E.

Capacity of the Agent must be able to bind himself insofar as his obligations to his principal are
concerned.
F. Distinctions from Other Contracts:
i) Lease of Services/Employment Art. 1644;
Art. 1644. In the lease of work or service, one of the parties binds himself to execute a piece of work or to
render to the other some service for a price certain, but the relation of principal and agent does not exist
between them.
- Cesar Lirio, doing business under the name Celkor Ad Sonicmix v. Genovia, 661 SCRA 126
[2011]
Facts:

On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner Cesar Lirio
and/or Celkor Ad Sonicmix Recording Studio for illegal dismissal, non-payment of commission and award of
moral and exemplary damages.
In his Position Paper,[1] respondent Genovia alleged, among others, that on August 15, 2001, he
was hired as studio manager by petitioner Lirio, owner of Celkor Ad Sonicmix Recording Studio (Celkor). He
was employed to manage and operate Celkor and to promote and sell the recording studio's services to
music enthusiasts and other prospective clients. He received a monthly salary of P7,000.00. They also
agreed that he was entitled to an additional commission of P100.00 per hour as recording technician
whenever a client uses the studio for recording, editing or any related work. He was made to report for
work from Monday to Friday from 9:00 a.m. to 6 p.m. On Saturdays, he was required to work half-day only,
but most of the time, he still rendered eight hours of work or more. All the employees of petitioner,
including respondent, rendered overtime work almost everyday, but petitioner never kept a daily time
record to avoid paying the employees overtime pay.
Respondent stated that a few days after he started working as a studio manager, petitioner
approached him and told him about his project to produce an album for his 15-year-old daughter, Celine
Mei Lirio, a former talent of ABS-CBN Star Records. Petitioner asked respondent to compose and arrange
songs for Celine and promised that he (Lirio) would draft a contract to assure respondent of his
compensation for such services. As agreed upon, the additional services that respondent would render
included composing and arranging musical scores only, while the technical aspect in producing the album,
such as digital editing, mixing and sound engineering would be performed by respondent in his capacity
as studio manager for which he was paid on a monthly basis. Petitioner instructed respondent that his
work on the album as composer and arranger would only be done during his spare time, since his other
work as studio manager was the priority. Respondent then started working on the album.
Respondent alleged that before the end of September 2001, he reminded petitioner about his
compensation as composer and arranger of the album. Petitioner verbally assured him that he would be
duly compensated. By mid-November 2001, respondent finally finished the compositions and musical
arrangements of the songs to be included in the album. Before the month ended, the lead and back-up
vocals in the ten (10) songs were finally recorded and completed. From December 2001 to January 2002,
respondent, in his capacity as studio manager, worked on digital editing, mixing and sound engineering of
the vocal and instrumental audio files.
Thereafter, respondent was tasked by petitioner to prepare official correspondence, establish
contacts and negotiate with various radio stations, malls, publishers, record companies and
manufacturers, record bars and other outlets in preparation for the promotion of the said album. By early
February 2002, the album was in its manufacturing stage. ELECTROMAT, manufacturer of CDs and
cassette tapes, was tapped to do the job. The carrier single of the album, which respondent composed and
arranged, was finally aired over the radio on February 22, 2002.
On February 26, 2002, respondent again reminded petitioner about the contract on his
compensation as composer and arranger of the album. Petitioner told respondent that since he was
practically a nobody and had proven nothing yet in the music industry, respondent did not deserve a high
compensation, and he should be thankful that he was given a job to feed his family. Petitioner informed
respondent that he was entitled only to 20% of the net profit, and not of the gross sales of the album, and
that the salaries he received and would continue to receive as studio manager of Celkor would be
deducted from the said 20% net profit share. Respondent objected and insisted that he be properly
compensated. On March 14, 2002, petitioner verbally terminated respondents services, and he was
instructed not to report for work.

Respondent asserts that he was illegally dismissed as he was terminated without any valid
grounds, and no hearing was conducted before he was terminated, in violation of his constitutional right to
due process. Having worked for more than six months, he was already a regular employee. Although he
was a so called studio manager, he had no managerial powers, but was merely an ordinary employee.
Respondent prayed for his reinstatement without loss of seniority rights, or, in the alternative, that
he be paid separation pay, backwages and overtime pay; and that he be awarded unpaid commission in
the amount of P2,000.00 for services rendered as a studio technician as well as moral and exemplary
damages.
Respondents evidence consisted of the Payroll dated July 31, 2001 to March 15, 2002, which was
certified correct by petitioner,[2] and Petty Cash Vouchers[3] evidencing receipt of payroll payments by
respondent from Celkor.
In defense, petitioner stated in his Position Paper [4] that respondent was not hired as studio
manager, composer, technician or as an employee in any other capacity of Celkor. Respondent could not
have been hired as a studio manager, since the recording studio has no personnel except petitioner.
Petitioner further claimed that his daughter Celine Mei Lirio, a former contract artist of ABS-CBN Star
Records, failed to come up with an album as the latter aborted its project to produce one. Thus, he decided
to produce an album for his daughter and established a recording studio, which he named Celkor Ad
Sonicmix Recording Studio. He looked for a composer/arranger who would compose the songs for the said
album. In July 2001, Bob Santiago, his son-in-law, introduced him to respondent, who claimed to be an
amateur composer, an arranger with limited experience and musician without any formal musical training.
According to petitioner, respondent had no track record as a composer, and he was not known in the field
of music. Nevertheless, after some discussion, respondent verbally agreed with petitioner to co-produce
the album based on the following terms and conditions: (1) petitioner shall provide all the financing,
equipment and recording studio; (2) Celine Mei Lirio shall sing all the songs; (3) respondent shall act as
composer and arranger of all the lyrics and the music of the five songs he already composed and the
revival songs; (4) petitioner shall have exclusive right to market the album; (5) petitioner was entitled to
60% of the net profit, while respondent and Celine Mei Lirio were each entitled to 20% of the net profit;
and (6) respondent shall be entitled to draw advances of P7,000.00 a month, which shall be deductible
from his share of the net profits and only until such time that the album has been produced.
According to petitioner, they arrived at the foregoing sharing of profits based on the mutual
understanding that respondent was just an amateur composer with no track record whatsoever in the
music industry, had no definite source of income, had limited experience as an arranger, had no
knowledge of the use of sound mixers or digital arranger and that petitioner would help and teach him how
to use the studio equipment; that petitioner would shoulder all the expenses of production and provide the
studio and equipment as well as his knowledge in the use thereof; and Celine Mei Lirio would sing the
songs. They embarked on the production of the album on or about the third week of August 2002.
Petitioner asserted that from the aforesaid terms and conditions, his relationship with respondent is
one of an informal partnership under Article 1767 [5] of the New Civil Code, since they agreed to contribute
money, property or industry to a common fund with the intention of dividing the profits among themselves.
Petitioner had no control over the time and manner by which respondent composed or arranged the songs,
except on the result thereof. Respondent reported to the recording studio between 10:00 a.m. and 12:00
noon. Hence, petitioner contended that no employer-employee relationship existed between him and the
respondent, and there was no illegal dismissal to speak of.
On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a decision, [6] finding that an
employer-employee relationship existed between petitioner and respondent, and that respondent was
illegally dismissed.
The Labor Arbiter stated that petitioners denial of the employment relationship cannot overcome
respondents positive assertion and documentary evidence proving that petitioner hired respondent as his
employee.[8]
Petitioner appealed the decision of the Labor Arbiter to the National Labor Relations Commission
(NLRC).

In a Resolution7 dated October 14, 2004, the NLRC reversed and set aside the decision of the Labor
Arbiter.
The NLRC stated that respondent failed to prove his employment tale with substantial evidence.
Although the NLRC agreed that respondent was able to prove that he received gross pay less deduction
and net pay, with the corresponding Certification of Correctness by petitioner, covering the period from
July 31, 2001 to March 15, 2002, the NLRC held that respondent failed to proved with substantial evidence
that he was selected and engaged by petitioner, that petitioner had the power to dismiss him, and that
they had the power to control him not only as to the result of his work, but also as to the means and
methods of accomplishing his work.
Respondents motion for reconsideration was denied by the NLRC in a Resolution 9 dated December
14, 2004.
Respondent filed a petition for certiorari before the Court of Appeals.
On August 4, 2005, the Court of Appeals rendered a decision [10] reversing and setting aside the
resolution of the NLRC, and reinstating the decision of the Labor Arbiter, with modification in regard to the
award of commission and damages. The Court of Appeals deleted the award of commission, and moral and
exemplary damages as the same were not substantiated.
Petitioners motion for reconsideration was denied for lack of merit by the Court of Appeals in its
Resolution[12] dated September 21, 2005.
Hence, petitioner Lirio filed this petition.
Between the documentary evidence presented by respondent and the mere allegation of petitioner
without any proof by way of any document evincing their alleged partnership agreement, the Court of
Appeals agreed with the Labor Arbiter that petitioner failed to substantiate his claim that he had a
partnership with respondent, citing the Labor Arbiters finding, thus:
In this case, complainant's evidence is substantial enough to prove the employment
relationship that on August 14, 2001, he was hired as 'Studio manager' by respondent Lirio
to manage and operate the recording studio and to promote and sell its services to music
enthusiasts and clients, proven by his receipt for this purpose from said respondent a fixed
monthly compensation of P7,000.00, with commission of P100.00 per hour when serving as
recording technician, shown by the payroll from July 31, 2001-March 15, 2002. The said
evidence points to complainant's hiring as employee so that the case comes within the
purview of our jurisdiction on labor disputes between an employer and an employee. x x x.
Respondent Lirio's so-called existence of a partnership agreement was not
substantiated and his assertion thereto, in the face of complainant's evidence,
constitute but a self-serving assertion, without probative value, a mere
invention to justify the illegal dismissal.
xxxx
Indeed, we find credible that what caused complainant's dismissal on March 14, 2002
was due to his refusal to respondent's Lirio's insistences on merely giving him 20% based on
net profit on sale of the album which he composed and arranged during his free time and,
moreover, that salaries which he received would be deducted therefrom, which obviously,
soured the relations from the point of view of respondent Lirio. [23]
Hence, based on the finding above and the doctrine that if doubt exists between the evidence
presented by the employer and the employee, the scales of justice must be tilted in favor of the latter,
[24]
the Court of Appeals reversed the resolution of the NLRC and reinstated the decision of the Labor
Arbiter with modification. Even if the Court of Appeals was remiss in not stating it in definite terms, it is
implied that the Court of Appeals found that the NLRC gravely abused its discretion in finding that no
employer-employee relationship existed between petitioner and respondent based on the evidence on
record.
We now proceed to the main issue raised before this Court: Whether or not the decision of the
Court of Appeals is in accordance with law, or whether or not the Court of Appeals erred in

reversing and setting aside the decision of the NLRC, and reinstating the decision of the Labor
Arbiter with modification.
In petitions for review, only errors of law are generally reviewed by this Court. This rule, however, is
not ironclad.[25] Where the issue is shrouded by a conflict of factual perceptions by the lower court or the
lower administrative body, in this case, the NLRC, this Court is constrained to review the factual findings of
the Court of Appeals.[26]
Before a case for illegal dismissal can prosper, it must first be established that an employeremployee relationship existed between petitioner and respondent. [27]
The elements to determine the existence of an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers
power to control the employees conduct. The most important element is the employers control of the
employees conduct, not only as to the result of the work to be done, but also as to the means and methods
to accomplish it.[28]
It is settled that no particular form of evidence is required to prove the existence of an employeremployee relationship.[29] Any competent and relevant evidence to prove the relationship may be admitted.
[30]

In this case, the documentary evidence presented by respondent to prove that he was an employee
of petitioner are as follows: (a) a document denominated as "payroll" (dated July 31, 2001 to March 15,
2002) certified correct by petitioner,[31] which showed that respondent received a monthly salary
of P7,000.00 (P3,500.00 every 15th of the month and another P3,500.00 every 30th of the month) with the
corresponding deductions due to absences incurred by respondent; and (2) copies of petty cash vouchers,
[32]
showing the amounts he received and signed for in the payrolls.
The said documents showed that petitioner hired respondent as an employee and he was paid
monthly wages of P7,000.00. Petitioner wielded the power to dismiss as respondent stated that he was
verbally dismissed by petitioner, and respondent, thereafter, filed an action for illegal dismissal against
petitioner. The power of control refers merely to the existence of the power. [33] It is not essential for the
employer to actually supervise the performance of duties of the employee, as it is sufficient that the
former has a right to wield the power. [34] Nevertheless, petitioner stated in his Position Paper that it was
agreed that he would help and teach respondent how to use the studio equipment. In such case,
petitioner certainly had the power to check on the progress and work of respondent.
On the other hand, petitioner failed to prove that his relationship with respondent was one of
partnership. Such claim was not supported by any written agreement. The Court notes that in the payroll
dated July 31, 2001 to March 15, 2002,[35] there were deductions from the wages of respondent for his
absence from work, which negates petitioners claim that the wages paid were advances for respondents
work in the partnership. In Nicario v. National Labor Relations Commission,[36] the Court held:
It is a well-settled doctrine, that if doubts exist between the evidence presented by
the employer and the employee, the scales of justice must be tilted in favor of the latter. It is
a time-honored rule that in controversies between a laborer and his master, doubts
reasonably arising from the evidence, or in the interpretation of agreements and writing
should be resolved in the formers favor. The policy is to extend the doctrine to a greater
number of employees who can avail of the benefits under the law, which is in consonance
with the avowed policy of the State to give maximum aid and protection of labor. This rule
should be applied in the case at bar, especially since the evidence presented by the private
respondent company is not convincing. x x x[37]
Based on the foregoing, the Court agrees with the Court of Appeals that the evidence presented by
the parties showed that an employer-employee relationship existed between petitioner and respondent.
In termination cases, the burden is upon the employer to show by substantial evidence that the
termination was for lawful cause and validly made.[38] Article 277 (b) of the Labor Code[39] puts the burden
of proving that the dismissal of an employee was for a valid or authorized cause on the employer, without
distinction whether the employer admits or does not admit the dismissal. [40] For an employees dismissal to

be valid, (a) the dismissal must be for a valid cause, and (b) the employee must be afforded due process.
[41]
Procedural due process requires the employer to furnish an employee with two written notices before
the latter is dismissed: (1) the notice to apprise the employee of the particular acts or omissions for which
his dismissal is sought, which is the equivalent of a charge; and (2) the notice informing the employee of
his dismissal, to be issued after the employee has been given reasonable opportunity to answer and to be
heard on his defense.[42] Petitioner failed to comply with these legal requirements; hence, the Court of
Appeals correctly affirmed the Labor Arbiters finding that respondent was illegally dismissed, and entitled
to the payment of backwages, and separation pay in lieu of reinstatement.
- Tongko vs. Manulife, 622 SCRA 58 [2010]
GREGORIO
V.
TONGKO
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS

vs.

Facts:
The contractual relationship between Tongko and Manulife had two basic phases. The first or initial phase
began on July 1, 1977, under a Career Agents Agreement (Agreement) that provided:
It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall
be construed or interpreted as creating an employer-employee relationship between the Company and the
Agent.
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products
offered by the Company, and collect, in exchange for provisional receipts issued by the Agent, money due
to or become due to the Company in respect of applications or policies obtained by or through the Agent or
from policyholders allotted by the Company to the Agent for servicing, subject to subsequent confirmation
of receipt of payment by the Company as evidenced by an Official Receipt issued by the Company directly
to the policyholder.
The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by
the Agent by giving written notice to the Agent within fifteen (15) days from the time of the discovery of
the breach. No waiver, extinguishment, abandonment, withdrawal or cancellation of the right to terminate
this Agreement by the Company shall be construed for any previous failure to exercise its right under any
provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to
the other party fifteen (15) days notice in writing.2
Tongko additionally agreed (1) to comply with all regulations and requirements of Manulife, and (2) to
maintain a standard of knowledge and competency in the sale of Manulifes products, satisfactory to
Manulife and sufficient to meet the volume of the new business, required by his Production Club
membership.3
The second phase started in 1983 when Tongko was named Unit Manager in Manulifes Sales Agency
Organization. In 1990, he became a Branch Manager. Six years later (or in 1996), Tongko became a
Regional Sales Manager.4
Tongkos gross earnings consisted of commissions, persistency income, and management overrides. Since
the beginning, Tongko consistently declared himself self-employed in his income tax returns. Thus, under
oath, he declared his gross business income and deducted his business expenses to arrive at his taxable
business income. Manulife withheld the corresponding 10% tax on Tongkos earnings. 5
In 2001, Manulife instituted manpower development programs at the regional sales management level.
Respondent Renato Vergel de Dios wrote Tongko a letter dated November 6, 2001 on concerns that were
brought up during the October 18, 2001 Metro North Sales Managers Meeting.
Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001, terminating Tongkos
services.

Tongko responded by filing an illegal dismissal complaint with the National Labor Relations Commission
(NLRC) Arbitration Branch. He essentially alleged despite the clear terms of the letter terminating his
Agency Agreement that he was Manulifes employee before he was illegally dismissed. 8
Thus, the threshold issue is the existence of an employment relationship. A finding that none
exists renders the question of illegal dismissal moot; a finding that an employment relationship exists, on
the other hand, necessarily leads to the need to determine the validity of the termination of the
relationship.
A. Tongkos Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual over-rider not exceeding P50,000.00,
regardless of production levels attained and exclusive of commissions and bonuses. He also claimed that
as Regional Sales Manager, he was given a travel and entertainment allowance of P36,000.00 per year in
addition to his overriding commissions; he was tasked with numerous administrative functions and
supervisory authority over Manulifes employees, aside from merely selling policies and recruiting agents
for Manulife; and he recommended and recruited insurance agents subject to vetting and approval by
Manulife. He further alleges that he was assigned a definite place in the Manulife offices when he was not
in the field at the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts., Salcedo Village, Makati
City for which he never paid any rental. Manulife provided the office equipment he used, including tables,
chairs, computers and printers (and even office stationery), and paid for the electricity, water and
telephone bills. As Regional Sales Manager, Tongko additionally asserts that he was required to follow at
least three codes of conduct.9
B. Manulifes Case Agency Relationship with Tongko
Manulife argues that Tongko had no fixed wage or salary. Under the Agreement, Tongko was paid
commissions of varying amounts, computed based on the premium paid in full and actually received by
Manulife on policies obtained through an agent. As sales manager, Tongko was paid overriding sales
commission derived from sales made by agents under his unit/structure/branch/region. Manulife also
points out that it deducted and withheld a 10% tax from all commissions Tongko received; Tongko even
declared himself to be self-employed and consistently paid taxes as suchi.e., he availed of tax
deductions such as ordinary and necessary trade, business and professional expenses to which a business
is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over Tongkos claim as he was not its
employee as characterized in the four-fold test and our ruling in Carungcong v. National Labor Relations
Commission.10
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling and found that an employment
relationship existed between Tongko and Manulife. We concluded that Tongko is Manulifes employee for
the following reasons:
1. Our ruling in the first Insular 11 case did not foreclose the possibility of an insurance agent
becoming an employee of an insurance company; if evidence exists showing that the company
promulgated rules or regulations that effectively controlled or restricted an insurance agents
choice of methods or the methods themselves in selling insurance, an employer-employee
relationship would be present. The determination of the existence of an employer-employee
relationship is thus on a case-to-case basis depending on the evidence on record.
2. Manulife had the power of control over Tongko, sufficient to characterize him as an employee, as
shown by the following indicators:
2.1 Tongko undertook to comply with Manulifes rules, regulations and other requirements,
i.e., the different codes of conduct such as the Agent Code of Conduct, the Manulife Financial
Code of Conduct, and the Financial Code of Conduct Agreement;

2.2 The various affidavits of Manulifes insurance agents and managers, who occupied
similar positions as Tongko, showed that they performed administrative duties that
established employment with Manulife;12 and
2.3 Tongko was tasked to recruit some agents in addition to his other administrative
functions. De Dios letter harped on the direction Manulife intended to take, viz., greater
agency recruitment as the primary means to sell more policies; Tongkos alleged failure to
follow this directive led to the termination of his employment with Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present motion for reconsideration .
THE COURTS RULING
A. The Insurance and the Civil Codes;
the Parties Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law perspective, oblivious that the factual
antecedents were set in the insurance industry so that the Insurance Code primarily governs. Chapter IV,
Title 1 of this Code is wholly devoted to "Insurance Agents and Brokers" and specifically defines the agents
and brokers relationship with the insurance company and how they are governed by the Code and
regulated by the Insurance Commission.
The Insurance Code, of course, does not wholly regulate the "agency" that it speaks of, as agency is a civil
law matter governed by the Civil Code. Thus, at the very least, three sets of laws namely, the Insurance
Code, the Labor Code and the Civil Code have to be considered in looking at the present case. Not to be
forgotten, too, is the Agreement (partly reproduced on page 2 of this Dissent and which no one disputes)
that the parties adopted to govern their relationship for purposes of selling the insurance the company
offers. To forget these other laws is to take a myopic view of the present case and to add to the
uncertainties that now exist in considering the legal relationship between the insurance company and its
"agents."
The main issue of whether an agency or an employment relationship exists depends on the
incidents of the relationship. The Labor Code concept of "control" has to be compared and
distinguished with the "control" that must necessarily exist in a principal-agent relationship.
The principal cannot but also have his or her say in directing the course of the principal-agent
relationship, especially in cases where the company-representative relationship in the
insurance industry is an agency.
a. The laws on insurance and agency
The application for an insurance agents license requires a written examination, and the applicant must be
of good moral character and must not have been convicted of a crime involving moral turpitude. 14 The
insurance agent who collects premiums from an insured person for remittance to the insurance company
does so in a fiduciary capacity, and an insurance company which delivers an insurance policy or contract
to an authorized agent is deemed to have authorized the agent to receive payment on the companys
behalf.15 Section 361 further prohibits the offer, negotiation, or collection of any amount other than that
specified in the policy and this covers any rebate from the premium or any special favor or advantage in
the dividends or benefit accruing from the policy.
Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed and must also
act within the parameters of the authority granted under the license and under the contract with the
principal. Other than the need for a license, the agent is limited in the way he offers and negotiates for the
sale of the companys insurance products, in his collection activities, and in the delivery of the insurance
contract or policy. Rules regarding the desired results (e.g., the required volume to continue to qualify as a
company agent, rules to check on the parameters on the authority given to the agent, and rules to ensure
that industry, legal and ethical rules are followed) are built-in elements of control specific to an insurance

agency and should not and cannot be read as elements of control that attend an employment relationship
governed by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person [who] 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."16 While this is a very broad definition that on its face may even encompass an employment
relationship, the distinctions between agency and employment are sufficiently established by law and
jurisprudence.
Generally, the determinative element is the control exercised over the one rendering service.
The employer controls the employee both in the results and in the means and manner of
achieving this result. The principal in an agency relationship, on the other hand, also has the
prerogative to exercise control over the agent in undertaking the assigned task based on the
parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an agency must be express in light of the need
for a license and for the designation by the insurance company. In the present case, the Agreement fully
serves as grant of authority to Tongko as Manulifes insurance agent. 17 This agreement is supplemented by
the companys agency practices and usages, duly accepted by the agent in carrying out the agency. 18 By
authority of the Insurance Code, an insurance agency is for compensation, 19 a matter the Civil Code Rules
on Agency presumes in the absence of proof to the contrary. 20 Other than the compensation, the principal
is bound to advance to, or to reimburse, the agent the agreed sums necessary for the execution of the
agency.21 By implication at least under Article 1994 of the Civil Code, the principal can appoint two or more
agents to carry out the same assigned tasks,22 based necessarily on the specific instructions and directives
given to them.
With particular relevance to the present case is the provision that "In the execution of the agency, the
agent shall act in accordance with the instructions of the principal." 23 This provision is pertinent for
purposes of the necessary control that the principal exercises over the agent in undertaking the assigned
task, and is an area where the instructions can intrude into the labor law concept of control so that minute
consideration of the facts is necessary. A related article is Article 1891 of the Civil Code which binds the
agent to render an account of his transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to establish that the
company rules and regulations that an agent has to comply with are indicative of an employer-employee
relationship.24 The Dissenting Opinions of Justice Presbitero Velasco, Jr. and Justice Conchita Carpio Morales
also cite Insular Life Assurance Co. v. National Labor Relations Commission (second Insular case) 25 to
support the view that Tongko is Manulifes employee. On the other hand, Manulife cites the Carungcong
case and AFP Mutual Benefit Association, Inc. v. National Labor Relations Commission (AFPMBAI case) 26 to
support its allegation that Tongko was not its employee.
A caveat has been given above with respect to the use of the rulings in the cited cases because none of
them is on all fours with the present case; the uniqueness of the factual situation of the present case
prevents it from being directly and readily cast in the mold of the cited cases. These cited cases are
themselves different from one another; this difference underscores the need to read and quote them in the
context of their own factual situations.
The present case at first glance appears aligned with the facts in the Carungcong, the Grepalife, and the
second Insular Life cases. A critical difference, however, exists as these cited cases dealt with the
proper legal characterization of a subsequent management contract that superseded the
original agency contract between the insurance company and its agent. Carungcong dealt with a
subsequent Agreement making Carungcong a New Business Manager that clearly superseded the
Agreement designating Carungcong as an agent empowered to solicit applications for insurance. The
Grepalife case, on the other hand, dealt with the proper legal characterization of the appointment of the
Ruiz brothers to positions higher than their original position as insurance agents. Thus, after analyzing the
duties and functions of the Ruiz brothers, as these were enumerated in their contracts, we concluded that
the company practically dictated the manner by which the Ruiz brothers were to carry out their jobs.
Finally, the second Insular Life case dealt with the implications of de los Reyes appointment as acting unit

manager which, like the subsequent contracts in the Carungcong and the Grepalife cases, was clearly
defined under a subsequent contract. In all these cited cases, a determination of the presence of
the Labor Code element of control was made on the basis of the stipulations of the subsequent
contracts.
In stark contrast with the Carungcong, the Grepalife, and the second Insular Life cases, the
only contract or document extant and submitted as evidence in the present case is the
Agreement a pure agency agreement in the Civil Code context similar to the original contract in
the first Insular Life case and the contract in the AFPMBAI case. And while Tongko was later on designated
unit manager in 1983, Branch Manager in 1990, and Regional Sales Manager in 1996, no formal contract
regarding these undertakings appears in the records of the case. Any such contract or agreement, had
there been any, could have at the very least provided the bases for properly ascertaining the juridical
relationship established between the parties.
These critical differences, particularly between the present case and the Grepalife and the second Insular
Life cases, should therefore immediately drive us to be more prudent and cautious in applying the rulings
in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977 Agreement that governed and defined the
parties relations until the Agreements termination in 2001. This Agreement stood for more than two
decades and, based on the records of the case, was never modified or novated. It assumes primacy
because it directly dealt with the nature of the parties relationship up to the very end; moreover, both
parties never disputed its authenticity or the accuracy of its terms.
By the Agreements express terms, Tongko served as an "insurance agent" for Manulife, not as
an employee.
The parties legal characterization of their intent, although not conclusive, is critical in this case because
this intent is not illegal or outside the contemplation of law, particularly of the Insurance and the Civil
Codes. From this perspective, the provisions of the Insurance Code cannot be disregarded as this Code (as
heretofore already noted) expressly envisions a principal-agent relationship between the insurance
company and the insurance agent in the sale of insurance to the public. For this reason, we can take
judicial notice that as a matter of Insurance Code-based business practice, an agency relationship prevails
in the insurance industry for the purpose of selling insurance. The Agreement, by its express terms, is in
accordance with the Insurance Code model when it provided for a principal-agent relationship, and thus
cannot lightly be set aside nor simply be considered as an agreement that does not reflect the parties true
intent. This intent, incidentally, is reinforced by the system of compensation the Agreement provides,
which likewise is in accordance with the production-based sales commissions the Insurance Code provides.
Significantly, evidence shows that Tongkos role as an insurance agent never changed during
his relationship with Manulife. If changes occurred at all, the changes did not appear to be in
the nature of their core relationship. Tongko essentially remained an agent, but moved up in
this role through Manulifes recognition that he could use other agents approved by Manulife,
but operating under his guidance and in whose commissions he had a share. For want of a
better term, Tongko perhaps could be labeled as a "lead agent" who guided under his wing
other Manulife agents similarly tasked with the selling of Manulife insurance.
Like Tongko, the evidence suggests that these other agents operated under their own agency agreements.
Thus, if Tongkos compensation scheme changed at all during his relationship with Manulife, the change
was solely for purposes of crediting him with his share in the commissions the agents under his wing
generated. As an agent who was recruiting and guiding other insurance agents, Tongko likewise moved up
in terms of the reimbursement of expenses he incurred in the course of his lead agency, a prerogative he
enjoyed pursuant to Article 1912 of the Civil Code. Thus, Tongko received greater reimbursements for his
expenses and was even allowed to use Manulife facilities in his interactions with the agents, all of whom

were, in the strict sense, Manulife agents approved and certified as such by Manulife with the Insurance
Commission.
That Tongko assumed a leadership role but nevertheless wholly remained an agent is the inevitable
conclusion that results from the reading of the Agreement (the only agreement on record in this case) and
his continuing role thereunder as sales agent, from the perspective of the Insurance and the Civil Codes
and in light of what Tongko himself attested to as his role as Regional Sales Manager.
Evidence indicates that Tongko consistently clung to the view that he was an independent agent selling
Manulife insurance products since he invariably declared himself a business or self-employed person in his
income tax returns. This consistency with, and action made pursuant to the Agreement were
pieces of evidence that were never mentioned nor considered in our Decision of November 7,
2008.
Hand in hand with the concept of admission against interest in considering the tax returns, the concept of
estoppel a legal and equitable concept 28 necessarily must come into play. Tongkos previous admissions
in several years of tax returns as an independent agent, as against his belated claim that he was all along
an employee, are too diametrically opposed to be simply dismissed or ignored. Interestingly, Justice
Velascos dissenting opinion states that Tongko was forced to declare himself a business or self-employed
person by Manulifes persistent refusal to recognize him as its employee. 29 Regrettably, the dissent has
shown no basis for this conclusion, an understandable omission since no evidence in fact
exists on this point in the records of the case. In fact, what the evidence shows is Tongkos full
conformity with, and action as, an independent agent until his relationship with Manulife took a bad turn.
Another interesting point the dissent raised with respect to the Agreement is its conclusion that the
Agreement negated any employment relationship between Tongko and Manulife so that the commissions
he earned as a sales agent should not be considered in the determination of the backwages and
separation pay that should be given to him. This part of the dissent is correct although it went on to twist
this conclusion by asserting that Tongko had dual roles in his relationship with Manulife; he was an agent,
not an employee, in so far as he sold insurance for Manulife, but was an employee in his capacity as a
manager. Thus, the dissent concluded that Tongkos backwages should only be with respect to his role as
Manulifes manager.
The conclusion with respect to Tongkos employment as a manager is, of course, unacceptable for the
legal, factual and practical reasons discussed in this Resolution. In brief, the factual reason is grounded
on the lack of evidentiary support of the conclusion that Manulife exercised control over Tongko in the
sense understood in the Labor Code. The legal reason, partly based on the lack of factual basis, is the
erroneous legal conclusion that Manulife controlled Tongko and was thus its employee. The practical
reason, on the other hand, is the havoc that the dissents unwarranted conclusion would cause the
insurance industry that, by the laws own design, operated along the lines of principal-agent relationship in
the sale of insurance.
c.2. Other Evidence of Alleged Control
The general law on agency, on the other hand, expressly allows the principal an element of control over
the agent in a manner consistent with an agency relationship. In this sense, these control measures cannot
be read as indicative of labor law control. Foremost among these are the directives that the principal may
impose on the agent to achieve the assigned tasks, to the extent that they do not involve the means and
manner of undertaking these tasks. The law likewise obligates the agent to render an account; in this
sense, the principal may impose on the agent specific instructions on how an account shall be made,
particularly on the matter of expenses and reimbursements. To these extents, control can be imposed
through rules and regulations without intruding into the labor law concept of control for purposes of
employment.
From jurisprudence, an important lesson that the first Insular Life case teaches us is that a commitment to
abide by the rules and regulations of an insurance company does not ipso facto make the insurance agent
an employee. Neither do guidelines somehow restrictive of the insurance agents conduct necessarily
indicate "control" as this term is defined in jurisprudence. Guidelines indicative of labor law "control,"
as the first Insular Life case tells us, should not merely relate to the mutually desirable result
intended by the contractual relationship; they must have the nature of dictating the means or

methods to be employed in attaining the result, or of fixing the methodology and of binding or restricting
the party hired to the use of these means. In fact, results-wise, the principal can impose production quotas
and can determine how many agents, with specific territories, ought to be employed to achieve the
companys objectives. These are management policy decisions that the labor law element of control
cannot reach. Our ruling in these respects in the first Insular Life case was practically reiterated in
Carungcong. Thus, as will be shown more fully below, Manulifes codes of conduct, 30 all of which do not
intrude into the insurance agents means and manner of conducting their sales and only control them as to
the desired results and Insurance Code norms, cannot be used as basis for a finding that the labor law
concept of control existed between Manulife and Tongko.
The present case must be distinguished from the second Insular Life case that showed the
hallmarks of an employer-employee relationship in the management system established.
These were: exclusivity of service, control of assignments and removal of agents under the
private respondents unit, and furnishing of company facilities and materials as well as capital
described as Unit Development Fund. All these are obviously absent in the present case. If there is a
commonality in these cases, it is in the collection of premiums which is a basic authority that can be
delegated to agents under the Insurance Code.
As previously discussed, what simply happened in Tongkos case was the grant of an expanded sales
agency role that recognized him as leader amongst agents in an area that Manulife defined. Whether this
consequently resulted in the establishment of an employment relationship can be answered by
concrete evidence that corresponds to the following questions:

as lead agent, what were Tongkos specific functions and the terms of his additional engagement;

was he paid additional compensation as a so-called Area Sales Manager, apart from the
commissions he received from the insurance sales he generated;

what can be Manulifes basis to terminate his status as lead agent;

can Manulife terminate his role as lead agent separately from his agency contract; and

to what extent does Manulife control the means and methods of Tongkos role as lead agent?

Under this legal situation, the only conclusion that can be made is that the absence of
evidence showing Manulifes control over Tongkos contractual duties points to the absence of
any employer-employee relationship between Tongko and Manulife. In the context of the
established evidence, Tongko remained an agent all along; although his subsequent duties
made him a lead agent with leadership role, he was nevertheless only an agent whose basic
contract yields no evidence of means-and-manner control.
This conclusion renders unnecessary any further discussion of the question of whether an agent may
simultaneously assume conflicting dual personalities. But to set the record straight, the concept of a
single person having the dual role of agent and employee while doing the same task is a novel
one in our jurisprudence, which must be viewed with caution especially when it is devoid of
any jurisprudential support or precedent.
The Grepalife case dealt with the sole issue of whether the Ruiz brothers appointment as zone supervisor
and district manager made them employees of Grepalife. Indeed, because of the presence of the element
of control in their contract of engagements, they were considered Grepalifes employees. This did not
mean, however, that they were simultaneously considered agents as well as employees of Grepalife; the
Courts ruling never implied that this situation existed insofar as the Ruiz brothers were concerned. The
Courts statement the Insurance Code may govern the licensing requirements and other particular duties
of insurance agents, but it does not bar the application of the Labor Code with regard to labor standards
and labor relations simply means that when an insurance company has exercised control over its agents
so as to make them their employees, the relationship between the parties, which was otherwise one for
agency governed by the Civil Code and the Insurance Code, will now be governed by the Labor Code. The
reason for this is simple the contract of agency has been transformed into an employer-employee
relationship.

The second Insular Life case, on the other hand, involved the issue of whether the labor bodies have
jurisdiction over an illegal termination dispute involving parties who had two contracts first, an original
contract (agency contract), which was undoubtedly one for agency, and another subsequent contract that
in turn designated the agent acting unit manager (a management contract). Both the Insular Life and the
labor arbiter were one in the position that both were agency contracts. The Court disagreed with this
conclusion and held that insofar as the management contract is concerned, the labor arbiter has
jurisdiction. It is in this light that we remanded the case to the labor arbiter for further proceedings. We
never said in this case though that the insurance agent had effectively assumed dual personalities for the
simple reason that the agency contract has been effectively superseded by the management contract. The
management contract provided that if the appointment was terminated for any reason other than for
cause, the acting unit manager would be reverted to agent status and assigned to any unit.
In light of these conclusions, the sufficiency of Tongkos failure to comply with the guidelines of de Dios
letter, as a ground for termination of Tongkos agency, is a matter that the labor tribunals cannot rule upon
in the absence of an employer-employee relationship. Jurisdiction over the matter belongs to the courts
applying the laws of insurance, agency and contracts.

Nielson & Co. vs. Lepanto Consolidated Mining Co. 26 SCRA 540 (1968)
FACTS:
Lepanto seeks the reconsideration of the decision rendered on December 17, 1966. The motion for
reconsideration is based on two sets of grounds the first set consisting of four principal grounds, and the
second set consisting of five alternative grounds, as follows:
Principal Grounds:
1. The court erred in overlooking and failing to apply the proper law applicable to the agency or
management contract in question, namely, Article 1733 of the Old Civil Code (Article 1920 of the
new), by virtue of which said agency was effectively revoked and terminated in 1945 when, as
stated in paragraph 20 of the complaint, "defendant voluntarily ... prevented plaintiff from resuming
management and operation of said mining properties."
2. The court erred in holding that paragraph II of the management contract (Exhibit C) suspended
the period of said contract.
3. The court erred in reversing the ruling of the trial judge, based on well-settled jurisprudence of
this Supreme Court, that the management agreement was only suspended but not extended on
account of the war.
4. The court erred in reversing the finding of the trial judge that Nielson's action had prescribed, but
considering only the first claim and ignoring the prescriptibility of the other claims.
Alternative Grounds:
5. The court erred in holding that the period of suspension of the contract on account of the war
lasted from February 1942 to June 26, 1948.
6. Assuming arguendo that Nielson is entitled to any relief, the court erred in awarding as damages
(a) 10% of the cash dividends declared and paid in December, 1941; (b) the management fee of
P2,500.00 for the month of January, 1942; and (c) the full contract price for the extended period of
sixty months, since these damages were neither demanded nor proved and, in any case, not
allowable under the general law of damages.
7. Assuming arguendo that appellant is entitled to any relief, the court erred in ordering appellee to
issue and deliver to appellant shares of stock together with fruits thereof.
8. The court erred in awarding to appellant an undetermined amount of shares of stock and/or cash,
which award cannot be ascertained and executed without further litigation.
9. The court erred in rendering judgment for attorney's fees.
We are going to dwell on these grounds in the order they are presented.
1. In its first principal ground Lepanto claims that its own counsel and this Court had overlooked the real
nature of the management contract entered into by and between Lepanto and Nielson, and the law that is
applicable on said contract. Lepanto now asserts for the first time and this is done in a motion for
reconsideration - that the management contract in question is a contract of agency such that it has the
right to revoke and terminate the said contract, as it did terminate the same, under the law of agency, and
particularly pursuant to Article 1733 of the Old Civil Code (Article 1920 of the New Civil Code).

We have taken note that Lepanto is advancing a new theory. We have carefully examined the pleadings
filed by Lepanto in the lower court, its memorandum and its brief on appeal, and never did it assert the
theory that it has the right to terminate the management contract because that contract is one of agency
which it could terminate at will. While it is true that in its ninth and tenth special affirmative defenses, in its
answer in the court below, Lepanto pleaded that it had the right to terminate the management contract in
question, that plea of its right to terminate was not based upon the ground that the relation between
Lepanto and Nielson was that of principal and agent but upon the ground that Nielson had allegedly not
complied with certain terms of the management contract. If Lepanto had thought of considering the
management contract as one of agency it could have amended its answer by stating exactly its position. It
could have asserted its theory of agency in its memorandum for the lower court and in its brief on appeal.
This, Lepanto did not do. It is the rule, and the settled doctrine of this Court, that a party cannot change his
theory on appeal that is, that a party cannot raise in the appellate court any question of law or of fact
that was not raised in the court below or which was not within the issue made by the parties in their
pleadings (Section 19, Rule 49 of the old Rules of Court, and also Section 18 of the new Rules of Court;
Hautea vs. Magallon, L-20345, November 28, 1964; Northern Motors, Inc. vs. Prince Line, L-13884,
February 29, 1960; American Express Co. vs. Natividad, 46 Phil. 207; Agoncillo vs. Javier, 38 Phil. 424 and
Molina vs. Somes, 24 Phil 49).
At any rate, even if we allow Lepanto to assert its new theory at this very late stage of the proceedings,
this Court cannot sustain the same.
Lepanto contends that the management contract in question (Exhibit C) is one of agency because: (1)
Nielson was to manage and operate the mining properties and mill on behalf, and for the account, of
Lepanto; and (2) Nielson was authorized to represent Lepanto in entering, on Lepanto's behalf, into
contracts for the hiring of laborers, purchase of supplies, and the sale and marketing of the ores mined. All
these, Lepanto claims, show that Nielson was, by the terms of the contract, destined to execute juridical
acts not on its own behalf but on behalf of Lepanto under the control of the Board of Directors of Lepanto
"at all times". Hence Lepanto claims that the contract is one of agency. Lepanto then maintains that an
agency is revocable at the will of the principal (Article 1733 of the Old Civil Code), regardless of any term
or period stipulated in the contract, and it was in pursuance of that right that Lepanto terminated the
contract in 1945 when it took over and assumed exclusive management of the work previously entrusted
to Nielson under the contract. Lepanto finally maintains that Nielson as an agent is not entitled to damages
since the law gives to the principal the right to terminate the agency at will.
Because of Lepanto's new theory We consider it necessary to determine the nature of the management
contract whether it is a contract of agency or a contract of lease of services. Incidentally, we have noted
that the lower court, in the decision appealed from, considered the management contract as a contract of
lease of services.
Article 1709 of the Old Civil Code, defining contract of agency, provides:
By the contract of agency, one person binds himself to render some service or do something for the
account or at the request of another.
Article 1544, defining contract of lease of service, provides:
In a lease of work or services, one of the parties binds himself to make or construct something or to render
a service to the other for a price certain.
In both agency and lease of services one of the parties binds himself to render some service to the other
party. Agency, however, is distinguished from lease of work or services in that the basis of agency is
representation, while in the lease of work or services the basis is employment. The lessor of services does
not represent his employer, while the agent represents his principal. Manresa, in his "Commentarios al
Codigo Civil Espaol" (1931, Tomo IX, pp. 372-373), points out that the element of representation
distinguishes agency from lease of services, as follows:
Nuestro art. 1.709 como el art. 1.984 del Codigo de Napoleon y cuantos textos legales citamos en las
concordancias, expresan claramente esta idea de la representacion, "hacer alguna cosa por cuenta o
encargo de otra" dice nuestro Codigo; "poder de hacer alguna cosa para el mandante o en su nombre"
dice el Codigo de Napoleon, y en tales palabras aparece vivo y luminoso el concepto y la teoria de la
representacion, tan fecunda en ensenanzas, que a su sola luz es como se explican las diferencias que
separan el mandato del arrendamiento de servicios, de los contratos inominados, del consejo y de la
gestion de negocios.
En efecto, en el arrendamiento de servicios al obligarse para su ejecucion, se trabaja, en verdad, para el
dueno que remunera la labor, pero ni se le representa ni se obra en su nombre....
On the basis of the interpretation of Article 1709 of the old Civil Code, Article 1868 of the new Civil Code
has defined the contract of agency in more explicit terms, as follows:
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.

There is another obvious distinction between agency and lease of services. Agency is a preparatory
contract, as agency "does not stop with the agency because the purpose is to enter into other contracts."
The most characteristic feature of an agency relationship is the agent's power to bring about business
relations between his principal and third persons. "The agent is destined to execute juridical acts (creation,
modification or extinction of relations with third parties). Lease of services contemplate only material (nonjuridical) acts." (Reyes and Puno, "An Outline of Philippine Civil Law," Vol. V, p. 277).
In the light of the interpretations we have mentioned in the foregoing paragraphs let us now determine the
nature of the management contract in question. Under the contract, Nielson had agreed, for a period of
five years, with the right to renew for a like period, to explore, develop and operate the mining claims of
Lepanto, and to mine, or mine and mill, such pay ore as may be found therein and to market the metallic
products recovered therefrom which may prove to be marketable, as well as to render for Lepanto other
services specified in the contract. We gather from the contract that the work undertaken by Nielson was to
take complete charge subject at all times to the general control of the Board of Directors of Lepanto, of the
exploration and development of the mining claims, of the hiring of a sufficient and competent staff and of
sufficient and capable laborers, of the prospecting and development of the mine, of the erection and
operation of the mill, and of the benefication and marketing of the minerals found on the mining
properties; and in carrying out said obligation Nielson should proceed diligently and in accordance with the
best mining practice. In connection with its work Nielson was to submit reports, maps, plans and
recommendations with respect to the operation and development of the mining properties, make
recommendations and plans on the erection or enlargement of any existing mill, dispatch mining engineers
and technicians to the mining properties as from time to time may reasonably be required to investigate
and make recommendations without cost or expense to Lepanto. Nielson was also to "act as purchasing
agent of supplies, equipment and other necessary purchases by Lepanto, provided, however, that no
purchase shall be made without the prior approval of Lepanto; and provided further, that no commission
shall be claimed or retained by Nielson on such purchase"; and "to submit all requisition for supplies, all
constricts and arrangement with engineers, and staff and all matters requiring the expenditures of money,
present or future, for prior approval by Lepanto; and also to make contracts subject to the prior approve of
Lepanto for the sale and marketing of the minerals mined from said properties, when said products are in a
suitable condition for marketing."1
It thus appears that the principal and paramount undertaking of Nielson under the management contract
was the operation and development of the mine and the operation of the mill. All the other undertakings
mentioned in the contract are necessary or incidental to the principal undertaking these other
undertakings being dependent upon the work on the development of the mine and the operation of the
mill. In the performance of this principal undertaking Nielson was not in any way executing juridical acts for
Lepanto, destined to create, modify or extinguish business relations between Lepanto and third persons. In
other words, in performing its principal undertaking Nielson was not acting as an agent of Lepanto, in the
sense that the term agent is interpreted under the law of agency, but as one who was performing material
acts for an employer, for a compensation.
It is true that the management contract provides that Nielson would also act as purchasing agent of
supplies and enter into contracts regarding the sale of mineral, but the contract also provides that Nielson
could not make any purchase, or sell the minerals, without the prior approval of Lepanto. It is clear,
therefore, that even in these cases Nielson could not execute juridical acts which would bind Lepanto
without first securing the approval of Lepanto. Nielson, then, was to act only as an intermediary, not as an
agent.
Lepanto contends that the management contract in question being one of agency it had the right to
terminate the contract at will pursuant to the provision of Article 1733 of the old Civil Code. We find,
however, a proviso in the management contract which militates against this stand of Lepanto. Paragraph XI
of the contract provides:
Both parties to this agreement fully recognize that the terms of this Agreement are made possible only
because of the faith or confidence that the Officials of each company have in the other; therefore, in order
to assure that such confidence and faith shall abide and continue, NIELSON agrees that LEPANTO may
cancel this Agreement at any time upon ninety (90) days written notice, in the event that NIELSON for any
reason whatsoever, except acts of God, strike and other causes beyond its control, shall cease to
prosecute the operation and development of the properties herein described, in good faith and in
accordance with approved mining practice.

It is thus seen, from the above-quoted provision of paragraph XI of the management contract, that Lepanto
could not terminate the agreement at will. Lepanto could terminate or cancel the agreement by giving
notice of termination ninety days in advance only in the event that Nielson should prosecute in bad faith
and not in accordance with approved mining practice the operation and development of the mining
properties of Lepanto. Lepanto could not terminate the agreement if Nielson should cease to prosecute the
operation and development of the mining properties by reason of acts of God, strike and other causes
beyond the control of Nielson.
The phrase "Both parties to this agreement fully recognize that the terms of this agreement are made
possible only because of the faith and confidence of the officials of each company have in the other" in
paragraph XI of the management contract does not qualify the relation between Lepanto and Nielson as
that of principal and agent based on trust and confidence, such that the contractual relation may be
terminated by the principal at any time that the principal loses trust and confidence in the agent. Rather,
that phrase simply implies the circumstance that brought about the execution of the management
contract. Thus, in the annual report for 1936 2, submitted by Mr. C. A. Dewit, President of Lepanto, to its
stockholders, under date of March 15, 1937, we read the following:
To the stockholders
xxx
xxx
xxx
The incorporation of our Company was effected as a result of negotiations with Messrs. Nielson &
Co., Inc., and an offer by these gentlemen to Messrs. C. I. Cookes and V. L. Lednicky, dated August
11, 1936, reading as follows:
Messrs. Cookes and Lednicky,
Present
Re: Mankayan Copper Mines
GENTLEMEN:
After an examination of your property by our engineers, we have decided to offer as we hereby
offer to underwrite the entire issue of stock of a corporation to be formed for the purpose of taking
over said properties, said corporation to have an authorized capital of P1,750,000.00, of which
P700,000.00 will be issued in escrow to the claim-owners in exchange for their claims, and the
balance of P1,050,000.00 we will sell to the public at par or take ourselves.
The arrangement will be under the following conditions:
1. The subscriptions for cash shall be payable 50% at time of subscription and the balance subject
to the call of the Board of Directors of the proposed corporation.
2. We shall have an underwriting and brokerage commission of 10% of the P1,050,000.00 to be sold
for cash to the public, said commission to be payable from the first payment of 50% on each
subscription.
3. We will bear the cost of preparing and mailing any prospectus that may be required, but no such
prospectus will be sent out until the text thereof has been first approved by the Board of Directors
of the proposed corporation.
4. That after the organization of the corporation, all operating contract be entered into between
ourselves and said corporation, under the terms which the property will be developed and mined
and a mill erected, under our supervision, our compensation to be P2,000.00 per month until the
property is put on a profitable basis and P2,500.00 per month plus 10% of the net profits for a
period of five years thereafter.
5. That we shall have the option to renew said operating contract for an additional period of five
years, on the same basis as the original contract, upon the expiration thereof.
It is understood that the development and mining operations on said property, and the erection of
the mill thereon, and the expenditures therefor shall be subject to the general control of the Board
of Directors of the proposed corporation, and, in case you accept this proposition, that a detailed
operating contract will be entered into, covering the relationships between the parties.
Yours very truly,
(Sgd.) L. R. Nielson
Pursuant to the provisions of paragraph 2 of this offer, Messrs. Nielson & Co., took subscriptions for
One Million Fifty Thousand Pesos (P1,050,000.00) in shares of our Company and their underwriting and
brokerage commission has been paid. More than fifty per cent of these subscriptions have been paid to the
Company in cash. The claim owners have transferred their claims to the Corporation, but the P700,000.00
in stock which they are to receive therefor, is as yet held in escrow.
Immediately upon the formation of the Corporation Messrs. Nielson & Co., assumed the
Management of the property under the control of the Board of Directors. A modification in the Management

Contract was made with the consent of all the then stockholders, in virtue of which the compensation of
Messrs. Nielson & Co., was increased to P2,500.00 per month when mill construction began. The formal
Management Contract was not entered into until January 30, 1937.
xxx
xxx
xxx
Manila, March 15, 1937
(Sgd.) C. A. DeWitt President
ISSUE: WON there is a contract of agency between Lepanto and Nielson
HELD: NO.
We can gather from the foregoing statements in the annual report for 1936, and from the provision of
paragraph XI of the Management contract, that the employment by Lepanto of Nielson to operate and
manage its mines was principally in consideration of the know-how and technical services that Nielson
offered Lepanto. The contract thus entered into pursuant to the offer made by Nielson and accepted by
Lepanto was a "detailed operating contract". It was not a contract of agency. Nowhere in the record is it
shown that Lepanto considered Nielson as its agent and that Lepanto terminated the management
contract because it had lost its trust and confidence in Nielson.
The contention of Lepanto that it had terminated the management contract in 1945, following the
liberation of the mines from Japanese control, because the relation between it and Nielson was one of
agency and as such it could terminate the agency at will, is, therefore, untenable. On the other hand, it
can be said that, in asserting that it had terminated or cancelled the management contract in 1945,
Lepanto had thereby violated the express terms of the management contract. The management contract
was renewed to last until January 31, 1947, so that the contract had yet almost two years to go upon
the liberation of the mines in 1945. There is no showing that Nielson had ceased to prosecute the
operation and development of the mines in good faith and in accordance with approved mining practice
which would warrant the termination of the contract upon ninety days written notice. In fact there was no
such written notice of termination. It is an admitted fact that Nielson ceased to operate and develop the
mines because of the war a cause beyond the control of Nielson. Indeed, if the management contract in
question was intended to create a relationship of principal and agent between Lepanto and Nielson,
paragraph XI of the contract should not have been inserted because, as provided in Article 1733 of the old
Civil Code, agency is essentially revocable at the will of the principal that means, with or without cause.
But precisely said paragraph XI was inserted in the management contract to provide for the cause for its
revocation. The provision of paragraph XI must be given effect.
In the construction of an instrument where there are several provisions or particulars, such a construction
is, if possible, to be adopted as will give effect to all, 3 and if some stipulation of any contract should admit
of several meanings, it shall be understood as bearing that import which is most adequate to render it
effectual.4
It is Our considered view that by express stipulation of the parties, the management contract in question is
not revocable at the will of Lepanto. We rule that this management contract is not a contract of agency as
defined in Article 1709 of the old Civil Code, but a contract of lease of services as defined in Article 1544 of
the same Code. This contract can not be unilaterally revoked by Lepanto.
The first ground of the motion for reconsideration should, therefore, be brushed aside.

- performs a ministerial service for the benefit of another;

- employment; 2 persons involved
ii) Partnership Art. 1767
ARTICLE 1767. By the contract of partnership two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the inten- tion of dividing the
profits among themselves.
Two or more persons may also form a partnership for the exercise of a profession. (1665a)
Agency distinguished from partnership.
A contract of partnership18 is a contract of agency, and it differs from a pure agency in that while an agent
acts only for his principal, a partner acts not only for his co-partners and the partnership but also as
principal of himself. In other words, each partner is regarded as an agent of his co-partners when he is
acting and as principal of his co-partners when they are acting. This has been said to be the most certain
test of partnership as distinguished from ordinary agency or employment. A partnership is, in effect, a
contract of mutual agency.

In both cases, the agent or partner can bind the principal or his co-partner only by such contracts as are
entered into within the scope of his authority. (Arts. 1910, 1803, 1818.) In general, both conceptions import
the idea of a fiduciary relationship.
The agency which results from the relation of partnership is of a peculiar kind, sui generis, and must be
distinguished sharply from the ordinary concept of agency in two important respects:
18Art. 1767. By the contract of partnership two or more persons bind themselves to contribute money,
property or industry to a common fund, with the intention of dividing the profits among themselves.
Two or more persons may also form a partnership for the exercise of a profession. (1665a)
(1) Control by the principal. An essential characteristic of the agency relationship, i.e., control by the
principal, which is not applicable to the partnership concept. It is fundamental in the law of agency that an
agent must submit to the principals right to control the agents conduct in regard to the subject of the
agency. Yet the partnership relation, while having many of the characteristics of the agency relationship,
differs from it in that a partners power to bind his co-partner is not subject to the co-partners right to
control, unless there is an agreement to that effect.
(2) Liability of the agent. A partner acting as agent for the partnership binds not only the firm members
but himself as well, while the ordinary agent assumes no personal liability where he acts within the scope
of his authority. This is but a logical deduction from the proposition that a partner is both an agent and a
principal at the same time when engaged in carrying on the partnership business. It is for this reason that
Article 1822 of the Civil Code provides that, as to wrongful acts of partners done in the ordinary course of
business the partnership is liable therefor to the same extent as the partner so acting or omitting to act.
(3) Sharing of profits. Now, what is the test to determine whether, in a given case, the parties have
entered into a relationship of partner and partner, or principal and agent? The answer depends upon the
manner in which the profits are shared: If, when earned, the profits belong to all the parties as common
proprietors in agreed proportions, the relation is one of partnership, but if the alleged owner or partner
takes his agreed share of profits, not as owner but as an agreed measure of compensation for his services
or the like, the relation is one of agency. Accordingly, Article 1769(4) of the Civil Code provides that the
receipt by a person of the share of the profits of a business is not prima facie evidence that he is a partner
in the business if such profits were received as wages of an employee. (Teller, op. cit., pp. 22-23, citing
Dinkelspeel vs. Lewis, 50 Wyo. 380; Person vs. Cartex, 7 N.C. 324; 2 Corp. Jur. 426.)
ILLUSTRATIVE CASE:
Branch manager of a travel agency company, who is a bona fide travel agent herself, had assumed
solidary liability with the company for the payment of monthly rentals to the lessor.
Facts: A contract of lease was entered into between LS and the Tourist World Service, Inc. (TWS), whereby
the latter leased the premises belonging to the former for use as a branch office. LS held herself solidarily
liable with TWS for prompt payment of the monthly rental. When the branch office was opened, the same
was run by LS who was designated as branch manager. Any airline fare brought in through the efforts of LS
entitled her to receive 4% of the proceeds. LS was not in the companys payroll.
On mere suspicion that LS was connected with a rival firm, the office of branch manager was abolished.

Issue: What was the nature of the arrangement of LS and TWS?

Held: (1) Employer-employee relationship not intended. It was not a case of employer-employee relation
in view of the following:
(a) LS was not subject to the control by TWS either as to the result of the enterprise or as to the means
used in connection therewith. A true employee cannot be made to part with his own money in pursuance
of his employers business or otherwise assume any liability thereof. As to the means used in soliciting
airline fares, LS obviously relied on her own gifts and capabilities; and
(b) She was not in the companys payroll. Unlike an employee who usually earns a fixed salary, she earned
com- pensation in fluctuating amounts, depending on her book- ing success. The fact that she was
designated as branch manager did not make her an employee. Employment is determined by the right
of control test and certain eco- nomic parameters, like the inclusion of the employee in the payroll.
(2) Partnership not intended. The parties had not embarked on a partnership. LS herself did not
recognize the existence of such a relation when in her letter, she expressly concedes your (TWS) right to
stop the operation of your branch
Art. 1868 NATURE, FORM, AND KINDS OF AGENCY 355
office, in effect, accepting its control over the manner in which the business was run. A joint venture,
including a partnership, presupposes generally a parity of understanding between the joint co-venturers or
partners in which each party has an equal proprietary interest in the capital or property contributed and
where each party exercises equal rights in the conduct of the business. Furthermore, the partners did not
hold themselves out as partners and the building itself was embellished with the electric sign Tourist
World Service, Inc., in lieu of a distinct partnership name.
(3) Principal-agent relationship intended. The parties have contemplated a principal-agent relationship.
LS solicited airline fares but she did so for and on behalf of her principal, TWS. As compensation, she
received 4% of the proceeds in the concept of commission. In her head letter, she presumed her principals
authority as owner of the business undertaking. The agency was one coupled with an interest (see Arts.
1927, 1930.) having been created for the mutual interest of the agent (LS was a bona fide travel agent
herself) and the principal, and, therefore, could not be revoked at will. Accordingly, LS was entitled to
damages. (Sevilla vs. Court of Appeals, 160 SCRA 171 [1988].)
- Sevilla vs. CA, 160 SCRA 171 (1988)
FACTS:
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on Oct.
19, 1960 by and between Mrs. Segundina Noguera, party of the first part; the Tourist World Service, Inc.,
represented by Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as appellants, the
Tourist World Service, Inc. leased the premises belonging to the party of the first part at Mabini St., Manila
for the former-s use as a branch office. In the said contract the party of the third part held herself solidarily
liable with the party of the part for the prompt payment of the monthly rental agreed on. When the branch
office was opened, the same was run by the herein appellant Una 0. Sevilla payable to Tourist World
Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina
Sevilla and 3% was to be withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been informed
that Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the branch office

was anyhow losing, the Tourist World Service considered closing down its office. This was firmed up by two
resolutions of the board of directors of Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13),
the first abolishing the office of the manager and vice-president of the Tourist World Service, Inc., Ermita
Branch, and the second,authorizing the corporate secretary to receive the properties of the Tourist World
Service then located at the said branch office. It further appears that on Jan. 3, 1962, the contract with the
appellees for the use of the Branch Office premises was terminated and while the effectivity thereof was
Jan. 31, 1962, the appellees no longer used it. As a matter of fact appellants used it since Nov. 1961.
Because of this, and to comply with the mandate of the Tourist World Service, the corporate secretary
Gabino Canilao went over to the branch office, and, finding the premises locked, and, being unable to
contact Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the interests of the Tourist World
Service. When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises,
a complaint wall filed by the herein appellants against the appellees with a prayer for the issuance of
mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent lack of
interest of the parties therein, the trial court ordered the dismissal of the case without prejudice.
The appellee Segundina Noguera sought reconsideration of the order dismissing her counterclaim which
the court a quo, in an order dated June 8, 1963, granted permitting her to present evidence in support of
her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after the issues
were joined, the reinstated counterclaim of Segundina Noguera and the new complaint of appellant Lina
Sevilla were jointly heard following which the court a quo ordered both cases dismiss for lack of merit, on
the basis of which was elevated the instant appeal.
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and
between her and appellee TWS with offices at the Ermita branch office and that she was not an employee
of the TWS to the end that her relationship with TWS was one of a joint business venture.
Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist
World Service, Inc. and as such was designated manager. 1
xxx xxx xxx
The trial court 2 held for the private respondent on the premise that the private respondent, Tourist World
Service, Inc., being the true lessee, it was within its prerogative to terminate the lease and padlock the
premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere employee of said Tourist World
Service, Inc. and as such, she was bound by the acts of her employer. 4 The respondent Court of Appeal 5
rendered an affirmance.
The petitioners now claim that the respondent Court, in sustaining the lower court, erred.
ISSUES:
1

WON the relationship between Sevilla and TWS a Joint Venture or an employer-employee one.

HELD: Neither. Contract of Agency.

As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla
and Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the crucial issue, in
its opinion being "whether or not the padlocking of the premises by the Tourist World Service, Inc. without
the knowledge and consent of the appellant Lina Sevilla entitled the latter to the relief of damages prayed
for and whether or not the evidence for the said appellant supports the contention that the appellee Tourist
World Service, Inc. unilaterally and without the consent of the appellant disconnected the telephone lines
of the Ermita branch office of the appellee Tourist World Service, Inc. 7 Tourist World Service, Inc., insists, on
the other hand, that Lina SEVILLA was a mere employee, being "branch manager" of its Ermita "branch"
office and that inferentially, she had no say on the lease executed with the private respondent, Segundina
Noguera. The petitioners contend, however, that relation between the between parties was one of joint
venture, but concede that "whatever might have been the true relationship between Sevilla and Tourist
World Service," the Rule of Law enjoined Tourist World Service and Canilao from taking the law into their
own hands, 8 in reference to the padlocking now questioned.
The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service,
Inc., maintains, that the relation between the parties was in the character of employer and employee, the

courts would have been without jurisdiction to try the case, labor disputes being the exclusive domain of
the Court of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee
relation. In general, we have relied on the so-called right of control test, "where the person for whom the
services are performed reserves a right to control not only the end to be achieved but also the means to
be used in reaching such end." 10 Subsequently, however, we have considered, in addition to the standard
of right-of control, the existing economic conditions prevailing between the parties, like the inclusion of the
employee in the payrolls, in determining the existence of an employer-employee relationship. 11
The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent
Tourist World Service, Inc., either as to the result of the enterprise or as to the means used in connection
therewith. In the first place, under the contract of lease covering the Tourist Worlds Ermita office, she had
bound herself in solidum as and for rental payments, an arrangement that would be like claims of a
master-servant relationship. True the respondent Court would later minimize her participation in the lease
as one of mere guaranty, 12 that does not make her an employee of Tourist World, since in any case, a true
employee cannot be made to part with his own money in pursuance of his employer's business, or
otherwise, assume any liability thereof. In that event, the parties must be bound by some other relation,
but certainly not employment.
In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same
was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any
fare brought in on the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be said that
Sevilla was under the control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the
business, obviously relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in
commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then, who
earns a fixed salary usually, she earned compensation in fluctuating amounts depending on her booking
successes.
The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's
employee. As we said, employment is determined by the right-of-control test and certain economic
parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina
Sevilla's own, that is, that the parties had embarked on a joint venture or otherwise, a partnership. And
apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of November 28,
1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the operation of your branch
office 14 in effect, accepting Tourist World Service, Inc.'s control over the manner in which the business was
run. A joint venture, including a partnership, presupposes generally a of standing between the joint coventurers or partners, in which each party has an equal proprietary interest in the capital or property
contributed 15 and where each party exercises equal rights in the conduct of the business. 16 furthermore,
the parties did not hold themselves out as partners, and the building itself was embellished with the
electric sign "Tourist World Service, Inc. 17in lieu of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man
the private respondent, Tourist World Service, Inc.'s Ermita office, she must have done so
pursuant to a contract of agency. It is the essence of this contract that the agent renders
services "in representation or on behalf of another. 18 In the case at bar, Sevilla solicited airline
fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As
compensation, she received 4% of the proceeds in the concept of commissions. And as we
said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her principal's
authority as owner of the business undertaking. We are convinced, considering the
circumstances and from the respondent Court's recital of facts, that the ties had contemplated
a principal agent relationship, rather than a joint managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with
the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the
agency having been created for mutual interest, of the agent and the principal. 19 It appears that Lina
Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business

entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding
herself solidarily liable for the payment of rentals. She continued the business, using her own name, after
Tourist World had stopped further operations. Her interest, obviously, is not to the commissions she earned
as a result of her business transactions, but one that extends to the very subject matter of the power of
management delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the
principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection
and padlocking incidents. Anent the disconnection issue, it is the holding of the Court of Appeals that there
is 'no evidence showing that the Tourist World Service, Inc. disconnected the telephone lines at the branch
office. 20 Yet, what cannot be denied is the fact that Tourist World Service, Inc. did not take pains to have
them reconnected. Assuming, therefore, that it had no hand in the disconnection now complained of, it had
clearly condoned it, and as owner of the telephone lines, it must shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the
fact that Tourist World Service, Inc. was the lessee named in the lease con-tract did not accord it any
authority to terminate that contract without notice to its actual occupant, and to padlock the premises in
such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the
business itself, and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a
stranger to that contract having been explicitly named therein as a third party in charge of rental
payments (solidarily with Tourist World, Inc.). She could not be ousted from possession as summarily as
one would eject an interloper.
The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put
the petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a rival firm. To be
sure, the respondent court speaks of alleged business losses to justify the closure '21 but there is no clear
showing that Tourist World Ermita Branch had in fact sustained such reverses, let alone, the fact that
Sevilla had moonlit for another company. What the evidence discloses, on the other hand, is that following
such an information (that Sevilla was working for another company), Tourist World's board of directors
adopted two resolutions abolishing the office of 'manager" and authorizing the corporate secretary, the
respondent Eliseo Canilao, to effect the takeover of its branch office properties. On January 3, 1962, the
private respondents ended the lease over the branch office premises, incidentally, without notice to her.
It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked,
personally by the respondent Canilao, on the pretext that it was necessary to Protect the interests of the
Tourist World Service. " 22 It is strange indeed that Tourist World Service, Inc. did not find such a need when
it cancelled the lease five months earlier. While Tourist World Service, Inc. would not pretend that it sought
to locate Sevilla to inform her of the closure, but surely, it was aware that after office hours, she could not
have been anywhere near the premises. Capping these series of "offensives," it cut the office's telephone
lines, paralyzing completely its business operations, and in the process, depriving Sevilla articipation
therein.
This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had
perceived to be disloyalty on her part. It is offensive, in any event, to elementary norms of justice and fair
play.
We rule therefore, that for its unwarranted revocation of the contract of agency, the private
respondent, Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil
Code, moral damages may be awarded for "breaches of contract where the defendant acted ...
in bad faith. 23
We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina
Sevilla from its brazen conduct subsequent to the cancellation of the power of attorney granted to her on
the authority of Article 21 of the Civil Code, in relation to Article 2219 (10) thereof
ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals,
good customs or public policy shall compensate the latter for the damage. 24
ART. 2219. Moral damages 25 may be recovered in the following and analogous cases:
xxx xxx xxx
(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same
damages in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been
shown that she had connived with Tourist World Service, Inc. in the disconnection and padlocking incidents.
She cannot therefore be held liable as a cotortfeasor.
-form of agency: acts for himself & partners.
- partners power to bind other partners is not subject to control of co-partners, unless agreed upon.partner as agent is also liable.
iii) Guardianship - Rules 93-95, Rules of Court- represents an incapacitated person- court appointed- not
directed by ward
RULE 93
Appointment of Guardians
Section 1. Who may petition for appointment of guardian for resident. Any relative, friend, or other
person on behalf of a resident minor or incompetent who has no parent or lawful guardian, or the minor
himself if fourteen years of age or over, may petition the court having jurisdiction for the appointment of a
general guardian for the person or estate, or both, of such minor or incompetent. An officer of the Federal
Administration of the United States in the Philippines may also file a petition in favor of a ward thereof, and
the Director of Health, in favor of an insane person who should be hospitalized, or in favor of an isolated
leper.
Section 2. Contents of petition. A petition for the appointment of a general guardian must show, so far
as known to the petitioner:
(a) The jurisdiction facts;
(b) The minority or incompetency rendering the appointment necessary or convenient;
(c) The names, ages, and residence of the relatives of the minor or incompetent, and of the person having
him in their care;
(d) The probable value and character of his estate;
(e) The name of the person for whom letters of guardianship.
The petition shall be verified; but no defect in the petition or verification shall render void the issuance of
letters of guardianship.
Section 3. Court to set time for hearing. Notice thereof. When a petition for the appointment of a
general guardian is filed, the court shall fix a time and place for hearing the same, and shall cause
reasonable notice thereof to be given to the persons mentioned in the petition residing in the province,
including the minor if above 14 years of age or the incompetent himself, and may direct other general or
special notice thereof to be given.
Section 4. Opposition to petition. Any interested person may, by filing a written opposition, contest the
petition on the ground of majority of the alleged minor, competency of the alleged incompetent, or the
insuitability of the person for whom letters are prayed, and may pray that the petition be dismissed, or
that letters of guardianship issue to himself, or to any suitable person named in the opposition.
Section 5. Hearing and order for letters to issue. At the hearing of the petition the alleged in competent
must be present if able to attend, and it must be shown that the required notice has been given.
Thereupon the courts shall hear the evidence of the parties in support of their respective allegations, and,
if the person in question is a minor, or incompetent it shall be appoint a suitable guardian of his person or
estate, or both, with the powers and duties hereinafter specified.
Section 6. When and how guardian for non-resident appointed. Notice. When a person liable to be put
under guardianship resides without the Philippines but the estate therein, any relative or friend of such
person, or any one interested in his estate, in expectancy or otherwise, may petition a court having
jurisdiction for the appointment of a guardian for the estate, and if, after notice given to such person and
in such manner as the court deems proper, by publication or otherwise, and hearing, the court is satisfied
that such non-resident is a minor or incompetent rendering a guardian necessary or convenient, it may
appoint a guardian for such estate.
Section 7. Parents as guardians. When the property of the child under parental authority is worth two
thousand pesos or less, the father of the mother, without the necessity of court appointment, shall be his
legal guardian. When the property of the child is worth more than two thousand pesos, the father or the
mother shall be considered guardian of the child's property, with the duties and obligations of guardians
under this rules, and shall file the petition required by section 2 hereof. For good reasons the court may,
however, appoint another suitable person.
Section 8. Service of judgment. Final orders or judgments under this rule shall be served upon the civil

registrar of the municipality or city where the minor or incompetent person resides or where his property
or part thereof is situated.
RULE 94
Bonds of Guardians
Section 1. Bond to be given before issuance of letters. Amount. Condition. Before a guardian appointed
enters upon the execution of his trust, or letters of guardianship issue, he shall give a bond, in such sum as
the court directs, conditioned as follows:
(a) To make and return to the court, within three (3) months, a true and complete inventory of all the
estate, real and personal, of his ward which shall come to his possession or knowledge of any other person
for him;
(b) To faithfully execute the duties of his trust, to manage and dispose of the estate according to these
rules for the best interests of the ward, and to provide for the proper care, custody, and education of the
ward;
(c) To render a true and just account of all the estate of the ward in his hands, and of all proceeds or
interest derived therefrom, and of the management and disposition of the same, at the time designated by
these rules and such other times as the courts directs, and at the expiration of his trust to settle his
accounts with the court and deliver and pay over all the estate, effects, and moneys remaining in his
hands, or due from him on such settlement, to the person lawfully entitled thereto;
(d) To perform all orders of the court by him to be performed.
Section 2. When new bond may be required and old sureties discharged. Whenever it is deemed
necessary, the court may require a new bond to be given by the guardian, and may discharge the sureties
on the old bond from further liability, after due notice to interested persons, when no injury can result
therefrom to those interested in the estate.
Section 3. Bonds to be filed. Actions thereon. Every bond given by a guardian shall be filed in the office
of the clerk of the court, and, in case of the breach of a condition thereof, may be prosecuted in the same
proceeding or in a separate action for the use and benefit of the ward or of any other person legally
interested in the estate.
RULE 95
Selling and Encumbering Property of Ward
Section 1. Petition of guardian for leave to sell or encumber estate. When the income of the estate
under guardianship is insufficient to maintain the ward and his family, or to maintain and educate the ward
when a minor, or when it appears that it is for the benefit of the ward that his real estate or some part
thereof be sold, or mortgaged or otherwise encumbered, and the proceeds thereof put out at interest, or
invested in some productive security, or in the improvement or security or other real estate of the ward,
the guardian may present a verified petition to the court by which he was appointed setting forth such
facts, and praying that an order issue authorizing the sale or encumbrance.
Section 2. Order to show cause thereupon. If it seems probable that such sale or encumbrance is
necessary, or would be beneficial to the ward, the court shall make an order directing the next of kin of the
ward, and all persons interested in the estate, to appear at a reasonable time and place therein specified
to show cause why the prayer of the petition should not be granted.
Section 3. Hearing on return of order. Costs. At the time and place designated in the order to show
cause, the court shall hear the proofs and allegations of the petitioner and next of kin, and other persons
interested, together with their witnesses, and grant and refuse the prayer of the petition as the best
interest of the ward require. The court shall make such order as to cost of the hearing as may be just.
Section 4. Contents of order for sale or encumbrance, and how long effective. Bond. If, after full
examination, it appears that it is necessary, or would be beneficial to the ward, to sell or encumber the
estate, or some portion of it, the court shall order such sale or encumbrance and that the proceeds thereof
be expended for the maintenance of the ward and his family, or the education of the ward, if a minor, or
for the putting of the same interest, or the investment of the same as the circumstances may require. The
order shall specify the causes why the sale or encumbrance is necessary or beneficial, and may direct that
estate ordered sold be disposed of at either public or private sale, subject to such conditions as to the time
and manner of payment, and security where a part of the payment is deferred as in the discretion of the
court are deemed most beneficial to the ward. The original bond of the guardian shall stand as security for
the proper appropriation of the proceeds of the sale, but the judge may, if deemed expedient, require an
additional bond as a condition for the granting of the order of sale. No order of sale granted in pursuance
of this section shall continue in force more than one (1) year after granting the same, without a sale being
had.
Section 5. Court may order investment of proceeds and direct management of estate. The court may
authorize and require the guardian to invest the proceeds of sales or encumbrances, and any other of his

ward's money in his hands, in real estate or otherwise, as shall be for the best interest of all concerned,
and may make such other orders for the management, investment, and disposition of the estate and
effects, as circumstances may require.
Agency distinguished from guardianship.
The distinctions are:
(1) While the agent derives his authority from his principal, the guardian,23 although he acts for and on
behalf of his ward, does not derive his authority so to act from the ward (2 C.J.S. 1027.);
(2) The relation of principal and agent is founded upon consent of the parties thereto, while that of
guardian and ward may be created irrespective of the consent or capacity of the ward;
(3) Agents are subject to the control of their principals, while guardians are not subject to the direction of
their wards;
(4) A legal guardian is substituted by law, while ordinarily an agent is the appointee of the principal and his
power may at any time be abrogated or modified by the principal (see 3 Am. Jur. 2d 421.); and
(5) While an agent represents one who has capacity to con- tract for himself where he present, a guardian
represents one who has no such capacity.
iv) Trust Art. 1440
- title and control of the property under trust passes to a trustee who acts in his own name
- involves control of property
- does not possess authority to bind trustor
- may be created by law
ARTICLE 1440. A person who establishes a trust is called the trustor; one in whom
confidence is reposed as regards property for the benefit of another person is
known as the trustee; and the person for whose benefit the trust has been created is referred
to as the beneficiary.
Concept of trust
A trust is the fi duciary relationship between one person having an equitable ownership in property
and another owning the legal title to such property, the equitable ownership of the former entitling him to
the performance of certain duties and the exercise of certain powers by the latter (see 54 Am. Jur. 21.) for
the benefit of the former.
It is a legal arrangement whereby a person transfers his legal title to property to another to be
administered by the latter for the benefit of a third party. It is a right of property held by one party for the
benefit of another.
(1) Trust implies confidence in a relationship. The word trust is often employed in a broader or
popular sense as denoting confidence, fiduciary relationship, etc. and is often used in reference to the
confidential aspect of any kind of a bailment or possession by one person of the property of another.
(Ibid.,22.)
It indicates duties, relations, and responsibilities which are not strictly technical trusts. (89 C.J.S. 712; Salao
vs. Salao, 70 SCRA 65[1976].)
In its more technical significance, the word still implies such confidence in a relationship
intentionally created, involving a trustee, a beneficiary, and a trust property and not one involving merely
personal duties, imposing equitable duties upon the trustee with respect to the property to deal with it for
the benefit of the beneficiary.
(2) Trust cannot be established in violation of law. A trust is the right, enforceable in equity, to
the beneficial enjoyment of property the legal title to which is in another. Trust is founded in equity and can
never result from acts violative of law. Thus, no trust can result from a contract of partnership formed for
an illegal purpose. Since the contract is null and void, no rights and obligations can arise therefrom.
(Deluao vs. Casteel, 26 SCRA 415 [1968] and 29 SCRA 350 [1969].)
v) Sale Art. 1458 vs. Agency to Sell;
Article 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
Sale Defined

Sale is a contract where one party (seller or vendor) obligates himself to transfer the ownership of
and to deliver a determinate thing, while the other party (buyer or vendee) obligates himself to pay for
said thing a price certain in money or its equivalent.
Elements of the Contract of Sale
Essential elements (those without which there can be novalid sale):
1) Consent or meeting of the minds, i.e., consent to transfer ownership in exchange for the price.
2) Determinate subject matter (generally, there is no sale of generic thing; moreover, if the parties differ
as to the object, there can be no meeting of the minds).
3) Price certain in money or its equivalent (this is the cause or consideration). (The price need not be in
money.) (Republic v. Phil. Resources Dev. Corp., L-10414, Jan. 31, 1958).
Art. 1466. In construing a contract containing provisions characteristic of both the
contract of sale and of the contract of agency to sell, the essential clauses of the whole
instrument shall be considered.
Distinctions Between a Contract of Sale and an Agency to Sell (like a Consignment for Sale)
(a) In sale, the buyer pays the price; the agent delivers the price which in turn he got from his
buyer.
(b) In sale, the buyer after delivery becomes the owner; the agent who is supposed to sell does not
become the owner, even if the property has already been delivered to him.
(c) In sale, the seller warrants; the agent who sells assumes no personal liability as long as he acts
within his authority and in the name of the principal.
Bar Question
X acquired a booklet of 10 sweepstakes tickets directly from the office of the Philippine Charity
Sweepstakes. X paid P1,800 for the booklet, less the customary discount. What was the legal nature of Xs
act in acquiring the tickets? Did he enter into a contract of purchase and sale?
ANS.: Yes, X entered into a contract of purchase and sale, notwithstanding the fact that he may be referred
to as an agent of the Sweepstakes Office, and the fact that he may be entitled to an agents prize
should one of the tickets purchased win a principal prize. The truth is that he is not really required to resell the tickets, and even if he were to do so, still failure on the part of his purchasers to pay will not allow
him to recover what he himself has paid to the office. Moreover, the delivery of the tickets to him
transferred their ownership to him; this is not true in the case of an agency to sell. Furthermore, it has
been said that in a contract of sale, the buyer pays the price; while in an agency to sell, the agent delivers
the price. The mere fact that a discount or so-called commission has been given is immaterial. (See
Quiroga v. Parsons Hardware Co., 38 Phil. 501).
NARCISO DEGAOS, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.
Facts:
In an amended information dated March 23, 1994, the Office of the Provincial Prosecutor of Bulacan
charged Brigida D. Luz, alias Aida Luz, and Narciso Degaos in the Regional Trial Court in Malolos, Bulacan
with estafa under Article 315 paragraph 1 (b) of the Revised Penal Code, allegedly committed.
EVIDENCE FOR THE PROSECUTION
The prosecution evidence consists of the testimonies of the private complainants-spouses, Jose and Lydia
Bordador.
Private complainant Lydia Bordador, a jeweler, testified that accused Narciso Degaos and Brigida/Aida Luz
are brother and sister. She knew them because they are the relatives of her husband and their
Kumpadre/kumadre. Brigida/Aida Luz was the one who gave instructions to Narciso Degaos to get gold
and jewelry from Lydia for them to sell. Lydia came to know Narciso Degaos because the latter frequently
visited their house selling religious articles and books. While in their house, Narciso Degaos saw her
counting pieces of jewelry and he asked her if he could show the said pieces of jewelry to his sister,
Brigida/Aida Luz, to which she agreed. Thereafter, Narciso Degaos returned the jewelry and Aida/Brigida
Luz called her to ask if she could trust Narciso Degaos to get the pieces of jewelry from her for
Aida/Brigida Luz to sell. Lydia agreed on the condition that if they could not pay it in cash, they should pay
it after one month or return the unsold jewelry within the said period. She delivered the said jewelry

starting sometime in 1986 as evidenced by several documents entitled "Katibayan at Kasunduan", the
earliest of which is dated March 16, 1986. Everytime Narciso Degaos got jewelry from her, he signed the
receipts in her presence. They were able to pay only up to a certain point. However, receipt nos. 614 to
745 dated from April 27, 1987 up to July 20, 1987 (Exhs. "A"-"O") were no longer paid and the accused
failed to return the jewelry covered by such receipts. Despite oral and written demands, the accused failed
and refused to pay and return the subject jewelry. As of October 1998, the total obligation of the accused
amounted to P725,000.00. ACTaDH
Private complainant Atty. Jose Bordador corroborated the testimony of his wife, Lydia. He confirmed that
their usual business practice with the accused was for Narciso Degaos to receive the jewelry and gold
items for and in behalf of Brigida/Aida Luz and for Narciso Degaos to sign the "Kasunduan at Katibayan"
receipts while Brigida/Aida Luz will pay for the price later on. The subject items were usually given to
Narciso Degaos only upon instruction from Brigida/Aida Luz through telephone calls or letters. For the last
one year, the "Kasunduan at Katibayan" receipts were signed in his presence. Said business arrangement
went on for quite sometime since Narciso Degaos and Brigida/Aida Luz had been paying religiously. When
the accused defaulted in their payment, they sent demand letters. It was the accused's sister, Julie dela
Rosa, who responded, seeking an extension of time for the accused to settle their obligation.
EVIDENCE FOR THE DEFENSE
The defense presented accused Brigida/Aida Luz, who testified that she started transacting business of
selling gold bars and jewelry with the private complainants sometime in 1986 through her brother, Narciso
Degaos. It was the usual business practice for Narciso Degaos to get the gold bars and pieces of jewelry
from the private complainants after she placed orders through telephone calls to the private complainants,
although sometimes she personally went to the private complainants' house to get the said items. The
gold bars and pieces of jewelry delivered to her by Narciso Degaos were usually accompanied by a pink
receipt which she would sign and after which she would make the payments to the private complainants
through Narciso Degaos, which payments are in the form of postdated checks usually with a thirty-day
period. In return, the private complainants would give the original white receipts to Narciso Degaos for
him to sign. Thereafter, as soon as the postdated checks were honored by the drawee bank, the said white
receipts were stamped "paid" by Lydia Bordador, after which the same would be delivered to her by
Narciso Degaos. DEIHSa
On September 2, 1987, she sent a letter to private complainant Lydia Bordador requesting for an
accounting of her indebtedness. Lydia Bordador made an accounting which contained the amount of
P122,673.00 as principal and P21,483.00 as interest. Thereafter, she paid the principal amount through
checks. She did not pay the interest because the same was allegedly excessive. In 1998, private
complainant Atty. Jose Bordador brought a ledger to her and asked her to sign the same. The said ledger
contains a list of her supposed indebtedness to the private complainants. She refused to sign the same
because the contents thereof are not her indebtedness but that of his brother, Narciso Degaos. She even
asked the private complainants why they gave so many pieces of jewelry and gold bars to Narciso
Degaos without her permission, and told them that she has no participation in the transactions covered
by the subject "Kasunduan at Katibayan" receipts.
Co-accused Narciso Degaos testified that he came to know the private complainants when he went to the
latter's house in 1986 to sell some Bible books. Two days later he returned to their house and was initially
given a gold bracelet and necklace to sell. He was able to sell the same and paid the private complainants
with the proceeds thereof. Since then he started conducting similar business transactions with the private
complainants. Said transactions are usually covered by receipts denominated as "Kasunduan at
Katibayan". All the "Kasunduan at Katibayan" receipts were issued by the private complainants and was
signed by him. The phrase "for Brigida Luz" and for "Evely Aquino" were written on the receipts so that in
case he fails to pay for the items covered therein, the private complainants would have someone to collect
from. He categorically admitted that he is the only one who was indebted to the private complainants and
out of his indebtedness, he already made partial payments in the amount of P53,307.00. Included in the
said partial payments is the amount of P20,000.00 which was contributed by his brothers and sisters who
helped him and which amount was delivered by Brigida Luz to the private complainants.
Issue: What is the nature of the contract created?
Held: Transaction was an agency, not a sale on credit.

Based on the express terms and tenor of the Kasunduan at Katibayan, Degaos received and accepted the
items under the obligation to sell them in behalf of the complainants ("ang mga hiyas (jewelries) na
natatala sa ibaba nito upang ipagbili ko sa kapakanan ng nasabing Ginang"), and he would be
compensated with the overprice as his commission ("Ang bilang kabayaran o pabuya sa akin ay ano mang
halaga na aking mapalabis na mga halagang nakatala sa ibaba nito."). Plainly, the transaction was a
consignment under the obligation to account for the proceeds of sale, or to return the unsold items. As
such, he was the agent of the complainants in the sale to others of the items listed in the Kasunduan at
Katibayan.
In contrast, according the first paragraph of Article 1458 of the Civil Code, one of the contracting
parties in a contract of sale obligates himself to transfer the ownership of and to deliver a
determinate thing, while the other party obligates himself to pay therefor a price certain in
money or its equivalent. Contrary to the contention of Degaos, there was no sale on credit to
him because the ownership of the items did not pass to him.

Laureano T. Angeles vs. Philippine National Railways (PNR) and Rodolfo Flores,
August 31, 2006 G.R. No. 150128
Facts:
Respondent Philippine National Railways (PNR) informed a certain Gaudencio Romualdez (Romualdez,
hereinafter) that it has accepted the latters offer to buy the PNRs scrap/unserviceable rails located in Del
Carmen and Lubao, Pampanga at P1,300.00 and P2,100.00 per metric ton, respectively, for the total amount of
P96,600.00. Romualdez paid the purchase price and addressed a letter to Atty. Cipriano Dizon, PNRs Acting
Purchasing Agent. The letter authorized LIZETTE R. WIJANCO to be his (Romualdez) lawful representative in
the withdrawal of the scrap/unserviceable rails awarded to him. Furthermore, the original copy of the award
which indicates the waiver of rights, interest and participation in favor of Lizetter R. Wijanco was also given.
The Lizette R. Wijanco was petitioner's now deceased wife. That very same day, Lizette requested the PNR to
transfer the location of withdrawal for the reason that the scrap/unserviceable rails located in Del Carmen and
Lubao, Pampanga were not ready for hauling. The PNR granted said request and allowed Lizette to withdraw
scrap/unserviceable rails in Murcia, Capas and San Miguel, Tarlac instead. However, PNR subsequently
suspended the withdrawal in view of what it considered as documentary discrepancies coupled by reported
pilferages of over P500,000.00 worth of PNR scrap properties in Tarlac. Consequently, the spouses Angeles
demanded the refund of the amount of P96,000.00. The PNR, however, refused to pay, alleging that as per
delivery receipt duly signed by Lizette, 54.658 metric tons of unserviceable rails had already been
withdrawn. The spouses Angeles filed suit against the PNR for specific performance and damages before the
Regional Trial Court. Lizette W. Angeles passed away and was substituted by her heirs, among whom is her
husband, herein petitioner Laureno T. Angeles.
The trial court, on the postulate that the spouses Angeles are not the real parties-in-interest, rendered judgment
dismissing their complaint for lack of cause of action. As held by the court, Lizette was merely a representative
of Romualdez in the withdrawal of scrap or unserviceable rails awarded to him and not an assignee to the
latter's rights with respect to the award. Petitioner appealed with the Court of Appeals which dismissed the
appeal and affirmed that of the trial court.
Issue:
Whether or not the CA erred in affirming the trial court's holding that petitioner and his spouse, as plaintiffs a
quo, had no cause of action as they were not the real parties-in-interest in this case.
Held:

No. The CAs conclusion, affirmatory of that of the trial court, is that Lizette was not an assignee, but merely an
agent whose authority was limited to the withdrawal of the scrap rails, hence, without personality to sue. Where
agency exists, the third party's (in this case, PNR's) liability on a contract is to the principal and not to the agent
and the relationship of the third party to the principal is the same as that in a contract in which there is no agent.
Normally, the agent has neither rights nor liabilities as against the third party. He cannot thus sue or be sued on
the contract. Since a contract may be violated only by the parties thereto as against each other, the real party-ininterest, either as plaintiff or defendant in an action upon that contract must,
generally, be a contracting party.
The legal situation is, however, different where an agent is constituted as an assignee. In such a case, the agent
may, in his own behalf, sue on a contract made for his principal, as an assignee of such contract. The rule
requiring every action to be prosecuted in the name of the real party-in-interest recognizes the assignment of
rights of action and also recognize sthat when one has a right assigned to him, he is then the real party-ininterest and may maintain an action upon such claim or right.
WHEREFORE, the petition is DENIED and the assailed decision of the CA is AFFIRMED. Costs against the
petitioner.
- Victorias Milling vs. CA, 333 SCRA 663 (2000)
Facts: St. Therese Merchandising (hereafter STM) regularly bought sugar from petitioner Victorias Milling Co.,
Inc. In the course of their dealings, petitioner issued several Shipping List/Delivery Receipts to STM as proof of
purchases. Among these was SLDR No. 1214M, which gave rise to the instant case. SLDR No. 1214M covers
25,000 bags of sugar. The transaction it covered was a "direct sale."
Thereafter, STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in SLDR No.
1214M. That same day, CSC wrote petitioner that it had been authorized by STM to withdraw the sugar covered
by the SLDR. However, after 2,000 bags had been released, petitioner refused to allow furtherwithdrawals of
sugar. CSC thus inquired when it would be allowed to withdraw the remaining 23,000 bags. In its reply,
petitioner said that it could not allow any further withdrawals of sugar because STM had already withdrawn all
the sugar covered by the cleared checks. Petitioner also noted that CSC had represented itself to be STM's agent
as it had withdrawn the 2,000 bags "for and in behalf" of STM.
As a result, CSC filed a complaint for specific performance. Petitioner's primary defense a quo was that it was
an unpaid seller for the 23,000 bags. Since STM had already drawn in full all the sugar corresponding to the
amount of its cleared checks, it could no longer authorize further delivery of sugar to CSC. Petitioner also
contended that it had no privity of contract with CSC. Furthermore, the SLDRs prescribed delivery of the sugar
to the party specified therein and did not authorize the transfer of said party's rights and interests.
The Trial Court rendered its judgment favoring the private respondent CSC. The appellate court affirmed said
decision but modified the costs against petitioner.
Issue: Whether or not the Court of Appeals erred in not ruling that CSC was an agent of STM and hence,
estopped to sue upon SLDR No. 1214M as an assignee.

Held: No. It is clear from Article 1868 that the basis of agency is representation. One factor which most clearly
distinguishes agency from other legal concepts is control; one person - the agent - agrees to act under the
control or direction of another - the principal
That the authorization given to CSC contained the phrase "for and in our (STM's) behalf" did not establish an
agency. Ultimately, what is decisive is the intention of the parties. That no agency was meant to be established
by the CSC and STM is clearly shown by CSC's communication to petitioner that SLDR No. 1214M had been
"sold and endorsed" to it. The use of the words "sold and endorsed" means that STM and CSC intended
a contract of sale, and not an agency. Hence, on this score, no error was committed by the respondent appellate
court when it held that CSC was not STM's agent and could independently sue petitioner
- Hahn vs. CA, 266 SCRA (1997)
Facts: Petitioner is a Filipino citizen doing business under the name of Hahn-Manila. Private respondent
BMW is a non-resident corporation incorporated in Germany. Petitioner executed in favor of private respondent
a Deed of Assignment with a Special Power of Attorney which constituted petitioner as the exclusive dealer
of private respondent as long as the assignment of its trademark and device subsisted. However, no formal
contract was drawn between the two parties. Thereafter, petitioner was informed that BMW was arranging to
grant the exclusive dealership of BMW cars and products to Columbia Motors Corp. (CMC). BMW expressed
dissatisfaction with various aspect of petitioners business but nonetheless also expressed willingness to
continue business relations with petitioner on the basis of a standard BMW contract otherwise, if said offer was
unacceptable to petitioner then BMW would terminate petitioners exclusive dealership. Petitioner refused
BMWs offer in which case BMW withdrew its alternative offer and terminated petitioners exclusive dealership.
Petitioner therefore filed an action for specific performance and damages against BMW to compel it to continue
the exclusive dealership.
BMW moved to dismiss the case contending that the trial court did not acquire jurisdiction over it through the
service of summons on DTI because BMW is a foreign corporation and is not doing business in the Philippines.
The trial court deferred the resolution of the motion for dismissal until after trial on the merits for the reason
that the grounds advanced by BMW did not seem indubitable. BMW appealed said order to the CA. The CA
resolved that BMW was not doing business in the country and therefore jurisdiction over it could not have been
acquired through the service of summons on DTI and it dismissed the petition.

Issue: W/N BMW is doing business in the Philippines so as to enable the court to acquire jurisdiction over it
through the service of summons on the DTI.

HeId: RA 7042 enumerates what acts are considered as doing business. Section 3(d) enumerating such acts
includes the phrase appointing representatives or distributors in the Philippines but not when the
representative or distributor transacts business in his own name for his own account. In the case at bar,
petitioner is private respondent BMWs agent and not merely a broker. The record reveals that private
respondent exercised control over petitioners activities as a dealer and made regular inspections of petitioners
premises to enforce its standards. Since BMW is considered as doing business in the Philippines, the trial court
validly acquired jurisdiction over it by virtue of the service of summons on the DTI. Furthermore, it is now
settled that, for purposes of having summons served on a foreign corporation in accordance with the Rules of
Court, it is sufficient that it be alleged in the complaint that the foreign corporation is doing business in the
Philippines. The court need not go beyond the allegations in the complaint in order to determine whether or not

it acquired jurisdiction. Such determination that the foreign corporation is doing business in the Philippines is
only tentative and only for the purpose of enabling the court to acquire jurisdiction. A contrary determination
may be made based on the courts findings or evidence presented.
- Lim vs. People, 133 SCRA 333 (1984) buyer receives goods as owner
Facts:
Lim is a businesswoman. She went to the house of Maria Ayroso and proposed to sell Ayroso's tobacco.
Ayroso agreed to the proposition of the appellant to sell her tobacco consisting of 615 kilos at P1.30 a kilo. The
appellant was to receive the overprice for which she could sell the tobacco.
EXHIBIT A: To Whom It May Concern: This is to certify that I have received from Mrs. Maria de Guzman
Vda. de Ayroso. of Gapan, Nueva Ecija, six hundred fifteen kilos of leaf tobacco to be sold at Pl.30 per kilo.
The proceed in the amount of Seven Hundred Ninety Nine Pesos and 50/100 (P 799.50) will be given to her as
soon as it was sold. (This was signed by the appellant and witnessed by the complainant's sister, Salud Bantug,
and the latter's maid, Genoveva Ruiz.)
Of the total value of P799.50, the appellant had paid to Ayroso only P240.00, and this was paid on three
different times. Demands for the payment of the balance of the value of the tobacco were made but even trips to
Lims camarin proved futile because the same was empty.
Petitioner Lourdes Valerio Lim was found guilty by the Trial Court and Court of Appeals of the crime of
estafa (Ca only modified the penalty).
Issue: WON the receipt, Exhibit "A", is a contract of agency to sell or a contract of sale of the subject tobacco
between petitioner and the complainant, Maria de Guzman Vda. de Ayroso, thereby precluding criminal liability
of petitioner for the crime charged. contract of agency
HELD:
It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the tobacco should be turned over to
the complainant as soon as the same was sold, or, that the obligation was immediately demandable as soon as
the tobacco was disposed of. Hence, Article 1197 of the New Civil Code, which provides that the courts may fix
the duration of the obligation if it does not fix a period, does not apply.
Re: Agency Aside from the fact that Maria Ayroso testified that the appellant asked her to be her agent in
selling Ayroso's tobacco, the appellant herself admitted that there was an agreement that upon the sale of the
tobacco she would be given something. The appellant is a businesswoman, and it is unbelievable that she would
go to the extent of going to Ayroso's house and take the tobacco with a jeep which she had brought if she did not
intend to make a profit out of the transaction. Certainly, if she was doing a favor to Maria Ayroso and it was
Ayroso who had requested her to sell her tobacco, it would not have been the appellant who would have gone to
the house of Ayroso, but it would have been Ayroso who would have gone to the house of the appellant and
deliver the tobacco to the appellant. (CA) The fact that appellant received the tobacco to be sold at P1.30 per
kilo and the proceeds to be given to complainant as soon as it was sold, strongly negates transfer of ownership
of the goods to the petitioner. The agreement (Exhibit "A') constituted her as an agent with the obligation to
return the tobacco if the same was not sold.
- Chua Ngo vs. Universal Trading Co., Inc. 87 Phil. 331 buyer pays the price & cannot return the object
sold
Republic of the Philippines
SUPREME COURT
Manila

EN BANC
G.R. No. L-2870

September 19, 1950

CHUA NGO, plaintiff-appellee,

vs.
UNIVERSAL TRADING CO., INC., defendant-appellant.
Manuel O. Chan and H.B. Arandia for appellant.
Arsenio Sy Santos for appellee.
BENGZON, J.:
Chua Ngo delivered, in Manila, to the Universal Trading Company, Inc., a local corporation, the price 300
boxes of Sunkist oranges to be gotten from the United States. The latter ordered the said boxes from Gabuardi
Company of San Francisco, and in due course, the goods were shipped from that port to Manila "F. O. B. San
Francisco." One hundred eighty boxes were lost in transit, and were never delivered to Chua Ngo.
This suit by Chua Ngo is to recover the corresponding price he had paid in advance.
Universal Trading Company refused to pay, alleging it merely acted as agent of Chua Ngo in purchasing the
oranges. Chua Ngo maintains he bought the oranges from Universal Trading Company, and, therefore, is
entitled to the return of the price corresponding to the undelivered fruit.
From a judgment for plaintiff, the defendant appealed.
It appears that on January 14, 1946, the herein litigants signed the document Exhibit 1, which reads as follows:
UNIVERSAL TRADING COMPANY, INC.
Far Eastern Division
R-236-238 Ayala Building
Juan Luna, Manila
CONTRACT NO. 632 14 January 1946
Agreement is hereby made between Messrs. Chua Ngo of 753 Folgueras, Manila, and the Universal
Trading Company, Inc., Manila, for order as follows and under the following terms:
Quantity Merchandise and description Unit Unit price Amount
300 Sunkist oranges, wrapped
Grade No. 1 .................... .......... ................ .................
Navel, 220 to case ............ Case $6.30 $1,890.00
300 Onions, Australian
Browns, 90 lbs. to case Case $6.82 $2,046.00
We are advised by the supplier that the charges to bring these goods to Manila are:
Oranges........................................................
.

$3.06 per case

Onions .........................................................
..

$1.83 per case.

Deposit of 40% of the contract price plus the above charges to be payable immediately upon receipt of
telegraphic confirmation. Balance payable upon arrival of goods in Manila. If balance is not paid within
48 hours of notification merchandise may be resold by Universal Trading Co., Inc. and the deposit
forfeited.
NOTE:
Onions canceled by supplier.
(Initialed) R. E. H.
Total amount of order .................................................................................. $3,936
Agreed and accepted:
(Sgd.) CHUA NGO
Confirmed and approved:
(Sgd.) RALPH E. HOLMES
Sales manager
Universal Trading Company, Inc.
(See terms of agreement on reverse side.)
On the same date, the defendant forwarded and order to Gabuardi Company of San Francisco, U. S. A., which
in part says:
ORDER NO. 707
TO GABUARDI COMPANY OF CALIFORNIA
258 Market Street
San Francisco, California
Please send for our account, subject to conditions on the back of this order, the following merchandise
enumerated below:
Shipping instructions
Via San Francisco, California
Terms: F. O. B.
San Francisco
Quantity Articles Unit Unit price Total price
300 Sunkist oranges wrapped
Grade No 1 ............... ............ ..........
Navel, 220 to case ...... Case $6.00 $1,800.00.

xxx

xxx

xxx

xxx

xxx

xxx

Approved:
Universal Trading Company, Inc.
(Sgd.) RALPH R. HOLMES
Sales Manager

On January 16 and January 19, 1946, the Universal Trading Co., Inc., wrote Chua Ngo two letters informing
him that the contract for oranges (and onions) had been confirmed by the supplier i. e., could be fulfilled
and asking for deposit of 65% of the price and certain additional charges.
On January 21, 1946, Chua Ngo deposited with the defendant, on account of the Sunkist oranges, the amount of
P3,650, and later (March 9, 1946), delivered the additional sum of P2,822.43 to complete the price, as follows:
300 cases of oranges at $9.36..................................

P6,616.00

Bank charges ................................................................

196.56

Custom charges, etc. ..................................................

270.00

Delivery charges ..........................................................

171.00

3 percent sales tax ...................................................

218.00
P6,253.56

Less deposit R. No. 1062 ................

3,650.00
P2,822,43
=========

The 300 cases of oranges ordered by the defendant from Gabuardi Company were loaded in good condition on
board the S/S Silversandal in the port of San Francisco, together with other oranges (totaling 6,380 cases) for
other customers. They were all marked "UTC Manila" and were consigned to defendant. The Silversandal
arrived at the port of Manila on March 7, 1946. And out of the 6,380 boxes of oranges, 607 cases were short
short landed for causes beyond defendant's control. Consequently, defendant failed to deliver to Chua Ngo 180
cases of the 300 cases contracted for. The total cost of such 180 cases (received by defendant) is admittedly
P3,882.60.

The above are the main facts according to the stipulation of the parties. Uncontradicted additional evidence was
introduced that the mark "UTC Manila" written on all the boxes means "Universal Trading Company, Manila";
that the defendant paid in its own name to Gabuardi Company the shipment of oranges, and made claims for the
lost oranges to the steamship company that insured the shipment company and the insurance company that
insured the shipment; and finally, that in the transaction between plaintiff and defendant, the latter received no
commission.
The crucial question is: Did Universal Trading Company merely agree to buy for and on behalf of Chua Ngo
the 300 boxes of oranges, or did it agree to sell and sold the oranges to Chua Ngo? If the first, the
judgment m ust be reversed; if the latter, it should be affirmed.
In our opinion, the circumstances of record sufficiently indicate a sale. First, no commission was paid. Second,
Exhibit 1 says that "if balance is not paid within 48 hours of notification, merchandise may be resold by the
Universal Trading Company and the deposit forfeited." "Resold" implies the goods had been sold to Chua Ngo.
And forfeiture of the deposit is incompatible with a contract of agency. Third, immediately after executing
Exhibit 1 wherein oranges were quoted at $6.30 per box, Universal Trading placed an order for purchase of the
same with Gabuardi Company at $6 per box. If Universal Trading Gabuardi Company was agent of Chua Ngo,
it could not properly do that. Inasmuch as good faith is to be presumed, we must hold that Universal Trading
acted thus because it was not acting as agent of Chua Ngo, but as independent purchaser from Gabuardi
Company. Fourth, the defendant charged the plaintiff the sum of P218.87 for 3 percent sales tax, thereby
implying that their transaction was a sale. Fifth, if the purchase of the oranges had been made on behalf of Chua
Ngo, all claims for losses thereof against the insurance company and against the shipping company should have
been assigned to Chua Ngo. Instead, the defendant has been pressing such claims for itself.
In our opinion, the arrangement between the parties was this: Chua Ngo purchased from Universal Trading
Company, 300 boxes of oranges at $6.30 plus. In turn, the latter purchased from Gabuardi Company at $6 plus,
sufficient fruit to comply with its contract with Chua Ngo.
Unfortunately, however, part of the orange consignment from San Francisco was lost in transit. Who is to suffer
that loss? Naturally, whoever was the owner of the oranges at the time of such loss. It could not be Chua Ngo
because the fruit had not been delivered to him. As between Gabuardi and the Universal Trading, inasmuch as
the goods had been sold "F. O. B. San Francisco", the loss must be borne by the latter, because under the law,
said goods had been delivered to the purchaser at San Francisco on board the vessel Silversandal.1 That is why
the Universal has been trying to recover the loss from both the steamship company and the insurer.
Now, as Chua Ngo has paid for 300 boxes and has received 120 boxes only, the price of 180 boxes undelivered
must be paid back to him.
It appears that whereas in the lower court defendant sustained the theory that it acted as agent of plaintiff, in this
Court the additional theory is advanced that it acted as agent of Gabuardi Company. This obviously has no
merit.
As to the contention that defendant incurred no liability because it is admitted that the oranges were lost due to
causes beyond the control of the defendant, and the oranges were shipped "F. O. B. San Francisco, the answer is
that such contention is based on the assumption which we reject that defendant merely acted as agent of
plaintiff in the purchase of the oranges from Gabuardi.
In view of the foregoing, the appealed judgment for plaintiff in the sum of P3,882.60 is affirmed with costs.
Moran, C.J., Ozaeta, Paras, Pablo, Tuason, Montemayor and Reyes, JJ., concur.

In Chua Ngo v. Universal Trading Co., Inc., 87 Phil. 331 (1950), where a local importing company was
contracted to purchase from the United States several boxes of oranges, most of which were lost in transit, the
purchaser sought to recover the advance purchased price paid, which were refused by the local importing
company on the ground that it merely imported the oranges as agent of the purchaser for which it could not be
held liable for their loss in transit. The Court, in reviewing the terms and conditions of the agreement between
the parties, held that the arrangement was a sale rather than a contract of agency to purchase on the following
grounds: (a) no commission was paid by the purchaser to the local importing company; (b) the local importing
company was given the option to resell the oranges if the balance of the purchase price was not paid within 48
hours from notification, which clearly implies that the local importing company did in fact sell the oranges to
the purchaser; (c) the local importing company placed order for the oranges a lower the price agreed upon with
the purchaser which it could not properly do if indeed it were merely acting as an agent; (d) the local
importing company charged the purchaser with a sales tax, showing that the arrangement was indeed a sale; and
(e) when the losses occurred, the local importing company made claims against the insurance company in its
own name, indicating that he imported the oranges as his own products, and not merely as agent of the local
purchaser.
vi) Independent Contractor Shell Co. of the Phil. vs. Firemens Ins. Co. of Nevada, et al. 53
OG 6084
G.R. No. L-8169
January 29, 1957
THE
SHELL
COMPANY
OF
THE
PHILIPPINES,
LTD., petitioner,
vs.
FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY COMMERCIAL CASUALTY
INSURANCE CO., SALVADOR SISON, PORFIRIO DE LA FUENTE and THE COURT OF APPEALS (First
Division),respondents.
FACTS: It is a fact that a Plymounth car owned by Salvador R. Sison was brought, on September 3, 1947 to
the Shell Gasoline and Service Station, located at the corner of Marques de Comillas and Isaac Peral
Streets, Manila, for washing, greasing and spraying. The operator of the station, having agreed to do
service upon payment of P8.00, the car was placed on a hydraulic lifter under the direction of the
personnel of the station.
Said car was insured against loss or damage by Firemen's Insurance Company of Newark, New Jersey, and
Commercial Casualty Insurance Company jointly for the sum of P10,000
The job of washing and greasing was undertaken by DE LA FUENTE through his two employees a
greaseman and a helper/washer. To perform the job, the car was carefully and centrally placed on the
platform of a hydraulic lifter before raising up said platform to a height of about 5 feet and then the
servicing job was started
After more than one hour of washing and greasing, the job was about to be completed except for an
ungreased portion underneath the vehicle which could not be reached by the greaseman. So, the lifter was
lowered a little by the greaseman and while doing so, the car for unknown reason accidentally fell and
suffered substantial damage
SISON forthwith brought the matter to his insurers attention. The insurance companies after due
inspection paid the sum of P1,651.38 for the damaged cars repair. SISON, for his part made assignments
of his rights to recover damages in favor of the Firemen's Insurance Company and the Commercial
Casualty Insurance Company hence, the instant case for the recovery of the total amount of the damage
from SHELL and DE LA FUENTE on the ground of negligence
CFI dismissed the complaint. Insurance Companies appealed. The Court of Appeals reversed the CFIs
judgment and sentenced SHELL and DE LA FUENTE to pay the amount sought to be recovered, plus legal
interest and costs
The CA ruled that DE LA FUENTE is SHELLs agent; hence, as principal, it is liable for his agents breach of
undertaking
SHELL now comes to the SC on appeal questioning the aforesaid CA decision, raising the following
ISSUE: WON DE LA FUENTE is really SHELLs agent? Isnt he more of an independent contractor?

HELD: DE LA FUENTE is SHELLs agent. The operator of a gasoline station is an agent of the oil company.
He cannot be considered as an independent contractor by reason of SHELLs extensive control and
supervision over his tasks. The assailed CA decision is affirmed.
DE LA FUENTE owed his position to SHELL which could remove him or terminate his services at any time.
He merely undertook to exclusively sell SHELLs products at the station he operates. For this purpose, he
was placed in possession of all the equipments needed to operate it, including the hydraulic lifter from
which SISONs automobile fell
But it must be noted that these equipments were delivered to DE LA FUENTE merely on loan basis. SHELL
still took charge of its care and maintenance. It supervised DE LA FUENTE and conducted periodic
inspection of the gasoline and service station
Moreover, SHELL did not leave the fixing of price for gasoline to DE LA FUENTE; on the other hand, SHELL
had complete control thereof; and it had supervision over DE LA FUENTE in the operation of the station and
in the sale of its products therein
In fine, the gasoline and service station really belonged to SHELL. It bore its tradename and the operator
DE LA FUENTE merely sold the products of SHELL there
Considering the abovelisted, in no wise can it be said that DE LA FUENTE is an independent contractor of
SHELL. The extensive control and supervision that SHELL exercises over DE LA FUENTE militate heavily
against this contention. On the contrary, such circumstances show the existence of agency between them
The existence of agency between SHELL and DE LA FUENTE is also evidenced by a receipt issued by SHELL
and signed by DE LA FUENTE, acknowledging the delivery of equipments for the gas station in question
and an official from of the inventory of said equipment containing DE LA FUENTEs signature above the
words: "Agent's signature"
RE: Liability of Principal for Agents breach of undertaking
As the CA correctly ruled, the fall of SISONs car from the hydraulic lift was the result of some unforeseen
shortcoming of the mechanism itself. As the servicing job on SISONs car was accepted by DE LA FUENTE in
the normal and ordinary conduct of his business as operator of SHELLs service station, and that the
defective hydraulic lift caused the fall of the car, he is liable therefor. SHELL, his principal, is also liable as
DE LA FUENTE acted withn the representative authority granted him as SHELLs agent. As the act of the
agent acting within the scope of his authority is the act of the principal, the breach of the
undertaking by the agent is one for which the principal is answerable
Moreover, SHELL undertook to "answer and see to it that the equipments are in good running order and
usable condition." Obviously, SHELL failed to make a thorough check up of the hydraulic lifter. Hence, it
was also negligent in that aspect to which it must answer, as the faulty lifter was the cause of the fall of
the SISONs car.
G.
Kinds
of
Agency
i.
Manner
of
Constitution
a. express Art. 1869
Art. 1869. Agency may be express, or implied from the acts of the principal, from his silence or
lack of action, or his failure to repudiate the agency, knowing that another person is acting on
his behalf without authority.
Agency may be oral, unless the law requires a specific form. (1710a)
Kinds of agency.
Agency may be classified as follows:
(1) As to manner of its creation:
(a) express. one where the agent has been actually authorized by the principal, either orally or in writing
(Art.1869.); or
(b) implied. one which is 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
(Ibid.), or from the acts of the agent which carry out the agency, or from his silence or inaction according
to the circumstances. (Art. 1870.) An implied agency is an actual agency as much as an express agency.
The enumeration of cases of implied agency in Articles
1869 and 1870 is not exclusive. Ratification may produce the effect of an express or implied agency.25 It
results in agency by ratification. (see Arts. 1901, 1910, par. 2.) The principal cannot deny the existence of
the agency after third parties, relying on his conduct, have had dealings with the supposed agent. This
method of creating an agency is known as agency by estoppel or implication. (see Art. 1911.)
An agency may exist by operation of law. (see Arts. 1884, par. 2; 1885, 1929, 1931, and 1932.)
(2) As to its character:
(a) gratuitous. one where the agent receives no compensation for his services (Art. 1875.); or
(b) compensated or onerous. one where the agent receives compensation for his services. (Ibid.)

(3) As to extent of business covered:

(a) general. one which comprises all the business of the principal (Art. 1876.); or
(b) special. one which comprises one or more specific transactions. (Ibid.)
(4) As to authority conferred:
(a) couched in general terms. one which is created in general terms and is deemed to comprise only
acts of administration (Art. 1877.); or
(b) couched in specific terms. one authorizing only the performance of a specific act or acts. (see Art.
1878.)
(5) As to its nature and effects:
(a) ostensible or representative. one where the agent acts in the name and representation of the
principal (Art. 1868.); or
(b) simple or commission. one where the agent acts in his own name but for the account of the
principal.
b. implied Art. 1870; 1871; 1872; 1910, par. 2, 1911;
Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the
agency, or from his silence or inaction according to the circumstances. (n)
Form of agency.
The usual method an agency is created is by contract which may be oral, written, or implied. There are
some provisions of law which require certain formalities for particular contracts. The first is when the form
is required for the validity of the contract; the second, when it is required to make the contract effective
against third persons such as those mentioned in Articles 1357 and 1358 of the Civil Code; and the third,
when it is required for the purpose of proving the existence of a contract such as those provided in the
Statute of Frauds in Article 1403. (Lim vs. Court of Appeals, 254 SCRA 170 [1996].)
(1) In general, there are no formal requirements governing the appointment of an agent. The agents
authority may be oral or written. It may be in public or private writing. An instance when the law requires a
specific form for the agency is Article
1874.
(2) Agency may even be implied from words and conduct of the parties and the circumstances of the
particular case. (Arts.1869-1872.) But agency cannot be inferred from mere relationship or family ties.
(Sidle vs. Kaufman, 345 Pa. 549.) Thus, it has been held that a father who was unable to drive an
automobile but who purchased one for pleasure and convenience of family was not liable for injuries
inflicted by the automobile while driven by an adult son with the fathers permission on trip to make
arrangements for sons approaching marriage, as no agency of son for father was created. (Hildock vs.
Grosso, 566 Pa. 222.)
Appointment of agent.
It is not essential that an agent should be appointed directly by the principal, but the appointment may be
made through another as by referring an applicant to another and representing that he has authority to
act, or the relation may arise out of an agreement to employ the agent of another, such person then
becoming the agent of the first party.
An agent appointed by the directors of a corporation to act for the corporation is an agent of the
corporation and not of the directors. (2 C.J.S. 1044-1045.)
Presumption of agency.
(1) General rule. Agency is generally not presumed. The relation between principal and agent must exist
as a fact. Thus, it is held that where the relation of agency is dependent upon the acts of the parties, the
law makes no presumption of agency, and it is always a fact to be proved, with the burden of proof resting
upon the person alleging the agency to show, not only the fact of its existence, but also its nature and
extent. (Antonio vs. Enriquez, [C.A.] 51 O.G. 3536; Lopez vs. Tan Tioco, 8 Phil. 693 [1907]; Harry E. Keller
Elec. Co. vs. Rodriguez, 44 Phil. 19 [1922].) It is a rule that whatever statements or communications made
by the parties (supposed principal and agent) between them, if anything thereto appears contrary to their
intention, the latter will always prevail. (3 C.J.S. 252.)
(2) Exceptions. A presumption of agency may arise, however, in those few cases where an agency may
arise by operation of law27 (3 Am. Jur. 706.) or to prevent unjust enrichment. Thus, it has been held that a
shipper may be held liable for freightage on bills of ladings signed by another person where the shipper
appears as shipper or consignee, on bills of lading where other persons appear as shippers, and on
unsigned bills of lading, where the evidence shows that the goods shipped actually belong to such shipper.
(Comp

Art. 1871. Between persons who are present, the acceptance of the agency may also be
implied if the principal delivers his power of attorney to the agent and the latter receives it
without any objection. (n)
Acceptance between persons present.
As regards implied acceptance by the agent, the law distinguishes between cases (1) where persons are
present (Art. 1871.) and (2) where persons are absent. (Art. 1872.) The agency is impliedly accepted if the
agent receives a power of attorney from the principal himself personally without any objection, both being
present.
The presumption of acceptance may be rebutted by contrary proof.
Definition and purpose of a power of attorney.
(1) A power of attorney is an instrument in writing by which one person, as principal, appoints another as
his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of
the principal. The written authorization itself is the power of attorney, and this is clearly indicated by the
fact that it has also been called a letter of attorney.
(2) Its primary purpose is not to define the authority of the agent as between himself and his principal but
to evidence the authority of the agent to third parties within whom the agent deals; and the person
holding a power of attorney is shown and designated as an attorney-in-fact, thus distinguishing such
person from an attorney-at-law (3 Am. Jur. 2d 433.), a lawyer.
Except as may be required by statute, a power of attorney is valid although no notary public intervened in
its execution.28 (see Reyes vs. Santiago, C.A.-G.R. Nos. 47996-7-R, Nov. 27, 1975; see Angeles vs. Phil.
National Railways, 500 SCRA 744 [2006].)
Construction of powers of attorney.
(1) Rule of strict construction. It is the general rule that a power of attorney must be strictly construed
and strictly pursued. Under this rule, the instrument will be held to grant only those powers which are
specified and defined, and the agent may neither go beyond nor deviate from the power of attorney. In
other words, the act done must be legally identical with that authorized to be done. Moreover, where the
mode of exercising a power is prescribed in the instrument in which it is created, there must be a strict
compliance therewith in every substantial particular.29 This is but in accord with the disinclination of
courts to enlarge the authority granted.
(2) Qualification of the rule. The rule is not absolute and should not be applied to the extent of
destroying the very purpose of the power. If the language will permit, a construction should be adopted
which will carry out, instead of defeat, the purpose of the appointment. Even if there are repugnant clauses
in a power of attorney, they should be reconciled, if possible, so as to give effect to the instrument in
keeping with its general intent or predominant purpose. Furthermore, the instrument should always be
deemed to give such powers as are essential or usual and reasonably necessary and proper in effectuating
the express powers. (3 Am. Jur. 2d., 437-438; Angeles vs. Philippine National Railways, 520 SCRA 444
[2006]; Mercado vs. Allied Banking Corporation, 528 SCRA 444 [2007].)
Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied
from the silence of the agent, except:
(1) When the principal transmits his power of attorney to the agent, who receives it without
any objection;
(2) When the principal entrusts to him by letter or telegram a power of attorney with respect
to the business in which he is habitually engaged as an agent, and he did not reply to the
letter or telegram. (n)
Acceptance between persons absent.
If both the principal and the agent are absent, acceptance of the agency by the agent is not implied from
his silence or inaction.
Since the agent is not bound to accept the agency, he can simply ignore the offer.
However, in the two cases mentioned in Article 1872, agency is implied. Thus, there is implied acceptance
if the agent writes a letter acknowledging receipt of the power of attorney but offers no objection to the
creation of the agency. (No. 1.) But his mere failure to give a reply does not mean that the agency has
been accepted unless the power of attorney is with respect to the business in which he is habitually
engaged as an agent (No. 2.),31 or the acceptance could be inferred from his acts which carry out the
agency (Art. 1870.) as when he begins to act under the authority conferred upon him. It should be noted
that under Article 1872, the principal transmits the power of attorney to the agent. In Article 1871, he
personally delivers the power of attorney to the agent.

Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not bound
except when he ratifies it expressly or tacitly. (1727)
Representation, essence of agency.
(1) Agent acts in a representative capacity. Representation being the essence of agency, it is evident
that the obligations contracted by the agent are for and in behalf of the principal to bind him as if he
personally contracted. (11 Manresa 647.) It is not enough, however, that the agent should act within the
scope of his authority under Article 1910. (par. 1.) The agent must also act in a representative capacity
(Art. 1868.), in the principals name; otherwise, the principal assumes no liability. (Art. 1883.)
(2) Agent acts within limits of his authority. Under the second paragraph of Article 1910, the agent who
exceeds his authority is not deemed a representative of the principal. In effect, he acts without authority
and becomes personally liable for any damage caused. Hence, the principal is not bound unless he ratifies
the act expressly or impliedly. Without such ratification, the agent is the one personally liable.2 (Art. 1897.)
Of course, the principal must have capacity to ratify the unauthorized act. (Infra.)
Meaning of ratification.
As applied to the law of agency, ratification is the adoption or affirmance by a person of a prior act which
did not bind him, but which was done or professed to be done on his account thus giving effect to the acts
as if originally authorized.3 The doctrine applies to the ratification of the act of an agent in excess of his
authority or the act of one who purports to be an agent but is really not. (3 Am. Jur. 2d 548.) It may be
implied from the principals conduct, e.g., acceptance of benefits by the principal under a contract entered
in his name.
Acts that may be ratified.
(1) Valid/void acts. Usually, those acts that may be authorized (i.e., they are valid) may be ratified. Acts
which are absolutely void cannot be authorized nor ratified.
(2) Voidable acts. Acts which are merely voidable may be
ratified.5 The reason is that a voidable act is not inoperative but imperfectly inoperative. Ratification,
indeed, is a method by which a voidable act may be ratified.6 (Teller, op. cit., p. 83.)
(3) Unrevoked acts. The act or transaction must remain capable of ratification. The general rule is that a
principal must ratify his agents unauthorized contract before it is revoked by the other contracting party.7
In other words, the third partys contract with the unauthorized agent may be said to constitute an offer to
the principal which can be revoked by the offeror before acceptance by the offeree. This aspect of the
doctrine of ratification would appear to contradict a fundamental concept of the doctrine, that of relation
back to the time when the contract was originally entered into. (Teller, op. cit., p. 93.)
The third partys offer to a principal arising out of a contract with his unauthorized agent, may be revoked
in one of two ways: first, as indicated above, by express revocation, and second, by a change in the nature
of the contract as originally entered into.
(4) Criminal acts. The general rule is subject to qualification in one important particular. A substantial
number of cases hold that one whose name has been forged can ratify the act. A slight majority of the
cases, however, hold that since forgery involves a crime and a public wrong and is also opposed to public
policy, it cannot be ratified. This is another instance where ratification should not be confused with
estoppel. All would probably agree that a person who expressly or impliedly represents that his forged
signature is genuine, would be estopped from denying its genuineness against one who has changed his
position from the worse. (Wyatt & Wyatt, op. cit., p. 240.)
(5) Tortious acts. An agency to commit a tort would generally be inoperative and, therefore, the
ratification without more of a tort is inconceivable, and is, in fact, a rare phenomenon.
The usual case, however, presents the ratification of a transaction in general, which includes, by
circumstance, a tort. (Teller, op. cit., p. 83.)
Acts must be done in behalf of principal.
An act, to be capable of ratification, must be done by one party as agent for someone else. Stated in
another way, a principal cannot ratify the unauthorized act of another person unless that person purported
to act as agent for, and in the name of, the principal, and not in his own behalf.
The rule operates to prevent one person from acquiring the right of another. One person may enter into a
fruitful contract with another person; a stranger cannot acquire rights in the contract by attempting to
ratify it. (Wyatt & Wyatt, op. cit., p. 240.)

Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable
with the agent if the former allowed the latter to act as though he had full powers. (n)
Meaning of estoppel.
Estoppel is a bar which precludes a person from denying or asserting anything contrary to that which has
been established as the truth by his own deed or representation either express or implied. (19 Am. Jur.
601.)
Through estoppel, an admission or representation is thus rendered conclusive upon the person making it
and cannot be denied or disproved as against the person relying thereon. (Art. 1431.)
Ratification and estoppel distinguished.
(1) Ratification differs from estoppel mainly in that the former rests on intention, express or implied,
regardless of prejudice to another, whereas estoppel rests on prejudice rather than intention. (3 Am. Jur. 2d
549.) In other words, in the former, the party is bound because he intended to be, while in the latter, he is
bound notwithstanding the absence of such intention because the other party will be prejudiced and
defrauded by his conduct, unless the law treats him as legally bound. (Forsythe vs. Day, 46 Me. 175, cited
in Teller, pp. 81-82.)
(2) While ratification is retroactive and makes the agents unauthorized act good from the beginning,
estoppel operates upon something which has been done but after the misleading act and in reliance on it
and may only extend to so much of such act as can be shown to be affected by the estopping conduct.
(Woodworth vs. School Dist. No. 2, Stevens Country, 159 P. 757, 92 Washington 456; 2 C.J.S. 1070.) Stated
otherwise, ratification affects the entire transaction and from the beginning, while estoppel affects only the
relevant parts of the transaction and from that time only when estoppel may be said to be spelled out.
(Federal Garage, Inc. vs. Prenner, 106 Vt. 222, cited in Teller, p. 82.)
(3) Ratification by a principal of an unauthorized act of his agent has occasionally been grounded upon the
doctrine of an equitable estoppel. A clear distinction, however, exists between an estoppel in pais9 (or by
conduct) and ratification. The substance of ratification is confirmation of the unauthorized act or contract
after it has been done or made, whereas, the substance of estoppel is the principals inducement to
another to act to his prejudice. Acts and conduct amounting to an estoppel in pais may in some instances
amount to a ratification; but on the other hand, ratification may be complete without any elements of
estoppel. (2 C.J. 469.)
So far as the rights of third persons are concerned, however, the distinctions are of little importance
because the principal is bound by the acts of the agent whether the conduct of the principal constitutes
ratification or whether it constitutes estoppel.
When principal solidarily liable with the agent.
Under Article 1911, the agent must have acted in the name of a disclosed principal and the third person
was not aware of the limits of the power granted by the principal. (See Art. 1898.)
Article 1911 is based on the principle of estoppel and it is necessary for the protection of innocent third
persons. It is an instance when solidarity is imposed by law. (Arts. 1207, 1208.)
Both the principal and the agent may be considered as joint tortfeasors whose liability is solidary. (Verzosa
vs. Lim, 45 Phil. 416 [1923]; see Cuison vs. Court of Appeals, 227 SCRA 391 [1993]; Lustan vs. Court of
Appeals, 266 SCRA 663 [1997].)
The third person with whom the agent dealt may sue either the agent or the principal alone, or both. The
agent should be exempt from liability if he acted in good faith.
- Equitable PCIBank vs. Ku, 355 SCRA 309 (2001)
[G.R. No. 142950. March 26, 2001]
EQUITABLE PCI BANK, formerly EQUITABLE BANKING CORPORATION, petitioner, vs. ROSITA
KU, respondent.
On February 4, 1982, respondent Rosita Ku, as treasurer of Noddy Dairy Products, Inc., and Ku Giok
Heng, as Vice-President/General Manager of the same corporation, mortgaged the subject property to the
Equitable Banking Corporation, now known as Equitable PCI Bank to secure Noddy Inc.s loan to
Equitable. The property, a residential house and lot located in La Vista, Quezon City, was registered in
respondents name.
Noddy, Inc. subsequently failed to pay the loan secured by the mortgage, prompting petitioner to
foreclose the property extrajudicially. As the winning bidder in the foreclosure sale, petitioner was issued a
certificate of sale. Respondent failed to redeem the property. Thus, on December 10, 1984, the Register of

Deeds canceled the Transfer Certificate of Title in the name of respondent and a new one was issued in
petitioners name.
On May 10, 1989, petitioner instituted an action for ejectment before the Quezon City Metropolitan
Trial Court (MeTC) against respondents father Ku Giok Heng. Petitioner alleged that it allowed Ku Giok Heng
to remain in the property on the condition that the latter pay rent. Ku Giok Hengs failure to pay rent
prompted the MeTC to seek his ejectment. Ku Giok Heng denied that there was any lease agreement over
the property.
On December 8, 1994, the MeTC rendered a decision in favor of petitioner and ordered Ku Giok Heng
to, among other things, vacate the premises
Ku Giok Heng did not appeal the decision of the MeTC. Instead, he and his daughter, respondent Rosita
Ku, filed on December 20, 1994, an action before the Regional Trial Court (RTC) of Quezon City to nullify the
decision of the MeTC. Finding no merit in the complaint, the RTC on September 13, 1999 dismissed the
same and ordered the execution of the MeTC decision.
Respondent filed in the Court of Appeals (CA) a special civil action for certiorari assailing the decision
of the RTC. She contended that she was not made a party to the ejectment suit and was, therefore,
deprived of due process. The CA agreed and, on March 31, 2000, rendered a decision enjoining the eviction
of respondent from the premises.
Issue: Can a person be evicted by virtue of a decision rendered in an ejectment case where she was not
joined as a party? This was the issue that confronted the Court of Appeals, which resolved the issue in the
negative. To hold the contrary, it said, would violate due process.
Held:
The petition is meritorious.
Generally, no man shall be affected by any proceeding to which he is a stranger, and strangers to a
case are not bound by judgment rendered by the court. [5] Nevertheless, a judgment in an ejectment suit is
binding not only upon the defendants in the suit but also against those not made parties thereto, if they
are:
a) trespassers, squatters or agents of the defendant fraudulently occupying the property to frustrate
the judgment;
b) guests or other occupants of the premises with the permission of the defendant;
c) transferees pendente lite;
d) sub-lessees;
e) co-lessees; or
f) members of the family, relatives and other privies of the defendant. [6]
Thus, even if respondent were a resident of the property, a point disputed by the parties, she is
nevertheless bound by the judgment of the MeTC in the action for ejectment despite her being a non-party
thereto.Respondent is the daughter of Ku Giok Heng, the defendant in the action for ejectment.
Respondent nevertheless claims that the petition is defective. The bank alleged in its petition that it
received a copy of the CA decision on April 25, 2000. A Certification dated June 6, 2000 issued by the
Manila Central Post Office reveals, however, that the copy was duly delivered to and received by Joel
Rosales (Authorized Representative) on April 24, 2000.[7] Petitioners motion for extension to file this
petition was filed onMay 10, 2000, sixteen (16) days from the petitioners receipt of the CA decision (April
24, 2000) and one (1) day beyond the reglementary period for filing the petition for review (May 9, 2000).

Petitioner argues that receipt on April 25, 2000 by Joel Rosales, who was not an agent of its counsels
law office, did not constitute notice to its counsel, as required by Sections 2 [10] and 10,[11] Rule 13 of the
Rules of Court. To support this contention, petitioner cites Philippine Long Distance Telephone Co. vs. NLRC.
[12]
In said case, the bailiff served the decision of the National Labor Relations Commission at the ground
floor of the building of the petitioner therein, the Philippine Long Distance Telephone Co., rather than on
the office of its counsel, whose address, as indicated in the notice of the decision, was on the ninth floor of
the building. We held that:
x x x practical considerations and the realities of the situation dictate that the service made by the bailiff
on March 23, 1981 at the ground floor of the petitioners building and not at the address of record of
petitioners counsel on record at the 9 th floor of the PLDT building cannot be considered a valid service. It
was only when the Legal Services Division actually received a copy of the decision on March 26, 1981 that
a proper and valid service may be deemed to have been made. x x x.
Applying the foregoing provisions and jurisprudence, petitioner submits that actual receipt by its
counsel was on April 27, 2000, not April 25, 2000. Following the argument to its logical conclusion, the
motion for extension to file the petition for review was even filed two (2) days before the lapse of the 15day reglementary period. That counsel treated April 25, 2000 and not April 27, 2000 as the date of receipt
was purportedly intended to obviate respondents possible argument that the 15-day period had to be
counted from April 25, 2000.
The Court is not wholly convinced by petitioners argument. The Affidavit of Joel Rosales states that he
is not the constituted agent of Curato Divina Mabilog Nedo Magturo Pagaduan Law Office. An agency may
be express but it may also be 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.
[13]
Likewise, acceptance by the agent may also be express, although it may also be implied from his acts
which carry out the agency, or from his silence or inaction according to the circumstances. [14] In this case,
Joel Rosales averred that [o]n occasions when I receive mail matters for said law office, it is only to help
them receive their letters promptly, implying that counsel had allowed the practice of Rosales receiving
mail in behalf of the former. There is no showing that counsel had objected to this practice or took steps to
put a stop to it. The facts are, therefore, inadequate for the Court to make a ruling in petitioners favor.
Assuming the motion for extension was indeed one day late, petitioner urges the Court, in any event,
to suspend its rules and admit the petition in the interest of justice. Petitioner invokes Philippine National
Bank vs. Court of Appeals,[15] where the petition was filed three (3) days late. The Court held:
It has been said time and again that the perfection of an appeal within the period fixed by the rules is
mandatory and jurisdictional. But, it is always in the power of this Court to suspend its own rules, or to
except a particular case from its operation, whenever the purposes of justice require it. Strong compelling
reasons such as serving the ends of justice and preventing a grave miscarriage thereof warrant the
suspension of the rules.
The Court finds these arguments to be persuasive, especially in light of the merits of the petition.
WHEREFORE, the petition is GIVEN DUE COURSE and GRANTED. The decision of the Court of Appeals
is REVERSED. SO ORDERED.

Calibo vs. CA, 350 SCRA 427 (2001)

FACTS:
Mike Abuella, private respondents son leased the house of Calibo for residential purposes. Pablo
Abuella left the tractor with his son for safekeeping. Rent and other expenses were initially paid but
subsequently defaulted in payment thereof. When confronted by Calibo, Mike Abuella manifested that hell
only stay in the house until end of the year 1986 and offered the tractor as security. In order for him to pay
his obligations sooner, he asked Calibo to help him look for buyers. In January 1987, a new tenant occupied
the house and Calibo moved the tractor to his fathers garage also in the same city. Even after demands,
Mike failed to pay his arrears; he only assured Calibo that the tractor would stand as guarantee to his
payment. When Pablo Abuella tried to get the tractor from Calibo, he tried to negotiate with him and
offered to write a check in payment of the rentals and postdated checks to cover the other expenses but
still had to verify with Mike. Calibo would only accept the latter if Pablo would execute a promissory note in

his favor to cover the remaining expenses. The two did not agree. Pablo Abuella instituted an action for
replevin, claiming ownership of the tractor and seeking to recover possession thereof from petitioner Both
the trial court and the CA ruled in favor of Abuella. Mike Abuella could not have validly pledged the subject
tractor to petitioner since he was not the owner thereof, nor was he authorized by its owner to pledge the
tractor.
ISSUE: Whether or not there was an implied principal-agent relationship between Pablo and Mike
HELD: No.
Pablo Abuella categorically stated that the tractor was only left to Mike for safekeeping; not to be
pledged or alienated. Mike acted without authority or consent from Pablo. Article 1869 states that there
would only be implied agency is the person is acting within the authority granted to him by the principal.
Article 1911 mandates that the principal is solidarily liable with the agent if the former allowed the latter to
act as though he had full powers. Again, in view of Pablos lack of knowledge of Mikes pledging the tractor
without any authority from him, it shows that Pablo could not have allowed the Mike to pledge the tractor
as if he had full powers to do so. Petition denied. CA decision affirmed.
- Dela Pena vs. Hidalgo, 16 Phil. 450;
The CASE was instituted by the heirs of Jose Gomiz y Dela Pea to recover sums of money from Federico
Hidalgo which he allegedly owes the estate of Jose representing unremitted accounts during the
administration of Federico of the properties of Jose Gomiz y Dela Pea.
FACTS:
In 1887, Federico Hidalgo took charge of administration of Jose Gomiz y Dela Peas properties by
virtue of a power of attorney executed by the latter in favor of 4 agents (Federico included) before he
embarked for Spain. After several years of agency, Federico Hidalgo wrote to Jose Gomiz requesting him to
designate a person to substitute him in the position because one of those appointed in the power of
attorney had died and the others did not wish to take charge of the administration of Gomiz properties.
Gomiz did not answer Federicos letters nor did he approve or object to Federicos accounts nor did he
appoint or designate another person to substitute Federico. In 1894, Federico was obliged to embark for
Spain for health reasons. On preparing for his departure, he rendered the accounts of the administration.
Federico also informed Gomiz of his intended departure from the Philippines and of his turning over the
administration to his cousin Antonio Hidalgo, upon whom he conferred a GPA. But because he deemed
such GPA to be insufficient, he also asked Gomiz to send a new SPA in favor or Antonio. When Antonio died,
Francisco Hidalgo took Antonios place. Gomiz died without having said anything regarding the substitution
of agents
ISSUE: Whether or not there was valid renunciation of the agency.
HELD: YES.
Under the circumstances of the case, it is reasonable to conclude that the agency was duly
terminated. Although Federico did not use the words renouncing the agency, such words were
undoubtedly understood and accepted by the principal because if the lapse of nearly 9 years up to time of
principals death, he never interrogated the renouncing agent and disapproved what he had done nor the
power conferred to the substituting agent. The agent who was obliged to leave his charge for a legitimate
cause and who duly informed his principal, is released and freed from the results and the consequences of
the substitute agent it was with the consent, even tacit of the principal. The agent is not required to
sacrifice his health, life, and his own interests, if it is shown that it was impossible for him to continue the
discharge of his duties.
- Conde vs. Court of Appeals, 119 SCRA 245 (1982)
FACTS: 7 April 1938. Margarita Conde, Bernardo Conde and the petitioner Dominga Conde, as heirs of
Santiago Conde, sold with right of repurchase, within ten (10) years from said date, a parcel of agricultural
land to Casimira Pasagui, married to Pio for P165.00. "Pacto de Retro Sale" provided that after 10 yrs. If
land is not repurchased a new agreement shall be made between the parties and in no case title and
ownership shall be vested in the hand of the party of the SECOND PART (the Alteras). Three years after
Cadastral Court adjudicated land to the Alteras "subject to the right of redemption by Dominga Conde,
within ten (10) years counting from April 7, 1983, after returning the amount of P165.00 and the amounts
paid by the spouses in concept of land tax Neither of the vendees-a-retro, Pio Altera nor Casimira
Pasagui, was a signatory to the deed. Conde maintains that because Pio Altera was very ill at the time,
Paciente Cordero executed the deed of resale for and on behalf of his father-in-law. Conde further states
that she redeemed the property with her own money as her co-heirs were bereft of funds for the purpose.
30 June 1965 Pio Altera sold lot to the Sps Ramon Conde and Catalina T. Conde (private respondents).
Dominga contends that land was repurchased in 1945 and filed a case against Paciente Cordero and his
wife Nicetas Altera, Ramon Conde and his wife Catalina T. Conde, and Casimira Pasagui Pio Altera having
died in 1966), for quieting of title to real property and declaration of ownership. Domingas Evidence:

Paciente Cordero signed the Memorandum of Repurchase in representation of his father-in-law Pio Altera,
who was seriously sick on that occasion, and of his mother-in-law who was in Manila at the time, and that
Cordero received the repurchase price of P65.00. TC: Dominga was ordered to vacate property CA: Upheld
TC-petitioner Neither of the vendees-a-retro signed the "Memorandum of Repurchase", and that there was
no formal authorization from the vendees for Paciente Cordero to act for and on their behalf.
ISSUE: Whether or not there was an implied agency
HELD: Yes.
From the execution of the repurchase document in 1945, possession, which heretofore had been with the
Alteras, has been in the hands of Dominga. Land taxes have also been paid for by Dominga, yearly from
1947 to 1969 inclusive. If, as opined by both the TC and the Appellate Court, petitioner had done nothing
to formalize her repurchase, by the same token, neither have the vendees-a-retro done anything to clear
their title of the encumbrance therein regarding petitioner's right to repurchase. No new agreement was
entered into by the parties as stipulated in the deed of pacto de retro, if the vendors a retro failed to
exercise their right of redemption after ten years. If, as alleged, petitioner exerted no effort to procure the
signature of Pio Altera after he had recovered from his illness, neither did the Alteras repudiate the deed
that their son-in-law had signed. Thus, an implied agency must be held to have been created from their
silence or lack of action, or their failure to repudiate the agency. Possession of the lot in dispute having
been adversely and uninterruptedly with petitioner from 1945 when the document of repurchase was
executed, to 1969, when she instituted this action, or for 24 years, the Alteras must be deemed to have
incurred in laches. That petitioner merely took advantage of the abandonment of the land by the Alteras
due to the separation of said spouses, and that petitioner's possession was in the concept of a tenant,
remain bare assertions without proof. Catalina is not buyer in good faith since the tenyear period had
lapsed in 1965 and there was no annotation of any repurchase by Domingo, neither had the title been
cleared of that encumbrance. The purchasers were put on notice that some other person could have a
right to or interest in the property. It behooved Ramon Conde and Catalina Conde to have looked into the
right of redemption inscribed on the title, and particularly the matter of possession, which, as also
admitted by them at the pre-trial, had been with petitioner since 1945. Altera and Catalinas must be held
bound by the clear terms of the Memorandum of Repurchase that he had signed wherein he acknowledged
the receipt of P165.00 and assumed the obligation to maintain the repurchasers in peaceful possession
should they be "disturbed by other persons". The imperatives of substantial justice, and the equitable
principle of laches brought about by private respondents' inaction and neglect for 24 years, loom in
petitioner's favor.
ii.
According
to
Form
a. oral Art. 1873; Agency by estoppel (1911) vs. implied agency (1881-1882)
ART. 1873. If a person specially informs another or states by public advertisement that he has given a
power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former case
with respect to the person who received the special information, and in the latter case with regard to any
person.
The power shall continue to be in full force until the notice is rescinded in the same manner in which it was
given. (n)
Communication of existence of agency. There are two ways of giving notice of agency with different
effects: (1) If by special information (e.g., by letter), the person appointed as agent is considered such with
respect to the person to whom it was given. (2) If by public advertisement, the agent is considered as such
with regard to any person. Public advertisement may be made in any form through the newspaper,
radio, etc. and by posters or billboards. In either case, the agency is deemed to exist whether there is
actually an agency or not.
Manner of revocation of agency. The power of attorney must be revoked in the same manner in which
it was given. (par. 2.) If the agency has been entrusted for the purpose of contracting with specifi ed
persons, its revocation shall not prejudice the latter if they were not given notice thereof. (Art. 1921.) If the
agent had general powers, revocation of the agency does not prejudice third persons who acted in good
faith and without knowledge of the revocation. Notice of the revocation in a newspaper of general
circulation is a suffi cient warning to third persons. (Art. 1922.) Nevertheless, revocation made in any
manner is effective where the person dealing with the agent has actual knowledge thereof; otherwise, bad
faith and fraud would be committed.
Agency by estoppel and implied agency distinguished.
Agency by estoppel (see Art. 1911.) should be distinguished from implied agency. (see Arts. 1881-1882.)
(1) Existence of actual agency. In the latter, there is an actual agency, as much as if it were created
by express words. The principal alone is liable. In an agency by estoppel, there is no agency at all, but the
one assuming to act as agent has apparent or ostensible, although not real, authority to represent another.
It is not a real agency as is one under express or implied authority.

(a) If the estoppel is caused by the principal, he is liable to any third person who relied on the
misrepresentation. Our Supreme Court has said: One who clothes another with apparent authority as his
agent, and holds him out to the public as such, cannot be permitted to deny the authority of such person
to act as his agent to the prejudice of innocent third parties dealing with such person in good faith and in
the honest belief that he is what he appears to be. (Macke vs. Camps, 7 Phil. 553 [1907]; Naguiat vs.
Court of Appeals, 412 SCRA 591 [2003].)
(b) If the estoppel is caused by the agent, then only the agent is liable.
(2) Reliance by third persons. Agency by estoppel can be invoked only by a third person who in good
faith relied on the conduct of the principal in holding agent out as being authorized, while such reliance is
not necessary in an implied agency since in such case, the agent is a real agent. As to third persons, the
principal is equally liable in the case of agency by estoppel and implied agency.
(3) Nature of authority. As between the principal and the agent, the distinction between the two
kinds of agency is vital.
(a) An agent by implied appointment is a real agent with all the rights and liabilities; he has actual
authority to act on behalf of the principal. An apparent agent, an agent by estoppel, is no agent at all, and
as against the principal, has none of the rights of an agent (2 C.J.S. 1050-1051.), except where the
principals conduct or representations are such that the agent reasonably believed that the principal
intended him to act as agent in the matter.
(b) Implied agency, being an actual agency, is a fact to be proved by deductions or inferences from
other facts, while in a strict sense, agency by estoppel should be restricted to cases in which the authority
is not real but apparent. (2-A Words and Phrases 461.)
Agency by estoppel is well recognized in the law. If the estoppel is on the ground of negligence or
fraud on the part of the principal, the agency is allowed upon the theory that, when one of two innocent
persons must suffer loss, the loss should fall upon him whose conduct brought about the situation. (Ibid.,
459.)
- Gozun vs. Mercado, 511 SCRA 305 (2006)
FACTS: In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga. Upon
respondents request, petitioner, owner of JMG Publishing House, a printing shop located in San Fernando,
Pampanga, submitted to respondent draft samples and price quotation of campaign materials. By
petitioners claim, respondents wife had told him that respondent already approved his price quotation
and that he could start printing the campaign materials, hence, he did print campaign materials like
posters bearing respondents photograph, leaflets containing the slate of party candidates, sample ballots,
poll watcher identification cards, and stickers. Given the urgency and limited time to do the job order,
petitioner availed of the services and facilities of Metro Angeles Printing and of St. Joseph Printing Press,
owned by his daughter
Jennifer Gozun and mother Epifania Macalino Gozun, respectively.
Meanwhile, on March 31, 1995, respondents sister-in-law, Lilian Soriano (Lilian) obtained from
petitioner "cash advance" of P253,000 allegedly for the allowances of poll watchers who were attending a
seminar and for other related expenses. Lilian acknowledged on petitioners 1995 diary receipt of the
amount.
.
ISSUE: Whether or not Lilian R. Soriano was authorized by the respondent to receive the cash advance
from the petitioner in the amount of P253,000.00.
HELD: By the contract of agency a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. Contracts entered into in
the name of another person by one who has been given no authority or legal representation or who has
acted beyond his powers are classified as unauthorized contracts and are declared unenforceable, unless
they are ratified. Generally, the agency may be oral, unless the law requires a specific form.
However, a special power of attorney is necessary for an agent to, as in this case, borrow money,
unless it be urgent and indispensable for the preservation of the things which are under administration.
Since nothing in this case involves the preservation of things under administration, a determination of
whether Soriano had the special authority to borrow money on behalf of respondent is in order.
It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property
executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the
principal, otherwise, it will bind the agent only. It is not enough merely that the agent was in fact
authorized to make the mortgage, if he has not acted in the name of the principal. x x x
b. written Art. 1874;

ART. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the
latter shall be in writing; otherwise, the sale shall be void. (n)
Sale of land through agent. As a general rule, the agents authority may be oral or written. (Art. 1869.)
An agency to sell on commission basis does not belong to any of the categories of contracts for which the
law (see Arts. 1357, 1358, 1403.) requires certain formalities; hence, it is valid and enforceable in
whatever form it may be entered into. (Lim vs. Court of Appeals, 254 SCRA 170 [1996].) Under this article,
the sale of a piece of land (not any other real estate) or any interest thereon, like usufruct, mortgage, etc.,
through an agent is void unless the authority of the agent to sell is in writing. (Cosmic Lumber Corp. vs.
Court of Appeals, 265 SCRA 168 [1996].) It should, however, be considered as merely voidable since the
sale can be ratifi ed by the principal (see Arts. 1901, 1910, par. 2.) such as by availing himself of the benefi
ts derived from the contract.
(1) Article 1874 speaks only of an agency for sale of a piece of land or any interest therein. It may be
argued, therefore, that an agency to purchase need not be in writing. Such an agency, however, is covered
by Article 1878(5) which provides that, A special power of attorney is necessary to enter into any contract
by which the ownership of an immovable is transmitted or acquired.
(2) Article 1874 refers to sales made by an agent for a principal and not to sales made by the owner
personally to another, whether that other be acting personally or through a representative. (Rodriguez vs.
Court of Appeals, 29 SCRA 419 [1969].)
(3) A real estate broker is not within Article 1874 where his authority (as is usual) is limited to fi nding
prospective purchasers and does not extend to making a contract to pass title. (Babb & Martin, op. cit., p.
135.)
(4) A letter containing the specifi c authority to sell is held suffi cient. (see Jimenez vs. Rabot, 38 Phil. 387
[1918].) But when there is any reasonable doubt that the language used conveys such power, no such
construction shall be given the document. (Lian vs. Puno, 31 Phil. 259 [1915]; Cosmic Lumber Corp. vs.
Court of Appeals, supra.)
(5) The express mandate required by law to enable an appointee of an agency couched in general terms to
sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act
mentioned. (Strong vs. Gutierrez Repide, 6 Phil. 680 [1906]; Cosmic Lumber Corp. vs. Court of Appeals,
supra.) The written authorization need not contain a particular description of the property which the agent
is permitted to sell.
(a) Thus, the power giving to the agent the power to sell any or all tracts, lots, or parcels of land
belonging to the principal is adequate. (Ibid.)
(b) Similarly, a power of attorney stating that I hereby confer suffi cient power x x x upon A, in
order that in my name and representation he may administer the interest I possess within this Municipality
of Tarlac, purchase, sell, collect and pay, etc. was held sufficient to cover the sale by the agent of land of
the principal in Tarlac. (Lian vs. Puno, 31 Phil. 259 [1915].)
(c) The authority to sell any kind of realty that might belong to the principal was held to include
also such as the principal might afterwards have during the time it was in force. (Katigbak vs. Tai Hing Co.,
52 Phil. 622 [1928].)
(6) To authorize a conveyance of real estate, a power of attorney must be plain in its terms.
(a) Where such power is specifically conferred, it does not authorize a conveyance by the agent to
himself; unless such power is expressly granted, it will not be implied. (Mechem, Selected Cases on the
Law of Agency [3rd ed.], pp. 142-143; see Art. 1491[2].)
(b) Where the power of attorney says that the agent can enter into any contract concerning a land,
or can sell the land under any term or condition and covenant he may think fi t, the power granted is so
broad that it practically covers the celebration of any contract and the conclusion of any covenant or
stipulation, and it undoubtedly means that the agent can act in the same manner and with same breadth
and latitude as the principal could concerning the property. (P. Amigo and J. Amigo vs. S. Teves, 96 Phil. 252
[1954].)
(7) Where the co-owners of land affi xed their signatures on the contract to sell, they were no longer selling
their shares through an agent, but, rather, they were selling the same directly and in their own right,
therefore, a written authority is no longer necessary in order to sell their shares in the subject land.
(Oesmer vs. Paraiso Development Corporation, 514 SCRA 228 [2007].)
Under Article 1403 (No. 2, par. [e].) of the Civil Code, an oral agreement for the sale of real property or of
an interest therein is unenforceable even if there is no agent.