CASE SCRA
1 G.R. No. L-20567 July 30,
1965
PHILIPPINE NATIONAL
BANK, petitioner,
vs.
MANILA SURETY and FIDELITY
CO., INC. and THE COURT OF
APPEALS (Second
Division), respondents.
2 G.R. No. 102998 July 5, 1996
BA FINANCE
CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS and
ROBERTO M.
REYES, respondents.
DIGEST
Agency; Duty of agent to act with the care of a good father of a family.An agent is
required to act with the care of a good father of a family and becomes liable for the
damages which the principal may suffer through his non-performance.
Same; Same; Bank liable for neglect in collecting sums due its debtor.A bank is
answerable for negligence in failing to collect the sums due its debtor from the latters
own debtor, contrary to said banks duty as holder of an exclusive and irrevocable
power of attorney to make such collections.
Suretyship; Surety released when assigned funds permitted by creditor to be
exhausted without notifying former.By allowing the assigned funds to be exhausted
without notifying the surety, the creditor deprives the surety of any possibility of
recoursing against that security, and therefore the surety is released.
Philippine National Bank vs. Manila Surety & Fidelity Co., Inc., 14 SCRA 776, No. L-
20567 July 30, 1965
Actions; Replevin; Words and Phrases; Replevin, Explained; Replevin may refer either
to the action itself, i.e., to regain the possession of personal chattels being wrongfully
detained from the plaintiff by another, or to the provisional remedy that would allow
the plaintiff to retain the thing during the pendency of the action and hold it pendente
lite.Replevin, broadly understood, is both a form of principal remedy and of a
provisional relief. It may refer either to the action itself, i.e., to regain the possession of
personal chattels being wrongfully detained from the plaintiff by another, or to the
provisional remedy that would allow the plaintiff to retain the thing during the
pendency of the action and hold it pendente lite. The action is primarily possessory in
nature and generally determines nothing more than the right of possession.
Same; Same; Same; Same; Parties; As an action in rem, the gist of the replevin action
is the right of the plaintiff to obtain possession of specific personal property by reason
of his being the owner or of his having a special interest therein and the person in
possession of the property sought to be replevied is ordinarily the proper and only
necessary party defendant and the plaintiff is not required to so join as defendants
other persons claiming a right on the property but not in possession thereof.
Replevin is so usually described as a mixed action, being partly in rem and partly in
personamin rem insofar as the recovery of specific property is concerned, and in
personam as regards to damages involved. As an action in rem, the gist of the
replevin action is the right of the plaintiff to obtain possession of specific personal
property by reason of his being the owner or of his having a special interest therein.
Consequently, the person in possession of the property sought to be replevied is
An agent is required to act with the care of a good father of a family and becomes liable for
the damages, which the principal may suffer through his non-performance. A bank is
answerable for negligence in failing to collect the sums due its debtor from the latters own
debtor, contrary to said banks duty as holder of an exclusive and irrevocable power of
attorney to make such collections.
FACTS: Adams & Taguba Corporation (ATACO) constituted PNB as its assignee and attorney-
in-fact to receive and collect from the Bureau of Public Works the amount to pay for the
asphalt delivered to it under a trust receipt guaranteed by Manila Surety. ATACO delivered
to BPW asphalt worth P431,466.52. Of this amount, PNB was able to regularly collect a total
of P106,382.01. However, due to unexplained reasons, PNB was not able to collect until the
investigators found out that more money were payable to ATACO from BPW. The latter
allowed another creditor to collect funds due to ATACO under the same purchase order, to
a total of P311,230.41.
Thus, PNB sued both ATACO and Manila Surety to recover the balance of P158,563.18, plus
interests and damages. CA ruled that PNB was negligent in having stopped collecting from
BPW before ATACOs debt is fully collected, thereby allowing funds to be taken by other
creditors to the prejudice of the surety. PNB asserts that the power of attorney executed in
it is favor from ATACO was merely an additional security; that it was the duty of the surety
to see to it that the obligor fulfills his obligation; and that PNB has no obligation to the
surety to collect any sum from ATACO.
ISSUE: W/N PNB is negligent as an agent-creditor of ATACO in collecting sums due to it
HELD: YES. The CA did not hold PNB responsible for its negligence in failing to collect from
ATACO for its debt to PNB, but for ITS NEGLECT IN COLLECTING SUMS DUE TO ATACO FROM
BPW. An agent is required to act with the care and diligence of a good father of a family and
becomes liable for the damages, which the principal may suffer through its non-
performance. PNBs power to collect was expressly made irrevocable so that BPW could
very well refuse to make payments to ATACO itself, and reject any demands by the surety.
Persons dealing with an assumed agent, whether the assumed agency be a general one or
special one are bound at their peril, if they would hold the principal liable, to ascertain not
only the fact of agency but also the nature and extent of authority and in case either is
controverted, the burden of proof is upon them to establish it.
FACTS:
Renato Gaytano, under the name of Gebbs International, applied for and was granted a
loan with Traders Royal Bank for P60,000. As security for the payment of the loan, the
Gaytano Spouses executed a deed of suretyship. Also Philip Wong, as credit administrator
of BA Finance Corp., sent a letter to Traders Royal Bank stating that BA Finance undertakes
to guarantee the loan of the spouses.
Partial payments on the loan were made leaving only a balance of 85,807.25. The spouses
refused to pay so TRB filed a complaint for collection of sum of money against the spouses
and BA Finance as alternative defendant. BA Finance contends as defense the lack of
authority of Wong to bind the corporation.
The RTC ruled in favor of TRB ruling that the spouses are solidarily liable to pay which was
modified by the CA to include BA Finance solidarily liable as well since it was estopped from
asserting otherwise the guaranty made by its credit administrator thus the case at bar.
ISSUE: W/N BA Finance is liable by the acts of its credit administrator
HELD: NO
It is settled that persons dealing with an assumed agent, whether the assumed agency be
ordinarily the proper and only necessary party defendant, and the plaintiff is not
required to so join as defendants other persons claiming a right on the property but
not in possession thereof. Rule 60 of the Rules of Court allows an application for the
immediate possession of the property but the plaintiff must show that he has a good
legal basis, i.e., a clear title thereto, for seeking such interim possession.
Same; Same; Same; Same; Same; Chattel Mortgage; Where the right of the plaintiff to
the possession of the specific property is so conceded or evident, the action need only
be maintained against him who so possesses the property.Where the right of the
plaintiff to the possession of the specific property is so conceded or evident, the action
need only be maintained against him who so possesses the property. In rem actio est
per quam rem nostram quae ab alio possidetur petimus, et semper adversus eum est
qui rem possidet. In Northern Motors, Inc. vs. Herrera, the Court has said: There can
be no question that persons having a special right of property in the goods the
recovery of which is sought, such as a chattel mortgagee, may maintain an action for
replevin therefor. Where the mortgage authorizes the mortgagee to take possession of
the property on default, he may maintain an action to recover possession of the
mortgaged chattels from the mortgagor or from any person in whose hands he may
find them.
a general one or special one are bound at their peril, if they would hold the principal liable,
to ascertain not only the fact of agency but also the nature and extent of authority and in
case either is controverted, the burden of proof is upon them to establish it.
The burden is on TRB to satisfactorily prove that the credit administrator with whom they
transacted acted within the authority given to him by his principal. The only evidence
presented by Wong was a memorandum authorizing him to approve loans but nothing in
the document shows authority to make guarantees. It cannot be held to be included in the
term contingent commitment. An authority of an agent should not be inferred from the
use of vague or general words. Guaranty is not presumed, it must be expressed and cannot
be extended beyond its specified limits.
TRB has not shown any evidence aside from the testimony of Wong that their transaction
was entered into the official records of the corporation thus it would be unfair to hold BA
Finance guilty of estoppel. Wong acted beyond the scope of his authority therefore he
should personally be liable.

Same; Same; Same; Same; Same; Same; The mortgagee, upon the mortgagors default,
is constituted an attorney-in-fact of the mortgagor enabling such mortgagee to act for
and in behalf of the owner and the fact that the defendant is not privy to the chattel
mortgage is inconsequential.In effect then, the mortgagee, upon the mortgagors
default, is constituted an attorney-in-fact of the mortgagor enabling such mortgagee to
act for and in behalf of the owner. Accordingly, that the defendant is not privy to the
chattel mortgage should be inconsequential. By the fact that the object of replevin is
traced to his possession, one properly can be a defendant in an action for replevin. It is
here assumed that the plaintiffs right to possess the thing is not or cannot be
disputed.

Same; Same; Same; Same; Same; Same; In case the right of possession on the part of
the plaintiff, or his authority to claim such possession or that of his principal, is put to
great doubt, it could become essential to have other persons involved and accordingly
impleaded for a complete determination and resolution of the controversy.In case
the right of possession on the part of the plaintiff, or his authority to claim such
possession or that of his principal, is put to great doubt (a contending party might
contest the legal bases for plaintiffs cause of action or an adverse and independent
claim of ownership or right of possession is raised by that party), it could become
essential to have other persons involved and accordingly impleaded for a complete
determination and resolution of the controversy.

Same; Same; Same; Same; Same; Same; Where the mortgagees right of possession is
conditioned upon the actual fact of default which itself may be controverted, the
inclusion of other parties, like the debtor or the mortgagor himself, may be required in
order to allow a full and conclusive determination of the casean adverse possessor,
who is not the mortgagor, cannot just be deprived of his possession, let alone be
bound by the terms of the chattel mortgage contract, simply because the mortgagee
brings up an action for replevin.A chattel mortgagee, unlike a pledgee, need not be
in, nor entitled to, the possession of the property unless and until the mortgagor
defaults and the mortgagee thereupon seeks to foreclose thereon. Since the
mortgagees right of possession is conditioned upon the actual fact of default which
itself may be controverted, the inclusion of other parties, like the debtor or the
mortgagor himself, may be required in order to allow a full and conclusive
determination of the case. When the mortgagee seeks a replevin in order to effect the
eventual foreclosure of the mortgage, it is not only the existence of, but also the
 mortgagors default on, the chattel mortgage that, among other things, can properly
uphold the right to replevy the property. The burden to establish a valid justification
for that action lies with the plaintiff. An adverse possessor, who is not the mortgagor,
cannot just be deprived of his possession, let alone be bound by the terms of the
chattel mortgage contract, simply because the mortgagee brings up an action for
replevin. BA Finance Corporation vs. Court of Appeals, 258 SCRA 102, G.R. No. 102998
July 5, 1996
3 [G.R. No. 117356. June 19,
2000] FACTS:
Agency; The basis of agency is representationon the part of the principal, there must St. Therese Merchandising (STM) regularly bought sugar from Victorias Milling Co
be an actual intention to appoint or an intention naturally inferable from his words or
VICTORIAS MILLING (VMC). In the course of their dealings, VMC issued several Shipping List/Delivery Receipts
actions, while on the part of the agent, there must be an intention to accept the
CO., INC., petitioner,
appointment and act on it; One factor which most clearly distinguishes agency from
vs. COURT OF (SLDRs) to STM as proof of purchases. Among these was SLDR No. 1214M.SLDR No.
other legal concepts is controlone person (the agent) agreeing to act under the
APPEALS and
control or direction of another (the principal).It is clear from Article 1868 that the 1214M, dated October 16, 1989, covers 25,000 bags of sugar. Each bag contained 50 kg and
CONSOLIDATED
basis of agency is representation. On the part of the principal, there must be an actual
SUGAR priced at P638.00 per bag. The transaction covered was a direct sale.
intention to appoint or an intention naturally inferable from his words or actions; and
CORPORATION, resp
on the part of the agent, there must be an intention to accept the appointment and act
ondents.
on it, and in the absence of such intent, there is generally no agency. One factor which
most clearly distinguishes agency from other legal concepts is control; one person On October 25, 1989, STM sold to private respondent Consolidated Sugar
the agentagrees to act under the control or direction of anotherthe principal. Corporation (CSC) its rights in the same SLDR for P14,750,000.00. CSC issued checks in
Indeed, the very word agency has come to connote control by the principal. The
control factor, more than any other, has caused the courts to put contracts between payment. That same day, CSC wrote petitioner that it had been authorized by STM to
principal and agent in a separate category. withdraw the sugar covered by the said SLDR. Enclosed in the letter were a copy of SLDR
Same; An authorization given to another containing the phrase for and in our behalf No. 1214M and a letter of authority from STM authorizing CSC to withdraw for and in
does not necessarily establish an agency, as ultimately, what is decisive is the our behalf the refined sugar covered by the SLDR On Oct. 27, 1989, STM issued checks
intention of the parties, and the use of the words sold and endorsed means that the
parties intended a contract of sale, and not an agency.It appears plain to us that to VMC as payment for 50,000 bags, covering SLDR No. 1214M. CSC surrendered the
private respondent CSC was a buyer of the SLDFR form, and not an agent of STM.
Private respondent CSC was not subject to STMs control. The question of whether a SLDR No. 1214M and to VMCs NAWACO Warehouse and was allowed to withdraw
contract is one of sale or agency depends on the intention of the parties as gathered sugar. But only 2,000 bags had been released because VMC refused to release the other
from the whole scope and effect of the language employed. That the authorization
given to CSC contained the phrase for and in our (STMs) behalf did not establish an 23,000 bags.
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 CSCs communication
to petitioner that SLDR No. 1214M had been sold and endorsed to it. The use of the Therefore, CSC informed VMC that SLDR No. 1214M had been sold and
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 endorsed to it. But VMC replied that it could not allow any further withdrawals of sugar
appellate court when it held that CSC was not STMs agent and could independently against SLDR No. 1214M because STM had already withdrawn all the sugar covered by the
sue petitioner. Victorias Milling Co., Inc. vs. Court of Appeals, 333 SCRA 663, G.R. No.
117356 June 19, 2000 cleared checks. VMC also claimed that CSC was only representing itself as STMs agent as
it had withdrawn the 2,000 bags against SLDR No. 1214M for and in behalf of STM.
Hence, CSC filed a complaint for specific performance against Teresita Ng Sy (doing
business under STM's name) and VMC. However, the suit against Sy was discontinued
because later became a witness. RTC ruled in favor of CSC and ordered VMC to deliver the
23,000 bags left. CA concurred. Hence this appeal.

ISSUES:
W/N CA erred in not ruling that CSC was an agent of STM and hence, estopped to sue upon
SLDR No. 1214M as assignee.
HELD:
NO. CSC was not an agent of STM. VMC heavily relies on STMs letter of authority that
said CSC is authorized to withdraw sugar for and in our behalf. It is clear from Art. 1868
that the: basis of agency is representation. On the part of the principal, there must be an
actual intention to appoint or an intention naturally inferable from his words or
actions, and on the part of the agent, there must be an intention to accept the
appointment and act on it, and in the absence of such intent, there is generally NO
agency. 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. Indeed, the very word agency has come to connote control by the principal.
The control factor, more than any other, has caused the courts to put contracts between
principal and agent in a separate category. 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 persons alleging the agency, to show not
only the fact of its existence but also its nature and extent. It appears that CSC was a buyer
and not an agent of STM. CSC was not subject to STMs control. The terms for and in our
behalf should not be eyed as pointing to the existence of an agency relation. Whether or
not a contract is one of sale or agency depends on the intention of the parties as
gathered from the whole scope and effect of the language employed. Ultimately, what is
decisive is the intention of the parties. (In fact, CSC even informed VMC that the SLDR
was sold and endorsed to it.)
Agency distinguished from sale.

In an agency to sell, the agent, in dealing with the thing received, is bound to act according to
the instructions of his principal, while in a sale, the buyer can deal with the thing as he
pleases, being the owner. The elementary notion of sale is the transfer of title to a thing from
one to another, while the essence of agency involves the idea of an appointment of one to act
for another. Agency is a relationship which often results in a sale, but the sale is a subsequent
step in the transaction. (Teller, op. cit., p. 26; see Commissioner of Internal Revenue vs.
Manila Machinery & Supply Co., 135 SCRA 8 [1985].) An authorization given to another
containing the phrase for and in our behalf does not necessarily establish an agency, as
ultimately what is decisive is the intention of the parties. Thus, the use of the words sold
and endorsed may mean that the parties intended a contract of sale, and not a contract of
agency.
4 EDUARDO B. OLAGUER,
Petitioner, Civil Law; Powers of Attorney; Agency; It is a general rule that a power of attorney
Vs. must be strictly construed; the instrument will be held to grant only those powers that
EMILIO PURUGGANAN, JR. AND are specified, and the agent may neither go beyond nor deviate from the power of
RAUL LOCSIN, attorney.Petitioners arguments are unpersuasive. It is a general rule that a power
Respondents. of attorney must be strictly construed; the instrument will be held to grant only those
powers that are specified, and the agent may neither go beyond nor deviate from the
G.R. No. 158907 power of attorney. However, 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, the
construction that should be adopted is that which will carry out instead of defeat the
purpose of the appointment. Clauses in a power of attorney that are repugnant to each
other should be reconciled so as to give effect to the instrument in accordance with its
general intent or predominant purpose. Furthermore, the instrument should always
be deemed to give such powers as essential or usual in effectuating the express
powers.
Same; Same; Same; In the present case, limiting the definitions of absence to that
provided under Article 381 of the Civil Code and of incapacity under Article 38 of the
same Code negates the effect of the power of attorney by creating absurd, if not
impossible, legal situations.In the present case, limiting the definitions of absence
to that provided under Article 381 of the Civil Code and of incapacity under Article
38 of the same Code negates the effect of the power of attorney by creating absurd, if
not impossible, legal situations. Article 381 provides the necessarily stringent
standards that would justify the appointment of a representative by a judge. Among
the standards the said article enumerates is that no agent has been appointed to
administer the property. In the present case, petitioner himself had already
authorized agents to do specific acts of administration and thus, no longer
necessitated the appointment of one by the court. Likewise, limiting the construction
of incapacity to minority, insanity, imbecility, the state of being a deaf-mute,
prodigality and civil interdiction, as provided under Article 38, would render the SPA
ineffective. Article 1919(3) of the Civil Code provides that the death, civil interdiction,
insanity or insolvency of the principal or of the agent extinguishes the agency. It would
be equally incongruous, if not outright impossible, for the petitioner to require himself
to qualify as a minor, an imbecile, a deaf-mute, or a prodigal before the SPA becomes
operative. In such cases, not only would he be prevented from appointing an agent, he
himself would be unable to administer his property.
Same; Same; Same; Defining the terms absence and incapacity by their everyday
usage makes for a reasonable construction, that is, the state of not being present and
the inability to act, given the context that the Special Power of Attorney (SPA)
authorizes the agents to attend stockholders meeting and vote in behalf of petitioner,
to sell the shares of stock, and other related acts.Defining the terms absence and
incapacity by their everyday usage makes for a reasonable construction, that is, the
state of not being present and the inability to act, given the context that the SPA
authorizes the agents to attend stockholders meetings and vote in behalf of petitioner,
to sell the shares of stock, and other related acts. This construction covers the
situation wherein petitioner was arrested and detained. This much is admitted by
petitioner in his testimony.
OLAGUER VS PURUGGANAN JR OLAGUER VS PURUGGANAN JR
Facts: A petition for review on the decision of CA affirming the decision of RTC
dismissing the Olaguer s suit. P was the owner of shares of stocks of
businessday Corp. He was active in the political opposition against Marcos
dictatorship. Antiicpating the possibility of his arrest and detention by tem arcos
military, he executed a SPS appointing his attorneys-in-fact Locsin, Joaquin and
hofilena for the purpose of selling or transferring his shares of stocks with
Busonessday. During his trial under the SPA, in order to cancel his shares of stocks
even before they are sold for the purpose of concealing that he was a stockholder.
The parties acknowledge the SPA before Emilio Purugganan, the corporate Sec and
the notary public. He was arrested for arson and locsin ordered purugganan to
cancel the shares in thr books of the corp and to transfer them to Locsin s name.
When he was released from detention, he discovered that he was no longer
registered as stickholder. He demanded that respondents restore to him full
ownership , but they refused to do so. He filed a complaint before RTC against
purugganana and locsin to declare as illegal the sale of the shares of stock. He
alleged that respondent exceeded his authority under the SPA. SPA only applied in
absence and incapacity. RTC dismissed and found the sale of shares b/w him and
respondent locsin was valid.
Issue: WON the CA erred in ruling that there was perfected sale.
Ruling: Petitioner sought to impose a strict construction of the SPA by limiting th
deifiniton of the word ABSENCE to a condition wherein a person disappears from
his domicile, his whereabouts being unknown without leaving an agent to administer
his proeprty. Incapacity for olaguer would be limited to mean minority, insanity,
imbecility, the state of being deaf-mute, prodigality and civil interdiction. He claims
that his arrest and subsequent detention are not among the instances covered by
the terms absence and incapacity as provided in the SPA in favor of locsin. It is a
general rule the SPA must be strictly construed, however, the rule is not absolute
and should not be applied to the extent of destroying the very purpose of the power.
He already authorized agents to do specific acts of admniistraiton and no longer
necessitated the appointment of one by the court. Absence and incapacity by their
everyday usage means the state of not being present and the inability
to act given to context that the SPA authorizes the agents to attend
stockholders meeitgns and vote in behalf of petitioner, to sell the shares of stocks
and other related acts. This construction covers the situation wherein petritoner was
arrested and detained. Which he admitted in his testimony.

Same; Same; Same; Article 1882 of the Civil Code provides that the limits of an agents
authority shall not be considered exceeded should it have been performed in a
manner advantageous to the principal than that specified by him.Article 1882 of the
Civil Code provides that the limits of an agents authority shall not be considered
exceeded should it have been performed in a manner more advantageous to the
principal than that specified by him.
 Same; Same; Same; The prohibition against agents purchasing property in their hands
for sale or management is, however, clearly, not absolute.It is, indeed, a familiar and
universally recognized doctrine that a person who undertakes to act as agent for
another cannot be permitted to deal in the agency matter on his own account and for
his own benefit without the consent of his principal, freely given, with full knowledge
of every detail known to the agent which might affect the transaction. The prohibition
against agents purchasing property in their hands for sale or management is, however,
clearly, not absolute. It does not apply where the principal consents to the sale of the
property in the hands of the agent or administrator. Olaguer vs. Purugganan, Jr., 515
SCRA 460, G.R. No. 158907 February 12, 2007

5 CAROLINA HERNANDEZ- Agency; Sales; Words and Phrases; The power conferred on the agent to sell for such
NIEVERA, DEMETRIO P. price or amount is broad enough to cover the exchange contemplated in the Deed of
HERNANDEZ, JR., and Assignment and Conveyance between the properties and the corresponding corporate
MARGARITA H. MALVAR, shares in a corporation, with the latter replacing the cash equivalent of the option
Petitioners, money initially agreed to be paid by said corporation under the Memorandum of
Agreement; Price is understood to mean the cost at which something is obtained, or
Vs. something which one ordinarily accepts voluntarily in exchange for something else, or
the consideration given for the purchase of a thing.The powers conferred on
WILFREDO HERNANDEZ, Demetrio were exclusive only to selling and mortgaging the properties. Between these
HOME INSURANCE AND two specific powers, the power to sell is quite controversial because it is the sale
GUARANTY CORPORATION, transaction which bears close resemblance to the deal contemplated in the DAC. In
PROJECT MOVERS REALTY fact, part of the testimony of Atty. Danilo Javier, counsel for respondent HIGC and head
AND DEVELOPMENT of its legal department at the time, is that in the execution of the DAC, respondents had
CORPORATION, MARIO P. relied on Demetrios special power of attorney and also on his supposed agreement to
VILLAMOR and LAND BANK OF be paid in kind, i.e., in shares of stock, as consideration for the assignment and
THE PHILIPPINES, conveyance of the subject properties to the Asset Pool. What petitioners miss,
Respondents. however, is that the power conferred on Demetrio to sell for such price or amount is
broad enough to cover the exchange contemplated in the DAC between the properties
G.R. No. 171165 and the corresponding corporate shares in PMRDC, with the latter replacing the cash
equivalent of the option money initially agreed to be paid by PMRDC under the MOA.
Suffice it to say that price is understood to mean the cost at which something is
obtained, or something which one ordinarily accepts voluntarily in exchange for
something else, or the consideration given for the purchase of a thing.
Same; Same; The special power of attorney to sell is sufficient to enable the agent to
make a binding commitment under the Deed of Assignment and Conveyance.Thus, it
becomes clear that Demetrios special power of attorney to sell is sufficient to enable
him to make a binding commitment under the DAC in behalf of Carolina and Margarita.
In particular, it does include the authority to extinguish PMRDCs obligation under the
MOA to deliver option money and agree to a more flexible term by agreeing instead to
receive shares of stock in lieu thereof and in consideration of the assignment and
conveyance of the properties to the Asset Pool. Indeed, the terms of his special power
of attorney allow much leeway to accommodate not only the terms of the MOA but
also those of the subsequent agreement in the DAC which, in this case, necessarily and
consequently has resulted in a novation of PMRDCs integral obligations. On this score,
we quote with approval the decision of the Court of Appeals, aptly citing the case of
California Bus Lines, Inc. v. State Investment House, Inc., 403 SCRA 222 (2003) thus
There are two ways which could indicate, in fine, the presence of novation and thereby
produce the effect of extinguishing an obligation by another which substitutes the
same. The first is when novation has been explicitly stated and declared in
unequivocal terms. The second is when the old and the new obligations are
incompatible on every point. The test of incompatibility is whether the two obligations
can stand together, each one having its independent existence. If they cannot, they are
incompatible, and the latter obligation novates the first. Corollarily, changes that
breed incompatibility must be essential in nature and not merely accidental. The
FACTS:
On 11 November 1993, the owners of the Hernandez property, which includes
petitioner Cornelia Hernandez, executed a letter indicating: (1) respondent Cecilio
Hernandez as the representative of the owners of the land; and (2) the
compensation he gets in doing such job. Such property was subject of an
expropriation case for a DPWH project. During the course of the expropriation
proceedings, an Order was issued by the RTC, Cecilio was appointed as one of the
commissioners in the expropriation case. On 18 October 1996, Cornelia, and her
other co-owners who were also signatories of the 11 November 1993 letter,
executed an irrevocable Special Power of Attorney (SPA) appointing Cecilio
Hernandez as their "true and lawful attorney" with respect to the expropriation of the
subject property. There was no mention of the compensation scheme for Cecilio, the
attorney-in-fact.
The just compensation for the condemned properties was fixed subsequently, with
Cornelias share amounting to P7,321,500.00the amount apro-indivisoowner is to
receive. At this point, Cecilios SPA was revoked by Cornelia. On 7 February 2000,
however, Cornelia received from Cecilio a check amounting to P1,123,000.00. The
check was accompanied by a Receipt and Quit claim document in favor of Cecilio.In
essence it states that: (1) the amount received will be the share of Cornelia in the
just compensation paid by the government in the expropriated property; (2) in
consideration of the payment, it will release and forever discharge Cecilio from any
action, damages, claims or demands; and (3) Cornelia will not institute any action
and will not pursue her complaint or opposition to the release to Cecilio or his heirs
or assigns.
In a Letter dated 22 June 2000after she learned of her true share in the
expropriation proceedings Cornelia demanded the accounting of the proceeds. The
letter was left unanswered. She then decided to have the courts settle the issue. A
Complaint for the Annulment of Quitclaim and Recovery of Sum of Money and
Damages was filed before the RTC. Cecilio was declared in default, but this was
reversed by the CA.
ISSUE: Whether or not the CA erred in holding the validity of the receipt and
quitclaim document
HELD:
The petition is granted.
CIVIL LAW: Voidable contracts.

6 G.R. No. L-30573 October 29,
1971
VICENTE M. DOMINGO,
represented by his heirs,
ANTONINA RAYMUNDO VDA.
DE DOMINGO, RICARDO,
CESAR, AMELIA, VICENTE JR.,
SALVADOR, IRENE and
JOSELITO, all surnamed
DOMINGO, petitioners-
appellants,
vs.
GREGORIO M.
DOMINGO, respondent-
appellee, TEOFILO P.
PURISIMA, intervenor-
respondent.
7 GR No. L-46472 January 23,
1940
TAN TIONG TECK, recurrent,
incompatibility must take place in any of the essential elements of the obligation such
as its object, cause or principal conditions thereof; otherwise, the change would be
merely modificatory in nature and insufficient to extinguish the original obligation.
Hernandez-Nievera vs. Hernandez, 642 SCRA 646, G.R. No. 171165 February 14, 2011
Agency; Obligations of an agent.Articles 1891 and 1909 of the Civil Code demand
the utmost good faith, fidelity, honesty, candor and fairness on the part of the agent to
his principal. The agent has an absolute obligation to make a full disclosure or
complete account to his principal of all his transactions and other material facts
relevant to the agency, so much so that the law as amended does not countenance any
stipulation exempting the agent from such an obligation and considers such an
exemption as void.
Same; Failure of agent to make full disclosure makes him guilty of breach of his loyalty
to the principal.An agent who takes a secret profit in the nature of a bonus, gratuity
or personal benefit from the vendee, without revealing the same to bis principal is
guilty of a breach of his loyalty to the latter and forfeits his right to collect the
commission that may be due him, even if the principal does not suffer any injury by
reason of such breach of fidelity, or that he obtained better results or that the agency
is a gratuitous one, or that usage or custom allows it; because the rule is to prevent the
possibility of any wrong, not to remedy or repair an actual damage.
Same; Duty of fidelity when not applicable.The duty embodied in Article 1891 of
the Civil Code does not apply if the agent or broker acted only as a middleman with
the task of merely bringing together the vendor and vendee, who themselves
thereafter will negotiate on the terms and conditions of the transaction. Domingo vs.
Domingo, 42 SCRA 131, No. L-30573 October 29, 1971
A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable. In determining whether consent is vitiated by any of
the circumstances mentioned, courts are given a wide latitude in weighing the facts
or circumstances in a given case and in deciding in their favor what they believe to
have actually occurred, considering the age, physical infirmity, intelligence,
relationship, and the conduct of the parties at the time of the making of the contract
and subsequent thereto. Here, the service contract of 11 November 1993
(appointing Cecilio as representative), as well as the quitclaim and receipt, are
voidable the first due to mistake, the second due to fraud.
First, the service contract gave Cecilio compensation based on "1998 skyrocketing"
prices that essentially will give Cecilio 83.07% of the just compensation due Cornelia
as the co-owner of the land. No evidence on record would show that Cornelia
agreed, by way of the 11 November 1993 letter, to give Cecilio 83.07% of the
proceeds of the sale of her land. Second, quitclaims are also contracts and can be
voided if there was fraud or intimidation that leads to lack of consent. The facts show
that a simple accounting of the proceeds of the just compensation will be enough to
satisfy the curiosity of Cornelia. However, Cecilio did not disclose the truth and
instead of coming up with the request of his aunt, he made a contract intended to
bar Cornelia from recovering any further sum of money from the sale of her property.
Moreover, when Cecilio accepted the position as commissioner, he created a barrier
that prevented his performance of his duties under the SPA. Cecilio could not have
been a hearing officer and a defendant at the same time. Indeed, Cecilio foisted
fraud on both the Court and the Hernandezes when, after his appointment as
commissioner, he accepted the appointment by the Hernandezes to "represent" and
"sue for" them.
The decision of the CA is REVERSED and SET ASIDE.
Facts:
Gregorio Domingo, Vicente Domingos broker and agent, received P1,000 from Oscar de
Leon as gift or propina. Oscar gave him said amount after Gregorio succeeded in persuading
Vicente to accept his offer to buy the lot for P1.20instead of P2.
Held:
An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit
from the vendee, without revealing the same to his principal, the vendor, is guilty of a
breach of his loyalty to the principal and forfeits his right to collect the commission from his
principal, even if the principal does not suffer any injury by reason of such breach of fidelity
,or that he obtained better results or that the agency is a gratuitous one, or that usage or
custom allows it. The fact that the principal may have been benefited by the valuable
services of the said agent does not exculpate the agent who has only himself to blame for
such a result by reason of his treachery or perfidy. As a necessary consequence of such
breach of trust, Gregorio Domingo must forfeit his right to the commission and must return
the part of the commission he received from his principal.
 vs.
THE COMMISSION OF
SECURITIES AND BAGS, and
CUA OH & CO., Appealed.
8 G.R. No. 121824 January 29,
1998
BRITISH AIRWAYS, petitioner,
vs.
COURT OF APPEALS, GOP
MAHTANI, and PHILIPPINE
AIRLINES, respondents.
9 G.R. No. L-19893 March
31, 1923
ARNALDO F. DE SILVA, plaintiff-
appellant,
vs.
ABOITIZ & COMPANY,
INC., defendant-appellee.
Air Transportation; Agency; Damages; An agent is also responsible for any negligence
in the performance of its function and is liable for damages which the principal may
suffer by reason of its negligent act.Parenthetically, the Court of Appeals should
have been cognizant of the well-settled rule that an agent is also responsible for any
negligence in the performance of its function and is liable for damages which the
principal may suffer by reason of its negligent act. Hence, the Court of Appeals erred
when it opined that BA, being the principal, had no cause of action against PAL, its
agent or subcontractor.
Same; Same; Same; International Air Transport Association (IATA); Member airlines
of the IATA are regarded as agents of each other in the issuance of the tickets and
other matters pertaining to their relationship.Also, it is worth mentioning that both
BA and PAL are members of the International Air Transport Association (IATA),
wherein member airlines are regarded as agents of each other in the issuance of the
tickets and other matters pertaining to their relationship. Therefore, in the instant
case, the contractual relationship between BA and PAL is one of agency, the former
being the principal, since it was the one which issued the confirmed ticket, and the
latter the agent.
British Airways vs. Court of Appeals, 285 SCRA 450, G.R. No. 121824 January 29, 1998
Facts: On April 16, 1989, Mahtani is on his way to Bombay, India from Manila. His
trip was Manila-Hong Kong via PAL and then Hong Kong-India via British Airways.
Prior to his departure, he checked in two pieces of luggage containing his clothing
and other personal effects, confident that the same would be transferred to his BA
flight.
Unfortunately, when he arrived in India, he discovered that his luggage was
missing.
The RTC awarded Mahtani damages which was affirmed by CA.
Issue: Whether or not in a contract of air carriage a declaration by the passenger is
needed to recover a greater amount?
Held: American jurisprudence provides that an air carrier is not liable for the loss of
baggage in an amount in excess of the limits specified in the tariff which was filed
with the proper authorities, such tariff being binding on the passenger regardless of
the passengers lack of knowledge thereof or assent thereto. This doctrine is
recognized in this jurisdiction.
The inescapable conclusion that BA had waived the defense of limited liability when
it allowed Mahtani to testify as to the actual damages he incurred due to
misplacement of his luggage, without any objection.
It is a well-settled doctrine that where the proponent offers evidence deemed by
counsel of the adverse party to be inadmissible for any reason, the latter has the
right to object. However, such right is a mere privilege which can be waived.
Necessarily, the objection must be made at the earliest opportunity, in case of
silence when there is opportunity to speak may operate as a waiver of objections.