W. G. PHILPOTTS vs. PHILIPPINE MANUFACTURING COMPANY and F. N.

BERRY
No. 15568 November 8, 1919

Principal: PHILIPPINE MANUFACTURING COMPANY

Agent: W. G. PHILPOTTS
FACTS:
The petitioner, W. G. Philpotts, a stockholder in the Philippine Manufacturing Company, asks to obtain a writ of
mandamus to compel the respondents to permit him or by some authorized agent or attorney, to inspect and examine
the records of the business transacted by said company since January 1, 1918. The respondents interposed a demurrer.
The respondent corporation or any of its officials has refused to allow the petitioner himself to examine anything relating
to the affairs of the company, and the petition prays for a peremptory order commanding the respondents to place the
records of all business transactions of the company, during a specified period, at the disposal of the plaintiff or his duly
authorized agent or attorney, it being evident that the petitioner desires to exercise said right through an agent or
attorney. It is conceded by counsel for the respondents that there is a right of examination in the stockholder granted
under section 51 of the Corporation Law, but it is insisted that this right must be exercised in person.
BASIS: The pertinent provision of our law is found in the second paragraph of section 51 of Act No. 1459 (Corporation
Law), which reads as follows: "The record of all business transactions of the corporation and the minutes of any meeting
shall be open to the inspection of any director, member, or stockholder of the corporation at reasonable hours."
This provision is to be read of course in connection with the related provisions of sections 51 and 52, defining the duty of
the corporation in respect to the keeping of its records.
ISSUE:
Whether the right which the law concedes to a stockholder to inspect the records can be exercised by a proper
agent or attorney of the stockholder as well as by the stockholder in person?
HELD:
YES. The right of examination into corporate affairs which is conceded to the stockholder by section 51 of the
Corporation Law may be exercised either by the stockholder in person or by any duly authorized representative. This is in
conformity with the general rule that what a man may do in person he may do through another; and we find nothing in
the statute that would justify us in qualifying the right in the manner suggested by the respondents.
RULING: (In favor of petitioner)
The demurrer is overruled; and it is ordered that the writ of mandamus shall issue as prayed, unless within 5 days from
notification hereof the respondents answer to the merits.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-1

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES vs. COURT OF APPEALS and AMERICAN AIRLINES INCORPORATED
G.R. No. 76931. May 29, 1991
Principal: AMERICAN AIRLINES INCORPORATED
Agent: ORIENT AIR SERVICES & HOTEL REPRESENTATIVES

FACTS: The respondent, American Air, is an air carrier offering passenger and air cargo transportation in the Philippines,
and Orient Air & et. al., entered into a General Sales Agency Agreement (GSA) whereby the former authorized the latter
to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation.
----------------------------------General Sales Agency Agreement (GSA):
1.Representation of American by Orient Air Services
Orient Air Services will act on Americans behalf as its exclusive General Sales Agent within the Philippines, including any
United States military installation therein which are not serviced by an Air Carrier Representation Office (ACRO), for the
sale of air passenger transportation. The services to be performed by Orient Air Services shall include:
(a) soliciting and promoting passenger traffic for the services of American and, if necessary, employing staff competent
and sufficient to do so;
(b) providing and maintaining a suitable area in its place of business to be used exclusively for the transaction of the
business of American;
(c) arranging for distribution of Americans timetables, tariffs and promotional material to sales agents and the general
public in the assigned territory;
(d) servicing and supervising of sales agents (including such sub-agents as may be appointed by Orient Air Services with
the prior written consent of American) in the assigned territory including if required by American the control of
remittances and commissions retained; and
(e) holding out a passenger reservation facility to sales agents and the general public in the assigned territory.
5. Commissions:
(b)Overriding commission
In addition to the above commission American will pay Orient Air Services an overriding commission of 3% of the tariff
fares and charges for all sales of transportation over Americans service by Orient Air Service or its sub-agents.
13.Termination
American may terminate the Agreement on two days notice in the event Orient Air Services is unable to transfer to the
United States the funds payable by Orient Air Services to American under this Agreement. Either party may terminate the
Agreement without cause by giving the other 30 days notice by letter, telegram or cable.
------------------------------------: Respondent (American Air)s contention: It alleged that Orient Air had reneged on its obligations under the Agreement
by failing to promptly remit the net proceeds of sales for the months of January to March 1981 in the amount of US
$254,400.40, American Air by itself undertook the collection of the proceeds of tickets sold originally by Orient Air and
terminated forthwith the Agreement in accordance with Paragraph 13 thereof. American Air instituted suit against Orient
Air for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order, averring
the basis for the termination of the Agreement as well as therein defendants previous record of failures to promptly
settle past outstanding refunds of which there were available funds in the possession of the defendant, to the damage
and prejudice of plaintiff.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-2

Petitioner (Orient Air)s defense: It denied the material allegations of the complaint with respect to its entitlement to
alleged unremitted amounts, contending that after application thereof to the commissions due it under the Agreement,
American Air in fact still owed Orient Air a balance in unpaid overriding commissions. Further, the it contended that the
actions taken by American Air in the course of terminating the Agreement as well as the termination itself were
untenable, Orient Air claiming that American Airs precipitous conduct had occasioned prejudice to its business interests.
Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having opted to appoint
any sub-agents, it is American Airs contention that Orient Air can claim entitlement to the disputed overriding
commission based only on ticketed sales.
Orient Air contends that the contractual stipulation of a 3% overriding commission covers the total revenue of American
Air and not merely that derived from ticketed sales undertaken by Orient Air. The latter, in justification of its submission,
invokes its designation as the exclusive General Sales Agent of American Air, with the corresponding obligations arising
from such agency, such as, the promotion and solicitation for the services of its principal. In effect, by virtue of such
exclusivity, all sales of transportation over American Airs services are necessarily by Orient Air.
As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the promotion and
marketing of American Airs services for air passenger transportation, and the solicitation of sales therefor. In return for
such efforts and services, Orient Air was to be paid commissions of two (2) kinds: first, a sales agency commission, ranging
from 7-8% of tariff fares and charges from sales by Orient Air when made on American Air ticket stock; and second, an
overriding commission of 3% of tariff fares and charges for all sales of passenger transportation over American Air
services.
ISSUES:
1) Whether or not the Orient Air Services & et. al., as agent of respondent American Air, acted within the scope of
his authority?; 2) If indeed, there exists an agent-principal relationship, whether Orient Air be entitled to its claim
of 3% overriding commission based on total revenue?
HELD:
YES. In an agent-principal relationship, the personality of the principal is extended through the facility of the
agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would
have him do. Such a relationship can only be effected with the consent of the principal, which must not, in any way, be
compelled by law or by any court. The Agreement itself between the parties states that either party may terminate the
Agreement without cause by giving the other 30 days notice by letter, telegram or cable. The court set aside the portion
of the ruling of the respondent appellate court reinstating Orient Air as general sales agent of American Air.
After a careful examination of the records, the Court finds merit in the contention of Orient Air that the
Agreement, when interpreted in accordance with the foregoing principles, entitles it to the 3% overriding commission
based on total revenue, or as referred to by the parties, total flown revenue.
-------------------------------An agent-principal relationship can only be effected with the consent of the principal, and must not, in any way
be compelled by law or by any court.By affirming this ruling of the trial court, respondent appellate court, in effect,
compels American Air to extend its personality to Orient Air. Such would be violative of the principles and essence of
agency, defined by law as a contract whereby a person binds himself to render some service or to do something in
representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-3

No. L-24332 January 31, 1978

RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS vs. FELIX GO CHAN & SONS REALTY CORPORATION
and COURT OF APPEALS

Principal: Concepcion Rallos, represented by RAMON RALLOS, Administrator of her Estate

Agent: Simeon Rallos
FACTS:
Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of land known as Lot No. 5983 of the
Cadastral Survey of Cebu covered by TCT No. 11118 of the Registry of Cebu. The sisters executed a special power of
attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf the property. However
Concepcion Rallos died. Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia in lot 5983 to
respondent Corporation for the sum of P10,686.90. The deed of sale was registered. Ramon Rallos, as administrator of
the Intestate Estate of Concepcion Rallos filed a complaint praying (1) that the sale of the undivided share of the deceased
Concepcion Rallos in lot 5983 be declared unenforceable, and said share be reconveyed to her estate; (2) that the
Certificate of Title issued in the name of Felix Go Chan & Sons Realty Corporation be cancelled and another title be issued
in the names of the corporation and the Intestate estate of Concepcion Rallos in equal undivided shares; and (3) that
plaintiff be indemnified by way of attorneys fees and payment of costs of suit.. While the case was pending in the trial
court, both Simeon and his sister Gerundia died and they were substituted by the respective administrators of their
estates.
ISSUES:
1) Whether or not the death of Concepcion Rallos, the principal, terminates the agency relationship?; 2) If indeed
the death of principal revokes such agency, whether Simeon Rallos, the agent, may bind third person on the sale
of property?

HELD: 1) YES. As provided under Art. 1919 of the Civil Code, that death of principal revokes ipso jure the agency unless
falls under exceptions of articles 1930 & 1931.
2) NO. In the instant case, it cannot be questioned that the agent Simeon Rallos knew of the death of his principal
at the time he sold the latters share in Lot No. 5983 to respondent corporation. On the basis of the established
knowledge of Simeon Rallos concerning the death of his principal, Concepcion Rallos, Article 1931 of the Civil
Code is inapplicable. The law expressly requires for its application lack of knowledge on the part of the agent of
the death of his principal; it is not enough that the third person acted in good faith. The General rule is that an
act of agent after death of his principal is void ab initio unless the same falls under exceptions in Arts. 1930 and
1931 of the Civil Code

-----------------------------------------------------------Agency, its concept, essential elements and characteristics.By the relationship of agency, one party called the principal
authorizes another called the agent to act for and in his behalf in transactions with third persons. The essential elements
of agency are:(l) 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 agent acts as a representative and not for himself; and (4)

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-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. He who acts through another acts himself.
Art. 1930 and Art. 1931 of the Civil Code exceptions to general rule provided in Art. 1919 of the Civil Code, that death of
principal revokes ipso jure the agency:
Under Art. 1931 of the Civil Code, an act done by the agent after the death of his principal is valid and effective only
under two conditions, viz: (1) that the agent acted without knowledge of the death of the principal, and (2) that the third
person who contracted with the agent himself acted in good faith. Good faith here means that the third person was not
aware of the death of the principal at the time he contracted with said agent. These two requisites must concur: the
absence of one will render the act of the agent invalid and unenforceable.
The Civil Code does not impose a duty on the heirs of the principal to notify the agent of the death of said principal. What
the Code provides in Article 1932 is that, 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. Hence, the fact that no notice of the
death of the principal was registered on the certificate of title of the property in the Office of the Register of Deeds, is not
fatal to the cause of the estate of the principal.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-5

URBAN BANK, INC vs. MAGDALENO M. PEA

G.R. No. 145817 October 19, 2011
Principal: URBAN BANK, INC
Agent: ATTY. MAGDALENO M. PEA
------------------------------------------------------------------In the eyes of the trial court, the controlling finding is that Atty. Pea should be believed when he testified that in
a telephone conversation, the president of Urban Bank, Teodoro Borlongan, a respondent herein, agreed to pay him for
his services 10% of the value of the property then worth PhP240,000,000, or PhP24,000,000. Costs and other awards
additionally amount to PhP4,500,000, for a total award of PhP28,500,000 according to the trial court. To the Court of
Appeals, such an award has no basis, as in fact, no contract of agency exists between Atty. Pea and Urban Bank. Hence,
Atty. Pea should only be recompensed according to the principle of unjust enrichment, and that he should be awarded
the amount of PhP3,000,000 only for his services and reimbursements of costs.
As the records bear, Atty. Peas services consisted of causing the departure of unauthorized sub-tenants in twenty-three
commercial establishments in an entertainment compound along Roxas Boulevard. It involved the filing of ejectment suits
against them, Peas personal defense in the counter-suits filed against him, his settlement with them to the tune of
PhP1,500,000, which he advanced from his own funds, and his retention of security guards and expenditure for other
costs amounting to more or less PhP1,500,000. There is no claim by Atty. Pea of any service beyond those. He claims
damages from the threats to his life and safety from the angry tenants, as well as a vexatious collection suit he had to face
from a creditor-friend from whom he borrowed
Pea had included as co-defendants with Urban Bank in the RTC case, several officers and board directors of Urban Bank.
Not all board directors were sued, however. With respect to those included in the complaint, other than against Teodoro
Borlongan, Corazon Bejasa, and Arturo Manuel, no evidence was ever offered as to their individual actions that gave rise
to Atty. Peas cause of actionthe execution of the agency contract and its breachand yet, these officers and directors
were made solidarily liable by the trial court with Urban Bank for the alleged breach of the alleged corporate contract of
agency.
-----------------------------------------------------------------FACTUAL ANTECEDENTS:
Petitioner-respondent Atty. Magdaleno M. Pea (Pea) is a lawyer by profession and was formerly a stockholder, director
and corporate secretary of Isabel Sugar Company, Inc. (ISCI). The latter owned a parcel of land located in Pasay City. ISCI
leased the Pasay property for a period of 10 years.
Two weeks before the lease over the Pasay property was to expire, ISCI and Urban Bank executed a Contract to Sell,
whereby the latter would pay ISCI the amount of PhP241,612,000 in installments for the Pasay property. Both parties
agreed that the final installment of PhP25,000,000 would be released by the bank upon ISCIs delivery of full and actual
possession of the land, free from any tenants. In the meantime, the amount of the final installment would be held by the
bank in escrow.
ISCI then instructed Pea, who was its director and corporate secretary, to take over possession of the Pasay property
against the tenants upon the expiration of the lease. ISCIs president, Mr. Enrique G. Montilla III (Montilla), faxed a letter
to Pea, confirming the latters engagement as the corporations agent to handle the eviction of the tenants from the
Pasay property.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-6

To prevent the sub-tenants from further appropriating the Pasay property, Atty. Pea, as director and representative of
ISCI, filed a complaint for injunction.
Later, within the four-month period allegedly agreed upon in the telephone conversation, Pea formally informed Urban
Bank that it could already take possession of the Pasay property. There was however no mention of the compensation
due and owed to him for the services he had rendered.
Pea thereafter made several attempts to contact respondents Borlongan (Union Banks president) and Bejasa by
telephone, but the bank officers would not take any of his calls.After he turned over possession of the Pasay property,
Pea formally demanded from Urban Bank the payment of the 10% compensation and attorneys fees allegedly
promised to him during his telephone conversation with Borlongan for securing and maintaining peaceful possession of
the property. However, Urban Bank refused to pay for his services in connection with the Pasay property, Pea filed a
complaint for recovery of agents compensation and expenses, damages and attorneys fees.
ISSUES:
1) Whether or not there exists an agency relationship between Atty. Pea and the Union Bank? 2) If indeed such
principal-agent relationship has been established between them, whether Atty. Pea be entitled to 10%of the
market value of the property as compensation and attorneys fees?
HELD:
1) YES. Agency is presumed to be for compensation. Unless the contrary intent is shown, a person who acts as an
agent does so with the expectation of payment according to the agreement and to the services rendered or
results effected. The court find that the agency of Pea comprised of services ordinarily performed by a lawyer
who is tasked with the job of ensuring clean possession by the owner of a property. Thus measure what he is
entitled to for the legal services rendered. The Court concludes that Urban Bank constituted Atty. Pea as its
agent to secure possession of the Pasay property. This conclusion, however, is not determinative of the basis of
the amount of payment that must be made to him by the bank. The context in which the agency was created lays
the basis for the amount of compensation Atty. Pea is entitled to.
NO. Lawyering is not a business; it is a profession in which duty to public service, not money, is the primary
consideration. The principle of quantum meruit applies if lawyers are employed without a price agreed upon for their
services, in which case they would be entitled to receive what they merit for their services, or as much as they have
earned. In fixing a reasonable compensation for the services rendered by a lawyer on the basis of quantum meruit, one
may consider factors such as the time spent and extent of services rendered; novelty and difficulty of the questions
involved; importance of the subject matter; skill demanded; probability of losing other employment as a result of
acceptance of the proffered case; customary charges for similar services; amount involved in the controversy and the
resulting benefits for the client; certainty of compensation; character of employment; and professional standing of the
lawyer.
----------------------------------------------------In the absence of a written contract for professional services, the attorneys fees are fixed on the basis of quantum
meruit, i.e., the reasonable worth of the attorneys services. When an agent performs services for a principal at the
latters request, the law will normally imply a promise on the part of the principal to pay for the reasonable worth of
those services. The intent of a principal to compensate the agent for services performed on behalf of the former will be
inferred from the principals request for the agents.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-7

The transactional history and context of the sale between ISCI and Urban Bank of the Pasay property, and Atty. Peas
participation in the transfer of possession thereof to Urban Bank provide crucial linkages that establish the nature of the
relationship between the lawyer and the landowner-bank.. To hold a director, a trustee or an officer personally liable for
the debts of the corporation and, thus, pierce the veil of corporate fiction, bad faith or gross negligence by the director,
trustee or officer in directing the corporate affairs must be established clearly and convincingly.
The circumstances that would reasonably justify superior urgency, demanding interim execution of Peas claims for
compensation and/or damages, have already been settled by the financial capacity of the eight other co-defendants, the
approval of the supersedeas bonds, the subsequent takeover by EIB, and the successor banks stable financial condition,
which can answer for the judgment debt. Thus, Peas interest as a judgment creditor is already well-protected.
In cases where two or more defendants are made subsidiarily or solidarily liable by the final judgment of the trial court,
discretionary execution can be allowed if all the defendants have been found to be insolvent. Considering that only Urban
Bank, and not the other eight individual defendants, was later on considered by the Court of Appeals to have been in
danger of insolvency, is not sufficient reason to allow execution pending appeal, since the liability for the award to Pea
was made solidarily liable together with the bank officers.
-------------------------------------------------A stipulation on a lawyers compensation in a written contract for professional services ordinarily controls the amount of
fees that the contracting lawyer may be allowed to collect, unless the court finds the amount to be unconscionable.
Lawyering is not a business; it is a profession in which duty to public service, not money, is the primary consideration.
The principle of quantum meruit applies if lawyers are employed without a price agreed upon for their services, in which
case they would be entitled to receive what they merit for their services, or as much as they have earned. In fixing a
reasonable compensation for the services rendered by a lawyer on the basis of quantum meruit, one may consider factors
such as the time spent and extent of services rendered; novelty and difficulty of the questions involved; importance of the
subject matter; skill demanded; probability of losing other employment as a result of acceptance of the proffered case;
customary charges for similar services; amount involved in the controversy and the resulting benefits for the client;
certainty of compensation; character of employment; and professional standing of the lawyer.
RULING:
The Petitions for Review on Certiorari filed by petitioners Urban Bank (G.R. No. 145817) and Benjamin L. de Leon,
Delfin Gonzalez, Jr., and Eric L. Lee (G.R. No. 145822) are hereby GRANTED.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-8

DOMINION INSURANCE CORPORATION vs. COURT OF APPEALS, RODOLFO S. GUEVARRA, and FERNANDO AUSTRIA
G.R. No. 129919 February 6, 2002

Principal: DOMINION INSURANCE CORPORATION

Agent: RODOLFO S. GUEVARRA
FACTS:
The respondent, Rodolfo S. Guevarra instituted Civil Case for sum of money against Petitioner Corporation. The
former sought to recover sums of money which he claimed to have advanced in his capacity as manager of the latter to
satisfy certain claims. Later respondent corporation, filed a third-party complaint against Fernando Austria, Regional
Manager for Central Luzon area.
----------------------------------TERMS OF AGREEMENT:
That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC., a corporation duly organized and existing under and by
virtue of the laws of the Republic of the Philippines, x x x represented by the undersigned as Regional Manager, x x x do
hereby appoint RSG Guevarra Insurance Services represented by Mr. Rodolfo Guevarra x x x to be our Agency Manager
in San Fernando and to do the following acts:
1. To conduct, sign, manager , carry on and transact Bonding and Insurance business as usually pertain to a Agency
Office, or FIRE, MARINE, MOTOR CAR, PERSONAL ACCIDENT, and BONDING with the right, upon our prior written consent,
to appoint agents and sub-agents.
2.To accept, underwrite and subscribed cover notes or Policies of Insurance and Bonds for and on our behalf.
3. To demand, sue, for collect, deposit, enforce payment, deliver and transfer for and receive and give effectual receipts
and discharge for all money to which the FIRST CONTINENTAL ASSURANCE COMPANY, INC.,18 may hereafter become due,
owing payable or transferable to said Corporation by reason of or in connection with the above-mentioned appointment.
4. To receive notices, summons, and legal processes for and in behalf of the FIRST CONTINENTAL ASSURANCE COMPANY,
INC., in connection with actions and all legal proceedings against the said Corporation.
-----------------------------------Respondent Guevarras authority to settle claims is embodied in the Memorandum of Management Agreement dated
February 18, 1987 which enumerates the scope of respondent Guevarras duties and responsibilities as agency manager
for San Fernando, Pampanga, as follows:
x x x x x x x x x
1. You are hereby given authority to settle and dispose of all motor car claims in the amount of P5,000.00 with prior
approval of the Regional Office.
2.Full authority is given you on TPPI claims settlement.
x x x x x x x x x
In settling the claims mentioned above, respondent Guevarras authority is further limited by the written standard
authority to pay, which states that the payment shall come from respondent Guevarras revolving fund or collection.
ISSUE:
Whether or not respondent Guevarra is entitled to reimbursement of amounts he paid out of his personal money
in settling the claims of several insured under the Memorandum of Management Agreement?
HELD:
NO. Respondent Guevarra was authorized to pay the claim of the insured, 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
respondent Guevarra incurred in the settlement of the claims of the insured may not be reimbursed from petitioner
Dominion. This conclusion is in accord with Article 1918 (1) : The principal is not liable for the expenses incurred by the

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-9

agent, If the agent acted in contravention of the principals instructions, unless the latter should wish to avail himself of
the benefits derived from the contract
However, while the law on agency prohibits respondent Guevarra from obtaining reimbursement, his right to recover
may still be justified under the general law on obligations and contracts.
Article 1236, second paragraph, Civil Code, provides:
Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the
debtor.
In this case, when the risk insured against occurred, petitioners liability as insurer arose. This obligation was
extinguished when respondent Guevarra paid the claims and obtained Release of Claim Loss and Subrogation
Receipts from the insured who were paid.
Thus, to the extent that the obligation of the petitioner has been extinguished, respondent Guevarra may demand for
reimbursement from his principal. To rule otherwise would result in unjust enrichment of petitioner.
The extent to which petitioner was benefited by the settlement of the insurance claims could best be proven by the
Release of Claim Loss and Subrogation Receipts.
---------------------------------------------By the contract of agency, a person binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter. The basis for agency is representation. On the part of the
principal, there must be an actual intention to appoint or an intention naturally inferrable from his words or actions; and
on the part of the agent, there must be an intention to accept the appointment and act on it, and in the absence of such
intent, there is generally no agency.
A perusal of the Special Power of Attorney would show that petitioner (represented by third-party defendant Austria)
and respondent Guevarra intended to enter into a principal-agent relationship. Despite the word special in the title of
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, it is limited only to acts of
administration.
A general power permits the agent to do all acts for which the law does not require a special power. Thus, the acts
enumerated in or similar to those enumerated in the Special Power of Attorney do not require a special power of
attorney.
Article 1878, Civil Code, enumerates the instances when a special power of attorney is required. The pertinent portion
that applies to this case provides that:
Article 1878. Special powers of attorney are necessary in the following cases:
(1) To make such payments as are not usually considered as acts of administration;
x x x x x x x x x
(15) Any other act of strict dominion.
The payment of claims is not an act of administration. The settlement of claims is not included among the acts
enumerated in the Special Power of Attorney, neither is it of a character similar to the acts enumerated therein. A special
power of attorney is required before respondent Guevarra could settle the insurance claims of the insured.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-10

LOADMASTERS CUSTOMS SERVICES, INC. vs. GLODEL BROKERAGE CORPORATION and R&B INSURANCE CORPORATION
G.R. No. 179446 January 10, 2011
-NO AGENCY RELATIONSHIPFACTS:
R&B Insurance issued Marine Policy in favor of Columbia Wire & Cable Corporation to insure the shipment of 132
bundles of electric copper cathodes against All Risks. The cargoes were shipped on board the vessel Richard Rey from
Isabela, Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date. Later, Columbia engaged the services of
Glodel for the release and withdrawal of the cargoes from the pier and the subsequent delivery to its warehouses/plants.
Glodel, in turn, engaged the services of Loadmasters for the use of its delivery trucks to transport the cargoes to
Columbias warehouses/plants in Bulacan and Valenzuela City. The goods were loaded on board twelve (12) trucks owned
by Loadmasters, driven by its employed drivers and accompanied by its employed truck helpers
R&B Insurance filed a complaint for damages against both Loadmasters and Glodel asking for reimbursement of
the amount it had paid to Columbia for the loss of the subject cargo. It claimed that it had been subrogated to the right
of the consignee to recover from the parties who may be held legally liable for the loss. Then, the RTC rendered a
decision holding Glodel liable for damages for the loss of the subject cargo and dismissing Loadmasters counterclaim for
damages and attorneys fees against R&B Insurance.
ISSUES:
1) Whether or not there exists an agency relationship between Loadmasters and Glodel Brokerage Corporation?
2) Whether both Loadmasters and Glodel Brokerage Corporation are held solidarily liable to R&B Insurance
Corporation?
HELD:

1) NO. It is a settled rule that the basis for agency is representation, that is, the agent acts for and on behalf of the
principal on matters within the scope of his authority and said acts has the same legal effect as if they were
personally executed by the principal. In the case at bar, the Court clarifies that there exists no principal-agent
relationship between Glodel and Loadmasters, as erroneously found by the CA.

2) YES. Premises considered, the Court is of the view that both Loadmasters and Glodel are jointly and severally
liable to R & B Insurance for the loss of the subject cargo. Under Article 2194 of the New Civil Code, the
responsibility of two or more persons who are liable for a quasi-delict is solidary.
It is not disputed that the subject cargo was lost while in the custody of Loadmasters whose employees (truck driver and
helper) were instrumental in the hijacking or robbery of the shipment. As employer, Loadmasters should be made
answerable for the damages caused by its employees who acted within the scope of their assigned task of delivering the
goods safely to the warehouse. Whenever an employees negligence causes damage or injury to another, there instantly
arises a presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection (culpa
in eligiendo) or supervision (culpa in vigilando) of its employees. To avoid liability for a quasi-delict committed by its
employee, an employer must overcome the presumption by presenting convincing proof that he exercised the care and
diligence of a good father of a family in the selection and supervision of his employee. In this regard, Loadmasters failed.

--------------------------------------

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-11

Subrogation is the substitution of one person in the place of another with reference to a lawful claim or right, so that he
who is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities.
Doubtless, R&B Insurance is subrogated to the rights of the insured to the extent of the amount it paid the consignee
under the marine insurance, as provided under Article 2207 of the Civil Code, which reads: ART. 2207. If the plaintiffs
property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of
the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured
against the wrong-doer or the person who has violated the contract. If the amount paid by the insurance company does
not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing
the loss or injury.
ART. 2176, NCC: Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-12

EDUARDO V. LITONJUA, JR. & et. al vs. ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES CORPORATION) & et.
al. G.R. No. 144805. June 8, 2006
Principal: ETERNIT CORPORATION (EC), Jack Glanville (Australian citizen), General Manager & President of EC;
Agents: (1) Jack Glanville (Australian citizen), General Manager & President of EC; (2) Claude Frederick Delsaux, the
Regional Director for Asia of Eteroutremer S.A. Corporation (ESAC); (3) Lauro G. Marquez, realtor/broker
FACTS:
The Eternit Corporation (EC) is a corporation duly organized and registered under Philippine laws. Since 1950, it
had been engaged in the manufacture of roofing materials and pipe products. Its manufacturing operations were
conducted on eight parcels of land with a total area of 47,233 square meters. The properties, located in Mandaluyong
City, Metro Manila, were covered by TCT. Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer
S.A. Corporation (ESAC), a corporation organized and registered under the laws of Belgium. Jack Glanville, an Australian
citizen, was the General Manager and President of EC, while Claude Frederick Delsaux was the Regional Director for Asia
of ESAC. Both had their offices in Belgium.
Later, the management of ESAC grew concerned about the political situation in the Philippines and wanted to stop its
operations in the country. The Committee for Asia of ESAC instructed Michael Adams, a member of ECs Board of
Directors, to dispose of the eight parcels of land. Adams engaged the services of realtor/broker Lauro G. Marquez so
that the properties could be offered for sale to prospective buyers. Glanville later showed the properties to Marquez.
Marquez thereafter offered the parcels of land and the improvements thereon to Eduardo B. Litonjua, Jr. of the Litonjua
& Company, Inc. Then in a letter, Marquez declared that he was authorized to sell the properties for P27,000,000.00 and
that the terms of the sale were subject to negotiation
Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo Litonjua, Jr., and his brother
Antonio K. Litonjua. The Litonjua siblings offered to buy the property for P20,000,000.00 cash. Marquez apprised Glanville
of the Litonjua siblings offer and relayed the same to Delsaux in Belgium, but the latter did not respond. Later, Glanville
telexed Delsaux in Belgium, inquiring on his position/counterproposal to the offer of the Litonjua siblings. However
Delsaux informed Glanville about counter proposal on the final offer to increase to cover all existing obligations prior to
final liquidation. The Litonjua brothers accepted such counter proposal and deposited the amount of US$1,000,000.00
with the Security Bank & Trust Company. However, Marquez received a telephone call from Glanville, advising that the
sale would no longer proceed.
Glanville followed it up with a Letter dated May 7, 1987, confirming that he had been instructed by his principal to inform
Marquez that the decision has been taken at a Board Meeting not to sell the properties on which Eternit Corporation is
situated. The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far
as the Philippines are concerned. Considering new political situation since the departure of MR. MARCOS and a certain
stabilization in the Philippines, the Committee has decided not to stop our operations in Manila. In fact, production has
started again last week, and to recognize the participation in the Corporation.
The Litonjuas, through counsel, wrote EC, demanding payment for damages they had suffered on account of the aborted
sale. EC, however, rejected their demand. The Litonjuas then filed a complaint for specific performance and damages
against EC (now the Eterton Multi-Resources Corporation) and the Far East Bank & Trust Company, and ESAC in the RTC of
Pasig City.
Respondents allegation: EC and ESAC alleged that since Eteroutremer was not doing business in the Philippines, it cannot
be subject to the jurisdiction of Philippine courts; the Board and stockholders of EC never approved any resolution to sell

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-13

subject properties nor authorized Marquez to sell the same; and the telex dated October 28, 1986 of Jack Glanville was
his own personal making which did not bind EC.
EC alleged that Marquez had no written authority from the Board of Directors to bind it; neither were Glanville
and Delsaux authorized by its board of directors to offer the property for sale. Since the sale involved substantially all of
the corporations assets, it would necessarily need the authority from the stockholders.
Petitioners contention: Petitioners assert that there was no need for a written authority from the Board of Directors of
EC for Marquez to validly act as broker/middleman/intermediary. As broker, Marquez was not an ordinary agent because
his authority was of a special and limited character in most respects. His only job as a broker was to look for a buyer and
to bring together the parties to the transaction. He was not authorized to sell the properties or to make a binding contract
to respondent EC; hence, petitioners argue, Article 1874 of the New Civil Code does not apply.
Trial Courts decision: The trial court declared that since the authority of the agents/realtors was not in writing, the sale is
void and not merely unenforceable, and as such, could not have been ratified by the principal. In any event, such
ratification cannot be given any retroactive effect. Plaintiffs could not assume that defendants had agreed to sell the
property without a clear authorization from the corporation concerned, that is, through resolutions of the Board of
Directors and stockholders. The trial court also pointed out that the supposed sale involves substantially all the assets of
defendant EC which would result in the eventual total cessation of its operation.
ISSUES:
(1) Whether or not Glanville, Delsaux, & Adams are authorized by respondent Eternit Corporation (EC) to act as
its agents relative to the sale of the properties of EC?; (2) Whether or not the act of Lauro Marquez, the
broker, shall bind the EC to the sale of its properties?
HELD:
1) NO. Glanville was the President and General Manager of respondent EC, and Adams and Delsaux were members
of its Board of Directors, the three acted for and in behalf of respondent ESAC, and not as duly authorized agents
of respondent EC; a board resolution evincing the grant of such authority is needed to bind EC to any agreement
regarding the sale of the subject properties. Such board resolution is not a mere formality but is a condition
sine qua non to bind respondent EC. Admittedly, respondent ESAC owned 90% of the shares of stocks of
respondent EC; however, the mere fact that a corporation owns a majority of the shares of stocks of another, or
even all of such shares of stocks, taken alone, will not justify their being treated as one corporation;
2) NO. The Supreme Court affirmed Court Appeals decision that Marquez, who was a real estate broker, was a
special agent within the purview of Article 1874 of the New Civil Code. However, under Section 23 of the
Corporation Code, he needed a special authority from ECs board of directors to bind such corporation to the sale
of its properties. Delsaux, who was merely the representative of ESAC (the majority stockholder of EC) had no
authority to bind the latter. The CA pointed out that Delsaux was not even a member of the board of directors of
EC. Moreover, the Litonjuas failed to prove that an agency by estoppel had been created between the parties.
Any sale of real property of a corporation by a person purporting to be an agent thereof but without written authority
from the corporation is null and void. While a corporation may appoint agents to negotiate for the sale of its real
properties, the final say will have to be with the board of directors through its officers and agents as authorized by a
board resolution or by its by-laws. An unauthorized act of an officer of the corporation is not binding on it unless the
latter ratifies the same expressly or impliedly by its board of directors. The declarations of the agent alone are generally
insufficient to establish the fact or extent of his/her authority.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-14

-----------------------------------------------By the contract of agency, a person binds himself to render some service or to do something in representation on behalf
of another, with the consent or authority of the latter. Consent of both principal and agent is necessary to create an
agency. The principal must intend that the agent shall act for him; the agent must intend to accept the authority and act
on it, and the intention of the parties must find expression either in words or conduct between them.
Corporation Law: The general principles of agency govern the relation between the corporation and its officers or agents,
subject to the articles of incorporation, by-laws, or relevant provisions of law.
The property of a corporation, however, is not the property of the stockholders or members, and as such, may not be sold
without express authority from the board of directors. Physical acts, like the offering of the properties of the corporation
for sale, or the acceptance of a counter-offer of prospective buyers of such properties and the execution of the deed of
sale covering such property, can be performed by the corporation only by officers or agents duly authorized for the
purpose by corporate by-laws or by specific acts of the board of directors. Absent such valid delegation/authorization, the
rule is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or
connected with, the performance of authorized duties of such director, are not binding on the corporation.
Requisites: For an agency by estoppel to exist, the following must be established.For an agency by estoppel to exist, the
following must be established: (1) the principal manifested a representation of the agents authority or knowingly allowed
the agent to assume such authority; (2) the third person, in good faith, relied upon such representation; (3) relying upon
such representation, such third person has changed his position to his detriment. An agency by estoppel, which is similar
to the doctrine of apparent authority, requires proof of reliance upon the representations, and that, in turn, needs proof
that the representations predated the action taken in reliance.
Article 1874, NCC: 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.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-15

JOCELYN B. DOLES vs. MA. AURA TINA ANGELES

G.R. No. 149353 June 26, 2006

Principals: , Zenaida Romulo, Theresa Moratin, Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden (FRIENDS OF
PETITIONER DOLES)
Agent: JOCELYN B. DOLES
FACTS:
The respondent, Ma. Aura Tina Angeles filed a complaint for Specific Performance with Damages against
petitioner Doles. The former alleged that petitioner was indebted to the former in the concept of a personal loan
amounting to P405,430.00 representing the principal amount and interest. By virtue of a Deed of Absolute Sale,
petitioner, Doles, as seller, ceded to respondent, as buyer, a parcel of land, as well as the improvements thereon, with
TCT and located at a subdivision project known as Camella Townhomes Sorrente in Bacoor, Cavite, in order to satisfy her
personal loan with respondent. The property was mortgaged to National Home Mortgage Finance Corporation (NHMFC)
to secure petitioners loan in the sum of P337,050.00 with that entity. As condition of the sale, respondent shall assume
the undue balance of the mortgage and pay the monthly amortization of P4,748.11for the remainder of the 25 years. The
property was at that time being occupied by a tenant paying a monthly rent of P3,000.00. that upon verification with the
NHMFC, respondent learned that petitioner had incurred arrearages amounting to P26,744.09, inclusive of penalties and
interest; that upon informing the petitioner of her arrears. However, petitioner denied that she incurred them and
refused to pay the same. Despite repeated demand, petitioner refused to cooperate with respondent to execute the
necessary documents and other formalities required by the NHMFC to effect the transfer of the title over the property;
that petitioner collected rent over the property for the month of January 1997 and refused to remit the proceeds to
respondent; and that respondent suffered damages as a result and was forced to litigate.
Petitioner Doles allegations: She denied that she borrowed money from respondent, and averred that from June to
September 1995, she referred her friends to respondent whom she knew to be engaged in the business of lending money
in exchange for personal checks through her capitalist Arsenio Pua. She alleged that her friends, namely, Zenaida Romulo,
Theresa Moratin, Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden, borrowed money from respondent and issued
personal checks in payment of the loan. The said checks bounced for insufficiency of funds; that despite her efforts to
assist respondent to collect from the borrowers, she could no longer locate them. Later, she was forced to issue eight
checks amounting to P350,000 to answer for the bounced checks of the borrowers she referred; that prior to the issuance
of the checks she informed respondent that they were not sufficiently funded but the latter nonetheless deposited the
checks and for which reason they were subsequently dishonored.
Respondents contentions: The respondent then threatened to initiate a criminal case against her for violation of
BatasPambansa Blg. 22. Later , she was forced by respondent to execute an Absolute Deed of Sale over her property in
Bacoor, Cavite, to avoid criminal prosecution. However the said deed had no valid consideration, she did not appear
before a notary public, that the Community Tax Certificate number on the deed was not hers and for which respondent
may be prosecuted for falsification and perjury; and that she suffered damages and lost rental as a result.
ISSUES:
1) Whether or not there exists an agency relationship between the actual borrowers (friends of petitioner
Doles) and the respondents financial financier? 2) If indeed such principal-agent relationship has been
established, whether the Deed of Absolute Sale executed by petitioner Doles in favor of respondent
Angeles is valid?

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-16

HELD:
1) YES. The Supreme Court reversed the the CAs decision as the latter was incorrect when it considered the fact
that the supposed friends of *petitioner+, the actual borrowers, did not present themselves to *respondent+ as
evidence that negates the agency relationship. In this case, petitioner knew that the financier of respondent is
Pua; and respondent knew that the borrowers are friends of petitioner. It is sufficient that petitioner disclosed
to respondent that the former was acting in behalf of her principals, her friends whom she referred to
respondent. For an agency to arise, it is not necessary that the principal personally encounter the third person
with whom the agent interacts. The law in fact contemplates, and to a great degree, impersonal dealings where
the principal need not personally know or meet the third person with whom her agent transacts: precisely, the
purpose of agency is to extend the personality of the principal through the facility of the agent. In the case at bar,
both petitioner and respondent have undeniably disclosed to each other that they are representing someone
else, and so both of them are estopped to deny the same. It is evident from the record that petitioner merely
refers actual borrowers and then collects and disburses the amounts of the loan upon which she received a
commission; and that respondent transacts on behalf of her principal financier, a certain Arsenio Pua. If their
respective principals do not actually and personally know each other, such ignorance does not affect their
juridical standing as agents, especially since the very purpose of agency is to extend the personality of the
principal through the facility of the agent;
2) NO. In view of the two agency relationships, petitioner and respondent are not privy to the contract of loan
between their principals. Since the sale is predicated on that loan, then the sale is void for lack of consideration.
Ruling: The petition is granted. The Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-17

MANILA MEMORIAL PARK CEMETERY, INC., vs. PEDRO L. LINSANGAN

G.R. No. 151319 November 22, 2004

Principal: MANILA MEMORIAL PARK CEMETERY, INC.,

Agent: Baluyot
FACTS:
Florencia Baluyot offered Atty. Pedro Linsangan a lot called Garden State at the Holy Cross Memorial Park
owned by petitioner (MMPCI). According to Baluyot, a former owner of a memorial lot under Contract was no longer
interested in acquiring the lot and had opted to sell his rights subject to reimbursement of the amounts he already paid.
The contract was for P95,000.00. Baluyot reassured Atty. Linsangan that once reimbursement is made to the former
buyer, the contract would be transferred to him. Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the
amount to be reimbursed to the original buyer and to complete the down payment to MMPCI. Baluyot issued
handwritten and typewritten receipts for these payments. Baluyot informed Atty. Linsangan that he would be issued a
new contract covering the subject lot. However, 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. Later, Baluyot verbally
advised Atty. Linsangan that 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. As a consequence, Atty. Linsangan filed a Complaint for Breach of Contract and
Damages against the former.
Petitioner (MMPCI)s defense: MMPCI alleged that Contract was cancelled conformably with the terms of the contract
because of non-payment of arrearages. MMPCI stated that Baluyot was not an agent but an independent contractor, and
as such was not authorized to represent MMPCI or to use its name except as to the extent expressly stated in the Agency
Manager Agreement. Moreover, MMPCI was not aware of the arrangements entered into by Atty. Linsangan and Baluyot,
as it in fact received a down payment and monthly installments as indicated in the contract. Official receipts showing the
application of payment were turned over to Baluyot whom Atty. Linsangan had from the beginning allowed to receive the
same in his behalf. Furthermore, whatever misimpression that Atty. Linsangan may have had must have been rectified by
the Account Updating Arrangement signed by Atty. Linsangan which states that he expressly admits that Contract No on
account of serious delinquency . . . is now due for cancellation under its terms and conditions.
Trial Courts decision: The trial court held MMPCI and Baluyot jointly and severally liable. It found that Baluyot was an
agent of MMPCI and that the latter was estopped from denying this agency, having received and enchased the checks
issued by Atty. Linsangan and given to it by Baluyot. While MMPCI insisted that Baluyot was authorized to receive only the
down payment, it allowed her to continue to receive postdated checks from Atty. Linsangan, which it in turn consistently
encashed.
Petitioner (MMPCI)s defense: MMPCI further alleged that it cannot be held jointly and solidarily liable with Baluyot as
the latter exceeded the terms of her agency, neither did MMPCI ratify Baluyots acts. It added that it cannot be charged
with making any misrepresentation, nor of having allowed Baluyot to act as though she had full powers as the written
contract expressly stated the terms and conditions which Atty. Linsangan accepted and understood. In canceling the
contract, MMPCI merely enforced the terms and conditions imposed therein.
The Court of Appeals affirmed the decision of the trial court. It upheld the trial courts finding that Baluyot was an agent
of MMPCI at the time the disputed contract was entered into, having represented MMPCIs interest and acting on its
behalf in the dealings with clients and customers. Hence, MMPCI is considered estopped when it allowed Baluyot to act

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-18

and represent MMPCI even beyond her authority.20 The appellate court likewise found that the acts of Baluyot bound
MMPCI when the latter allowed the former to act for and in its behalf and stead. While Baluyots authority may not have
been expressly conferred upon her, the same may have been derived impliedly by habit or custom, which may have been
an accepted practice in the company for a long period of time.21 Thus, the Court of Appeals noted, innocent third
persons such as Atty. Linsangan should not be prejudiced where the principal failed to adopt the needed measures to
prevent misrepresentation. Furthermore, if an agent misrepresents to a purchaser and the principal accepts the benefits
of such misrepresentation, he cannot at the same time deny responsibility for such misrepresentation
MMPCI pointed out that under its Agency Manager Agreement that an agency manager such as Baluyot is considered an
independent contractor and not an agent However, in the same contract, Baluyot as agency manager was authorized to
solicit and remit to MMPCI offers to purchase interment spaces belonging to and sold by the latter.
The trial and appellate courts found MMPCI liable based on ratification and estoppel. For the trial court, MMPCIs acts of
accepting and encashing the checks issued by Atty. Linsangan as well as allowing Baluyot to receive checks drawn in the
name of MMPCI confirm and ratify the contract of agency. On the other hand, the Court of Appeals faulted MMPCI in
failing to adopt measures to prevent misrepresentation, and declared that in view of MMPCIs acceptance of the benefits
of Baluyots misrepresentation, it can no longer deny responsibility therefor.

ISSUES: (1) Whether or not agent Baluyot acted within the scope of his authority conferred under Agency Manager
Agreement with petitioner MMPCI?; (2) Whether MMPCI may be held solidarily liable with Baluyot to respondent Atty.
Linsangan?
HELD: 1) NO. The acts of an agent beyond the scope of his authority do not bind the principal, unless he ratifies them,
expressly or impliedly. Only the principal can ratify; the agent cannot ratify his own unauthorized acts. Moreover, the
principal must have knowledge of the acts he is to ratify. As provided under article 1898 (NCC), If the agent contracts in
the name of the principal, exceeding the scope of 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.
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. Linsangans 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;
2) NO. The Supreme Court disagreed the rulings of both trial court and court of appeals. Even assuming that Atty.
Linsangan was misled by MMPCIs actuations, he still cannot invoke the principle of estoppel, as he was clearly negligent
in his dealings with Baluyot, and could have easily determined, had he only been cautious and prudent, whether said
agent was clothed with the authority to change the terms of the principals written contract. Estoppel must be intentional
and unequivocal, for when misapplied, it can easily become a most convenient and effective means of injustice. In view of
the lack of sufficient proof showing estoppel, the court refuse to hold MMPCI liable on this score
Ruling:
The instant petition is GRANTED. The Decision of the Court of Appeals dated 22 June 2001 and its Resolution
dated 12 December 2001 in CA-G.R. CV No. 49802, as well as the Decision in Civil Case No. 88-1253 of the Regional Trial
Court, Makati City Branch 57, are hereby REVERSED and SET ASIDE.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-19

--------------------------------------------The Court does not agree. Pertinent to this case are the following provisions of the Civil Code:
Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of 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.
Art. 1910. The principal must comply with all the obligations that 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.
Art. 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.
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.
Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by
another without authority; If material facts were suppressed or unknown, there can be no valid ratification regardless of
the purpose or lack thereof in concealing such facts and regardless of the parties between whom the question of
ratification may arise, unless the principals ignorance of the material facts and circumstances was willful, or that the
principal chooses to act in ignorance of the facts.

Essential Elements of Estoppel are (i) conduct of a party amounting to false representation or concealment of material
facts or at least calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which
the party subsequently attempts to assert; (ii) intent, or at least expectation, that this conduct shall be acted upon by, or
at least influence, the other party; and (iii) knowledge, actual or constructive, of the real facts.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-20

JOSE BORDADOR and LYDIA BORDADOR vs. BRIGIDA D. LUZ, ERNESTO M. LUZ and NARCISO DEGANOS,
G.R. No. 130148. December 15, 1997
FACTS:
Petitioners were engaged in the business of purchase and sale of jewelry and respondent Brigida D. Luz, also
known as Aida D. Luz, was their regular customer. On several occasions, respondent Narciso Deganos, the brother of
Brigida received several pieces of gold and jewelry from petitioners amounting to P382,816.00.1 These items and their
prices were indicated in seventeen receipts covering the same. Eleven of the receipts stated that they were received for a
certain Evelyn Aquino, a niece of Deganos, and the remaining six indicated that they were received for Brigida. Deganos
was supposed to sell the items at a profit and thereafter remit the proceeds and return the unsold items to petitioners.
Deganos remitted only the sum of P53,207.00. He neither paid the balance of the sales proceeds, nor did he return any
unsold item to petitioners. The total of his unpaid account to petitioners, including interest, reached the sum of
P725,463.98.3 Petitioners eventually filed a complaint in the barangay court against Deganos to recover said amount. In
the barangay proceedings, Brigida D. Luz, who was not impleaded in the case, appeared as a witness for Deganos and
ultimately, she and her husband, together with Deganos, signed a compromise agreement with petitioners. In that
compromise agreement, Deganos obligated himself to pay petitioners, on installment basis, the balance of his account
plus interest thereon. However, he failed to comply with his undertakings. Petitioners instituted Civil Case in the RTC of
Malolos, Bulacan against Deganos and Brigida for recovery of a sum of money and damages, with an application for
preliminary attachment. Later, Deganos and Brigida D. Luz were charged with estafa.
Petitioners contention: Petitioners claimed that Deganos acted as the agent of Brigida D. Luz when he received the
subject items of jewelry and, because he failed to pay for the same, Brigida, as principal, and her spouse are solidarily
liable with him therefor.
Respondent (Brigida Luz)s defense: Brigida, on her part, denied that she had anything to do with the transactions
between petitioners and Deganos. She claimed that she never authorized Deganos to receive any item of jewelry in her
behalf and, for that matter, neither did she actually receive any of the articles in question.
ISSUE: Whether or not respondent spouses are liable to petitioners for the latters claim for money and damages in the
sum of P725,463.98, plus interests and attorneys fees, despite the fact that the evidence does not show that they signed
any of the subject receipts or authorized Deganos to receive the items of jewelry on their behalf?
HELD: NO. The basis for agency is representation. Here, there is no showing that Brigida consented to the acts of
Deganos or authorized him to act on her behalf, much less with respect to the particular transactions involved.
Petitioners attempt to foist liability on respondent spouses through the supposed agency relation with Deganos is
groundless and ill-advised.
The records show that neither an express nor an implied agency was proven to have existed between Deganos and Brigida
D. Luz. Evidently, petitioners, who were negligent in their transactions with Deganos, cannot seek relief from the effects
of their negligence by conjuring a supposed agency relation between the two respondents where no evidence supports
such claim.
Ruling: No error having been committed by the Court of Appeals in affirming the judgment of the court a quo, its
challenged decision and resolution are hereby AFFIRMED and the instant petition is DENIED, with double costs against
petitioners.
--------------------------------------------------Art. 1868, NCC :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.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-21

REGINA P. DIZON, & et. al. vs. COURT OF APPEALS and OVERLAND EXPRESS LINES, INC.
G.R. No. 122544 January 28, 1999
FACTS:
The private respondent, 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 situated at corner MacArthur Highway and
South H Street, Diliman, Quezon City. The 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. Thereafter, 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 , petitioners filed an action for ejectment. The court t
rendered judgment ordering 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. Private respondent filed 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. Then, the trial court denied the issuance of a writ of preliminary injunction on the
ground that the decision of the then City Court for the ejectment of the private respondent, having been affirmed by the
then Intermediate Appellate Court and the Supreme Court, has become final and executory. The Court of Appeals went
further by stating that in fact, what was entered into was a conditional contract of sale wherein ownership over the
leased property shall not pass to the private respondent until it has fully paid the purchase price. Since private respondent
did not consign to the court the balance of the purchase price and continued to occupy the subject premises, it had the
obligation to pay the amount of P1,700.00 in monthly rentals until full payment of the purchase price.
ISSUE: Whether or not there exists an agency relationship between petitioners (as co-owners of the leased premises) and
Alice A. Dizon, as petitioners alleged agent on the supposed agency?
HELD:
NO. 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.
Ruling: The petition is granted.
-------------------------------------------------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.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-22

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

--AGENCY CASE DIGESTS-23