PNB V. MANILA SURETY & FIDELITY CO., INC.

FACTS: Adams & Taguba Corporation (ATACO) constituted PNB as its

assignee and attorney-in-fact to receive and collect from the Bureau of Public
Works the amount to pay for the asphalt delivered to it under a trust receipt
guaranteed by Manila Surety. ATACO delivered to BPW asphalt worth
P431,466.52. Of this amount, PNB was able to regularly collect a total of
P106,382.01. However, due to unexplained reasons, PNB was not able to
collect until the investigators found out that more money were payable to
ATACO from BPW. The latter allowed another creditor to collect funds due to
ATACO under the same purchase order, to a total of P311,230.41. 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. A bank is answerable for negligence in failing to collect the
sums due its debtor from the latters own debtor, contrary to said banks duty
as holder of an exclusive and irrevocable power of attorney to make such
collections. The general rule under A1883 is that an agent who acts in his
own name is a bar against the right of action of the principal against the
person to whom the agent has contracted with. In this case, the agent is the
one primarily bound. Exception: When the contract invloves things belonging
to the principal. Thus, PNB sued both ATACO and Manila Surety to recover
the balance of P158,563.18, plus interests and damages. CA ruled that PNB
was negligent in having stopped collecting from BPW before ATACOs debt is
fully collected, thereby allowing funds to be taken by other creditors to the
prejudice of the surety. PNB asserts that the power of attorney executed in it
is favor from ATACO was merely an additional security; that it was the duty of
the surety to see to it that the obligor fulfills his obligation; and that PNB has
no obligation to the surety to collect any sum from ATACO.
ISSUE: W/N PNB is negligent as an agent-creditor of ATACO in collecting
sums due to it.
HELD: YES. The CA did not hold PNB responsible for its negligence in
failing to collect from ATACO for its debt to PNB, but for ITS NEGLECT IN
COLLECTING SUMS DUE TO ATACO FROM BPW. An agent is required to
act with the care and diligence of a good father of a family and becomes
liable for the damages, which the principal may suffer through its nonperformance. PNBs power to collect was expressly made irrevocable so that
BPW could very well refuse to make payments to ATACO itself, and reject
any demands by the surety.
Borja, Sr. vs. Sulyap, Inc. 399 SCRA 601 (2003)

DOCTRINE: "Private practice" of a profession, specifically the law profession

does not pertain to an isolated court appearance; rather, it contemplates a
succession of acts of the same nature habitually or customarily holding ones
self to the public as a lawyer.
FACTS: Basilio Borja, Sr. as lessor, and Sulyap, Inc., as lessee, entered into
a contract of lease involving a one-storey office building owned by Borja
located at New Manila, Quezon City. Pursuant to the lease, Sulyap, Inc. paid,
among others, advance rentals, association dues and deposit for electrical
and telephone expenses. Upon the expiration of their lease contract, Sulyap
demanded the return of the said advance rentals, dues and deposit but Borja
refused to do so. Thus, Sulyap filed with the RTC of QC a complaint for sum
of money against Borja. Subsequently, the parties entered into and submitted
to the trial court a Compromise Agreement stating that Borja is bound to
pay the amounts P30,575 and P50,000 and in case any amount due is
not paid within the period stated in this agreement shall earn 2% interest per
month until fully paid plus 25% attorneys fees of the amount collectible and
that writ of execution shall be issued as a matter of right.
Petitioner, however, failed to pay the amounts stated in the judicial
compromise. Sulyap filed a writ of execution against Borja. The Trial Court
granted the writ. Borja motioned to quash the writ by stating that his failure to
pay the amounts within the agreed period was due to Sulyaps fault;
therefore, the penalty clause should not be imposed.
Borja filed another motion praying for the quashal of the writ of execution
and modification of the decision. This time, he contended that there was
fraud in the execution of the compromise agreement. He claimed that 3 sets
of compromise agreement were submitted for his approval. Among them, he
allegedly chose and signed the compromise agreement which contained no
stipulation as to the payment of 2% monthly interest and 25% attorneys fees
in case of default in payment. He alleged that his former counsel, Atty.
Leonardo Cruz, who assisted him in entering into the said agreement,
removed the page of the genuine compromise agreement where he affixed
his
signature
and
fraudulently
attached
the
same
to
the
compromise agreement submitted to the court in order to make it appear that
he agreed to the penalty clause embodied therein.
Sulyap presented Atty. Cruz as witness, who declared that the petitioner gave
hisconsent to the inclusion of the penalty clause of 2% monthly interest and
25% attorneys fees in the compromise agreement. He added that the
compromise agreement approved by the court was in fact signed by the

petitioner inside the courtroom before the same was submitted for approval.
Atty. Cruz stressed that the penalty clause of 2% interest per month until full
payment of the amount due, plus 25% thereof as attorneys fees, in case of
default in payment, was actually chosen by the petitioner.
The trial court ruled in favour of Sulyap because it gave credence to the
testimony ofAtty. Cruz and even noted that it was more than one year from
receipt of the judgment on compromise on October 25, 1995, when he
questioned the inclusion of the penalty clause in the approved compromise
agreement despite several opportunities to raise said objection.
ISSUE: Whether Borja is bound by the penalty clause in the compromise
agreement.
HELD: YES. While a judicial compromise may be annulled or modified on
the ground ofvitiated consent or forgery, we find that the testimony of the
petitioner failed to establish the attendance of fraud in the instant case. No
evidence was presented by petitioner other than his bare allegation that his
former counsel fraudulently attached the page of the genuine compromise
agreement where he affixed his signature to the compromise agreement
submitted to the court.
Petitioner cannot feign ignorance of the existence of the penalty clause in
thecompromise agreement approved by the court. When he received the
judgmentreproducing the full text of the compromise agreement, to February
19, 1997, he neverraised the issue of the fraudulent inclusion of the penalty
clause in their agreement. We note that petitioner is a doctor of medicine. He
must have read and understood thecontents of the judgment on compromise.
In fact, on November 13, 1995, he filed,without the assistance of counsel, a
motion praying that the amounts of P50,000.00 and 37,575.00 be withheld
from his total obligation and instead be applied to the expenses for the repair
of the leased premises which was allegedly vandalized by the private
respondent
Even assuming that Atty. Leonardo Cruz exceeded his authority in inserting
the penalty clause, the status of the said clause is not void but merely
voidable, i.e., capable of being ratified.17 Indeed, petitioners failure to
question the inclusion of the 2% monthly interest and 25% attorneys fees in
the judicial compromise despite several opportunities to do so was
tantamount to ratification. Hence, he is estopped from assailing the validity
thereof.

Finally, we find no merit in petitioner's contention that the compromise

agreement should be annulled because Atty. Cruz, who assisted him in
entering into such agreement, was then an employee of the Quezon City
government, and is thus prohibited from engaging in the private practice of
his profession. Suffice it to state that the isolated assistance provided by Atty.
Cruz to the petitioner in entering into a compromise agreement does not
constitute a prohibited "private practice" of law by a public official. "Private
practice" of a profession, specifically the law profession does not pertain to
an isolated court appearance; rather, it contemplates a succession of acts of
the same nature habitually or customarily holding ones self to the public as a
lawyer. Such was never established in the instant case.
GOZUN V MERCADO
FACTS: In the local elections of 1995, respondent vied for the gubernatorial
post in Pampanga. Upon respondents request, petitioner, owner of JMG
Publishing House, a printing shop located in San Fernando, Pampanga,
submitted to respondent draft samples and price quotation of campaign
materials. By petitioners claim, respondents wife had told him that
respondent already approved his price quotation and that he could start
printing the campaign materials, hence, he did print campaign materials like
posters bearing respondents photograph, leaflets containing the slate of
party candidates, sample ballots, poll watcher identification cards, and
stickers. Given the urgency and limited time to do the job order, petitioner
availed of the services and facilities of Metro Angeles Printing and of St.
Joseph Printing Press, owned by his daughter Jennifer Gozun and mother
Epifania Macalino Gozun, respectively. Meanwhile, on March 31, 1995,
respondents sister-in-law, Lilian Soriano (Lilian) obtained from petitioner
"cash advance" of P253,000 allegedly for the allowances of poll watchers
who were attending a seminar and for other related expenses. Lilian
acknowledged on petitioners 1995 diary receipt of the amount.
ISSUE: W/N Lilian R. Soriano was authorized by the respondent to receive
the cash advance from the petitioner in the amount of P253,000.00.
Held: 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. Contracts 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 are classified as
unauthorized contracts and are declared unenforceable, unless they are
ratified. Generally, the agency may be oral, unless the law requires a specific

form. However, a special power of attorney is necessary for an agent to, as in

this case, borrow money, unless it be urgentand indispensable for the
preservation of the things which are under administration.
Since nothing in this case involves the preservation of things under
administration, a determination of whether Soriano had the special authority
to borrow money on behalf of respondent is in order. It is a general rule in the
law of agency that, in order to bind the principal by a mortgage on real
property executed by an agent, it must upon its face purport to be made,
signed and sealed in the name of the principal, otherwise, it will bind the
agent only. It is not enough merely that the agent was in fact authorized to
make the mortgage, if he has not acted in the name of the principal. x x
x (Emphasis and underscoring supplied)
Serona v. CA
FACTS: Leonida Quilatan delivered pieecs of jewelry to Serona to be sold on
commission basis. By oral agreement, shall remit payment or return the
pieces of jewelry if not sold to Quilatan, both within 30 days from receipt of
the items. Quilatan required Serona to execute an acknowledgement receipt
indicating said agreement and the total amount due. This was signed by
Serona and a witness. Unknown to Quilantan, Serona had earlier entrusted
the jewelry to Marichu Labrador for the latter to sell on commission basis.
Serona was not able to collect payment from Labrador, which caused her to
likewise fail to pay her obligation to Quilatan. So Quilatan filed an action for
estafa under Art. 315 1(b). RTC found Serona guilty of Estafa. CA affirmed
said ruling but modified the penalty.
ISSUE(S): WON Serona is guilty of estafa
HELD: No she did not commit estafa through conversion or misappropriation
by delivering the jewelry to a sub-agent for sale on commission basis. Serona
is acquitted but liable for civil damages for value of unpaid jewelry.
RATIO: She neither abused the confidence reposed upon her by Quilatan nor
converted or misappropriated the subject jewelry. Giving the pieces of jewelry
to a sub-agent for sale on commission basis did not violate her undertaking
with Quilatan. Moreover, she delivered the jewelry to Labrador under the
same terms upon which it was originally entrusted to her and that Serona had
not derived any personal benefit from the loss of the jewelry. Labrador
admitted that she received the jewelry from petitioner and sold the same to a
third person. She further acknowledged that she owed Serona P441,035.00,
thereby negating any criminal intent on the part of Serona. There is no
showing that she conspired with Labrador to deprive Quilatan of the jewelry
or its value. 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.
Thus Serona is still civilly liable.
CASE LAW/ DOCTRINE: The acts of an agent beyond the scope of his
authority do not bind the principal unless he ratifies them, expressly or
impliedly. An agent who is not prohibited from appointing a sub-agent but
does so without express authority is responsible for the acts of the subagent.
WILLIAM UY V. COURT OF APPEALS
FACTS:
Petitioners Uy and Roxas are agents authorized to sell eight parcels of land
bythe owners thereof. By virtue of such authority, petitioners offered to sell
thelands located in Benguet to respondent NHA to be utilized and developed
as ahousing project. On February 14, 1989, the NHA Board approved
theacquisition of said lands, at the cost of P23.87M, pursuant to which the
partiesexecuted a series of Deeds of Absolute Sale covering the subject
lands. Of theeight parcels, however, only five were paid for by the NHA
because of thereport it received from the Land Geosciences Bureau of the
DENR that theremaining area is located at an active landslide area and
therefore, not suitablefor development into a housing project.In 1991, the
NHA cancelled the sale of the 3 parcels of land and subsequentlyoffered the
amount of P1.225 million to the landowners as daos perjuicios. On9 March
1992, petitioners filed before the QC RTC a Complaint for Damages.The
RTC rendered a decision declaring the cancellation of the contract to
bejustified. The trial court nevertheless awarded damages to plaintiffs in the
sameamount offered by NHA to petitioners as damages. Upon appeal by
petitioners,the CA held that since there was "sufficient justifiable basis" in
cancelling thesale, "it saw no reason" for the award of damages. Hence, this
petition.
ISSUES:
(1) Was there a legal basis for the rescission of the sale of the 3 parcels of
land?And granting arguendo that NHA has legal basis to rescind, does the
petitionerhave the right to claim for damages?(2) [Irrelevant] Were the
petitioners allowed to lodge a complaint as agents?
HELD:

(1) There was no rescission per se. What is involved is a

Facts:

cancellation basedon the negation of the cause of the contract.(2) [Irrelevant]

No. Petitioners are not parties, heirs, assignees, or beneficiariesof a
stipulation pour autrui under the contracts of sale, they do not,
undersubstantive law, possess the right they seek to enforce.

Respondent Philippine National Railways (PNR) informed a certain Gaudenci

oRomualdez(Romualdez, hereinafter) that it has accepted the latters offer to
buythe PNRsscrap/unserviceable rails located in Del Carmen and
Lubao,
Pampanga at P1,300.00 andP2,100.00 per metric ton, respectively, for the
total amount of P96,600.00. Romualdez paid the purchase price and
addressed a letter to Atty. CiprianoDizon, PNRs Acting Purchasing Agent.
The letter authorized LIZETTE WIJANCOto be his (Romualdez) lawful
representative in the withdrawal of the scrap/unserviceable rails awarded to
him. Furthermore, the original copy of the award which indicates the waiver
of rights, interest and participation in favor of Lizetter Wijanco was also
given.The Lizette R. Wijanco was petitioner's now deceased wife. That very s
ame day, Lizetterequested the PNR to transfer the location of withdrawal for t
he reason that thescrap/unserviceable rails located in Del Carmen and
Lubao, Pampanga were not ready for hauling. The PNR granted said request
and allowed Lizette to withdraw scrap/unserviceable rails in Murcia, Capas
and San Miguel, Tarlac instead. However, PNR subsequently suspended the
withdrawal in view of what it considered as documentary discrepancies
coupled
by
reportedpilferages of over P500,000.00
worth of PNR scrap properties in Tarlac.

RATIO:
(1) Petitioners confuse the cancellation of the contract by the NHA as
arescission of the contract under Art. 1191. The right of rescission or,
moreaccurately, resolution, is predicated on a breach of faith by the other
party.NHA did not have the right to rescind for the other parties to the
contract, thevendors, did not commit any breach of their obligation. The
cancellation wasbased 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. Cause, whichis the essential reason for the contract, should be
distinguished from motive,which is the particular reason of a party which
does not affect the other party.In a contract of sale of a piece of land, such as
in this case, the cause of thevendor (petitioners' principals) in entering into
the contract is to obtain theprice. For the vendee, NHA, it is the acquisition of
the land. The motive of theNHA, on the other hand, is to use said lands for
housing. Ordinarily, a party's motives for entering into the contract do not
affect the contract. However, when the motive predetermines the cause, the
motive may be regarded as the cause. In this case, it is clear, and petitioners
do not dispute, that NHA would not have entered into the contract were the
lands not suitable for housing. In other words, the quality of the land was an
implied condition for the NHA to enter into the contract.
On NHAs part, therefore, the motive was the cause for its being a party to
the sale. The findings of the Land Geosciences Bureau were sufficient for the
cancellation of the sale 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. Article
1318 of the Civil Code enumerates the essential requisites of a contract: (1)
Consent of the parties; (2)Subject matter; and (3) Cause of the obligation
which is established. Therefore, assuming that petitioners are parties,
assignees or beneficiaries to the contract of sale, they would not be entitled
to any award of damages
Laureano Angeles vs. Philippine National Railways

Consequently, thespouses Angeles demanded the refund of the amount

of P96,000.00. The PNR, however,refused to pay, alleging that as per
delivery receipt duly signed by Lizette, 54.658 metric tons of unserviceable
rails had already been withdrawn. The spouses Angeles filed suit against
thePNR for specific performance and damages before the Regional
Trial Court. Lizette W. Angelespassed away and was substituted by her heirs,
among whom is her husband, herein petitioner Laureno T. Angeles.The trial
court, on the postulate that the spouses Angeles are not the real parties-ininterest,rendered judgment dismissing their complaint for lack of cause of
action. As held by the court,Lizette was merely a representative of
Romualdez in the withdrawal of scrap or unserviceablerails awarded to him
and not an assignee to the latter's rights with respect to the award.Petitioner
appealed with the Court of Appeals which dismissed the appeal and affirmed
that of the trial court.
Issue: Whether or not the CA erred in affirming the trial court's holding that
petitioner and his spouse, as plaintiffs a quo, had no cause of action as they
were not the real parties-in-interest in this case.

Held: No. The CAs conclusion, affirmatory of that of the trial court, is that
Lizette was not an assignee, but merely an agent whose authority was limited
to the withdrawal of the scrap rails, hence, without personality to sue. Where
agency exists, the third party's (in this case, PNR's) liability on a contract is to
the principal and not to the agent and the relationship of the third party to the
principal is the same as that in a contract in which there is no agent.
Normally, the agent has neither rights nor liabilities as against the third party.
He cannot thus sue or be sued on the contract. Since a contract may be
violated only by the parties thereto as against each other, the real party-ininterest, either as plaintiff or defendant in an action upon that contract must,
generally, be a contracting party. The legal situation is, however, different
where an agent is constituted as an assignee. In such a case, the agent may,
in his own behalf, sue on a contract made for his principal, as an assignee of
such contract. The rule requiring every action to be prosecuted in the name
of the real party-in-interest recognizes the assignment of rights of action and
also recognizes that when one has a right assigned to him, he is then the
real party-in-interest and may maintain an action upon such claim or right.
WHEREFORE, the petition is DENIED and the assailed decision of the CA is
AFFIRMED. Costs against the petitioner.
Pineda V. CA (1993) September 27, 1993
FACTS: Prime Marine Services, Inc. (PMSI), a crewing/manning outfit,
procured Group PoIicy from Insular Life Assurance Co., Ltd. to provide life
insurance coverage to its sea-based employees enrolled under the plan.
February 17 1986: 6 employees of the PMSI perished at sea when M/V
Nemos, a Greek cargo vessel, sunk somewhere in El Jadida, Morocco. The
beneficiaries asked President and General Manager of PMSI, Capt. Roberto
Nuval and issued him special powers of attorney authorizing him to "follow
up, ask, demand, collect and receive" for their benefit indemnities. It only
verbally pertained to the sinking of the fatal vessel. Unknown to them,
however, the PMSI, in its capacity as employer and policyholder of the life
insurance of its deceased workers, filed with formal claims with their special
power of attorney. Capt. Nuval, upon receipt of these checks from the
treasurer, who happened to be his son-in-law, endorsed and deposited them
in his account with the Commercial Bank of Manila, now Boston Bank Upon
learning that they are entitled to the claim, they sought to recover
from Insular Life but it denied on the ground that they already delivered to
PMSI

The fact that there was a verbal agreement between complainants-appellees

and Capt. Nuval limiting the authority of the latter to claiming specified death
benefits cannot prejudice the insurance company which relied on the terms of
the powers of attorney which on their face do not disclose such limitation
Section 180 of the Insurance Code has been amended by the Family Code
17 which grants the father and mother joint legal guardianship over the
property of their unemancipated common child without the necessity of a
court appointment; however, when the market value of the property or the
annual income of the child exceeds P50,000.00, the parent concerned shall
be required to put up a bond in such amount as the court may determine.
Insurance Commission: favored petitioners The Insular Life Assurance
Company appealed stating that
a) had no jurisdiction over the case considering that the claims
exceeded P100,000
b) erred in holding that the powers of attorney relied upon by Insular
Life were insufficient to convey absolute authority to Capt. Nuval to
demand, receive and take delivery of the insurance proceeds
pertaining to the petitioners
c) erred in not giving credit to the version of Insular Life that the power
of attorney supposed to have been executed in favor of the Alarcons
was missing, and
d) erred in holding that Insular Life was liable for violating Section 180
of the Insurance Code for having released to the surviving mothers
the insurance proceeds pertaining to the beneficiaries who were still
minors despite the failure of the former to obtain a court authorization
or to post a bond.
CA: eliminated the award to minor beneficiaries Dina Ayo and Lucia Lontok
ISSUE: W/N the minor beneficiaries award should be eliminated
HELD: YES. petition is GRANTED. CA Reversed. Insurance Commission
Reinstated.
Being special powers of attorney, they must be strictly construed. Insular Life
knew that a power of attorney in favor of Capt. Nuval for the collection and
receipt of such proceeds was a deviation from its practice with respect to
group policies.

Group Insurance coverage terms for group insurance are usually stated in a
master agreement or policy that is issued by the insurer to a representative of
the group or to an administrator of the insurance program employer acts as a
functionary in the collection and payment of premiums and in performing
related duties falling within the ambit of administration of a group policy is the
disbursement of insurance payments by the employer to the employees
employee is in the position of a real party to the master policy employees is
the true source of the benefits, which are a form of additional compensation
to them enables the employees to carry a larger amount of insurance than
they could otherwise, and helps to attract and hold a permanent class of
employees. Even granting for the sake of argument that the special powers
of attorney were in due form, Insular Life was grossly negligent in delivering
the checks, drawn in favor of the petitioners, to a party who is not the agent
mentioned in the special power of attorney. Nor can we agree with the
opinion of the public respondent that since the shares of the minors in the
insurance proceeds are less than P50,000.00, then under Article 225 of the
Family Code their mothers could receive such shares without need of either
court appointments as guardian or the posting of a bond
Art. 225. The father and the mother shall jointly exercise legal guardianship
over the property of their unemancipated common child without the necessity
of a court appointment. In case of disagreement, the father's decision shall
prevail, unless there is judicial order to the contrary.

Where the market value of the property or the annual income of the child
exceeds P50,000, the parent concerned shall be required to furnish a bond in
such amount as the court may determine, but not less than ten per centum
(10%) of the value of the property or annual income, to guarantee the
performance of the obligations prescribed for general guardians.
It is clear from the said Article that regardless of the value of the
unemancipated common child's property, the father and mother ipso jure
become the legal guardian of the child's property. However, if the market
value of the property or the annual income of the child exceeds P50,000.00,
a bond has to be posted by the parents concerned to guarantee the
performance of the obligations of a general guardian.
It must, however, be noted that the second paragraph of Article 225 of the
Family Code speaks of the "market value of the property or the annual
income of the child," which means, therefore, the aggregate of the child's
property or annual income; if this exceeds P50,000.00, a bond is required.
There is no evidence that the share of each of the minors in the proceeds of
the group policy in question is the minor's only property. Without such
evidence, it would not be safe to conclude that, indeed, that is his only
property.