Nano had possession of Jose Vallejo's title papers. Without those title papers handed over to Nano with the acquiescence of Vallejo, a fraud could not have been perpetrated. When Fernando de la Cantera, a lawyer and the husband of Blondeau, the principal plaintiff, searched the registration records, he found them in due form, including the power of attorney of Vallejo, in favor of Nano. If this had not been so and if thereafter the proper notation of the encumbrance could not have been made, Angela Blondeau would not have lent P12,000 to the defendant Vallejo. The Torrens system is intended for the registration of title, rather than the muniments of title. It represents a departure from the orthodox principles of property law. Under the common law, if the pretended signature of the mortgagor is a forgery, the instrument is invalid for every purpose and will pass on the title or rights to anyone, unless the spurious document is ratified and accepted by the mortgagor. The Torrens Act on the contrary permits a forged transfer, when duly entered in the registry, to become the root of a valid title in a bona fide purchaser. The act erects a safeguard against a forged transfer being registered, by the requirement that no transfer shall be registered unless the owner's certificate was produced along with the instrument of transfer. An executed transfer of registered lands placed by the registered owner thereof in the hands of another operates as a representation

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to a third party that the holder of the transfer is authorized to deal with the lands. With respect to the conclusiveness of the Torrens title and the binding force and effect of annotations thereon even when through a forged deed the land passes into the possession of an innocent purchaser for value, the basic rule is found in the opinion delivered by Mr. Chief Justice Arellano in De la Cruz vs. Fabie which sates that innocent buyers may still have valid title. Court mentions Vargas & Maalac in their treatise on the Philippine Land Registration Law quote with approval the comment of Mr. Powell in his book on Land Registration, section 213. The question which the author propounded was: Why does the law say that the person who had no title at all and only a forged deed as a color of title should become the true owner of the land by merely continuing to occupy and enjoy the land which in fact does not belong to him, but which belongs to the victim of the forgery? Public policy, expediency, and the need of repose and certainty as to land titles demand that the bona fide purchaser of a certificate of title to registered land, who, though he buys on a forged transfer, succeeds in having the land registered in his name, should nevertheless hold an unimpeachable title. In the first place, a forger cannot effectuate his forgery in the case of registered land by executing a transfer which can be registered, unless the owner has allowed him, in some way, to get possession of the owner's certificate. .The Act has erected in favor of the owner, as a safeguard, against a forged transfer being perpetrated against him, the requirement that no voluntary transfer shall be registered unless the owner's certificate is produced along with the instrument of transfer. Therefore, if the owner has voluntarily or carelessly allowed the forger to come into possession of his owner's certificate he is to be judged according to the maxim, that when one of two innocent persons must suffer by the wrongful act of a third person the loss fall on him who put it into the power of that third person to perpetrate the wrong. Furthermore, even if the forger stole the owner's certificate, the owner is up against no greater hardship than is experienced by one whose money or negotiable paper payable to bearer is stolen and transferred by the thief to an innocent purchaser. Plaintiff's mortgage sustained.

Terrado v. CA, 131 SCRA 371 - REX

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