AGENCY

1. EUROTECH INDUSTRIAL TECHNOLOGIES, INC VS CUIZON (ACTS OF AGENTS ARE ACTS OF

PRINCIPALS)
521 SCRA 584
FACTS: From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to P91,338.00
pesos. Subsequently, respondents sought to buy from petitioner one unit of sludge pump valued at P250,000.00 with
respondents making a down payment of P50,000.00. When the sludge pump arrived from the United Kingdom, petitioner
refused to deliver the same to respondents without their having fully settled their indebtedness to petitioner. Thus, on 28
June 1995, respondent EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of Assignment of
receivables in favor of petitioner. Impact systems is owed by ERWIN Cuizon.
Despite the existence of the Deed of Assignment, respondents proceeded to collect from Toledo Power Company the amount
of P365,135.29. Alarmed by this development, petitioner made several demands upon respondents to pay their obligations.
As a result, respondents were able to make partial payments to petitioner. On 7 October 1996, petitioner's counsel sent
respondents a final demand letter wherein it was stated that as of 11 June 1996, respondents' total obligations stood at
P295,000.00 excluding interests and attorney's fees. Because of respondents' failure to abide by said final demand letter,
petitioner instituted a complaint for sum of money, damages, with application for preliminary attachment against herein
respondents.
By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in interest in this case.
According to him, he was acting as mere agent of his principal, which was the Impact Systems, in his transaction with
petitioner and the latter was very much aware of this fact.
ISSUE: Whether the act of Edwin in signing the Deed of Assignment binds his principal Impact Systems
HELD: Yes, the act of Edwin in signing the Deed of Assignment binds Impact Systems
The Supreme Court held that in a contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another with the latter's consent. Its purpose is to extend the personality of the principal or
the party for whom another acts and from whom he or she derives the authority to act. It is said that the basis of agency is
representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said
acts have the same legal effect as if they were personally executed by the principal.
In this case at hand, the parties do not dispute the existence of the agency relationship between respondents ERWIN as
principal and EDWIN as agent.
 2. BALTAZAR VS OMBUDSMAN (ACTS THAT CANNOT BE DELEGATED)
510 SCRA 74
FACTS: Paciencia Regala owns a seven (7)-hectare fishpond located at Sasmuan, Pampanga. Her Attorney-in-Fact Faustino
R. Mercado leased the fishpond for PhP 230,000.00 to Eduardo Lapid for a three (3)-year period. Lessee Eduardo Lapid in
turn sub-leased the fishpond to Rafael Lopez for PhP 50,000.00 during the last seven (7) months of the original lease.
Respondent Ernesto Salenga was hired by Eduardo Lapid as fishpond watchman (bante-encargado). In the sub-lease, Rafael
Lopez rehired respondent Salenga.
Meanwhile, on March 11, 1993, respondent Salenga, through a certain Francis Lagman, sent his January 28, 1993 demand
letter to Rafael Lopez and Lourdes Lapid for unpaid salaries and non-payment of the 10% share in the harvest.
On June 5, 1993, sub-lessee Rafael Lopez wrote a letter to respondent Salenga informing the latter that for the last two (2)
months of the sub-lease, he had given the rights over the fishpond to Mario Palad and Ambit Perez for PhP 20,000.00. This
prompted respondent Salenga to file a Complaint before the Provincial Agrarian Reform Adjudication Board (PARAB).
On November 24, 1994, pending resolution of the agrarian case, the instant case was instituted by petitioner Antonio
Baltazar, an alleged nephew of Faustino Mercado, through a Complaint-Affidavit against private respondents before the
Office of the Ombudsman.
Petitioner charged private respondents of conspiracy through the issuance of the TRO in allowing respondent Salenga to
retain possession of the fishpond, operate it, harvest the produce, and keep the sales under the safekeeping of other private
respondents
Petitioner asserts that he is duly authorized by Faustino Mercado to institute the suit and presented a Special Power of
Attorney (SPA) from Faustino Mercado.
ISSUE: Whether Faustino Mercado can delegate his agency to his nephew Antonio Baltazar
HELD: No, Faustino Mercado cannot delegate his agency to his nephew Antonio Baltazar.
The Supreme Court held that petitioner's principal, Faustino Mercado, is an agent himself and as such cannot further delegate
his agency to another. Otherwise put, an agent cannot delegate to another the same agency. The legal maxim potestas
delegata non delegare potest; a power once delegated cannot be re-delegated, while applied primarily in political law to the
exercise of legislative power, is a principle of agency. For another, a re-delegation of the agency would be detrimental to
the principal as the second agent has no privity of contract with the former.
In the instant case, petitioner has no privity of contract with Paciencia Regala, owner of the fishpond and principal of
Faustino Mercado.
 3. ONG VS CA (CRIMINAL ACTS OR ACTS PROHIBITED BY LAW)
401 SCRA 684
FACTS: That on or about July 23, 1990, Benito Ong, representing ARMAGRI International Corporation, conspiring and
confederating together did then and there willfully, unlawfully and feloniously defraud the SOLIDBANK Corporation
represented by its Accountant, DEMETRIO LAZARO, in the following manner, to wit: the said accused received in trust
from said SOLIDBANK Corporation, 10,000 bags of urea valued at P, 2,050,000 specified in a Trust Receipt Agreement
and covered by a Letter of Credit No. DOM GD 90-009 in favor of the Fertiphil Corporation.
Under the express obligation on the part of the said accused to account for said goods to Solidbank Corporation and/or remit
the proceeds of the sale thereof within the period specified in the Agreement or return the goods, if unsold immediately or
upon demand.
However, Ong, once in possession of said goods, far from complying with the aforesaid obligation failed and refused and
still fails and refuses to do so despite repeated demands made upon him to that effect and with intent to defraud, willfully,
unlawfully and feloniously misapplied, misappropriated and converted the same or the value thereof to his own personal
use and benefit, to the damage and prejudice of the said Solidbank Corporation in the aforesaid amount of P2,050,000.00
Philippine Currency.
Petitioner contends that in signing the trust receipts, he merely acted as an agent of ARMAGRI. Petitioner asserts that
nowhere in the trust receipts did he assume personal responsibility for the undertakings of ARMAGRI which was the
entrustee.
ISSUE: Whether ARMAGRI Corp. violated the Trust Receipts Law
HELD: No, ARMGAGRI Corp. did not violate the Trust Receipts Law
The Supreme Court held that the Trust Receipts Law recognizes the impossibility of imposing the penalty of imprisonment
on a corporation. Hence, if the entrustee is a corporation, the law makes the officers or employees or other persons
responsible for the offense liable to suffer the penalty of imprisonment. The reason is obvious: corporations, partnerships,
associations and other juridical entities cannot be put to jail. Hence, the criminal liability falls on the human agent
responsible for the violation of the Trust Receipts Law.
In the instant case, the Bank was the entruster while ARMAGRI was the entrustee. Being the entrustee, ARMAGRI was
the one responsible to account for the goods or its proceeds in case of sale. However, the criminal liability for violation of
the Trust Receipts Law falls on the human agent responsible for the violation.
Petitioner, who admits being the agent of ARMAGRI, is the person responsible for the offense for two reasons. First,
petitioner is the signatory to the trust receipts, the loan applications and the letters of credit. Second, despite being the
signatory to the trust receipts and the other documents, petitioner did not explain or show why he is not responsible for the
failure to turn over the proceeds of the sale or account for the goods covered by the trust receipts.
 4. SUNANCE INTERNATIONAL MANAGEMENT SERVICES, INC. VS NLRC
480 SCRA 146
(KNOWLEDGE OF AGENT IMPUTED TO THE PRINCIPAL)
FACTS: Respondent Divina Montehermozo is a domestic helper deployed to Taiwan by Sunace International Management
Services (Sunace) under a 12-month contract. Such employment was made with the assistance of Taiwanese broker Edmund
Wang. After the expiration of the contract, Montehermozo continued her employment with her Taiwanese employer for
another 2 years.
When Montehermozo returned to the Philippines, she filed a complaint against Sunace, Wang, and her Taiwanese employer
before the National Labor Relations Commission (NLRC). She alleges that she was underpaid and was jailed for three
months in Taiwan. She further alleges that the 2-year extension of her employment contract was with the consent and
knowledge of Sunace. Sunace, on the other hand, denied all the allegations.
The Labor Arbiter ruled in favor of Montehermozo and found Sunace liable thereof. The National Labor Relations
Commission and Court of Appeals affirmed the labor arbiter’s decision. Hence, the filing of this appeal.
ISSUE: Whether or not the 2-year extension of Montehermozo’s employment was made with the knowledge and consent
of Sunace
HELD: There is an implied revocation of an agency relationship when after the termination of the original employment
contract, the foreign principal directly negotiated with the employee and entered into a new and separate employment
contract.
Contrary to the Court of Appeals finding, the alleged continuous communication was with the Taiwanese broker Wang, not
with the foreign employer.
The finding of the Court of Appeals solely on the basis of the telefax message written by Wang to Sunace, that Sunace
continually communicated with the foreign "principal" (sic) and therefore was aware of and had consented to the execution
of the extension of the contract is misplaced. The message does not provide evidence that Sunace was privy to the new
contract executed after the expiration on February 1, 1998 of the original contract. That Sunace and the Taiwanese broker
communicated regarding Montehermozo’s allegedly withheld savings does not necessarily mean that Sunace ratified the
extension of the contract.
As can be seen from that letter communication, it was just an information given to Sunace that Montehermozo had taken
already her savings from her foreign employer and that no deduction was made on her salary. It contains nothing about the
extension or Sunace’s consent thereto.
Parenthetically, since the telefax message is dated February 21, 2000, it is safe to assume that it was sent to enlighten Sunace
who had been directed, by Summons issued on February 15, 2000, to appear on February 28, 2000 for a mandatory
conference following Montehermozo’s filing of the complaint on February 14, 2000.
Respecting the decision of Court of Appeals following as agent of its foreign principal, [Sunace] cannot profess ignorance
of such an extension as obviously, the act of its principal extending [Montehermozo’s] employment contract necessarily
bound it, it too is a misapplication, a misapplication of the theory of imputed knowledge.
The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the principal, employer, not the other
way around. The knowledge of the principal-foreign employer cannot, therefore, be imputed to its agent Sunace.
There being no substantial proof that Sunace knew of and consented to be bound under the 2-year employment contract
extension, it cannot be said to be privy thereto. As such, it and its "owner" cannot be held solidarily liable for any of
Montehermozo’s claims arising from the 2-year employment extension. As the New Civil Code provides, Contracts take
effect only between the parties, their assigns, and heirs, except in case where the rights and obligations arising from the
contract are not transmissible by their nature, or by stipulation or by provision of law. Furthermore, as Sunace correctly
points out, there was an implied revocation of its agency relationship with its foreign principal when, after the termination
of the original employment contract, the foreign principal directly negotiated with Montehermozo and entered into a new
and separate employment contract in Taiwan. Article 1924 of the New Civil Code states that the agency is revoked if the
principal directly manages the business entrusted to the agent, dealing directly with third persons.
5. SEVILLA VS CA (AGENCY COUPLED WITH AN INTEREST)
160 SCRA 171
FACTS: On Oct. 19, 1960, the Tourist World Service, Inc. leased an office at Mabini St., Manila for the former's use as a
branch office. When 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 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, 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, 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 was 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.
ISSUE: Whether the act of Tourist World Service in abolishing its Ermita branch proper
HELD: No, the act of Tourist World Service in abolishing its Ermita branch is not proper.
The Supreme Court held that when the petitioner, Lina Sevilla, agreed to manage Tourist World Service, Inc.'s Ermita
office, she must have done so pursuant to a contract of agency.
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, presumed 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 parties had contemplated
a principal-agent relationship, rather than a joint management 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
the mutual interest of the agent and the principal. Accordingly, the revocation complained of should entitle the petitioner,
Lina Sevilla, to damages
 6. HAHN VS CA (EXCLUSIVE DISTRIBUTOR AS AGENT)
266 SCRA 537
FACTS: Petitioner Alfred Hahn is a Filipino citizen doing business under the name and style "Hahn-Manila". On the other
hand, private respondent (BMW) is a nonresident foreign corporation existing under the laws of the former Federal Republic
of Germany, with principal office at Munich, Germany.
On March 7, 1967, petitioner executed in favor of private respondent a "Deed of Assignment with Special Power of
Attorney. Per the agreement, the parties "continue[d] business relations as has been usual in the past without a formal
contract."
But on February 16, 1993, in a meeting with a BMW representative and the president of Columbia Motors Corporation
(CMC), Jose Alvarez, petitioner was informed that BMW was arranging to grant the exclusive dealership of BMW cars and
products to CMC, which had expressed interest in acquiring the same.
On February 24, 1993, petitioner received confirmation of the information from BMW which, in a letter, expressed
dissatisfaction with various aspects of petitioner's business, mentioning among other things, decline in sales, deteriorating
services, and inadequate showroom and warehouse facilities, and petitioner's alleged failure to comply with the standards
for an exclusive BMW dealer.
Nonetheless, BMW expressed willingness to continue business relations with the petitioner on the basis of a "standard
BMW importer" contract, otherwise, it said, if this was not acceptable to petitioner, BMW would have no alternative but to
terminate petitioner's exclusive dealership effective June 30, 1993.
Because of Hahn's insistence on the former business relations, BMW withdrew on March 26, 1993 its offer of a "standard
importer contract" and terminated the exclusive dealer relationship effective June 30, 1993.
On April 29, 1993, BMW proposed that Hahn and CMC jointly import and distribute BMW cars and parts.
Hahn found the proposal unacceptable. On May 14, 1993, he filed a complaint for specific performance and damages against
BMW to compel it to continue the exclusive dealership.
ISSUE: Whether petitioner Alfred Hahn is the agent or distributor in the Philippines of private respondent BMW
HELD: Alfred Hahn is an agent of BMW.
The Supreme Court held that agency is shown when Hahn claimed he took orders for BMW cars and transmits them to
BMW. Then BMW fixes the down payment and pricing charges and will notify Hahn of the scheduled production month
for the orders, and reconfirm the orders by signing and returning to Hahn the acceptance sheets.
The payment is made by the buyer directly to BMW. Title to cars purchased passed directly to the buyer and Hahn never
paid for the purchase price of BMW cars sold in the Philippines. Hahn was credited with a commission equal to 14% of the
purchase price upon the invoicing of a vehicle order by BMW. Upon confirmation in writing that the vehicles had been
registered in the Philippines and serviced by him, Hahn received an additional 3% of the full purchase price. Hahn performed
after-sale services, including, warranty services. for which he received reimbursement from BMW. All orders were on
invoices and forms of BMW.
Moreover, the Court distinguished an agent from a broker. The court ruled that an agent receives a commission upon the
successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller
together, even if no sale is eventually made.
 7. UYTENGSU II VS BADUEL (AUTHORITY OF COUNSEL AS AGENT)
477 SCRA 621
FACTS: Complainant is one of the heirs of Tirso Uytengsu, Jr. He and his co-heirs had a pending patent application. He
alleges that sometime in December 1998 respondent requested him to sign a special power of attorney (SPA) authorizing
Luis Wee (Wee) and/or Thomas Jacobo (Jacobo) to claim, demand, acknowledge and receive on his behalf the certificates
of title from the Register of Deeds, General Santos City, Department of Environment and Natural Resources and from any
government office or agency due to complainant and his co-heirs by reason of their application for Homestead Patent.
Complainant refused to sign the SPA as he wanted to obtain the documents personally. In essence, complainant asserts that
respondent caused Kokseng to execute an SPA in favor of Wee and/or Jacobo to the damage and prejudice of the heirs of
Tirso Uytengsu, Jr. even if he knew that Kokseng had no authority to do so.
ISSUE: Whether Atty. Baduel exceeded his authority as counsel when he asked Uytengsu to sign an SPA
HELD: No, Atty. Baduel did not exceed his authority as counsel.
The Supreme Court held that the relation of attorney and client is in many respects one of agency and the general rules of
ordinary agency apply to such relation. The extent of authority of a lawyer, when acting on behalf of his client outside of
court, is measured by the same test as that which is applied to an ordinary agent. Such being the case, even respondent
himself can acquire the certificates of title and other documents without need of an SPA from complainant and his co-heirs.
8. J. PHIL. MARINE VS NLRC (AUTHORITY OF COUNSEL AS AGENT)
561 SCRA 675
FACTS: Warlito E. Dumalaog (respondent), who served as cook aboard vessels plying overseas, filed on March 4, 2002
before the National Labor Relations Commission (NLRC) a pro-forma complaint against petitioners — manning agency J-
Phil Marine, Inc. (J-Phil), its then president Jesus Candava, and its foreign principal Norman Shipping Services — for
unpaid money claims, moral and exemplary damages, and attorney's fees. Respondent's total claim against petitioners was
P864,343.30 plus P117,557.60 representing interest and P195,928.66 representing attorney's fees By Decision of August
29, 2003, Labor Arbiter Fe Superiaso-Cellan dismissed respondent's complaint for lack of merit.
On appeal, the NLRC, by Decision of September 27, 2004, reversed the Labor Arbiter's decision.
During the pendency of the case before the Supreme Court, respondent, against the advice of his counsel, entered into a
compromise agreement with petitioners. He thereupon signed a Quitclaim and Release subscribed and sworn to before the
Labor Arbiter.
ISSUE: Whether the act of Dumalaog in entering into a compromise agreement without the assistance of a counsel is proper
HELD: Yes, the act of Dumalaog in entering into a compromise agreement without a lawyer is proper.
The Supreme Court held that the relation of attorney and client is in many respects one of agency, and the general rules of
agency apply to such relation. The acts of an agent are deemed the acts of the principal only if the agent acts within the
scope of his authority. The circumstances of this case indicate that respondent's counsel is acting beyond the scope of his
authority in questioning the compromise agreement.
Dumalaog has undoubtedly the right to compromise a suit without the intervention of his lawyer cannot be gainsaid, the
only qualification being that if such compromise is entered into with the intent of defrauding the lawyer of the fees justly
due him, the compromise must be subject to the said fees.
In the case at bar, there is no showing that respondent intended to defraud his counsel of his fees.
 9. LIM VS SABAN (EVASION OF COMMISSION IN BAD FAITH)
447 SCRA 232
FACTS: Under an Agency Agreement, Ybañez authorized Saban to look for a buyer of the lot for Two Hundred Thousand
Pesos (P200,000.00) and to mark up the selling price to include the amounts needed for payment of taxes, transfer of title
and other expenses incident to the sale, as well as Saban's commission for the sale.
Through Saban's efforts, Ybañez and his wife were able to sell the lot to the petitioner Genevieve Lim (Lim) and the spouses
Benjamin and Lourdes Lim (the Spouses Lim) on March 10, 1994. The price of the lot as indicated in the Deed of Absolute
Sale is Two Hundred Thousand Pesos (P200,000.00). It appears, however, that the vendees agreed to purchase the lot at
the price of Six Hundred Thousand Pesos (P600,000.00), inclusive of taxes and other incidental expenses of the sale.
After the sale, Lim remitted to Saban the amounts of P113,257 for payment of taxes due on the transaction as well as
P50,000.00 as broker's commission. Lim also issued in the name of Saban four postdated checks in the aggregate amount
of P236,743.00.
Subsequently, Ybañez sent a letter dated June 10, 1994 addressed to Lim. In the letter Ybañez asked Lim to cancel all the
checks issued by her in Saban's favor and to "extend another partial payment" for the lot in his (Ybañez's) favor.
After the four checks in his favor were dishonored upon presentment, Saban filed a complaint for collection of sum of
money and damages against Ybañez and Lim
Saban alleged that Ybañez told Lim that he (Saban) was not entitled to any commission for the sale since he concealed the
actual selling price of the lot from Ybañez and because he was not a licensed real estate broker. Ybañez was able to convince
Lim to cancel all four checks.
In his Answer, Ybañez claimed that Saban was not entitled to any commission because he concealed the actual selling price
from him and because he was not a licensed real estate broker.
ISSUE: Whether Saban is entitled to receive his commission from the sale
HELD: Yes, Saban is entitled to receive his commission from the sale.
The Supreme Court held that to deprive Saban of his commission subsequent to the sale which was consummated through
his efforts would be a breach of his contract of agency with Ybañez which expressly states that Saban would be entitled to
any excess in the purchase price after deducting the P200,000.00 due to Ybañez and the transfer taxes and other incidental
expenses of the sale.
Moreover, the Court has already decided in earlier cases that would be in the height of injustice to permit the principal to
terminate the contract of agency to the prejudice of the broker when he had already reaped the benefits of the broker's efforts.
 10. VELOSO VS CA (GENERAL POWER OF ATTORNEY/ SPECIAL POWER OF ATTORNEY)
260 SCRA 593
FACTS: Petitioner Francisco Veloso was the owner of a parcel of land situated in the district of Tondo, Manila, with an
area of 177 square meters. The title was registered in the name of Francisco A. Veloso. The said title was subsequently
cancelled and a new one issued in the name of Aglaloma B. Escario, married to Gregorio L. Escario, on May 24, 1988.
On August 24, 1988, petitioner Veloso filed an action for annulment of documents, reconveyance of property with damages
and preliminary injunction and/or restraining order. Petitioner alleged therein that he was the absolute owner of the subject
property and he never authorized anybody, not even his wife, to sell it. He alleged that he was in possession of the title but
when his wife, Irma, left for abroad, he found out that his copy was missing. He then verified with the Registry of Deeds of
Manila and there he discovered that his title was already canceled in favor of defendant Aglaloma Escario.
The transfer of property was supported by a General Power of Attorney dated November 29, 1985 and Deed of Absolute
Sale, dated November 2, 1987, executed by Irma Veloso, wife of the petitioner and appearing as his attorney-in-fact, and
defendant Aglaloma Escario.
Petitioner Veloso, however, denied having executed the power of attorney and alleged that his signature was falsified. He
also denied having seen or even known Rosemarie Reyes and Imelda Santos, the supposed witnesses in the execution of the
power of attorney. He vehemently denied having met or transacted with the defendant. Thus, he contended that the sale of
the property, and the subsequent transfer thereof, were null and void.
Defendant Aglaloma Escario in her answer alleged that she was a buyer in good faith and denied any knowledge of the
alleged irregularity. She allegedly relied on the general power of attorney of Irma Veloso which was sufficient in form and
substance and was duly notarized.
ISSUE: Whether there was a valid sale of the subject property
HELD: Yes, the sale of the subject property is valid
The Supreme Court held that an examination of the records showed that the assailed power of attorney was valid and regular
on its face. It was notarized and as such, it carries the evidentiary weight conferred upon it with respect to its due execution.
While it is true that it was denominated as a general power of attorney, a perusal thereof revealed that it stated an authority
to sell.
Respondent Aglaloma relied on the power of attorney presented by petitioner's wife, Irma. Being the wife of the owner and
having with her the title of the property, there was no reason for the private respondent not to believe, in her authority. Thus,
having had no inkling on any irregularity and having no participation thereof, private respondent was a buyer in good faith.
It has been consistently held that a purchaser in good faith is one who buys property of another, without notice that some
other person has a right to, or interest in such property and pays a full and fair price for the same, at the time of such
purchase, or before he has notice of the claim or interest of some other person in the property.
 11. ESTATE OF LINO OLAGUER VS ONGJICO (GENERAL POWER OF ATTORNEY/ SPECIAL POWER OF
ATTORNEY)
563 SCRA 373
FACTS: Lino Olaguer died on October 3, 1957 so Special Proceedings No. 528 for probate of will was filed in the then
Court of First Instance of Albay. Defendant Olivia P. Olaguer was appointed as administrator pursuant to the will. Later,
defendant Eduardo Olaguer was appointed as co-administrator. In the order of the probate court dated April 4, 1961, some
properties of the estate were authorized to be sold to pay obligations of the estate.
Relying upon the order, but without prior notice or permission from the Probate Court, defendants Olivia P. Olaguer and
Eduardo Olaguer on November 1, 1965 sold to Estanislao Olaguer 10 parcels of land. The sale to was approved by the
Probate Court on November 12, 1965.
On July 7, 1966, defendant Olivia P. Olaguer executed a Special Power of Attorney in favor of defendant Jose A. Olaguer,
authorizing the latter to "sell, mortgage, assign, transfer, endorse and deliver" of 6 properties.
On July 7, 1966, Estanislao Olaguer executed a Special Power of Attorney in favor of Jose A. Olaguer authorizing the latter
to "sell, mortgage, assign, transfer, endorse and deliver" the 9 properties.
By virtue of this Special Power of Attorney, on March 1, 1967, Jose A. Olaguer as Attorney-in-Fact of Estanislao Olaguer
mortgaged Lots 7589, 7593 and 7396 to defendant PNB as security for a loan of 10,000 Pesos. The mortgage was foreclosed
by the PNB on June 13, 1973 and the properties mortgage were sold at public auction to PNB. On December 10, 1990, the
PNB transferred the properties to the Republic of the Philippines pursuant to Exec. Order No. 407 dated June 14, 1990 for
agrarian reform purposes.
On October 29, 1966, Estanislao Olaguer executed a General Power of Attorney in favor of Jose A. Olaguer, authorizing
the latter to exercise general control and supervision over all of his business and properties, and among others, to sell or
mortgage any of his properties.
On December 29, 1966, Estanislao Olaguer sold to Jose A. Olaguer for 15,000 the 10 parcels of land he bought from Olivia
P. Olaguer and Eduardo Olaguer.
On March 16, 1968, Estanislao Olaguer sold to Jose A. Olaguer for 1 Peso and other valuable consideration 2 parcels of
land which have a total area of 2.5 hectares.
On June 5, 1968, Estanislao Olaguer sold another 2 lots to Jose A. Olaguer for 1 Peso and other valuable consideration.
On May 13, 1971, Jose A. Olaguer in his capacity as Attorney in-Fact of Estanislao Olaguer sold to his son Virgilio Olaguer
for 1 Peso and other valuable consideration.
On July 15, 1974, Jose A. Olaguer sold to his son Virgilio Olaguer Lot No. 4521 and Lot No. 4522 for 1,000 Pesos.
On September 16, 1978 Virgilio Olaguer executed a General Power of Attorney in favor of Jose A. Olaguer authorizing the
latter to exercise general control and supervision over all of his business and properties and among others, to sell or mortgage
the same.
Olivia P. Olaguer and Eduardo Olaguer were removed as administrators of the estate and on February 12, 1980, plaintiff
Ma. Linda Olaguer Montayre was appointed administrator by the Probate Court.
The decedent Lino Olaguer have had three marriages. He was first married to Margarita Ofemaria who died April 6, 1925.
His second wife was Gloria Buenaventura who died on July 2, 1937. The third wife was the defendant Olivia P. Olaguer.
Jose Olaguer acting upon the general power of attorney sold 8 parcels of land to Emilio Ongjoco.
On 28 January 1980, the Estate of Lino Olaguer filed an action for the Annulment of Sales of Real Property and/or
Cancellation of Titles in the then Court of First Instance of Albay. The plaintiffs therein alleged that the sales of the following
properties belonging to the Estate of Lino Olaguer to Estanislao Olaguer were absolutely simulated or fictitious, the
plaintiffs likewise prayed that the resulting Transfer Certificates of Title issued to Jose Olaguer, Virgilio Olaguer, Cipriano
Duran and the PNB be annulled.
ISSUE: Whether General Power of Attorney was sufficient to effect the sale of the subject properties
HELD: Yes, the general power of attorney was sufficient
The Supreme Court held that while the law requires a special power of attorney, the general power of attorney was sufficient
in this case, as Jose A. Olaguer was expressly empowered to sell any of Virgilio's properties; and to sign, execute,
acknowledge and deliver any agreement therefor. Even if a document is designated as a general power of attorney, the
requirement of a special power of attorney is met if there is a clear mandate from the principal specifically authorizing the
performance of the act. The special power of attorney can be included in the general power when the act or transaction for
which the special power is required is specified therein.
On its face, the written power of attorney contained the signature of Virgilio Olaguer and was duly notarized. As such, the
same is considered a public document and it has in its favor the presumption of authenticity and due execution, which can
only be contradicted by clear and convincing evidence.
 12. DOMINGO VS DOMINGO (HIGHEST LOYALTY REQUIRED)
42 SCRA 131
FACTS: On June 2, 1956, Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the exclusive agency to
sell his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at the rate of P2.00 per square meter (or for
P176,954.00) with a commission of 5% on the total price, if the property is sold by Vicente or by anyone else during the
30-day duration of the agency or if the property is sold by Vicente within three months from the termination of the agency
to a purchaser to whom it was submitted by Gregorio during the continuance of the agency with notice to Vicente. The said
agency contract was in triplicate, one copy was given to Vicente, while the original and another copy were retained by
Gregorio.
On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer, promising him one-half of the
5% commission.Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer. Oscar de Leon
submitted a written offer which was very much lower than the price of P2.00 per square meter. Vicente directed Gregorio
to tell Oscar de Leon to raise his offer. After several conferences between Gregorio and Oscar de Leon, the latter raised his
offer to P109,000.00 on June 20 and Vicente agreed. Upon demand of Vicente, Oscar de Leon issued to him a check in the
amount of P1,000.00 as earnest money, after which Vicente advanced to Gregorio the sum of P300.00. Oscar de Leon
confirmed his former offer to pay for the property at P1.20 per square meter in another letter. Subsequently, Vicente asked
for an additional amount of P1,000.00 as earnest money, which Oscar de Leon promised to deliver to him.
Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the sum of 1,000.00 for succeeding in persuading
Vicente to sell his lot at P1.20 per square meter or a total in round figure of P109,000.00. This gift of P1,000.00 was not
disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the additional amount of P1,000.00 by way of earnest
money. When the deed of sale was not executed on August 1, 1956 as stipulated nor on August 16, 1956 as extended by
Vicente, Oscar told Gregorio that he did not receive his money from his brother in the United States, for which reason he
was giving up the negotiation including the amount of P 1,000 given as earnest money to Vicente and the P 1,000 given to
Gregorio as propina or gift. When Oscar did not see him after several weeks, Gregorio sensed something fishy. So, he went
to Vicente and read a portion to the effect that Vicente was still committed to pay him 5% commission. Vicente grabbed the
original of the document and tore it to pieces.
From his meeting with Vicente, Gregorio proceeded to the office of the Register of Deeds of Quezon City, where he
discovered a deed of sale executed on September 17, 1956 by Amparo Diaz.
Upon thus learning that Vicente sold his property to the same buyer, Oscar de Leon and his wife, he demanded in writing
payment of his commission on the sale price of P109,000.00.
Vicente stated that Gregorio is not entitled to the 5% commission because he sold the property not to Gregorio's buyer,
Oscar de Leon, but to another buyer, Amparo Diaz, wife of Oscar de Leon
ISSUE: Whether Gregorio was entitled to receive the 5% commission
HELD: No, Gregorio is not entitled to receive the 5% commission.
The Supreme Court held that the law imposes upon the agent the 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.
Hence, by taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a position wholly
inconsistent with that of being an agent for his principal, who has a right to treat him, insofar as his Commission is concerned,
as if no agency had existed. 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.
 13. NATIONAL POWER CORPORATION VS NATIONAL MERCHANDISING CORPORATION
117 SCRA 789
(WHEN AGENTS EXCEED HIS AUTHORITY)
FACTS: Plaintiff-appellant National Power Corporation (NPC) and defendant- appellant National Merchandising
Corporation (NAMERCO), the Philippine representative of New York-based International Commodities Corporation,
executed a contract of sale of sulfur with a stipulation for liquidated damages in case of breach.
Defendant-appellant Domestic Insurance Company executed a performance bond in favor of NPC to guarantee the seller's
obligation. In entering into the contract, Namerco, however, did not disclose to NPC that Namerco's principal, in a cabled
instruction, stated that the sale was subject to availability of a steamer, and contrary to its principal's instruction, Namerco
agreed that non-availability of a steamer was not a justification for non-payment of liquidated damages.
The New York supplier was not able to deliver the sulfur due to its inability to secure shipping space. Consequently, the
Government Corporate Counsel rescinded the contract of sale due to the supplier's non-performance of its obligations, and
demanded payment of liquidated damages from both Namerco and the surety. Thereafter, NPC sued for recovery of the
stipulated liquidated damages. After trial, the Court of First Instance rendered judgment ordering defendants-appellants to
pay solidarity to the NPC reduced liquidated damages with interest.
ISSUE: Whether NaMerCo exceeded their authority
HELD: Yes, NaMerCo exceeded their authority.
The Supreme Court held that before the contract of sale was signed Namerco was already aware that its principal was having
difficulties in booking shipping space.
It is being enforced against the agent because article 1897 implies that the agent who acts in excess of his authority is
personally liable to the party with whom he contracted.
Moreover, the rule is complemented by article 1898 of the Civil Code which provides that "if the agent contracts in the
name of the principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if
the party with whom the agent contracted is aware of the limits of the powers granted by the principal".
Namerco never disclosed to the Napocor the cabled or written instructions of its principal. For that reason and because
Namerco exceeded the limits of its authority, it virtually acted in its own name and not as agent and it is, therefore, bound
by the contract of sale which, however, is not enforceable against its principal.
 14. EUROTECH INDUSTRIAL TECHNOLOGIES, INC. VS CUIZON (WHEN AGENTS EXCEEDS HIS
AUTHORITY)
521 SCRA 584
FACTS: Eurotech is engaged in the business of importation and distribution of various European industrial equipment. It
has as one of its customers Impact Systems Sales which is a sole proprietorship owned by Erwin Cuizon. Eurotech sold to
Impact Systems various products allegedly amounting to P91,338.00. Cuizons sought to buy from Eurotech 1 unit of sludge
pump valued at P250,000.00 with Cuizons making a down payment of P50,000.00. When the sludge pump arrived from the
United Kingdom, Eurotech refused to deliver the same to Cuizons without their having fully settled their indebtedness to
Eurotech. Thus, Edwin Cuizon and Alberto de Jesus, general manager of Eurotech, executed a Deed of Assignment of
receivables in favor of Eurotech.
Cuizons, despite the existence of the Deed of Assignment, proceeded to collect from Toledo Power Company the amount
of P365,135.29. Eurotech made several demands upon Cuizons to pay their obligations. As a result, Cuizons were able to
make partial payments to Eurotech. Cuizons’ total obligations stood at P295,000.00 excluding interests and attorney’s fees.
Edwin Cuizon alleged that he is not a real party in interest in this case. According to him, he was acting as mere
agent of his principal, which was the Impact Systems, in his transaction with Eurotech and the latter was very much aware
of this fact.
ISSUE: Whether or not Edwin exceeded his authority when he signed the Deed of Assignment thereby binding himself
personally to pay the obligations to Eurotech
HELD: No. Edwin insists that he was a mere agent of Impact Systems which is owned by Erwin and that his status as such
is known even to Eurotech as it is alleged in the Complaint that he is being sued in his capacity as the sales manager of the
said business venture. Likewise, Edwin points to the Deed of Assignment which clearly states that he was acting as a
representative of Impact Systems in said transaction.
Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds
himself or exceeds the limits of his authority without giving such party sufficient notice of his powers.
In a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of
another with the latter’s consent. Its purpose is to extend the personality of the principal or the party for whom another acts
and from whom he or she derives the authority to act. The basis of agency is representation, that is, the agent acts for and
on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were
personally executed by the principal.
Elements of the contract of agency: (1) consent, express or implied, of the parties to establish the relationship; (2) the object
is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4)
the agent acts within the scope of his authority
An agent, who acts as such, is not personally liable to the party with whom he contracts. There are 2 instances when an
agent becomes personally liable to a third person. The first is when he expressly binds himself to the obligation and the
second is when he exceeds his authority. In the last instance, the agent can be held liable if he does not give the third party
sufficient notice of his powers. Edwin does not fall within any of the exceptions contained in Art. 1897.
In the absence of an agreement to the contrary, a managing agent may enter into any contracts that he deems reasonably
necessary or requisite for the protection of the interests of his principal entrusted to his management.
Edwin Cuizon acted well-within his authority when he signed the Deed of Assignment. Eurotech refused to deliver the 1
unit of sludge pump unless it received, in full, the payment for Impact Systems’ indebtedness. Impact Systems desperately
needed the sludge pump for its business since after it paid the amount of P50,000.00 as downpayment it still persisted in
negotiating with Eurotech which culminated in the execution of the Deed of Assignment of its receivables from Toledo
Power Company. The significant amount of time spent on the negotiation for the sale of the sludge pump underscores Impact
Systems’ perseverance to get hold of the said equipment. Edwin’s participation in the Deed of Assignment was “reasonably
necessary” or was required in order for him to protect the business of his principal.
 15. DEVELOPMENT BANK OF THE PHILIPPINES VS CA (WHEN AGENTS EXCEEDS HIS AUTHORITY)
231 SCRA 370
FACTS: In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for a loan of
P500,000.00 with the Development Bank of the Philippines (DBP), Basilan Branch. As the principal mortgagor, Dans, then
76 years of age, was advised by DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption
Insurance Pool (DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by DBP on August 4, 1987 and released on August 11, 1987.
From the proceeds of the loan, DBP deducted the amount of P1,476.00 as payment for the MRI premium. On August 15,
1987, Dans accomplished and submitted the "MRI Application for Insurance" and the "Health Statement for DBP MRI
Pool."
On August 20, 1987, the MRI premium of Dans, less the DBP service fee of 10 percent, was credited by DBP to the savings
account of the DBP MRI Pool.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this information to the DBP MRI Pool.
On September 23, 1987, the DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage, being over the
acceptance age limit of 60 years at the time of application.
On October 21, 1987, DBP apprised Candida Dans of the disapproval of her late husband's MRI application. The DBP
offered to refund the premium of P1,476.00 which the deceased had paid, but Candida Dans refused to accept the same,
demanding payment of the face value of the MRI or an amount equivalent to the loan. She, likewise, refused to accept anex
gratia settlement of P30,000.00, which the DBP later offered.
On February 10, 1989, respondent Estate, through Candida Dans as administratrix, filed a complaint with the Regional Trial
Court, Branch I, Basilan, against DBP and the insurance pool for "Collection of Sum of Money with Damages." Respondent
Estate alleged that Dans became insured by the DBP MRI Pool when DBP, with full knowledge of Dans' age at the time of
application, required him to apply for MRI, and later collected the insurance premium thereon.
ISSUE: Whether DBP exceeded its authority when it approved the application of Dans
HELD: Yes, DBP exceeded its authority.
The Supreme Court held that as an insurance agent, DBP made Dans go through the motion of applying for said insurance,
thereby leading him and his family to believe that they had already fulfilled all the requirements for the MRI and that the
issuance of their policy was forthcoming. Apparently, DBP had full knowledge that Dan's application was never going to
be approved. The maximum age for MRI acceptance is 60 years as clearly and specifically provided in Article 1 of the
Group Mortgage Redemption Insurance Policy signed in 1984 by all the insurance companies concerned.
Under Article 1987 of the Civil Code of the Philippines, "the agent who acts as such is not personally liable to the party
with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party
sufficient notice of his powers." The DBP is not authorized to accept applications for MRI when its clients are more than
60 years of age. Knowing all the while that Dans was ineligible for MRI coverage because of his advanced age, DBP
exceeded the scope of its authority when it accepted Dan's application for MRI by collecting the insurance premium, and
deducting its agent's commission and service fee.
 16. SAFIC ALCAN & CIE VS IMPERIAL VEGETABLE OIL CO., INC. (WHEN AGENTS EXCEEDS HIS
AUTHORITY)
355 SCRA 559
FACTS: Petitioner Safic Alcan & Cie (hereinafter, "Safic") is a French corporation engaged in the international purchase,
sale and trading of coconut oil.
Petitioner Safic alleged that on July 1, 1986 and September 25, 1986, it placed purchase orders with IVO for 2,000 long
tons of crude coconut oil, valued at US$222.50 per ton to be delivered within the month of January 1987. Private respondent,
however, failed to deliver the said coconut oil and, instead, offered a "wash out" settlement, whereby the coconut oil subject
of the purchase contracts were to be "sold back" to IVO at the prevailing price in the international market at the time of
wash out. Thus, IVO bound itself to pay to Safic the difference between the said prevailing price and the contract price of
the 2,000 long tons of crude coconut oil, which amounted to US$293,500.00. IVO failed to pay this amount despite repeated
oral and written demands.
Safic alleged that on eight occasions between April 24, 1986 and October 31, 1986, it placed purchase orders with IVO for
a total of 4,750 tons of crude coconut oil. When IVO failed to honor its obligation under the wash out settlement narrated
above, Safic demanded that IVO make marginal deposits within forty-eight hours on the eight purchase contracts in amounts
equivalent to the difference between the contract price and the market price of the coconut oil, to compensate it for the
damages it suffered when it was forced to acquire coconut oil at a higher price. IVO failed to make the prescribed marginal
deposits on the eight contacts, in the aggregate amount of US$391,593.62, despite written demands.
Hence, Safic prayed that IVO be ordered to pay the sums of US$293,500.00 and US$391,593.62, plus attorney's fees and
litigation expenses.
IVO raised the following special affirmative defenses: Safic had no legal capacity to sue because it was doing business in
the Philippines without the requisite license or authority; the subject contracts were speculative contracts entered into by
IVO's then President, Dominador Monteverde, in contravention of the prohibition by the Board of Directors against
engaging in speculative paper trading, and despite IVO's lack of the necessary license from Central Bank to engage in such
kind of trading activity.
ISSUE: Whether the act of Dominador Monteverde binds IVO
HELD: No, the act of Dominador Monteverde without the authorization of the Board of Directors did not bind IVO.
The Supreme Court ruled that Monteverde had no blanket authority to bind IVO to any contract. He must act according to
the instructions of the Board of Directors. Even in instances when he was authorized to act according to his discretion, that
discretion must not conflict with prior Board orders, resolutions and instructions. The evidence shows that the IVO Board
knew nothing of the 1986 contracts and that it did not authorize Monteverde to enter into speculative contracts.
Safic can not rely on the doctrine of implied agency because before the controversial 1986 contracts, IVO did not enter into
identical contracts with Safic. The basis for agency is representation and a person dealing with an agent is put upon inquiry
and must discover upon his peril the authority of the agent.
Under Article 1898 of the Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal unless
the latter ratifies the same expressly or impliedly. It also bears emphasizing that when the third person knows that the agent
was acting beyond his power or authority, the principal can not be held liable for the acts of the agent. If the said third
person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the
latter undertook to secure the principal's ratification.
 17. FILIPINAS LIFE ASSURANCE COMPANY VS PEDROSO (ESTOPPEL)
543 SCRA 542
FACTS: Teresita Pedroso is a policyholder of a 20-year endowment life insurance issued by Filipinas Life Assurance Co.
Pedroso claims Renato Valle was her insurance agent since 1972 and Valle collected her monthly premiums. In the first
week of January 1977, Valle told her that the Filipinas Life Escolta Office was holding a promotional investment program
for policyholders. It was offering 8% prepaid interest a month for certain amounts deposited on a monthly basis. Enticed,
she initially invested and issued a post-dated check for P10,000. In return, Valle issued Pedroso his personal check for P800
for the 8% prepaid interest and a Filipinas Life Agent receipt.
Pedroso called the Escolta office and talked to Francisco Alcantara, the administrative assistant, who referred her to the
branch manager, Angel Apetrior. Pedroso inquired about the promotional investment and Apetrior confirmed that there was
such a promotion. She was even told she could push through with the check she issued. From the records, the check, with
the endorsement of Alcantara at the back, was deposited in the account of Filipinas Life with the Commercial Bank and
Trust Company, Escolta Branch.
Relying on the representations made by Filipinas Life’s duly authorized representatives Apetrior and Alcantara, as well as
having known agent Valle for quite some time, Pedroso waited for the maturity of her initial investment. A month after, her
investment of P10,000 was returned to her after she made a written request for its refund. To collect the amount, Pedroso
personally went to the Escolta branch where Alcantara gave her the P10,000 in cash. After a second investment, she made
7 to 8 more investments in varying amounts, totaling P37,000 but at a lower rate of 5% prepaid interest a month. Upon
maturity of Pedroso’s subsequent investments, Valle would take back from Pedroso the corresponding agent’s receipt he
issued to the latter.
Pedroso told respondent Jennifer Palacio, also a Filipinas Life insurance policyholder, about the investment plan. Palacio
made a total investment of P49,550 but at only 5% prepaid interest. However, when Pedroso tried to withdraw her
investment, Valle did not want to return some P17,000 worth of it. Palacio also tried to withdraw hers, but Filipinas Life,
despite demands, refused to return her money.
ISSUE: WON Filipinas Life is jointly and severally liable with Apetrior and Alcantara on the claim of Pedroso and Palacio
or WON its agent Renato Valle is solely liable to Pedroso and Palacio
HELD: Pedroso and Palacio had invested P47,000 and P49,550, respectively. These were received by Valle and remitted to
Filipinas Life, using Filipinas Life’s official receipts. Valle’s authority to solicit and receive investments was also
established by the parties. When Pedroso and Palacio sought confirmation, Alcantara, holding a supervisory position, and
Apetrior, the branch manager, confirmed that Valle had authority. While it is true that a person dealing with an agent is put
upon inquiry and must discover at his own peril the agent’s authority, in this case, Pedroso and Palacio did exercise due
diligence in removing all doubts and in confirming the validity of the representations made by Valle.
Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. By the contract of agency, a person
binds himself to render some service or to do something in representation or on behalf of another, with the consent or
authority of the latter. The general rule is that the principal is responsible for the acts of its agent done within the scope of
its authority, and should bear the damage caused to third persons. When the agent exceeds his authority, the agent becomes
personally liable for the damage. But even when the agent exceeds his authority, the principal is still solidarily liable together
with the agent if the principal allowed the agent to act as though the agent had full powers. The acts of an agent beyond the
scope of his authority do not bind the principal, unless the principal ratifies them, expressly or impliedly.
Ratification – adoption or confirmation by one person of an act performed on his behalf by another without authority
Even if Valle’s representations were beyond his authority as a debit/insurance agent, Filipinas Life thru Alcantara and
Apetrior expressly and knowingly ratified Valle’s acts. Filipinas Life benefited from the investments deposited by Valle in
the account of Filipinas Life.
 18. DOMINGO VS ROBLES (ESTOPPEL TO DENY)
453 SCRA 812
FACTS: Petitioner wants to dispose her property located in Marikina. Bacani volunteered to act as petitioner's agent in
selling the lot. Petitioner delivered her owner's copy of TCT to Bacani. Thereafter, the TCT was said to have been lost. In
its reconstitution, petitioner gave Bacani all her receipts of payment for real estate taxes. Bacani also asked petitioner to
sign what she recalled was a record of exhibits. Petitioner waited patiently but Bacani did not show up any more. Later,
petitioner visited the lot and was surprised to see the respondents starting to build a house on the subject lot.
Verification with ROD revealed that the lost title has already been reconstituted and cancelled with the registration of deed
of sale executed by the petitioner in favor of the respondent. A transfer of certificate of title was also issued to the respondent.
Petitioner claimed not to have met any of the respondents nor having signed any sale over the property in favor of anybody.
Petitioner alleged that the Deed of Absolute Sale is a forgery and therefore could not validly transfer ownership of the lot
to the respondents.
Respondent contented that she is a buyer in good faith and for value; that the lot was offered to them by Bacani, as the agent
of the petitioner. That after some time when they were already prepared to buy the lot, Bacani introduced to them the
supposed owners and agreed on the sale. Bacani and the introduced seller presented a Deed of Absolute Sale
already signed by the petitioner needing only respondent’s signature. That she paid full purchase price and the original of
the owner's duplicate of Transfer Certificate of Title was given to her.
Petitioner filed a case for the nullity and reconveyance. RTC dismiss the complaint. CA affirmed lower court’s decision.
Issue: Whether or not the petitioner is entitled to her claims.
Held: No. Notarized instrument enjoys a prima facie presumption of authenticity and due execution. Clear and convincing
evidence must be presented to overcome such legal presumption. Forgery cannot be presumed. Bare allegations,
unsubstantiated by evidence, are not equivalent to proof. ITC, it was incumbent upon petitioner to prove her allegations.
However, the petitioner failed to do so.
The sale was admittedly made with the aid of Bacani, petitioner's agent, who had with him the original of the owner's
duplicate Certificate of Title to the property, free from any liens or encumbrances. The signatures of Spouses Domingo, the
registered owners, appear on the Deed of Absolute Sale. Petitioner's husband met with Respondent Yolanda Robles and
received payment for the property.
The Torrens Act requires, as a prerequisite to registration, the production of the owner's certificate of title and the instrument
of conveyance. The registered owner who places in the hands of another an executed document of transfer of registered land
effectively represents to a third party that the holder of such document is authorized to deal with the property.
 19. RURAL BANK OF MILAOR VS OCFEMIA (ESTOPPEL TO DENY)
326 SCRA 99
FACTS: The evidence presented by the respondents through the testimony of Marife O. Niño, shows that she is the daughter
of Francisca Ocfemia and the late Renato Ocfemia who died on July 23, 1994. The parents of her father, Renato Ocfemia,
were Juanita Arellano Ocfemia and Felicisimo Ocfemia.
Marife O. Niño knows the five (5) parcels of land which are located in Bombon, Camarines Sur and that they are the ones
possessing them which were originally owned by her grandparents. During the lifetime of her grandparents, respondents
mortgaged the said five (5) parcels of land and two (2) others to the Rural Bank of Milaor.
The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia were not able to redeem the mortgaged properties consisting
of 7 parcels of land and so the mortgage was foreclosed and thereafter ownership thereof was transferred to the bank. Out
of the 7 parcels that were foreclosed, 5 of them are in the possession of the respondents because these 5 parcels of land were
sold by the bank to the parents of Marife O. Niño as evidenced by a Deed of Sale executed in January 1988.
The aforementioned 5 parcels of land subject of the deed of sale, have not been, however transferred in the name of the
parents of Merife O. Niño after they were sold to her parents by the bank because according to the Assessor's Office the
five (5) parcels of land, subject of the sale, cannot be transferred in the name of the buyers as there is a need to have the
document of sale registered with the Register of Deeds of Camarines Sur.
In view of the foregoing, Marife O. Niño went to the Register of Deeds of Camarines Sur with the Deed of Sale in order to
have the same registered. The Register of Deeds, however, informed her that the document of sale cannot be registered
without a board resolution of the Bank. Marife Niño then went to the bank, showed to it the Deed of Sale, the tax declaration
and receipt of tax payments and requested the bank for a board resolution so that the property can be transferred to the name
of Renato Ocfemia the husband of petitioner Francisca Ocfemia and the father of the other respondents having died already.
Despite several requests, the bank refused her request for a board resolution and made many alibis. She was told that the
bank had a new manager and it had no record of the sale.
ISSUE: Whether the board of directors of a rural banking corporation be compelled to confirm a deed of absolute sale of
real property which deed of sale was executed by the bank manager without prior authority of the board of directors of the
rural banking corporation
HELD: Yes, the board of directors can be compelled to confirm a deed of absolute sale even though the bank manager
executed such deed without prior authority from the banking corporation.
The Supreme Court ruled that the bank acknowledged, by its own acts or failure to act, the authority of the manager to enter
into binding contracts. After the execution of the Deed of Sale, respondents occupied the properties in dispute and paid the
real estate taxes due thereon. If the bank management believed that it had title to the property, it should have taken some
measures to prevent the infringement or invasion of its title thereto and possession thereof.
In this light, the bank is estopped from questioning the authority of the bank manager to enter into the contract of sale. If a
corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds
the agent out to the public as possessing the power to do those acts; thus, the corporation will, as against anyone who has in
good faith dealt with it through such agent, be estopped from denying the agent's authority.
Unquestionably, petitioner has authorized Tena to enter into the Deed of Sale. Accordingly, it has a clear legal duty to issue
the board resolution sought by respondents. Having authorized her to sell the property, it behooves the bank to confirm the
Deed of Sale so that the buyers may enjoy its full use.
 20. AIR FRANCE VS CA (ACTUAL KNOWLEDGE)
126 SCRA 448
FACTS: In February, 1970, the late Jose G. Gana and his family, (the GANAS), purchased from AIR FRANCE through
Imperial Travels, Incorporated, a duly authorized travel agent, nine "open-dated" air passage tickets for the
Manila/Osaka/Tokyo/Manila route.
On April 24, 1970, AIR FRANCE exchanged or substituted the aforementioned tickets with other tickets for the same route.
At this time, the GANAS were booked for the Manila/Osaka segment on AIR FRANCE Flight 184 for May 8, 1970, and
for the Tokyo/Manila return trip on AIR FRANCE Flight 187 on May 22, 1970. The aforesaid tickets were valid until May
8, 1971.The GANAS did not depart on 8 May 1970.
Jose Gana sought the assistance of Teresita Manucdoc, a Secretary of the Sta. Clara Lumber Company where Jose Gana
was the Director and Treasurer, for the extension of the validity of their tickets, which were due to expire on May 8, 1971.
Teresita enlisted the help of Lee Ella Manager of the Philippine Travel Bureau, who used to handle travel arrangements for
the personnel of the Sta. Clara Lumber Company. Ella sent the tickets to Cesar Rillo, Office Manager of AIR FRANCE.
The tickets were returned to Ella who was informed that extension was not possible. Ella then returned the tickets to Teresita
and informed her of the impossibility of extension.
In the meantime, the GANAS had scheduled their departure on May 7, 1971 or one day before the expiry date. In the
morning of the very day of their scheduled departure on the first leg of their trip, Teresita requested travel agent Ella to
arrange the revalidation of the tickets. Ella gave the same negative answer and warned her that although the tickets could
be used by the GANAS if they left onMay 7, 1971, the tickets would no longer be valid for the rest of their trip because the
tickets would then have expired on May 8,1971. Teresita replied that it will be up to the GANAS to make the arrangements.
Notwithstanding the warnings, the GANAS departed from Manila in the afternoon of May 7, 1971 on board AIR FRANCE
Flight 184 for Osaka, Japan.
However, for the Osaka/Tokyo flight on May 17, 1971, Japan Airlines refused to honor the tickets because of their
expiration, and the GANAS had to purchase new tickets. They encountered the same difficulty with respect to their return
trip to Manila as AIR FRANCE also refused to honor their tickets. They were able to return only after pre-payment in
Manila, through their relatives, of the readjusted rates. They finally flew back to Manila on separate Air France Frights.
Issue: Whether or not Teresita was the agent of the GANAS and notice to of the rejection of the request of the validity of
the tickets was notice to the GANAS, her principals.
Held: The GANAS cannot defend by contending lack of knowledge of those rules since the evidence bears out that Teresita,
who handled travel arrangements for the GANAS, was duly informed by travel agent Ella of the advice of Reno, the Office
Manager of Air France, that the tickets in question could not be extended beyond the period of their validity without paying
the fare differentials and additional travel taxes brought about by the increased fare rate and travel taxes.
To all legal intents and purposes, Teresita was the agent of the GANAS and notice to her of the rejection of the request for
extension of the validity of the tickets was notice to the GANAS, her principals.
 21. PNB VS IAC (REVOCATION)
189 SCRA 680
FACTS: Leticia de la Vina-Sepe executed a real estate mortgage in favor of PNB over a lot registered in her name, to secure
the payment of a sugar crop loan of P3,400. Later, Leticia Sepe, acting as attorney-in-fact for her brother-in-law, private
respondent Romeo Alcedo, executed an amended real estate mortgage to include his (Alcedo's) Lot No. 1626. Leticia Sepe
and private respondent Alcedo verbally agreed to split fifty-fifty (50-50) the proceeds of the loan. but failing to receive his
one-half share from her, Alcedo wrote a letter on May 12, 1970 to the PNB, San Carlos Branch, revoking the Special Power
of Attorney which he had given to Leticia Sepe to mortgage his Lot No. 1626.
Despite the above advice from PNB, Sepe was still able to obtain an additional loan from PNB increasing her debt of P
16,500 to P56,638.69 on the security of Alcedo's property as collateral.
Alcedo sued Sepe and PNB in the Court of First Instance of Negros Occidental for collection and injunction with damages.
During the pendency of the case, PNB filed in the Office of the Sheriff at Pasig, Metro Manila, a petition for extrajudicial
foreclosure of its real estate mortgage on Alcedo's land.
PNB alleged that it had no knowledge of the agreement between Mrs. Sepe and Alcedo to split the crop loan proceeds
between them. It required Sepe to put up other collaterals when it granted her an additional loan because Alcedo informed
the Bank that he was revoking the Special Power of Attorney he gave Sepe; that the revocation was not formalized in
accordance with law; and that in any event, the revocation of the Special Power of Attorney on May 12, 1970 by Alcedo
did not impair the real estate mortgage earlier executed on April 28, 1969 by Sepe in favor of the Bank.
ISSUE: Whether or not PNB validly foreclosed the real estate mortgage on Alcedo's property despite notice of Alcedo's
revocation of the Special Power of Attorney authorizing Leticia Sepe to mortgage his property as security for her sugar crop
loans and despite the Bank's written assurance to Alcedo that it would exclude his property as collateral for Sepe's future
loan obligations.
HELD: We agree with the opinion of the appellate court that under the doctrine of promissory estoppel, the act and assurance
given by the PNB to Alcedo "that we shall exclude the aforementioned lot as a collateral of Leticia de la Vina-Sepe is
binding on the bank. Having given that assurance, the bank may not turn around and do the exact opposite of what it said it
would not do. One may not take inconsistent positions. A party may not go back on his own acts and representations to the
prejudice of the other party who relied upon them.
In the case of Philippine National Bank vs. Court of Appeals (94 SCRA 357), where the bank manager assured the heirs of
the debtor-mortgagor that they would be allowed to pay the remaining obligation of their deceased parents, the Supreme
Court held that the bank must abide by its representations.
On equitable principles, particularly on the ground of estoppel, we must rule against petitioner Bank. The doctrine of
estoppel is based upon the grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to
speak against its own act, representations, or commitments to the injury of one to whom they were directed and who
reasonably relied thereon. The doctrine of estoppel springs from equitable principles and the equities in the case. It is
designed to aid the law in the administration of justice where without its aid injustice might result. It has been applied by
this Court wherever and whenever the special circumstances of a case so demands.
In the case at bar, since PNB had promised to exclude Alcedo's property as collateral for Sepe's 1971-72 sugar crop loan, it
should have released the property to Alcedo. The mortgage which Sepe gave to the bank on Alcedo's lot as collateral for
her 1971-72 sugar crop loan was null and void for having been already disauthorized by Alcedo. Since Alcedo's property
secured only P13,100.00 of Sepe's 1970-71 sugar crop loan of P16,500.00 (because P3,400 was secured by Sepe's own
property), Alcedo's property may be held to answer for only the unpaid balance, if any, of Sepe's 1970-71 loan, but not the
1971-72 crop loan.
 22. PHILEX MINING CORPORATION VS CIR (AGENCY COUPLED WITH AN INTEREST)
551 SCRA 428
FACTS: Philex Mining Corp. entered into an agreement with Baguio Gold Mining Co. for the former to manage and operate
the latter’s mining claim, known as the Sto. Nino Mine. The parties’ agreement was denominated as “Power of Attorney”
which provides inter alia:
4. Within three (3) years from date thereof, the PRINCIPAL (Baguio Gold) shall make available to the MANAGERS
(Philex Mining) up to ELEVEN MILLION PESOS (P11,000,000.00), in such amounts as from time to time may be required
by the MANAGERS within the said 3-year period, for use in the MANAGEMENT of the STO. NINO MINE. The said
ELEVEN MILLION PESOS (P11,000,000.00) shall be deemed, for internal audit purposes, as the owner’s account in the
Sto. Nino PROJECT. Any part of any income of the PRINCIPAL from the STO. NINO MINE, which is left with the Sto.
Nino PROJECT, shall be added to such owner’s account.
5. Whenever the MANAGERS shall deem it necessary and convenient in connection with the MANAGEMENT of the
STO. NINO MINE, they may transfer their own funds or property to the Sto. Nino PROJECT, in accordance with the
following arrangements:
(a) The properties shall be appraised and, together with the cash, shall be carried by the Sto. Nino PROJECT as a special
fund to be known as the MANAGERS’ account.
(b) The total of the MANAGERS’ account shall not exceed P11,000,000.00, except with prior approval of the
PRINCIPAL; provided, however, that if the compensation of the MANAGERS as herein provided cannot be paid in cash
from the Sto. Nino PROJECT, the amount not so paid in cash shall be added to the MANAGERS’ account.
(c) The cash and property shall not thereafter be withdrawn from the Sto. Nino PROJECT until termination of this
Agency.
(d) The MANAGERS’ account shall not accrue interest. Since it is the desire of the PRINCIPAL to extend to the
MANAGERS the benefit of subsequent appreciation of property, upon a projected termination of this Agency, the ratio
which the MANAGERS’ account has to the owner’s account will be determined, and the corresponding proportion of the
entire assets of the STO. NINO MINE, excluding the claims, shall be transferred to the MANAGERS, except that such
transferred assets shall not include mine development, roads, buildings, and similar property which will be valueless, or of
slight value, to the MANAGERS. The MANAGERS can, on the other hand, require at their option that property originally
transferred by them to the Sto. Nino PROJECT be re-transferred to them. Until such assets are transferred to the
MANAGERS, this Agency shall remain subsisting.
12. The compensation of the MANAGER shall be fifty per cent (50%) of the net profit of the Sto. Nino PROJECT
before income tax. It is understood that the MANAGERS shall pay income tax on their compensation, while the
PRINCIPAL shall pay income tax on the net profit of the Sto. Nino PROJECT after deduction therefrom of the
MANAGERS’ compensation.
Philex Mining made advances of cash and property in accordance with paragraph 5 of the agreement. However, the mine
suffered continuing losses over the years which resulted to Philex Mining’s withdrawal as manager of the mine and in the
eventual cessation of mine operations.
The parties executed a “Compromise with Dation in Payment” wherein Baguio Gold admitted an indebtedness to petitioner
in the amount of P179,394,000.00 and agreed to pay the same in three segments by first assigning Baguio Gold’s tangible
assets to Philex Mining, transferring to the latter Baguio Gold’s equitable title in its Philodrill assets and finally settling the
remaining liability through properties that Baguio Gold may acquire in the future.
The parties executed an “Amendment to Compromise with Dation in Payment” where the parties determined that Baguio
Gold’s indebtedness to petitioner actually amounted to P259,137,245.00, which sum included liabilities of Baguio Gold to
other creditors that petitioner had assumed as guarantor. These liabilities pertained to long-term loans amounting to
US$11,000,000.00 contracted by Baguio Gold from the Bank of America NT & SA and Citibank N.A. This time, Baguio
Gold undertook to pay petitioner in two segments by first assigning its tangible assets for P127,838,051.00 and then
transferring its equitable title in its Philodrill assets for P16,302,426.00. The parties then ascertained that Baguio Gold had
a remaining outstanding indebtedness to petitioner in the amount of P114,996,768.00.
Philex Mining wrote off in its 1982 books of account the remaining outstanding indebtedness of Baguio Gold by charging
P112,136,000.00 to allowances and reserves that were set up in 1981 and P2,860,768.00 to the 1982 operations.
In its 1982 annual income tax return, Philex Mining deducted from its gross income the amount of P112,136,000.00 as “loss
on settlement of receivables from Baguio Gold against reserves and allowances.” However, the BIR disallowed the amount
as deduction for bad debt and assessed petitioner a deficiency income tax of P62,811,161.39. Philex Mining protested before
the BIR arguing that the deduction must be allowed since all requisites for a bad debt deduction were satisfied, to wit: (a)
there was a valid and existing debt; (b) the debt was ascertained to be worthless; and (c) it was charged off within the taxable
year when it was determined to be worthless. BIR denied petitioner’s protest. It held that the alleged debt was not ascertained
to be worthless since Baguio Gold remained existing and had not filed a petition for bankruptcy; and that the deduction did
not consist of a valid and subsisting debt considering that, under the management contract, petitioner was to be paid 50%
of the project’s net profit.
ISSUE: WON the parties entered into a contract of agency coupled with an interest which is not revocable at will
HELD: No. An examination of the “Power of Attorney” reveals that a partnership or joint venture was indeed intended by
the parties.
In an agency coupled with interest, it is the agency that cannot be revoked or withdrawn by the principal due to an interest
of a third party that depends upon it, or the mutual interest of both principal and agent. In this case, the non-revocation or
non-withdrawal under paragraph 5(c) applies to the advances made by petitioner who is supposedly the agent and not the
principal under the contract. Thus, it cannot be inferred from the stipulation that the parties’ relation under the agreement is
one of agency coupled with an interest and not a partnership.
Neither can paragraph 16 of the agreement be taken as an indication that the relationship of the parties was one of agency
and not a partnership. Although the said provision states that “this Agency shall be irrevocable while any obligation of the
PRINCIPAL in favor of the MANAGERS is outstanding, inclusive of the MANAGERS’ account,” it does not necessarily
follow that the parties entered into an agency contract coupled with an interest that cannot be withdrawn by Baguio Gold.
The main object of the “Power of Attorney” was not to confer a power in favor of petitioner to contract with third persons
on behalf of Baguio Gold but to create a business relationship between petitioner and Baguio Gold, in which the former was
to manage and operate the latter’s mine through the parties’ mutual contribution of material resources and industry. The
essence of an agency, even one that is coupled with interest, is the agent’s ability to represent his principal and bring about
business relations between the latter and third persons.
The strongest indication that petitioner was a partner in the Sto. Nino Mine is the fact that it would receive 50% of the net
profits as “compensation” under paragraph 12 of the agreement. The entirety of the parties’ contractual stipulations simply
leads to no other conclusion than that petitioner’s “compensation” is actually its share in the income of the joint venture.
Article 1769 (4) of the Civil Code explicitly provides that the “receipt by a person of a share in the profits of a business is
prima facie evidence that he is a partner in the business.”