Compiled Agency Digests Part2

AGENCY DIANE DESIERTO
CHAPTER 1: NATURE, FORM AND KINDS OF AGENCY A. NATURE OF AGENCY RELATIONSHIP (A1868) A.1 PRESUMED TO BE FOR COMPENSATION (A1875) A.2. SCOPE OF AGENT AUTHORITY (A1881-A1883) SPOUSES YU ENG CHO V PAN AMERICAN WORLD AIRWAYS, INC., 328 SCRA PUNO; March 27, 2000
NATURE: Petition for review FACTS: Yu Eng Cho bought plane tickets from defendant Claudia Tagunicar who represented herself to be an agent of defendant Tourist World Services, Inc. (TWSI). The destinations are Hongkong, Tokyo, San Francisco, U.S.A., for the amount of P25,000.00. The purpose of this trip is to go to Fairfield, New Jersey, U.S.A. to buy two (2) lines of infrared heating system processing textured plastic article. Only Manila to Hongkong, then to Tokyo reservation were confirmed. The Tokyo -San Francisco segment of the trip was on "RQ" or on request status". After calling up Canilao of TWSI a few days later Tagunicar told plaintiffs that their flight is now confirmed all the way. Thereafter, she attached the confirmation stickers on the plane tickets. Upon their arrival in Tokyo, they called up Pan-Am office for reconfirmation of their flight to San Francisco. Said office, however, informed them that their names are not in the manifest. They went to Taipei instead per advise of JAL officials. Upon reaching Taipei, there were no flights available for them, they were forced to return back to Manila instead of proceeding to the United States. They sued Pan-Am,TWSI/Canilao and Tagunicar for damages. The trial court held Pan-Am , TWSI and Tagunicar solidarily liable to the plaintiffs. The CA held Tagunicar solely responsible for damages since Tagunicar is an independent travel solicitor and is not a duly authorized agent or representative of either Pan Am or TWSI. It held that their business transactions are not sufficient to consider Pan Am as the principal, and Tagunicar and TWSI as its agent and sub-agent, respectively. It further held that Tagunicar was not authorized to confirm the bookings of, nor issue validation stickers to, herein petitioners and hence, Pan Am and TWSI cannot be held responsible for her actions. ISSUE: WON TWSI and Pan Am should be held liable as principals for the acts of Tagunicar HELD: NO
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Ratio: 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. Reasoning: 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. Petitioners rely on the affidavit of Tagunicar where she stated that she is an authorized agent of TWSI. This affidavit, however, has weak probative value in light of respondent Tagunicars testimony in court to the contrary. Affidavits, being taken ex parte, are almost always incomplete and often inaccurate. This purported admission of respondent Tagunicar cannot be used by petitioners to prove their agency relationship. The existence of the agency relationship cannot be established on its sole basis. The declarations of the agent alone are generally insufficient to establish the fact or extent of his authority. In addition, as between the negative allegation of respondents Canilao and Tagunicar that neither is an agent nor principal of the other, and the affirmative allegation of petitioners that an agency relationship exists, it is the latter who have the burden of evidence to prove their allegation, failing in which, their claim must necessarily fail. As further proofs of agency, petitioners call our attention to the Ticket Sales Report submitted by TWSI to Pan Am reflecting the commissions received by TWSI as an agent of Pan Am. These documents cannot justify the deduction that Tagunicar was paid a commission either by TWSI or Pan Am. On the contrary, Tagunicar testified that when she pays TWSI, she already deducts in advance her commission and merely gives the net amount to TWSI. From all sides of the legal prism, the transaction is simply a contract of sale wherein Tagunicar buys airline tickets from TWSI and then sells it at a premium to her clients.
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- Before the completion of the operation, it was noted by the nurse that they could not account for two pieces of gauze. A search was conducted by the same were not found. Dr. Ampil nevertheless closed the incision and completed the operation. - Natividad after her released from the hospital began to experience excruciating pain in her anal region. Dr. Ampil told her that the pain was just a natural consequence of the surgery. He advised her to consult an oncologist to examine the cancerous nodes which were not removed during the operation. - Natividad went to the US to seek further treatment and she was declared cancer free after four months of consultation and laboratory examination. She flew back to the Philippines. - The pain she was experiencing however did not go away. Two weeks after her return, her daughter found a piece of gauze protruding from her vagina. Dr. Ampil managed to extract by hand a piece of gauze and assured Natividad that the pain would soon vanish. Despite this assurance, the pain instead further intensified prompting Natividad to seek treatment at Polymedic where a doctor detected the presence of another piece of gauze in her vagina which badly infected her vagina vault causing her to excrete stool through her vagina. - Natividad filed a complaint for damages against Dr. Ampil, Professional Services, Inc. (owner of Medical City), and Dr. Fuentes alleging negligence for leaving the pieces of gauze inside her body and malpractice for concealing their acts of negligence. An administrative case against Dr. Ampil and Dr. Fuentes was also filed with the Professional Regulation Commission. - The Trial Court ruled in favor of Natividad (who had died earlier and was substituted in the action by her husband. On appeal, the CA dismissed the action against Dr. Fuentes but affirmed the rest of the rulings of the trial court. - Professional Services and Dr. Ampil filed an appeal with the Supreme Court . PSI claims that it should not be held liable as Dr. Ampi is not an employee but a mere consultant or independent contractor. ISSUE WON Professional Services is solidarily liable HELD YES. The Court in ruling in the affirmative cited its ruling in the Ramos vs CA case and reiterated that for purposes of apportioning responsibility in medical negligence cases, an employer-employee relationship in effect exists between hospitals and their attending and visiting physicians. Additionally, the court ruled that the basis in sustaining PSIs liability is anchored upon the principle of apparent authority or agency by estoppel and the doctrine of corporate negligence. - Apparent authority or what is sometimes referred to as the holding out theory, or doctrine of ostensible agency or agency by estoppel imposes liability, not as a result of the reality of a contractual relationship, but rather because of the actions of a principal or an employer in somehow misleading the public into believing that the relationship or authority exists. The concept is one of estoppel and is explained thus:
PROFESSIONAL SERVICES INC V AGANA 513 SCRA 478 SANDOVAL-GUTIERREZ, J; January 31, 2007
NATURE Petition for review on certiorari FACTS - Natividad Agana was rushed to the Medical City Hospital because of difficulty of bowel movement and bloody anal discharged. Dr. Ampil diagnosed her as suffering from cancer of the sigmoid ( the last curvature of the colon leading to the rectum). She was thus operated on after a week stay in the hospital. While performing the operation, Dr. Ampil discovered that the malignancy had spread to her ovary necessitated the bring in of another surgeon, Dr. Fuentes, who can perform a hysterectomy.
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The principal is bound by the acts of his agent with apparent authority which he knowingly permits the agent to assume, or which he holds the agent out to the public as possessing. The question in every case is the principal has by his voluntary act placed the agent in such a situation that a person of ordinary prudence, conversant with business usage and the nature of the particular business, is justified in presuming that such an agent has authority to perform the particular act in question. - In the case at bar, PSI publicly displays in the lobby of the hospital the names and specializations of the physicians associated or accredited by it. This is tantamount to PSI holding out to the public that the hospital, through its accredited physicians, offer quality health care services. Hence, the conclusion is that it is now estopped from passing all the blame to the physicians whose name it proudly paraded in the public directory leading the public to believe that it vouched for their skill and competence. - The concept of an agency by implication or estoppel is contained in Article 1869 of the Civil Code which reads: ART 1869- Agency may be expressed, 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. Disposition Petition denied. The decision of the CA is affirmed.
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- She also charged him with harassment and intimidation, and immorality for siring a child with another woman which Justo denied. - He said that (as regards the dishonesty and falsification charges) during the sugarboom in the 1970's, his wife executed in his favor a Special Power of Attorney to negotiate for an agricultural or crop loan authorizing him "to borrow money and apply for and secure any agricultural or crop loan for sugar cane from the Bais Rural Bank, Bais City and that NBI report which found that the questioned signatures (referring to the alleged forged signatures of Rosa) and the standard sample signatures JUSTO J. PARAS were written by one and the same person was doctored, and that his wife filed against him a string of cases for falsification of public documents because he intends to disinherit his children and bequeath his inchoate share in the conjugal properties to his own mother. - Justo contended that his wife, in cahoots with her family, is out to destroy and strip him of his share in their multi-million conjugal assets. - Both parties come from wealthy families and they have vast sugar lands and other businesses. - Their marriage fell apart when due to "marital strain that has developed through the years," Justo left his wife and children to live with his mother and sister in Dumaguete City and thence started his law practice. - Rosa, in the meantime, filed a case for the dissolution of their marriage, which case is still pending in court at the time of this case. - The Commission on Bar Discipline (CBD) of the IBP investigated the complaint and found Justo guilty as charged and recommended his suspension for 3 mos (for dishonesty and forgery charges) and indefinite suspension from the practice of law (for the other charges). - The CBD held that the dismissal of the criminal cases against respondent for falsification and use of falsified documents and for concubinage will not bar the filing of an administrative case for disbarment against him. - The CBD gave credence to the NBI Report that "the questioned signatures (referring to the signatures appearing in the loan agreements, contracts of mortgage, etc.) and the standard sample signatures of respondent were written by one and the same person." This affirms the allegation of complainant Rosa Yap Paras that her husband forged her signatures in those instruments. ISSUE: WON Atty Paras is guilty of falsifying his wifes signature HELD: YES ON THE CHARGE OF FALSIFICATION OF ROSA'S SIGNATURE -The handwriting examination conducted by the NBI on the signatures of Rosa and Justo Paras vis--vis the questioned signature "Rosa Y. Paras" appearing in the questioned bank loan documents, contracts of mortgage and other related instrument, yielded the following results: 1. The questioned and the standard sample signatures JUSTO J. PARAS were written by one and the same person. 2. The questioned and the standard sample signatures ROSA YAP PARAS were not written by one and the same person. - The NBI did not make a categorical statement that respondent forged the signatures of complainant. However, an analysis of the above findings lead to no other conclusion than that the questioned or falsified signatures of complainant Rosa Y. Paras
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were authored by respondent as said falsified signatures were the same as the sample signatures of respondent. - To explain this anomaly, he presented a Special Power of Attorney (SPA) executed in his favor by complainant to negotiate for an agricultural or crop loan from the Bais Rural Bank of Bais City. Instead of exculpating respondent, the presence of the SPA places him in hot water. For if he was so authorized to obtain loans from the banks, then why did he have to falsify his wife's signatures in the bank loan documents? THE SIGNIFICANCE OF AN SPA -The purpose of an SPA is to especially authorize the attorney-in-fact to sign for and on behalf of the principal using his own name. Disposition: Atty Paras is SUSPENDED from the practice of law for 6 MONTHS on the charge of falsifying his wife's signature in bank documents and other related loan instruments; and for 1 YEAR from the practice of law on the charges of immorality and abandonment of his own family, the penalties to be served simultaneously.
C.2. RATIONALE FOR REQUIRING AN S.P.A. IN SPECIFIC CASES C.3. S.P.A. FOR SALE VIS--VIS MORTGAGE (A1879) C.4. S.P.A. FOR COMPROMISE DOES NOT IMPLY SUBMISSION TO ARBITRATION (A1880) C.5. GENERAL AGENCY VIS--VIS SPECIAL AGENCY (A1876) C.6. GENERALLY TERMED AGENCY ONLY REFERS TO ACTS OF ADMINISTRATION (A1877) FABIA V DAVID G.R. No. L-123 OZAETA; December 12, 1945
NATURE Petition to annul the order of dismissal and to require the Court of First Instance to try and decide the case on the merits FACTS - Josefa Fabie is the usufructuary of the income of certain houses located at 372-376 Santo Cristo, Binondo, and 950-956 Ongpin, Santa Cruz, Manila, under the ninth clause of the will of the deceased Rosario Fabie y Grey. The owner of the Santo Cristo property is the respondent Juan Grey.
A.3. FORM (A1869) B. CREATION OF AGENCY RELATIONSHIP (A18701873) C. CATEGORIES AND CONSEQUENCES (A1874, A1876-1180) C.1. SIGNIFICANCE OF AN S.P.A. ROSA YAP PARAS V. ATTY. JUSTO DE JESUS PARAS 343 SCRA 414 MELO; October 18, 2000
NATURE: Administrative Case (Disbarment) FACTS: - Rosa Yap Paras charged her husband with dishonesty and falsification of public documents , (according to Rosa, Justo obtained loans from certain banks in the name of complainant by counterfeiting her signature, falsely making it appear that she was the applicant for said loans. Thereafter, he carted away and misappropriated the proceeds of the loans and to guarantee the above loans, Justo mortgaged some personal properties belonging to the conjugal partnership without the consent of Rosa)
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- In an agreement dated March 31, 1942, between the usufructuary Josefa Fabie and the owner Juan Grey whereby the latter as agent collected the rents of the property in question and delivered the same to the usufructuary after deducting the expenses for taxes, repairs, insurance premiums, and the expenses of collection. But in the month of October 1943 the usufructuary refused to continue with the said agreement of March 31, 1942, and thereafter a case involving the administration of the houses mentioned in clause 9 of the arose between the parties, which by stipulation approved by the court was settled among them in the following manner: Beginning with the month of September 1944 the usufructuary shall collect all the rents of the property in question; shall, at her own cost and expense, pay all the real estate taxes, special assessments, and nsurance premiums, including the documentary stamps, and make all the necessary repairs on the property; and in case of default on her part the owner shall have the right to any or all of those things, in which event he shall be entitled to collect all subsequent rents until the amounts paid by him are fully satisfied, after which the usufructuary shall again collect the rents. - Ngo Boo Soo had been a tenant of the premises in question. He was renting it from its owner and administrator Juan Grey which will expire on December 31, 1945. Beginning the month of April 1945, without plaintiff's consent and contrary to their agreement, Ngo Boo Soo subleased the property to another Chinese. The defendant was asked to leave the said premises, but he refused. - Defendant claims that plaintiff is merely the usufructuary of the income therefrom, and by agreement between her and said owner, which is embodied in a final judgment of the Court of First Instance of Manila on the case involving the administration of the properties, her only right as usufructuary of the income is to receive the whole of such income. She has no right or authority to eject tenants, such right being in the owner and administrator of the house, the aforesaid Juan Grey ISSUE
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the latter. He could have no legal justification or valid excuse to claim the right to choose the tenant and fix the amount of the rent when under the will, the stipulation of the parties, and the final judgment of the court it is not he but the usufructuary who is entitled to said rents. Disposition The orders of dismissal of the
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merchandise which the said firm possessed in the pueblo of Laoang and Catubig. GH did not comply as he only insured those in Laoang. The stocks in Catubig were later destroyed. GH, complying with orders from OH, insured against all war risks, in a certain insurance company of London, stock of hemp in Catarman. When the stock of hemp was stolen, OH could not recover because GH allegedly made out the insurance contract defectively. It therefore was forced to incur legal expenses in trying to claim from the court in London. GH bound itself to acquire for and transmit to defendant rice and other articles, including coin, which OH might request at Laoang, Samar, and so plaintiff did; but since 1904, the fifth year of their mercantile relations, plaintiff failed repeatedly to comply with its obligation. (thus there were unrealized profits, losses, damages) - OH wants proper accounting of their transactions, and that it be supported by vouchers and other evidence. - To prove the propriety and justice of its complaint, GH, alleged that, in accordance with the agreement made, it sent weekly and semiannually a general account that comprised a statement of the business transacted during the preceding six months, to OH who examined and approved such reports. This procedure went on for 9 years. ISSUE/S 1. WON Gutierrez Hermanos can be compelled to make a general rendition of accounts comprehensive of the business transacted between both firms 2. WON Gutierrez Hermanos is liable for not insuring the stocks of hemp and merchandise in Catubig 3. WON Gutierrez Hermanos is liable for the legal expenses incurred from claiming against the insurance company in London 4. WON Gutierrez Hermanos is liable for not complying with its obligation of transimitting rice and other articles HELD 1. (on some items, they were required to render a new accounting) Ratio When accounts of the agent to the principal are once approved by the principal, the latter has no right to ask afterwards for a revision of the same or for a detailed account of the business, unless he can show that there was fraud, deceit, error or mistake in the approval of the accounts Reasoning Sale of hemp and copra Defendant was not able to show proof of any fraud committed by GH. Sale of sacks of rice for having collected an additional 2% on top of the profits, the court reserves its opinion on whether there was fraud or error, until such proper accounting is made. Sale of petroleum - GH committed fraud in the purchase and shipments of the said article, not only because they kept the discount allowed by the selling firm by which their principals, for whom they purchased the petroleum should have profited, and not the commission agents who acted for them simply in the capacity of agents; but also because in one of the invoices they charged, besides, a greater price than they paid to the vendors, and then collected a commission of 2 per cent on all the invoices. It is the obligation of commission agents to make the purchases for their principals on the most advantageous terms. For this they are paid the rate of commission stipulated. They have no right to keep the discount allowed by the vendors
respondent Court are set aside.
of
First
Instance
CHAPTER 2: OBLIGATIONS OF THE AGENT A. IF AGENCY IS DECLINED (A1885) B. IF AGENCY IS ACCEPTED B.1. AGENTS GENERAL OBLIGATION (A1884) GUTIERREZ HERMANOS V ORIA HERMANOS 30 PHIL 491 TORRES; March 30, 1915
NATURE Appeal from the judgment of the CFI of Manila FACTS - Gutierrez Hermanos (GH) filed written complaint CFI against the commercial concern of Oria Hermanos & Co. (OH), alleging therein as a cause of action that between plaintiff and defendant there have existed commercial relations which gave rise to the opening of a mutual current account, at 8 percent interest, under the name of Oria Hermanos & Co., on the books of the plaintiff Gutierrez Hermanos. It showed a balance in GHs favor of P144,473.78. GH now wants to claim this from OH since the account was to be closed. - OH refused to pay, and avers that: GH sent to OH, by virtue of a commission contract, forwarded to GH hemp, copra and loose hemp for sale on commission. OH alleges that it later learned that GH bought it for himself, thus it collected by reason of such sale, commission and brokerage; acts which redound to the fraud, injury, and prejudice of OH GH sent to OH sacks of rice said to have been purchased from 3 rd persons. As such GH was paid commission fees. OH now alleges that it later learned that the rice was owned by GH himself, thus it was able to collect from OH excessive prices, advance payments, commission and interest. GH sent to OH salt, petroleum, tobacco, groceries and beverages. OH alleges that it later learned that GH had set larger prices on the said goods than it had actually paid for them and had unduly charged such prices OHs predecessor had ordered its consignee in Manila, Gutierrez Hermanos, to insure against all war risks the stocks of hemp and
WON petitioner has the right to manage or administer the property

HELD YES - Judges of the Court First Instance erred in holding otherwise. - The said usufructuary has the right to administer the property in question. All the acts of administration to collect the rents for herself, and to conserve the property by making all necessary repairs and paying all the taxes, special assessments, and insurance premiums thereon were by said judgment vested in the usufructuary. The pretension of the respondent Juan Grey that he is the administrator of the property with the right to choose the tenants and to dictate the conditions of the lease is contrary to both the letter and the spirit of the said clause of the will, the stipulation of the parties, and the judgment of the court. He cannot manage or administer the property after all the acts of management or administration have been vested by the court, with his consent, in the usufructuary. He admitted that before said judgment he had been collecting the rents as agent of the usufructuary under an agreement with
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on the price of the articles they purchase for their principals, even less to increase, to their benefit, the price charged them. 2. NO Reasoning If GH had taken steps to insure the stocks of merchandise in Catubig and had declared to any officer of the insuring company the truth about the terrible slaughter which had just taken place, it would have been impossible to obtain a war insurance on the said merchandise; and if, instead of declaring the truth, plaintiff had omitted it, the insurance if obtained could not have been collected. The insurance company would have learned of the circumstances which had not been stated and had been omitted in the application and would have refused to pay the insurance. In any case, there would have been a loss. 3. No. Ratio The loss of the suit cannot be ascribed to either the fault or the negligence of Gutierrez Hermanos, inasmuch as this plaintiff merely complied with the orders of the defendant Reasoning The firm of Gutierrez Hermanos, in executing orders and charges of Oria Hermanos and Co., became, by virtue of an implied agency, an agent of the latter and, in the fulfillment of the orders of the principal, adjusted its action to the instructions of Oria Hermanos & Co. The record does not show that in so doing it proceeded with negligence or with deceit. Therefore there is no reason nor legal ground whereby plaintiff should be compelled to pay the sum demanded. - It merely complied with the orders of Oria Hermanos & Co. to insure the stock of hemp in Cataraman, with an insurance company established in London, in view of the fact that there was no insurance company in this city which would issue policies against war risks. The reason it was not able to claim is that it concealed certain facts which, had they been known to the underwriter, would have deterred the insurance company from issuing a policy for the hemp 4. NO Ratio In mutual obligations none of the persons bound shall incur default if the other does not fulfill or does not submit to properly fulfill what is incumbent upon him. From the time one of the persons obligated fulfills his obligation the default begins for the other party Reasoning Gutierrez did not comply with his obligation since OHs current account amounted, in 1905, to P321,000 and would not send a quantity of hemp and copra sufficient in value to cover the value of the remittance of money and of the shipments of the effects requested. There was also an obligation for OH to send to GH hemp, copra and other effects to cover at least part of the debt. Disposition Decision affirmed NATURE Petition for review on certiorari
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KAPUNAN; September 9, 1999
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contract are not transmissible by their nature, or by stipulation, or by provision of law. The fact that an agent who makes a contract for his principal will gain or suffer loss by the performance or nonperformance of the contract by the principal or by the other party thereto does not entitle him to maintain an action on his own behalf against the other party for its breach Reasoning Petitioners are not parties to the contract of sale between their principals and NHA. They are mere agents of the owners of the land subject of the sale. As agents, they only render some service or do something in representation or on behalf of their principals. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to said contract. - There has been no allegation, much less proof, that petitioners are the heirs of their principals. Petitioners have not shown that they are assignees of their principals to the subject contracts. While they alleged that they made advances and that they suffered loss of commissions, they have not established any agreement granting them the right to receive payment and out of the proceeds to reimburse [themselves] for advances and commissions before turning the balance over to the principal[s]. - Finally, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under the second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds of Absolute Sale clearly and deliberately conferring a favor to any third person. - That petitioners did not obtain their commissions or recoup their advances because of the non-performance of the contract did not entitle them to file the action below against respondent NHA. - As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the contracts of sale, they do not, under substantive law, possess the right they seek to enforce. Therefore, they are not the real parties-in-interest in this case. - The real party-in-interest is the party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. Interest, within the meaning of the rule, means material interest, an interest in the issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. Cases construing the real party-in-interest provision can be more easily understood if it is borne in mind that the true meaning of real party-in-interest may be summarized as follows: An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced. - Petitioners not being the real parties-in-interest, any decision rendered herein would be pointless since the same would not bind the real parties-ininterest. Disposition Petition denied
FACTS - Petitioners William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by the owners thereof. By virtue of such authority, petitioners offered to sell the lands to respondent National Housing Authority (NHA) to be utilized and developed as a housing project. - The NHA Board passed a Resolution approving the acquisition of said lands. Of the eight parcels of land, however, only five were paid for by the NHA because of the report from DENR that the remaining area is located at an active landslide area and therefore, not suitable for development into a housing project. Therefore, the NHA cancelled the sale over the three parcels of land. The NHA, through Resolution subsecguently offered the amount of P1.225 million to the landowners as daos perjuicios. - Petitioners filed before the Regional Trial Court a Complaint for Damages against NHA and its General Manager Robert Balao. The RTC rendered a decision declaring the cancellation of the contract to be justified. The trial court nevertheless awarded damages - Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a new one dismissing the complaint. It held that since there was sufficient justifiable basis in cancelling the sale, it saw no reason for the award of damages. The Court of Appeals also noted that petitioners were mere attorneys-in-fact and, therefore, not the real parties-ininterest in the action before the trial court. - The CA reasoned that UY and Roxas, as attorneys-in-fact or apoderados, cannot by themselves lawfully commence this action, more so, when the supposed special power of attorney, in their favor, was never presented as an evidence in this case. Besides, even if herein plaintiffs Uy and Roxas were authorized by the lot owners to commence this action, the same must still be filed in the name of the principal, As such indispensable party, their joinder in the action is mandatory and the complaint may be dismissed if not so impleaded - Petitioners argue that the damages prayed for were intended not for the benefit of their principals but to indemnify petitioners for the losses they themselves allegedly incurred as a result of such termination. These damages consist mainly of unearned income and advances. ISSUE WON petitioner agents can file this complaint for damages not in behalf of their principals but in their own name as agents, and therefore CA erred in dismissing the complaint HELD NO Ratio Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights and obligations arising from the
B.4.B. ADVANCE FUNDS WHEN STIPULATED EXCEPT WHEN PRINCIPAL INSOLVENT (A1886) UY V CA (National Housing Authority and Balao) 314 SCRA 69
B.4.C. BORROWING AND LENDING MONEY (A1890) DBP V CA (Estate of DANS)
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GR 109937 QUIASON; MARCH 21, 1994
NATURE Review on certiorari FACTS - Juan Dans (Dans) and his wife Candida applied for loan w/ the Devt Bank of the Phil (DBP). As the principal mortgagor, Dans, then 76 yrs old, was advised by DBP to obtain a mortgage redemption insurance (MRI) w/ the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool). - A P300,000.00 loan was approved by DBP and released it on 8/11/87. From the proceeds of the loan, DBP deducted the amount of P1,476.00 as payment for the MRI premium. - On 8/20/87, the MRI premium of Dans was credited by DBP to the savings account of the DBP MRI Pool. DBP deducted 10% service fee for this. - On 9/3/87, Dans died of cardiac arrest. The DBP relayed info to the DBP MRI Pool. The DBP MRI Pool told DBP that Dans was not eligible for MRI coverage, being over the acceptance age limit of 60 years at the time of application. - The DBP offered to refund the premium of P1,476.00. Candida Dans refused to accept, demanding payment of the face value of the MRI or an amount equivalent to the loan. She also refused to accept an ex gratia settlement of P30,000.00, w/c DBP later offered. - Estate of Dans, through Candida Dans, filed a complaint w/ RTC against DBP and MRI Pool. Estate: Dans became insured by the DBP MRI Pool when DBP, with full knowledge of Dans' age at the time of application, required him to apply for MRI, and later collected the insurance premium. Estate prayed: (1) that the sum of P139,500.00 be reimbursed; (2) that the mortgage debt of the deceased be declared fully paid; and (3) award for damages. - TC: decision against DBP. But absolved DBP MRI Pool from liability. Found no privity of contract between Pool and Dans. Declared DBP in estoppel for having led Dans into applying for MRI and actually collecting the premium and the service fee, despite knowledge of his age ineligibility. DBP to consider the mortgage loan of P300,000.00 including all interest accumulated to have been settled, satisfied or set-off by virtue of the insurance coverage - The DBP appealed to the CA. CA affirmed in toto. ISSUES 1. WON DBP MRI Pool is liable 2. WON DBP is liable HELD 1.NO -There was no perfected contract of insurance; the DBP MRI Pool cannot be held liable on a contract that does not exist. -The power to approve MRI applications is lodged with the DBP MRI Pool. The Pool, however, did not approve the application of Dans. There is also no showing that it accepted the sum of P1,476.00, which DBP credited to its account with full knowledge that it was payment for Dan's premium.
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2. YES Article 1987, CC: "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." If the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on the agent and he (third person) has been deceived by the non-disclosure thereof by the agent, then the latter is liable for damages to him. - In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second as an insurance agent. The DBP is not authorized to accept applications for MRI when its clients are more than 60 years of age. Knowing all the while that Dans was ineligible for MRI coverage because of his advanced age, DBP exceeded the scope of its authority when it accepted Dan's application for MRI by collecting the insurance premium, and deducting its agent's commission and service fee. - The liability of an agent who exceeds the scope of his authority depends upon whether the third person is aware of the limits of the agent's powers. There is no showing that Dans knew of the limitation on DBP's authority to solicit applications for MRI. Disposition CA decision affirmed but modified (SC deleted decision that mortgage fee as fully paid, and awarded moral damages, pls see orig for reasoning).
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ISSUE WON the defendant sureties on the bond of A.S. Canon are liable for certain advances made to him while acting as agent for the West Coast Life Insurance Company, and for certain expenditures incurred by the company or its general manager in connection with the agency, under the terms of a fidelity bond executed by them upon his appointment as an agent of the company. HELD NO - under the terms of the bond the sureties cannot be held liable for loans of money advanced to the agent under a general agreement that such loans were for his personal use, and to be repaid by him out of his earnings; nor for expenses lawfully incurred in behalf of the agency and actually paid by him or by any other person for him. Under the covenant of the bond the sureties did not undertake to secure the payment of any debt which the agent might contract, or any expense which he might incur in the course of his employment. They merely guaranteed that he would faithfully account for and pay to the company moneys, etc., "payable to or the property of the company," that might come into his possession or control, "whether by way of advances or in any way whatsoever." Money advanced the agent for his personal use by way of an "advance loan" ceased to be the property of the company when the advance was made, the liability of the borrower not being to return the money actually received, but to repay an equal amount in accordance with the stipulation at the time when the advances were made. - the company or its manager might have stipulated that the moneys advanced to the agent should be used only for the necessary expenses of the agent in the course of his employment and that its expenditure should be accounted for by him, with the understanding that any unexpended balance would be returned to the company, all expenditures to be charged against his future earnings. Under such a conditional advance of funds the agent would doubtless be required to account to the company for all expenditures, and under the terms of the bonds the sureties would, perhaps, be liable for his failure so to do, and might be required to refund any part of such advances not satisfactorily accounted for. But even in that event they would not be liable for moneys so advanced and actually expended and accounted for. The covenant of the bond manifestly contemplates merely the failure to account for, or the misappropriation of moneys, securities, etc., payable to, or the property of the company; and any money expended and accounted for under the conditions indicated would cease to be payable to, or the property of the company, the effect of the lawful expenditure of such money being to convert the conditional advance into an absolute one. - It may be that the reference in the covenant to moneys coming into the possession of the agent "by way of advances" may have been made in anticipation of the execution of such contract with reference to advances to be made the agent, but the record seems to disclose that the advances made to the agent were in truth "advance loans," with the sole condition that the company was given the right to deduct the amount of such loans from any future commissions to which he might be entitled. - As to the cash expended by the company or its general manager on behalf of the agency, it is very clear that it does not represent money payable to, or the property of the company, which came into the possession or control of its
B.4.D. ACCOUNTING AND DELIVERY TO PRINCIPAL (A1891) NORTHCOTT v CANON G.R. No 10001 CARSON; Sept 3, 1915
FACTS: - Northcott and A.S Canon executed a fidelity bond, the pertinent provisions of which are as follows: "Whereas the said A.S. Canon, who has been or is about to be appointed an agent of the company, covenants with the company that he will faithfully account for and pay to the company all moneys, securities, and things of value of every description payable to or the property of the company, that may come into his possession or control, whether by way of advances or in any manner whatsoever, and will faithfully discharge his duties as agent and conform to the company's by-laws, rules and regulations, and such instructions as he may from time to time receive relating to his duties as agent." - The advances in question on this appeal are certain sums of money advanced to Canon against future unearned commissions. The expenditures for which appellant seeks to hold the bondsmen liable are for the most part medical fees paid out by the company to their medical examiners, the amount of which, it would appear, the company claimed the right to deduct from commissions earned by the agent. There is no question as to the liability of the sureties for premiums actually collected by the agent which he may have failed to pay over to the company.
25

agent. Doubtless the agent is liable to reimburse of such expenditures, but there is nothing in the covenant of the bond which would render the sureties liable therefor. The judgment entered into the court below should be affirmed, with the costs of this instance against the appellant. So ordered. Disposition Affirmed
A2010
- The Mirasols then filed a suit for accounting, specific performance, and damages with the RTC of Bacolod against private respondent PNB for its refusal to render an accounting of the proceeds of the sale of their export sugar, later modifying their complaint to implead PHILEX. RTC decided in favor of petitioners, declared PD 579 unconstitutional and among others, directed the defendants PNB and PHILEX to pay, jointly and severally, plaintiffs the sum of P50K in moral damages and the amount of P50K as attorneys fees, plus costs of litigation. - The RTC, in a Resolution dated May 14, 1992, modified the decision and added: This decision should however, be interpreted without prejudice to whatever benefits that may have accrued in favor of the plaintiffs with the passage and approval of RA 7202 or Sugar Restitution Law, authorizing the restitution of losses suffered by the plaintiffs from Crop year 1974-1975 to Crop year 1984-1985 occasioned by the actuations of government-owned and controlled agencies. - The Mirasols then filed an appeal with the respondent court (CA), which reversed the decision of the lower court, deleting the P50K award for moral damages as well as the P50K as attorneys fees. A subsequent MFR was denied, hence, this instant petition. ***In their petition, the petitioners raised such issues as the constitutionality of PD 579, the jurisdiction of the RTC to declare a statute unconstitutional without notice to the SolGen, the issue of WON CA committed error in not applying the doctrine of piercing the corporate veil between PNB and PHILEX, and WON the CA erred in upholding the validity of the foreclosure on petitioners property and in upholding the validity of the dacion en pago. (Please refer to original as to the resolution of these issues). ISSUE Whether the CA committed manifest error in not awarding damages to petitioners on grounds relied upon the allowance of the petition HELD NO. Reasoning The trial court awarded petitioners P50K in moral damages and P50K. Petitioners theorize that it was error for the CA to have deleted these awards, considering that the appellate court found that PNB breached its duty as an agent to render an accounting to petitioners. An agents failure to render an accounting to his principal is contrary to Article 1891 of the Civil Code. The erring agent is liable for damages under Article 1170 of the Civil Code. Article 1170, however, must be construed in relation to Article 2217. Moral damages are explicitly authorized in breaches of contract where the defendant acted fraudulently or in bad faith. Good faith, however, is always presumed and any person who seeks to be awarded damages due to the acts of another has the burden of proving that the latter acted in bad faith, with malice, or with ill motive. In the instant case, petitioners have failed to show malice or bad faith on the part of PNB in failing to render an accounting. Absent such showing, moral damages cannot be awarded. Nor can we restore the award of attorneys fees and costs of suit in favor of petitioners. Under Article 2208 CC, attorneys fees are allowed in the absence of stipulation only if the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just, and demandable
PROF.
claim. As earlier stated, petitioners have not proven bad faith on the part of PNB and PHILEX. Disposition Petition DENIED. CA decision AFFIRMED.
MIRASOL v CA (PNB) GR NO. 128448 QUISUMBING; FEB.1, 2001

NATURE Review on certiorari FACTS - The Mirasols are sugarland owners and planters who produced several piculs of sugar for export. Private respondent PNB (Phil. Natl. Bank) financed the Mirasols sugar production venture under a crop loan financing scheme for the crop years 1973-1974, 1974-1975, 1975-1976 and 1976-1977. Under said scheme, the Mirasols signed Credit Agreements, a Chattel Mortgage on Standing Crops, and a Real Estate Mortgage in favor of PNB. The Chattel Mortgage empowered PNB as the petitioners attorney-in-fact to negotiate and to sell the latters sugar in both domestic and export markets and to apply the proceeds to the payment of their obligations to it. - During this time, PD 579 was issued, which authorized private respondent PHILEX to purchase sugar allocated for export to the US and other foreign markets, the price and quantity of which was to be determined by the PNB, along with the Office of the Pres. The decree further authorized PNB to finance PHILEXs purchases and directed that whatever profit PHILEX might realize from sales of sugar abroad was to be remitted to a special fund of the national government - Petitioners asked PNB for an accounting of the proceeds of the sale of their export sugar. PNB ignored the request. Believing that the proceeds of their sugar sales to PNB, if properly accounted for, were more than enough to pay their obligations, petitioners continued to avail of other loans from PNB and made unfunded withdrawals from their current accounts with said bank. PNB then asked petitioners to settle their due and demandable accounts. Petitioners conveyed to PNB real properties by way of dacion en pago but still left a balance of P15,964,252.93. Despite demands, the Mirasols failed to settle said due and demandable accounts. PNB then proceeded to extrajudicially foreclose the mortgaged properties. After applying the proceeds of the auction sale of the mortgaged realties, PNB still had a deficiency claim of P12,551,252.93. - Petitioners continued to ask PNB to account for the proceeds of the sale of their export sugar for crop years 1973-1974 and 1974-1975, insisting that said proceeds, if properly liquidated, could offset their outstanding obligations with the bank. PNB remained adamant in its stance that under PD 579, there was nothing to account since under said law, all earnings from the export sales of sugar pertained to the Natl Govt. and were subject to the disposition of the President for public purposes.
FILADAMS PHARMA, INC VS CA (ANTONIO FERIA) G.R. No. 132422 CORONA, J.: March 30, 2004
NATURE Petition for review under Rule 45 of the Rules of Court FACTS - Petitioner Filadams Pharma, Inc. (Filadams) was a corporation engaged in the business of selling medicines to wholesalers. Private respondent Antonio Feria was its sales representative until his dismissal on March 9, 1994. In an audit conducted, Feria was found accountable for P41,733.01 representing unsold but unreturned stocks and samples, unremitted collections and unliquidated cash advances. Filadams alleged that these shortages and accountabilities were admitted by respondent through his wife and counsel in a conference held at its office but despite repeated demands, respondent failed to settle them to its damage and prejudice. - In his defense, Feria denied the charge. He averred that, although he was an agent of the corporation, he was not the trustee of its products. The cash advances were spent, as intended, for promoting the products of the company and it was only the unexpended amount that was supposed to be returned by way of liquidation. The cash rebates were properly given to the customers concerned although the same were given in kind, as requested by the customers. In a spot check conducted in his area, the stock overages in his possession were segregated and returned to the company but he was not given the returned goods slip (RGS). He also returned various items or medicines amounting to P19,615.49 but what was reflected in the inventory report was only P8,185.30. He maintained that he neither misappropriated nor converted the subject sums of money for his personal use or benefit. If ever, his obligation was purely civil in nature and the company in fact accepted his partial payment of P3,000 through his wife in a conference held at petitioners office. - In a reply-affidavit, the internal auditor of Filadams asserted that respondent occupied a position of trust and confidence. He was not given a new cash advance but merely a replenishment of the used revolving fund. The cash rebates were never received by the customer as confirmed by the customer himself. Respondent signed the physical inventory report so he could not claim that he made returns that were not recorded. Paying back the amount of P3,000 to the company was an acknowledgment of his stock shortages and proof of his breach of trust and confidence resulting in the company's damage and prejudice. - The Asst. City Prosecutor of QC dismissed the complaint-affidavit for lack of cause of action-the specifics of the misappropriation (when committed, where committed, how much per act of misappropriation or was the misappropriation a one-act deal) were all conclusions a general recitals of the fact of commission/omission followed by the personal conclusion of guilt by the complainant which are not sustained by admissible evidence. - Petitioner filed a motion for reconsideration but this was denied
26

- Petitioner appealed to the Secretary of Justice but the DOJ also dismissed the appeal - On the ground of grave abuse of discretion, Filadams filed with the CA a petition for certiorari under Rule 65 of the Rules of Court seeking to annul the above-quoted decision of the DOJ. The CA denied the petition on two grounds: (1) the proper remedy for the petitioner was a petition for review under Rule 45 and not a petition for certiorari inasmuch as certiorari was available only if there was no appeal or any plain, speedy and adequate remedy in the ordinary course of law, and (2) assuming that a petition for certiorari was proper, the DOJ decision was not marked by grave abuse of discretion. - This case was elevated to the CA by way of a petition on certiorari under Rule 65. CA dismissed the petition for certiorari on the ground that the proper remedy was petition for review under Rule 43. Petitioner submits that a prosecutor conducting a preliminary investigation performs a quasijudicial function. ISSUES 1. WON appeal and not certiorari is the proper remedy in assailing the 2 resolutions (was the Office of the Prosecutor of Quezon City a quasijudicial agency whose resolutions were appealable to the Court of Appeals under Rule 43). 2. WON there was grave abuse of discretion in disregarding the guidelines set by the SC in determining the existence of a probable cause to warrant the filing of an information in court. HELD 1. NO. Ratio Preliminary investigation is very different from other quasi-judicial proceedings. A quasi-judicial body has been defined as "an organ of government other than a court and other than a legislature which affects the rights of private parties through either adjudication or rule-making." - the prosecutor in a preliminary investigation does not determine the guilt or innocence of the accused. He does not exercise adjudication nor rulemaking functions. Preliminary investigation is merely inquisitorial, and is often the only means of discovering the persons who may be reasonably charged with a crime and to enable the fiscal to prepare his complaint or information. It is not a trial of the case on the merits and has no purpose except that of determining whether a crime has been committed and whether there is probable cause to believe that the accused is guilty thereof. While the fiscal makes that determination, he cannot be said to be acting as a quasi-court, for it is the courts, ultimately, that pass judgment on the accused, not the fiscal. Hence, the Office of the Prosecutor is not a quasi-judicial body; necessarily, its decisions approving the filing of a criminal complaint are not appealable to the Court of Appeals under Rule 43. - Since the Office of the Regional State Prosecutor has the power to resolve appeals with finality only where the penalty prescribed for the offense does not exceed prision correccional, regardless of the imposable fine, the only remedy of petitioner, in the absence of grave abuse of discretion, is to present her defense in the trial of the case. - In this case, the petitioner appealed to the Secretary of Justice but his appeal was dismissed. His motion for reconsideration was also dismissed.
A2010
Since there was no more appeal or other remedy available in the ordinary course of law, the petitioner correctly filed a petition for certiorari with the CA on the ground of grave abuse of discretion. 2. YES Ratio To determine whether there was probable cause warranting the filing of the information for estafa through misappropriation or with abuse of confidence, the presence of the following elements assumes critical importance: 1. that money, goods, or other personal property is received by the offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return, the same; 2. that there is a misappropriation or conversion of such money or property by the offender or denial on his part of such receipt; 3. that such misappropriation or conversion or denial is to the prejudice of another; and, 4. that there is a demand made by the offended party on the offender. - Invoking Ilagan vs. Court of Appeals, petitioner contends that it is the mere failure to turn over or to deliver to the principal the amounts collected, despite the duty to do so, that constitutes the operative fact in the crime of estafa through unfaithfulness or abuse of confidence. In short, the mere failure of respondent Feria to turn over the stock shortages, money collections, cash advances and unused cash rebates, despite demand and the duty to do so, constituted prima facie evidence of misappropriation. - The first, third and fourth elements were duly established by the complaintaffidavits and were not disputed by the parties. - What was disputed was whether the element of misappropriation, the most important element of the crime charged, was shown by the affidavits to engender a well-founded belief that a crime was committed and the respondent was probably guilty thereof. The essence of estafa under Article 315 (1)(b) of the RPC is the appropriation or conversion of money or property received, to the prejudice of the owner thereof. It takes place when a person actually appropriates the property of another for his own benefit, use and enjoyment. The failure to account, upon demand, for funds or property held in trust is circumstantial evidence of misappropriation. The demand for the return of the thing delivered in trust and the failure of the accused to account for it are circumstantial evidence of misappropriation. However, this presumption is rebuttable. If the accused is able to satisfactorily explain his failure to produce the thing delivered in trust, he may not be held liable for estafa. - in this case, the unrecorded returns claimed by respondent were belied by the physical inventory report prepared and signed by both the warehouseman and respondent himself. Respondent admitted that he was given checks for cash rebates to particular customers. Since the rebates given to customers were in the form of goods, as admitted by the respondent himself, why did he therefore not return the checks given to him? With respect to the unliquidated cash advances, petitioner clarified that it was incorrect for respondent to allege that he had already liquidated his cash advances when he was given another P1,500 after his first cash advance of P2,500. The truth was that he was given another P1,500 not because he had already liquidated his first cash advance of P2,500 but because it was the company's practice to replenish the revolving fund to its original amount. Therefore, the release of a new cash advance was not proof of liquidation of
PROF.
his previous cash advances. The inventory clearly showed in fact that he still had not liquidated his cash advances. - The rule that "the failure to account, upon demand, for funds or property held in trust is circumstantial evidence of misappropriation" applies without doubt in the present case. Since a preliminary investigation is merely a determination of "whether there is a sufficient ground to engender a wellfounded belief that a crime has been committed and the respondent is probably guilty thereof, and should be held for trial," we find the documented allegations in the complaint-affidavit and reply-affidavit of Filadams sufficient to generate such well-founded belief. Disposition WHEREFORE, the petition is hereby GRANTED.
B.4.E. RESPONSIBILITY FOR FRAUD AND NEGLIGENCE (A1909) METROPOLITAN BANK AND TRUST COMPANY VS CA GR No. 88866 CRUZ; February 18,1991
NATURE Petition for review FACTS - A certain Eduardo Gomez opened an account with Golden Savings and deposited over a period of two months 38 treasury warrants with a total value of P1,755,228.37. They were all drawn by the Philippine Fish Marketing Authority and purportedly signed by its General Manager and countersigned by its Auditor. Six of these were directly payable to Gomez while the others appeared to have been indorsed by their respective payees, followed by Gomez as second indorser. On various dates between June 25 and July 16, 1979, all these warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account No. 2498 in the Metrobank branch in Calapan, Mindoro. They were then sent for clearing by the branch office to the principal office of Metrobank, which forwarded them to the Bureau of Treasury for special clearing. - More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times to ask whether the warrants had been cleared. She was told to wait. Accordingly, Gomez was meanwhile not allowed to withdraw from his account. Later, however, "exasperated" over Gloria's repeated inquiries and also as an accommodation for a "valued client," the petitioner says it finally decided to allow Golden Savings to withdraw from the proceeds of the warrants. - The first withdrawal was made on July 9, 1979, in the amount of P508,000.00, the second on July 13, 1979, in the amount of P310,000.00, and the third on July 16, 1979, in the amount of P150,000.00. The total withdrawal was P968.000.00. - In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account, eventually collecting the total amount of P1,167,500.00 from the proceeds of the apparently cleared warrants. The last withdrawal was made on July 16, 1979. On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had been dishonored by
27

the Bureau of Treasury on July 19, 1979, and demanded the refund by Golden Savings of the amount it had previously withdrawn, to make up the deficit in its account. The demand was rejected. Metrobank then sued Golden Savings in the Regional Trial Court of Mindoro. 5 After trial, judgment was rendered in favor of Golden Savings, which, however, filed a motion for reconsideration even as Metrobank filed its notice of appeal. On appeal to the respondent court, the decision was affirmed, prompting Metrobank to file this petition for review. ISSUE 1. WON Metrobank should bear the loss HELD YES. Ratio - From the above undisputed facts, it would appear to the Court that Metrobank was indeed negligent in giving Golden Savings the impression that the treasury warrants had been cleared and that, consequently, it was safe to allow Gomez to withdraw the proceeds thereof from his account with it. Without such assurance, Golden Savings would not have allowed the withdrawals; with such assurance, there was no reason not to allow the withdrawal. Indeed, Golden Savings might even have incurred liability for its refusal to return the money that to all appearances belonged to the depositor, who could therefore withdraw it any time and for any reason he saw fit. It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited them to its account with Metrobank. Golden Savings had no clearing facilities of its own. It relied on Metrobank to determine the validity of the warrants through its own services. The proceeds of the warrants were withheld from Gomez until Metrobank allowed Golden Savings itself to withdraw them from its own deposit. It was only when Metrobank gave the go-signal that Gomez was finally allowed by Golden Savings to withdraw them from his own account. - The argument of Metrobank that Golden Savings should have exercised more care in checking the personal circumstances of Gomez before accepting his deposit does not hold water. It was Gomez who was entrusting the warrants, not Golden Savings that was extending him a loan; and moreover, the treasury warrants were subject to clearing, pending which the depositor could not withdraw its proceeds. There was no question of Gomez's identity or of the genuineness of his signature as checked by Golden Savings. In fact, the treasury warrants were dishonored allegedly because of the forgery of the signatures of the drawers, not of Gomez as payee or indorser. Under the circumstances, it is clear that Golden Savings acted with due care and diligence and cannot be faulted for the withdrawals it allowed Gomez to make. Reasoning - By contrast, Metrobank exhibited extraordinary carelessness. The amount involved was not trifling ? more than one and a half million pesos (and this was 1979). There was no reason why it should not have waited until the treasury warrants had been cleared; it would not have lost a single centavo by waiting. Yet, despite the lack of such clearance ? and notwithstanding that it had not received a single centavo from the proceeds of the treasury warrants, as it now repeatedly stresses ? it
A2010
allowed Golden Savings to withdraw ? not once, not twice, but thrice ? from the uncleared treasury warrants in the total amount of P968,000. In stressing that it was acting only as a collecting agent for Golden Savings, Metrobank seems to be suggesting that as a mere agent it cannot be liable to the principal. This is not exactly true. On the contrary, Article 1909 of the Civil Code clearly provides that Art. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged 'with more or less rigor by the courts, according to whether the agency was or was not for a compensation. The negligence of Metrobank has been sufficiently established. To repeat for emphasis, it was the clearance given by it that assured Golden Savings it was already safe to allow Gomez to withdraw the proceeds of the treasury warrants he had deposited Metrobank misled Golden Savings. There may have been no express clearance, as Metrobank insists (although this is refuted by Golden Savings) but in any case that clearance could be implied from its allowing Golden Savings to withdraw from its account not only once or even twice but three times. The total withdrawal was in excess of its original balance before the treasury warrants were deposited, which only added to its belief that the treasury warrants had indeed been cleared. - Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were "genuine and in all respects what they purport to be," in accordance with Section 66 of the Negotiable Instruments Law. The simple reason is that this law is not applicable to the non-negotiable treasury warrants. The indorsement was made by Gloria Castillo not for the purpose of guaranteeing the genuineness of the warrants but merely to deposit them with Metrobank for clearing. It was in fact Metrobank that made the guarantee when it stamped on the back of the warrants: "All prior indorsement and/or lack of endorsements guaranteed, Metropolitan Bank & Trust Co., Calapan Branch. - The total value of the 32 treasury warrants dishonored was P1,754,089.00, from which Gomez was allowed to withdraw P1,167,500.00 before Golden Savings was notified of the dishonor. The amount he has withdrawn must be charged not to Golden Savings but to Metrobank, which must bear the consequences of its own negligence. But the balance of P586,589.00 should be debited to Golden Savings, as obviously Gomez can no longer be permitted to withdraw this amount from his deposit because of the dishonor of the warrants. Gomez has in fact disappeared. To also credit the balance to Golden Savings would unduly enrich it at the expense of Metrobank, let alone the fact that it has already been informed of the dishonor of the treasury warrants. Disposition Decision AFFIRMED.
PROF.
G.R. No. 156940 PANGANIBAN, December 14, 2004
NATURE Petition for Review FACTS - Vicente Henry Tan (hereafter TAN) is a businessman and a regular depositor-creditor of the Associated Bank (hereinafter referred to as the BANK). Sometime in September 1990, he deposited a postdated UCPB check with the said BANK in the amount of P101,000.00 issued to him by a certain Willy Cheng from Tarlac. The check was duly entered in his bank record thereby making his balance in the amount of P297,000.00, as of October 1, 1990, from his original deposit of P196,000.00. Allegedly, upon advice and instruction of the BANK that the P101,000.00 check was already cleared and backed up by sufficient funds, TAN, on the same date, withdrew the sum of P240,000.00, leaving a balance of P57,793.45. A day after, TAN deposited the amount of P50,000.00 making his existing balance in the amount of P107,793.45, because he has issued several checks to his business partners, - However, his suppliers and business partners went back to him alleging that the checks he issued bounced for insufficiency of funds. Thereafter, TAN, thru his lawyer, informed the BANK to take positive steps regarding the matter for he has adequate and sufficient funds to pay the amount of the subject checks. Nonetheless, the BANK did not bother nor offer any apology regarding the incident. Consequently, TAN, as plaintiff, filed a Complaint for Damages on December 19, 1990, with the Regional Trial Court of Cabanatuan. - In his Complaint, Tan maintained that he had sufficient funds to pay the subject checks and alleged that his suppliers decreased in number for lack of trust. As he has been in the business community for quite a time and has established a good record of reputation and probity, plaintiff claimed that he suffered embarrassment, humiliation, besmirched reputation, mental anxieties and sleepless nights because of the said unfortunate incident. Considering that Westmont Bank has taken over the management of the affairs/properties of the BANK, Tan on October 10, 1996, filed an Amended Complaint reiterating substantially his allegations in the original complaint, except that the name of the previous defendant ASSOCIATED BANK is now WESTMONT BANK. - RTC ruled in favor of Tan. WESTMONT appealed to the CA. CA affirmed. ISSUE WON the Bank is liable for damages to Tan HELD YES Ratio As a general rule, a bank is liable for the wrongful or tortuous acts and declarations of its officers or agents within the course and scope of their employment. Reasoning - The bank deposit slip expressed this reservation:
ASSOCIATED BANK (Now WESTMONT BANK) v VICENTE HENRY TAN
28

In receiving items on deposit, this Bank obligates itself only as the Depositors Collecting agent, assuming no responsibility beyond carefulness in selecting correspondents, and until such time as actual payments shall have come to its possession, this Bank reserves the right to charge back to the Depositors account any amounts previously credited whether or not the deposited item is returned. x x x." - By the express terms of the stipulation, petitioner took upon itself certain obligations as respondents agent, consonant with the well-settled rule that the relationship between the payee or holder of a commercial paper and the collecting bank is that of principal and agent. Under Article 1909 of the Civil Code, such bank could be held liable not only for fraud, but also for negligence. - As a general rule, a bank is liable for the wrongful or tortuous acts and declarations of its officers or agents within the course and scope of their employment. Due to the very nature of their business, banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees. Jurisprudence has established that the lack of diligence of a servant is imputed to the negligence of the employer, when the negligent or wrongful act of the former proximately results in an injury to a third person; in this case, the depositor. - The manager of the banks Cabanatuan branch, Consorcia Santiago, categorically admitted that she and the employees under her control had breached bank policies. They admittedly breached those policies when, without clearance from the drawee bank in Baguio, they allowed respondent to withdraw on October 1, 1990, the amount of the check deposited. Santiago testified that respondent was not officially informed about the debiting of the P101,000 from his existing balance of P170,000 on October 2, 1990 x x x. - Being the branch manager, Santiago clearly acted within the scope of her authority in authorizing the withdrawal and the subsequent debiting without notice. Aggravating matters, petitioner failed to show that it had immediately and duly informed respondent of the debiting of his account.
A2010
- Lluch, a holder of a forest products license, wrote to Rustan and offered to supply raw materials. In response, petitioner Rustan proposed, among other things, in a letter That the contract to supply is not exclusive because Rustan shall have the option to buy from other suppliers who are qualified and holder of appropriate government authority or license to sell and dispose pulp wood." - On April 1968, they executed a contract of sale whereby Lluch agreed to sell, and Rustan Pulp and Paper Mill, Inc. to pay the price of P30.00 per cubic meter of pulp wood raw materials to be delivered at the buyer's plant. - In the bilateral undertaking, they stipulated (1) that BUYER shall have the option to buy from other SELLERS (2)that BUYER shall not buy from any other seller whose pulp woods being sold shall have been established to have emanated from the SELLER'S lumber and/or firewood concession(3) that SELLER has the priority to supply the pulp wood materials requirement of the BUYER; (4) that the BUYER shall have the right to stop delivery of the said raw materials by the seller covered by this contract when supply of the same shall become sufficient until such time when need for said raw materials shall have become necessary provided, however, (5) that the SELLER is given sufficient notice - During the test run of the pulp mill, the machinery line had major defects while deliveries of the raw materials piled up, which prompted the Japanese supplier of the machinery to recommend the stoppage of the deliveries. - Rustan informed the suppliers to stop deliveries thus, a letter was sent (dated Sept 1968) to Lluch informing him that the supply of raw materials to us has become sufficient and we will not be needing further delivery from you. As per the terms of our contract, please stop delivery 30 days from today. It was signed by Dr. Romeo Vergara, the resident manager. - Lluch sought to clarify whether stoppage of delivery or termination of the contract of sale was intended, but the query was not answered by petitioners. This alleged ambiguity notwithstanding, Lluch and the other suppliers resumed deliveries after the series of talks between Vergara and Lluch. -On January 23, 1969, a complaint for contractual breach was filed. -The trial court dismissed it. On appeal, the IAC modified the judgment by directing Rustan, Tantoco and Vergara to pay respondents, jointly and severally, the sum of P30,000.00 as moral damages and P15,000.00 as attorney's fees ISSUE WON Tantoco and Vergara should be personally liable under a contract of sale where Tantoco signed merely as a representative of Rustan Pulp
PROF.
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).
MANILA MEMORIAL PARK CEMETERY INC. V LINSANGAN 443 SCRA TINGA; November 22, 2004 Supra in page 10
NATURE Petition for review decision of CA FACTS - Atty Linsangan entered into a contract of sale of a memorial lot owned by MMPCI with Baluyot, agent of MMPCI. Agreement between Linsangan and Baluyot was for a price of 95k, while official contract with MMPCI indicated that the price was 132k. Baluyot assured Linsangan that he would still pay the lower price, and even executed a document confirming the price of 95k. Linsangan paid in accordance to the old agreement. MMPCI cancelled the contract for noncompliance with its terms (it was not aware of the agreement between LInsangan and Baluyot re: 95k price). - one of the contentions of MMPCI is that Baluyot was not an agent but an independent contractor, and as such was not authorized to represent MMPCI or to use its name except as to the extent expressly stated in the Agency Manager Agreement - TC: MMPCI and Baluyot jointly and severally liable (there was agency and MMPCI has ratified agency, having received and encashed the checks issued by Linsangan through Baluyot) - CA: upheld TC (there was agency, MMPCI estopped when it allowed Baluyot to act and represent MMPCI even beyond her authority. Also, the acts of Baluyot bound MMPCI when the latter allowed the former to act for and in its behalf and stead.) ISSUE/S 1. WON there is agency 2. WON MMPCI is bound by agreement between Baluyot and Linsangan HELD 1. YES Ratio Baluyot was an agent of MMPCI, having represented the interest of the latter, and having been allowed by MMPCI to represent it in her dealings with its clients/prospective buyers Reasoning In an attempt to prove that Baluyot was not its agent, MMPCI pointed out that under its Agency Manager Agreement; an agency manager such as Baluyot is considered an independent contractor and not an agent. However, in the same contract, Baluyot as agency manager was authorized to solicit and remit to MMPCI offers to purchase interment spaces belonging to and sold by the latter. Notwithstanding the claim of MMPCI that Baluyot was an
B.4.F. CONFLICT OF INTEREST WITH PRINCIPAL AND CONSEQUENCES (A1889, 1896) MOLINA V PACIFIC PLANS GR NO. 165476 B.4.G. AGENT AUTHORITY TO PRINCIPALS NAME (A1897, A1899) CONTRACT IN
RUSTAN PULP AND PAPER MILLS V IAC (ILIGAN DIVERSIFIED PROJECTS, INC., ROMEO A. LLUCH) GR 70789 MELO; October 19, 1992
FACTS - Rustan established a pulp and paper mill in Lanao del Norte in 1966.
HELD NO. The President and Manager of a corporation who entered into and signed a contract in his official capacity, cannot be made liable thereunder in his individual capacity in the absence of stipulation to that effect due to the personality of the corporation being separate and distinct from the persons composing it. And because of this precept, Vergara's supposed nonparticipation in the contract of sale although he signed the letter dated Sept 30, 1968 is completely immaterial. The two exceptions contemplated by Article 1897 of the New Civil Code where agents are directly responsible are absent and wanting.(Article 1897. The agent who acts as such is not
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independent contractor, the fact remains that she was authorized to solicit solely for and in behalf of MMPCI. - Nevertheless, contrary to the findings of the CA, MMPCI cannot be bound by the contract between Atty. Linsangan and Baluyot. 2. NO Ratio The acts of an agent beyond the scope of his authority do not bind the principal, unless he ratifies them, expressly or impliedly. Only the principal can ratify; the agent cannot ratify his own unauthorized acts. Moreover, the principal must have knowledge of the acts he is to ratify. Reasoning - Art.1898: If the agent contracts in the name of the principal, exceeding the scope of his authority, and principal does not ratify contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook to secure the principals ratification. - Ratification cant be implied against principal who is ignorant of the facts - Here, Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces obtained on forms provided by MMPCI. The terms of the offer to purchase are contained in such forms and, when signed by buyer and an authorized officer of MMPCI, becomes binding. - The Offer to Purchase duly signed by Linsangan, and accepted and validated by MMPCI showed a total list price of P132,250.00. Likewise, it was clearly stated therein that Purchaser agrees that he has read or has had read to him this agreement, that he understands its terms and conditions, and that there are no covenants, conditions, warranties or representations other than those contained herein. By signing the Offer to Purchase, Linsangan signified that he understood its contents. That he and Baluyot had an agreement different from that contained in the Offer to Purchase is of no moment, and should not affect MMPCI, as it was obviously made outside Baluyots authority. To repeat, Baluyots authority was limited only to soliciting purchasers. She had no authority to alter the terms of the written contract provided by MMPCI. The document confirming the agreement that Linsangan would have to pay the old price was executed by Baluyot alone. Nowhere is there any indication that the same came from MMPCI or any of its officers. - apparently, the real arrangement between Linsangan and Baluyot was that Linsangan would pay according to their agreement, while Baluyot would shoulder the difference to meet the list price of MMPCI by adding cash to the checks issued by Linsangan (yiheee). This Baluyot failed to do Disposition Petition is granted. CA decision reversed.
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Instant petition challenging the CA decision, reversing TC judgment FACTS - 29 June 1984 > Julieta Esguerra (petitioner) filed a complaint for administration of conjugal partnership or separation of property against her husband Vicente Esguerra, Jr. before TC. This was later amended on October 1985 impleading V. Esguerra Construction Co., Inc. (VECCI) and other family corporations as defendants - The parties entered a compromise agreement which was submitted to the court. - 11 January 1990 TC rendered two partial judgments: one between Vicente and Julieta and the other as between the Juleita and VECCI. - compromise agreement between Juileta and VECCI: Joint Motion for Partial Judgment Based on Compromise Agreement > VECCI to sell/alienate/transfer or dispose of in any lawful and convenient manner, and under the terms and conditions recited in the enabling resolutions of its Board of Directors and stockholders, the ff properties: 2 real estate and buildings at Legaspi Village, Makati (INCLUDES ESGUERRA I AND II BLDGS) and 4 real estate and improvements in Rizal > After properties shall have been sold, VECCI shall cause to be paid to Juleita such amount equivalent to 50% of the resulting balance - The controversy arose wrt Esguerra Building II in Makati where Julieta started claiming of the rentals of the said building which VECCI refused. - 7 August 1990 > Juleita filed a motion with TC praying that VECCI be ordered to remit of the rentals to her effective January 1990 until the same be sold and VECCI opposed the motion - October 30, 1990 > TC ruled in favor of Juleita - 17 May 1991 > CA affirmed TC decision - 4 May 1992 > VECCI resorted to SC which affirmed CAs decision wc reads: it can be deduced from the terms of the Compromise Agreement that the basis of the equal division of the proceeds of any sale or disposition of any of the subject properties is the acknowledged ownership of Julieta over of the said assets. Considering that the other building has yet to be sold, it is but logical that pending its disposition and conformably with her interest therein, Julieta should be entitled to of its rentals which forms part of her share in the fruits of the assets. - Esguerra Bldg. II was sold to Sureste Properties, Inc for P150M - 17 June 1993 > Julieta filed a motion seeking the nullification of the sale before TC that VECCI is not the lawful and absolute owner thereof and that she has not been notified nor consulted as to the terms and conditions of the sale - 23 June 1993 > Not being a party to the civil case, Sureste filed a Manifestation concerning Julietas motion to declare the sale void ab initio and that in the compromise agreement executed by VECCI and Julieta, she gave her express consent to the sale of the said building - 05 August 1993 > TC issued an Omnibus Order denying Surestes motion - RTC: Omnibus Order of the Court issued on August 5, 1993 is reconsidered and modified that the sale of Esguerra Bldg. II is declared valid wrt but ineffectual and unenforceable wrt the as the Julieta was not consulted as to the terms and conditions of the sale. - CA: ruled in favor of Sureste Properties, Inc.
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ISSUES WON the portion of the sale of Esguerra Bldg II is unenforceable a. because VECCI did not obtain Julietas consent on the sale b. that VECCI acted beyond the scope of its authority HELD a. NO Reasoning - CC: contract is unenforceable when it is entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers. And that (a) contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable. - SC finds the sale of Esguerra Building II by VECCI Sureste Properties, Inc. valid. The sale was expressly and clearly authorized under the judiciallyapproved compromise agreement freely consented to and voluntarily signed by Julieta. The compromise agreement expressly authorizes VECCI to sell the subject properties, with the only condition that the sale be in a lawful and convenient manner and under the terms and conditions recited in the enabling resolutions of its Board of Directors and stockholders. There is nothing in the said agreement requiring VECCI to consult the Julieta before any sale b. NO Reasoning - Article 1900 CC: So far as third persons are concerned, an act is deemed to have been performed within the scope of the agents authority, if such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent. - Thus, as far as private respondent Sureste Properties, Inc. is concerned, the sale to it by VECCI was completely valid and legal because it was executed in accordance with the compromise agreement, authorized not only by the parties thereto, who became co-principals in a contract of agency created thereby, but by the approving court as well. Consequently, the sale to Sureste Properties, Inc. of Esguerra Building II cannot in any manner or guise be deemed unenforceable, as contended by petitioner. Disposition petition is hereby DENIED for lack of merit
B.4.G.2. CONTRACT WHERE AGENT EXCEEDS LIMITS OF AUTHORITY (A1898, A1899) CERVANTES V CA (PHIL. AILRINES) GR No. 125138 PURISIMA; March 2, 1999
NATURE Petition for review. Certiorari FACTS - On March 27, 1989, the private respondent, Philippines Air Lines, Inc. (PAL), issued to the herein petitioner, Nicholas Cervantes (Cervantes), a
B.4.G.1. PERFORMANCE WITHIN SCOPE OF AGENT AUTHORITY (A1900) ESGUERRA V CA (SURESTE PROPERTIES INC) G.R. No. 119310 PANGANIBAN; February 3, 1997
NATURE
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round trip plane ticket for Manila-Honolulu-Los Angeles-Honolulu-Manila, which ticket expressly provided an expiry of date of one year from issuance, i.e., until March 27, 1990. The issuance of the said plane ticket was in compliance with a Compromise Agreement entered into between the contending parties in two previous suits, docketed as Civil Case Nos. 3392 and 3451 before the Regional Trial Court in Surigao. - Four days before the expiry of the ticket, he used the same in his travel. Upon arrival in LA, he booked his return flight which the PAL agent confirmed. He subsequently found out that the flight was via San Francisco and hence decided to rebook to take the flight out of SFO. When he checked in to board his flight, he was denied the passage with the ground handler citing the expiry of tne validity of his ticket as ground for refusal. - Cervantes filed a case for damages and breach of contract with the Surigao RTC. This was dismissed. The appeal with the CA was also dismissed for lack of merit. ISSUE WON the act of the PAL agents in confirming subject ticket extended the period of validity of petitioner's ticket HELD No. Under Article 19891 of the New Civil Code, the acts an agent beyond the scope of his authority do not bind the principal, unless the latter ratifies the same expressly or impliedly. Furthermore, when the third person (herein petitioner) knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal's ratification. - The admission by Cervantes that he was told by PAL's legal counsel that he had to submit a letter requesting for an extension of the validity of subject tickets was tantamount to knowledge on his part that the PAL employees had no authority to extend the validity of subject tickets and only PAL's legal counsel was authorized to do so. Disposition Petition dismissed.
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purchase orders with IVO for 2,000 long tons of crude coconut oil, valued at US$222.50 per ton to be delivered within the month of January 1987. IVO however, failed to deliver the said coconut oil and, instead, offered a wash out settlement, whereby the coconut oil subject of the purchase contracts were to be sold back to IVO at the prevailing price in the international market at the time of wash out. Thus, IVO bound itself to pay to Safic the difference between the said prevailing price and the contract price of the 2,000 long tons of crude coconut oil, which amounted to US$293,500.00. IVO failed to pay this amount despite repeated oral and written demands. - Under its second cause of action, Safic alleged that on eight occasions it placed purchase orders with IVO for a total of 4,750 tons of crude coconut oil. When IVO failed to honor its obligation under the wash out settlement narrated above, Safic demanded that IVO make marginal deposits within forty-eight hours on the eight purchase contracts in amounts equivalent to the difference between the contract price and the market price of the coconut oil, to compensate it for the damages it suffered when it was forced to acquire coconut oil at a higher price. IVO failed to make the prescribed marginal deposits on the eight contracts, in the aggregate amount of US$391,593.62, despite written demand therefor. - In its answer, IVO raised the following special affirmative defenses: Safic had no legal capacity to sue because it was doing business in the Philippines without the requisite license or authority; the subject contracts were speculative contracts entered into by IVOs then President, Dominador Monteverde, in contravention of the prohibition by the Board of Directors against engaging in speculative paper trading, and despite IVOs lack of the necessary license from Central Bank to engage in such kind of trading activity; and that under Article 2018 of the Civil Code, if a contract which purports to be for the delivery of goods, securities or shares of stock is entered into with the intention that the difference between the price stipulated and the exchange or market price at the time of the pretended delivery shall be paid by the loser to the winner, the transaction is null and void. - IVO set up counterclaims anchored on harassment, paralyzation of business, financial losses, rumor-mongering and oppressive action. Later, IVO filed a supplemental counterclaim alleging that it was unable to operate its business normally because of the arrest of most of its physical assets; that its suppliers were driven away; and that its major creditors have inundated it with claims for immediate payment of its debts, and China Banking Corporation had foreclosed its chattel and real estate mortgages. ISSUE WON IVOs President, Dominador Monteverde, validly entered into the 1986 contracts for and on behalf of IVO. HELD NO. - IVOs By-laws show that Monteverde had no blanket authority to bind IVO to any contract. He must act according to the instructions of the Board of Directors. Even in instances when he was authorized to act according to his discretion, that discretion must not conflict with prior Board orders, resolutions and instructions. The evidence shows that the IVO Board knew nothing of the 1986 contracts and that it did not authorize Monteverde to enter into speculative contracts.
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- The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of the agents authority, and his ignorance of that authority will not be any excuse. Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but also the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it. - The most prudent thing petitioner should have done was to ascertain the extent of the authority of Dominador Monteverde. Being remiss in this regard, petitioner can not seek relief on the basis of a supposed agency. - Under Article 1898 of the Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal unless the latter ratifies the same expressly or impliedly. It also bears emphasizing that when the third person knows that the agent was acting beyond his power or authority, the principal can not be held liable for the acts of the agent. If the said third person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principals ratification. - When Monteverde entered into the speculative contracts with Safic, he did not secure the Boards approval. He also did not submit the contracts to the Board after their consummation so there was, in fact, no occasion at all for ratification. The contracts were not reported in IVOs export sales book and turn-out book. Neither were they reflected in other books and records of the corporation. It must be pointed out that the Board of Directors, not Monteverde, exercises corporate power. Disposition In view of all the foregoing, the petition is DENIED for lack of merit.
B.4.G.3. EFFECT OF RATIFICATION BY PRINCIPAL (A1901) B.4.G.4. PRINCIPALS PRIVATE/SECRET INSTRUCTIONS UNAVAILING AGAINST THIRD PERSONS RELYING ON POWER OF ATTORNEY OR INSTRUCTIONS PREVIOUSLY SHOWN (A1902) CRUZ V CA GR NO. 85685 B.4.H. RULES ON COMMISSION AGENTS (A1903-1908) COMMISSION MERCHANTS AGENTS, BROKERS, COMMISSION
SAFIC ALCAN & CIE V IMPERIAL VEGETABLE OIL CO., INC. GR No. 126751 YNARES-SANTIAGO; March 28, 2001
FACTS - Safic is a French corporation engaged in the international purchase, sale and trading of coconut oil. It filed with the RTC a complaint against private respondent Imperial Vegetable Oil Co (IVO)alleging that it placed
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Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook to secure the principal's ratification.
MEDRANO V CA GR NO. 150678
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SCHMID & OBERLY, INC. vs. RJL MARTINEZ FISHING CORPORATION 166 SCRA 493 CORTES; October 18, 1988
NATURE Petition to review the decision and resolution of the CA. FACTS - RJL MARTINEZ is engaged in the business of deep-sea fishing. As RJL MARTINEZ needed electric generators for some of its boats and SCHMID sold electric generators of different brands, negotiations between them for the acquisition thereof took place. The parties had two separate transactions over "Nagata"-brand generators. - The first transaction was the sale of three (3) generators. In this transaction, it is not disputed that SCHMID was the vendor of the generators. The company supplied the generators from its stockroom; it was also SCHMID which invoiced the sale. - The second transaction, which gave rise to the present controversy, involves twelve (12) "Nagata"-brand generators. - As RJL MARTINEZ was canvassing for generators, SCHMID gave RJL MARTINEZ its Quotation for twelve (12) Nagatan-brand generators. - Agreeing with the terms of the Quotation, RJL MARTINEZ opened a letter of credit in favor of NAGATA CO. Accordingly, SCHMID transmitted to NAGATA CO. an order for the twelve (12) generators to be shipped directly to RJL MARTINEZ. NAGATA CO. thereafter sent RJL MARTINEZ the bill of lading and its own invoice and shipped the generators directly to RJL MARTINEZ. - For its efforts, SCHMID received from NAGATA CO. a commission of $1,752.00. - All fifteen (15) generators subject of the two transactions burned out after continuous use. RJL MARTINEZ informed SCHMID about this development. In turn, SCHMID brought the matter to the attention of NAGATA CO. NAGATA CO. sent two technical representatives who made an ocular inspection and conducted tests on some of the burnedout generators, which by then had been delivered to the premises of SCHMID. - The tests revealed that the generators were overrated. - SCHMID replaced the three (3) generators subject of the first sale with generators of a different brand. - As for the twelve (12) generators subject of the second transaction, the Japanese technicians advised RJL MARTINEZ to ship three (3) generators to Japan, which the company did. These three (3) generators were repaired by NAGATA CO. itself and thereafter returned to RJL MARTINEZ; the remaining nine (9) were neither repaired nor replaced. NAGATA CO., however, wrote SCHMID suggesting that the latter check the generators, request for spare parts for replacement free of charge, and send to NAGATA CO. SCHMID's warranty claim including the labor cost for repairs. In its reply letter, SCHMID indicated that it was not agreeable to these terms.
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- As not all of the generators were replaced or repaired, RJL MARTINEZ formally demanded that it be refunded the cost of the generators and paid damages. SCHMID in its reply maintained that it was not the seller of the twelve (12) generators and thus refused to refund the purchase price therefor. Hence, RJL MARTINEZ brought suit against SCHMID on the theory that the latter was the vendor of the twelve (12) generators and, as such vendor, was liable under its warranty against hidden defects. - Both the trial court and the Court of Appeals upheld the contention of RJL MARTINEZ that SCHMID was the vendor in the second transaction and was liable under its warranty. Hence, this petition. ISSUE WON SCHMID was not a vendor, but was merely an indentor, in the second transaction. HELD Yes. Reasoning: a. Definition of terms. An indentor is a middleman in the same class as commercial brokers and commission merchants. A broker is generally defined as one who is engaged, for others, on a commission, negotiating contracts relative to property with the custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the name of those who employed him; he is strictly a middleman and for some purpose the agent of both parties. A broker is one whose occupation it is to bring parties together to bargain, or to bargain for them, in matters of trade, commerce or navigation. Judge Storey, in his work on Agency, defines a broker as an agent employed to make bargains and contracts between other persons, in matters of trade, commerce or navigation, for compensation commonly called brokerage. A commission merchant is one engaged in the purchase or sale for another of personal property which, for this purpose, is placed in his possession and at his disposal. He maintains a relation not only with his principal and the purchasers or vendors, but also with the property which is subject matter of the transaction. Webster defines an indent as "a purchase order for goods especially when sent from a foreign country." An indentor is one who, for compensation, acts as a middleman in bringing about a purchase and sale of goods between a foreign supplier and a local purchaser. b. RJL MARTINEZ admitted that the generators were purchased "through indent order". c. The evidence also show that RJL MARTINEZ paid directly NAGATA CO, for the generators, and that the latter company itself invoiced the sale and shipped the generators directly to the former. SCHMID only acted as an intermediary or middleman (procured an order and forwarded it to NAGATA CO.) d. He only received commission. e. Neither does the solicitous manner by which SCHMID responded to RJL MARTINEZ's complaint prove that the former was the seller of the generators. No indentor will just fold its hands when a client complains about the goods it has bought upon the indentor's mediation. In its desire to
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promote the product of the seller and to retain the goodwill of the buyer, a prudent indentor desirous of maintaining his business would have to act considerably towards his clients. e. The argument of RJL that if SHMID is considered as a mere agent of NAGATA CO., a foreign corporation not licensed to do business in the Philippines, then the officers and employees of the may be penalized for violation of the Old Corporation Law has no application in this case. What the law seeks to prevent, through said provision, is the circumvention by foreign corporations of licensing requirements through the device of employing local representatives. An indentor, acting in his own name, is not, however, covered by the above-quoted provision. In fact, the provision of the Rules and Regulations implementing the Omnibus Investments Code quoted above, which was copied from the Rules implementing Republic Act No. 5455, recognizes the distinct role of an indentor, such that when a foreign corporation does business through such indentor, the foreign corporation is not deemed doing business in the Philippines. Disposition The petition is GRANTED and the appealed Decision and Resolution of the Court of Appeals are REVERSED. The complaint of RJL Martinez Fishing Corporation is hereby DISMISSED.
KERR AND CO. LTD V COLLECTOR 70 PHIL 36 SALE ON CREDIT TOYOTA SHAW, INC. v CA (SOSA) 244 SCRA 320 DAVIDE, JR.; May 23,1995
FACTS - Luna Sosa wanted to purchase a Toyota Lite Ace. Upon contacting Toyota Shaw, Inc., he was told that there was an available unit. Sosa and his son, Gilbert, went to the Toyota office at Shaw Boulevard and met with Popong Bernardo, a sales representative of Toyota. Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he, his family, and a balikbayan guest would use it on 18 June 1989 to go to Marinduque, where he would celebrate his birthday. Bernardo assured Sosa that a unit would be ready for pick on said date. Bernardo then signed "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also agreed upon by the parties that the balance of the purchase price would be paid by credit financing through B.A. Finance. The next day, Sosa went to Toyota to deliver the downpayment of P100,000.00. They met Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP), which stated the initial cash outlay and the balance to be financed. Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved the VSP. On 17 June 1989, however, the car was not delivered to Soza. Bernardo said that the car could not be delivered because " nasulot ang unit ng ibang malakas." Sosa asked that his downpayment be refunded. Toyota did so on
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the very same day. Thereafter, Sosa sent two letters to Toyota demanding refund of the downpayment and P1M as payment for damages. Toyota refused to accede to the demands of Sosa. Hence, Sosa filed with the RTC of Marinduque a a complaint against Toyota for damages. - Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the disapproval by B.A. Finance of the credit financing application of Sosa. It further alleged that no sale was entered into between it and Sosa, that Bernardo had no authority to sign the agreement for and in its behalf, and that Bernardo signed the agreement in his personal capacity. As special and affirmative defenses, it alleged that: the VSP did not state date of delivery; Sosa had not completed the documents required by the financing company, and as a matter of policy, the vehicle could not and would not be released prior to full compliance with financing requirements, submission of all documents, and execution of the sales agreement/invoice. - RTC: In favor of Sosa - There was a valid perfected contract of sale between Sosa and Toyota which bound Toyota to deliver the vehicle to Sosa; from the beginning of the transaction up to its consummation when the downpayment was made by the plaintiff, the defendants had made known to the plaintiff the impression that Popong Bernardo is an authorized sales executive as it permitted the latter to do acts within the scope of an apparent authority holding him out to the public as possessing power to do these acts." Bernardo then "was an agent of the defendant Toyota Shaw, Inc. and hence bound the defendants." - CA: affirmed in toto the appealed decision. ISSUE WON there was a perfected contract of sale HELD NO Neither logic nor recourse to one's imagination can lead to the conclusion that the "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." is a perfected contract of sale. Under the agreement, no obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefor a price certain appears therein. The provision on the downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on installment basis, as the VSP executed the following day confirmed. But nothing was mentioned about the full purchase price and the manner the installments were to be paid. This Court had already ruled that a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. This is so because the agreement as to the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Definiteness as to the price is an essential element of a binding agreement to sell personal property. Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa. For one thing, Sosa did not even sign it. For another, Sosa was well aware from its title, written in bold letters, viz.,AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA SHAW, INC.that he was not dealing with Toyota but with
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Popong Bernardo and that the latter did not misrepresent that he had the authority to sell any Toyota vehicle. He knew that Bernardo was only a sales representative of Toyota and hence a mere agent of the latter. It was incumbent upon Sosa to act with ordinary prudence and reasonable diligence to know the extent of Bernardo's authority as an agent in respect of contracts to sell Toyota's vehicles. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. At the most, the agreement may be considered as part of the initial phase of the generation or negotiation stage of a contract of sale. There are three stages in the contract of sale, namely: (a) preparation, conception, or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the parties; (b) perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; and (c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract. The second phase of the generation or negotiation stage in this case was the execution of the VSP. It must be emphasized that thereunder, the downpayment of the purchase price was P53,148.00 while the balance to be paid on installment should be financed by B.A. Finance Corporation. It is, of course, to be assumed that B.A. Finance Corp. was acceptable to Toyota, otherwise it should not have mentioned B.A. Finance in the VSP. In a sale on installment basis which is financed by a financing company, three parties are thus involved: the buyer who executes a note or notes for the unpaid balance of the price of the thing purchased on installment, the seller who assigns the notes or discounts them with a financing company, and the financing company which is subrogated in the place of the seller, as the creditor of the installment buyer. Since B.A. Finance did not approve Sosa's application, there was then no meeting of minds on the sale on installment basis. The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows that the VSP created no demandable right in favor of Sosa for the delivery of the vehicle to him, and its non-delivery did not cause any legally indemnifiable injury.
PROF.
-Bedia and White entered into a Participation Contract where White agrees to reserve booth space for the 1980 Dallas State Fair, and in case White decides to cancel the reservation, the amount she paid would be forfeited in favor of HONTIVEROS & ASSOCIATED PRODUCERS PHIL. YIELDS, INC. It was also the latter which was supposed to reserve the booth for White. However, in the Participation Contract, Bedia was the signatory. -However, even after White made a $500 downpayment to Bedia on the agreed display space, when she went to Dallas no space was reserved in her name. She then filed a complaint for damages against the HONTIVEROS and Bedia. -HONTIVEROS and Bedia answered that no display space was registered in Whites name as she was only supposed to share the space leased by Hontiveros in its name. Also, White was not allowed to display her goods because she had not paid her balance of $1,750.00, in violation of their contract. Bedia avered that she was only acting as an agent of HONTIVEROS and that she returned the downpayment paid by white. White dismissed complaint agains HONTIVEROS. TC: Bedia not an agent, liable for fraud CA: affirmed. Bedia acted on her own, represented herself as authorized by the State of Texas to solicit and assign booths at the Texas fair, and assured White that she could give her booth. ISSUE WON Bedia was an agent of HONTIVEROS HELD NO. Ratio The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. Reasoning In Whites letter to the minister of Trade, she recognized that Bedia was only acting in behalf of Hontiveros. The Participation Contract was typewritten on the letterhead stationery of Hontiveros. Hontiveros has not repudiated Bedias agency, they even filed a joint answer with the latter through a common counsel and even admitted that Bedia was their agent. -Since it has not been found that Bedia was acting beyond the scope of her authority when she entered into the Participation Contract on behalf of Hontiveros, it is the latter that should be held answerable for any obligation arising from that agreement. By moving to dismiss the complaint against Hontiveros, the plaintiffs virtually disarmed themselves and forfeited whatever claims they might have proved against the latter under the contract signed for it by Bedia. It should be obvious that having waived these claims against the principal, they cannot now assert them against the agent. Disposition. WHEREFORE, the appealed decision dated March 30, 1990, of the respondent court is REVERSED and a new judgment is rendered dismissing Civil Case No. 9246-P in the Regional Trial Court of Pasay City.
CHAPTER 3: OBLIGATIONS OF THE PRINCIPAL A. PRINCIPALS OBLIGATIONS TO PERSONS WITH WHOM THE AGENT CONTRACTED 3.A.1. WITHIN SCOPE OF AGENT AUTHORITY (A1910) BEDIA V. WHITE G.R. No. 94050 CRUZ, November 21, 1991
NATURE Petition for review FACTS
WOODCHILD HOLDINGS INC. V ROXAS ELECTRIC AND CONSTRUCTION CO. GR NO. 140667
33

AREOLA V CA (PRUDENTIAL GUARANTEE AND ASSURANCE, INC.) GR NO. 95641 ROMERO; September 22, 1994
FACTS - Santos Areola, a lawyer from Dagupan City, bought, through the Baguio City branch of Prudential Guarantee and Assurance, Inc.a personal accident insurance policy covering the one-year period between noon of November 28, 1984 and noon of November 28, 1985. -Under the terms of the statement of account issued by respondent insurance company, petitioner-insured was supposed to pay the total amount of P1,609.65 -Seven months after the issuance of Santos Areola's Personal Accident Insurance Policy, respondent insurance company unilaterally cancelled the same since company records revealed that petitioner-insured failed to pay his premiums. -On August 3, 1985, respondent insurance company offered to reinstate same policy it had previously cancelled and even proposed to extend its lifetime to December 17, 1985, upon a finding that the cancellation was erroneous and that the premiums were paid in full by petitioner-insured but were not remitted by Teofilo M. Malapit, respondent insurance company's branch manager. -Unfortunately, Areola and his wife had already filed a complaint for breach of contract with damages before the lower court. -The trial court, on June 30, 1987, rendered a judgment in favor of petitioner-insured, -This ruling was challenged on appeal by respondent insurance company, and the appellate court issued a reversal of the decision of the trial court -Petitioner-insured moved for the reconsideration of the said decision which the Court of Appeals denied. Hence, this petition for review on certiorari ISSUE WON Prudential is liable for the cancellation of the insurance contract which was admittedly caused by the fraudulent acts and bad faith of its own officers HELD YES. -It is petitioner-insured's submission that the fraudulent act of Malapit, manager of respondent insurance company's branch office in Baguio, in misappropriating his premium payments is the proximate cause of the cancellation of the insurance policy. Petitioner-insured theorized that Malapit's act of signing and even sending the notice of cancellation himself, notwithstanding his personal knowledge of petitioner-insured's full payment of premiums, further reinforces the allegation of bad faith. Such fraudulent act committed by Malapit, argued petitioner-insured, is attributable to respondent insurance company, an artificial corporate being which can act only through its officers or employees. Malapit's actuation, concludes petitioner-insured, is therefore not separate and distinct from that of respondent-insurance company. It must, therefore, bear the
A2010
consequences of the erroneous cancellation of subject insurance policy caused by the non-remittance by its own employee of the premiums paid. Subsequent reinstatement, according to petitioner-insured, could not possibly absolve respondent insurance company from liability, there being an obvious breach of contract. -SC upheld petitioner's contention that Malapit's fraudulent act of misappropriating the premiums paid by petitioner-insured is beyond doubt directly imputable to respondent insurance company. A corporation, such as respondent insurance company, acts solely thru its employees. The latters' acts are considered as its own for which it can be held to account. The facts are clear as to the relationship between private respondent insurance company and Malapit. As admitted by private respondent insurance company in its answer, Malapit was the manager of its Baguio branch. It is beyond doubt that he represented its interest and acted in its behalf. His act of receiving the premiums collected is well within the province of his authority. Thus, his receipt of said premiums is receipt by private respondent insurance company who, by provision of law, particularly under Article 1910 of the Civil Code, is bound by the acts of its agent. -Article 1910 thus reads: 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. Disposition Petition for review on certiorari is hereby GRANTED and the decision of the Court of Appeals REVERSED
PROF.
ISSUE/S WON Manila Remnant should be held solidarily liable with Valencia, considering he was the only one who acted with fraud, without the authority to do those illegal acts from Manila Remnant? HELD 1. Yes. Ratio - First: the presidency of Valencia of both companies is equivalent to knowledge or constructive notice to Manila Remnant, and their failure to do anything to correct such an irregularity was deemed to have ratified the same. - Second: Authority by Estoppel Article 1191 NCC: Even when the agent has exceeded his authority, the principal is still solidarily liable with the agent if the former allowed the latter to act as though he had full powers. a.) Carte blanche authority was given to Valencia b.) Manila Remnant was Negligent, in failing to properly supervise and control the affairs of its agent and to adopt the needed measures to prevent further misrepresentation. c.) Failure to act swiftly which prejudiced 3rd parties the cited article 1191 is new, intended to protect the rights of innocent persons, the principal and the agent may be considered as joint tortfeasors. Reasoning Even without Article 1191, the mere fact that in Article 1897 of the New Civil Code: the agent who acts as such is not personally liable to that 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 principal is liable, Manila Remnant cannot escape its liability. Disposition: CA affirmed **Carte Blanche- white or black card; unlimited authorization; free hand. (Ulep, Latin Words and Phrases for Lawyers and Students)
3.A.2. BEYOND SCOPE OF AGENT AUTHORITY BUT WITH RATIFICATION BY PRINCIPAL OR AGENCY BY ESTOPPEL (A1910, A1911) MANILA REMNANT CO., INC. V. CA (Ventanilla, et. al.) 191 SCRA 622 FERNAN; November 22, 1990
NATURE Petition to review the decision of the Court of Appeals FACTS - UP faculty members, the spouses Oscar and Carmen Ventanilla bought land in the Capital Homes Subdivision through Artemio U. Valencia in March 1970, paid the downpayment and monthly installments thereof. - Manila Remnant Co., Inc. owned the parcels of land which it agreed that A.U. Valencia and Co., Inc. was to develop the subdivision and manage the sales thereof. Valencia was the president of both companies. - however, Valencia 1. Deposited in his own account the downpayment paid by the Ventanilla couple 2. re-sold the property to Carlos Crisostomo without consideration, and gave the monthly remittances of the couple as payments of Crisostomo. Therefore the couple was informed later on that they dont have a valid claim to title because theyre not in the records of both firms. - The RTC affirmed by CA held that Valencia & Manila Remnant should be solidarily liable to pay the damages.
CUISION V CA GR NO. 88539 3.A.3. DOUBLE CONTRACTING WITH PRINCIPAL AND AGENT (A1916, A1917) STA. ROMANA V IMPERIO GR NO. L-17280 3.B. PRINCIPALS OBLIGATIONS TO THE AGENT 3.B.1. SOLIDARY LIABILITY TO COMMON AGENT (A1915)
34

DE CASTRO ET AL V CA (ARTIGO) GR NO. 115838 CARPIO; July 18, 2002
NATURE Petition for Review on Certiorari FACTS Constante A. De Castro ("Constante" for brevity) and Corazon A. De Castro ("Corazon" for brevity) were co-owners of four (4) lots located at EDSA corner New York and Denver Streets in Cubao, Quezon City. In a letter dated January 24, 1984 Artigo was authorized by petitioners to act as real estate broker in the sale of these properties for the amount of P23,000,000.00, five percent (5%) of which will be given to the agent as commission. It was Artigo who first found Times Transit Corporation, represented by its president Mr. Rondaris, as prospective buyer which desired to buy two lots only, specifically lots 14 and 15. Eventually, sometime in May of 1985, the sale of lots 14 and 15 was consummated. Artigo received from the De Castros P48,893.76 as commission. Artigo apparently felt short changed because according to him, his total commission should be P352,500.00 which is five percent of the agreed price of P7,050,000.00 paid by Times Transit Corporation to petitioners for the two lots, and that it was he who introduced the buyer to appellants and unceasingly facilitated the negotiation which ultimately led to the consummation of the sale. Hence, he sued below to collect the balance of P303,606.24 after having received P48,893.76 in advance. On the other hand, the De Castros completely traverse Artigo's claims and essentially argue that Artigo is selfishly asking for more than what he truly deserved as commission to the prejudice of other agents who were more instrumental in the consummation of the sale. Although appellants readily concede that it was Artigo who first introduced Times Transit Corp. to them, Artigo was not designated by them as their exclusive real estate agent but that in fact there were more or less 18)others whose collective efforts in the long run dwarfed those of Artigo's, considering that the first negotiation for the sale where Artigo took active participation failed and it was these other agents who successfully brokered in the second negotiation. But despite this and out of appellants' "pure liberality, beneficence and magnanimity", Artigo nevertheless was given the largest cut in the commission (P48,893.76), although on the principle of quantum meruit he would have certainly been entitled to less. So Artigo should not have been heard to complain of getting only a pittance when he actually got the lion's share of the commission and worse, he should not have been allowed to get the entire commission. Furthermore, the purchase price for the two lots was only P3.6 million as appearing in the deed of sale and not P7.05 million as alleged by Artigo. Thus, even assuming that Artigo is entitled to the entire commission, he would only be getting 5% of the P3.6 million, or P180,000.00." The Court of Appeals affirmed in toto the decision of the trial court.Hence, the instant petition.
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ISSUE WON the complaint merits dismissal for failure to implead other co-owners as indispensable parties HELD NO. An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final determination of the case can be had.7 The joinder of indispensable parties is mandatory and courts cannot proceed without their presence. Whenever it appears to the court in the course of a proceeding that an indispensable party has not been joined, it is the duty of the court to stop the trial and order the inclusion of such party.9 - However, the rule on mandatory joinder of indispensable parties is not applicable to the instant case. There is no dispute that Constante appointed Artigo in a handwritten note dated January 24, 1984 to sell the properties of the De Castros for P23 million at a 5 percent commission. The authority was on a first come, first serve basis. - Constante signed the note as owner and as representative of the other coowners. Under this note, a contract of agency was clearly constituted between Constante and Artigo. Whether Constante appointed Artigo as agent, in Constante's individual or representative capacity, or both, the De Castros cannot seek the dismissal of the case for failure to implead the other co-owners as indispensable parties. The De Castros admit that the other coowners are solidarily liable under the contract of agency , citing Article 1915 of the Civil Code, which reads: - Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency. The solidary liability of the four co-owners, however, militates against the De Castros' theory that the other co-owners should be impleaded as indispensable parties. A noted commentator explained Article 1915 thus: - "The rule in this article applies even when the appointments were made by the principals in separate acts, provided that they are for the same transaction. The solidarity arises from the common interest of the principals, and not from the act of constituting the agency. By virtue of this solidarity, the agent can recover from any principal the whole compensation and indemnity owing to him by the others. The parties, however, may, by express agreement, negate this solidary responsibility. The solidarity does not disappear by the mere partition effected by the principals after the accomplishment of the agency. - If the undertaking is one in which several are interested, but only some create the agency, only the latter are solidarily liable, without prejudice to the effects of negotiorum gestio with respect to the others. And if the power granted includes various transactions some of which are common and others are not, only those interested in each transaction shall be liable for it." - When the law expressly provides for solidarity of the obligation, as in the liability of co-principals in a contract of agency, each obligor may be compelled to pay the entire obligation. 12 The agent may recover the whole compensation from any one of the co-principals, as in this case. Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary debtors. This article reads:
PROF.
- Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected. - Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co., Inc. that: "x x x solidarity does not make a solidary obligor an indispensable party in a suit filed by the creditor . Article 1216 of the Civil Code says that the creditor `may proceed against anyone of the solidary debtors or some or all of them simultaneously'." (Emphasis supplied) Dispositive Petition denied
3.B.2. PAY NECESSARY SUMS AND EXPENSES INCURRED FOR EXECUTION OF THE AGENCY (A1912) WILLIAM UY and RODEL ROXAS v. CA [HON. ROBERT BALAO and NHA] 314 SCRA 73 KAPUNAN; September 9, 1999
NATURE Certiorari FACTS - William Uy and Rodel Roxas were agents authorized (by the owners thereof) to sell 8 parcels of land (located in Tuba, Tadiangan, Benguet), which they offered to sell, to National Housing Authority (NHA) to be utilized and developed as a housing project. - NHA Board passed Resolution No. 1632 approving the acquisition of said lands, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the subject lands. - Of the 8 parcels of land, however, only 5 were paid for by the NHA because of the report it received from the Land Geosciences Bureau of the DENR that the remaining area is located at an active landslide area and therefore, not suitable for development into a housing project. - NHA issued Resolution No. 2352 canceling the sale over the 3 parcels of land. - NHA, through Resolution No. 2394, subsequently offered the amount of P1.225 million to the landowners as daos perjuicios. - Petitioners filed in the RTC of QC a Complaint for Damages against NHA and its General Manager Robert Balao. - RTC: the cancellation of the contract to be justified. The trial court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same amount initially offered by NHA to petitioners as damages. - CA: reversed RTC and entered a new one dismissing the complaint. It held that since there was "sufficient justifiable basis" in canceling the sale, "it saw no reason" for the award of damages and that petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the RTC. ISSUES:
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1. WON THE CA ERRED IN DISMISSING THE SUBJECT COMPLAINT FINDING THAT THE PETITIONERS FAILED TO JOIN AS INDISPENSABLE PARTY PLAINTIFF THE SELLING LOTOWNERS. 2. WON THE CA ERRED IN DECLARING THAT THE NHA HAD ANY LEGAL BASIS FOR RESCINDING THE SALE INVOLVING THE LAST 3 PARCELS COVERED BY NHA RESOLUTION NO. 1632. (and assuming that the NHA had legal basis to rescind) WON THE CA ERRED IN DENYING HEREIN PETITIONERS' CLAIM TO DAMAGES (ie the expenses2 they paid for the execution of the agency, unearned income and opportunity loss), CONTRARY TO THE PROVISIONS OF A. 1191 OF THE CIVIL CODE. HELD: 1. NO. Petitioners are not parties to the contract of sale between their principals and NHA. They are mere agents of the owners of the land subject of the sale. As agents, they only render some service or do something in representation or on behalf of their principals. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to said contract. -As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the contracts of sale, they do not, under substantive law, possess the right they seek to enforce. Therefore, they are not the real parties-in-interest in this case. - Petitioners not being the real parties-in-interest, any decision rendered herein would be pointless since the same would not bind the real partiesininterest. Reasoning: - Sec. 2, Rule 3 of the RoC requires that every action must be prosecuted and defended in the name of the real party-in-interest. The real party-ininterest is the party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. "Interest, within the meaning of the rule, means material interest, an interest in the issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest.
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- True meaning of real party-in-interest: An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced. - Neither have the petitioners shown that they were heirs of the landowners or assignees of the latter (because they have not established any agreement granting them "the right to receive payment and out of the proceeds to reimburse [themselves] for advances and commissions before turning the balance over to the principal[s].) * Note that an agent, in his own behalf, may bring an action founded on a contract made for his principal, as an assignee of such contract accdng to Sec.372 (1) of the Restatement of the Law on Agency (Second): (1) Unless otherwise agreed, an agent who has or who acquires an interest in a contract which he makes on behalf of his principal can, although not a promisee, maintain such action thereon maintain such action thereon as might a transferee having a similar interest. * The Comment on subsection (1) states: a. Agent a transferee. One who has made a contract on behalf of another may become an assignee of the contract and bring suit against the other party to it, as any other transferee. The customs of business or the course of conduct between the principal and the agent may indicate that an agent who ordinarily has merely a security interest is a transferee of the principals rights under the contract and as such is permitted to bring suit. If the agent has settled with his principal with the understanding that he is to collect the claim against the obligor by way of reimbursing himself for his advances and commissions, the agent is in the position of an assignee who is the beneficial owner of the chose in action. He has an irrevocable power to sue in his principal's name. . . . And, under the statutes which permit the real party in interest to sue, he can maintain an action in his own name. This power to sue is not affected by a settlement between the principal and the obligor if the latter has notice of the agent's interest. . . . Even though the agent has not settled with his principal, he may, by agreement with the principal, have a right to receive payment and out of the proceeds to reimburse himself for advances and commissions before turning the balance over to the principal. In such a case, although there is no formal assignment, the agent is in the position of a transferee of the whole claim for security; he has an irrevocable power to sue in his principal's name and, under statutes which permit the real party in interest to sue, he can maintain an action in his own name. - Finally, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under the second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds of Absolute Sale "clearly and deliberately" conferring a favor to any third person. *A1311 of the Civil Code, which states: Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by provision of law. . . .
PROF.
If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. - That petitioners did not obtain their commissions or recoup their advances because of the non-performance of the contract did not entitle them to file the action below against NHA. Section 372 (2) of the Restatement of the Law on Agency (Second) states: (2) An agent does not have such an interest in a contract as to entitle him to maintain an action at law upon it in his own name merely because he is entitled to a portion of the proceeds as compensation for making it or because he is liable for its breach. *The following Comment on the subsection 2 is states: The fact that an agent who makes a contract for his principal will gain or suffer loss by the performance or nonperformance of the contract by the principal or by the other party thereto does not entitle him to maintain an action on his own behalf against the other party for its breach. An agent entitled to receive a commission from his principal upon the performance of a contract which he has made on his principal's account does not, from this fact alone, have any claim against the other party for breach of the contract, either in an action on the contract or otherwise. An agent who is not a promisee cannot maintain an action at law against a purchaser merely because he is entitled to have his compensation or advances paid out of the purchase price before payment to the principal. . . . - Hopkins vs. Ives: the Supreme Court of Arkansas, citing Section 372 (2) above, denied the claim of a real estate broker to recover his alleged commission against the purchaser in an agreement to purchase property. - Goduco vs. CA: this Court held that granting that appellant had the authority to sell the property, the same did not make the buyer liable for the commission she claimed. At most, the owner of the property and the one who promised to give her a commission should be the one liable to pay the same and to whom the claim should have been directed. . . . HELD: 2. NO. NHA had no legal basis to "rescind" the sale of the 3 parcels of land. The cancellation, therefore, was not a rescission under A1191. Rather, the cancellation was based on the negation of the cause arising from the realization that the lands, which were the object of the sale, were not suitable for housing. (In short, NHA cancelled it not rescinded it.) Reasoning -Petitioners confuse the cancellation of the contract by the NHA as a rescission of the contract under Article 1191 of the Civil Code. The right of rescission or, more accurately, resolution, of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party that -violates the reciprocity between them. The power to rescind, therefore, is given to the injured party.
Expenses: Through the last three years, herein plaintiffs had consistently and unhesitantly spent reasonable sums of money by way of representations, advances to landowners, advances for the clearing of titles subject of the herein transactions, advances to sub-agents, logistical expenses and lawyer's fees, in the process, they also incurred loans to finance these expenses, total expenses incurred prior to the filing of the present case being estimated at P1.3 million. Defendants should be required to reimburse the plaintiffs for these expenses as shall be proven in the course of the trial.
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- Indeed, the NHA did not have the right to do so for the other parties to the contract, the vendors did not commit any breach, much less a substantial breach of their obligation. Their obligation was merely to deliver the parcels of land to the NHA, an obligation that they fulfilled. The NHA did not suffer any injury by the performance thereof. - (OBLICON REVIEW: Cause is the essential reason which moves the contracting parties to enter into it. In other words, the cause is the immediate, direct and proximate reason which justifies the creation of an obligation through the will of the contracting parties. Cause, which is the essential reason for the contract, should be distinguished from motive, which is the particular reason of a contracting party which does not affect the other party. For example, in a contract of sale of a piece of land, such as in this case, the cause of the vendor (petitioners' principals) in entering into the contract is to obtain the price. For the vendee, NHA, it is the acquisition of the land. The motive of the NHA, on the other hand, is to use said lands for housing. This is apparent from the portion of the Deeds of Absolute Sale. Remember: Liguez vs. CA with JBL REYES: motive may be the causa when it predetermines the purpose of the contract.) - In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the contract were the lands not suitable for housing. In other words, the quality of the land was an implied condition for the NHA to enter into the contract. On the part of the NHA, therefore, the motive was the cause for its being a party to the sale. -The NHA was justified in canceling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent. *Art. 1318. There is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established. - Therefore, assuming that petitioners are parties, assignees or beneficiaries to the contract of sale, they would not be entitled to any award of damages. Disposition: petition is hereby DENIED.
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4.A. REVOCATION BY THE PRINCIPAL (A1920, A1925) 4.A.1. PRINCIPAL REVOCATION AT WILL (A1920) CMS LOGGING INC. V. CA (D.R. AGUINALDO CORP.) GR No. L-41420 NOCON; July 10, 1992
NATURE Petition for review on certiorari of decision of CA FACTS - CMS is engaged in logging. DRACOR exports and sells logs. They entered into contract of agency CMS appointed DRACOR as exclusive export and sales agent for all logs produced for 5 yrs. - 6 mos prior to expiration, CMS President Sison and General Manager / Legal Counsel Dominguez discovered that DRACOR used SHINKO as agent in selling the logs in Japan for which SHINKO earned commission. - CMS claimed that this commission paid to Shinko was in violation of agreement and that it (CMS) is entitled to this amount as part of proceeds of the sale of logs. CMS contended that since DRACOR had been paid 5% commission under the agreement, it is no longer entitled to additional commission paid to Shinko. - After the discovery, CMS directly shipped logs to Japan. - CMS sued DRACOR for commission received by Shinko and for damages. DRACOR counterclaimed for its commission from the sales made by CMS for sales made by CMS to Japanese firms. - TC: No evidence to show that Shinko received the commission. Counterclaim was also dismissed. CMS appealed to CA. - CA affirmed the dismissal. CMS appealed to SC. ISSUE/S 1. WON Shinko received the commission 2. WON DRACOR was entitled to its commission from sales made by CMS directly to Japanese firms. HELD 1. NO. First, this is the CAs finding of fact final and conclusive. Second, while it has been established that Shinko is DRACORs agent, there is no evidence that Shinko did receive the amount as commission from sale of CMS logs. Third, even if Shinko did receive the amount, CMS is still not entitled thereto because these were paid by the buyers to Shinko and not part of the gross sales of CMS logs. 2. NO. Ratio The principal may revoke a contract of agency at will, and such revocation may be express, or implied, and may be availed of even if the period fixed in the contract of agency as not yet expired. As the principal has this absolute right to revoke the agency, the agent can not object thereto; neither may he
PROF.
claim damages arising from such revocation, unless it is shown that such was done in order to evade the payment of agent's commission. Reasoning - CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms. Yet, during the existence of the contract of agency, DRACOR admitted that CMS sold its logs directly to several Japanese firms. This act constituted an implied revocation (Art 1924, CC). - Since the contract of agency was revoked by CMS when it sold its logs to Japanese firms without the intervention of DRACOR, the latter is no longer entitled to its commission from the proceeds of such sale. - Neither would DRACOR be entitled to collect damages from CMS, since damages are generally not awarded to the agent for the revocation of the agency. Disposition Decision appealed from is modified.
BARRETTO V SANTA MARINA G.R. No. L-8169 TORRES; December 29, 1913
NATURE Appeal from the decision of a lower court FACTS - Barretto filed suit against Santa Marina, alleging that the defendant, a resident of Spain, was then the owner and proprietor of the business known as the La Insular Cigar and Cigarette Factory. Plaintiff was the agent of the defendant in the Philippine Islands for the management of the said business in the name and for the account of the said defendant; his services were rendered in pursuance of a contract whereby the defendant obligated himself in writing to hire him for so long a time as the plaintiff should not show discouragement and to compensate such services at the rate of P37k/year. Plaintiff was allegedly removed aribitrarily. - Demand is made in this suit for the payment of salary for services rendered by the plaintiff as agent and manager of the tobacco factory and as an indemnity for losses and damages, on account of the plaintiff's removal without just cause from his position as agent and manager of said factory, effected arbitrarily and in violation of the contract of hire of services between the parties, the plaintiff claiming to be still entitled to hold the position from which he was dismissed. - Defendant set forth that the plaintiff had no contract with the defendant in which any period of time was stipulated during which the former was to render his services as manager of the La Insular factory; and that the defendant revoked for just cause the power conferred upon the plaintiff. Subsequently, he agreed that there was a verbal contract bet plaintiff and his predecessor. - Evidence showed that Barretto's renunciation of the position he held was freely and voluntarily made by him on the occasion of the insolvency and disappearance of the Chinaman Uy Yan, who owing a large debt to the factory, disappeared and has not been seen since. - Court sentenced the defendant to pay to the plaintiff the salary to which he was entitled but not damages. ISSUE
3.B.2.a. EXCEPTIONS (A1918) 3.B.2.b. AGENTS RIGHT OF RETENTION IN PLEDGE (A1914) 3.B.3. INDEMNIFY ALL DAMAGES CAUSED BY EXECUTION OF THE AGENCY WITHOUT FAULT OR NEGLIGENCE (A1913) CHAPTER 4: MODES OF EXTINGUISHMENT OF AGENCY (A1918 et seq)
37

WON any period or term for the duration of the position of agent and manager was fixed in the verbal contract made between the defendant's predecessor in interest, and the plaintiff, a contract which, after predecessor's death was ratified by his brother and heir, the defendant HELD NONE Ratio The contract of agency can subsist only so long as the principal has confidence in his agent, because, from the moment such confidence disappears and although there be a fixed period for the exercise of the office of agent, a circumstance that does not appear in the present case the principal has a perfect right to revoke the power that he had conferred upon the agent owing to the confidence he had in him and which for sound reasons had ceased to exist Reasoning - From the context of the instrument, it can not be concluded that any time whatever was fixed during which the plaintiff should hold his position of agent. The defendant, in executing that instrument, whereby the agreement made between his brother Joaquin and Barretto was ratified, did no more than accord to the plaintiff the same confidence that the defendant's predecessor in interest had in him; and so long as this merely subjective condition of trust lodged in the agent existed, the time during which the latter might hold his office could be considered indefinite or undetermined, but as soon as that indispensable condition of a power of attorney disappeared and the conduct of the agent deceased to inspire confidence, the principal had a right to revoke the power he had conferred upon his agent, especially when the latter, for good reasons, gave up the office he was holding. - Even if there was a period, the principal may revoke the authority anytime pursuant to Art. 1733 of the Civil Code 3 and Article 279 of the Code of Commerce.4 From the mere fact that the principal no longer had confidence in the agent, he is entitled to withdraw it and to revoke the power he conferred upon the latter, even before the expiration of the period of the engagement or of the agreement made between them. - The loan contracted by the agent Barretto, without the approval of the principal, caused a great panic among the stockholders of the factory and that the defendant hoped to allay it by the new measure that he expected to adopt. This, then, was still another reason the induced the principal to withdraw the confidence placed in the plaintiff and to revoke the power he had conferred upon him. - In accordance with the provisions of article 283 of the Code of Commerce, the manager of an enterprise or manufacturing or commercial establishment, authorized to administer it and direct it, with more or less powers, as the owner may have considered advisable, shall have the legal qualifications of an agent.
3
A2010
- Article 300 of the same code prescribes: "The following shall be special reasons for which principals may discharge their employees, even though the time of service of the contract has not elapsed: Fraud or breach of trust in the business entrusted to them." Disposition Judgment affirmed.
PROF.
apartment units. The CA also held that while it may be conceded that the sale to the tenants was a general concern that would have redounded to their benefit, still it cannot be denied that the transaction could not have been effected unless the tenants and the owners came to terms regarding the sale. It appears incumbent upon the tenants to verify from time to time on the progress of the negotiations. Their inaction leads to the impression that they lacked interest to pursue their original plan to purchase the property or they could not agree on the terms and conditions for the sale. ISSUE WON the CA erred in reversing the finding of the trial court that a constructive trust existed between the plaintiffs and the defendant. HELD YES. Ratio Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. Reasoning Implied trusts are those which, without being expressed, are deducible from the nature of the transaction by operation of law as matters of equity, independently of the particular intention of the parties. Constructive trusts are created in order to satisfy the demands of justice and prevent unjust enrichment. They arise against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold. - It is not necessary that the intention of the tenants to purchase their apartments units be categorically stated in the purposes of their Association. A constructive trust can be implied from the nature of the transaction as a matter of equity, regardless of the absence of such intention in the purposes of their Association. - Uy admitted that he was not only representing himself but also the other tenants as president of the Association. This admission recognized the confidence reposed in him by his co-tenants. The incriminating admission of Uy that he had not informed the plaintiffs in the redemption case (the property was heavily encumbered) of the giveaway prices at which the apartment units were sold demonstrated his betrayal of their trust. If only the tenants had been informed of this predicament of the owners, they would have raised the required amount to redeem the property and, in turn, acquired the units being rented by them. - The tenants could not be faulted for not inquiring into the status of the negotiation with the owners of the apartments. They had a right to expect Uy to be true to his duty as their representative and to take the initiative of informing them of the progress of his negotiations. This violation of the trust reposed in him warrants the sanction provided by the equitable rule on which constructive trust is founded. Policarpio (the other plaintiffs failed to perfect their appeal) is granted the opportunity to purchase the property. Disposition Petition is GRANTED. Uy is ORDERED to EXECUTE a deed of conveyance covering Door 8, Lot 14, in favor of Policarpio upon the latter's payment of P35,200 (amount Uy paid to original owners for the unit) without any interest.
4.A.2. PRINCIPAL DIRECTLY MANAGES THE BUSINESS (A1924) POLICARPIO V CA (ROSITO PUECHI UY) 269 SCRA 344 PANGANIBAN; March 7, 1997
NATURE Petition under Rule 45 of the Rules of Court. FACTS - Meynardo Policarpio, along with Rosito Uy, were former tenants of the 30door Barretto Apartments formerly owned by Serapia Realty, Inc. In April 1984, Uy was elected President of the Barretto Tenants Association which was formed to promote, safeguard and protect the general interest and welfare of its members. Uy as president sought the assistance of the then Minister of Human Settlements to cause the expropriation of the property under the Urban Land Reform Program for subsequent resale to its tenants. Failing to get the assistance of the government, the tenants undertook to negotiate directly with the owner. - The tenants designated Uy as their president to negotiate. But the negotiations apparently did not ripen into a perfected sale. One and a half years later, on March 1987, the tenants were notified that Rosito Uy was the new owner of the apartment units occupied by them. Believing that they had been betrayed by their Association president, they sued for "Redemption and Damages with Prayer For Preliminary Injunction." - Uy counter-sued for Damages and Accion Publiciana with Preliminary Attachment. He alleged that upon denial of the tenants' request for expropriation by the Ministry of Human Settlements, and the revelation that Barretto's apartments were heavily encumbered, tenants completely abandoned the plan to organize a formal association (they did not registerwith the SEC). Assuming that the informal Association created a relationship among the parties, the same ceased and expired by virtue of the act of the owners of the apartment who directly deal with the tenants under Article 1924 of the Civil Code. - Joint trial of the two cases ensued. The trial court found that Uy had been designated and entrusted by plaintiffs to negotiate with the Barretto family for the sale of the units. It also found that a constructive trust was created between Uy as trustee and plaintiffs as beneficiaries [or cestuis que trust] vis-a-vis the subject units. The trial court ordered Uy to execute deeds of conveyance in favor of plaintiffs. - The CA, however, reversed holding that the contemporary and subsequent acts of the parties fail to convince that a constructive trust exists for the benefit of the tenants. A reading of the Articles of Incorporation of the Association shows that the purpose for its formation is couched in general terms without specifically stipulating the proposed purchase and sale of the
The principal may, at his will, revoke the power and compel the agent to return the instrument containing the same in which the authority was given. 4 The principal may revoke the commission intrusted to an agent at any stage of the transaction, advising him thereof, but always being liable for the result of the transactions which took place before the latter was informed of the revocation.
38

4.A.3. PRINCIPAL APPOINTS NEW AGENT FOR SAME BUSINESS (A1923) 4.A.4. PRINCIPALS ISSUANCE OF SPA TO ANOTHER AGENT PREVAILS OVER GENERAL POWER OF ATTORNEY PREVIOUSLY GIVEN (A1926) 4.A.5. WHEN REVOCATION CANNOT BE MADE; AGENCY COUPLED WITH AN INTEREST (A1927) LIM V. SABAN G.R. NO. 163720 TINGA; DEC. 16, 2004
A2010
- RTC dismissed Sabans complaint. CA reversed the RTCts ruling and held that Saban was entitled to his commission amounting to P236,743.00. Lims MOR was denied by the CA. Lim filed the present petition. ISSUES 1.) WON Saban is entitled to receive his commission from the sale. HELD YES. - The agency was not revoked since Ybaez requested that Lim make stop payment orders for the checks payable to Saban only after the consummation of the sale. At that time, Saban had already performed his obligation as Ybaezs agent when, through his efforts, Ybaez executed the Deed of Absolute Sale of the lot with Lim and the Spouses Lim. - To deprive Saban of his commission subsequent to the sale which was consummated through his efforts would be a breach of his contract of agency with Ybaez which expressly states that Saban would be entitled to any excess in the purchase price after deducting the P200,000.00 due to Ybaez and the transfer taxes and other incidental expenses of the sale. The broker has the right to his commission for finding a suitable buyer for the sellers property even though the seller himself consummated the sale with the buyer.It would be in the height of injustice to permit the principal to terminate the contract of agency to the prejudice of the broker when he had already reaped the benefits of the brokers efforts. - Court does not agree with the appellate courts pronouncement that Sabans agency was one coupled with an interest. Under Article 1927 of the Civil Code, an agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. Stated differently, an agency is deemed as one coupled with an interest where it is established for the mutual benefit of the principal and of the agent, or for the interest of the principal and of third persons, and it cannot be revoked by the principal so long as the interest of the agent or of a third person subsists. In an agency coupled with an interest, the agents interest must be in the subject matter of the power conferred and not merely an interest in the exercise of the power because it entitles him to compensation. When an agents interest is confined to earning his agreed compensation, the agency is not one coupled with an interest, since an agents interest in obtaining his compensation as such agent is an ordinary incident of the agency relationship. Disposition Petition is DISMISSED.
PROF.
FACTS - Jose dela Pena Y de Ramon, plaintiff, is the administrator of the estate of Jose Dela Pena Y Gomiz, principal. Francisco Hidalgo, defendant, is the agent. - Plaintiff filed a complaint with the court for 4 instances where the defendant allegedly misappropriated sums of money belonging to the principal amounting to more than 85k plus interest. - Defendant denies the allegations and avers that prior to the said date of March 22, the defendant came, rendered accounts to his principal, and on the date when he embarked for Spain rendered the accounts pertaining to the years 1892 and 1893, which were those that yet remained to be forwarded, and transmitted to him a general statement of accounts embracing the period from November 18, 1887, to December 31, 1893, with a balance of 6,774.50 pesos in favor of Pea y Gomiz, which remained in the control of the acting administrator, Antonio Hidalgo; that from the 22nd of March, 1894, when the defendant left these Islands, to the date of his answer to the said complaint, he has not again intervened nor taken any part directly or indirectly in the administration of the property of Pea y Gomiz, the latter's administrator by express authorization having been Antonio Hidalgo, from January 1, 1894, to October, 1902, who, on this latter date, delegated his powers to Francisco Hidalgo, who in turn administered the said property until January 7, 1904; that the defendant, notwithstanding his having rendered, in 1894, all his accounts to Jose Pea y Gomiz, again rendered to the plaintiff in 1904 those pertaining to the period from 1887 to December 31, 1893, which accounts the plaintiff approved without any protest whatever and received to his entire satisfaction the balance due and the vouchers and documents and documents relating to the property of the deceased Pea y Gomiz and issued to the defendant the proper acquaintance therefor. ISSUE WON the defendant effectively renounced the agency HELD YES Ratio From the procedure followed by the agent, Federico Hidalgo, it is logically inferred that he had definitely renounced his agency and that the agency was duly terminated, according to the provisions of article 1732 of the Civil Code, because, although in the said letter of March 22, 1894, the word "renounce" was not employed in connection with the agency or power of attorney executed in his favor, yet when the agent informs his principal that for reasons of health and by medical advice he is about to depart from the place where he is exercising his trust and where the property subject to his administration is situated, abandons the property, turns it over a third party, without stating when he may return to take charge of the administration, renders accounts of its revenues up to a certain date, December 31, 1893, and transmits to his principal a general statement which summarizes and embraces all the balances of his accounts since he began to exercise his agency to the date when he ceased to hold his trust, and asks that a power of attorney in due form be executed and transmitted to another person who substituted him and took charge of the administration of the principal's property, it is then reasonable and just to conclude that the
NATURE Petition for Review on Certiorari assailing the Decision of the CA. FACTS - Ybaez, owner a lot in Cebu City entered into an Agreement and Authority to Negotiate and Sell (Agency Agreement) with respondent Saban which authorized Saban to look for a buyer of the lot for P200,000.00 and to mark up the selling price to include the amounts needed for payment of taxes, transfer of title and other expenses incident to the sale, as well as Sabans commission for the sale. - Through Sabans efforts, Ybaez and his wife were able to sell the lot to the petitioner Genevieve Lim (Lim) and the spouses Benjamin and Lourdes Lim (the Spouses Lim). The price of the lot as indicated in the Deed of Absolute Sale is P200,000.00. It appears, however, that the vendees agreed to purchase the lot at the price P600,000.00, inclusive of taxes and other incidental expenses of the sale. After the sale, Lim remitted to Saban the amounts of P113,257.00 for payment of taxes due on the transaction as well as P50,000.00 as brokers commission. Lim also issued in the name of Saban four postdated checks in the aggregate amount of P236,743.00. Ybaez sent a letter to Lim asking Lim to cancel all the checks issued by her in Sabans favor and to "extend another partial payment" for the lot in his Ybaezs favor. - After the four checks in his favor were dishonored upon presentment, Saban filed a Complaint for collection of sum of money and damages against Ybaez and Lim with the RTC of Cebu City. Saban averred that Ybaez and Lim connived to deprive him of his sales commission by withholding payment of the first three checks. He also claimed that Lim failed to make good the fourth check which was dishonored because the account against which it was drawn was closed. - In his Answer, Ybaez claimed that Saban was not entitled to any commission because he concealed the actual selling price from him and because he was not a licensed real estate broker. Lim, for her part, argued that she was not privy to the agreement between Ybaez and Saban. - Ybaez died during the pendency of the case before the RTC. TC dismissed the case only against him.
DELA RAMA STEAMSHIP CO INC. V TAN GR NO. L-8784 4.B. WITHDRAWAL BY AGENT (A1920, A1928, A1929) DELA PENA V HIDALGO 16 PHIL 450 TORRES; August 17, 1910
39

said agent expressly and definitely renounced his agency, and it may not be alleged that the designation of Antonio Hidalgo to take charge of the said administration was that of a mere proceed lasted for more than fifteen years, for such an allegation would be in conflict with the nature of the agency. Reasoning Moreover, the act was confirmed by the principal in not disapproving the designation of Antonio Hidalgo nor did he appoint another, nor send a new power of attorney to the same, as he was requested to by the previous administrator who abandoned his charge. Disposition The judgment appealed from, together with that part thereof relative to the statement it contains concerning the equivalence between the Philippine peso and the Mexican peso, is affirmed in so far as it is in agreement with the findings of this decision, and the said judgment is reversed in so far as it is not in accordance herewith. No special finding is made as to costs assessed in either instance, and to the plaintiff is reserved any right that he may be entitled to enforce against Antonio Hidalgo.
A2010
- Two days after the execution of the basic agreement, Claparols executed in favor of Coleongco, at the latter's behest a SPA to open and negotiate letters of credit, to sign contracts, bills of lading, invoices, and papers covering transactions; to represent Claparols and the nail factory; and to accept payments and cash advances from dealers and distributors. - Thereafter, Coleongco also became the assistant manager of the factory, and took over its business transactions, while Claparols devoted most of his time to the nail manufacture processes. - Claparols was served an alias writ of execution to enforce a judgment obtained against him by the PNB, despite the fact that on the preceding September he had submitted an amortization plan to settle the account. - He learned to his dismay that the execution had been procured because of derogatory information against him by Coleongco. - Apparently, the latter, without his knowledge, had written to the bank in connection with the verbal offer for the Coleongcos acquisition of the whole interest of Claparols in the Claparols Steel & Nail Plant and the Claparols Hollow Blocks Factory"; - Later, Coleongco had written again the bank another letter, also behind the back of, wherein Coleongco charged Claparols with taking machines mortgaged to the bank, and added that Claparols was not serious in meeting his obligations with the bank. - Fortunately, Claparols managed to arrange matters with the bank and to have the execution levy lifted. - Claparols revoked the power of attorney and informed Coleongco thereof by registered mail, demanding a full accounting at the same time. - He also, through a letter, dismissed Coleongco as assistant manager of the plant and asked C. Miller & Company, auditors, to go over the books and records of the business with a view to adjusting the accounts of the associates. - The examination by the auditors, summarized infound that Coleongco owed the Claparols Nail Factory the amount of P87,387.37, as of June 30, 1957. - As the parties could not amicably settle their accounts, Coleongco filed a suit against Claparols charging breach of contract, asking for accounting, and praying for P528,762.19 as damages, and attorney's fees (the nerve di ba?) - Claparols answered, denying the charge, and counter-claiming for the rescission of the agreement with Coleongco for P561,387.99 by way of damages. - RTC: decided in favor of Claparols ISSUES: 1. WON the SPA was made to protect Coleongco s interest under the financing agreement and was irrevocable 2. WON the RTC erred in dismissing Coleongo's action for damages, and ordering him to pay defendant Eduardo Claparols the amount of P81,387.27 plus legal interest from the filing of the counterclaim till payment thereof; P50,000 as moral and compensatory damages suffered by defendant; and costs. HELD: 1.No Reasoning
PROF.
- The financing agreement itself already contained clauses for the protection of appellant's interest, and did not call for the execution of any power of attorney in favor of Coleongco. It must not be forgotten that a power of attorney can be made irrevocable by contract only in the sense that the principal may not recall it at his pleasure; but coupled with interest or not, the authority certainly can be revoked for a just cause, such as when the attorney-in-fact betrays the interest of the principal, as happened in this case. - It is not open to serious doubt that the irrevocability of the power of attorney may not be used to shield the perpetration of acts in bad faith, breach of confidence, or betrayal of trust, by the agent for that would amount to holding that a power coupled with an interest authorizes the agent to commit frauds against the principal. - A1172: prescribes that responsibility arising from fraud is demandable in all obligations, and that any waiver of action for future fraud is void. - A1800: declares that the powers of a partner, appointed as manager, in the articles of co-partnership are irrevocable without just or lawful cause; and an agent with power coupled with an interest can not stand on better ground than such a partner in so far as irrevocability of the power is concerned. - Coleongco acted in bad faith towards his principal Claparols as evidenced by his letters to the PNB attempting to undermine the credit of the principal and to acquire the factory of the latter, without the principal's knowledge; (court further cited acts of deliberate sabotage by the agent) that fully justified the revocation of the power of attorney 2. No. Reasoning - The record shows that the Coleongco likewise breached his part of the contract. Instead of putting up all the necessary money needed to finance the imports of raw material, Coleongco merely advanced 25% in cash on account of the price and had the balance covered by surety agreements executed by Claparols and others as solidary, (joint and several) guarantors. - The upshot of this arrangement was that Claparols was made to shoulder 3/4 of the payment for the imports, contrary to the financing agreement. - Par. 11 of the latter expressly denied Coleongco any power or authority to bind Claparols without previous consultation and authority. - When the balances for the cost of the importations became due, Coleongco, in some instances, paid it with the dealers' advances to the nail factory against future sales without the knowledge of Claparols. Under paragraphs 8 and 11 of the financing agreement, Coleongco was to give preference to the operating expenses before sharing profits, so that until the operating costs were provided for, Coleongco had no right to apply the factory's income to pay his own obligations. - It also appeared that the company was able to finance the importation of the nail wires without Coleongcos help. - Coleongco (who had the control of the factory's cash and bank deposits, under Paragraph 11) never liquidated and paid in full to Claparols his half of the profits. - No error was, therefore, committed by the RTC in declaring the financing contract properly resolved by Claparols or in rendering judgment against appellant in favor of appellee for the said amount of P81,387.37.
VALERA V VELASCO GR NO. 28050 4.C. DEATH, CIVIL INTERDICTION, INSANITY, OR INSOLVENCY OF PRINCIPAL OR AGENT (A1930, A1931, A1932) VICENTE M. COLEONGCO v. EDUARDO L. CLAPAROLS GR NO. L-18616 REYES; March 31, 1964
NATURE Appeal FACTS: - A contract was perfected between Claparols and Coleongco whereby Coleongco undertook to finance and put up the funds required for the importation of the nail wire, which Claparols bound himself to convert into nails at his plant. - It was agreed that Coleongco would have the exclusive distribution of the product, and the "absolute care in the marketing of these nails and the promotion of sales all over the Philippines", except the Davao Agency; that Coleongco would "share the control of all the cash" from sales or deposited in banks; that he would have a representative in the management; that all contracts and transactions should be jointly approved by both parties; that proper books would be kept and annual accounts rendered; and that profits and losses would be shared "on a 5050 basis". - The contract was renewed from one year to year until 1958, and Coleongco's share subsequently increased by 5% of the net profit of the factory.
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- The basic rule of contracts requires parties to act loyally toward each other in the pursuit of the common end, and appellant clearly violated the rule of good faith prescribed by Art. 1315 of the new Civil Code. Disposition The decision appealed from is affirmed. Costs against appellant Vicente Coleongco
A2010
- Article 1930 is not involved because admittedly the special power of attorney executed in favor of Simeon Rallos was not coupled with an interest. Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his principal is valid and effective only under two conditions, viz: (1) that the agent acted without knowledge of the death of the principal and (2) that the third person who contracted with the agent himself acted in good faith. Good faith here means that the third person was not aware of the death of the principal at the time he contracted with said agent. These two requisites must concur the absence of one will render the act of the agent invalid and unenforceable. - In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his principal at the time he sold the latter's share in the lot to respondent corporation. The knowledge of the death is clearly to be inferred from the pleadings filed by Simon Rallos before the trial court. That Simeon Rallos knew of the death of his sister Concepcion is also a finding of fact of the court a quo and of respondent appellate court when the latter stated that Simon Rallos 'must have known of the death of his sister, and yet he proceeded with the sale of the lot in the name of both his sisters Concepcion and Gerundia Rallos without informing appellant (the realty corporation) of the death of the former. On the basis of the established knowledge of Simon Rallos concerning the death of his principal Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for its application lack of knowledge on the part of the agent of the death of his principal; it is not enough that the third person acted in good faith. Disposition Decision of respondent appellate courtis set aside, judgment rendered by the CFi affirmed in toto
PROF.
P 38,600 on July 2, 1979 P 25,000 on June 2, 1980 - Lustan didnt know of the last 3 loans and all the proceeds of these (totaling P 101,600) went to, and was used by, Parangan - All of the loans (encumbrances) were duly annotated in the Certificate of Title of Lot 8069 - April 16, 1973: Lustan signed a Deed of Pacto de Retro Sale in favor of Parangan - May 4, 1979: a Deed of Definite Sale was executed by Lustan in favor of Parangan - Lustan signed the Deed upon Parangans representation that it is merely an evidence of the loans that the latter extended to her - However, under the document, Lustan conveyed Lot 8069 and all improvements to Parangan for P 75,000 - Lustan became afraid that the property might be prejudiced by Parangans continued borrowing - She demanded that the certificate of title be returned to her - Parangan didnt comply and instead asserted his rights over the property - This alleged right over the property stems from the Deed of Definite Sale executed on May 4, 1979 - Lustan filed an action for: Cancellation of liens Quieting of title Recovery of possession Damages against Parangan and the PNB - Iloilo RTC ruled in favor of Lustan - Cancelled the unauthorized encumbrances annotated in TCT of Lot 8069 - Declared the Deeds of Pacto de Retro Sale and of Definite Sale as null and void; declared the 2 documents as Deeds of Equitable Mortgage - Ordered Parangan to: pay all the unauthorized loans he obtained from PNB using Lustans lot as collateral; return possession of the lot in question upon Lustans payment of P 75,000; pay attorneys fees and cost of the suit - CA reversed RTC ISSUES 1. WON the Deed of Definite Sale is an equitable mortgage 2. WON the loans obtained by Parangan using the SPA were valid making Lustans property liable to PNB HELD 1. YES. Reasoning In this case, the evidence show that Parangan merely intended to consolidate Lustans indebtedness to him in a single instrument and to secure it with the lot in question - According to 1602, If any 1 of the instances below are present, then a contract shall be presumed as an equitable mortgage: 1. When the price of a sale with right to repurchase is unusually inadequate; 2. When the vendor remains in possession as lessor or otherwise; 3. When upon or after the expiration of the right to repurchase, another instrument extending the period of redemption or granting a new period is executed; 4. When the vendor binds himself to pay the taxes on the thing sold;
RALLOS V FELIX GO CHAN & SONS REALTY CORP. G.R. No. L-24332 MUNOZ PALMA; January 31, 1978
NATURE Petition for review on certiorari FACTS - Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of in Cebu. On April 21, 1954, the sisters executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf the said lot. On March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia in the lot to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. The deed of sale was registered in the Registry of Deeds of Cebu. - On May 18, 1956, the administrator of the estate, Ramon Rallos, filed a case before the CFI to have the sale declared unenforceable and to recover the disposed share. The trial court granted the relief prayed for, but upon appeal the Court of Appeals upheld the validity of the sale and the complaint. Hence, this Petition. ISSUE WON the sale of the undivided share of Concepcion Rallos in the lot was valid although it was executed by the agent after the death of his principal. HELD NO Reasoning - Article 1919 of the Civil Code provides: ART. 1919. Agency is extinguished. xxx xxx xxx 3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ... (Emphasis supplied) - Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned: ART. 1930. The agency shall remain in full force and effect even after the death of the principal, 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. Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good. faith.
4.D. DISSOLUTION OF THE FIRM OR CORPORATION WHICH ENTRUSTED OR ACCEPTED THE AGENCY (A1921) LUSTAN v. CA, PARANGAN, PNB G.R. No, 111924 FRANCISCO, J.; January 27, 1997
FACTS - Adoracion Lustan leased Lot 8069 to Nicolas Parangan Term: 10 years Annual rent: P1,000 - During the lease, Parangan was regularly extending loans in small amounts to Lustan to finance her daughters education and to defray her daily expenses - SPA # 1: Executed by Lustan in favor of Parangan on July 29, 1970 to secure an agricultural loan from Philippine National Bank Collateral: Lot 8069 - SPA # 2: Executed by Lustan in favor of Parangan on February 18, 1972. Through this SPA, Parangan was able to secure 4 additional loans from PNB in the ff amounts P 24,000 on December 15, 1975 P 38,000 on September 6, 1976
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5. When the purchaser retains for himself a part of the purchase price; 6. In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. - In this case, the relevant circumstance is # 6 o Lustan didnt know that the contract she signed was a deed of sale o She is illiterate and yet the contents were not read nor explained to her o She merely relied on Parangans assurance that the contract was merely evidence of her indebtedness there was no intent to convey the property 2. YES. - 3rd persons may use their own properties to secure loans obtained by other people so long as they give consent in which case, the mortgaged property is subject to execution and sale for the purpose of paying the amount of the debt for which it is liable even if the 3 rd party is foreign to the loan agreement - Even if Lustan didnt benefit from the loans (secured by the mortgage of her property) obtained by Parangan, the mortgage remains valid - By giving consent, the property will still secure and respond for the performance of the principal obligation - The CONSENT in this case was given through the SPA executed by Lustan in favor of Parangan - Lustan argues that the last 3 mortgages were void since she didnt authorize them this argument must fail - SPAs are continuing and absent a valid revocation duly furnished to the mortgagee (in this case, PNB), they remain to have force and effect as against 3rd persons who had no knowledge of such lack of Authority - Controlling law is Art.1921 of the Civil Code which provides: If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof. - The SPA executed by Lustan authorized Parangan to represent and act in her behalf in effect, she gave Parangan authority to deal with PNB in her behalf - Without proof that PNB knew that the last 3 loans were without the express authority of Lustan, the mortgages remain valid and cannot be prejudiced - As far as 3rd persons are concerned, an act is deemed to have been performed within the scope of the agent's authority if such is within the terms of the power of attorney as written even if the agent has in fact exceeded the limits of his authority according to the understanding between the principal and the agent. - In this case, the SPA provides: That it is good for: The principal loan (the 1st loan obtained with Lustans knowledge) And also for subsequent commercial, industrial, agricultural loan or credit accommodation that the attorney-in-fact may obtain - That the power of attorney subsists until it is revoked in a public instrument and a copy is furnished to PNB - Even if the agent exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers.
A2010
- In this case, Lustan has an unquestionable right to demand proportional indemnification from Parangan in case her property is sold to satisfy the unpaid debts to PNB by virtue of the mortgage Disposition RTCs judgment is REINSTATED with the following MODIFICATIONS: 1. Declaring the deed of definite sale as an equitable mortgage 2. Ordered Parangan to return the possession of Lot 8069 to Lustan upon her payment of P 750,000 w/in 90 days from receipt of SCs decision 3. Declared the mortgages in favor of PNB as valid and subsisting and may be subjected to execution sale 4. Ordered Parangan to pay Lustan Attorneys fees and costs of the suit
PROF.
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