Effects of Acts Done Within the Scope of Agents Authority:

Principal Is the One Liable; Agent Is Not Personally Liable

PACIFIC REHOUSE CORP V. EIB SECURITIES INC, G.R. NO 184036 (2010)
FACTS:
During the period of June 2003 to March 2004, plaintiffs Pacific Rehouse Corp (PRC), through their broker
EIB Securities (EIB) purchased 60,790,000 shares of Kuok Properties Inc (KPP), valued at P0.22 per share.
1. Subsequently, PRC also bought 32,180,000 DMIC shares. Of these shares, 16,180,000 were
acquired through EIB, while the remaining 16,000,000 were transferred from Westlink Global Equities Inc.
The DMIC shares were purchased at P.038 per share
2. PRc and EIB agreed to sell the KPP shares for P0.14 per share with the option to buy back or reacquire
the KPP shares within a period of 30 days from transaction date at P0.18 pershare.
3. Since PRC was undecided on whether it was to exercise their option to buy back the shares, PRC and EIB
agreed to extend the buyback option.
4. However, without their knowledge or consent, EIB sold the 32,180,000 DMIC shares atP0.24 per share
despite knowing that such sale would result in a substantial loss to PRC.
5. As such, PRC filed an action against EIB for damages.
6. The trial court held in favor of PRC. It held that that EIB went beyond its authority in selling petitioners
DMIC shares in order to buy back the KKP shares
7. Petitioners asserted the inapplicability of Sec 7 of the SDAA to their liability to reacquire the KKP shares,
as the DMIC shares were not sold to pay their P70 million obligation to EIB but to settle their obligation to the
buyers of their KKP shares
ISSUE:
WON EiB acted within the scope of its authority in the sale of the DMIC shares
HELD:
No. Sec 7 of the SDAA does not apply to petitioners obligation to third party purchasers of their KKP shares
under the full cross to seller obligation, and certainly EIB could not use said provision for the repurchase of
the KKP shares. Indubitably, the sale of the DMIC shares made by EIB is null and void for lack of authority
to do so since PRC never gave their consent or permission to the sale. Moreover, ART 1991 NCC provides
that the agent must act within the scope of his authority.
Pursuant to the authority given by the principal, the agent is granted the right to affect the legal relations of
his principal by the performance of acts effectuated in accordance with the principals manifestation of
consent.
CAB: The scope of EIB as agent of petitioner is to retain apply, sell, or dispose of all or any of the petitioners
property, of all or any indebtedness or other obligations of petitioners to EIB are not discharged in full by
PRC when due or on demand in or towards the payment and discharge of such obligation or liability.
The right to sell or dispose of the properties of petitioners by EIB is unequivocally confined to the
payment of obligations and liabilities of petitioners to EIB and none other. Thus, when EIB sold the
DMIC shares to buy back the KPP shares, it paid the proceeds to the vendees of said shares, the act
of which is clearly an obligation to a third party and hence, beyond the scope of its authority as agent.
Such an act is surely illegal and does not bind petitioners as principals of EIB.