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PART TWO: AGENCY (Arts.

1868-1932)
I. Nature, Form and Kinds of Agency
A. Definition Art. 1868; Art. 1883, last paragraph.
Art. 1868. By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of another, with the
consent or authority of the latter.
Art. 1883. If an agent acts in his own name, the principal has no right of action
against the persons with whom the agent has contracted; neither have such
persons against the principal.
In such case the agent is the one directly bound in favor of the person with whom
he has contracted, as if the transaction were his own, except when the contract
involves things belonging to the principal.
The provisions of this article shall be understood to be without prejudice to the
actions between the principal and agent.
JBL Reyes Observation: This article does not draw clearly the distinction between lease of
services and agency without representation. The laborer also does something or renders
service on behalf of another. The true essence of the distinction, it is submitted, lies in that
the agents enters or is designed to enter juridical relations, with or without representation of
the principal. (XVI Lawyers Journal, March 31, 1951, p. 138).
- Orient Air Services and Hotel Reps. vs. CA, 197 SCRA 645 (1991)
ORIENT AIR SERVICES & HOTEL REPRESENTATIVES vs. COURT OF APPEALS and
AMERICAN AIR-LINES INCORPORATED
Facts: On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air),
an air carrier offering passenger and air cargo transportation in the Philippines, and Orient
Air Services and Hotel Representatives (hereinafter referred to as Orient Air), entered into a
General Sales Agency Agreement (hereinafter referred to as the Agreement), whereby the
former authorized the latter to act as its exclusive general sales agent within the Philippines
for the sale of air passenger transportation.
On 11 May 1981, alleging that Orient Air had reneged on its obligations under the
Agreement by failing to promptly remit the net proceeds of sales for the months of January
to March 1981 in the amount of US $254,400.40, 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 (Termination). Four (4) days later, or on
15 May 1981, American Air instituted suit against Orient Air with the Court of First Instance
of Manila, Branch 24, for Accounting with Preliminary Attachment or Garnishment,
Mandatory Injunction and Restraining Order 4 averring the aforesaid basis for the termination
of the Agreement as well as therein defendant's 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." 5
In its Answer 6 with counterclaim dated 9 July 1981, defendant Orient Air denied the material
allegations of the complaint with respect to plaintiff's entitlement to alleged unremitted
amounts, contending that after application thereof to the commissions due it under the

Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions.
Further, the defendant contended that the actions taken by American Air in the course of
terminating the Agreement as well as the termination itself were untenable, Orient Air
claiming that American Air's precipitous conduct had occasioned prejudice to its business
interests.
Finding that the record and the evidence substantiated the allegations of the defendant, the
trial court ruled in its favor, rendering a decision dismissing the complaint and holding the
termination made by the latter as affecting the GSA agreement illegal and improper and
order the plaintiff to reinstate defendant as its general sales agent for passenger
transportation in the Philippines in accordance with said GSA agreement;
On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision
promulgated on 27 January 1986, affirmed the findings of the court a quo on their material
points but with some modifications with respect to the monetary awards granted.
American Air moved for reconsideration of the aforementioned decision, assailing the
substance thereof and arguing for its reversal. The appellate court's decision was also the
subject of a Motion for Partial Reconsideration by Orient Air which prayed for the restoration
of the trial court's ruling with respect to the monetary awards. The Court of Appeals, by
resolution promulgated on 17 December 1986, denied American Air's motion and with
respect to that of Orient Air, ruled thus:
Orient's motion for partial reconsideration is denied insofar as it prays for affirmance
of the trial court's award of exemplary damages and attorney's fees, but granted
insofar as the rate of exchange is concerned. The decision of January 27, 1986 is
modified in paragraphs (1) and (2) of the dispositive part so that the payment of the
sums mentioned therein shall be at their Philippine peso equivalent in accordance
with the official rate of exchange legally prevailing on the date of actual payment. 9
Both parties appealed the aforesaid resolution and decision of the respondent court, Orient
Air as petitioner in G.R. No. 76931 and American Air as petitioner in G.R. No. 76933. By
resolution 10 of this Court dated 25 March 1987 both petitions were consolidated, hence, the
case at bar.
Issue: The propriety of American Air's termination of the Agreement. The
respondent appellate court, on this issue, ruled thus:
It is not denied that Orient withheld remittances but such action finds justification
from paragraph 4 of the Agreement, Exh. F, which provides for remittances to
American less commissions to which Orient is entitled, and from paragraph 5(d)
which specifically allows Orient to retain the full amount of its commissions. Since, as
stated ante, Orient is entitled to the 3% override. American's premise, therefore, for
the cancellation of the Agreement did not exist. . . ."
We agree with the findings of the respondent appellate court. As earlier established, Orient
Air was entitled to an overriding commission based on total flown revenue. American Air's
perception that Orient Air was remiss or in default of its obligations under the Agreement
was, in fact, a situation where the latter acted in accordance with the Agreementthat of
retaining from the sales proceeds its accrued commissions before remitting the balance to
American Air. Since the latter was still obligated to Orient Air by way of such commissions.
Orient Air was clearly justified in retaining and refusing to remit the sums claimed by
American Air. The latter's termination of the Agreement was, therefore, without
cause and basis, for which it should be held liable to Orient Air.

B. Elements:
i) with consent, express or implied, of the parties to establish the relationship;
(Art. 1869 conduct; Art. 1910 ratification; Art. 1868 conduct)
Art. 1869. Agency may be express, or implied from the acts of the principal, from
his silence or lack of action, or his failure to repudiate the agency, knowing that
another person is acting on his behalf without authority.
Agency may be oral, unless the law requires a specific form.
Art. 1910. The principal must comply with all the obligations which the agent may
have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is
not bound except when he ratifies it expressly or tacitly.
Art. 1868. By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of another, with the
consent or authority of the latter.
ii) the object is the execution of a judicial act in relation to a third person;
iii) the agent acts as a representative and not for himself;
iv) the agents act within the scope of his authority. (Art. 1881)

Art. 1881. The agent must act within the scope of his authority. He may do such
acts as may be conducive to the accomplishment of the purpose of the agency.

-Loadmasters Customs Services, Inc. vs. Glodel Brokerage


Corporation and R&B Insurance Corporation, 639 SCRA 69 [2011]

THE FACTS:

On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor
of Columbia to insure the shipment of 132 bundles of electric copper cathodes against All Risks.
On August 28, 2001, the cargoes were shipped on board the vessel "Richard Rey" from Isabela,
Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date.

Columbia engaged the services of Glodel for the release and withdrawal of the cargoes
from the pier and the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the
services of Loadmasters for the use of its delivery trucks to transport the cargoes to Columbia's
warehouses/plants in Bulacan and Valenzuela City.

The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by
its employed drivers and accompanied by its employed truck helpers. Six (6) truckloads of
copper cathodes were to be delivered to Balagtas, Bulacan, while the other six (6) truckloads
were destined for Lawang Bato, Valenzuela City. The cargoes in six truckloads for Lawang Bato
were duly delivered in Columbia's warehouses there. Of the six (6) trucks en route to Balagtas,
Bulacan, however, only five (5) reached the destination. One (1) truck, loaded with 11 bundles
or 232 pieces of copper cathodes, failed to deliver its cargo.

Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered but without the
copper cathodes. Because of this incident, Columbia filed with R&B Insurance a claim for
insurance indemnity in the amount of P1,903,335.39. After the requisite investigation and
adjustment, R&B Insurance paid Columbia the amount of P1,896,789.62 as insurance
indemnity.

R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and
Glodel before the Regional Trial Court, Branch 14, Manila (RTC), docketed as Civil Case No.
02-103040. It sought reimbursement of the amount it had paid to Columbia for the loss of the
subject cargo. It claimed that it had been subrogated "to the right of the consignee to recover
from the party/parties who may be held legally liable for the loss." 2

On November 19, 2003, the RTC rendered a decision 3 holding Glodel liable for
damages for the loss of the subject cargo and dismissing Loadmasters' counterclaim for
damages and attorney's fees against R&B Insurance. The dispositive portion of the decision
reads:

Both R&B Insurance and Glodel appealed the RTC decision to the CA.
On August 24, 2007, the CA rendered the assailed decision which reads in part:

Considering that appellee is an agent of appellant Glodel, whatever liability the latter owes to
appellant R&B Insurance Corporation as insurance indemnity must likewise be the amount it
shall be paid by appellee Loadmasters.

Hence, Loadmasters filed the present petition for review on certiorari before this Court
presenting the following:

ISSUES

1.Can Petitioner Loadmasters be held liable to Respondent Glodel in spite of the fact that the
latter respondent Glodel did not file a cross-claim against it (Loadmasters)?

2.Under the set of facts established and undisputed in the case, can petitioner Loadmasters be
legally considered as an Agent of respondent Glodel?

HELD:

1. To totally exculpate itself from responsibility for the lost goods, Loadmasters argues that it cannot be
considered an agent of Glodel because it never represented the latter in its dealings with the consignee.
At any rate, it further contends that Glodel has no recourse against it for its (Glodel's) failure to file a
cross-claim pursuant to Section 2, Rule 9 of the 1997 Rules of Civil Procedure.

Glodel, in its Comment, 7 counters that Loadmasters is liable to it under its cross-claim because the latter
was grossly negligent in the transportation of the subject cargo. With respect to Loadmasters' claim that it
is already estopped from filing a cross-claim, Glodel insists that it can still do so even for the first time on
appeal because there is no rule that provides otherwise. Finally, Glodel argues that its relationship with
Loadmasters is that of Charter wherein the transporter (Loadmasters) is only hired for the specific job of
delivering the merchandise. Thus, the diligence required in this case is merely ordinary diligence or that of
a good father of the family, not the extraordinary diligence required of common carriers.

R&B Insurance, for its part, claims that Glodel is deemed to have interposed a cross-claim against
Loadmasters because it was not prevented from presenting evidence to prove its position even without
amending its Answer. As to the relationship between Loadmasters and Glodel, it contends that a contract
of agency existed between the two corporations. 8

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. 9 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: EScHDA

ART. 2207.If the plaintiff's 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.

As subrogee of the rights and interest of the consignee, R&B Insurance has the right to seek
reimbursement from either Loadmasters or Glodel or both for breach of contract and/or tort.

The issue now is who, between Glodel and Loadmasters, is liable to pay R&B Insurance for the amount of
the indemnity it paid Columbia.

At the outset, it is well to resolve the issue of whether Loadmasters and Glodel are common carriers to
determine their liability for the loss of the subject cargo. Under Article 1732 of the Civil Code, common
carriers are persons, corporations, firms, or associations engaged in the business of carrying or
transporting passenger or goods, or both by land, water or air for compensation, offering their services to
the public.

Based on the aforecited definition, Loadmasters is a common carrier because it is engaged in the
business of transporting goods by land, through its trucking service. It is a common carrier as
distinguished from a private carrier wherein the carriage is generally undertaken by special agreement
and it does not hold itself out to carry goods for the general public. 10 The distinction is significant in the
sense that "the rights and obligations of the parties to a contract of private carriage are governed
principally by their stipulations, not by the law on common carriers." 11

In the present case, there is no indication that the undertaking in the contract between Loadmasters and
Glodel was private in character. There is no showing that Loadmasters solely and exclusively rendered

services to Glodel.

In fact, Loadmasters admitted that it is a common carrier. 12

In the same vein, Glodel is also considered a common carrier within the context of Article 1732. In its
Memorandum, 13 it states that it "is a corporation duly organized and existing under the laws of the
Republic of the Philippines and is engaged in the business of customs brokering." It cannot be considered
otherwise because as held by this Court in Schmitz Transport & Brokerage Corporation v. Transport
Venture, Inc., 14 a customs broker is also regarded as a common carrier, the transportation of goods
being an integral part of its business.

Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business
and for reasons of public policy, to observe the extraordinary diligence in the vigilance over the goods
transported by them according to all the circumstances of such case, as required by Article 1733 of the
Civil Code. When the Court speaks of extraordinary diligence, it is that extreme measure of care and
caution which persons of unusual prudence and circumspection observe for securing and preserving their
own property or rights. 15 This exacting standard imposed on common carriers in a contract of carriage of
goods is intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier once
the goods have been lodged for shipment. 16 Thus, in case of loss of the goods, the common carrier is
presumed to have been at fault or to have acted negligently. 17 This presumption of fault or negligence,
however, may be rebutted by proof that the common carrier has observed extraordinary diligence over the
goods.

With respect to the time frame of this extraordinary responsibility, the Civil Code provides that the
exercise of extraordinary diligence lasts from the time the goods are unconditionally placed in the
possession of, and received by, the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them. 18

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." aEcSIH

Loadmasters' claim that it was never privy to the contract entered into by Glodel with the consignee
Columbia or R&B Insurance as subrogee, is not a valid defense. It may not have a direct contractual
relation with Columbia, but it is liable for tort under the provisions of Article 2176 of the Civil Code on
quasi-delicts which expressly provide:

ART. 2176.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.

Pertinent is the ruling enunciated in the case of Mindanao Terminal and Brokerage Service, Inc. v.
Phoenix Assurance Company of New York/McGee & Co., Inc. 19 where this Court held that a tort may
arise despite the absence of a contractual relationship, to wit:

We agree with the Court of Appeals that the complaint filed by Phoenix and McGee against Mindanao
Terminal, from which the present case has arisen, states a cause of action. The present action is based
on quasi-delict, arising from the negligent and careless loading and stowing of the cargoes belonging to
Del Monte Produce. Even assuming that both Phoenix and McGee have only been subrogated in the
rights of Del Monte Produce, who is not a party to the contract of service between Mindanao Terminal and
Del Monte, still the insurance carriers may have a cause of action in light of the Court's consistent ruling
that the act that breaks the contract may be also a tort. In fine, a liability for tort may arise even under a
contract, where tort is that which breaches the contract. In the present case, Phoenix and McGee are not
suing for damages for injuries arising from the breach of the contract of service but from the
alleged negligent manner by which Mindanao Terminal handled the cargoes belonging to Del Monte
Produce. Despite the absence of contractual relationship between Del Monte Produce and Mindanao
Terminal, the allegation of negligence on the part of the defendant should be sufficient to establish a
cause of action arising from quasi-delict. [Emphases supplied]

In connection therewith, Article 2180 provides:


ART. 2180.The obligation imposed by Article 2176 is demandable not only for one's own acts or
omissions, but also for those of persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any business or
industry.
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 employee's 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. 20 To avoid liability for a quasidelict 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. 21 In this regard, Loadmasters failed.

Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to ensure that
Loadmasters would fully comply with the undertaking to safely transport the subject cargo to the
designated destination. It should have been more prudent in entrusting the goods to Loadmasters by
taking precautionary measures, such as providing escorts to accompany the trucks in delivering the
cargoes. Glodel should, therefore, be held liable with Loadmasters. Its defense of force majeure is
unavailing.

At this juncture, the Court clarifies that there exists no principal-agent relationship between Glodel and
Loadmasters, as erroneously found by the CA. Article 1868 of the Civil Code provides: "By the contract of
agency a person binds himself to render some service or to do something in representation or on behalf
of another, with the consent or authority of the latter." The elements of a contract of agency are: (1)
consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a
juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the
agent acts within the scope of his authority. 22

2.

Accordingly, there can be no contract of agency between the parties. Loadmasters never
represented Glodel. Neither was it ever authorized to make such representation. It is a settled rule that
the basis for agency is representation, that is, the agent acts for and on behalf of the principal on matters
within the scope of his authority and said acts have the same legal effect as if they were personally
executed by the principal. On the part of the principal, there must be an actual intention to appoint or an
intention naturally inferable from his words or actions, while on the part of the agent, there must be an
intention to accept the appointment and act on it. 23 Such mutual intent is not obtaining in this case.
HSaCcE

What then is the extent of the respective liabilities of Loadmasters and Glodel? Each wrongdoer
is liable for the total damage suffered by R&B Insurance. Where there are several causes for the resulting
damages, a party is not relieved from liability, even partially. It is sufficient that the negligence of a party is
an efficient cause without which the damage would not have resulted. It is no defense to one of the
concurrent tortfeasors that the damage would not have resulted from his negligence alone, without the
negligence or wrongful acts of the other concurrent tortfeasor. As stated in the case of Far Eastern
Shipping v. Court of Appeals, 24

. . . . Where several causes producing an injury are concurrent and each is an efficient cause without
which the injury would not have happened, the injury may be attributed to all or any of the causes and
recovery may be had against any or all of the responsible persons although under the circumstances of
the case, it may appear that one of them was more culpable, and that the duty owed by them to the
injured person was not the same. No actor's negligence ceases to be a proximate cause merely because
it does not exceed the negligence of other actors. Each wrongdoer is responsible for the entire result and
is liable as though his acts were the sole cause of the injury.

There is no contribution between joint tortfeasors whose liability is solidary since both of them are
liable for the total damage. Where the concurrent or successive negligent acts or omissions of two or
more persons, although acting independently, are in combination the direct and proximate cause of a
single injury to a third person, it is impossible to determine in what proportion each contributed to the
injury and either of them is responsible for the whole injury. Where their concurring negligence
resulted in injury or damage to a third party, they become joint tortfeasors and are solidarily liable for the
resulting damage under Article 2194 of the Civil Code. [Emphasis supplied]

The Court now resolves the issue of whether Glodel can collect from Loadmasters, it having
failed to file a cross-claim against the latter.

Undoubtedly, Glodel has a definite cause of action against Loadmasters for breach of contract of
service as the latter is primarily liable for the loss of the subject cargo. In this case, however, it cannot
succeed in seeking judicial sanction against Loadmasters because the records disclose that it did not
properly interpose a cross-claim against the latter. Glodel did not even pray that Loadmasters be liable for
any and all claims that it may be adjudged liable in favor of R&B Insurance. Under the Rules, a
compulsory counterclaim, or a cross-claim, not set up shall be barred. 25 Thus, a cross-claim cannot be
set up for the first time on appeal.

For the consequence, Glodel has no one to blame but itself. The Court cannot come to its aid on
equitable grounds. "Equity, which has been aptly described as 'a justice outside legality,' is applied only in
the absence of, and never against, statutory law or judicial rules of procedure." 26 The Court cannot be a
lawyer and take the cudgels for a party who has been at fault or negligent.

- Westmont Investment Corp. v. Amos Francia, 661 SCRA 787 [2011]

Short Digest:

FACTS: In 1999, Amos Francia was convinced by the bank manager of Westmont Bank to make an
investment in Westmont Investment. Since the interest rate offered was impressive, Amos was convinced,
he invited his siblings to join in the investment and so they invested an aggregate amount of P3.9 million.
When the investment matured, the Francia siblings demanded the retirement of their investment but
Westmont Investment advised them they have no funds. Westmont Investment then requested for an
extension. At the same time, Westmont Investment advised the Francias that their money was borrowed
by Pearlbank. When the extension asked by Westmont expired, they again were not able to pay up and

so the Francias sued Westmont Investment. Pearlbank was impleaded in the complaint.

In its defense, Westmont Investment alleged that it was merely acting as an agent of Pearlbank; that
Pearlbank authorized Westmont Investment to borrow money on its behalf; that Westmont Investment
merely brokered a loan transaction between Pearlbank and the Francias. To support its claim, Westmont
provided documents showing that Pearlbank borrowed an amount equivalent to the investment of the
Francias.

ISSUE: Whether or not Westmont Investment is an agent of Pearlbank.

HELD: No. The evidence presented is not sufficient to prove that an agency existed between Pearlbank
and Westmont Investment hence, only Westmont Investment is liable to pay the Francias. Pearlbank did
not authorize Westmont Investment to borrow money for it. Neither was there a ratification, expressly or
impliedly, that it had authorized or consented to said transaction. In fact, Pearlbank questioned Westmont
Investments practice of naming Pearlbank as a borrower of certain investments made by other
investors with Westmont Investment. Also, the Francias had no personal knowledge if Pearlbank was
indeed the recipient/beneficiary of their investments. The Francias have always maintained that they only
transacted with Westmont Investment and never with Pearlbank. The fact that the Francias impleaded
Pearlbank in their suite is understandable (it does not defeat their suit) because they only impleaded
Pearlbank to protect their interest when they found out that Westmont was already bankrupt.

Detailed Digest:

FACTS:

On March 27, 2001, respondents Amos P. Francia, Jr., Cecilia Zamora and Benjamin Francia (the
Francias) filed a Complaint for Collection of Sum of Money and Damages 4 arising from their investments
against petitioner Westmont Investment Corporation (Wincorp) and respondent Pearlbank Securities Inc.
(Pearlbank) before the RTC.

Wincorp and Pearlbank filed their separate motions to dismiss. 5 Both motions were anchored on the
ground that the complaint of the Francias failed to state a cause of action. On July 16, 2001, after several
exchanges of pleadings, the RTC issued an order 6 dismissing the motions to dismiss of Wincorp and
Pearlbank for lack of merit.

Wincorp then filed its Answer,7 while Pearlbank filed its Answer with Counterclaim and Crossclaim

(against Wincorp).8

The case was set for pre-trial but before pre-trial conference could be held, Wincorp filed its Motion to
Dismiss Crossclaim9 of Pearlbank to which the latter filed an opposition. 10 The RTC denied Wincorps
motion to dismiss crossclaim.11

The pre-trial conference was later conducted after the parties had filed their respective pre-trial briefs. The
parties agreed on the following stipulation of facts, as contained in the Pre-Trial Order 12 issued by the
RTC on April 17, 2002:

1. The personal and juridical circumstances of the parties meaning, the plaintiffs and both corporate
defendants;
2. That plaintiffs caused the service of a demand letter on Pearl Bank on February 13, 2001 marked as
Exhibit E;
3. Plaintiffs do not have personal knowledge as to whether or not Pearl Bank indeed borrowed the
funds allegedly invested by the plaintiff from Wincorp; and
4. That the alleged confirmation advices which indicate Pearl Bank as alleged borrower of the
funds allegedly invested by the plaintiffs in Wincorp do not bear the signature or acknowledgment
of Pearl Bank. (Emphases supplied)

After several postponements requested by Wincorp, trial on the merits finally ensued. The gist of the
testimony of Amos Francia, Jr. (Amos) is as follows:

1. Sometime in 1999, he was enticed by Ms. Lalaine Alcaraz, the bank manager of Westmont Bank,
Meycauayan, Bulacan Branch, to make an investment with Wincorp, the banks financial investment arm,
as it was offering interest rates that were 3% to 5% higher than regular bank interest rates. Due to the
promise of a good return of investment, he was convinced to invest. He even invited his sister, Cecilia
Zamora and his brother, Benjamin Francia, to join him. Eventually, they placed their investment in the
amounts of P 1,420,352.72 and P 2,522,745.34 with Wincorp in consideration of a net interest rate of 11%
over a 43-day spread. Thereafter, Wincorp, through Westmont Bank, issued Official Receipt Nos.
47084413 and 470845,14 both dated January 27, 2000, evidencing the said transactions. 15

2. When the 43-day placement matured, the Francias wanted to retire their investments but they were told
that Wincorp had no funds. Instead, Wincorp "rolled-over" their placements and issued Confirmation
Advices16 extending their placements for another 34 days. The said confirmation advices indicated the
name of the borrower as Pearlbank. The maturity values were P 1,435,108.61 and P 2,548,953.86 with a
due date of April 13, 2000.

3. On April 13, 2000, they again tried to get back the principal amount they invested plus interest but,
again, they were frustrated.17

4. Constrained, they demanded from Pearlbank 18 their investments. There were several attempts to settle
the case, but all proved futile.

After the testimony of Amos Francia, Jr., the Francias filed their Formal Offer of Evidence. 19 Pearlbank
filed its Comment/Objection,20 while Wincorp did not file any comment or objection. After all the exhibits of
the Francias were admitted for the purposes they were offered, the Francias rested their case.

Thereafter, the case was set for the presentation of the defense evidence of Wincorp. On March 7, 2003,
three (3) days before the scheduled hearing, Wincorp filed a written motion to postpone the hearing on
even date, as its witness, Antonio T. Ong, was unavailable because he had to attend a congressional
hearing. Wincorps substitute witness, Atty. Nemesio Briones, was likewise unavailable due to a previous
commitment in the Securities and Exchange Commission.

The RTC denied Wincorps Motion to Postpone and considered it to have waived its right to present
evidence.21 The Motion for Reconsideration of Wincorp was likewise denied. 22

On August 14, 2003, Pearlbank filed its Demurrer to Evidence. 23 The RTC granted the same in its Order24
dated January 12, 2004. Hence, the complaint against Pearlbank was dismissed, while the case was
considered submitted for decision insofar as Wincorp was concerned.

On September 27, 2004, the RTC rendered a decision 25 in favor of the Francias and held Wincorp solely
liable to them. The dispositive portion thereof reads:

WHEREFORE, judgment is rendered ordering defendant Westmont Investment Corporation to pay the
plaintiffs, the following amounts:
1. P 3,984,062.47 representing the aggregate amount of investment placements made by plaintiffs, plus
11% per annum by way of stipulated interest, to be counted from 10 March 2000 until fully paid; and
2. 10% of the above-mentioned amount as and for attorneys fees and costs of suit.
SO ORDERED.

Wincorp then filed a motion for reconsideration, but it was denied by the RTC in its Order 26 dated
November 10, 2004.

Not in conformity with the pronouncement of the RTC, Wincorp interposed an appeal with the CA.

The CA affirmed with modification the ruling of the RTC in its July 27, 2010 Decision

The CA explained:

After a careful and judicious scrutiny of the records of the present case, together with the
applicable laws and jurisprudence, this Court finds defendant-appellant Wincorp solely liable to
pay the amount of P 3,984,062.47 plus 11% interest per annum computed from 10 March 2000 to
plaintiffs-appellees.

Preliminarily, the Court will rule on the procedural issues raised to know what pieces of evidence
will be considered in this appeal.

Section 34, Rule 132 of the Rules on Evidence states that:


"The court shall consider no evidence which has not been formally offered. The purpose for which
the evidence is offered must be specified."

A formal offer is necessary because judges are mandated to rest their findings of facts and their
judgment only and strictly upon the evidence offered by the parties at the trial. Its function is to
enable the trial judge to know the purpose or purposes for which the proponent is presenting the
evidence. On the other hand, this allows opposing parties to examine the evidence and object to
its admissibility. Moreover, it facilitates review as the appellate court will not be required to review
documents not previously scrutinized by the trial court. Evidence not formally offered during the
trial can not be used for or against a party litigant. Neither may it be taken into account on appeal.

The rule on formal offer of evidence is not a trivial matter. Failure to make a formal offer within a
considerable period of time shall be deemed a waiver to submit it. Consequently, any evidence
that has not been offered shall be excluded and rejected.

Prescinding therefrom, the very glaring conclusion is that all the documents attached in the

motion for reconsideration of the decision of the trial court and all the documents attached in the
defendant-appellants brief filed by defendant-appellant Wincorp cannot be given any probative
weight or credit for the sole reason that the said documents were not formally offered as
evidence in the trial court because to consider them at this stage will deny the other
parties the right to rebut them.

The arguments of defendant-appellant Wincorp that the plaintiffs-appellees made an erroneous


offer of evidence as the documents were offered to prove what is contrary to its content and that
they made a violation of the parol evidence rule do not hold water.

It is basic in the rule of evidence that objection to evidence must be made after the evidence is
formally offered. In case of documentary evidence, offer is made after all the witnesses of the
party making the offer have testified, specifying the purpose for which the evidence is being
offered. It is only at this time, and not at any other, that objection to the documentary evidence
may be made.

As to oral evidence, objection thereto must likewise be raised at the earliest possible time, that is,
after the objectionable question is asked or after the answer is given if the objectionable issue
becomes apparent only after the answer was given.
xxx

In the case at bench, a perusal of the records shows that the plaintiffs-appellees have sufficiently
established their cause of action by preponderance of evidence. The fact that on 27 January
2000, plaintiffs-appellees placed their investment in the amounts of P 1,420,352.72 and P
2,522,754.34 with defendant-appellant Wincorp to earn a net interest at the rate of 11% over a
43-day period was distinctly proved by the testimony of plaintiff-appellee Amos Francia, Jr. and
supported by Official Receipt Nos. 470844 and 470845 issued by defendant-appellant Wincorp
through Westmont Bank. The facts that plaintiffs-appellees failed to get back their investment
after 43 days and that their investment was rolled over for another 34 days were also established
by their oral evidence and confirmed by the Confirmation Advices issued by defendant-appellant
Wincorp, which indicate that their investment already amounted to P 1,435,108.61 and P
2,548,953.86 upon its maturity on 13 April 2000. Likewise, the fact that plaintiffs-appellees
investment was not returned to them until this date by defendant-appellant Wincorp was proved
by their evidence. To top it all, defendant-appellant Wincorp never negated these
established facts because defendant-appellant Wincorps claim is that it received the
money of plaintiffs-appellees but it merely acted as an agent of plaintiffs-appellees and
that the actual borrower of plaintiffs-appellees money is defendant-appellee PearlBank.
Hence, defendant-appellant Wincorp alleges that it should be the latter who must be held
liable to the plaintiffs-appellees.

However, the contract of agency and the fact that defendant-appellee PearlBank actually received
their money were never proven. The records are bereft of any showing that defendant-appellee
PearlBank is the actual borrower of the money invested by plaintiffs-appellees as defendantappellant Wincorp never presented any evidence to prove the same.

Moreover, the trial court did not err in dismissing defendant-appellant Wincorps crossclaim as
nothing in the records supports its claim. And such was solely due to defendant-appellant
Wincorp because it failed to present any scintilla of evidence that would implicate defendantappellee PearlBank to the transactions involved in this case. The fact that the name of defendantappellee PearlBank was printed in the Confirmation Advices as the actual borrower does not
automatically makes defendant-appellee PearlBank liable to the plaintiffs-appellees as nothing
therein shows that defendant-appellee PearlBank adhered or acknowledged that it is the actual
borrower of the amount specified therein.

Clearly, the plaintiffs-appellees were able to establish their cause of action against defendantappellant Wincorp, while the latter failed to establish its cause of action against defendantappellee PearlBank.

Hence, in view of all the foregoing, the Court finds defendant-appellant Wincorp solely liable to
pay the amount of P 3,984,062.47 representing the matured value of the plaintiffs-appellees
investment as of 13 April 2000 plus 11% interest per annum by way of stipulated interest counted
from maturity date (13 April 2000).

As to the award of attorneys fees, this Court finds that the undeniable source of the present
controversy is the failure of defendant-appellant Wincorp to return the principal amount and the
interest of the investment money of plaintiffs-appellees, thus, the latter was forced to engage the
services of their counsel to protect their right. It is elementary that when attorneys fees is
awarded, they are so adjudicated, because it is in the nature of actual damages suffered by the
party to whom it is awarded, as he was constrained to engage the services of a counsel to
represent him for the protection of his interest. Thus, although the award of attorneys fees to
plaintiffs-appellees was warranted by the circumstances obtained in this case, this Court finds it
equitable to reduce the same from 10% of the total award to a fixed amount of P 100,000.00.28

Wincorps Motion for Reconsideration was likewise denied by the CA in its October 14, 2010 Resolution. 29

Not in conformity, Wincorp seeks relief with this Court via this petition for review alleging that

PLAINTIFFS-RESPONDENTS HAVE NO CAUSE OF ACTION AGAINST WINCORP AS THE

EVIDENCE ON RECORD SHOWS THAT THE ACTUAL BENEFICIARY OF THE PROCEEDS OF THE
LOAN TRANSACTIONS WAS PEARLBANK
SUBSTANTIAL JUSTICE DICTATES THAT THE EVIDENCE PROFERRED BY WINCORP SHOULD BE
CONSIDERED TO DETERMINE WHO, AMONG THE PARTIES, ARE LIABLE TO PLAINTIFFSRESPONDENTS30

ISSUE:

The core issue in this case is whether or not the CA is correct in finding Wincorp solely liable to pay the
Francias the amount of P 3,984,062.47 plus interest of 11% per annum.

HELD:

Quite clearly, the case at bench presents a factual issue.

As a rule, a petition for review under Rule 45 of the Rules of Court covers only questions of law.
Questions of fact are not reviewable and cannot be passed upon by this Court in the exercise of its power
to review. The distinction between questions of law and questions of fact is established. A question of law
exists when the doubt or difference centers on what the law is on a certain state of facts. A question of
fact, on the other hand, exists if the doubt centers on the truth or falsity of the alleged facts. 31 This being
so, the findings of fact of the CA are final and conclusive and this Court will not review them on appeal.

While it goes without saying that only questions of law can be raised in a petition for review on certiorari
under Rule 45, the same admits of exceptions, namely: (1) when the findings are grounded entirely on
speculations, surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or
impossible; (3) when there is a grave abuse of discretion; (4) when the judgment is based on
misappreciation of facts; (5) when the findings of fact are conflicting; (6) when in making its findings, the
same are contrary to the admissions of both appellant and appellee; (7) when the findings are contrary to
those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which
they are based; (9) when the facts set forth in the petition as well as in the petitioners main and reply
briefs are not disputed by the respondent; and (10) when the findings of fact are premised on the
supposed absence of evidence and contradicted by the evidence on record. 32

The Court finds that no cogent reason exists in this case to deviate from the general rule.

Wincorp insists that the CA should have based its decision on the express terms, stipulations, and

agreements provided for in the documents offered by the Francias as the legal relationship of the parties
was clearly spelled out in the very documents introduced by them which indicated that it merely brokered
the loan transaction between the Francias and Pearlbank. 33

Wincorp would want the Court to rule that there was a contract of agency between it and the Francias
with the latter authorizing the former as their agent to lend money to Pearlbank. According to Wincorp, the
two Confirmation Advices presented as evidence by the Francias and admitted by the court, were
competent proof that the recipient of the loan proceeds was Pearlbank. 34

The Court is not persuaded.

In a contract of agency, a person binds himself to render some service or to do something in


representation or on behalf of another with the latters consent. 35 It is said that the underlying principle of
the contract of agency is to accomplish results by using the services of others to do a great variety of
things. Its aim is to extend the personality of the principal or the party for whom another acts and from
whom he or she derives the authority to act. Its basis is representation. 36

Significantly, the elements of the contract of agency are: (1) consent, express or implied, of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3)
the agent acts as a representative and not for himself; (4) the agent acts within the scope of his
authority.37

In this case, the principal-agent relationship between the Francias and Wincorp was not duly established
by evidence. The records are bereft of any showing that Wincorp merely brokered the loan transactions
between the Francias and Pearlbank and the latter was the actual recipient of the money invested by the
former. Pearlbank did not authorize Wincorp to borrow money for it. Neither was there a ratification,
expressly or impliedly, that it had authorized or consented to said transaction.

As to Pearlbank, records bear out that the Francias anchor their cause of action against it merely on the
strength of the subject Confirmation Advices bearing the name "PearlBank" as the supposed borrower of
their investments. Apparently, the Francias ran after Pearlbank only after learning that Wincorp was
reportedly bankrupt.38 The Francias were consistent in saying that they only dealt with Wincorp and not
with Pearlbank. It bears noting that even in their Complaint and during the pre-trial conference, the
Francias alleged that they did not have any personal knowledge if Pearlbank was indeed the
recipient/beneficiary of their investments.

Although the subject Confirmation Advices indicate the name of Pearlbank as the purported borrower of
the said investments, said documents do not bear the signature or acknowledgment of Pearlbank or any

of its officers. This cannot prove the position of Wincorp that it was Pearlbank which received and
benefited from the investments made by the Francias. There was not even a promissory note validly and
duly executed by Pearlbank which would in any way serve as evidence of the said borrowing.

Another significant point which would support the stand of Pearlbank that it was not the borrower of
whatever funds supposedly invested by the Francias was the fact that it initiated, filed and pursued
several cases against Wincorp, questioning, among others, the latters acts of naming it as borrower of
funds from investors.

1avvp1
It bears stressing too that all the documents attached by Wincorp to its pleadings before the CA cannot be
given any weight or evidentiary value for the sole reason that, as correctly observed by the CA, these
documents were not formally offered as evidence in the trial court. To consider them now would deny the
other parties the right to examine and rebut them. Section 34, Rule 132 of the Rules of Court provides:

Section 34. Offer of evidence The court shall consider no evidence which has not been formally offered.
The purpose for which the evidence is offered must be specified.

"The offer of evidence is necessary because it is the duty of the court to rest its findings of fact and its
judgment only and strictly upon the evidence offered by the parties. Unless and until admitted by the court
in evidence for the purpose or purposes for which such document is offered, the same is merely a scrap
of paper barren of probative weight."40

The Court cannot, likewise, disturb the findings of the RTC and the CA as to the evidence presented by
the Francias. It is elementary that objection to evidence must be made after evidence is formally offered. 41
It appears that Wincorp was given ample opportunity to file its Comment/Objection to the formal offer of
evidence of the Francias but it chose not to file any.

All told, the CA committed no reversible error in rendering the assailed July 27, 2010 Decision and in
issuing the challenged October 14, 2010 Resolution.
WHEREFORE, the petition is DENIED.
SO ORDERED.

- Soriamont Steamship Agencies Inc. and Patrick Ronas vs. Sprint


Transport Services, Inc., Ricardo Cruz Papa, 592 SRA 622 [2009]

FACTS:

Soriamont is a domestic corporation providing services as a receiving agent for line load
contractor vessels. Patrick Ronas (Ronas) is its general manager.

On the other hand, Sprint is a domestic corporation engaged in transport services. Its corespondent Ricardo Cruz Papa (Papa) is engaged in the trucking business under the business
name "Papa Transport Services" (PTS).

Sprint filed with the RTC on 2 June 1998 a Complaint 4 for Sum of Money against Soriamont and
Ronas, docketed as Civil Case No. 98-89047. Sprint alleged in its Complaint that: (a) on 17
December 1993, it entered into a lease agreement, denominated as Equipment Lease
Agreement (ELA) with Soriamont, wherein the former agreed to lease a number of chassis units
to the latter for the transport of container vans; (b) with authorization letters dated 19 June 1996
issued by Ronas on behalf of Soriamont, PTS and another trucker, Rebson Trucking, were able
to withdraw on 22 and 25 June 1996, from the container yard of Sprint, two chassis units
(subject equipment),5 evidenced by Equipment Interchange Receipts No. 14215 and No. 14222;
(c) Soriamont and Ronas failed to pay rental fees for the subject equipment since 15 January
1997; (d) Sprint was subsequently informed by Ronas, through a letter dated 17 June 1997, of
the purported loss of the subject equipment sometime in June 1997; and (e) despite demands,
Soriamont and Ronas failed to pay the rental fees for the subject equipment, and to replace or
return the same to Sprint.

Sprint, thus, prayed for the RTC to render judgment:


1. Ordering [Soriamont and Ronas] to pay [Sprint], jointly and severally, actual damages, in the
amount of Five Hundred Thirty-Seven Thousand Eight Hundred Pesos (P537,800.00)
representing unpaid rentals and the replacement cost for the lost chassis units.
2. Ordering [Soriamont and Ronas], jointly and severally, to pay [Sprint] the amount of FiftyThree Thousand Five Hundred Four Pesos and Forty-Two centavos (P53,504.42) as interest
and penalties accrued as of March 31, 1998 and until full satisfaction thereof.
3. Ordering [Soriamont and Ronas], jointly and severally, to pay [Sprint] the amount equivalent
to twenty-five percent (25%) of the total amount claimed for and as attorneys fees plus Two
Thousand Pesos (P2,000.00) per court appearance.
4. Ordering [Soriamont and Ronas] to pay the cost of the suit.6

Soriamont and Ronas filed with the RTC their Answer with Compulsory Counterclaim. 7
Soriamont admitted therein to having a lease agreement with Sprint, but only for the period 21
October 1993 to 21 January 1994. It denied entering into an ELA with respondent Sprint on 17
December 1993 as alleged in the Complaint. Soriamont further argued that it was not a party-ininterest in Civil Case No. 98-89047, since it was PTS and Rebson Trucking that withdrew the
subject equipment from the container yard of Sprint. Ronas was likewise not a party-in-interest
in the case since his actions, assailed in the Complaint, were executed as part of his regular
functions as an officer of Soriamont.

Consistent with their stance, Soriamont and Ronas filed a Third-Party Complaint8 against Papa,
who was doing business under the name PTS. Soriamont and Ronas averred in their ThirdParty Complaint that it was PTS and Rebson Trucking that withdrew the subject equipments
from the container yard of Sprint, and failed to return the same. Since Papa failed to file an
answer to the Third-Party Complaint, he was declared by the RTC to be in default.9

After trial, the RTC rendered its Decision in Civil Case No. 98-89047 on 22 April 2002, finding
Soriamont liable for the claim of Sprint, while absolving Ronas and Papa from any liability.
According to the RTC, Soriamont authorized PTS to withdraw the subject equipment.

The rate of interest shall be increased to 12% per annum once this decision becomes final and
executory.

Defendant Patrick Ronas and [herein respondent] Ricardo Cruz Papa are absolved from
liability.10

Soriamont filed an appeal of the foregoing RTC Decision to the Court of Appeals, docketed as
CA-G.R. CV No. 74987.

The Court of Appeals, in its Decision dated 22 June 2006, found the following facts to be borne
out by the records: (1) Sprint and Soriamont entered into an ELA whereby the former leased
chassis units to the latter for the specified daily rates. The ELA covered the period 21 October
1993 to 21 January 1994, but it contained an "automatic" renewal clause; (2) on 22 and 25 June
1996, Soriamont, through PTS and Rebson Trucking, withdrew Sprint Chassis 2-07 with Plate
No. NUP-261 Serial No. ICAZ-165118, and Sprint Chassis 2-55 with Plate No. NUP-533 Serial

MOTZ-160080, from the container yard of Sprint; (3) Soriamont authorized the withdrawal by
PTS and Rebson Trucking of the subject equipment from the container yard of Sprint; and (4)
the subject pieces of equipment were never returned to Sprint. In a letter to Sprint dated 19
June 1997, Soriamont relayed that it was still trying to locate the subject equipment, and
requested the former to refrain from releasing more equipment to respondent PTS and Rebson
Trucking.

Hence, the Court of Appeals decreed:

WHEREFORE, the appealed Decision dated April 22, 2002 of the trial court is affirmed, subject
to the modification that the specific rate of legal interest per annum on both the P320,000.00
representing the value of the two chassis units, and on the P270,124.42 representing the unpaid
rentals, is six percent (6%), to be increased to twelve percent (12%) from the finality of this
Decision until its full satisfaction.11

In a Resolution dated 7 September 2006, the Court of Appeals denied the Motion for
Reconsideration of Soriamont for failing to present any cogent and substantial matter that would
warrant a reversal or modification of its earlier Decision.

Aggrieved, Soriamont12 filed the present Petition for Review.

The Court of Appeals and the RTC sustained the contention of Sprint that PTS was authorized
by Soriamont to secure possession of the subject equipment from Sprint, pursuant to the
existing ELA between Soriamont and Sprint. The authorization issued by Soriamont to PTS
established an agency relationship, with Soriamont as the principal and PTS as an agent.
Resultantly, the actions taken by PTS as regards the subject equipment were binding on
Soriamont, making the latter liable to Sprint for the unpaid rentals for the use, and damages for
the subsequent loss, of the subject equipment.

Soriamont anchors its defense on its denial that it issued an authorization to PTS to withdraw
the subject equipment from the container yard of Sprint. Although Soriamont admits that the
authorization letter dated 19 June 1996 was under its letterhead, said letter was actually meant
for and sent to Harman Foods as shipper. It was then Harman Foods that tasked PTS to
withdraw the subject equipment from Sprint. Soriamont insists that the Court of Appeals merely
presumed that an agency relationship existed between Soriamont and PTS, since there was
nothing in the records to evidence the same. Meanwhile, there is undisputed evidence that it

was PTS that withdrew and was last in possession of the subject equipment. Soriamont further
calls attention to the testimony of Enrico Valencia (Valencia), a witness for Sprint, actually
supporting the position of Soriamont that PTS did not present any authorization from Soriamont
when it withdrew the subject equipment from the container yard of Sprint. Assuming, for the
sake of argument that an agency relationship did exist between Soriamont and PTS, the latter
should not have been exonerated from any liability. The acts of PTS that resulted in the loss of
the subject equipment were beyond the scope of its authority as supposed agent of Soriamont.
Soriamont never ratified, expressly or impliedly, such acts of PTS.

ISSUE: WON there exists an agency relationship between Soriamont and PTS

HELD:

After a review of the evidence on record, we rule that the preponderance of evidence indeed
supports the existence of an agency relationship between Soriamont and PTS.

It is true that a person dealing with an agent is not authorized, under any circumstances, to trust
blindly the agents statements as to the extent of his powers. Such person must not act
negligently but must use reasonable diligence and prudence to ascertain whether the agent acts
within the scope of his authority. The settled rule is that persons dealing with an assumed agent
are bound at their peril; and if they would hold the principal liable, they must ascertain not only
the fact of agency, but also the nature and extent of authority, and in case either is controverted,
the burden of proof is upon them to prove it. Sprint has successfully discharged this burden.

The ELA executed on 17 December 1993 between Sprint, as lessor, and Soriamont, as lessee,
of chassis units, explicitly authorized the latter to appoint a representative who shall withdraw
and return the leased chassis units to Sprint, to wit:

EQUIPMENT LEASE AGREEMENT


between
SPRINT TRANSPORT SERVICES, INC. (LESSOR)
And

SORIAMONT STEAMSHIP AGENCIES, INC.


(LESSEE)
TERMS and CONDITIONS
xxxx
4. Equipment Interchange Receipt (EIR) as mentioned herein is a document accomplished
every time a chassis is withdrawn and returned to a designated depot. The EIR relates the
condition of the chassis at the point of on-hire/off-hire duly acknowledged by the LESSOR,
Property Custodian and the LESSEES authorized representative.
xxxx
5. Chassis Withdrawal/Return Slip as mentioned herein is that document where the LESSEE
authorizes his representative to withdraw/return the chassis on his behalf. Only persons with a
duly accomplished and signed authorization slip shall be entertained by the LESSOR for
purposes of withdrawal/return of the chassis. The signatory in the Withdrawal/Return Slip has to
be the signatory of the corresponding Lease Agreement or the LESSEEs duly authorized
representative(s).17 (Emphases ours.)
Soriamont, though, avers that the aforequoted ELA was only for 21 October 1993 to 21 January
1994, and no longer in effect at the time the subject pieces of equipment were reportedly
withdrawn and lost by PTS. This contention of Soriamont is without merit, given that the same
ELA expressly provides for the "automatic" renewal thereof in paragraph 24, which reads:
There shall be an automatic renewal of the contract subject to the same terms and conditions as
stipulated in the original contract unless terminated by either party in accordance with paragraph
no. 23 hereof. However, in this case, termination will take effect immediately.18
There being no showing that the ELA was terminated by either party, then it was being
automatically renewed in accordance with the afore-quoted paragraph 24.
It was, therefore, totally regular and in conformity with the ELA that PTS and Rebson Trucking
should appear before Sprint in June 1996 with authorization letters, issued by Soriamont, for the
withdrawal of the subject equipment.19 On the witness stand, Valencia testified, as the
operations manager of Sprint, as follows:

Atty. Porciuncula:
Q. Mr. Witness, as operation manager, are you aware of any transactions between Sprint
Transport Services, Inc. and the defendant Soriamont Steamship Agencies, Inc.?
A. Yes, Sir.
Q. What transactions are these, Mr. Witness?

A. They got from us chassis, Sir.


Court:
Q. Who among the two, who withdrew?
A. The representative of Soriamont Steamship Agencies, Inc., Your Honor.
Atty. Porciuncula:
Q. And when were these chassis withdrawn, Mr. Witness?
A. June 1996, Sir.
Q. Will you kindly tell this Honorable Court what do you mean by withdrawing the chassis
units from your container yard?
Witness:
Before they can withdraw the chassis they have to present withdrawal authority, Sir.
Atty. Porciuncula:
And what is this withdrawal authority?
A. This is to prove that they are authorizing their representative to get from us a chassis unit.
Q. And who is this authorization send to you, Mr. Witness?
A. Sometime a representative bring to our office the letter or the authorization or sometime
thru fax, Sir.
Q. In this particular incident, Mr. Witness, how was it sent?
A. By fax, Sir.
Q. Is this standard operating procedure of Sprint Transport Services, Inc.?
A. Yes, Sir, if the trucking could not bring to our office the original copy of the authorization
they have to send us thru fax, but the original copy of the authorization will be followed.
Atty. Porciuncula:
Q. Mr. Witness, I am showing to you two documents of Soriamont Steamship Agencies, Inc.
letter head with the headings Authorization, are these the same withdrawal authority that you
mentioned awhile ago?
A. Yes, Sir.
Atty. Porciuncula:
Your Honor, at this point may we request that these documents identified by the witness be
marked as Exhibits JJ and KK, Your Honor.

Court:
Mark them.
xxxx
Q. Way back Mr. Witness, who withdrew the chassis units 2-07 and 2-55?
A. The representative of Soriamont Steamship Agencies, Inc., the Papa Trucking, Sir.
Q. And are these trucking companies authorized to withdraw these chassis units?
A. Yes, Sir, it was stated in the withdrawal authority.
Atty. Porciuncula:
Q. Showing you again Mr. Witness, this authorization previously marked as Exhibits JJ and
KK, could you please go over the same and tell this Honorable Court where states there that
the trucking companies which you mentioned awhile ago authorized to withdraw?
A. Yes, Sir, it is stated in this withdrawal authority.
Atty. Porciuncula:
At this juncture, Your Honor, may we request that the Papa trucking and Rebson trucking
identified by the witness be bracketed and mark as our Exhibits JJ-1 and KK-1, Your Honor.
Court:
Mark them. Are these documents have dates?
Atty. Porciuncula:
Yes, Your Honor, both documents are dated June 19, 1996.
Q. Mr. Witness, after this what happened next?
A. After they presented to us the withdrawal authority, we called up Soriamont Steamship
Agencies, Inc. to verify whether the one sent to us through truck and the one sent to us
through fax are one and the same.
Q. Then what happened next, Mr. Witness?
A. Then after the verification whether it is true, then we asked them to choose the chassis
units then my checker would see to it whether the chassis units are in good condition, then
after that we prepared the outgoing Equipment Interchange Receipt, Sir.
Q. Mr. Witness, could you tell this Honorable Court what an outgoing Equipment Interchange
Receipt means?
A. This is a document proving that the representative of Soriamont Steamship Agencies, Inc.
really withdraw (sic) the chassis units, Sir.

xxxx
Atty. Porciuncula:
Q. Going back Mr. Witness, you mentioned awhile ago that your company issued outgoing
Equipment Interchange Receipt?
A. Yes, Sir.
Q. Are there incoming Equipment Interchange Receipt Mr. Witness?
A. We have not made Incoming Equipment Interchange Receipt with respect to Soriamont
Steamship Agencies, Inc., Sir.
Q. And why not, Mr. Witness?
A. Because they have not returned to us the two chassis units.20

In his candid and straightforward testimony, Valencia was able to clearly describe the standard
operating procedure followed in the withdrawal by Soriamont or its authorized representative of
the leased chassis units from the container yard of Sprint. In the transaction involved herein,
authorization letters dated 19 June 1996 in favor of PTS and Rebson Trucking were faxed by
Sprint to Soriamont, and were further verified by Sprint through a telephone call to Soriamont.
Valencias testimony established that Sprint exercised due diligence in its dealings with PTS, as
the agent of Soriamont.
Soriamont cannot rely on the outgoing Equipment Interchange Receipts as proof that the
withdrawal of the subject equipment was not authorized by it, but by the shipper/consignee,
Harman Foods, which actually designated PTS and Rebson Trucking as truckers. However, a
scrutiny of the Equipment Interchange Receipts will show that these documents merely
identified Harman Foods as the shipper/consignee, and the location of said shipping line. It
bears to stress that it was Soriamont that had an existing ELA with Sprint, not Harman Foods,
for the lease of the subject equipment. Moreover, as stated in the ELA, the outgoing Equipment
Interchange Receipts shall be signed, upon the withdrawal of the leased chassis units, by the
lessee, Soriamont, or its authorized representative. In this case, we can only hold that the driver
of PTS signed the receipts for the subject equipment as the authorized representative of
Soriamont, and no other.
Finally, the letter21 dated 17 June 1997, sent to Sprint by Ronas, on behalf of Soriamont, which
stated:
As we are currently having a problem with regards to the whereabouts of the subject trailers,
may we request your kind assistance in refraining from issuing any equipment to the above
trucking companies.
reveals that PTS did have previous authority from Soriamont to withdraw the leased chassis
units from Sprint, hence, necessitating an express request from Soriamont for Sprint to
discontinue recognizing said authority.

Alternatively, if PTS is found to be its agent, Soriamont argues that PTS is liable for the loss of
the subject equipment, since PTS acted beyond its authority as agent. Soriamont cites Article
1897 of the Civil Code, which provides:
Art. 1897. The agent who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of his authority without giving
such party sufficient notice of his powers.
The burden falls upon Soriamont to prove its affirmative allegation that PTS acted in any
manner in excess of its authority as agent, thus, resulting in the loss of the subject equipment.
To recall, the subject equipment was withdrawn and used by PTS with the authority of
Soriamont. And for PTS to be personally liable, as agent, it is vital that Soriamont be able to
prove that PTS damaged or lost the said equipment because it acted contrary to or in excess of
the authority granted to it by Soriamont. As the Court of Appeals and the RTC found, however,
Soriamont did not adduce any evidence at all to prove said allegation. Given the lack of
evidence that PTS was in any way responsible for the loss of the subject equipment, then, it
cannot be held liable to Sprint, or even to Soriamont as its agent. In the absence of evidence
showing that PTS acted contrary to or in excess of the authority granted to it by its principal,
Soriamont, this Court cannot merely presume PTS liable to Soriamont as its agent. The only
thing proven was that Soriamont, through PTS, withdrew the two chassis units from Sprint, and
that these have never been returned to Sprint.

Considering our preceding discussion, there is no reason for us to depart from the general rule
that the findings of fact of the Court of Appeals and the RTC are already conclusive and binding
upon us.

Finally, the adjustment by the Court of Appeals with respect to the applicable rate of legal
interest on the P320,000.00, representing the value of the subject equipment, and on the
P270,124.42, representing the unpaid rentals awarded in favor of Sprint, is proper and with legal
basis. Under Article 2209 of the Civil Code, when an obligation not constituting a loan or
forbearance of money is breached, then an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum. Clearly, the monetary
judgment in favor of Sprint does not involve a loan or forbearance of money; hence, the proper
imposable rate of interest is six (6%) percent. Further, as declared in Eastern Shipping Lines,
Inc. v. Court of Appeals,22 the interim period from the finality of the judgment awarding a
monetary claim until payment thereof is deemed to be equivalent to a forbearance of credit.
Eastern Shipping Lines, Inc. v. Court of Appeals23 explained, to wit:

J-PHIL MARINE, INC. and/or JESUS CANDAVA and NORMAN SHIPPING SERVICES,
petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and WARLITO E.
DUMALAOG, respondents.

Facts:
Warlito E. Dumalaog (respondent), who served as cook aboard vessels plying overseas, filed
on March 4, 2002 before the National Labor Relations Commission (NLRC) a pro-forma
complaint 1 against petitioners manning agency J-Phil Marine, Inc. (J-Phil), its then
president Jesus Candava, and its foreign principal Norman Shipping Services for unpaid
money claims, moral and exemplary damages, and attorney's fees.
During the pendency of the case before this Court, respondent, against the advice of his
counsel, entered into a compromise agreement with petitioners. He thereupon signed a
Quitclaim and Release subscribed and sworn to before the Labor Arbiter.
On May 8, 2007, petitioners filed before this Court a Manifestation 13 dated May 7, 2007
informing that, inter alia, they and respondent had forged an amicable settlement.
On July 2, 2007, respondent's counsel filed before this Court a Comment and Opposition (to
Petitioners' Manifestation of May 7, 2007) 14 interposing no objection to the dismissal of the
petition but objecting to "the absolution" of petitioners from paying respondent the total
amount of Fifty Thousand US Dollars (US$50,000.00) or approximately P2,300,000.00, the
amount awarded by the NLRC, he adding that:
There being already a payment of P450,000.00, and invoking the doctrine of parens
patriae, we pray then [to] this Honorable Supreme Court that the said amount be
deducted from the [NLRC] judgment award of US$50,000.00, or approximately
P2,300,000.00, and petitioners be furthermore ordered to pay in favor of herein
respondent [the] remaining balance thereof.
Issue:
Whether or not the counsel has the authority to question the compromise agreement
entered into by his client.
Held:
No.
Article 227 of the Labor Code provides:
Any compromise settlement, including those involving labor standard laws, voluntarily
agreed upon by the parties with the assistance of the Department of Labor, shall be final
and binding upon the parties. The National Labor Relations Commission or any court shall
not assume jurisdiction over issues involved therein except in case of non-compliance
thereof or if there is prima facie evidence that the settlement was obtained through fraud,
misrepresentation, or coercion. (Emphasis and underscoring supplied)
In Olaybar v. NLRC, 17 the Court, recognizing the conclusiveness of compromise settlements
as a means to end labor disputes, held that Article 2037 of the Civil Code, which provides
that "[a] compromise has upon the parties the effect and authority of res judicata", applies
suppletorily to labor cases even if the compromise is not judicially approved. 18

That respondent was not assisted by his counsel when he entered into the compromise does
not render it null and void. Eurotech Hair Systems, Inc. v. Go 19 so enlightens:
A compromise agreement is valid as long as the consideration is reasonable and the
employee signed the waiver voluntarily, with a full understanding of what he was entering
into. All that is required for the compromise to be deemed voluntarily entered into is
personal and specific individual consent. Thus, contrary to respondent's contention, the
employee's counsel need not be present at the time of the signing of the compromise
agreement. 20 (Underscoring supplied)
It bears noting that, as reflected earlier, the Quitclaim and Waiver was subscribed and sworn
to before the Labor Arbiter.
Respondent's counsel nevertheless argues that "[t]he amount of Four Hundred Fifty
Thousand Pesos (P450,000.00) given to respondent on April 4, 2007, as 'full and final
settlement of judgment award', is unconscionably low, and un-[C]hristian, to say the least."
21 Only respondent, however, can impugn the consideration of the compromise as being
unconscionable.
The relation of attorney and client is in many respects one of agency, and the
general rules of agency apply to such relation. The acts of an agent are deemed
the acts of the principal only if the agent acts within the scope of his authority.
The circumstances of this case indicate that respondent's counsel is acting
beyond the scope of his authority in questioning the compromise agreement.
That a client has undoubtedly the right to compromise a suit without the intervention of his
lawyer 24 cannot be gainsaid, the only qualification being that if such compromise is entered
into with the intent of defrauding the lawyer of the fees justly due him, the compromise
must be subject to the said fees. 25 In the case at bar, there is no showing that respondent
intended to defraud his counsel of his fees. In fact, the Quitclaim and Release, the execution
of which was witnessed by petitioner J-Phil's president Eulalio C. Candava and one Antonio C.
Casim, notes that the 20% attorney's fees would be "paid 12 April 2007 P90,000".

FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE ASSURANCE, INC.),


petitioner, vs. CLEMENTE N. PEDROSO, TERESITA O. PEDROSO and JENNIFER N.
PALACIO thru her Attorney-in-Fact PONCIANO C. MARQUEZ, respondents.

Facts:
Respondent Teresita O. Pedroso is a policyholder of a 20-year endowment life insurance
issued by petitioner Filipinas Life Assurance Company (Filipinas Life). Pedroso claims Renato
Valle was her insurance agent since 1972 and Valle collected her monthly premiums. In the
first week of January 1977, Valle told her that the Filipinas Life Escolta Office was holding a
promotional investment program for policyholders. It was offering 8% prepaid interest a
month for certain amounts deposited on a monthly basis. Enticed, she initially invested and
issued a post-dated check dated January 7, 1977 for P10,000. 4 In return, Valle issued

Pedroso his personal check for P800 for the 8% 5 prepaid interest and a Filipinas Life
"Agent's Receipt" No. 807838. 6
Subsequently, she called the Escolta office and talked to Francisco Alcantara, the
administrative assistant, who referred her to the branch manager, Angel Apetrior. Pedroso
inquired about the promotional investment and Apetrior confirmed that there was such a
promotion. She was even told she could "push through with the check" she issued. From the
records, the check, with the endorsement of Alcantara at the back, was deposited in the
account of Filipinas Life with the Commercial Bank and Trust Company (CBTC), Escolta
Branch.
Relying on the representations made by the petitioner's duly authorized representatives
Apetrior and Alcantara, as well as having known agent Valle for quite some time, Pedroso
waited for the maturity of her initial investment. A month after, her investment of P10,000
was returned to her after she made a written request for its refund. The formal written
request, dated February 3, 1977, was written on an inter-office memorandum form of
Filipinas Life prepared by Alcantara. 7 To collect the amount, Pedroso personally went to the
Escolta branch where Alcantara gave her the P10,000 in cash. After a second investment,
she made 7 to 8 more investments in varying amounts, totaling P37,000 but at a lower rate
of 5% 8 prepaid interest a month. Upon maturity of Pedroso's subsequent investments, Valle
would take back from Pedroso the corresponding yellow-colored agent's receipt he issued to
the latter.
Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life insurance policyholder, about
the investment plan. Palacio made a total investment of P49,550 9 but at only 5% prepaid
interest. However, when Pedroso tried to withdraw her investment, Valle did not want to
return some P17,000 worth of it. Palacio also tried to withdraw hers, but Filipinas Life,
despite demands, refused to return her money. With the assistance of their lawyer, they
went to Filipinas Life Escolta Office to collect their respective investments, and to inquire
why they had not seen Valle for quite some time. But their attempts were futile. Hence,
respondents filed an action for the recovery of a sum of money.
After trial, the RTC, Branch 3, Manila, held Filipinas Life and its co-defendants Valle, Apetrior
and Alcantara jointly and solidarily liable to the respondents.
On appeal, the Court of Appeals affirmed the trial court's ruling and subsequently denied the
motion for reconsideration.
Issue:
Whether or not the agent, Reynato Valle should be solely liable to the respondents.
Held:
No.
Filipinas Life does not dispute that Valle was its agent, but claims that it was only a life
insurance company and was not engaged in the business of collecting investment money. It
contends that the investment scheme offered to respondents by Valle, Apetrior and
Alcantara was outside the scope of their authority as agents of Filipinas Life such that, it
cannot be held liable to the respondents. 11

On the other hand, respondents contend that Filipinas Life authorized Valle to solicit
investments from them. In fact, Filipinas Life's official documents and facilities were used in
consummating the transactions. These transactions, according to respondents, were
confirmed by its officers Apetrior and Alcantara. Respondents assert they exercised all the
diligence required of them in ascertaining the authority of petitioner's agents; and it is
Filipinas Life that failed in its duty to ensure that its agents act within the scope of their
authority.
Considering the issue raised in the light of the submissions of the parties, we find that the
petition lacks merit. The Court of Appeals committed no reversible error nor abused gravely
its discretion in rendering the assailed decision and resolution.
It appears indisputable that respondents Pedroso and Palacio had invested P47,000 and
P49,550, respectively. These were received by Valle and remitted to Filipinas Life, using
Filipinas Life's official receipts, whose authenticity were not disputed. Valle's authority to
solicit and receive investments was also established by the parties. When respondents
sought confirmation, Alcantara, holding a supervisory position, and Apetrior, the branch
manager, confirmed that Valle had authority. While it is true that a person dealing with an
agent is put upon inquiry and must discover at his own peril the agent's authority, in this
case, respondents did exercise due diligence in removing all doubts and in confirming the
validity of the representations made by Valle.

Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. 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. 12 The
general rule is that the principal is responsible for the acts of its agent done
within the scope of its authority, and should bear the damage caused to third
persons. 13 When the agent exceeds his authority, the agent becomes personally
liable for the damage. 14 But even when the agent exceeds his authority, the
principal is still solidarily liable together with the agent if the principal allowed
the agent to act as though the agent had full powers. 15 In other words, the acts of
an agent beyond the scope of his authority do not bind the principal, unless the principal
ratifies them, expressly or impliedly. 16 Ratification in agency is the adoption or confirmation
by one person of an act performed on his behalf by another without authority. 17
Filipinas Life cannot profess ignorance of Valle's acts. Even if Valle's representations were
beyond his authority as a debit/insurance agent, Filipinas Life thru Alcantara and Apetrior
expressly and knowingly ratified Valle's acts. It cannot even be denied that Filipinas Life
benefited from the investments deposited by Valle in the account of Filipinas Life. In our
considered view, Filipinas Life had clothed Valle with apparent authority; hence, it is now
estopped to deny said authority. Innocent third persons should not be prejudiced if the
principal failed to adopt the needed measures to prevent misrepresentation, much more so
if the principal ratified his agent's acts beyond the latter's authority. The act of the agent is
considered that of the principal itself. Qui per alium facit per seipsum facere videtur. "He
who does a thing by an agent is considered as doing it himself." 18

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., petitioner, vs. EDWIN CUIZON and


ERWIN CUIZON, respondents.
Facts:
Petitioner is engaged in the business of importation and distribution of various European
industrial equipment for customers here in the Philippines. It has as one of its customers
Impact Systems Sales ("Impact Systems") which is a sole proprietorship owned by
respondent ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales manager of Impact
Systems and was impleaded in the court a quo in said capacity.

From January to April 1995, petitioner sold to Impact Systems various products allegedly
amounting to ninety-one thousand three hundred thirty-eight (P91,338.00) pesos.
Subsequently, respondents sought to buy from petitioner one unit of sludge pump valued at
P250,000.00 with respondents making a down payment of fifty thousand pesos
(P50,000.00). 4 When the sludge pump arrived from the United Kingdom, petitioner refused
to deliver the same to respondents without their having fully settled their indebtedness to
petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto de Jesus, general manager
of petitioner, executed a Deed of Assignment of receivables in favor of petitioner, the
pertinent part of which states:
1.) That ASSIGNOR 5 has an outstanding receivables from Toledo Power Corporation in the
amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS as payment for the
purchase of one unit of Selwood Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the ASSIGNEE 6
the said receivables from Toledo Power Corporation in the amount of THREE HUNDRED SIXTY
FIVE THOUSAND (P365,000.00) PESOS which receivables the ASSIGNOR is the lawful
recipient; IDCcEa
3.) That the ASSIGNEE does hereby accept this assignment. 7
Following the execution of the Deed of Assignment, petitioner delivered to respondents the
sludge pump as shown by Invoice No. 12034 dated 30 June 1995. 8
Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of
Assignment, proceeded to collect from Toledo Power Company the amount of P365,135.29
as evidenced by Check Voucher No. 0933 9 prepared by said power company and an official
receipt dated 15 August 1995 issued by Impact Systems. 10 Alarmed by this development,
petitioner made several demands upon respondents to pay their obligations. As a result,
respondents were able to make partial payments to petitioner. On 7 October 1996,
petitioner's counsel sent respondents a final demand letter wherein it was stated that as of
11 June 1996, respondents' total obligations stood at P295,000.00 excluding interests and
attorney's fees. 11 Because of respondents' failure to abide by said final demand letter,
petitioner instituted a complaint for sum of money, damages, with application for
preliminary attachment against herein respondents before the Regional Trial Court of Cebu
City.
Issue:

Whether or not the agent Edwin Cuizon is personally liable.


Held:
No.
To support its argument, petitioner points to Article 1897 of the New Civil Code which states:

Art. 1897. The agent who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of his authority without
giving such party sufficient notice of his powers.
Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWIN's act of
collecting the receivables from the Toledo Power Corporation notwithstanding the existence
of the Deed of Assignment signed by EDWIN on behalf of Impact Systems. While said
collection did not revoke the agency relations of respondents, petitioner insists that ERWIN's
action repudiated EDWIN's power to sign the Deed of Assignment. As EDWIN did not
sufficiently notify it of the extent of his powers as an agent, petitioner claims that he should
be made personally liable for the obligations of his principal. 26
Petitioner also contends that it fell victim to the fraudulent scheme of respondents who
induced it into selling the one unit of sludge pump to Impact Systems and signing the Deed
of Assignment. Petitioner directs the attention of this Court to the fact that respondents are
bound not only by their principal and agent relationship but are in fact full-blooded brothers
whose successive contravening acts bore the obvious signs of conspiracy to defraud
petitioner. 27
In his Comment, 28 respondent EDWIN again posits the argument that he is not a real party
in interest in this case and it was proper for the trial court to have him dropped as a
defendant. He insists that he was a mere agent of Impact Systems which is owned by ERWIN
and that his status as such is known even to petitioner as it is alleged in the Complaint that
he is being sued in his capacity as the sales manager of the said business venture. Likewise,
respondent EDWIN points to the Deed of Assignment which clearly states that he was acting
as a representative of Impact Systems in said transaction.
We do not find merit in the petition.
In a contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another with the latter's consent. 29 The underlying principle
of the contract of agency is to accomplish results by using the services of others to do a
great variety of things like selling, buying, manufacturing, and transporting. 30 Its purpose is
to extend the personality of the principal or the party for whom another acts and from whom
he or she derives the authority to act. 31 It is said that the basis of agency is representation,
that is, the agent acts for and on behalf of the principal on matters within the scope of his
authority and said acts have the same legal effect as if they were personally executed by
the principal. 32 By this legal fiction, the actual or real absence of the principal is converted
into his legal or juridical presence qui facit per alium facit per se. 33

The elements of the contract of agency are: (1) consent, express or implied, of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation to a
third person; (3) the agent acts as a representative and not for himself; (4) the agent acts
within the scope of his authority. 34
In this case, the parties do not dispute the existence of the agency relationship between
respondents ERWIN as principal and EDWIN as agent. The only cause of the present dispute
is whether respondent EDWIN exceeded his authority when he signed the Deed of
Assignment thereby binding himself personally to pay the obligations to petitioner. Petitioner
firmly believes that respondent EDWIN acted beyond the authority granted by his principal
and he should therefore bear the effect of his deed pursuant to Article 1897 of the New Civil
Code.
We disagree.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not
personally liable to the party with whom he contracts. The same provision, however,
presents two instances when an agent becomes personally liable to a third person. The first
is when he expressly binds himself to the obligation and the second is when he exceeds his
authority. In the last instance, the agent can be held liable if he does not give the third party
sufficient notice of his powers. We hold that respondent EDWIN does not fall within any of
the exceptions contained in this provision.
The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales
manager of Impact Systems. As discussed elsewhere, the position of manager is unique in
that it presupposes the grant of broad powers with which to conduct the business of the
principal, thus:
The powers of an agent are particularly broad in the case of one acting as a general agent or
manager; such a position presupposes a degree of confidence reposed and investiture with
liberal powers for the exercise of judgment and discretion in transactions and concerns
which are incidental or appurtenant to the business entrusted to his care and management.
In the absence of an agreement to the contrary, a managing agent may enter into
any contracts that he deems reasonably necessary or requisite for the protection
of the interests of his principal entrusted to his management. . . . 35

Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his
authority when he signed the Deed of Assignment. To recall, petitioner refused to deliver the
one unit of sludge pump unless it received, in full, the payment for Impact Systems'
indebtedness. 36 We may very well assume that Impact Systems desperately needed the
sludge pump for its business since after it paid the amount of fifty thousand pesos
(P50,000.00) as down payment on 3 March 1995, 37 it still persisted in negotiating with
petitioner which culminated in the execution of the Deed of Assignment of its receivables
from Toledo Power Company on 28 June 1995. 38 The significant amount of time spent on
the negotiation for the sale of the sludge pump underscores Impact Systems' perseverance
to get hold of the said equipment. There is, therefore, no doubt in our mind that
respondent EDWIN's participation in the Deed of Assignment was "reasonably
necessary" or was required in order for him to protect the business of his

principal. Had he not acted in the way he did, the business of his principal would
have been adversely affected and he would have violated his fiduciary relation
with his principal.

We likewise take note of the fact that in this case, petitioner is seeking to recover both from
respondents ERWIN, the principal, and EDWIN, the agent. It is well to state here that Article
1897 of the New Civil Code upon which petitioner anchors its claim against respondent
EDWIN "does not hold that in case of excess of authority, both the agent and the principal
are liable to the other contracting party." 39 To reiterate, the first part of Article 1897
declares that the principal is liable in cases when the agent acted within the bounds of his
authority. Under this, the agent is completely absolved of any liability. The second part of the
said provision presents the situations when the agent himself becomes liable to a third party
when he expressly binds himself or he exceeds the limits of his authority without giving
notice of his powers to the third person. However, it must be pointed out that in case of
excess of authority by the agent, like what petitioner claims exists here, the law does not
say that a third person can recover from both the principal and the agent. 40
As we declare that respondent EDWIN acted within his authority as an agent, who did not
acquire any right nor incur any liability arising from the Deed of Assignment, it follows that
he is not a real party in interest who should be impleaded in this case. A real party in
interest is one who "stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit." 41 In this respect, we sustain his exclusion as a
defendant in the suit before the court a quo.

MR. & MRS. GEORGE R. TAN, petitioners, vs. G.V.T. Engineering Services, Acting
through its Owner/Manager GERINO V. TACTAQUIN, respondent.

Facts:
On October 18, 1989, the spouses George and Susan Tan (spouses Tan) entered into a
contract with G.V.T. Engineering Services (G.V.T.), through its owner/manager Gerino
Tactaquin (Tactaquin) for the construction of their residential house at Ifugao St., La Vista,
Quezon City. The contract price was P1,700,000.00. Since the spouses Tan have no
knowledge about building construction, they hired the services of Engineer Rudy Cadag
(Cadag) to supervise the said construction. In the course of the construction, the spouses
Tan caused several changes in the plans and specifications and ordered the deletion of some
items in G.V.T.'s scope of work. This brought about differences between the spouses Tan and
Cadag, on one hand, and Tactaquin, on the other. Subsequently, the latter stopped the
construction of the subject house.
On December 4, 1990, G.V.T., through Tactaquin, filed a Complaint for specific performance
and damages against the spouses Tan and Cadag with the RTC of Quezon City contending
that by reason of the changes in the plans and specifications of the construction project

ordered by Cadag and the spouses Tan, it was forced to borrow money from third persons at
exorbitant interest; that several portions of their contract were deleted but only to be
awarded later to other contractors; that it suffered tremendous delay in the completion of
the project brought about by the spouses Tan's delay in the delivery of construction
materials on the jobsite; that all the aforementioned acts caused undue prejudice and
damage to it.
In their Answer with Counterclaims, the spouses Tan and Cadag alleged, among others, that
G.V.T. performed several defective works; that to avert further losses, the spouses Tan
deleted some portions of the project covered by G.V.T.'s contract and awarded other portions
to another contractor; that the changes ordered by the spouses Tan were agreed upon by
the parties; that G.V.T., being a mere single proprietorship has no legal personality and
cannot be a party in a civil action.
Issue:

Whether or not Rudy Cadag is liable together with the spouses Tan as a party to the breach
of contract.
Held:
No.
It is wrong for petitioners to argue that since Cadag, whom they hired to supervise the
construction of their house, was absolved by the court from liability, they should not also be
held liable.
The Court finds no error on the part of the CA in ruling that it is a basic principle in civil law,
on relativity of contracts, that contracts can only bind the parties who had entered into it
and it cannot favor or prejudice third persons. Contracts take effect only between the
parties, their successors in interest, heirs and assigns. 38 Moreover, every cause of action ex
contractu must be founded upon a contract, oral or written, either express or implied. 39 In
the present case, the complaint for specific performance filed by herein respondent with the
trial court was based on the failure of the spouses Tan to faithfully comply with the
provisions of their contract. In other words, respondent's cause of action was the breach of
contract committed by the spouses Tan. Cadag is not a party to this contract. Neither did he
enter into any contract with respondent regarding the construction of the subject house.
Hence, considering that respondent's cause of action was breach of contract and since there
is no privity of contract between him and Cadag, there is no obligation or liability to speak
about and thus no cause of action arises. Clearly, Cadag, not being privy to the transaction
between respondent and the spouses Tan, should not be made to answer for the latter's
default.
Furthermore, Cadag was employed by the spouses Tan to supervise the
construction of their house. Acting as such, his role is merely that of an agent.
The essence of agency being the representation of another, it is evident that the
obligations contracted are for and on behalf of the principal. 40 A consequence of
this representation is the liability of the principal for the acts of his agent performed within

the limits of his authority that is equivalent to the performance by the principal himself who
should answer therefor. 41 In the present case, since there is neither allegation nor evidence
that Cadag exceeded his authority, all his acts are considered as those of his principal, the
spouses Tan, who are, therefore, the ones answerable for such acts.

JOCELYN B. DOLES, petitioner, vs. MA. AURA TINA ANGELES, respondent.


Facts:
On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for
Specific Performance with Damages against Jocelyn B. Doles (petitioner), docketed as Civil
Case No. 97-82716. Respondent 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; that on October 5, 1996, by virtue of a "Deed of Absolute Sale", 3 petitioner, as
seller, ceded to respondent, as buyer, a parcel of land, as well as the improvements thereon,
with an area of 42 square meters, covered by Transfer Certificate of Title No. 382532, 4 and
located at a subdivision project known as Camella Townhomes Sorrente in Bacoor, Cavite, in
order to satisfy her personal loan with respondent; that this property was mortgaged to
National Home Mortgage Finance Corporation (NHMFC) to secure petitioner's loan in the sum
of P337,050.00 with that entity; that as a condition for the foregoing sale, respondent shall
assume the undue balance of the mortgage and pay the monthly amortization of P4,748.11
for the remainder of the 25 years which began on September 3, 1994; that 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, petitioner denied that she incurred them and refused to pay the
same; that 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, then defendant, while admitting some allegations in the Complaint, 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; that the checks bounced for insufficiency of funds; that despite her
efforts to assist respondent to collect from the borrowers, she could no longer locate them;
that, because of this, respondent became furious and threatened petitioner that if the
accounts were not settled, a criminal case will be filed against her; that 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; that respondent then threatened to

initiate a criminal case against her for violation of Batas Pambansa Blg. 22; that she was
forced by respondent to execute an "Absolute Deed of Sale" over her property in Bacoor,
Cavite, to avoid criminal prosecution; that the said deed had no valid consideration; that 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.
Issue:
Whether or not agency was created
Held:
Yes.
The principal issue is whether the Deed of Absolute Sale is supported by a valid
consideration.
Petitioner argues that since she is merely the agent or representative of the alleged debtors,
then she is not a party to the loan; and that the Deed of Sale executed between her and the
respondent in their own names, which was predicated on that pre-existing debt, is void for
lack of consideration.
Indeed, the Deed of Absolute Sale purports to be supported by a consideration in the form of
a price certain in money 16 and that this sum indisputably pertains to the debt in issue. This
Court has consistently held that a contract of sale is null and void and produces no effect
whatsoever where the same is without cause or consideration. 17 The question that has to
be resolved for the moment is whether this debt can be considered as a valid cause or
consideration for the sale.
To restate, the CA cited four instances in the record to support its holding that petitioner "relends" the amount borrowed from respondent to her friends: first, the friends of petitioner
never presented themselves to respondent and that all transactions were made by and
between petitioner and respondent; 18 second; the money passed through the bank
accounts of petitioner and respondent; 19 third, petitioner herself admitted that she was "relending" the money loaned to other individuals for profit; 20 and fourth, the documentary
evidence shows that the actual borrowers, the friends of petitioner, consider her as their
creditor and not the respondent.
Respondent is estopped to deny that she herself acted as agent of a certain Arsenio Pua, her
disclosed principal. She is also estopped to deny that petitioner acted as agent for the
alleged debtors, the friends whom she (petitioner) referred.
This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is
representation. 25 The question of whether an agency has been created is
ordinarily a question which may be established in the same way as any other fact,
either by direct or circumstantial evidence. The question is ultimately one of
intention. 26 Agency may even be implied from the words and conduct of the
parties and the circumstances of the particular case. 27 Though the fact or extent of
authority of the agents may not, as a general rule, be established from the declarations of
the agents alone, if one professes to act as agent for another, she may be estopped to deny

her agency both as against the asserted principal and the third persons interested in the
transaction in which he or she is engaged. 28
In this case, petitioner knew that the financier of respondent is Pua; and respondent knew
that the borrowers are friends of petitioner.
The CA is 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 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. acCDSH
With respect to the admission of petitioner that she is "re-lending" the money loaned from
respondent to other individuals for profit, it must be stressed that the manner in which the
parties designate the relationship is not controlling. If an act done by one person in behalf of
another is in its essential nature one of agency, the former is the agent of the latter
notwithstanding he or she is not so called. 30 The question is to be determined by the fact
that one represents and is acting for another, and if relations exist which will constitute an
agency, it will be an agency whether the parties understood the exact nature of the relation
or not. 31
That both parties acted as mere agents is shown by the undisputed fact that the friends of
petitioner issued checks in payment of the loan in the name of Pua. If it is true that
petitioner was "re-lending", then the checks should have been drawn in her name and not
directly paid to Pua.
With respect to the second point, particularly, the finding of the CA that the disbursements
and payments for the loan were made through the bank accounts of petitioner and
respondent, suffice it to say that in the normal course of commercial dealings and for
reasons of convenience and practical utility it can be reasonably expected that the facilities
of the agent, such as a bank account, may be employed, and that a sub-agent be appointed,
such as the bank itself, to carry out the task, especially where there is no stipulation to the
contrary. 32

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.

Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp., et al., 492
SCRA 355 (2006)

Facts: The case involves the Diwalwal Gold Rush Area (Diwalwal), a rich tract of
mineral land located inside the Agusan-Davao-Surigao Forest Reserve in Davao del
Norte and Davao Oriental. Since the early 1980s, Diwalwal has been stormed by
conflicts brought about by numerous mining claims over it. On March 10, 1986,
Marcopper Mining Corporation (MMC) was granted an Exploration Permit (EP 133) by
the Bureau of Mines and Geo-Sciences (BMG). A long battle ensued between Apex
and MMC with the latter seeking the cancellation of the mining claims of Apex on
the ground that such mining claims were within a forest reservation (Agusan-DavaoSurigao Forest Reserve) and thus the acquisition on mining rights should have been
through an application for a permit to prospect with the BFD and not through
registration of a DOL with the BMG. When it reached the SC in 1991, the Court ruled
against Apex holding that the area is a forest reserve and thus it should have
applied for a permit to prospect with the BFD. On February 16 1994, MMC assigned
all its rights to EP 133 to Southeast Mindanao Gold Mining Corporation (SEM), a
domestic corporation which is alleged to be a 100%-owned subsidiary of MMC.
Subsequently, BMG registered SEMs Mineral Production Sharing Agreement (MPSA)
application and the Deed of Assignment. Several oppositions were filed. The Panel
of Arbitrators created by the DENR upheld the validity of EP 133. During the
pendency of the case, DENR AO No. 2002-18 was issued declaring an emergency
situation in the Diwalwal Gold Rush Area and ordering the stoppage of all mining
operations therein.

Issues:
1. W/N EP 133 and its subsequent transfer to SEM is valid.
2. W/N the DENR Secretary has authority to issue DAO 66 declaring 729 hectares of
the areas covered by the Agusan-Davao-Surigao Forest Reserve as non-forest lands
and open to smallscale mining purposes.
3. Who (among petitioners Apex and Balite) has priority right over Diwalwal?

Held/Ratio:

1. INVALID. One of the terms and conditions of EP 133 is: That this permit shall be
for the exclusive use and benefit of the permittee or his duly authorized agents and
shall be used for mineral exploration purposes only and for no other purpose. While
it may be true that SEM is a 100% subsidiary corporation of MMC, there is no
showing that the former is the duly authorized agent of the latter. As such, the
assignment is null and void as it directly contravenes the terms and conditions of
the grant of EP 133. a. The Deed of Assignment was a total abdication of MMCs
rights over the permit. It is not a mere grant of authority to SEM as agent. b. Reason
for the stipulation. Exploration permits are strictly granted to entities or individuals
possessing the resources and capability to undertake mining operations. Without
such a condition, non-qualified entities or individuals could circumvent the strict
requirements under the law by the simple expediency of acquiring the permit from
the original permittee. c. Separate personality. The fact that SEM is a 100%
subsidiary of MMC does not automatically make it an agent of MMC. A corporation is
an artificial being invested by law with a personality separate and distinct from
persons composing it as well as from that of any other legal entity to which it may
be related. Absent any clear proof to the contrary, SEM is a separate and distinct
entity from MMC. d. Doctrine of piercing the corporate veil inapplicable. Only in
cases where the corporate fiction was used as a shield for fraud, illegality or
inequity may the veil be pierced and removed. The doctrine of piercing the
corporate veil cannot therefore be used as a vehicle to commit prohibited acts. The
assignment of the permit in favor of SEM is utilized to circumvent the condition of
nontransferability of the exploration permit. To allow SEM to avail itself of this
doctrine and to approve the validity of the assignment is tantamount to sanctioning
an illegal act which is what the doctrine precisely seeks to forestall. e. PD 463
requires approval of Secretary of DENR. Also, PD 463 (Mineral Resources
Development Decree), which is the governing law when the assignment was
executed, explicitly requires that the transfer or assignment of mining rights,
including the right to explore a mining area, must be with the prior approval of the
Secretary of DENR. Such is not present in this case. f. EP 133 expired by nonrenewal. Although EP 133 was extended for 12 months until July 6, 1994, MMC
never renewed its permit prior and after its expiration. With the expiration of EP 133
on July 6, 1994, MMC lost any right to the Diwalwal Gold Rush Area. SEM, on the
other hand, has not acquired any right to the said area because the transfer of EP
133 in its favor is invalid. Hence, both MMC and SEM have not acquired any vested
right over the area covered by EP 133.

2. NO. The DENR Secretary has no power to convert forest reserves into non-forest
reserves. Such power is vested with the President. The DENR Secretary may only
recommend to the President which forest reservations are to be withdrawn from the

coverage thereof. Thus, DAO No. 66 is null and void for having been issued in excess
of the DENR Secretarys authority.

3. (Since its been held that neither MMC nor SEM has any right over Diwalwal, it is
thus necessary to make a determination of the existing right of the remaining
claimants, petitioners Apex and Balite, in the dispute.) The issue on who has priority
right over Diwalwal is deemed overtaken by the issuance of Proclamation 297 and
DAO No. 2002-18, both being constitutionally-sanctioned acts of the Executive
Branch. Mining operations in the Diwalwal Mineral Reservation are now, therefore,
within the full control of the State through the executive branch. Pursuant to Sec. 5
of RA 7942, the State can either: (1) directly undertake the exploration,
development and utilization of the area or (2) opt to award mining operations in the
mineral reservation to private entities including petitioners Apex and Balite, if it
wishes. The exercise of this prerogative lies with the Executive Department over
which courts will not interfere.
- Litonjua vs. Eternit Corporation, et al., 490 SCRA 204 (2006)

Overview:

Statement of the Case: Petition for Review on Certiorati of the CA decision


affirming the TC-Pasig and denying petitioners MR

Petitioners: Eduardo Litonjua, Jr. and Antonio Litonjua


Respondents: Eternit Corporation (now Eterton Multi-resources Corporation; EC for
brevity), Eteroutremer, S.A. Corporation (ESAC for brevity) and Far East Bank and Trust
Company (Bank for brevity)

Statement of Facts:

EC is a manufacturer of roofing materials and pipe products in the Philippines and


operates on eight parcels of lands in Mandaluyong City with a total of 47,233 sq.m., all
covered by various Transfer Certificates under the name of Bank as trustee.
90% of the shares of EC were owned by ESAC, a Belgian company.
1986: ESACs management grew wary of the political situation of the Philippines
(Marcos administration) and instructed Michael Adams, a member of ECs Board of
Directors, to dispose of the eight parcels of lands. For this, he hired Lauro G. Marquez as
realtor/broker. Jack Glanville, an Australian citizen and the General Manager and
President of EC, showed Marquez the lands.

Sept. 12, 1986: Marquez offered the lands to Eduardo Litonjua, Jr. of the Litonjua &
Company, Inc. The offer, made through letter with Marquez claim of authority to sell the
property, was for 27M with the terms of the sale subject to negotiation.
Eduardo, along with his brother Antonio, looked at the property and offered to buy it for
20M in cash. Marquez communicated the offer to Glanville and Claude Delsaux,
Regional Director for Asia of ESAC (both held offices in Belgium).
Oct. 28, 1986: Glanville telexed Delsaux about their decision on the offer since Delsaux
failed to reply to the previous communication
Feb. 12, 1987: Delsaux replied that their final offer, based on Belgian/Swiss decision,
was for $1M plus P2.5M to cover all existing obligations prior to liquidation.
Eduardo accepted the final offer and said that they would confirm full payment within 90
days after execution and preparation of all documents of sale and government clearances
The Litonjua brothers deposited $1M with Security Bank and executed an Escrow
Agreement
Sometime later, Glanville communicated with Delsaux that he had met with the buyers
and asked when the sale would be implemented, upon inquiry of the Litonjua brothers
and Marquez. The Litonjua brothers were concerned because they would be incurring
expenses in bank commitment fees.
Soon after Corazon Aquino assumed office, Glanville told Marquez that the sale would
not push through because of the stabilization of the political situation.
The Litonjuas demanded payment for damages from EC but EC refused
The Litonjuas filed with the RTC-Pasig a complaint for specific performance and
damages against herein respondents and amended to include Benito Tan, Ruperto Tan,
Stock Ha Tan and Deogracias Eufemio because of their purchase of ESAC stocks and
were the controlling stockholders.
Respondents answer:
o ESACr does not do business in the Philippines so the court has no jurisdiction
o The Board and stockholders of EC never approved a resolution to sell the land or
to authorize Marquez to do the same
o The Oct. 28 telex of Glanville was his own personal making and does not bind EC
TC dismissed case:
o No valid and binding sale between parties
o No cause of action against Far East Bank and Trust Company
o Counter-claim of respondents dismissed as well
o The authority of the agents/realtors was not made in writing therefore the sale is
not merely unenforceable but void. Ratification of this authority may not be
applied retroactively. Petitioners could not assume that the defendants gave the
agents authority without clear authorization in the form of Board resolutions.
o The supposed sale involves all assets of EC which would mean complete
cessation of its operations.
Litonjuas appealed to the CA, claiming that:
o Marquez was not an agent but merely a broker or go-between so he did not need
written authority

o Agency by estoppels was created when corporation clothed Marquez with


apparent authority
o It was a bilateral contract to buy and sell which is equivalent to a contract of sale
and is binding upon the corporation to consummate
ECs answer: Neither Marquez nor Glanville and Desaux were authorized by the Board
of Directors had written authority to sell or offer the property for sale. Since the sale
involved almost all the properties of EC, naturally it would need the consent of all the
stockholders.
CA affirmed the RTC and denied petitioners MR:
o Marquez being a real estate broker was considered to be a special agent under
NCC 1874. Under Sec. 23 of the Corporation Code, he needed a special authority
from the Board of Directors to bind the corporation to the sale.
o Delsaux was merely a representative of ESAC, the majority stockholder of EC,
but was not a part of ECs Board of Directors, so he had no authority to bind EC.
o Litonjuas failed to prove agency by estoppels
Petitioners brought case to the SC, claiming that:
o There was valid offer and acceptance when they accepted the final offer of EC
and Marquez made known to them the acceptance before they withdrew the offer
o Marquez did not need special authority because he was not tasked to sell the
properties but merely to bring both parties to a sale together, as a broker.
Therefore, NCC 1874 does not apply.
o Glanville and Delsaux were clothed with authority to sell the properties because it
would be inconsistent to say they didnt when they made a counter-offer and later
on rejected the sale
o Petitioners were in good faith because Glanville and Delsaux presented
themselves to the public as if they had authority from EC
o Glanville and Delsaux have authority because they sold 90% of the stocks of EC
to Ruperto Tan in 1997, therefore a Board Resolution is a mere formality since
they hold such high positions
Respondents reply:
o Factual matters so cannot be taken cognizance by the SC under Rule 45 of the
Rules of Court
o On the matters, they reiterate their stand in the CA

Issues:
1. W/N there was a perfected contract of sale
2. W/N Marquez needed written authority from ESAC
3. W/N Glanville and Delsaux had the necessary or apparent authority from
ESAC
Held & Rationale: Petition is without merit
1. The issues are factual, therefore not falling within the ambit of Rule 45.

In the absence of express written terms of the relationship of agency, the


existence of a relationship and the bounds of it is a question of fact. Whether
the person acted within his authority or whether there was apparent authority
is also a question of fact. These findings shall not be disturbed unless it is
shown that some facts and circumstances were not properly appreciated.
2. Petitioners failed to prove agency.
Petitioners failed to prove that EC accepted their counter-offer through
Glanville and Delsaux. When the case is for specific performance of a
contract, agency must be proven through clear, certain and specific proof.
Under Sec. 23 of the Corporation Code, a corporation has a separate and
distinct personality from its stockholders and is not affected by transactions
of the latter. Under Sec. 36 of the same code, it authorizes the corporation to
dispose of their properties. However, these acts such as offering a property
for sale and accepting a counter-offer may not be done without the authority
of corporate by-laws or specific acts of the board of directors. Absent this
authority, the rule is that the declaration of one director conferring such is
not binding on the corporation. Any act of an agent of a corporation must be
ratified by the Board of Directors, therefore it has to have written authority.
Written authority is also necessary because in this case, real rights over
immoveable property are conveyed, with which agency is required to be in
writing or else the sale is void.

Facts also showed that the final offer made by Delsaux was only from the
Belgian/Swiss component but not from the management or Board of Directors
of ESAC, thus it is not binding upon EC because they were officers of ESAC
but not EC. Though it is true that they owned majority of the stocks of EC, the
Court held that even if it owned all of the stocks, it does not merge them into
one corporation. Thus, they could not act to bind EC without a Board
resolution from the Board of Directors of EC itself. A Board resolution is not a
mere formality but is a condition sine qua non to the validity of the sale.

The Litonjuas had the responsibility to exercise due diligence in confirming


the authority of the agent. The rule is that anyone who deals with an
assumed does so at his own peril.

Marquez had no authority to be an agent. Marquez acted not merely as


a broker but also as an agent. He confirmed the offer and acceptance of the
Litonjuas to the officers of ESAC.

There was no agency by estoppels. The following are the requisites for
agency by estoppel: (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. Proof of reliance on such representation was lacking in this case
because in the communications between the Litonjuas and Glanville, Delsaux
and Marquez, the latter parties clearly stated that they were acting in the
behalf of ESAC only. It cannot be said also that EC ratified the acts of the
latter parties. There is no showing that the communications between them
were forwarded to ECs Board of Directors for ratification.

Judgment: Petition denied for lack of merit. Costs against petitioners.

- Amon Trading Corp. vs. CA, 477 SCRA 552 (2005)


Facts: Lines & Spaces, represented by Eleanor Bahia Sanchez, order from petitioner
Amon Trading Corporation, and from Juliana Marketing bags of cement for Tri-Reality
development and construction, but it found out that both cannot deliver all its
balance and refunded the amount of undelivered bags of cement to Lines and
Spaces in representation of Eleanor Sanchez, but Sanchez had already fled abroad,
private respondent filed this case for sum of money against petitioners and Lines &
Spaces.

Regional Trial Court of Quezon City, found Lines & Spaces solely liable to private
respondent and absolved petitioners of any liability. Tri-Realty partially appealed
from the trial courts decision absolving Amon Trading Corporation and Juliana
Marketing of any liability to Tri- Realty. In the presently assailed Decision, the Court
of Appealsreversed the decision of the trial court and held petitioners Amon Trading
Corporation and Juliana Marketing to be jointly and severally liable with Lines &
Spaces for the undelivered bags of cement.

Issue: Whether or not Lines & Spaces is the Tri-realtys agent

Held: No contract of agency between Tri-realty and Lines & Spaces, but rather a
supplier for the latters cement needs. All the quibbling about whether Lines &
Spaces acted as agent of private respondent is inane because Amon took orders
from Eleanor Sanchez who, after all, was the one who paid them the managers
checks for the purchase of cement. Sanchez represented herself to be from Lines &
Spaces/Tri-Realty, purportedly a single entity. Amon didnt knew that Lines space
and tri-realty is a separate entity.

Since line space is not agent of tri-realty, no vinculum could be said to exist
between amon and tri-realty.

Therefore Lines & Spaces solely liable to private tri-realty.


- Yu Eng Cho vs. Pan American World Airways, Inc., 328 SCRA 717 (2000)

This is a petition for review seeking the reversal of the CA decision holding private
respondent Claudia Tagunicar solely liable for moral and exemplary and attorneys
fees, deleting the RTCs award for actual damages.

Facts - Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. He
travels from time to time to Malaysia, Taipei, and Hong Kong.
- On July 10, 1976, he bought plane tickets from private respondent Claudia
Tagunicar, who represented herself as an agent of Tourist World Services, Inc.
(TWSI). Each ticket cost PhP25,000 and the destinations were Hong Kong, Tokyo,
and San Francisco.
- She advised petitioners to take Pan Am since Northwest Airlines was on strike and
Pan Am had a Tokyo-San Francisco flight.
- Petitioner was supposed to go to Fairfield, New Jersey to purchase two lines of
infrared heating system processing textured plastic article.

- Only the Manila-HK, then Tokyo was confirmed on the said date. Plan 002 or the
flight from TokyoSan Franciso was on RQ status or on request. She told the
petitioners to come back after a few days to confirm the last flight.
- After calling Julieta Canilao, the office manager of TWSI, Tagunicar confirmed the
petitioners flight to San Francisco and attached confirmation stickers on their
tickets. - Adrian Yu, son of petitioner, called the Pan Am office to verify the status of
their flight, and a personnel from Pan Am confirmed it. - They left for Hong Kong and
stayed there for five days before leaving for Tokyo. In Tokyo, they again called Pan
Am for reconfirmation to which said office said that their names were not on the
manifest. - Since they were transient passengers, they couldnt stay in Japan for
more than 72 hours. They couldnt get any flights to San Francisco because
Northwest Airlines was on strike at that time and booking a flight was difficult. They were offered tickets to Taipei, which they paid for, but upon reaching Taipei,
they were forced to go back to Manila since there were no flights available. Petitioner lost the chance to buy said infrared heating system from Radiant Heat,
which couldve given them profit of PhP300-400,000. - However, based on
defendants testimony, petitioners were referred to Tagunicar who was an
independent travel solicitor. She helps process travel papers, tickets, booking of
passengers, and airport assistance. They know her because theyve dealt with her
in the past. - She then bought tickets from Canilao with the following schedule:

Manila-HK 07-23-78 1135/1325hrs (flight out of Manila was thru Cathay)


HK-Tokyo 07-28-78 1615/2115hrs Pacific*)
Tokyo-San Francisco 07-29-78 1930/1640hrs

Tagunicar says Julieta Canilao told her, o, sige Claudia, confirm na, which she even
noted in her index card. However, TWSI/Canilao denied confirming the San Francisco
flight since it was really difficult to book one because of the strike. - Neither TWSI
nor Pan Am confirmed the flight and they never authorised Tagunicar to attach said
confirmation stickers. - A complaint for damages was filed by petitioners with the
RTC of Manila, Branch 3. They rendered judgement in favour of petitioners, holding
Pan Am, TWSI, and Tagunicar jointly and severally liable. (Canilao was not included
since she was just doing her job as the general manager of TWSI.) They were
ordered to pay PhP200,000 for actual damages, PhP100,000 as exemplary
damages, 20% of the award as attorneys fees, and PhP30,000 for litigation
expenses. - Pan Am and Tagunicar appealed. CA modified the judgement holding
Tagunicar solely liable, lowering the amount for moral and exemplary damages, and
attorneys fees to PhP50,000 and PhP25,000, and PhP10,000 only plus cost of suit,
and deleting the amount for actual damages. - CA found that Tagunicar is an

independent travel solicitor and is not a duly authorised agent or representative of


TWSI or Pan Am.

Issue Whether or not Tagunicar was an agent of Pan American Airways or Travel
World Services Inc.

Held No. Petitioners assert that Tagunicar is a sub-agent of TWSI while TWSI is a
duly authorized ticketing agent of Pan Am. Proceeding from this premise, they
contend that TWSI and Pan Am should be held liable as principals for the acts of
Tagunicar. They stubbornly insist that the existence of the agency relationship has
been established by the judicial admissions allegedly made by respondents that: (1)
the admission made by Pan Am in its Answer that TWSI is its authorized ticket
agent; (2) the affidavit executed by Tagunicar where she admitted that she is a duly
authorized agent of TWSI; and (3) the admission made by Canilao that TWSI
received commissions from ticket sales made by Tagunicar. However, Tagunicar has
openly denied in court that she was an agent of TWSI, and declared that she is an
independent travel solicitor. In case of conflict between statements in the affidavit
and testimonial declarations, the latter command greater weight. By the contract of
agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter.
The elements of agency are: (1) consent, express or implied, of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation
to a third person; (3) the agent acts as a representative and not for himself; (4) the
agent acts within the scope of his authority. TWSI nor Pan Am never authorised
private respondent Tagunicar to confirm subject flight to San Francisco. It is a
settled rule that persons dealing with an assumed agent are bound at their peril, if
they would hold the principal liable, to ascertain not only the fact of agency but also
the nature and extent of authority, and in case either is controverted, the burden of
proof is upon them to establish it WHEREFORE, the decision appealed from is
hereby AFFIRMED. Cost against petitioners. SO ORDERED.

- Rallos vs. Felix Go Chan vs. Sons Realty Corp. 81 SCRA 251 (1978)

Plaintiff: Ramon Rallos


Defendant: Felix Go Chan & Sons Realty Corporation

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 Transfer Certificate of Title No. 11116 of the Registry of Cebu.
They executed a special power of attorney in favor of their brother, Simeon
Rallos, authorizing him to sell such land for and in their behalf.
After Concepcion died, Simeon Rallos sold the undivided shares of his sisters
Concepcion and Gerundia to Felix Go Chan & Sons Realty Corporation for the
sum of P10,686.90. New TCTs were issued to the latter.
Petitioner Ramon Rallos, administrator of the Intestate Estate of Concepcion
filed a complaint praying (1) that the sale of the undivided share of the
deceased Concepcion Rallos in lot 5983 be unenforceable, and said share be
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 and (3) that plaintiff be indemnified by
way of attorney's fees and payment of costs of suit.

CFI: [Plaintiffs Complaint]

Sale of land was null and void insofar as the one-half pro-indiviso share of
Concepcion Rallos
Ordered the issuance of new TCTs to respondent corporation and the estate of
Concepcion in the proportion of share each pro-indiviso and the payment
of attorneys fees and cost of litigation

[Respondent filed cross claim against Simon Rallos(*Simon and Gerundia died
during pendency of case)]

Juan T. Borromeo, administrator of the Estate of Simeon Rallos was ordered to


pay defendant the price of the share of the land (P5,343.45) plus
attorneys fees

[Borromeo filed a third party complaint against Josefina Rallos, special


administratrix of the Estate of Gerundia]

Dismissed without prejudice to filing either a complaint against the regular


administrator of the Estate of Gerundia Rallos or a claim in the IntestateEstate of Cerundia Rallos, covering the same subject-matter

CA: CFI Decision reversed, upheld the sale of Concepcions share.


MR: denied.

Issues:
1) WON sale was valid although it was executed after the death of the principal,
Concepcion.
2) WON sale fell within the exception to the general rule that death extinguishes
the authority of the agent
3) WON agents knowledge of the principals death is a material factor.
4) WON petitioner must suffer the consequence of failing to annotate a notice of
death in the title (thus there was good faith on the part of the Respondent
vendee)
5) WON good faith on the part of the respondent in this case should be treated
parallel to that of an innocent purchaser for a value of a land.
Held/Ratio:

(Court discussed relevant principles first)


Relationship of Agency (concept arising from principles under Art 1317 1 and 14032)one party, caged the principal (mandante), authorizes another, called the agent
(mandatario), to act for and in his behalf in transactions with third persons.
-derivative in nature, power emanating from principal
-agents acts are acts of the principal

Essential Elements:
(1) there is consent, express or implied of the parties to establish the
relationship;
(2) the object is the execution of a juridical act in relation to a third person;
(3) the agents acts as a representative and not for himself, and
(4) the agent acts within the scope of his authority.

Extinguishment
o Generally: among others3, By the death, civil interdiction, insanity or
insolvency of the principal or of the agent

1 no one may contract in the name of another without being authorized by the latter, or unless he has
by law a right to represent him. A contract entered into in the name of another by one who has no
authority or the legal representation or who has acted beyond his powers, shall be unenforceable,
unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before
it is revoked by the other contracting party.

2The following contracts are unenforceable, unless they are justified: (1) Those entered into in the
name of another person by one who hi - been given no authority or legal representation or who has
acted beyond his powers; ...

- death of the principal effects instantaneous and absolute


revocation of the authority of the agent
o

Exceptions:
(Art. 1930) if it has been constituted in the common interest of
the latter and of the agent, or in the interest of a third person
who has accepted the stipulation in his favor.
(Art. 1931) agent acted without knowledge of the pricipals
death and that the third person was in good faith (both these
reqs should be present)

IN THE CASE AT BAR:

1) Sale was void.


No one may contract in the name of another without being authorized by the
latter, or unless he has by law a right to represent him (Art. 1317 of the Civil
Code).
Simons authority as agent was extinguished upon Concolacions death
2) The sale did not fall under the exceptions to the general rule that death ipso
jure extinguishes the authority of the agent
o Art. 1930 inapplicable: SPA in favor of Simon Rallos was not coupled
with interest
o Art. 1931 inapplicable:
Simon Rallos knew (as can be inferred from his pleadings) of
principal Concepcions death
For Art 1931 to apply, both requirements must be present
3) Yes, agents knowledge of principals death is material.
Respondent asserts that: there is no provision in the Code which provides
that whatever is done by an agent having knowledge of the death of his
principal is void even with respect to third persons who may have contracted
with him in good faith and without knowledge of the death of the principal
Court says: this contention ignored the ignores the existence of the general
rule enunciated in Article 1919 that the death of the principal extinguishes
the agency. Article 1931, being an exception to the general rule, is to be
strictly construed.

3 See Art. 1919

4) NO, the Civil Code does not impose a duty upon the heirs to notify the agent
or others of the death of the principal.
If revocation was by the act of the principal: a general power which does
not specify the persons to whom represents' on should be made, it is the
general opinion that all acts, executed with third persons who contracted
in good faith, Without knowledge of the revocation, are valid.
BUT, if revocation was due to death of the principal: extinguishment, by
operation of law, is instantaneous without the need for notification to the
parties concerned.
5) No.
Laws on agency, the terms of which are clear and unmistakable leaving no
room for an interpretation contrary to its tenor, should apply, the law
provides that death of the principal ipso jure extinguishes the authority of
the agent to sell rendering the sale to a third person in good faith
unenforceable unless at the agent had no knowledge of the principals
death at that time (exception under Art. 1931)
Dispositive: CA Decision reversed, CFI decision affirmed. Sale was null and void.

C.
Parties
to
the
Contract:
i) Principal Art. 1883 - one whom the agent represents and from whom
he derives his authority (Sec. 3, 2 C.J.S. 1024); one primarily concerned in
the contract;
Art. 1883. If an agent acts in his own name, the principal has no right of
action against the persons with whom the agent has contracted; neither
have such persons against the principal.
In such case the agent is the one directly bound in favor of the person
with whom he has contracted, as if the transaction were his own, except
when the contract involves things belonging to the principal.
The provisions of this article shall be understood to be without prejudice
to the actions between the principal and agent. (1717)

a. Disclosed Comm. Bank & Trust Co. vs. Republic Armored Car Services 9 SCRA 143
G.R. Nos. L-18223 and L-18224

September 30, 1963

COMMERCIAL BANK & TRUST COMPANY OF THE


vs.
REPUBLIC ARMORED CAR SERVICE CORPORATION
AL., defendants-appellants.

PHILIPPINES, plaintiff-appellee,
and

DAMASO

PEREZ,

ET

Defendant-appellant Damaso Perez has presented a motion for new trial on the ground of newly
discovered evidence. It is claimed that movant was not aware of the nature of the power of attorney
that Ramon Racelis used, purportedly signed by him, to secure the loans for the Republic Armored
Car Service Corporation and the Republic Credit Corporation. In the motion it is claimed that a
photostatic copy of the power of attorney used by Ramon Racelis was presented at the trial. This
photostatic copy or a copy thereof has not been submitted to us, for this reason We cannot rule upon
his claim and contention that Ramon Racelis had no authority to bind the movant as surety for the
loans obtained from the appellee Commercial Bank & Trust Company. Not having before Us the
supposed photostatic copy of the power of attorney used to secure the loans, there is no reason for
Us to rule, in accordance with his contention, that Racelis exceeded his authority in securing the
loans subject of the present actions.
The motion for reconsideration, however, presents a copy of a power of attorney purportedly
executed by movant on October 22, 1952. It is not expressly mentioned that this is the precise power
of attorney that Ramon Racelis Utilized to secure the loans the collection of which is sought in these
cases. But assuming, for the sake of argument, that the said power of attorney incorporated in the
motion for reconsideration was the one used to obtain the loans. We find that the movant's
contention has no merit. In accordance with the document, Racelis was authorized to negotiate for a
loan or various loans .. with other being institution, financing corporation, insurance companies or
investment corporations, in such sum or sums, aforesaid Attorney-in-fact Mr. Ramon Racelis, may
deem proper and convenient to my interests, ... and to execute any and all documents he deems
requisite and necessary in order to obtain such loans, always having in mind best interest; ... We
hold that this general power attorney to secure loans from any banking institute was sufficient
authority for Ramon Racelis to obtain the credits subject of the present suits.
It will be noted furthermore that Racelis, as agent Damaso Perez, executed the documents
evidencing the loans signing the same "Damaso Perez by Ramon Racelis," and in the said contracts
Damaso Perez agreed jointly and severally to be responsible for the loans. As the document as
signed makes Perez jointly and severally responsible, there is no merit in the contention that Perez
was only being held liable as a guarantor.
1awphl.nt

Furthermore, the promissory notes evidencing the loan are attached to the complaint in G.R. Nos. L182 and L-18224. If the movant Perez claims that Raceli had no authority to execute the said
promissory notes, the authenticity of said documents should have been specifically denied under
oath in defendant's answers in the lower court. This was done; consequently Perez could not and
may not now claim that his agent did not have authority to execute the loan agreements.
Motion for new trial is denied.

b.

Undisclosed

Philippine Charter Insurance Corporation vs. Explorer Maritime Co. et al., 657 SCRA 165
[2011]
G.R. No. 175409

September 7, 2011

PHILIPPINE
CHARTER
INSURANCE
CORPORATION, Petitioner,
vs.
EXPLORER MARITIME CO., LTD., OWNER OF THE VESSEL M/V "EXPLORER", WALLEM
PHILS. SHIPPING, INC., ASIAN TERMINALS, INC. AND FOREMOST INTERNATIONAL PORT
SERVICES, INC., Respondents.

On March 22, 1995, petitioner Philippine Charter Insurance Corporation (PCIC), as


insurer-subrogee, filed with the RTC of Manila a Complaint against respondents, to
wit: the unknown owner of the vessel M/V "Explorer" (common carrier), Wallem
Philippines Shipping, Inc. (ship agent), Asian Terminals, Inc. (arrastre), and Foremost
International Port Services, Inc. (broker). PCIC sought to recover from the
respondents the sum of P342,605.50, allegedly representing the value of lost or
damaged shipment paid to the insured, interest and attorneys fees.
PCIC filed a similar case against respondents Wallem Philippines Shipping, Inc.,
Asian Terminals, Inc., and Foremost International Port Services, Inc., but, this time,
the fourth defendant is "the unknown owner of the vessel M/V "Taygetus."
Respondents filed their respective answers with counterclaims. PCIC later filed its
answer to the counterclaims. PCIC filed an ex parte motion to set the case for pretrial conference, which was granted by the trial court. However, before the
scheduled date of the pre-trial conference, PCIC filed its Amended Complaint. The
"Unknown Owner" of the vessel M/V "Explorer" and Asian Terminals, Inc. filed anew
their respective answers with counterclaims.
Respondent common carrier, "the Unknown Owner" of the vessel M/V "Explorer,"
and Wallem Philippines Shipping, Inc. filed a Motion to Dismiss on the ground that
PCIC failed to prosecute its action for an unreasonable length of time. PCIC allegedly
filed its Opposition, claiming that the trial court has not yet acted on its Motion to
Disclose. In said motion, PCIC supposedly prayed for the trial court to order
respondent Wallem Philippines Shipping, Inc. to disclose the true identity and
whereabouts of defendant "Unknown Owner of the Vessel M/V Explorer."
Hence, this Petition for Review on Certiorari. On June 27, 2007, this Court required
the counsel of the "Unknown Owner" of the vessel M/V Explorer and Wallem
Philippines Shipping, Inc. to submit proof of identification of the owner of said
vessel.4 On September 17, 2007, this Court, pursuant to the information provided
by Wallem Philippines Shipping, Inc., directed its Division Clerk of Court to change
"Unknown Owner" to "Explorer Maritime Co., Ltd." in the title of this case.5

The basis for the dismissal by the trial court of Civil Case No. 95-73340 is Section 3,
Rule 17 and Section 1, Rule 18 of the Rules of Court, which respectively provide:
Section 3. Dismissal due to the fault of the plaintiff. If, for no justifiable cause, the
plaintiff fails to appear on the date of the presentation of his evidence in chief on
the complaint, or to prosecute his action for an unreasonable length of time, or to
comply with these Rules or any order of the court, the complaint may be dismissed
upon motion of the defendant or upon the courts own motion, without prejudice to
the right of the defendant to prosecute his counterclaim in the same or in a
separate action. This dismissal shall have the effect of adjudication upon the
merits, unless otherwise declared by the court.
xxxx
Section 1. When conducted. After the last pleading has been served and filed, it
shall be the duty of the plaintiff to promptly move ex parte that the case be set for
pre-trial.
It bears stressing that the sanction of dismissal may be imposed even
absent any allegation and proof of the plaintiffs lack of interest to
prosecute the action, or of any prejudice to the defendant resulting from
the failure of the plaintiff to comply with the rules. The failure of the
plaintiff to prosecute the action without any justifiable cause within a
reasonable period of time will give rise to the presumption that he is no
longer interested in obtaining the relief prayed for.
In this case, there was no justifiable reason for petitioners failure to file a motion to
set the case for pre-trial. Petitioners stubborn insistence that the case was not yet
ripe for pre-trial is erroneous. Although petitioners state that there are strong and
compelling reasons justifying a liberal application of the rule, the Court finds none in
this case. The burden to show that there are compelling reasons that would
make a dismissal of the case unjustified is on petitioners, and they have
not adduced any such compelling reason.[9][9] (Emphases supplied.)
In the case at bar, the alleged Motion to Disclose was filed on November 19, 1997.
Respondents filed the Motion to Dismiss on December 5, 2000. By that time, PCICs
inaction was thus already almost three years. There is therefore no question that
the failure to prosecute in the case at bar was for an unreasonable length of time.
Consequently, the Complaint may be dismissed even absent any allegation and
proof of the plaintiffs lack of interest to prosecute the action, or of any prejudice to
the defendant resulting from the failure of the plaintiff to comply with the rules. The
burden is now on PCIC to show that there are compelling reasons that would render
the dismissal of the case unjustified.
The only explanation that the PCIC can offer for its omission is that it was waiting for
the resolution of its Motion to Disclose, which it allegedly filed with another branch

of the court. According to PCIC, it was premature for it to move for the setting of
the pre-trial conference before the resolution of the Motion to Disclose.
We therefore hold that the RTC was correct in dismissing Civil Case No. 95-73340 for
failure of the plaintiff to prosecute the same for an unreasonable length of time. As
discussed by the Court of Appeals, PCIC could have filed a motion for the early
resolution of their Motion to Disclose after the apparent failure of the court to do so.
If PCIC had done so, it would possibly have discovered the error in the filing of said
motion much earlier. Finally, it is worth noting that the defendants also have the
right to the speedy disposition of the case; the delay of the pre-trial and the trial
might cause the impairment of their defenses.[19][19]
WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals dated
July 20, 2006 in CA-G.R. CV No. 78834 is hereby AFFIRMED.
Maritime Agencies & Securities vs. CA, 187 SCRA 346 (1990)
FACTS:
Transcontinental Fertilizer Company of London chartered from Hongkong Island Shipping
Company of Hongkong the motor vessel named "Hongkong Island" for the shipment of
8073.35 MT (gross) bagged urea from Novorossisk, Odessa, USSR to the Philippines, the
parties signing for this purpose a Uniform General Charter dated August 9, 1979. 1
Of the total shipment, 5,400.04 MT was for the account of Atlas Fertilizer Company as
consignee, 3,400.04 to be discharged in Manila and the remaining 2,000 MT in Cebu. 2 The
goods were insured by the consignee with the Union Insurance Society of Canton, Ltd. for
P6,779,214.00 against all risks. Maritime Agencies & Services, Inc. was appointed as the
charterer's agent and Macondray Company, Inc. as the owner's agent. The vessel arrived in
Manila and unloaded part of the consignee's goods, then proceeded to Cebu to discharge
the rest of the cargo.
The consignee filed a formal claim against Maritime, copy furnished Macondray. The
consignee filed another formal claim, this time against Viva Customs Brokerage.
These claims having been rejected, the consignee then went to Union, which on
demand paid the total indemnity of P113,123.86 pursuant to the insurance contract. As
subrogee of the consignee, Union then filed a complaint for reimbursement of this amount,
with legal interest and attorney's fees, against Hongkong Island Company, Ltd., Maritime
Agencies & Services, Inc. and/or Viva Customs Brokerage. The complaint was amended to
drop Viva and implead Macondray Company, Inc. as a new defendant.
After trial, the trial court rendered judgment holding the defendants liable. Petitioner
appealed the decision to the Court of Appeals. Maritime and Union filed separate motions for
reconsideration which were both denied. The movants are now before us to question the
decision of the respondent court.
ISSUE: Who shall be held liable
HELD:

There are three general categories of charters, to wit, the demise or "bareboat
charter," the time charter and the voyage charter. Based on their definitions, A voyage
charter being a private carriage, the parties may freely contract respecting liability for
damage to the goods and other matters. The basic principle is that "the responsibility for
cargo loss falls on the one who agreed to perform the duty involved" in accordance with the
terms of most voyage charters. This is true in the present cases where the charterer was
responsible for loading, stowage and discharging at the ports visited, while the owner was
responsible for the care of the cargo during the voyage.
In the cases at bar, the trial court found that 1,383 bags were shortlanded, which
could only mean that they were damaged or lost on board the vessel before unloading of the
shipment. It is not denied that the entire cargo shipped by the charterer in Odessa was
covered by a clean bill of lading. 16 As the bags were in good order when received in the
vessel, the presumption is that they were damaged or lost during the voyage as a result of
their negligent improper stowage. For this the ship owner should be held liable.
But we do agree that the period for filing the claim is one year, in accordance with
the Carriage of Goods by Sea Act. This was adopted and embodied by our legislature in Com.
Act No. 65 which, as a special law, prevails over the general provisions of the Civil Code on
prescription of actions.
The one-year period in the cases at bar should commence on October 20, 1979, when
the last item was delivered to the consignee. 18 Union's complaint was filed against
Hongkong on September 19, 1980, but tardily against Macondray on April 20, 1981. The
consequence is that the action is considered prescribed as far as Macondray is concerned
but not against its principal, which is what matters anyway.
As regards the goods damaged or lost during unloading, the charterer is liable
therefor, having assumed this activity under the charter party "free of expense to the
vessel." The difficulty is that Transcontinental has not been impleaded in these cases and so
is beyond our jurisdiction. The liability imposable upon it cannot be borne by Maritime which,
as a mere agent, is not answerable for injury caused by its principal. It is a well-settled
principle that the agent shall be liable for the act or omission of the principal only if the
latter is undisclosed.
The charterer did not represent itself as a carrier and indeed assumed responsibility
ability only for the unloading of the cargo, i.e, after the goods were already outside the
custody of the vessel. In supervising the unloading of the cargo and issuing Daily Operations
Report and Statement of Facts indicating and describing the day-to-day discharge of the
cargo, Maritime acted in representation of the charterer and not of the vessel. It thus cannot
be considered a ship agent. As a mere charterer's agent, it cannot be held solidarily liable
with Transcontinental for the losses/damages to the cargo outside the custody of the vessel.
Notably, Transcontinental was disclosed as the charterer's principal and there is no question
that Maritime acted within the scope of its authority.
We affirm the factual findings but must modify the legal conclusions. As previously
discussed, the liability of Macondray can no longer be enforced because the claim against it
has prescribed; and as for Maritime, it cannot be held liable for the acts of its known
principal resulting in injury to Union.

; Exceptions: Goldstar Mining vs. Lim-Jimena, 25 SCRA 597 (1968)


FACTS:
In 1937, Ananias Isaac Lincallo bound himself in writing to turn to Victor Jimena half
of the proceeds from all mining claims that he would purchase with the money to be
advanced by the latter. This agreement was later on modified to include in the equal sharing
agreement not only the proceeds from several mining claims, but also the lands constituting
the same, and so as to bring thereby their heirs, assigns, or legal representatives.
Eventually, the mining rights over parts of the claims were assigned by Lincallo to
Gold Star Mining Co., Inc., while others were assigned to Marinduque Iron Mines Agents.
Meanwhile, Jimena repeatedly apprised both mining corporations of his interests over the
mining claims so assigned and/or leased by Lincallo. However, both corporations ignored his
demands. Jimena also demanded Lincallo for the payment of the P5,800 he gave Lincallo as
money to purchase the mining claims and the lands, but to no avail. Lincallo did not only fail
to settle his accounts with Jimena, he even transferred about majority of his share in the
royalties due from Gold Star to Gregorio Tolentino, a salaried employee.
Hence, on Sept. 2, 1954, Jimena filed a suit against Lincallo for recovery of his
advances and his one-half share in the royalties, and impleaded Gold Star and Marinduque
Iron Mines, as well as Tolentino, later on as defendants. Two weeks later, the trial court
issued a writ of preliminary injunction, preventing both mining companies from paying
royalties during the pendency of the case to Lincallo, his assigns or legal representatives.
Despite of such injunction, Gold Star still paid P30,691.92 to Lincallo and Tolentino (claiming
that a writ of prelimary attachment filed by Jimena supposedly superseded the injunction,
but the condition to such attachment - the filing of a bond - was not fulfilled, so it cannot be
said that the injunction was superseded). Jimena and Tolentino died successively during the
pendency of the case in the trial court and were, accordingly, substituted by their respective
widows and children.
CFI decided in favor of Victor Jimenas heirs, declaring among others that they be
entitled to half of the shares of the royalties of Lincallo in his contracts with Gold Star,
Marinduque Iron Mines and Alejandro Marquez, that both mining companies pay directly to
the former half of the shares of the royalties until said contracts were terminated, that
Lincallo pay the heirs the capital Victor Jimena gave him to purchase the mining claims and
the latters shares with interest, and that Gold Star Mining Co., Inc. pay them the sum of
P30,691.92 solidarily with Ananias Isaac Lincallo for violation of an injunction. The
defendants appealed to the CA, which affirmed CFI Manilas decision.
ISSUES: 1. WON the CA erred in finding that the Jimenas have a cause of action against Gold
Star Mining Co., as there is no privity of contract between Gold Star and Jimena.
2. WON the CA erred in condemning Gold Star to pay the sum of P30,691.92 for violation of
an allegedly non-existent injunction.
JUDGMENT: Affirmed.
HELD: 1. NO. The existence of a common subject-matter supplies the juridical link. Jimena
repeatedly made demands upon God Star for the payment of his share of the royalties,
but all in vain, so he was forced to implead Gold Star for having refused to recognize his
right. Furthermore, under such conditions wherein Jimena was repeatedly denied of his
interests, Jimena has an action against Gold Star, pursuant to Art. 1883, NCC, which provides
that the principal may sue the person with whom the agent dealt with in his (agents) own
name, when the transaction involves things belonging to the principal.
2. NO. Said award is not so much a penalty against petitioner as a decree of restitution. Said
sum to be paid by the company to Jimena is to be imputed to Lincallos liability under this

judgment. CA thus left the way open for Gold Star to recover later the whole amount from
Lincallo.
ii) Agent Arts. 1881-1882 - he who acts or stands for another acts in a
representative capacity;
ART. 1881. The agent must act within the scope of his authority. He may do such acts as
may be conducive to the accomplishment of the purpose of the agency. (1714a)
ART. 1882. The limits of the agents authority shall not be considered exceeded should it
have been performed in a manner more advantageous to the principal than that specified by
him. (1715)
Authority of an agent dened. Authority is the power of the agent to affect the legal
relations of the principal by acts done in accordance with the principals manifestation of
consent to him. The authority of the agent is the very essence the sine qua non of the
principal and agent relationship. This authority, unless it is otherwise agreed, includes only
authority to act for the benefi t of the principal, and the source of the authority is always the
principal and never the agent. (3 Am. Jur. 2d 469.)
Authority distinguished from power. (1) As to existence. While authority and
power are often used synonymously, the former may be considered the source or cause,
while the latter, the effect. Thus, an agent granted authority by the principal has thereby the
power to act for him, which is taken to mean an ability on the part of the agent to
produce a change in a given legal relation, by doing and not doing a given act. The power
of the agent is also the limitation upon his ability to bind the principal, for it is well-settled
that an agent binds his principal only as to acts within his actual or apparent authority. (Ibid.,
470.)
(2) As to scope. Generally speaking, the extent of the agents authority depends upon the
purpose of the agency. As between an agent and a principal, an act is within the authority of
the agent if it is not a violation of his duty to the principal, and it is within his power if he has
the legal ability to bind the principal to a third person although the act constitutes a violation
of his duty to the principal. In fi ne, an agent with authority to do an act has also the power
to bind the principal, but the latter may exist without the former. So far as third persons are
concerned, no distinction exists.
An act within the power of the agent is deemed within the scope of his authority even
if the agent has, in fact, exceeded the limits of his authority (See examples under Arts. 1900
and 1911.), or he has no authority whatever to do so as in the following cases:
(a) The ambit of the principals liability for the agents torts are, under circumstances to be
discussed later (see Art. 1910.), not limited to acts performed by the agent within his
authority, but to tortious acts done by the agent within the scope of his employment, even
though beyond the scope of his authority;
(b) An agent may bind his principal in contract with a third party, although the agent was
unauthorized to do so, where he has apparent or ostensible authority upon which the third
party relied. Apparent or ostensible authority is proclaimed authority; and
(c) An agent, provided he be a general agent and not a special agent (see Art. 1876.),
possesses the power to subject his principal to third party liability in respect to matters
incidental to that type of general agency, although the agents contract was in point of fact
unauthorized or forbidden if usually within the authority of such a general agent. This is true
even though the principal is undisclosed. (see Teller, op. cit., p. 7.)
(d) Case law has it that wherever the doing of a certain act, or the transaction of a given
affair, or the performance of certain business is confi ded to an agent, the authority to so act
will generally carry with it by implication the authority to do all the collateral acts which are
the natural and ordinary incidents of the main act or business authorized. (Guinnawa vs.
People, 468 SCRA 278 [2005], citing Park vs. Moorman Manufacturing Co., 40 A.L.R. 2d 273
[1952].)

It will be seen that the power of the agent to subject his principal to liability at the
instance of third persons is much wider than his authority. Of course, it is to authority that
we must look in determining (a) the nature of the relationship, i.e., whether it be that of
master and servant, principal and agent, or principal and independent contractor, and (b)
the agents ability normally to subject his principal to liability in contract. (Teller, op. cit., p.
6.)
Kinds of authority. An agent cannot act in behalf of the principal in any way he sees fi t.
He can make the principal legally responsible only when he is authorized by the principal to
act the way he did. The authority of the agent may be:
(1) Actual. when it is actually granted, and it may be express or implied. It is the authority
that the agent does, in fact, have. It results from what the principal indicates to the agent;
(2) Express. when it is directly conferred by words (Art. 1869.);
(3) Implied. when it is incidental to the transaction or reasonably necessary to accomplish
the main purpose of the agency (Art. 1881.), and, therefore, the principal is deemed to have
actually intended the agent to possess although the principal has said nothing about the
particular aspect of the agents authority;
(4) Apparent or ostensible. when it is conferred by words, conduct or even by silence of
the principal (see Art. 1869.) which causes a third person reasonably to believe that a
particular person, who may or may not be the principals agent, has actual authority to act
for the principal. This specifi c type of authority is another name for authority by estoppel or
a species of the doctrine of estoppel.41 It is also an implied authority but only in the sense
that it is not expressly conferred. Apparent authority relied on by a third party to be
possessed by an agent may be created by the principal intentionally or by negligence. It is
something of a contradiction because it implies absence of actual authority. The apparent
authority of an agent can only arise by the acts or conduct of the principal giving rise to an
appearance of authority and making the principal responsible for certain agents action that
were not really authorized at all. Note that for apparent authority, an agent has authority if it
appeared reasonable from the viewpoint of the third party, while in the case of implied
authority, the concern is in what appeared responsible to the agent. Apparent authority is
the term used where no express or implied authority is present. Both actual and apparent
authority are embraced in the agents power (supra.);
(5) General. when it refers to all the business of the principal (see Art. 1876.);
(6) Special. when it is limited only to one or more specific transactions (Ibid.); and
(7) Authority by necessity or by operation of law. when it is demanded by necessity42 or
by virtue of the existence of an emergency. The agency terminates when the emergency has
passed.
When principal bound by act of agent. The principal is, of course, liable to the agent if
he breaches his contractual or any other duty to the agent. However, the more important
questions arising from the relationship relate to the principals liability to third persons with
whom the agent has dealt.
(1) Requisites. In order that the principal may be bound by the act of the agent as to third
persons and as to the agent himself, there are two requisites: (a) The agent must act within
the scope of his authority; and (b) The agent must act in behalf of the principal.
(2) Authority possessed by agent. The principal is bound by either actual or apparent
authority of the agent. (a) So long as the agent has actual authority, express or implied, the
principal is bound by the acts of the agent on his behalf, whether or not the third person
dealing with the agent believes that the agent has actual authority. (b) Under the doctrine
of apparent authority (estoppel), the principal is liable only as to third persons who have
been led reasonably to believe by the conduct of the principal that such actual authority
exists, although none has been given. The principal may or may not be liable to the
apparent agent.
(3) Authority ratified by another (prinicipal). On occasion, a person, who is in fact not an
agent, may make a contract on behalf of another, or he is an agent but he has exceeded his
powers. If the principal subsequently approves or affirms the contract, an agency

relationship is created by ratification, and neither the principal nor the third person can set
up the fact that the agent had no authority or exceeded his powers. (see Art. 1901.)
When a person not bound by act of another. A person, therefore, is not bound by the
act of another in the following instances:
(1) The latter acts without or beyond the scope of his authority in the formers name; and
(2) The latter acts within the scope of his authority but in his own name, except when the
transaction involves things belonging to the principal. (Art. 1883, par. 2.)
One who acts in his own behalf without authority from another, or in the name of a nonexistent principal, naturally binds himself alone. He cannot be considered an agent for any
purpose, since there must be a principal in order to have an agent.
Unauthorized acts in the name of another unenforceable. An agent acting for a
principal ordinarily incurs no personal liability if he acts in a proper fashion. If the agent
acts without authority or in excess or beyond the scope of his authority, there is no
representation. Such act is unauthorized and, therefore, unenforceable, whether or not the
party with whom the agent contracted was aware of the limits of the agents power, unless
the principal ratifi es the transaction before it is revoked by the other contracting party
(Arts. 1317, 1403[1].) or is in estoppel to deny the agents authority. (supra; see Art. 1911.)
Unauthorized acts in the name of another unenforceable. An agent acting for a
principal ordinarily incurs no personal liability if he acts in a proper fashion. If the agent
acts without authority or in excess or beyond the scope of his authority, there is no
representation. Such act is unauthorized and, therefore, unenforceable, whether or not the
party with whom the agent contracted was aware of the limits of the agents power, unless
the principal ratifi es the transaction before it is revoked by the other contracting party
(Arts. 1317, 1403[1].) or is in estoppel to deny the agents authority. (supra; see Art. 1911.)
Liability of principal/agent for acts of agent beyond his authority or power.
(1) Principal. As a general rule, the principal is not bound by the acts of an agent beyond
his limited powers. In other words, third persons dealing with an agent do so at their risk and
are bound to inquire as to the scope of his powers. There are, however, four qualifications
whereby the principal is held liable: (a) Where his (principals) acts have contributed to
deceive a third person in good faith; (b) Where the limitations upon the power created by
him could not have been known by the third person; (c) Where the principal has placed in
the hands of the agent instruments signed by him in blank (Strong vs. Gutierrez Repide, 6
Phil. 680 [1906]; see Art. 1887.); and (d) Where the principal has ratified the acts of the
agent. (see Art. 1901.)
(2) Agent. The agent who exceeds his authority is personally liable either to the principal
or to the third party, in the absence of ratification by the principal. (a) If the principal is liable
to the third party on the ground of apparent authority, the agents liability is to the principal.
(b) If the principal is not liable to the third person because the facts are such no apparent
authority is present, then the agents liability is to the third party. (c) If the agent personally
assumes responsibility for the particular transaction, if the principal defaults he, in effect,
also becomes obligated as a co-principal.
Action must be brought by and against principal. (1) An action is not properly
instituted when brought in the name of an attorney-in-fact (aporado) and not in the name
of the principal, the real party-in-interest, and in such case the complaint must be dismissed
not upon the merits, but on the ground that is has been improperly instituted. (Esperanza
and Bullo vs. Catindig, 27 Phil. 397 [1914].)
(2) When the principal is bound by the act of the agent, the action must be brought against
the principal, not against the agent. The bringing of the action against the agent cannot
have any legal effect except that of notifying the agent of the claim. Beyond such notifi

cation, the fi ling of the action can serve no other purpose. There is no law giving any effect
to such action upon the principal. (Ang vs. Fulton Fire Insurance Co., 2 SCRA 945 [1961].)
iii) Sub-Agent Art. 1892 - the agents own agent; (See COMMENTARIES
a.

Lorca vs. Dineros, 103 Phil. 122 (1958);

Facts:
Pursuant to a writ of execution issued in Civil Case No. 1062 entitled "Rosario Suero
vs. Jose Morata" Jose S. Dineros as Deputy Sheriff and in the name of the Sheriff sold at
public auction to Jose Bermejo and Rosario Suero the property attached therein, disregarding
the third-party claim of Loreto Lorca (herein Plaintiff) who asserted ownership over said
property. This suit for damages is the result of said auction sale. Defendant, in his answer,
denied liability, pointing out, that he had merely acted for and on behalf of Provincial Sheriff,
Cipriano Cabaluna.
The appellant insists here that Dineros was responsible in view of sec. 334 of the Revised
Administrative Code and sec. 15, Rule 39, Rules of Court, which provides as follows:
SEC. 334 Right of Bonded Officer to require Bond from Deputy or assistant. A
sheriff or other accountable official may require any of his deputies or assistants, not
bonded in the fidelity fund, to give an adequate personal bond as security against
loss by reason of any wrong doing on the part of such deputy or assistant. The taking
of such security shall in no wise impair the independent civil liability of any of the
parties.
. . . and in case the sheriff or attaching officer is sued for damages as a result of the
attachment. . . .
Issue: WON Dineros as Deputy Sheriff is liable for damages
HELD: Sec 334 of the Revised Admin Code, which states that deputies may be required to
give adequate personal bond as security against loss, is applicable only when the deputy
acts in his own name or is guilty of active malfeasance or where he exceeds the limits of his
agency. In this case, the certificate of sale clearly shows that Dineros acted in the name of
the Ex-Officio Provincial Sheriff. The Sheriff is the one liable to third persons on the acts of
his deputy, in the same manner that the principal is responsible for the acts of his agent,
that is why he is required to post a bond for the benefit of whom it may concern under Sec
330 of the Revised Admin Code.
b. Virgie Serona vs. CA, 392 SCRA 35, November 18, 2002
Facts:
Leonida Quilatan delivered pieces of jewelry to petitioner Virgie Serona to be sold on
commission basis. By oral agreement of the parties, Serona shall remit payment or return
the pieces of jewelry if not sold to Quilatan, both within 30 days from receipt of the items.
Serona had earlier entrusted the jewelry to one Marichu Labrador for the latter to sell on
commission basis. Petitioner was not able to collect payment from Labrador, which caused
her to likewise fail to pay her obligation to Quilatan. Quilatan sent a demand letter to Serona
but she failed to pay the principal. Labrador says that she sold some of the jewelry to a 3rd
person who did not pay her. Serano is charged with estafa and is now appealing to have the
decision of the TC reversed.
ISSUE: Whether or not Serona is liable for the acts of her subagent Labrador
HELD:

Found Not Guilty on the Estafa charge but sentenced to pay the civil liability of the
value of the unreturned jewelry. Petitioner did not ipso facto commit the crime of estafa
through conversion or misappropriation by delivering the jewelry to a sub-agent for sale on
commission basis. We are unable to agree with the lower courts conclusion that this fact
alone is sufficient ground for holding that petitioner disposed of the jewelry "as if it were
hers, thereby committing conversion and a clear breach of trust." The law on agency in our
jurisdiction allows the appointment by an agent of a substitute or subagent in the absence of
an express agreement to the contrary between the agent and the principal.
In the case at bar, the appointment of Labrador as petitioners sub-agent was not expressly
prohibited by Quilatan, as the acknowledgment receipt, does not contain any such limitation.
Neither does it appear that petitioner was verbally forbidden by Quilatan from passing on
the jewelry to another person before the acknowledgment receipt was executed or at any
other time. Thus, it cannot be said that petitioners act of entrusting the jewelry to Labrador
is characterized by abuse of confidence because such an act was not proscribed and is, in
fact, legally sanctioned. In the case at bar, it was established that the inability of petitioner
as agent to comply with her duty to return either the pieces of jewelry or the proceeds of its
sale to her principal Quilatan was due, in turn, to the failure of Labrador to abide by her
agreement with petitioner.
Notably, Labrador testified that she obligated herself to sell the jewelry in behalf of
petitioner also on commission basis or to return the same if not sold. In other words, the
pieces of jewelry were given by petitioner to Labrador to achieve the very same end for
which they were delivered to her in the first place. Consequently, there is no conversion
since the pieces of jewelry were not devoted to a purpose or use different from that agreed
upon. Similarly, it cannot be said that petitioner misappropriated the jewelry or delivered
them to Labrador "without right."
Aside from the fact that no condition or limitation was imposed on the mode or
manner by which petitioner was to effect the sale, it is also consistent with usual practice for
the seller to necessarily part with the valuables in order to find a buyer and allow inspection
of the items for sale. The agents to whom personal property was entrusted for sale,
conclusively proves the inability to return the same is solely due to malfeasance of a
subagent to whom the first agent had actually entrusted the property in good faith, and for
the same purpose for which it was received; there being no prohibition to do so and the
chattel being delivered to the subagent before the owner demands its return or before such
return becomes due, we hold that the first agent cannot be held guilty of estafa by either
misappropriation or conversion.
The abuse of confidence that is characteristic of this offense is missing under the
circumstances. An agent who is not prohibited from appointing a sub-agent but does so
without express authority is responsible for the acts of the sub-agent. Considering that the
civil action for the recovery of civil liability arising from the offense is deemed instituted with
the criminal action, petitioner is liable to pay complainant Quilatan the value of the unpaid
pieces of jewelry.
D. Capacity of the Principal Santos vs. Buenconsejo, 14 SCRA 407 (1965) (Guys, full text
to. Maikli naman)
It appears that the aforementioned Lot No. 1917 covered by Original Certificate of
Title No. RO-3848 (25322) was originally owned in common by Anatolio Buenconsejo to the
extent of undivided portion and Lorenzo Bon and Santiago Bon to the extent of the other
(Exh. B); that Anatolio Buenconsejo's rights, interests and participation over the portion
abovementioned were on January 3, 1961 and by a Certificate of Sale executed by the
Provincial Sheriff of Albay, transferred and conveyed to Atty. Tecla San Andres Ziga, awardee
in the corresponding auction sale conducted by said Sheriff in connection with the execution
of the decision of the Juvenile Delinquency and Domestic Relations Court in Civil Case No.
25267, entitled "Yolanda Buenconsejo, et al. vs. Anatolio Buenconsejo"; that on December

26, 1961 and by a certificate of redemption issued by the Provincial Sheriff of Albay, the
rights, interest, claim and/or or participation which Atty. Tecla San Andres Ziga may have
acquired over the property in question by reason of the aforementioned auction sale award,
were transferred and conveyed to the herein petitioner in his capacity as Attorney-in-fact of
the children of Anatolio Buenconsejo, namely, Anastacio Buenconsejo, Elena Buenconsejo
and Azucena Buenconsejo (Exh. C).
It would appear, also, that petitioner Santos had redeemed the aforementioned share
of Anatolio Buenconsejo, upon the authority of a special power of attorney executed in his
favor by the children of Anatolio Buenconsejo; that relying upon this power of attorney and
redemption made by him, Santos now claims to have acquired the share of Anatolio
Buenconsejo in the aforementioned Lot No. 1917; that as the alleged present owner of said
share, Santos caused a subdivision plan of said Lot No. 1917 to be made, in which the
portion he claims as his share thereof has been marked as Lot No. 1917-A; and that he
wants said subdivision at No. 1917-A to be segregated from Lot No. 1917 and a certificate of
title issued in his name exclusively for said subdivision Lot No. 1917-A.
As correctly held by the lower court, petitioner's claim is clearly untenable, for: (1)
said special power of attorney authorized him to act on behalf of the children of Anatolio
Buenconsejo, and, hence, it could not have possibly vested in him any property right in his
own name; (2) the children of Anatolio Buenconsejo had no authority to execute said power
of attorney, because their father is still alive and, in fact, he and his wife opposed the
petition of Santos; (3) in consequence of said power of attorney (if valid) and redemption,
Santos could have acquired no more than the share pro indiviso of Anatolio Buenconsejo in
Lot No. 1917, so that petitioner cannot without the conformity of the other co-owners
(Lorenzo and Santiago Bon), or a judicial decree of partition issued pursuant to the
provisions of Rule 69 of the new Rules of Court (Rule 71 of the old Rules of Court) which have
not been followed By Santos adjudicate to himself in fee simple a determinate portion of
said Lot No. 1917, as his share therein, to the exclusion of the other co-owners.
Inasmuch as the appeal is patently devoid of merit, the order appealed from is
hereby affirmed, with treble cost against petitioner-appellant Jose A. Santos y Diaz. It is so
ordered.
i) Arts. 1327; 1329 with capacity to contract;
Art. 1327. The following cannot give consent to a contract:
(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who do not know how to write. (1263a)
Art. 1329. The incapacity declared in Article 1327 is subject to the modifi cations
determined by law, and is understood to be without prejudice to special disqualifi cations
established in the laws. (1264)

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