Agency; February 25, 2014 1

DEADLINE: FEB 24, 12NN

Chapter 3
Obligations of the Principal

Article 1910 Obligation of the principal to comply with all obligations which
the agent may have contracted within the scope of his authority

Panlilio v. Citibank, N.A., 539 SCRA 69 (2007) ATIENZA

Doctrine: The principal assumes all the risk on the valid actions of its agent

Facts:

Spouses Raul and Amalia Panlilio's initial intention was to invest money in a Citibank
product which had a high interest but since it was not available, they put their
PhP1,000,000.00 in a savings account instead. More than a month later, petitioners
placed through Citibank another amount of PhP2,134,635.8 in the Citibanks
LongTerm Commercial Paper (LTCP), a debt instrument that paid a high interest,
issued by the corporation Camella and Palmera Homes (C&PHomes). Months after
signing with the debt instrument and after receiving interests, petitioners contested the
investment contract and demanded that the respondent bank to return their
investment money. This happened when newspaper reports came out that
C&PHomes' stock had plunged in value.

The Complaint essentially demanded a return of the investment, alleging that Amalia
never instructed respondent's employee Lee (Citibank) to invest the money in an
LTCP; and that far from what Lee executed, Amalia's instructions were to invest the
money in a trust account. However, respondent disputed the claim that Amalia
opened a trust account with a request for an interest rate of around 16.25% with a
term of 91 days; instead, respondent presented documents stating that Amalia
opened a directional investment management account (DIMA), with investments to
be made in C&P Homes' LTCP with a 2003 maturity. Citibank told Amalia that they
could not find yet a buyer for the LTCP and in case they do so, the amount will be
lower than Amalias investment.

RTC: The RTC upheld all the allegations of petitioners and concluded that Amalia
never instructed Citibank to invest the money in an LTCP

CA: Reversed RTC

Issues:

WON the investment contract creates a trusteeship or agency and
WON Citibank should return the investment

HELD:

The Investment contract creates an Agency and Citibank is not required to return the
investment. According to the SC, evidences have shown that Amalia has indeed
entered into a DIMA contract. This contract has stated that Citibank shall serve as an
agent of its principal (Amalia). Respondent purchased the LTCPs only as agent of
petitioners; thus, the latter assumed all obligations or inherent risks entailed by the
transaction under Article 1910. The transaction is perfectly legal, as investment
management activities may be exercised by a banking institution pursuant to Republic
Act No. 337


Manila Memorial Park Cemetery, Inc. v. Linsangan, 443 SCRA 377, 394 (2004)
BUENAVENTURA

DOCTRINE: The acts of the agent beyond the scope of his authority do not bind the
principal unless the latter ratifies the same. It also bears emphasis that when the third
person knows that the agent was acting beyond his power or authority, the principal
cannot be held liable for the acts of the agent. If the said third person was aware of
such limits of authority, he is to blame and is not entitled to recover damages from the
agent, unless the latter undertook to secure the principals ratification.

FACTS: Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State
at the Holy Cross Memorial Park owned by petitioner (MMPCI). According to Baluyot,
a former owner of a memorial lot under Contract No. 25012 was no longer interested
in acquiring the lot and had opted to sell his rights subject to reimbursement of the
amounts he already paid. The contract was for P95,000.00. Baluyot reassured Atty.
Linsangan that once reimbursement is made to the former buyer, the contract would
be transferred to him. Atty. Linsangan agreed and gave Baluyot P35,295.00
representing the amount to be reimbursed to the original buyer and to complete the
down payment to MMPCI. Baluyot issued handwritten and typewritten receipts for
these payments.
Sometime in March 1985, Baluyot informed Atty. Linsangan that he would
be issued a new contract covering the subject lot in the name of the latter instead of
old Contract No. 25012. Atty. Linsangan protested, but Baluyot assured him that he
would still be paying the old price of P95,000.00 with P19,838.00 credited as full down
payment leaving a balance of about P75,000.00.
Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase Lot
No. A11 (15), Block 83, Garden Estate I denominated as Contract No. 28660 and the
Official Receipt No. 118912 dated 6 April 1985 for the amount of P19,838.00. Contract
No. 28660 has a listed price of P132,250.00. Atty. Linsangan objected to the new
contract price, as the same was not the amount previously agreed upon. To convince
Atty. Linsangan, Baluyot executed a document confirming that while the contract price
is P132,250.00, Atty. Linsangan would pay only the original price of P95,000.00.
In the new contract, Atty. Linsangan acceded that he has read and
understood all the stipulations therein. The payment was made in installments for two
years which Atty. Linsangan completed, however, after two years, Florencia informed
Linsangan that their contract was cancelled and offered a different lot, Atty. Linsangan
refused the offer and filed a suit for breach of contract against MMPI and Florencia.
MMPI avers that Florencia acted beyond the scope of her authority as MMPIs agent
since the latter did not allow her to renegotiate existing contracts but only to sell new
Agency; February 25, 2014 2
contracts. Atty. Linsangan on the other hand argues that MMPI should be liable for the
acts of its agents.

TC: Held MMPCI and Baluyot jointly and severally liable. It found that Baluyot was an
agent of MMPCI and that the latter was estopped from denying this agency, having
received and enchased the checks issued by Atty. Linsangan and given to it by
Baluyot. While MMPCI insisted that Baluyot was authorized to receive only the down
payment, it allowed her to continue to receive postdated checks from Atty. Linsangan,
which it in turn consistently encashed.

CA: Affirmed the decision of the trial court. It upheld the trial courts finding that
Baluyot was an agent of MMPCI at the time the disputed contract was entered into,
having represented MMPCIs interest and acting on its behalf in the dealings with
clients and customers. Hence, MMPCI is considered estopped when it allowed
Baluyot to act and represent MMPCI even beyond her authority.The appellate court
likewise found that the acts of Baluyot bound MMPCI when the latter allowed the
former to act for and in its behalf and stead. While Baluyots authority may not have
been expressly conferred upon her, the same may have been derived impliedly by
habit or custom, which may have been an accepted practice in the company for a long
period of time.Thus, the Court of Appeals noted, innocent third persons such as Atty.
Linsangan should not be prejudiced where the principal failed to adopt the needed
measures to prevent misrepresentation. Furthermore, if an agent misrepresents to a
purchaser and the principal accepts the benefits of such misrepresentation, he cannot
at the same time deny responsibility for such misrepresentation.

Issue: Whether or not MMPI is liable for the acts of Florencia

Held: NO. The SC ruled that Florencia acted outside the scope of her authority as
agent of MMPI and Atty. Linsangan failed to ascertain the authority given to Florencia
especially that their agreement on the second contract had a different stipulation than
what he and Florencia agreed upon. Moreover, Atty. Linsangans signature over the
new contract signifies that he understands its terms and conditions, and that there are
no covenants, conditions, warranties or representations other than those contained
herein. and serves as a form of ratification for the acts of Florencia which were
outside the authority given her. As such, the SC ruled that the principal cannot be held
liable for actions of agents outside the scope of their authority when such acts are
ratified by the principal himself. On the part of MMPI, they did not ratify Florencias
acts, nor did they know of such actions.

SC reversed ruling of TC and CA.

Exceptions: (a) Even if the agent exceeded his power, if the principal ratifies,
expressly or tacitly principal shall be bound by the obligation (Art. 1910, 2nd
par.)


Air France v. Court of Appeals, 126 SCRA 448 (1983) CAMERINO

DOCTRINE: Under the principle that knowledge of the agent is considered knowledge
by the principle, the Court ruled that the spouses cannot defend by contending lack of
knowledge of the rules upon which they received their tickets from the airline company
since the evidence bore out that their travel agent who handled their travel
arrangements, was duly informed by proper representatives of the airline company.

FACTS: Sometime in February, 1970, the late Jose G. Gana and his family (Ganas)
purchased from Air France through Imperial Travels 9 (nine) open-dated tickets for the
Manila/Osaka/Tokyo/Manila route. Ganas were booked for Manila/Osaka May 8, 1970
and Tokyo/Manila May 22, 1970. The expiry date was May 8. 1971. The Ganas,
however, did not depart on May 8, 1970.

Sometime in January 1971, Jose Gana asked the assistance of Teresita Manucdoc
(Secretary of Sta Clara Lumber - where Jose Gana is working as Director and
Treasurer) for the extension of the validity of their tickets (which again due to expire on
May 8, 1971). Teresita asked for help from Lee Ella, Manager of the Philippine Travel
Bureau. She used to handle travels of Sta. Clara Lumber. She then sent the tickets to
Cesar Rillo who is the Office Manager of Air France. Tickets were returned to Ella. Ella
was informed that extension was NOT possible, unless the following are paid first (1)
fare differentials resulting from the increase in fares triggered by an increase of the
exchange rate of the USD to P and (2) the increased travel tax.

Ella returned the tickets to Manucdoc and informed the impossibility of extension.
Meanwhile, Ganas scheduled their departure on May 7, 1971 (ONE DAY BEFORE
expiry). Manucdoc requested Ella to arrange the tickets but Ella warned her that the
tickets can be used May 7, but they would NO longer be valid for the rest of the trip
because it will expire next day. Manucdoc said that Ganas will make the arrangements
(This was verified through the Q&A. It was even asked if Tagalog or in English. It was
in English).

Assured, Ella ON HIS OWN, attached to the tickets revalidating stickers (Japan
Airlines and Scandinavian Airways System (SAS) sticker). The SAS indicates that it
was Reevaluated by: the Philippine Travel Bureau, Branch No.2 (as shown by a
circular rubber stamp) and signed "Ador", and the date is handwritten in the center of
the circle. Then appear under printed headings the notations: JL. 108 (Flight), 16 May
(Date), 1040 (Time), OK (status). Ella made no more attempt to contact Air France as
there was no more time.

Come Osaka/Tokyo Flight on May 17, 1971 - Japan Airlines refused to honor the
tickets and the Ganas had to purchase new tickets. Same difficulty happened in their
return trip to Manila - Air France also refused the tickets. They were only able to return
only after pre-payment in Manila, through their relatives , of the adjusted rates. The
family flew separate flights.

TC Decision: Dismissed.
CA Decision: Reversed TC; Air France ordered to appellant moral damages (P90K
plus costs).

ISSUES:

1. W/N notice to Manucdoc is notice to the Ganas
2. W/N Ella acted beyond his powers as travel agent
Agency; February 25, 2014 3

SC DECISION/HELD:

1. YES. To all legal intents and purposes, Manucdoc 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 principal. There are IAT (Intl Air Transportation
Association) Rules about ticket expiry and fare differentials (adjustment for increase
and decrease). The GANAS cannot defend by contending lack of knowledge of those
rules since the evidence bears out that Manucdoc was duly informed by 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.

2. YES. The circumstances that AIR FRANCE personnel at the ticket counter in the
airport allowed the Ganas to leave is not tantamount to an implied ratification of travel
agent Ella's irregular actuations. It should be recalled that the Ganas left in Manila the
day before the expiry date of their tickets and that "other arrangements" were to be
made with respect to the remaining segments. Besides, the validating stickers that
Ella affixed on his own merely reflect the status of reservations on the specified flight
and could not legally serve to extend the validity of a ticket or revive an expired one. It
should be recalled that AIR FRANCE was even unaware of the validating SAS and
JAL. stickers that Ella had affixed spuriously. Consequently, Japan Air Lines and AIR
FRANCE merely acted within their contractual rights when they dishonored the tickets
on the remaining segments of the trip and when AIR FRANCE demanded payment of
the adjusted fare rates and travel taxes for the Tokyo/Manila flight.

Note: Tickets cost USD 2,528.58, exchange rate was P3.90/USD1, travel tax is P100
for each passenger

WHEREFORE, the judgment under review is hereby reversed and set aside, and the
Amended Complaint filed by private respondents is hereby dismissed.


Cuison v. Court of Appeals, 227 SCRA 391 (1993) DORIA
DOCTRINE:

Art. 1910, Par. 2: As for any obligation wherein the agent has exceeded his power, the
principal is not bound except when he ratifies it expressly or tacitly.

Tacit Ratification:
Principals unexplained delay in disowning the transactions entered into by
Agent despite several attempts made by innocent 3
rd
party to collect the
amount from him, proves that Principal was aware of the questioned
commission (Admission by Silence).

Principals categorical admission on the witness stand that Agent was the
manager of his store Such admission, spontaneous no doubt, and
standing alone, is sufficient to negate all the denials made by Principal
regarding the capacity of the Agent.

FACTS:
Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and sale of
newsprint, bond paper and scrap, with places of business at Quezon City and
Binondo, Manila. Private respondent Valiant Investment Associates, on the other
hand, is a partnership duly organized and existing under the laws of the Philippines
with business address at Kalookan City.
From December 1979 to February 1980, Valiant delivered various kinds of paper
products to a certain Lilian Tan of LT Trading. The deliveries were made pursuant to
orders allegedly placed by Tiu Huy Tiac an employee of the Binondo office of Cuison.
Upon delivery, Lilian Tan paid for the merchandise by issuing several checks payable
to cash at the specific request of Tiac. In turn, Tiac issued 9 postdated checks to
Valiant as payment for the paper products. Unfortunately, said checks were later
dishonored by the drawee bank.

Thereafter, Valiant made several demands upon Cuison, claiming that he duly
authorized Tiac as the manager of his Binondo office, to enter into the questioned
transactions. Cuison denied any involvement in the transaction entered into by Tiac
and refused to pay Valiant.

Hence, Valiant filed an action for the collection of P297,487.30 representing the price
of the merchandise.

TC:
Dismissed the complaint for lack of merit.

CA:
TC decision modified and reversed. Ordered Cuison to pay Valiant.

ISSUE:
W/N Tiu Huy Tiac possessed the required authority from petitioner sufficient to hold
the latter liable for the disputed transaction.

SC:
YES. Petition is DENIED.

HELD:
It is a well-established rule that one who clothes another with apparent authority as his
agent and holds him out to the public as such cannot be permitted to deny the
authority of such person to act as his agent, to the prejudice of innocent third parties
dealing with such person in good faith and in the honest belief that he is what he
appears to be. From the facts and the evidence on record, there is no doubt that this
rule obtains. The petition must therefore fail.

It is evident from the records that by his own acts and admission, petitioner held out
Tiu Huy Tiac to the public as the manager of his store in Sto. Cristo, Binondo, Manila.
Cuison explicitly introduced Tiu Huy Tiac to Bernardino Villanueva, respondent's
manager, as his branch manager. Also, Lilian Tan, who has been doing business with
petitioner for quite a while, also testified that she knew Tiu Huy Tiac to be the manager
of the Sto. Cristo, Binondo branch. This general perception of Tiu Huy Tiac as the
manager of petitioner's Sto. Cristo store is even made manifest by the fact that Tiu
Agency; February 25, 2014 4
Huy Tiac is known in the community to be the "kinakapatid" (godbrother) of petitioner.
In fact, even petitioner admitted his close relationship with Tiu Huy Tiac when he said
that they are "like brothers". There was thus no reason for anybody especially those
transacting business with petitioner to even doubt the authority of Tiu Huy Tiac as his
manager in the Sto. Cristo Binondo branch.

Of even greater weight than any of the testimonies, is petitioner's categorical
admission on the witness stand that Tiu Huy Tiac was the manager of his store in Sto.
Cristo, Binondo. Such admission, spontaneous no doubt, and standing alone, is
sufficient to negate all the denials made by petitioner regarding the capacity of Tiu Huy
Tiac to enter into the transaction in question. Furthermore, consistent with and as an
obvious indication of the fact that Tiu Huy Tiac was the manager of the Sto. Cristo
branch, 3 months after Tiu Huy Tiac left petitioner's employ, petitioner sent
communications to its customers notifying them that Tiu Huy Tiac is no longer
connected with the business. Such undertaking spoke unmistakenly of Tiu Huy Tiac's
valuable position as petitioner's manager than any uttered disclaimer. This act taken
together with the declaration of petitioner in open court amount to admissions under
Rule 130 Section 22 of the Rules of Court (1997 ROC: Rule 130 Section 26).

Moreover, petitioner's unexplained delay in disowning the transactions entered into by
Tiu Huy Tiac despite several attempts made by respondent to collect the amount from
him, proved all the more that petitioner was aware of the questioned commission, this
was tantamount to an admission by silence under Rule 130 Section 23 of the Rules of
Court (1997 ROC: Rule 130 Section 32).

All of these point to the fact that at the time of the transaction Tiu Huy Tiac was
admittedly the manager of petitioner's store in Sto. Cristo, Binondo. Consequently, the
transaction in question as well as the concomitant obligation is valid and binding upon
petitioner.

By his representations, petitioner is now estopped from disclaiming liability for the
transaction entered by Tiu Huy Tiac on his behalf. It matters not whether the
representations are intentional or merely negligent so long as innocent, third persons
relied upon such representations in good faith and for value (Manila Remnant Co. Inc.
v. Court of Appeals).

Tiu Huy Tiac, therefore, by petitioner's own representations and manifestations,
became an agent of petitioner by estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as against
the person relying thereon (Article 1431, Civil Code of the Philippines). A party cannot
be allowed to go back on his own acts and representations to the prejudice of the
other party who, in good faith, relied upon them (Philippine National Bank v.
Intermediate Appellate Court).

Taken in this light, petitioner is liable for the transaction entered into by Tiu Huy Tiac
on his behalf. Thus, even when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to fact as though he had
full powers (Article 1911 Civil Code), as in the case at bar.


Pleasantville Dev. v. Court of Appeals, 253 SCRA 10 (1996) FRANCISCO
Doctrine:
Art. 1909. The agent is responsible not only for fraud, but also for
NEGLIGENCE, which shall be judged with more or less rigor by the courts, according
to whether the agency was or was not for a compensation.
Art. 1910. The principal must comply with all the obligations which the agent
may have contracted WITHIN THE SCOPE OF HIS AUTHORITY.
As for any obligation wherein the agent has exceeded his power, the
principal is not bound except when he ratifies it expressly or tacitly.

Good faith consists in the belief of the builder that the land he is building on
is his and his ignorance of any defect or flaw in his title. The burden of proving bad
faith belongs to the one asserting it.

Pleasantville Development Corporation (PDC) - Principal and the petitioner in this
case
C.T. Torres Enterprises, Inc. (CTTEI) - agent or sole real estate representative of PDC
Robillo - who initially purchased the lot (lot 9) involved in the case from PDC
Jardinico - bought the rights to the lot (lot 9) involved from Robillo and one of the
respondents in the case
Kee - purchased lot (lot 8) from PDC and respondent

Facts:
Robillo purchased from PDC (principal) a parcel of land (lot 9).
1975. Jardinico bought the right to the lot (lot 9) from Robillo
Upon completing the payment, Jardinico secured fro registry of
Deed TCT in his name.
He discovered then that improvements had been
introduced on lot 9 by Kee, who took the possession
thereof.

March 1974. Kee bought lot 8 from CTTEI (agent of PDC) on installment
and could possess the lot even before the completion of payments.
After the preparation of lots 8 plan, a copy thereof was given to Kee.
CITTEI through its employee, Octaviano, accompanied Kee
(wife), to inspect Lot 8.
Unfortunately, the parcel of land pointed by
Octaviano was lot 9.
Thereafter, Kee proceeded constructing their residence,
store, auto repair shop, and other improvements
thereon.
Jardinico discovered the incident and he confronted Kee. Both parties tried
to settle but failed.

1981. Jardinicos lawyer wrote and demanded Kee to remove all
improvements and vacate lot 9.
Kee refused.
Jardinico then filed complaint for ejectment with damages against Kee
(MTC).
Kee, in turn, filed a third-party complaint against PDC and CTTEI
Agency; February 25, 2014 5

MTC: Kee ordered to vacate Lot 9, to remove all improvements he introduced thereon,
and to pay Jardonico rental fees from the time the suit was filed until he vacates the
premises. PDC and CTTEI ordered to pay Kee jointly and severally the attorneys
fees and litigation expenses.

RTC: Ruled that PDC and CTTEI were not at fault or were not negligent. The
complaint against PDC and CTTEI was dismissed.

CA: Kee declared as builder in good faith. PDC and CTTEI are solidarily liable (if
Jardonico decides to appropriate the improvements and thereafter remove those
improvements, PDC and CTTEI shall answer for all demolition expenses and the
value of the improvements OR if Jardonico decides that Kee buy the land, PDC and
CTTEI shall answer for the amount representing the value of lot 9 that Kee should pay
to Jardonico). PDC and CTTEI are also ordered to pay in solidium the attorneys
fees and litigation expenses.

Issue/s:
1. Whether or not Kee was a builder in good faith. YES
2. Whether or not CTTEI acted within the scope of his authority as an agent of
PDC. YES
3. Whether or not PDC is liable OR what is the liability, if any, of PDC and
CTTEI? (Main Issue!)

Held:
At the time Kee built improvements on lot 9, he believed that the said lot
was what he bought from PDC. He was not aware that the lot delivered to
him was not Lot 8. Thus, Kees good faith. PDC failed to prove otherwise.
CITTEI was acting within its authority as the sole real estate representative
agent of PDC when it made the delivery to Kee. In acting within the scope of
authority, it was, however, NEGLIGENT. It is this negligence that is the
basis of PDCs liability, as principal of CITTEI, per Article 1909 and 1910 of
the Civil Code (please see doctrines above).
PDCs liability lies in the NEGLIGENCE of its agent CTTEI. For such
negligence, PDC should be liable for damages.

SC: Kee declared as builder in good faith.
PDC and CTTEI are declared solidarily liable for damages due to
negligence, however, since the amount and/or extent of such damages was not
proven during the trial, the same cannot now be quantified and awarded.
PDC and CTTEI are ordered to pay in solidium attorneys fees and litigation
expenses.
The award of rentals to Jardonico is dispensed with.


Rural Bank of Milaor v. Ocfemia, 325 SCRA 99 (2000) GATCHALIAN

DOCTRINE: When a bank, by its acts and failure to act, has clearly clothed its
manager with apparent authority to sell an acquired asset in the normal course of
business, it is legally obliged to confirm the transaction by issuing a board resolution to
enable the buyers to register the property in their names. It has a duty to perform
necessary and lawful acts to enable the other parties to enjoy all benefits of the
contract which it had authorized.
FACTS:

The evidence presented by the [respondents] through the testimony of Marife O. Nio,
one of the [respondents] in this case, show[s] that she is the daughter of Francisca
Ocfemia, a co-[respondent] in this case, and the late Renato Ocfemia now deceased.
The parents of her father, Renato Ocfemia, were Juanita Arellano Ocfemia and
Felicisimo Ocfemia. Her other co-[respondents] Rowena O. Barrogo, Felicisimo
Ocfemia, Renato Ocfemia, Jr. and Winston Ocfemia are her brothers and sisters.

Marife O. Nio knows the five (5) parcels of land described in paragraph 6 of the
petition and that they are the ones possessing them which [were] originally owned by
her grandparents, Juanita Arellano Ocfemia and Felicisimo Ocfemia. During the
lifetime of her grandparents, [respondents] mortgaged the said five (5) parcels of land
and two (2) others to the [petitioner] Rural Bank of Milaor as shown by the Deed of
Real Estate Mortgage and the Promissory Note.

The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia were not able to
redeem the mortgaged properties consisting of seven (7) parcels of land and so the
mortgage was foreclosed and thereafter ownership thereof was transferred to the
[petitioner] bank. Out of the seven (7) parcels that were foreclosed, five (5) of them are
in the possession of the [respondents] because these five (5) parcels of land were
sold by the [petitioner] bank to the parents of Marife O. Nio as evidenced by a Deed
of Sale executed in January 1988.

The aforementioned five (5) parcels of land subject of the deed of sale have not been,
however transferred in the name of the parents of Merife O. Nio after they were sold
to her parents by the [petitioner] 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. Nio 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 [petitioner] Bank. Marife Nio then went to the bank, showed
to if the Deed of Sale the tax declaration and receipt of tax payments and requested
the [petitioner] 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.

The [petitioner] bank refused her request for a board resolution and made many
alibi[s]. She was told that the [petitioner] bank ha[d] a new manager and it had no
record of the sale. She was asked and she complied with the request of the [petitioner]
for a copy of the deed of sale and receipt of payment. The president of the [petitioner]
bank told her to get an authority from her parents and other [respondents] and receipts
evidencing payment of the consideration appearing in the deed of sale. She complied
with said requirements and after she gave all these documents, Marife O. Nio was
Agency; February 25, 2014 6
again told to wait for two (2) weeks because the [petitioner] bank would still study the
matter.

After two (2) weeks, Marife O. Nio returned to the [petitioner] bank and she was told
that the resolution of the board would not be released because the [petitioner] bank
ha[d] no records from the old manager.

The [respondents] are interested in having the property described in paragraph 6 of
the petition transferred to their names because their mother and co-petitioner,
Francisca Ocfemia, is very sickly and they want to mortgage the property for the
medical expenses of Francisca Ocfemia. The illness of Francisca Ocfemia beg[a]n
after her husband died and her suffering from arthritis and pulmonary disease already
became serious

TC: Granted the petition of the respondents

CA: Affirmed

ISSUE: May the board of directors of a rural banking corporation be compelled to
confirm a deed of absolute sale of real property owned by the corporation 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

Respondents based their action before the trial court on the Deed of Sale, the
substance of which was alleged in and a copy thereof was attached to the Petition for
Mandamus. The Deed named Fe S. Tena as the representative of the bank.
Petitioner, however, failed to specifically deny under oath the allegations in that
contract. In fact, it filed no answer at all, for which reason it was declared in default.

In failing to file its answer specifically denying under oath the Deed of Sale, the bank
admitted the due execution of the said contract. Such admission means that it
acknowledged that Tena was authorized to sign the Deed of Sale on its behalf.
13

Thus, defenses that are inconsistent with the due execution and the genuineness of
the written instrument are cut off by an admission implied from a failure to make a
verified specific denial.

In any event, the bank acknowledged, by its own acts or failure to act, the authority of
Fe S. Tena 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.

Likewise, Tena had previously transacted business on behalf of the bank, and the
latter had acknowledged her authority. A bank is liable to innocent third persons where
representation is made in the course of its normal business by an agent like Manager
Tena, even though such agent is abusing her authority.
14
Clearly, persons dealing
with her could not be blamed for believing that she was authorized to transact
business for and on behalf of the bank.

Thus, this Court has ruled in Board of Liquidators v. Kalaw:

Settled jurisprudence has it that where similar acts have been approved by
the directors as a matter of general practice, custom, and policy, the general
manager may bind the company without formal authorization of the board of
directors. In varying language, existence of such authority is established, by
proof of the course of business, the usages and practices of the company
and by the knowledge which the board of directors has, or must be
presumed to have, of acts and doings of its subordinates in and about the
affairs of the corporation.

Thus, when, in the usual course of business of a corporation, an officer has
been allowed in his official capacity to manage its affairs, his authority to
represent the corporation may be implied from the manner in which he has
been permitted by the directors to manage its business.

Notwithstanding the putative authority of the manager to bind the bank in the Deed of
Sale, petitioner has failed to file an answer to the Petition below within the
reglementary period, let alone present evidence controverting such authority. Indeed,
when one of herein respondents, Marife S. Nino, went to the bank to ask for the board
resolution, she was merely told to bring the receipts. The bank failed to categorically
declare that Tena had no authority. This Court stresses the following:

As already observed, it is familiar doctrine that if a corporation knowingly
permits one of its officers, or any other agent, to do acts within the scope of
an apparent authority, and thus holds him out to the public as possessing
power to do those acts, the corporation will, as against any one who has in
good faith dealt with the corporation through such agent, be estopped from
denying his authority; and where it is said "if the corporation permits this
means the same as "if the thing is permitted by the directing power of the
corporation."

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.
17


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
respondent's. 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.

The board resolution is, in fact, mere paper work. Nonetheless, it is paper work
necessary in the orderly operations of the register of deeds and the full enjoyment of
respondents' rights. Petitioner-bank persistently and unjustifiably refused to perform its
legal duty.
Agency; February 25, 2014 7

SEPARATE OPINION: (VITUG, J)

Corporate officers, in their case, may act on such matters as may be authorized either
expressly by the By-laws or Board Resolutions or impliedly such as by general
practice or policy or as are implied by express powers. When officers are allowed to
act in certain particular cases, their acts conformably therewith can bind the company.
Hence, a corporate officer entrusted with general management and control of the
business has the implied authority to act or contract for the corporation which may be
necessary or appropriate to conduct the ordinary business.
9
If the act of corporate
officers comes within corporate powers but it is done without any express or implied
authority therefor from the by-laws, board resolutions or corporate practices, such an
act does not bind the corporation. The Board, however, acting within its competence,
may ratify the unauthorized act of the corporate officer. So, too, a corporation may be
held in estoppel from denying as against innocent third persons the authority of its
officers or agents who have been clothed by it with ostensible or apparent authority.
10


The Corporation Code itself has not been that explicit with respect to the
consequences of ultra vires acts; hence, the varied ascriptions to its effects heretofore
expressed. It may well be to consider futile any further attempt to have these
situations bear any exact equivalence to the civil law precepts of defective contracts.
Nevertheless, general statements could be made. Here reiterated, while an act of the
corporation which is either illegal or outside of express, implied or incidental powers as
so provided by law or the charter would be void under Article 5
11
of the Civil Code,
and the act is not susceptible to ratification, an unauthorized act (if within corporate
powers) of the board or a corporate officer, however, would only be unenforceable
conformably with Article 1403
12
of the Civil Code but, if the party with whom the agent
has contracted is aware of the latter's limits of powers, the unauthorized act is
declared void by Article 1898
13
of the same Code, although still susceptible
thereunder to ratification by the principal. Any person dealing with corporate boards
and officers may be said to be charged with the knowledge that the latter can only act
within their respective limits of power, and he is put to notice accordingly. Thus, it
would generally behoove such a person to look into the extent of the authority of
corporate agents since the onus would ordinarily be with him.



Filipinas Life Assurance Co. v. Pedroso, 543 SCRA 542 (2008) GAUDIEL

Doctrine:

Even if the agent exceeded his power, if the principal ratifies, expressly or
tacitly principal shall be bound by the obligation.


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 forP800 for the 8% prepaid interest and a Filipinas Life
Agent receipt.

Pedroso called the Escolta office and talked to Francisco Alcantara, the
administrative assistant, whoreferred 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 Lifes 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
8more investments in varying amounts, totaling P37,000 but at a lower rate of 5%
prepaid interest a month. Upon maturity of Pedrosos subsequent investments, Valle
would take back from Pedroso the corresponding agents 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.

TC:

The court held Filipinas Life and its co-defendants Valle, Apetrior and Alcantara
jointly and solidarily liable to the respondents.

CA:

The Court of Appeals affirmed the trial courts ruling and subsequently denied the
motion for reconsideration.


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

SC:: Petition Denied for Lack of merit.
Agency; February 25, 2014 8


HELD:

Pedroso and Palacio had invested P47,000 and P49,550, respectively.
These were received by Valleand remitted to Filipinas Life, using Filipinas Lifes official
receipts. Valles authority to solicit andreceive 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 agents 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 agenthad 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 Valles representations were beyond his authority as a
debit/insurance agent, Filipinas Life thru Alcantara and Apetrior expressly and
knowingly ratified Valles acts. Filipinas Life benefited from the investments deposited
by Valle in the account of Filipinas Life.



Manila Memorial Park Cemetery, Inc. v. Linsangan, 443 SCRA 377, 394 (2004)
LESAVA

Facts: Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at
the Holy Cross Memorial Park owned by petitioner (MMPCI).
According to Baluyot (agent), a former owner of a memorial lot under
Contract No. 25012 was no longer interested in acquiring the lot and had
opted to sell his rights subject to reimbursement of the amounts he already
paid.
The contract was for P95,000.00.
Baluyot reassured Atty. Linsangan that once reimbursement is
made to the former buyer, the contract would be transferred to
him.
Atty. Linsangan agreed and gave Baluyot P35,295.00
representing the amount to be reimbursed to the original buyer
and to complete the down payment to MMPCI.
Baluyot issued handwritten and typewritten receipts for these
payments.

A new contract was issued to Atty. Linsangan covering the subject lot in the name of
the latter instead of old Contract. Atty. Linsangan protested, but Baluyot assured him
that he would still be paying the old price of P95,000.00 with P19,838.00 credited as
full down payment leaving a balance of about P75,000.00.

The new contract was brought by Baluyot which has a listed price of P132,250.00.
Atty. Linsangan objected to the new contract price, as the same was not the amount
previously agreed upon. To convince Atty. Linsangan, Baluyot executed a document6
confirming that while the contract price is P132,250.00, Atty. Linsangan would pay
only the original price of P95,000.00.

Atty. Linsangan signed the new contract and accepted Official Receipt No. 118912. As
requested by Baluyot, Atty. Linsangan issued twelve (12) postdated checks of
P1,800.00 each in favor of MMPCI. The next year, or on 29 April 1986, Atty.
Linsangan again issued twelve (12) postdated checks in favor of MMPCI. On 25 May
1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled
for reasons the latter could not explain, and presented to him another proposal for the
purchase of an equivalent property. He refused the new proposal and insisted that
Baluyot and MMPCI honor their undertaking.

For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty.
Linsangan filed a Complaint for Breach of Contract and Damages against the former.

MMPCI alleged that the new contract was cancelled conformably with the terms of the
contract because of non-payment of arrearages. MMPCI stated that Baluyot was not
an agent but an independent contractor, and as such was not authorized to represent
MMPCI or to use its name except as to the extent expressly stated in the Agency
Manager Agreement. Moreover, MMPCI was not aware of the arrangements entered
into by Atty. Linsangan and Baluyot, as it in fact received a down payment and
monthly installments as indicated in the contract. Official receipts showing the
application of payment were turned over to Baluyot whom Atty. Linsangan had from
the beginning allowed to receive the same in his behalf. Furthermore, whatever
misimpression that Atty. Linsangan may have had must have been rectified by the
Account Updating Arrangement signed by Atty. Linsangan which states that he
"expressly admits that Contract No. 28660 'on account of serious delinquencyis now
due for cancellation under its terms and conditions.'''

TC: held MMPCI and Baluyot jointly and severally liable. It found that Baluyot was an
agent of MMPCI and that the latter was estopped from denying this agency, having
received and enchased the checks issued by Atty. Linsangan and given to it by
Baluyot. While MMPCI insisted that Baluyot was authorized to receive only the down
payment, it allowed her to continue to receive postdated checks from Atty. Linsangan,
which it in turn consistently encashed.

Agency; February 25, 2014 9
CA: affirmed the decision of the trial court.

Issue: WON MMPCI can be held jointly and solidarily liable with Baluyot?

Held: NO. MMPCI cannot be bound by the contract procured by Atty. Linsangan and
solicited by Baluyot.

Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment
spaces obtained on forms provided by MMPCI. The terms of the offer to purchase,
therefore, are contained in such forms and, when signed by the buyer and an
authorized officer of MMPCI, becomes binding on both parties.

The Offer to Purchase duly signed by Atty. Linsangan, and accepted and validated by
MMPCI showed a total list price of P132,250.00. Likewise, it was clearly stated therein
that "Purchaser agrees that he has read or has had read to him this agreement, that
he understands its terms and conditions, and that there are no covenants, conditions,
warranties or representations other than those contained herein." By signing the Offer
to Purchase, Atty. Linsangan signified that he understood its contents. That he and
Baluyot had an agreement different from that contained in the Offer to Purchase is of
no moment, and should not affect MMPCI, as it was obviously made outside Baluyot's
authority. To repeat, Baluyot's authority was limited only to soliciting purchasers. She
had no authority to alter the terms of the written contract provided by MMPCI. The
document/letter "confirming" the agreement that Atty. Linsangan would have to pay
the old price was executed by Baluyot alone. Nowhere is there any indication that the
same came from MMPCI or any of its officers.



Doctrine of apparent authority

Professional Services, Inc. v. Court of Appeals, 544 SCRA 170 (2008) (Decision)
LIM
FACTS

On April 4, 1984, Natividad Agana was admitted at the Medical City General Hospital
(Medical City) because of difficulty of bowel movement and bloody anal discharge. Dr.
Ampil diagnosed her to be suffering from "cancer of the sigmoid." Thus, on April 11,
1984, Dr. Ampil, assisted by the medical staff1 of Medical City, performed an anterior
resection surgery upon her. During the surgery, he found that the malignancy in her
sigmoid area had spread to her left ovary, necessitating the removal of certain
portions of it. Thus, Dr. Ampil obtained the consent of Atty. Enrique Agana, Natividads
husband, to permit Dr. Juan Fuentes, respondent in G.R. No. 126467, to perform
hysterectomy upon Natividad.

Dr. Fuentes performed and completed the hysterectomy. Afterwards, Dr. Ampil took
over, completed the operation and closed the incision. However, the operation
appeared to be flawed.

After a couple of days, Natividad complained of excruciating pain in her anal region.
She consulted both Dr. Ampil and Dr. Fuentes about it. They told her that the pain was
the natural consequence of the surgical operation performed upon her. Dr. Ampil
recommended that Natividad consult an oncologist to treat the cancerous nodes which
were not removed during the operation.

On May 9, 1984, Natividad, accompanied by her husband, went to the United States
to seek further treatment. After four (4) months of consultations and laboratory
examinations, Natividad was told that she was free of cancer. Hence, she was advised
to return to the Philippines.

On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains.
Two (2) weeks thereafter, her daughter found a piece of gauze protruding from her
vagina. Dr. Ampil was immediately informed. He proceeded to Natividads house
where he managed to extract by hand a piece of gauze measuring 1.5 inches in width.
Dr. Ampil then assured Natividad that the pains would soon vanish.

Despite Dr. Ampils assurance, the pains intensified, prompting Natividad to seek
treatment at the Polymedic General Hospital. While confined thereat, Dr. Ramon
Gutierrez detected the presence of a foreign object in her vagina -- a foul-smelling
gauze measuring 1.5 inches in width. The gauze had badly infected her vaginal vault.
A recto-vaginal fistula had formed in her reproductive organ which forced stool to
excrete through the vagina. Another surgical operation was needed to remedy the
situation. Thus, in October 1984, Natividad underwent another surgery.

On November 12, 1984, Natividad and her husband filed with the Regional Trial Court,
Branch 96, Quezon City a complaint for damages against PSI (owner of Medical City),
Dr. Ampil and Dr. Fuentes.

On February 16, 1986, pending the outcome of the above case, Natividad died. She
was duly substituted by her above-named children (the Aganas).

RTC Ruling:
The trial court rendered judgment in favor of spouses Agana finding PSI, Dr. Ampil
and Dr. Fuentes jointly and severally liable.

CA Ruling:
On appeal, the Court of Appeals affirmed the assailed judgment with modification in
the sense that the complaint against Dr. Fuentes was dismissed.

PSI, Dr. Ampil and the Aganas filed with this Court separate petitions for review on
certiorari. On January 31, 2007, the Court, through its First Division, rendered a
Decision holding that PSI is jointly and severally liable with Dr. Ampil for the following
reasons: first, there is an employer-employee relationship between Medical City and
Dr. Ampil. The Court relied on Ramos v. Court of Appeals,2 holding that for the
purpose of apportioning responsibility in medical negligence cases, an employer-
employee relationship in effect exists between hospitals and their attending and
visiting physicians; second, PSIs act of publicly displaying in the lobby of the Medical
City the names and specializations of its accredited physicians, including Dr. Ampil,
estopped it from denying the existence of an employer-employee relationship between
them under the doctrine of ostensible agency or agency by estoppel; and third, PSIs
failure to supervise Dr. Ampil and its resident physicians and nurses and to take an
Agency; February 25, 2014 10
active step in order to remedy their negligence rendered it directly liable under the
doctrine of corporate negligence.

In its motion for reconsideration, PSI contends that the Court erred in finding it liable
under Article 2180 of the Civil Code, there being no employer-employee relationship
between it and its consultant, Dr. Ampil. PSI stressed that the Courts Decision in
Ramos holding that "an employer-employee relationship in effect exists between
hospitals and their attending and visiting physicians for the purpose of apportioning
responsibility" had been reversed in a subsequent Resolution.3 Further, PSI argues
that the doctrine of ostensible agency or agency by estoppel cannot apply because
spouses Agana failed to establish one requisite of the doctrine, i.e., that Natividad
relied on the representation of the hospital in engaging the services of Dr. Ampil. And
lastly, PSI maintains that the doctrine of corporate negligence is misplaced because
the proximate cause of Natividads injury was Dr. Ampils negligence.

Issue: W/N PSI is liable for the actions of its consultants.

Held: Yes.

Ratio:

The motion lacks merit. As earlier mentioned, the First Division, in its assailed
Decision, ruled that an employer-employee relationship "in effect" exists between the
Medical City and Dr. Ampil. Consequently, both are jointly and severally liable to the
Aganas.

In Ramos, the Court considered the peculiar relationship between a hospital and its
consultants on the bases of certain factors. One such factor is the "control test"
wherein the hospital exercises control in the hiring and firing of consultants, like Dr.
Ampil, and in the conduct of their work.

Actually, contrary to PSIs contention, the Court did not reverse its ruling in Ramos.
What it clarified was that the De Los Santos Medical Clinic did not exercise control
over its consultant, hence, there is no employer-employee relationship between them.
Thus, despite the granting of the said hospitals motion for reconsideration, the
doctrine in Ramos stays, i.e., for the purpose of allocating responsibility in medical
negligence cases, an employer-employee relationship exists between hospitals and
their consultants.

In the instant cases, PSI merely offered a general denial of responsibility, maintaining
that consultants, like Dr. Ampil, are "independent contractors," not employees of the
hospital. Even assuming that Dr. Ampil is not an employee of Medical City, but an
independent contractor, still the said hospital is liable to the Aganas.

In general, a hospital is not liable for the negligence of an independent contractor-
physician. There is, however, an exception to this principle. The hospital may be liable
if the physician is the "ostensible" agent of the hospital. This exception is also known
as the "doctrine of apparent authority." (Sometimes referred to as the apparent or
ostensible agency theory.

The doctrine of apparent authority essentially involves two factors to determine the
liability of an independent contractor-physician.

The first factor focuses on the hospitals manifestations and is sometimes described
as an inquiry whether the hospital acted in a manner which would lead a reasonable
person to conclude that the individual who was alleged to be negligent was an
employee or agent of the hospital. In this regard, the hospital need not make express
representations to the patient that the treating physician is an employee of the
hospital; rather a representation may be general and implied.

The doctrine of apparent authority is a specie of the doctrine of estoppel. Estoppel
rests on this rule: "Whether a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing true, and to act
upon such belief, he cannot, in any litigation arising out of such declaration, act or
omission, be permitted to falsify it.

The second factor focuses on the patients reliance. It is sometimes characterized as
an inquiry on whether the plaintiff acted in reliance upon the conduct of the hospital or
its agent, consistent with ordinary care and prudence. (Diggs v. Novant Health, Inc.)

PSI argues that the doctrine of apparent authority cannot apply to these cases
because spouses Agana failed to establish proof of their reliance on the
representation of Medical City that Dr. Ampil is its employee.

The argument lacks merit.

Atty. Agana categorically testified that one of the reasons why he chose Dr. Ampil was
that he knew him to be a staff member of Medical City, a prominent and known
hospital.

Clearly, PSI is estopped from passing the blame solely to Dr. Ampil. Its act of
displaying his name and those of the other physicians in the public directory at the
lobby of the hospital amounts to holding out to the public that it offers quality medical
service through the listed physicians. This justifies Atty. Aganas belief that Dr. Ampil
was a member of the hospitals staff. It must be stressed that under the doctrine of
apparent authority, the question in every case is whether the principal has by his
voluntary act placed the agent in such a situation that a person of ordinary prudence,
conversant with business usages and the nature of the particular business, is justified
in presuming that such agent has authority to perform the particular act in question.6
In these cases, the circumstances yield a positive answer to the question.


Professional Services, Inc. v. Court of Appeals, 611 SCRA 282 (2010)
(Resolution) MAGSUMBOL

FACTS:To recall the salient facts, PSI, together with Dr. Miguel Ampil (Dr. Ampil) and
Dr. Juan Fuentes (Dr. Fuentes), was impleaded by Enrique Agana and Natividad
Agana (later substituted by her heirs), in a complaint for damages filed in the Regional
Trial Court (RTC) of Quezon City, Branch 96, for the injuries suffered by Natividad
when Dr. Ampil and Dr. Fuentes neglected to remove from her body two gauzes which
Agency; February 25, 2014 11
were used in the surgery they performed on her on April 11, 1984 at the Medical City
General Hospital. PSI was impleaded as owner, operator and manager of the hospital.

ISSUE: W/N PSI can be held liable?

HELD: While in theory a hospital as a juridical entity cannot practice medicine,
32
in
reality it utilizes doctors, surgeons and medical practitioners in the conduct of its
business of facilitating medical and surgical treatment.
33
Within that reality, three legal
relationships crisscross: (1) between the hospital and the doctor practicing within its
premises; (2) between the hospital and the patient being treated or examined within its
premises and (3) between the patient and the doctor. The exact nature of each
relationship determines the basis and extent of the liability of the hospital for the
negligence of the doctor.
Where an employment relationship exists, the hospital may be held vicariously liable
under Article 2176
34
in relation to Article 2180
35
of the Civil Code or the principle of
respondeat superior. Even when no employment relationship exists but it is shown
that the hospital holds out to the patient that the doctor is its agent, the hospital may
still be vicariously liable under Article 2176 in relation to Article 1431
36
and Article
1869
37
of the Civil Code or the principle of apparent authority.
38
Moreover, regardless
of its relationship with the doctor, the hospital may be held directly liable to the patient
for its own negligence or failure to follow established standard of conduct to which it
should conform as a corporation.
39

This Court still employs the "control test" to determine the existence of an employer-
employee relationship between hospital and doctor. In Calamba Medical Center, Inc.
v. National Labor Relations Commission, et al.
40
it held:
Under the "control test", an employment relationship exists between a physician and a
hospital if the hospital controls both the means and the details of the process by which
the physician is to accomplish his task.
x x x x x x x x x
As priorly stated, private respondents maintained specific work-schedules, as
determined by petitioner through its medical director, which consisted of 24-hour shifts
totaling forty-eight hours each week and which were strictly to be observed under pain
of administrative sanctions.
That petitioner exercised control over respondents gains light from the
undisputed fact that in the emergency room, the operating room, or any
department or ward for that matter, respondents' work is monitored through its
nursing supervisors, charge nurses and orderlies. Without the approval or
consent of petitioner or its medical director, no operations can be undertaken in
those areas. For control test to apply, it is not essential for the employer to
actually supervise the performance of duties of the employee, it being enough
that it has the right to wield the power.



Banate v. Philippine Countryside Rural Bank, 625 SCRA 21 (2010) MARAMOT

Facts:

Spouses Rosendo Maglasang and Patrocinia Monilar (spouses Maglasang)
obtained a loan from Philippine Countryside Rural Bank (PCRB) for P1,070,000.00,
evidenced by a promissory note and payable on January 18, 1998.
To secure the payment of the loan, the spouses Maglasang executed a real estate
mortgage over their property owned by petitioners Mary Melgrid and Bonifacio Cortel
(spouses Cortel), the spouses Maglasangs daughter and son-in-law, in favor of
PCRB. Aside from this loan, the spouses Maglasang obtained two other loans from
PCRB which were covered by separate promissory notes and secured by mortgages
on their other properties.
However, before the first loan became due, the spouses Maglasang and the
spouses Cortel asked PCRBs permission to sell the properties. They also requested
that the properties be released from the mortgage since the two other loans were
adequately secured by the other mortgages. The two spouses claimed that PCRB,
through its Branch Manager, Pancrasio Mondigo, verbally agrred to the requests but
required the full payment of the first loan.
Thereafter, the two spouses Maglasang sold to Violeta Banate the properties for
P1,750,000.00, which was then used to pay the loan with PCRB.
After the loan was settled, PCRB issued an owners duplicate certificate of title of
the property to Banate, who was then able to secure a new title in her name. The title,
however, carried the mortgage lien in favor of PCRB, prompting Banate to request
from PCRB a Deed of Release of Mortgage.
As PCRB refused to comply with the request, the petitioners instituted an action for
specific performance before the RTC to compel PCRB to execute the release deed as
well as payment for damages.
The RTC ruled in favor of te petitioners, stating that PCRBs release of the title
indicated that the loan had already been settled. Furthermore, the RTC stated that the
petitioners are rightfully entitled to a deed of release of mortgage, pursuant to the
verbal agreement that the petitioners made with PCRBs branch manager, Mondigo
On appeal, the CA reversed the RTCs decision. The CA did not consider as valid
the petitioners new agreement with Mondigo, which would novate the original
mortgage contract containing the cross-collateral stipulation. It ruled that Mondigo
cannot orally amend the mortgage contract between PCRB, and the spouses
Maglasang and the spouses Cortel; therefore, the claimed commitment allowing the
release of the mortgage on the subject properties cannot bind PCRB.
Hence, the petition.
Issue:
Whether or not PCRB should be held liable for Mondigos commitment on the basis of
the latters apparent authority.

Held:
No.
The SC held that under the doctrine of apparent authority, acts and contracts of the
agent, as are within the apparent scope of the authority conferred on him, although no
actual authority to do such acts or to make such contracts has been conferred, bind
the principal. The principals liability, however, is limited only to third persons who
have been led reasonably to believe by the conduct of the principal that such actual
authority exists, although none was given. In other words, apparent authority is
determined only by the acts of the principal and not by the acts of the agent. There
can be no apparent authority of an agent without acts or conduct on the part of the
principal; such acts or conduct must have been known and relied upon in good faith as
a result of the exercise of reasonable prudence by a third party as claimant, and such
acts or conduct must have produced a change of position to the third partys
Agency; February 25, 2014 12
detriment
It further held that although a branch manager, within his field and as to third persons,
is the general agent and is in general charge of the corporation, with apparent
authority commensurate with the ordinary business entrusted him and the usual
course and conduct thereof, yet the power to modify or nullify corporate contracts
remains generally in the board of directors. Being a mere branch manager alone is
insufficient to support the conclusion that Mondigo has been clothed with apparent
authority to verbally alter terms of written contracts, especially when viewed against
the telling circumstances of this case: the unequivocal provision in the mortgage
contract; PCRBs vigorous denial that any agreement to release the mortgage was
ever entered into by it; and, the fact that the purported agreement was not even
reduced into writing considering its legal effects on the parties interests. To put it
simply, the burden of proving the authority of Mondigo to alter or novate the mortgage
contract has not been established.


Sargasso Construction & & Dev. Corp. v. PPA, 623 SCRA 260 (2010) MORA

Plaintiff Sargasso Construction and Development Corporation, Pick and Shovel, Inc.
and Atlantic Erectors, Inc., a joint venture, was awarded the construction of Pier 2 and
the rock causeway (R.C. Pier 2) for the port of San Fernando, La Union, after a public
bidding conducted by the defendant PPA. Implementation of the project commenced.
The port construction was in pursuance of the development of the Northwest Luzon
Growth Quadrangle. Adjacent to Pier 2 is an area of P4,280 square meters intended
for the reclamation project as part of the overall port development plan.

Mr. Melecio J. Go, Executive Director of the consortium, plaintiff offered to undertake
the reclamation between the Timber Pier and Pier 2 of the Port of San Fernando, La
Union, as an extra work to its existing construction of R.C. Pier 2 and Rock Causeway
for a price of P36,294,857.03. Defendant replied thru its Assistant General Manager
Teofilo H. Landicho who sent the following:

This is to acknowledge receipt of your letter dated 01 October 1992 offering to
undertake the reclamation between the Timber Pier and Pier 2, at the Port ofSan
Fernando, La Union as an extra work to your existing contract.

Your proposal to undertake the project at a total cost of THIRTY SIX MILLION TWO
HUNDRED NINETY FOUR THOUSAND EIGHT HUNDRED FIFTY SEVEN AND
03/100 PESOS (P36,294,857.03) is not acceptable to PPA. If you can reduce your
offer to THIRTY MILLION SEVEN HUNDRED NINETY FOUR THOUSAND TWO
HUNDRED THIRTY AND 89/100 (P30,794,230.89)we may consider favorably
award of the project in your favor, subject to the approval of higher authority.

Please signify your agreement to the reduced amount of P30,794,230.89 by signing in
the space provided below. (emphasis in the original)


A Notice of Award signed by PPA General Manager Rogelio Dayan was sent to
plaintiff for the phase I Reclamation Contract in the amount ofP30,794,230.89 and
instructing it to enter into and execute the contract agreement with this Office and to
furnish the documents representing performance security and credit line. Defendant
likewise stated [and] made it a condition that fendering of Pier No. 2 Port of San
Fernando, and the Port of Tabaco is completed before the approval of the contract for
the reclamation project. Installation of the rubber dock fenders in the said ports was
accomplished in the year 1994. PPA Management further set a condition [that] the
acceptance by the contractor that mobilization/demobilization cost shall not be
included in the contract and that escalation shall be reckoned upon approval of the
Supplemental Agreement. The award of the negotiated contract as additional or
supplemental project in favor of plaintiff was intended to save on the
mobilization/demobilization costs and some items as provided for in the original
contract. Hence, then General Manager Carlos L. Agustin presented for consideration
by the PPA Board of Directors the contract proposal for the reclamation project.

At its meeting, the Board decided not to approve the contract proposal, as reflected in
the following excerpt of the minutes taken during said board meeting:

After due deliberation, the Board advised Management to bid the project since
there is no strong legal basis for Management to award the supplemental
contract through negotiation. The Board noted that the Pier 2 Project was basically
for the construction of a pier while the supplemental agreement refers to reclamation.
Thus there is no basis to compare the terms and conditions of the reclamation project
with the original contract (Pier 2 Project) of Sargasso.

It appears that PPA did not formally advise the plaintiff of the Boards action on their
contract proposal. As plaintiff learned that the Board was not inclined to favor its
Supplemental Agreement, Mr. Go wrote General Manager Agustin requesting that the
same be presented again to the Board meeting for approval. However, no reply was
received by plaintiff from the defendant.

RTC: granted petitioners action for specific performance. RTC ordered PPA to
execute a contract in favor of the plaintiff for reclamation of the area between the
Timber Pier and Pier 2 in San Fernando, La Union

CA: reversed RTC decision. In setting aside the trial courts decision, the CA ruled
that the law itself should serve as the basis of the general managers authority to bind
respondent corporation and, thus, the trial court erred in merely relying on the
wordings of the Notice of Award and the Minutes of the Board meeting in determining
the limits of his authority; that the power of the general manager to sign contracts is
different from the Boards power to make or enter (into) contracts; and that, in the
execution of contracts, the general manager only exercised a delegated power, in
reference to which, evidence was wanting that the PPA Board delegated to its general
manager the authority to enter into a supplementary contract for the reclamation
project.

ISSUE:
Whether or not the general manager of PPA is vested with authority to enter into a
contract for and on behalf of PPA. --NO

HELD:
As correctly found by the CA, the issue on the reclamation of the area between Timber
Agency; February 25, 2014 13
Pier and Pier 2 of the Port of San Fernando involves a government infrastructure
project, and it is beyond dispute that the applicable laws, rules and regulations on
government contracts or projects apply.

On the matter of entering into negotiated contracts by government-owned and
controlled corporations, the provisions of existing laws are crystal clear in requiring the
governing boards approval thereof. The Court holds that the CA correctly applied the
pertinent laws, to wit:

Executive Order No. 380 provides for revised levels of authority on approval of
government contracts. Section 1 thereof authorizes GOCCs:
1. To enter into infrastructure contracts awarded through public
bidding regardless of the amount involved;
2. To enter into negotiated infrastructure contracts involving not
more than one hundred million pesos (P100 million) in the case of
the Department of Transportation and Communications and the
Department of Public Works and Highways, and not more than fifty
million pesos (P50 million) in the case of the other Departments
and governments corporations; Provided, That contracts
exceeding the said amounts shall only be entered into upon prior
authority from the Office of the President; and Provided, Further,
That said contracts shall only be awarded in strict compliance with
Section 5 of Executive Order No. 164, S. of 1987.
xxx

The rule on negotiated contracts, as amended on August 12, 2000 (IB 10.6.2) now
reads

1. Negotiated contract may be entered into only where any of the following conditions
exists and the implementing office/agency/corporation is not capable of undertaking
the contract by administration:

a. In times of emergencies arising from natural calamities where
immediate action is necessary to prevent imminent loss of life and/or
property or to restore vital public services, infrastructure and utilities
such as

b. Failure to award the contract after competitive public bidding
for valid cause or causes

c. Where the subject project is adjacent or contiguous to an on-
going project and it could be economically prosecuted by the same
contractor provided that subject contract has similar or related scope
of works and it is within the contracting capacity of the contractor, in
which case, direct negotiation may be undertaken with the said
contractor

x x x


In cases a and b above, bidding may be undertaken through sealed canvass of at
least three (3) qualified contractors Authority to negotiate contract for projects
under these exceptional cases shall be subject to prior approval by heads of
agencies within their limits of approving authority. (emphasis in the original)


Furthermore, the Revised Administrative Code lays down the same
requirement, thus:



Sec. 51. Who May Execute Contracts. Contracts in behalf of the Republic of
thePhilippines shall be executed by the President unless authority therefore is
expressly vested by law or by him in any other public officer.

Contracts in behalf of the political subdivisions and corporate agencies or
instrumentalities shall be approved by their respective governing boards or councils
and executed by their respective executive heads.


Petitioner neither disputes nor admits the application of the foregoing statutory
provisions but insists, nonetheless, that the Notice of Award itself already embodies a
perfected contract having passed the negotiation stage despite the clear absence
thereon of a condition requiring the prior approval of respondents higher authority.

Petitioners argument is untenable. Contracts to which the government is a party are
generallysubject to the same laws and regulations which govern the validity and
sufficiency of contracts between private individuals. A government contract, however,
is perfected only upon approval by a competent authority, where such approval is
required.



The contracting officer functions as agent of the Philippine government for the purpose
of making the contract. There arises then, in that regard, a principal-agent relationship
between the Government, on one hand, and the contracting official, on the other. The
latter though, in contemplation of law, possesses only actual agency authority. This is
to say that his contracting power exists, where it exists at all, only because and by
virtue of a law, or by authority of law, creating and conferring it. And it is well
settled that he may make only such contracts as he is so authorized to make.
Flowing from these basic guiding principles is another stating that the government is
bound only to the extent of the power it has actually given its officers-agents. It goes
without saying then that, conformably to a fundamental principle in agency, the acts of
such agents in entering into agreements or contracts beyond the scope of their actual
authority do not bind or obligate the Government. The moment this happens, the
Agency; February 25, 2014 14
principal-agent relationship between the Government and the contracting officer
ceases to exist. (emphasis supplied)


It was stressed that


the contracting official who gives his consent as to the subject matter and the
consideration ought to be empowered legally to bind the Government and that his
actuations in a particular contractual undertaking on behalf of the government come
within the ambit of his authority. On top of that, the approval of the contract by a higher
authority is usually required by law or administrative regulation as a requisite for its
perfection.


Under Article 1881 of the Civil Code, the agent must act within the scope of his
authority to bind his principal. So long as the agent has authority, express or implied,
the principal is bound by the acts of the agent on his behalf, whether or not the third
person dealing with the agent believes that the agent has actual authority. Thus, all
signatories in a contract should be clothed with authority to bind the parties they
represent.

P.D. 857 likewise states that one of the corporate powers of respondents Board of
Directors is to reclaim any part of the lands vested in the Authority. It also
exercise[s] all the powers of a corporation under the Corporation Law. On the other
hand, the law merely vests the general manager the general power to sign
contracts and to perform such other duties as the Board may assignTherefore,
unless respondents Board validly authorizes its general manager, the latter cannot
bind respondent PPA to a contract.

The Court completely agrees with the CA that the petitioner failed to present
competent evidence to prove that the respondents general manager possessed such
actual authority delegated either by the Board of Directors, or by statutory provision.
The authority of government officials to represent the government in any contract must
proceed from an express provision of law or valid delegation of authority. Without such
actual authority being possessed by PPAs general manager, there could be no real
consent, much less a perfected contract, to speak of.

It is of no moment if the phrase approval of higher authority appears nowhere in the
Notice of Award. It neither justifies petitioners presumption that the required approval
had already been granted nor supports its conclusion that no other condition (than
the completion of fendering of Pier 2 as stated in the Notice of Award) ought to be
complied with to create a perfected contract. Applicable laws form part of, and are
read into, the contract without need for any express reference thereto; more so, to a
purported government contract, which is imbued with public interest.

Adopting the trial courts ratiocination, petitioner further argues that had it been true
that respondents general manager was without authority to bind respondent by
contract, then the former should have disapproved the supplemental contract on that
ground. Petitioner also interprets the Boards silence on the matter as an explicit
recognition of the latters authority to enter into a negotiated contract involving the
reclamation project. This posture, however, does not conform with the basic provisions
of the law to which we always go back. Section 4 of P.D. 1594 provides:

Section 4. Bidding. Construction projects shall generally be undertaken by contract
after competitive public bidding. Projects may be undertaken by administration or force
account or by negotiated contract only in exceptional cases where time is of the
essence, or where there is lack of qualified bidders or contractors, or where there is a
conclusive evidence that greater economy and efficiency would be achieved through
this arrangement, and in accordance with provision of laws and acts on the matter,
subject to the approval of the Ministry of Public Works, Transportation and
Communications, the Minister of Public Highways, or the Minister of Energy, as the
case may be, if the project cost is less than P1 Million, and of the President of the
Philippines, upon the recommendation of the Minister, if the project cost is P1 Million
or more.


Precisely, the Board of Directors of the respondent did not see fit to approve the
contract by negotiation after finding that the Pier 2 Project was basically for the
construction of a pier while the supplemental agreement refers to reclamation. Thus,
there is no basis to compare the terms and conditions of the reclamation project with
the original contract (Pier 2 Project) of Sargasso. So even granting arguendo that the
Boards action or inaction is an explicit recognition of the authority of the general
manager, the purported contract cannot possibly be the basis of an action for specific
performance because the negotiated contract itself basically contravenes stringent
legal requirements aimed at protecting the interest of the public. The bottom line here
is that the facts do not conform to what the law requires.

No wonder petitioner conveniently omitted any attempt at presenting its case within
the statutory exceptions, and insisted that respondents disapproval of the
supplemental agreement was a mere afterthought perhaps realizing the infirmity of
its excuse (referring to petitioners belated pre-disqualification in the construction
project). But the Court, at the very outset, has previously clarified that the two projects
involved herein are distinct from each other. Hence, petitioners disqualification in the
construction project due to its lack of certain requirements has no significant bearing in
this case.
Agency; February 25, 2014 15

Lastly, petitioners invocation of the doctrine of apparent authority is misplaced. This
doctrine, in the realm of government contracts, has been restated to mean that the
government is NOT bound by unauthorized acts of its agents, even though within the
apparent scope of their authority. Under the law on agency, however, apparent
authority is defined as the power to affect the legal relations of another person by
transactions with third persons arising from the others manifestations to such third
person such that the liability of the principal for the acts and contracts of his
agentextends to those which are within the apparent scope of the authority conferred
on him, although no actual authority to do such acts or to make such contracts has
been conferred.

Apparent authority, or what is sometimes referred to as the holding out theory, or
doctrine of ostensible agency, imposes liability, not as the result of the reality of a
contractual relationship, but rather because of the actions of a principal or an
employer in somehow misleading the public into believing that the relationship
or the authority exists. The existence of apparent authority may be ascertained
through (1) the general manner in which the corporation holds out an officer or
agent as having the power to act or, in other words, the apparent authority to
act in general, with which it clothes him; or (2) the acquiescence in his acts of a
particular nature, with actual or constructive knowledge thereof, whether within
or beyond the scope of his ordinary powers. It requires presentation of evidence
of similar act(s) executed either in its favor or in favor of other parties.


Easily discernible from the foregoing is that apparent authority is determined only
by the acts of the principal and not by the acts of the agent. The principal is,
therefore, not responsible where the agents own conduct and statements have
created the apparent authority.

In this case, not a single act of respondent, acting through its Board of Directors, was
cited as having clothed its general manager with apparent authority to execute the
contract with it.



Agency by estoppel

Manila Remnants v. Court of Appeals, 191 SCRA 622 (1990 RANESES
DOCTRINE:
- by the principle of estoppel, Manila Remnant is deemed to have allowed its
agent to act as though it had plenary powers.
- Article 1911 of the Civil Code provides:
o "Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he had full
powers."
- Article 1911 is intended to protect the rights of innocent persons. In such a
situation, both the principal and the agent may be considered as joint feasors whose
liability is joint and solidary.

FACTS:
- MRCI owned parcels of land in Quezon City
- The parcels of land became the subject of its agreement with A.U. Valencia
and Co., Inc., (AUVCI) by virtue of which the latter was to act as the petitioner's agent
in the development and sale of the property.
- For a stipulated fee, AUVCI was to convert the lands into a subdivision,
manage the sale of the lots, execute contracts and issue official receipts to the lot
buyers.
- At the time of the agreement, the president of both MRCI and AUVCI was
Artemio U. Valencia.
- Pursuant to the above agreement, AUVCI executed two contracts to sell dated
March 3, 1970, covering Lots 1 and 2, Block 17, in favor of spouses Oscar C.
Ventanilla and Carmen Gloria Diaz for the combined contract price of P66,571.00,
payable monthly in ten years.
- After ten days and without the knowledge of the Ventanilla couple, Valencia, as
president of MRCI, resold the same parcels to Carlos Crisostomo, one of his sales
agents, without any consideration.
- Upon orders of Valencia, the monthly payments of the Ventanillas were
remitted to the MRCI as payments of Crisostomo, for which receipts were issued in his
name.
- the receipts were kept by Valencia without the knowledge of the Ventanillas
and Crisostomo. The Ventanillas continued paying their monthly installments.
- On May 30, 1973, MRCI informed AUVCI that it was terminating their
agreement because of discrepancies discovered in the latter's collections and
remittances. On June 6, 1973, Valencia was removed by the board of directors of
MRCI as its president.
- Later on, the Ventanilla spouses, having learned of the supposed sale of their
lots to Crisostomo, commenced an action for specific performance, annulment of
deeds, and damages against Manila Remnant Co., Inc., A.U. Valencia and Co., Inc.,
and Carlos Crisostomo.

TRIAL COURT:
Damages and attorney's fees in the total amount of P210,000.00 were also awarded
to the Ventanillas for which the MRCI, AUVCI, and Crisostomo were held solidarily
liable

CA: affirmed TCs decision

ISSUE: WON MRCI can be made solidarily liable with AUVCI and Crisostomo?
HELD: YES; agency by estoppel

RATIO:
- the Valencia realty firm had clearly overstepped the bounds of its authority as
Agency; February 25, 2014 16
agent and for that matter, even the law when it undertook the double sale
of the disputed lots.
- Such being the case, the principal, Manila Remnant, would have been in the
clear pursuant to Article 1897 of the Civil Code which states that "(t)he agent who acts
as such is not personally liable to that party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority without giving such party
sufficient notice of his powers.
- Bear in mind that the president then of both firms was Artemio U. Valencia, the
individual directly responsible for the sale scam. Hence, despite the fact that the
double sale was beyond the power of the agent, Manila Remnant as principal was
chargeable with the knowledge or constructive notice of that fact and not having done
anything to correct such an irregularity was deemed to have ratified the same
- More in point, we find that by the principle of estoppel, Manila Remnant is
deemed to have allowed its agent to act as though it had plenary powers.
- Article 1911 of the Civil Code provides:
o "Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he had full
powers."
- Article 1911 is intended to protect the rights of innocent persons. In such a
situation, both the principal and the agent may be considered as joint feasors whose
liability is joint and solidary.
- Authority by estoppel has arisen in the instant case because by its negligence,
the principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to
exercise powers not granted to it. That the principal might not have had actual
knowledge of the agent's misdeed is of no moment
- Manila Remnant literally gave carte blanche to its agent A.U. Valencia and Co.
in the sale and disposition of the subdivision lots. As a disclosed principal in the
contracts to sell in favor of the Ventanilla couple, there was no doubt that they were in
fact contracting with the principal.
- Manila Remnant also failed to check the records of its agent immediately after
the revocation of the agency contract despite the fact that such revocation was due to
reported anomalies in Valencia's collections.
- Altogether, as pointed out by the counsel for the Ventanillas, Manila Remnant
could and should have devised a system whereby it could monitor and require a
regular accounting from A.U. Valencia and Co., its agent. Not having done so, Manila
Remnant has made itself liable to those who have relied on its agent and the
representation that such agent was clothed with sufficient powers to act on behalf of
the principal.
- the basis for Manila Remnant's solidary liability is estoppel which, in turn, is
rooted in the principal's neglectfulness in failing to properly supervise and control the
affairs of its agent and to adopt the needed measures to prevent further
misrepresentation. As a consequence, Manila Remnant is considered estopped from
pleading the truth that it had no direct hand in the deception employed by its agent

DECISION: petition denied ; MRCI lost!





Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006) SANA

Facts:

Eternit Corporation is engaged in the manufacture of roofing materials and pipe
products, with Glanville as GM. It stands on eight parcels of land. Shares of the
company was owned by ESAC, a Belgian company. ESAC instructed Michael Adams,
a member of EC BOD to dispose of the eight parcel of land, with concerns over the
stability of the political environment. Adams engaged the services of broker Marquez.

Marquez offered the parcels of land to the Litonjuas. He declared to Litonjuas, through
letter, that he has authority to sell for 27M, negotiable. Litonjuas offered 20M. Marquez
relayed the same to Glanville, who telexed it to Delsaux in Belgium. Delaux sent
response that the Belgian-Swiss decision was $1M and P2.5M.

Litonjuas deposited the $1M with the Security Bank and Trust Company. Glanville
meet with the buyer and informed Delsaux, expressing the buyers concerns about the
incurring bank expenses as a consequences of prolonged inaction.

With the improved political environment, Marquez then received a phone call Glanville
advising that the sale would no longer proceed. Later Delsaux also sent a letter
confirming the same.

The Litonjuas insisted for damages.

Issue:

WON agency exits?

Held:

Petitioners failed to adduce in evidence any resolution of the Board of Directors of EC
empowering Marquez, Glanville or Delsaux as its agent, to sell, let alone offer for sale,
for and in its behalf, the eight parcel of land owned by EC. While Glanville was
President, and Delsaux and Adams were members of its BOD, the three acted for and
in behalf of ESAC, and not as duly authorized agents of EC. Such a board resolution
is a condition sine qua non to bind respondent EC.

For an agency of estoppel to exists, the following must be established: (1) the principal
manifested a representation of the agent's authority or knowingly allowed the agent to
assume such authority; (2) the third person, in good faith, relied upon such
representation; (3) relying upon such representation, such third person has changed
his position to his detriment. Agency by estoppel, which is similar to the doctrine of
apparent authority, requires proof of reliance upon the representations. And that, in
turn, needs proof that the representations predated the action taken in reliance.

Such proof is lacking in this case. In their communications to the petitioners, Glanville
and Delsaux positively and unequivocally declared that they were acting for and in
behalf of ESAC.

Agency; February 25, 2014 17

Filipinas Life Assurance Co. v. Pedroso, 543 SCRA 542 (2008) SUPAPO

FACTS: (Principal: Filipinas Life Assurance | Agent: Valle)
Valle, Filipinas Life Assurances agent told her client Teresita O. Pedroso, a
policyholder of a 20-year endowment life insurance of Filipinas Life, that the Filipinas
Life Escolta Office was holding a promotional investment program for policyholders.
Enticed, she invested and it was received by Valle and remitted to Filipinas Life, using
Filipinas Lifes official receipts. Pedroso inquired about the promotional investment.
She called the Escolta office and she was referred by Alcantara (administrative
assistant) to Apetrior (branch manager), who confirmed that there was such a
promotion.

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. 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 (initially,
it is at 8%).

Pedroso told Palacio, also a Filipinas Life insurance policyholder, about the
investment plan. Palacio made a total investment 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. (It was not indicated why they refused
to return the money.)

RTC: held Filipinas Life and its co-defendants Valle, Apetrior and Alcantara jointly and
solidarily liable to Pedroso.
CA: Affirmed RTCs decision; MR denied.

Filipinas Life contends that the investment scheme offered to respondents by Valle,
Apetrior and Alcantara was outside the scope of their authority as agents of Filipinas
Life such that, it cannot be held liable to the respondents.

Respondents contend that Filipinas Life authorized Valle to solicit investments from
them. In fact, Filipinas Lifes official documents and facilities were used in
consummating the transactions. These transactions, according to respondents, were
confirmed by its officers Apetrior and Alcantara. Respondents assert they exercised
all the diligence required of them in ascertaining the authority of petitioners agents;
and it is Filipinas Life that failed in its duty to ensure that its agents act within the
scope of their authority.

ISSUE: Is Filipinas Life and its co-defendants jointly and severally liable to the herein
respondents?
(For the subject matter: Is Filipinas Life estopped to deny the authority of Valle?)

HELD: YES
Filipinas Life cannot profess ignorance of Valles acts. Even if Valles representations
were beyond his authority as a debit/insurance agent, Filipinas Life thru Alcantara and
Apetrior expressly and knowingly ratified Valles acts. It cannot even be denied that
Filipinas Life benefited from the investments deposited by Valle in the account of
Filipinas Life. In our considered view, Filipinas Life had clothed Valle with apparent
authority; hence, it is now estopped to deny said authority. Innocent third persons
should not be prejudiced if the principal failed to adopt the needed measures to
prevent misrepresentation, much more so if the principal ratified his agents acts
beyond the latters authority. The act of the agent is considered that of the principal
itself. Qui per alium facit per seipsum facere videtur. He who does a thing by an
agent is considered as doing it himself.


Yun Kwan Byung v. PAGCOR, 608 SCRA 107 (2009) VELASCO

FACTS
PAGCOR launched its Foreign Highroller Marketing Program (Program). The Program
aims to invite patrons from foreign countries to play at the dollar pit of designated
PAGCOR-operated casinos under specified terms and conditions and in accordance
with industry practice.

The Korean-based ABS Corporation was one of the international groups that availed
of the Program. In a letter-agreement dated 25 April 1996 (Junket Agreement), ABS
Corporation agreed to bring in foreign players to play in Manila (Casino Filipino).

Relevant provisions state: 1) The players are to be provided with separate junket chips
distinguished from other chips being used in the casino. 2) ABS assumes
responsibility in paying the winnings of its foreign players and settle collectibles from
the losing ones. 3) PAGCOR shall be free from damages arising from the Junket
Agreement. 4) For providing gaming facilities, ABS shall pay PAGCOR 12.5% of its
gross winnings or $1.5M, whichever is higher, over a playing period of 6mos.

Petitioner, a Korean national, claims that in the course of the games, he was able to
accumulate gambling chips worth US$2.1 million. He contends that when he
presented the gambling chips for encashment with PAGCORs employees or agents,
PAGCOR refused to redeem them. Petitioner brought an action against PAGCOR
seeking the redemption of gambling chips.

Petitioners claims:
1. He won the gambling chips at the Casino Filipino.
2. Every time he would come to Manila, PAGCOR would extend to him amenities
deserving of a high roller.
3. A PAGCOR official would meet him at the airport would bring him to Casino Filipino.
4. The card dealers were all PAGCOR employees, the gambling chips, equipment and
furnitures belonged to PAGCOR, and PAGCOR enforced all the regulations dealing
with the operation of foreign exchange gambling pits.
5. He was able to redeem his gambling chips with the cashier during his first few winning
trips. But later on, the casino cashier refused to encash his gambling chips so he had
no recourse but to deposit his gambling chips at the Grand Boulevard Hotels deposit
box, every time he departed from Manila.

PAGCOR claims:
1. Petitioner, who was brought into the Philippines by ABS Corporation, is a junket player
Agency; February 25, 2014 18
who played in the dollar pit exclusively leased by ABS Corporation for its junket
players.
2. PAGCOR alleges that it provided ABS Corporation with distinct junket chips. ABS
Corporation distributed these chips to its junket players.
3. At the end of each playing period, the junket players would surrender the chips to ABS
Corporation. Only ABS Corporation would make an accounting of these chips to
PAGCORs casino treasury.
4. PAGCOR also posted a sign (in English and Korean) stating that the gaming room is
exclusively operated by ABS, and that ASB shall be accountable for the junket chips.
5. Petitioner is not a PAGCOR player because under PAGCORs gaming rules, gambling
chips cannot be brought outside the casino.

RTC DECISION
Trial court dismissed the complaint.

CA DECISION
CA affirmed the appealed decision.

ISSUE/S
1. WON PAGCOR is liable by virtue of the doctrine of implied agency, or agency by
estoppel;

2. WON CA erred in using intent of the contracting parties as the test for creation of
agency, when such is not relevant since the instant case involves liability of the
presumed principal in implied agency to a third party

HELD
The petition lacks merit.

Agency by estoppel
Petitioner claims that he is a third party proceeding against the liability of a presumed
principal and claims relief, alternatively, on the basis of implied agency or agency by
estoppel.

Article 1869 of the Civil Code states that implied agency is derived from the acts of the
principal, from his silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority. Implied agency,
being an actual agency, is a fact to be proved by deductions or inferences from other
facts.

On the other hand, apparent authority is based on estoppel and can arise from two
instances. First, the principal may knowingly permit the agent to hold himself out as
having such authority, and the principal becomes estopped to claim that the agent
does not have such authority. Second, the principal may clothe the agent with the
indicia of authority as to lead a reasonably prudent person to believe that the agent
actually has such authority. In an agency by estoppel, there is no agency at all, but the
one assuming to act as agent has apparent or ostensible, although not real, authority
to represent another.

Acts and conduct of PAGCOR negates the existence of an implied agency or an
agency by estoppel
Petitioner claims that even assuming that no actual agency existed between PAGCOR
and ABS Corporation, there is still an agency by estoppel based on the acts and
conduct of PAGCOR showing apparent authority in favor of ABS Corporation.
Petitioner states that one factor which distinguishes agency from other legal precepts
is control (basing on his claims stated in the facts).

Petitioners argument is clearly misplaced. The basis for 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, while on the part of the agent, there must
be an intention to accept the appointment and act on it. Absent such mutual intent,
there is generally no agency.

There is no implied agency in this case because PAGCOR did not hold out to the
public as the principal of ABS Corporation. PAGCORs actions did not mislead the
public into believing that an agency can be implied from the arrangement with the
junket operators, nor did it hold out ABS Corporation with any apparent authority to
represent it in any capacity. The Junket Agreement was merely a contract of lease of
facilities and services.

The players brought in by ABS Corporation were covered by a different set of rules in
acquiring and encashing chips. The players used a different kind of chip than what
was used in the regular gaming areas of PAGCOR, and that such junket players
played specifically only in the third floor area and did not mingle with the regular
patrons of PAGCOR. Furthermore, PAGCOR, in posting notices stating that the
players are playing under special rules, exercised the necessary precaution to warn
the gaming public that no agency relationship exists.

Petitioner claims that the intention of the parties cannot apply to him as he is not a
party to the contract
Disagree. There was no intent from the contracting parties to determine that an
agency by estoppel existed. An agency by estoppel, which is similar to the doctrine of
apparent authority requires proof of reliance upon the representations, and that, in
turn, needs proof that the representations predated the action taken in reliance.

There can be no apparent authority of an agent without acts or conduct on the part of
the principal and such acts or conduct of the principal must have been known and
relied upon in good faith and as a result of the exercise of reasonable prudence by a
third person as claimant, and such must have produced a change of position to its
detriment. Such proof is lacking in this case.

In the entire duration that petitioner played in Casino Filipino, he was dealing only with
ABS Corporation, and availing of the privileges extended only to players brought in by
ABS Corporation. The facts that he enjoyed special treatment upon his arrival in
Manila and special accommodations in Grand Boulevard Hotel, and that he was
playing in special gaming rooms are all indications that petitioner cannot claim good
faith that he believed he was dealing with PAGCOR. Petitioner cannot be considered
as an innocent third party and he cannot claim entitlement to equitable relief as well.

SC affirmed CA decision.
Agency; February 25, 2014 19

Other issues:

Courts will not enforce debts arising from illegal gambling
Gambling is prohibited by the laws of the Philippines. The only form of gambling
allowed by law is that which gave PAGCOR its franchise to maintain and operate
gambling casinos. The issue then turns on whether PAGCOR can validly share its
franchise with junket operators to operate gambling casinos in the country. The Junket
Agreement would be valid if under Section 3(h) of PAGCORs charter, PAGCOR
could share its gambling franchise with another entity. PAGCOR allowed ABS
Corporation to operate gaming tables in the dollar pit. The Junket Agreement is in
direct violation of PAGCORs charter and is therefore void. Since the Junket
Agreement violates PAGCORs charter, gambling between the junket player and the
junket operator under such agreement is illegal and may not be enforced by the
courts. Article 2014 of the Civil Code, which refers to illegal gambling, states that no
action can be maintained by the winner for the collection of what he has won in a
game of chance.

Petitioner asserts that PAGCOR ratified the acts of ABS Corporation
The Junket Agreement is void. A void or inexistent contract is one which has no force
and effect from the very beginning. Hence, it is as if it has never been entered into and
cannot be validated either by the passage of time or by ratification. Article 1409 of the
Civil Code provides that contracts expressly prohibited or declared void by law, such
as gambling contracts, cannot be ratified.


Article 1875 - In relation to: Obligation to Pay Agents Commission

Manotok Bros. Inc. v. CA, 221 SCRA 224 (1993) VILLAFUERTE

Doctrine: Agent, as efficient procuring cause in bringing about sale, is entitled to
agents commission.

Facts: Manotok Bros. (Petitioner) owned a parcel of land and building which were
formerly leased by City of Manila and used by Claro M. Recto High School.

By means of a letter, Manotok authorized Salvador Saligumba(respondent) to
negotiate with the City of Manila for the sale of the property for not less than 425K with
5% commission in the event that the sale is consummated.
This authority was extended for 120 days and another 120 days. Another letter signed
by the President of the Corp. authorized respondent to finalize and consummate the
sale for not less than 410K and extended the authority for another 180 days. The City
of Manila passed an ordinance appropriating for the payment of the 410K before the
expiration of the authority of the respondent.

However, the City Mayor signed it after 3 days of expiration of the authority. The sale
was consummated but respondent never received any commission. This was because
the petitioner refused to pay him as they did not recognize the respondents role as
agent in the transaction.

Respondent filed a case against the petitioner for the negotiation. On answer,
petitioner insisted that the respondent is not entitled because: (1) the sale was not
consummated within the period of his authority; and (2) the PTA president was the
one responsible for the negotiation.

RTC: ordered Manotok to pay respondent the commission fees with legal interest from
the date of filing of complaint.

CA: affirmed RTC decision.

Issue: Whether or not private respondent is entitled to the five percent (5%) agent's
commission

Held: Yes.

SC: affirmed RTC & CA decision.

1. Though the sale was consummated upon expiration of his authority, he is still
entitled to commission. In the case at bar, respondent is the efficient procuring cause
for without his efforts, the municipality would not have anything to pass and the Mayor
would not have anything to approve.

It is within the exception as in the case of Prats v. CA, petitioner had diligently taken
steps to bring back together Doronilla and the SSS. Xxx Prats efforts somehow
instrumental in bringing them together xxx although the finalization was after the
expiration of Prats extended authority. In Prats vs. CA, the agent was not even the
efficient procuring cause in bringing about the sale, unlike in the case at bar, it was still
held therein that the agent was entitled to compensation. In the case at bar, private
respondent is the efficient procuring cause for without his efforts, the municipality
would not have anything to pass and the Mayor would not have anything to approve.
From the foregoing, it follows then that private respondent herein, with more reason,
should be paid his commission.

2. When there is a close proximate and causal connection between the agents efforts
and labor and the principals sale of his property, the agent is entitled to a commission.



Medrano v. Court of Appeals, 452 SCRA 77 (2005) ATIENZA

DOCTRINE

When there is a close, proximate and causal connection between the brokers efforts
and the principals sale of his property, the broker is entitled to a commission.

FACTS

Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank, a bank owned
by the Medrano family. In 1986, Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law,
to look for a buyer of a foreclosed asset of the bank,
3
a 17-hectare mango plantation
Agency; February 25, 2014 20
priced at P2,200,000.00

Mr. Dominador Lee, a businessman from Makati City, was a client of respondent Mrs.
Pacita G. Borbon, a licensed real estate broker. Borbon relayed to her business
associates and friends that she had a ready buyer for a mango orchard. Flor then
advised her that her cousin-in-law owned a mango plantation which was up for sale.
She told Flor to confer with Medrano and to give them a written authority to negotiate
the sale of the property. Thus, on September 3, 1986, Medrano issued the Letter of
Authority which grants authority and commission of 5% of the total purchase price.

Lee eventually looked at the property on his own as there have been conflict of
schedule with Borbon. Josefina Antonio (employee of Borbon) called Lee to inquire
about the result of his ocular inspection. Lee told her that the mango trees "looked
sick" so he was bringing an agriculturist to the property. Three weeks thereafter,
Antonio called Lee again to make a follow-up of the latters visit to Ibaan. Lee informed
her that he already purchased the property and had made a down payment of
P1,000,000.00. According to Antonio, Lee asked her if they had already received their
commission. She answered "no," and Lee expressed surprise over this.

The petitioners refused to pay commissions and offered a measly sum ofP5,000.00
each. The petitioners further contended that the letter of authority signed by Medrano
was not binding or enforceable against the bank because the latter had a personality
separate and distinct from that of Medrano. They also contend that there were no
substantial efforts made by the broker and the negotiations were not even made by
them.


RTC On September 21, 1994, the trial court rendered a Decision in favor of the
respondents. The petitioners were ordered to pay, jointly and severally, the 5%
brokers commission to herein respondents

CA On May 3, 2001, the CA promulgated the assailed decision affirming the finding of
the trial court that the letter of authority was valid and binding. Applying the principle of
agency, the appellate court ruled that Bienvenido Medrano constituted the
respondents as his agents, granting them authority to represent and act on behalf of
the former in the sale of the 17-hectare mango plantation.

ISSUE

WON Borbon and Josefina Antonio are entitled to commission.

HELD

YES. A broker is generally defined as one who is engaged, for others, on a
commission, negotiating contracts relative to property with the custody of which he
has no concern; the negotiator between other parties, never acting in his own name
but in the name of those who employed him; he is strictly a middleman and for some
purposes the agent of both parties. To be entitled to commissions, the broker must be
the efficient agent or the procuring cause of the sale. Indeed, the evidence on record
shows that the respondents were instrumental in the sale of the property to Lee.
Without their intervention, no sale could have been consummated. Upon being
informed by Flor that Medrano was selling his mango orchard, Borbon lost no time in
informing Lee that they had found a property according to his specifications. When
there is a close, proximate and causal connection between the brokers efforts and the
principals sale of his property, the broker is entitled to a commission.

It has been held that a broker earns his pay merely by bringing the buyer and the
seller together, even if no sale is eventually made. The essential feature of a brokers
conventional employment is merely to procure a purchaser for a property ready, able,
and willing to buy at the price and on the terms mutually agreed upon by the owner
and the purchaser. No negotiations are necessary on the part of the Broker.


Phil. Health-care Providers (Maxicare) v. Estrada, 542 SCRA 616 (2008)
BUENAVENTURA
DOCTRINE:
FACTS: Maxicare allegedly engaged the services of Carmela Estrada who was doing
business under the name of CARA HEALTH SERVICES to promote and sell the
prepaid group practice health care delivery program called MAXICARE Plan with the
position of Independent Account Executive. Maxicare formally appointed Estrada as
its General Agent, evidenced by a letter-agreement dated February 16, 1991.

The letter agreement provided for plaintiff-appellees Estradas compensation in the
form of commission, viz.:

Commission

In consideration of the performance of your functions and duties
as specified in this letter-agreement, [Maxicare] shall pay you a
commission equivalent to 15 to 18% from individual, family, group
accounts; 2.5 to 10% on tailored fit plans; and 10% on standard
plans of commissionable amount on corporate accounts from all
membership dues collected and remitted by you to [Maxicare].

Maxicare alleged that it followed a franchising system in dealing with its agents
whereby an agent had to first secure permission from Maxicare to list a prospective
company as client. Estrada alleged that it did apply with Maxicare for the MERALCO
account and other accounts, and in fact, its franchise to solicit corporate accounts,
MERALCO account included, was renewed on February 11, 1991.

Estrada submitted proposals and made representations to the officers of MERALCO
regarding the MAXICARE Plan but when MERALCO decided to subscribe to the
MAXICARE Plan, Maxicare directly negotiated with MERALCO regarding the terms
and conditions of the agreement and left plaintiff-appellee Estrada out of the
discussions on the terms and conditions.

On November 28, 1991, MERALCO eventually subscribed to the MAXICARE Plan
and signed a Service Agreement directly with Maxicare for medical coverage of its
qualified members.

Agency; February 25, 2014 21
Then on March 24, 1992, Estrada through counsel demanded hercommission for the
MERALCO account and 9 other accounts but it was denied by MAXICARE because
she was not given a go signal to intervene in the negotiations for the terms and
conditions.

RTC: Maxicare liable for breach of contract and ordered it to pay Estrada actual
damages in the amount equivalent to 10% of P20,169,335 representing her
commission for Meralco

CA: Affirms in toto

ISSUE: W/N Estrada should be paid his commission for the Maxicare Plans
subscribed by Meralco

HELD: YES. petition is DENIED

Both courts were one in the conclusion that Maxicare successfully
landed the Meralco account for the sale of healthcare plans only by
virtue of Estradas involvement and participation in the negotiations
Maxicares contention that Estrada may only claim commissions from
membership dues which she has collected and remitted to Maxicare
as expressly provided for in the letter-agreement does not convince
us. It is readily apparent that Maxicare is attempting to evade payment
of the commission which rightfully belongs to Estrada as the broker
who brought the parties together.
The only reason Estrada was not able to participate in the collection
and remittance of premium dues to Maxicare was because she was
prevented from doing so by the acts of Maxicare, its officers, and
employees.
Agent vs. Broker:
agent
receives a commission upon the successful
conclusion of a sale
broker
earns his pay merely by bringing the buyer and
the seller together, even if no sale is eventually
made
"procuring cause" in describing a brokers activity
cause originating a series of events which, without break in
their continuity, result in the accomplishment
efforts must have been the foundation on which the
negotiations resulting in a sale began
Even a cursory reading of the Complaint and all the pleadings filed
thereafter before the RTC, CA, and this Court, readily show that
Estrada does not concede, at any point, that her negotiations with
Meralco failed -Counsel's contention is wrong
Estrada is entitled to 10% of the total amount of premiums paid by
Meralco to Maxicare as of May 1996 (including succeeding renewals)


Article 1915 Obligation Two (or Several) Principals with Common Agent is
Solidary

De Castro v. Court of Appeals, 384 SCRA 607 (2002) CAMERINO

DOCTRINE: Art. 1915 provides that if 2 or more persons have appointed an agent for
a common transaction or undertaking, they shall be solidarily liable to the agent for the
consequences of agency.

The solidarity arises from the common interest of the principals, and not from the act
of constituting the agency. By virtue of this solidarity, the agent can recover from any
principal the whole compensation and indemnity owing to him by the others.

FACTS: Petitioners Constante and Corazon De Castro (with 2 other co-owners not
made parties to the suit) were co- owners of 4 parcels of land in EDSA corner New
York Cubao, which they undertook to sell through their private respondent Artigo (for a
5% commission of the total selling price as agents fee) under an agreement:

- This is to state that Mr. Artigo is authorized as our real estate broker in connection
with the sale or our property in EDSA. Asking price: 23 million with 5% commission as
agents fee C. de Castro owner and representing co-owners;

- This authority is on a first come first serve basis.

2 parcels of the respective property were sold to Times Transit at the price of
P7,050,000 through the brokerage of Artigo; from which according to Artigo, the total
5% commission should amount to P352,500.00. Artigo was only paid (in advance)
P48,893.76 by De Castro, thus sued for the balance of P353,500P. The De Castros
contend that Artigo had already been given his proportionate share and that he was
only one among other agents also entitled to a proportionate share.

TC DECISION: Dismissed; ruled in favor of private respondent Artigo.
CA DECISION:The Court of Appeals affirmed in toto the decision of the TC.

ISSUES:

1. W/N dismissal is proper for not impleading the other co-owners
2. W/N Artigos claim has been extinguished by full payment, waiver or abandonment

SC DECISION/HELD:

1. No. Constante De Castro signed as owner and as representative of other owners.
The de Castros admit that other co-owners are solidarily liable under the above
contract of agency. Art. 1915 provides that if 2 or more persons have appointed an
Agency; February 25, 2014 22
agent for a common transaction or undertaking, they shall be solidarily liable to the
agent for the consequences of agency.

2. No. it was proved that the other agents the de Castros were referring to were
agents of Times Transit. The fact that other agents intervened cannot vary the terms
of the contract of agency granting Artigo 5% commission. He is not estopped from
claiming the balance as the mere receipt of partial payment is not equivalent to the
required acceptance of performance as would extinguish the whole obligation under
article 1235 (when obligee accepts performance, knowing its incompleteness or
irregularity, and without protest, the obligation is deemed complied with).

WHEREFORE, the petition is denied for lack of merit. The Decision of the Court of
Appeals dated May 4, 1994 in CA-G.R. CV No. 37996 is AFFIRMED in toto.



Article 1918 Principal is not liable to agent for expenses incurred (Art. 1918)

Hahn v. Court of Appeals, 266 SCRA 537 (1997) DORIA
(This is more like a CivPro case than an AP&T -___-)

DOCTRINE:
The fact that an individual invested his own money to put up service centers and
showrooms, under the control and regulation of another entity, does not necessarily
prove that he is not an agent of the latter.

FACTS:
Alfred Hahn is a Filipino citizen doing business under the name of "Hahn-Manila."
Private respondent BMW is a nonresident foreign corporation existing under the laws
of Germany.

On March 1967, a "Deed of Assignment with Special Power of Attorney" was executed
by petitioner and private respondent, constituting Hahn as the exclusive dealer of
BMW in the Philippines and agreed to transfer the BMW trademark and device in favor
of Hahn with the Philippines Patent Office.

Per the agreement, the parties "continued business relations as has been usual in the
past without a formal contract." But on February 1993, in a meeting with a BMW
representative and the president of Columbia Motors Corporation (CMC), Hahn was
informed that BMW was arranging to grant the exclusive dealership of BMW to CMC.
Days after the meeting, petitioner received a letter from BMW which expressed
dissatisfaction with various aspects of petitioner's business, which includes, decline in
sales, deteriorating services, and inadequate showroom and warehouse facilities, and
an 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, if this was
not acceptable to petitioner, BMW would have no alternative but to terminate
petitioner's exclusive dealership effective June 30, 1993.

Petitioner protested, claiming that the termination of his exclusive dealership would be
a breach of the Deed of Assignment. Hahn insisted that as long as the assignment of
its trademark and device subsisted, he remained BMW's exclusive dealer in the
Philippines because the assignment was made in consideration of the exclusive
dealership.

Because of Hahn's insistence on the former business relation, BMW withdrew its offer
of a "standard importer contract" and terminated the exclusive dealer relationship
effective June 30, 1993. At a conference of BMW Regional Importers held on April
1993 in Singapore, Hahn was surprised to find Alvarez among those invited from the
Asian region. 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. BMW moved to dismiss the case, contending that the trial court
did not acquire jurisdiction over it through the service of summons on the Department
of Trade and Industry, because it was a foreign corporation and it was not doing
business in the Philippines.

Hahn opposed the motion. He argued that BMW was doing business in the Philippines
through him as its agent, as shown by the fact that BMW invoices and order forms
were used to document his transactions; that he gave warranties as exclusive BMW
dealer; that BMW officials periodically inspected standards of service rendered by him;
and that he was described in service booklets and international publications of BMW
as a "BMW Importer" or "BMW Trading Company" in the Philippines.

TC:
Deferred resolution of the motion to dismiss until after trial on the merits for the reason
that the grounds advanced by BMW in its motion did not seem to be indubitable.

Without seeking reconsideration of the aforementioned order, BMW filed a petition for
certiorari with the Court of Appeals.

CA:
Enjoined the trial court from hearing petitioner's complaint. Rendered judgment finding
the trial court guilty of grave abuse of discretion in deferring resolution of the motion to
dismiss.

Then, after stating that any ruling which the RTC might make on the motion to dismiss
would anyway be elevated to it on appeal, the Court of Appeals itself resolved the
motion. It ruled that BMW was not doing business in the country and, therefore,
jurisdiction over it could not be acquired through service of summons on the DTI
pursuant to Rule 14, 14. 'The court upheld private respondent's contention that Hahn
acted in his own name and for his own account and independently of BMW, based on
Alfred Hahn's allegations that he had invested his own money and resources in
establishing BMW's goodwill in the Philippines and on BMW's claim that Hahn sold
products other than those of BMW. It held that petitioner was a mere indentor or
broker and not an agent through whom private respondent BMW transacted business
in the Philippines. Consequently, the Court of Appeals dismissed petitioner's
complaint against BMW.
Agency; February 25, 2014 23

ISSUE:
W/N Alfred Hahn is the agent or distributor in the Philippines of private respondent
BMW?
(If he is, BMW may be considered doing business in the Philippines and the trial
court acquired jurisdiction over it by virtue of the service of summons on the
Department of Trade and Industry. Otherwise, if Hahn is not the agent of BMW
but an independent dealer, BMW, a foreign corporation, is not considered doing
business in the Philippines within the meaning of the Foreign Investments Act of
1991 and the IRR, and the trial court did not acquire jurisdiction over it.)

SC:
YES, Hahn is the agent of BMW in the Philippines. Reversed CA decision and
remanded the case to the RTC.

HELD:
There is nothing to support the appellate court's finding that Hahn solicited orders
alone and for his own account and without "interference from, let alone direction of,
BMW." To the contrary, Hahn claimed he took orders for BMW cars and transmitted
them to BMW. Upon receipt of the orders, BMW fixed the downpayment and pricing
charges, notified Hahn of the scheduled production month for the orders, and
reconfirmed the orders by signing and returning to Hahn the acceptance sheets.
Payment was 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. These allegations were
substantially admitted by BMW in its petition for certiorari before the Court of Appeals.

Contrary to the appellate court's conclusion, this arrangement shows an agency. 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.

As to the service centers and showrooms which he said he had put up at his own
expense, Hahn said that he had to follow BMW specifications as exclusive dealer of
BMW in the Philippines. According to Hahn, BMW periodically inspected the service
centers to see to it that BMW standards were maintained. Indeed, it would seem from
BMW's letter to Hahn that it was for Hahn's alleged failure to maintain BMW standards
that BMW was terminating Hahn's dealership.

The fact that Hahn invested his own money to put up these service centers and
showrooms does not necessarily prove that he is not an agent of BMW. For as already
noted, there are facts in the record which suggest that BMW exercised control over
Hahn's activities as a dealer and made regular inspections of Hahn's premises to
enforce compliance with BMW standards and specifications.

In effect, BMW was
holding Hahn accountable to it under the 1967 Agreement.

This case fits into the mould of Communications Materials, Inc. v. Court of Appeals, in
which the foreign corporation entered into a "Representative Agreement" and a
"Licensing Agreement" with a domestic corporation, by virtue of which the latter was
appointed "exclusive representative" in the Philippines for a stipulated commission.
Pursuant to these contracts, the domestic corporation sold products exported by the
foreign corporation and put up a service center for the products sold locally. This Court
held that these acts constituted doing business in the Philippines. The arrangement
showed that the foreign corporation's purpose was to penetrate the Philippine market
and establish its presence in the Philippines.

Indeed these are not the only factual issues raised, which should have indicated to the
Court of Appeals the necessity of affirming the trial court's order deferring resolution of
BMW's motion to dismiss. It is not true then that the question whether BMW is doing
business could have been resolved simply by considering the parties' pleadings.
There are genuine issues of facts which can only be determined on the basis of
evidence duly presented. BMW cannot short circuit the process on the plea that to
compel it to go to trial would be to deny its right not to submit to the jurisdiction of the
trial court which precisely it denies. Rule 16, 3 authorizes courts to defer the
resolution of a motion to dismiss until after the trial if the ground on which the motion is
based does not appear to be indubitable. Here the record of the case bristles with
factual issues and it is not at all clear whether some allegations correspond to the
proof.

Far from committing an abuse of discretion, the trial court properly deferred resolution
of the motion to dismiss and thus avoided prematurely deciding a question which
requires a factual basis, with the same result if it had denied the motion and
conditionally assumed jurisdiction. It is the Court of Appeals which, by ruling that BMW
is not doing business on the basis merely of uncertain allegations in the pleadings,
disposed of the whole case with finality and thereby deprived petitioner of his right to
be heard on his cause of action.


Dominion Insurance Corp. v. Court of Appeals, 376 SCRA 239 (2002)
FRANCISCO
Doctrine:
Art. 1918. Principal is NOT liable to agent for expenses incurred
a. When agent acted in contravention of the principals
instructions unless principal wishes to avail the benefits derived from the
contract. (related in the case)
b. When expenses is due to the fault of the agent.
c. When agent incurred expenses with knowledge that an
unfavorable result would ensue, if the principal was not aware thereof.
d. When it was stipulated that the expense would be borne by the
agent, or that the latter was allowed only a certain sum.

Dominion Insurance Corporation (DIC) - Principal and the petitioner
Guevarra - Agent/Manager of DIC and the respondent

Facts:
Agency; February 25, 2014 24
Guevarra instituted a civil case for the recovery of sum of money
(P156,473.90) against its principal (DIC).
He claimed that the sum of money he is recovering is what he advanced in
his capacity as manager of DIC to satisfy claims filed by DICs clients.
DIC denied any liability to Guevarra and asserted a counterclaim for
premiums allegedly unremitted by Guevarra.
The pre-trial conference never pushed through.
The case was called again for pre-trial and DIC and its counsel
failed to show up.
The trial court declared DIC in default and denied any
reconsideration.

RTC: ruled DIC to pay Guevarra (P156,473.90) as the total amount advanced by him
in the payment of DICs clients.

CA: affirmed RTCs decision

Issues:
1. Whether or not DIC is liable to Guevarras expenses incurred in relation to
Art 1918. NO
2. Whether or not Guevarra is entitled to reimbursement to amount in relation
to law on obligations and contracts. YES

Held:
1. The payment of claims is not an act of administration. The settlement of
claims is not included among the acts enumerated in the Special Power of
Attorney, neither is it of a character similar to the acts enumerated therein. A
special power of attorney would have been required before Guevarra could
settle the insurance claims of the insured.
The instruction of DIC as the principal of Guevarra could not be
any clearer. Guevarra was authorized to pay the claim of the insured, but
the payment shall come from the revolving fund or collection in his
possession.
having deviated from the instructions of the principal (DIC), the
expenses that Guevarra incurred in the settlement of the claims of the
insured may not be reimbursed from DIC. This conclusion is in accord
with ARTICLE 1918 of Civil Code.
2. However, while the law on agency prohibits Guevarra from obtaining
reimbursement, his right to recovery may still be justified under the general
law on Obligations and Contracts, particularly, Art. 1236.
In this case, when the risk insured against occurred, Dominions
liability as insurer arose. This obligation was extinguished when Guevarra
paid such claims. Thus, to the extent that the obligation of Dominion had
been extinguished, Guevarra may demand reimbursement from his
principal. To rule otherwise would result in unjust enrichment of
Dominion.

SC: Dominion is ordered to pay Guevarra P112,6762.11, representing the total
amount advanced by the latter in the payment of the claims of the formers clients,
minus the amount in the revolving fund and the outstanding balance and remittance.


Chapter 4
Modes of Extinguishment of Agency

Article 1923 The Appointment of a New Agent for the Same Business or
Transaction

Elbina v. Ceniza, G.R. No. 154019 August 10, 2006 GATCHALIAN

DOCTRINE: There is no question that a party may have two or more lawyers working
in collaboration in a given litigation. However, a substitution should not be presumed
from the mere filing of a notice of appearance of a new lawyer. The fact that a second
attorney enters his appearance for the same party does not necessarily raise the
presumption that the authority of the first attorney has been withdrawn.

FACTS:

This case originated from a complaint for Quieting of Title, Declaration of Nullity of All
Documents Affecting Lots 948 and 1469 and All Tax Declaration issued by Virtue
Thereof where the trial court ruled against the petitioner.

Petitioners counsel of record, Atty. Ervin Estandarte, filed a motion for
reconsideration. A certain Atty. Mario Cugtas filed a Formal Notice of Appearance as
Collaborating Counsel for Defendants with Motion for Additional Period to File Written
Arguments in Support of the Motion for Reconsideration. The trial court granted Atty.
Cugtas motion.

The trial court thereafter denied the motion for reconsideration. A copy of the order
was received by Atty. Estandarteon July 23, 1997. Atty. Cugtas received his copy on
August 7, 1997. On the same day, Atty. Cugtas filed a notice of appeal but the appeal
was dismissed by the trial court for having been filed late.

Petitioner filed a Petition for Relief from Denial of Appeal. He claimed that the order
denying the motion for reconsideration was received by the Bernaldez and Estandarte
Law Office on July 23, 1997. Atty. Estandarte, however, did not act on the order
anymore since his legal services had already been terminated. The new counsel, Atty.
Cugtas, received a copy of the order only on August 7, 1997 and he filed a notice of
appeal on the same day.

TC: Dismissed petition for relief. MR denied

CA: Petitioner then sought to set aside the TCs order via special civil action for
certiorari. CA dismissed it

ISSUE: WON Atty. Cugtas replaced Atty. Estandarte and is now the only counsel of
the petitioner

HELD: NO.

Agency; February 25, 2014 25
Petitioner questions the trial courts reckoning of the timeliness of the appeal from the
receipt on July 23, 1997 by Atty. Estandarte of the copy of the denial of the motion for
reconsideration. The fact that Atty. Estandarte no longer appeared in the subsequent
hearings of the case was allegedly an indication that his legal services had already
been terminated. Atty. Estandarte consequently did not act on the trial courts order
since a new counsel, Atty. Cugtas, had by then already entered his appearance. And
considering that Atty. Cugtas received his copy of the order only on August 7, 1997,
the notice of appeal filed on the same day was allegedly within the 15-day
reglementary period to appeal.

The records do not show that a substitution of counsel ever took place. Petitioner
failed to present any evidence that he retained Atty.Cugtas as his new and only
counsel before the order of denial was sent to counsel. Atty. Cugtas pleading
denominated as Formal Notice of Appearance as Collaborating Counsel for
Defendants with Motion for Additional Period to File Written Arguments in Support of
the Motion for Reconsideration showed that he entered his appearance merely as
collaborating counsel.

In accordance with our ruling in Landbank v. Pamintuan Development Corporation,
there is no question that a party may have two or more lawyers working in
collaboration in a given litigation. However, a substitution should not be presumed
from the mere filing of a notice of appearance of a new lawyer. The fact that a second
attorney enters his appearance for the same party does not necessarily raise the
presumption that the authority of the first attorney has been withdrawn.

In this case, even if, from some point onwards, only Atty. Cugtas appeared in the
hearings of petitioners case, it did not necessarily mean that Atty. Estandarte had
withdrawn from representing petitioner.

Moreover, Atty. Estandartes legal services had not yet been terminated when he
received the notice of denial of the motion for reconsideration. No formal notice of
withdrawal as counsel had yet been filed with the court.

We have held time and again that there is an absolute need to observe legal
formalities before a counsel of record may be considered relieved of his
responsibilities. The withdrawal (or dismissal) of counsel must be made in a formal
petition filed in the case.
[20]
The representation of the first counsel of record is
presumed to continue until a formal notice to the contrary is filed with the court.
[21]


One more point. Atty. Estandarte filed a formal withdrawal of appearance on
September 4, 1997, long after he received a copy of the denial of the motion for
reconsideration.
[22]
Why did he bother to file a formal withdrawal as counsel then if he
believed he had already ceased representing petitioner? Clearly, Atty. Estandarte was
still the principal counsel of record of petitioner at the time the motion for
reconsideration was denied. The notice given to him was consequently valid and the
timeliness of the appeal must be reckoned from that date.


Article 1924 The Principal Directly Manages the Business Entrusted to the
Agent by Dealing Directly with Third Persons

CMS Logging v. Court of Appeals, 211 SCRA 374 (1992) GAUDIEL

Doctrine:

The Principal Directly Manages the Business Entrusted to the Agent
by Dealing Directly with Third Persons

The principal may revoke a contract of agency at will, and such
revocation may be express, or implied, and may be availed of even if the period
fixed in the contract of agency as not yet expired. As the principal has this
absolute right to revoke the agency, the agent can not object thereto; neither
may he claim damages arising from such revocation, unless it is shown that
such was done in order to evade the payment of agent's commission.


Facts:

Petitioner CMS is a forest concessionaire engaged in the logging business,
while private respondent DRACOR is engaged in the business of exporting and selling
logs and lumber. On August 28,1957, CMS and DRACOR entered into a contract of
agency 1 whereby the former appointed the latter as its exclusive export and sales
agent for all logs that the former may produce, for a period of five (5) years. About six
months prior to the expiration of the agreement, while on a trip to Tokyo, Japan,
CMS's president and general manager and legal counsel, discovered that DRACOR
had used Shinko Trading Co., Ltd. (Shinko for brevity) as agent, representative or
liaison officer in selling CMS's logs in Japan for which Shinko earned a commission of
U.S. $1.00 per 1,000 board feet from the buyer of the logs. Under this arrangement,
Shinko was able to collect a total of U.S. $77,264.67.CMS claimed that this
commission paid to Shinko was in violation of the agreement and that it (CMS) is
entitled to this amount as part of the proceeds of the sale of the logs. CMS contended
that since DRACOR had been paid the 5% commission under the agreement, it is no
longer entitled to the additional commission paid to Shinko as this tantamount to
DRACOR receiving double compensation for the services it rendered. After this
discovery, CMS sold and shipped logs valued at U.S.$739,321.13 or P2,883,351.90,
4 directly to several firms in Japan without the aid or intervention of DRACOR. CMS
sued DRACOR for the commission received by Shinko and for moral and exemplary
damages, while DRACOR counterclaimed for its commission, amounting to
P144,167.59,from the sales made by CMS of logs to Japanese firms. In its reply, CMS
averred as a defense to the counterclaim that DRACOR had retained the sum of
P101,167.59 as part of its commission for the sales made by CMS. Thus, as its
counterclaim to DRACOR's counterclaim, CMS demanded DRACOR return the
amount it unlawfully retained. DRACOR later filed an amended counterclaim, alleging
that the balance of its commission on the sales made by CMS was P42,630.82, thus
impliedly admitting that it retained the amount alleged by CMS.

TC:
The RTC dismissed the complaint. Evidence was presented to show that
Shinko received the commission of U.S. $77,264.67 arising from the sale of CMS's
logs in Japan, though the trial court stated that "Shinko was able to collect the total
Agency; February 25, 2014 26
amount of$77,264.67 US Dollars.

CA:
CA Affirmed RTC decision.

SC:

SC Affirmed. However, Court finds merit in CMS's contention that the
appellate court erred in holding that DRACOR was entitled to its commission from the
sales made by CMS to Japanese firms.

The principal may revoke a contract of agency at will, and such revocation
may be express, or implied, and may be availed of even if the period fixed in the
contract of agency as not yet expired. As the principal has this absolute right to revoke
the agency, the agent can not object thereto; neither may he claim damages arising
from such revocation, unless it is shown that such was done in order to evade the
payment of agent's commission.

Since the contract of agency was revoked by CMS when it sold its logs to
Japanese firms without the intervention of DRACOR, the latter is no longer entitled to
its commission from the proceeds of such sale and is not entitled to retain whatever
moneys it may have received as its commission for said transactions. Neither would
DRACOR be entitled to collect damages from CMS, since damages are generally not
awarded to the agent for the revocation of the agency, and the case at bar is not one
falling under the exception mentioned, which is to evade the payment of the agents
commission.




Article 1926 A General Power of Attorney is Revoked by a Special Power of
Attorney Granted to Another Agent, as Regards the Special Matter Involved in
the Latter (Art. 1926)

DyBuncio and Co. v. Ong Guan Can, 60 Phil 696 (1934) LESAVA

Doctrine: The making and accepting of a new power of attorney, whether it enlarges or
decreases the power of the agent under a prior power of attorney, must be held to
supplant and revoke the latter when the two are inconsistent. If the new appointment
with limited powers does not revoke the general power of attorney, the execution of
the second power of attorney would be a mere futile gesture.lawphi1.net

Facts: This is a suit over a rice mill and camarin situated at Dao, Province of Capiz.
Plaintiff claims property belongs to its judgment debtor, Ong Guan Can
Defendants Juan Tong and Pua Giok Eng claim themselves as owner and lessee
of the owner by virtue of a deed dated July 31, 1931, by Ong Guan Can, Jr.
CFI: held that the deed was invalid and that the property was subject to the execution
which has been levied on said properties by the judgment creditor of the owner.
Defendants brought appeal insisting deed of 31st July 1931 is valid.
The first recital of the deed is that:
Ong Guan Can, Jr., as agent of Ong Guan Can, the proprietor of the
commercial firm of Ong Guan Can & Sons, sells the rice-mill and
camarin for P13,000 and gives as his authority the power of attorney
dated the 23d of May, 1928, a copy of which is attached to the deed
and recorded with the deed in the office of the register of deeds of
Capiz.
The receipt of the money acknowledged in the deed was to the agent,
and the deed was signed by the agent in his own name and without
any words indicating that he was signing it for the principal.
The POA is not a general POA, but a limited one and and does not give the
express power to alienate the properties in question.
Appellants claim that this defect is cured by a general POA given to the same
agent in 1920.

Issue: WON the defect of the original limited POA has been cured by subsequent
general POA?

Held: SC affirms judgment of CFI. The title of Ong Guan Can has not been divested
by the deed of July 31, 1931. Thus, his properties are subject to attachment and
execution.

The making and accepting of a new power of attorney, whether it enlarges or
decreases the power of the agent under a prior power of attorney, must be held to
supplant and revoke the latter when the two are inconsistent. If the new appointment
with limited powers does not revoke the general power of attorney, the execution of
the second power of attorney would be a mere futile gesture.


Valenzuela v. Court of Appeals, 191 SCRA 1 (1990) LIM

Facts:
Petitioner Arturo P. Valenzuela (Valenzuela for short) is a General Agent of private
respondent Philippine American General Insurance Company, Inc. (Philamgen for
short) since 1965. As such, he was authorized to solicit and sell in behalf of Philamgen
all kinds of non-life insurance, and in consideration of services rendered was entitled
to receive the full agent's commission of 32.5% from Philamgen under the scheduled
commission rates. From 1973 to 1975, Valenzuela solicited marine insurance from
one of his clients, the Delta Motors, Inc. (Division of Electronics Airconditioning and
Refrigeration) in the amount of P4.4 Million from which he was entitled to a
commission of 32% . However, Valenzuela did not receive his full commission which
amounted to P1.6 Million from the P4.4 Million insurance coverage of the Delta
Motors. During the period 1976 to 1978, premium payments amounting to
P1,946,886.00 were paid directly to Philamgen and Valenzuela's commission to which
he is entitled amounted to P632,737.00.

In 1977, Philamgen started to become interested in and expressed its intent to share
in the commission due Valenzuela on a fifty-fifty basis. Valenzuela refused.

On February 8, 1978 Philamgen and its President, Bienvenido M. Aragon insisted on
the sharing of the commission with Valenzuela. This was followed by another sharing
Agency; February 25, 2014 27
proposal dated June 1, 1978. On June 16,1978, Valenzuela firmly reiterated his
objection to the proposals of respondents stating that: "It is with great reluctance that I
have to decline upon request to signify my conformity to your alternative proposal
regarding the payment of the commission due me. However, I have no choice for to do
otherwise would be violative of the Agency Agreement executed between our
goodselves."

Because of the refusal of Valenzuela, Philamgen and its officers, namely: Bienvenido
Aragon, Carlos Catolico and Robert E. Parnell took drastic action against Valenzuela.
They: (a) reversed the commission due him by not crediting in his account the
commission earned from the Delta Motors, Inc. insurance ; (b) placed agency
transactions on a cash and carry basis; (c) threatened the cancellation of policies
issued by his agency ; and (d) started to leak out news that Valenzuela has a
substantial account with Philamgen. All of these acts resulted in the decline of his
business as insurance agent. Then on December 27, 1978, Philamgen terminated the
General Agency Agreement of Valenzuela.

RTC ruling:
These acts of harrassment done by defendants on plaintiff Arturo P. Valenzuela to
force him to agree to the sharing of his Delta commission, which culminated in the
termination of plaintiff Arturo P. Valenzuela as one of defendant PHILAMGEN's
General Agent, do not justify said termination of the General Agency Agreement
entered into by defendant PHILAMGEN and plaintiff Arturo P. Valenzuela.

That since defendants are not justified in the termination of plaintiff Arturo P.
Valenzuela as one of their General Agents, defendants shall be liable for the resulting
damage and loss of business of plaintiff Arturo P. Valenzuela.

Judgment is hereby rendered in favor of plaintiff Arturo P. Valenzuela as the General
Agent of PHILAMGEN

CA Ruling: Modifies RTC Decision. Valenzuela to pay Philamgen.

Issue: W/N PHILAMGEN validly terminated the agency of Valenzuela

Held:
After a painstaking review of the entire records of the case and the findings of facts of
both the court a quo and respondent appellate court, we are constrained to affirm the
trial court's findings and rule for the petitioners.

We agree with the court a quo that the principal cause of the termination of Valenzuela
as General Agent of Philamgen arose from his refusal to share his Delta commission.
The records sustain the conclusions of the trial court on the apparent bad faith of the
private respondents in terminating the General Agency Agreement of petitioners.

As early as September 30,1977, Philamgen told the petitioners of its desire to share
the Delta Commission with them. It stated that should Delta back out from the
agreement, the petitioners would be charged interests through a reduced commission
after full payment by Delta.

On January 23, 1978 Philamgen proposed reducing the petitioners' commissions by
50% thus giving them an agent's commission of 16.25%. On February 8, 1978,
Philamgen insisted on the reduction scheme followed on June 1, 1978 by still another
insistence on reducing commissions and proposing two alternative schemes for
reduction. There were other pressures. Demands to settle accounts, to confer and
thresh out differences regarding the petitioners' income and the threat to terminate the
agency followed. The petitioners were told that the Delta commissions would not be
credited to their account. They were informed that the Valenzuela agency would be
placed on a cash and carry basis thus removing the 60-day credit for premiums due.
Existing policies were threatened to be cancelled . The Valenzuela business was
threatened with diversion to other agencies. Rumors were also spread about alleged
accounts of the Valenzuela agency. The petitioners consistently opposed the
pressures to hand over the agency or half of their commissions and for a treatment of
the Delta account distinct from other accounts. The pressures and demands, however,
continued until the agency agreement itself was finally terminated.

It is also evident from the records that the agency involving petitioner and private
respondent is one "coupled with an interest," and, therefore, should not be freely
revocable at the unilateral will of the latter.

In the insurance business in the Philippines, the most difficult and frustrating period is
the solicitation and persuasion of the prospective clients to buy insurance policies.
Normally, agents would encounter much embarrassment, difficulties, and oftentimes
frustrations in the solicitation and procurement of the insurance policies. To sell
policies, an agent exerts great effort, patience, perseverance, ingenuity, tact,
imagination, time and money. In the case of Valenzuela, he was able to build up an
Agency from scratch in 1965 to a highly productive enterprise with gross billings of
about Two Million Five Hundred Thousand Pesos (P2,500,000.00) premiums per
annum. The records sustain the finding that the private respondent started to covet a
share of the insurance business that Valenzuela had built up, developed and nurtured
to profitability through over thirteen (13) years of patient work and perseverance.
When Valenzuela refused to share his commission in the Delta account, the boom
suddenly fell on him.

The private respondents by the simple expedient of terminating the General Agency
Agreement appropriated the entire insurance business of Valenzuela. With the
termination of the General Agency Agreement, Valenzuela would no longer be entitled
to commission on the renewal of insurance policies of clients sourced from his agency.
Worse, despite the termination of the agency, Philamgen continued to hold Valenzuela
jointly and severally liable with the insured for unpaid premiums. Under these
circumstances, it is clear that Valenzuela had an interest in the continuation of the
agency when it was unceremoniously terminated not only because of the commissions
he should continue to receive from the insurance business he has solicited and
procured but also for the fact that by the very acts of the respondents, he was made
liable to Philamgen in the event the insured fail to pay the premiums due. They are
estopped by their own positive averments and claims for damages. Therefore, the
respondents cannot state that the agency relationship between Valenzuela and
Philamgen is not coupled with interest. "There may be cases in which an agent has
been induced to assume a responsibility or incur a liability, in reliance upon the
continuance of the authority under such circumstances that, if the authority be
Agency; February 25, 2014 28
withdrawn, the agent will be exposed to personal loss or liability".

Furthermore, there is an exception to the principle that an agency is revocable at will
and that is when the agency has been given not only for the interest of the principal
but for the interest of third persons or for the mutual interest of the principal and the
agent. In these cases, it is evident that the agency ceases to be freely revocable by
the sole will of the principal. The following citations are apropos:

The principal may not defeat the agent's right to indemnification by a termination of the
contract of agency (Erskine v. Chevrolet Motors Co. 185 NC 479, 117 SE 706, 32 ALR
196).

Where the principal terminates or repudiates the agent's employment in violation of
the contract of employment and without cause ... the agent is entitled to receive either
the amount of net losses caused and gains prevented by the breach, or the
reasonable value of the services rendered. Thus, the agent is entitled to prospective
profits which he would have made except for such wrongful termination provided that
such profits are not conjectural, or speculative but are capable of determination upon
some fairly reliable basis. And a principal's revocation of the agency agreement made
to avoid payment of compensation for a result which he has actually accomplished
(Hildendorf v. Hague, 293 NW 2d 272; Newhall v. Journal Printing Co., 105 Minn
44,117 NW 228; Gaylen Machinery Corp. v. Pitman-Moore Co. [C.A. 2 NY] 273 F 2d
340)

If a principal violates a contractual or quasi-contractual duty which he owes his agent,
the agent may as a rule bring an appropriate action for the breach of that duty. The
agent may in a proper case maintain an action at law for compensation or damages ...
A wrongfully discharged agent has a right of action for damages and in such action the
measure and element of damages are controlled generally by the rules governing any
other action for the employer's breach of an employment contract. (Riggs v. Lindsay,
11 US 500, 3L Ed 419; Tiffin Glass Co. v. Stoehr, 54 Ohio 157, 43 NE 2798)

At any rate, the question of whether or not the agency agreement is coupled with
interest is helpful to the petitioners' cause but is not the primary and compelling
reason. For the pivotal factor rendering Philamgen and the other private respondents
liable in damages is that the termination by them of the General Agency Agreement
was tainted with bad faith. Hence, if a principal acts in bad faith and with abuse of right
in terminating the agency, then he is liable in damages. This is in accordance with the
precepts in Human Relations enshrined in our Civil Code that "every person must in
the exercise of his rights and in the performance of his duties act with justice, give
every one his due, and observe honesty and good faith: (Art. 19, Civil Code), and
every person who, contrary to law, wilfully or negligently causes damages to another,
shall indemnify the latter for the same (Art. 20, id). "Any person who wilfully causes
loss or injury to another in a manner contrary to morals, good customs and public
policy shall compensate the latter for the damages" (Art. 21, id.).


Article 1927 The Principal may not Revoke an Agency at Will, if:

1. A bilateral contract depends upon it

Republic v. Evangelista, 466 SCRA 544 (2005) MAGSUMBOL

FACTS: Private respondent Legaspi is the owner of a land located in Bigte,
Norzagaray, Bulacan. Petitioner Calimlim, representing the Republic of the
Philippines, and as then head of the Intelligence Service of the Armed Forces of the
Philippines and the Presidential Security Group, entered into a Memorandum of
Agreement (MOA) with one Ciriaco Reyes. The MOA granted Reyes a permit to hunt
for treasure in a land in Bigte, Norzagaray, Bulacan. Petitioner Diciano signed the
MOA as a witness. It was further alleged that thereafter, Reyes, together with
petitioners, started, digging, tunneling and blasting works on the said land of Legaspi.
The complaint also alleged that petitioner Calimlim assigned about 80 military
personnel to guard the area and encamp thereon to intimidate Legaspi and other
occupants of the area from going near the subject land.

Legaspi executed a special power of attorney (SPA) appointing his nephew, private
respondent Gutierrez, as his attorney-in-fact. Gutierrez was given the power to deal
with the treasure hunting activities on Legaspis land and to file charges against those
who may enter it without the latters authority. Legaspi agreed to give Gutierrez 40% of
the treasure that may be found in the land.

Gutierrez filed a case for damages and injunction against petitioners for illegally
entering Legaspis land. He hired the legal services of Atty. Homobono Adaza. Their
contract provided that as legal fees, Atty. Adaza shall be entitled to 30% of Legaspis
share in whatever treasure may be found in the land. In addition, Gutierrez agreed to
pay Atty. Adaza P5,000.00 as appearance fee per court hearing and defray all
expenses for the cost of the litigation.



Petitioners claim that the special power of attorney of Gutierrez to represent Legaspi
has already been revoked by the latter. Private respondent Gutierrez, however,
contends that the unilateral revocation is invalid as his agency is coupled with interest.

ISSUE: W/N the contract of agency between Legaspi and Guttierez has been
effectively revoked by Legaspi?

HELD: Art. 1868 of the Civil Code provides that by the contract of agency, an agent
binds himself to render some service or do something in representation or on behalf of
another, known as the principal, with the consent or authority of the latter.

A contract of agency is generally revocable as it is a personal contract of
representation based on trust and confidence reposed by the principal on his agent.
As the power of the agent to act depends on the will and license of the principal he
represents, the power of the agent ceases when the will or permission is withdrawn by
the principal. Thus, generally, the agency may be revoked by the principal at will.

However, an exception to the revocability of a contract of agency is when it is coupled
with interest, i.e., if a bilateral contract depends upon the agency.The reason for its
irrevocability is because the agency becomes part of another obligation or agreement.
It is not solely the rights of the principal but also that of the agent and third persons
which are affected. Hence, the law provides that in such cases, the agency cannot be
Agency; February 25, 2014 29
revoked at the sole will of the principal.

In the case at bar, we agree with the finding of the trial and appellate courts that the
agency granted by Legaspi to Gutierrez is coupled with interest as a bilateral contract
depends on it. It is clear from the records that Gutierrez was given by Legaspi, inter
alia, the power to manage the treasure hunting activities in the subject land; to file any
case against anyone who enters the land without authority from Legaspi; to engage
the services of lawyers to carry out the agency; and, to dig for any treasure within the
land and enter into agreements relative thereto. It was likewise agreed upon that
Gutierrez shall be entitled to 40% of whatever treasure may be found in the land.
Pursuant to this authority and to protect Legaspis land from the alleged illegal entry of
petitioners, agent Gutierrez hired the services of Atty. Adaza to prosecute the case for
damages and injunction against petitioners. As payment for legal services, Gutierrez
agreed to assign to Atty. Adaza 30% of Legaspis share in whatever treasure may be
recovered in the subject land. It is clear that the treasure that may be found in the
land is the subject matter of the agency; that under the SPA, Gutierrez can enter into
contract for the legal services of Atty. Adaza; and, thus Gutierrez and Atty. Adaza
have an interest in the subject matter of the agency, i.e., in the treasures that may be
found in the land. This bilateral contract depends on the agency and thus renders it
as one coupled with interest, irrevocable at the sole will of the principal Legaspi. When
an agency is constituted as a clause in a bilateral contract, that is, when the agency is
inserted in another agreement, the agency ceases to be revocable at the pleasure of
the principal as the agency shall now follow the condition of the bilateral
agreement.Consequently, the Deed of Revocation executed by Legaspi has no effect.
The authority of Gutierrez to file and continue with the prosecution of the case at bar is
unaffected.



2. It is the means of fulfilling an obligation already contracted

National Sugar Trading v. Philippine National Bank, 396 SCRA 528 (2003).
MARAMOT

Facts:

In 1974, then President Ferdinand E. Marcos issued a presidential decree
constituting the Philippine Sugar Commission (PHILSUCOM), as the sole buying and
selling agent of sugar on the quedan permit level. In November of the same year,
another presidential decree was issued, authorizing the Philippine Exchange
Company, Inc. (PHILEXCHANGE), a wholly owned subsidiary of Philippine National
Bank (PNB) to serve as the marketing agent of PHILSUCOM. Pursuant to this decree,
PHILEXCHANGEs purchases of sugar shall be financed by PNB and the proceeds of
sugar trading operations of PHILEXCHANGE shall be used to pay its liabilities with
PNB.

In 1975, a presidential decree was issued constituting PHILEXCHANGE and/or
PNB as the exclusive sugar trading agencies of the government for buying sugar from
planters or millers and selling or exporting them. PNB then extended loans to
PHILEXCHANGE for the latters sugar trading operations. At first, PHILEXCHANGE
religiously paid its obligations to PNB by depositing the proceeds of the sale of sugar
with the bank. Subsequently, however, with the fall of sugar prices in the world
market, PHILEXCHANGE defaulted in the payments of its loans amounting to
P206,070,172.57.

In 1977, the National Sugar Trading Corporation (NASUTRA) replaced
PHILEXCHANGE as the marketing agent of PHILSUCOM. Accordingly,
PHILEXCHANGE sold and turned over all sugar quedans to NASUTRA. However, no
physical inventory of the sugar covered by the quedans was made. Neither
NASUTRA nor PHILSUCOM was required to immediately pay PHILEXCHANGE.
Notwithstanding this concession, NASUTRA and PHILSUCOM still failed to pay the
sugar stocks covered by quedans to PHILEXCHANGE As a consequence,
PHILEXCHANGE was not able to pay its obligations to PNB.

To finance its sugar trading operations, NASUTRA applied for and was granted a
revolving credit line by PNB in 1981. Every time NASUTRA availed of the credit line,
its Executive Vice-President, Jose Unson, executed a promissory note in favor of
PNB, appointing the latter as its attorney-in-fact with full power and authority for
NASUTRA to negotiate, sell and transfer any moneys, securities and things of value
which it may hold, by public or private sale and apply the proceeds thereof to the
payment of this note.

In order to stabilize sugar liquidation prices at a minimum, PHILSUCOM issued a
circular considering all sugar produced during crop year 1984-1985 as domestic
sugar. Furthermore, PHILSUCOMs Chairman of Executive Committee, Armando C.
Gustillo proposed a liquidation scheme of the sugar quedans assigned to PNB by the
sugar planters:

Upon notice from NASUTRA, PNB shall credit the individual producer and millers
loan accounts for their sugar proceeds and shall treat the same as loans of
NASUTRA. Such loans shall be charged interest at the prevailing rates and it shall
commence five (5) days after receipt by PNB of quedans from NASUTRA

PNB, for its part, approved the PHILSUCOM/NASUTRA proposal for the payment of
the sugar quedans assigned to it. However, despite such liquidation scheme,
NASUTRA/PHILSUCOM still failed to remit the interest payments to PNB. As a result,
NASUTRA was dissolved. Its records of its sugar trading operations, however, were
destroyed during the Edsa Revolution in 1986.

In 1986, then President Corazon C. Aquino issued an order creating the Sugar
Regulatory Administration (SRA) and abolishing PHILSUCOM. All the assets and
records of PHILSUCOM, including its beneficial interests over the assets of NASUTRA
were transferred to SRA. NASUTRA still defaulted in the payment of its loans.

When PNB received remittances from foreign banks, it then applied the same to the
unpaid accounts of NASUTRA/PHILSUCOM. NASUTRA requested PNB to furnish it
with the necessary documents and/or explanation concerning the disposition/
application, accounting and restitution of the remittances in question. Dissatisfied, and
believing that PNB failed to provide them with said documents, NASUTRA and SRA
filed a petition for arbitration with the DOJ in 1991. NASUTRA and SRA argued that
Agency; February 25, 2014 30
no compensation involving the subject remittances can take effect questioning the
relationship between NASUTRA and PNB and the latters failure to prove the
existence of the revolving credit line.

The DOJ held that the application of the remittances to offset the accounts of
NASUTRA with PNB was legal and valid, despite the fact that no credit-debtor
relationship existed between them. This decision was affirmed by the Office of the
President and the Court of Appeals.

Issue:
Whether or not NASUTRA may validly revoke its agency relationship with PNB.

Held:
No.
The SC held that the relationship between NASUTRA/SRA and PNB when the former
constituted the latter as its attorney-in-fact is not a simple agency. NASUTRA/SRA
has assigned and practically surrendered its rights in favor of PNB for a substantial
consideration. To reiterate, NASUTRA/SRA executed promissory notes in favor of
PNB every time it availed of the credit line. The agency established between the
parties is one coupled with interest which cannot be revoked or cancelled at will by
any of the parties.


Bacaling v. Muya, 380 SCRA 714 (2002) MORA

Petitioner Nelita M. Bacaling and her spouse Ramon Bacaling were the owners of
three (3) parcels of land, with a total area of 9.9631 hectares, located in Barangay
Cubay, Jaro, Iloilo City, and designated as Lot No. 2103-A (Psd-24069), Lot No. 2103-
B-12 (Psd 26685) and Lot No. 2295. These lots were duly covered by Transfer
Certificates of Title Nos.

In 1955 the landholding was subdivided into one hundred ten (110) sub-lots covered
by TCT Nos. T-10664 to T-10773, inclusive of the Registry of Deeds of the City of
Iloilo. The landholding was processed and approved as "residential" or "subdivision"
by the National Urban Planning Commission (NUPC). The Bureau of Lands approved
the corresponding subdivision plan for purposes of developing the said property into a
low-cost residential community which the spouses referred to as theBacaling-Moreno
Subdivision.

A real estate loan of P600,000.00 was granted to the spouses Nelita and Ramon
Bacaling by the Government Service Insurance System (GSIS) for the development of
the subdivision. To secure the repayment of the loan, the Bacalings executed in favor
of the GSIS a real estate mortgage over their parcels of land including the one
hundred ten (110) sub-lots. Out of the approved loan of Six Hundred Thousand Pesos
(P600,000.00), only Two Hundred Forty Thousand Pesos (P240,000.00) was released
to them. The Bacalings failed to pay the amortizations on the loan and consequently
the mortgage constituted on the one hundred ten (110) sub-lots was foreclosed by the
GSIS. After a court case that reached all the way to this Court,

Nelita Bacaling (by
then a widow) in 1989 was eventually able to restore to herself ownership of the one
hundred ten (110) sub-lots.

According to the findings of the Office of the President, in 1972 and thereafter,
respondents Felomino Muya, Crispin Amor, Wilfredo Jereza, Rodolfo Lazarte and
Nemesio Tonocante clandestinely entered and occupied the entire one hundred ten
(110) sub-lots. and grabbed exclusively for themselves the said 9.9631 hectare
landholding. Apparently, respondents took advantage of the problematic peace and
order situation at the onset of martial law and the foreclosure of the lots by GSIS.

They
sowed the lots as if the same were their own, and altered the roads, drainage,
boundaries and monuments established thereon.

Respondents, on the other hand, claim that in 1964 they were legally instituted by
Bacalings administrator/overseer as tenant-tillers of the subject parcels of land on
sharing basis with two and a half (2) hectares each for respondents Muya, Amor,
Tonocante and Lazarte, and one and a half (1) hectares for respondent Jereza. In
1974, their relationship with the landowner was changed to one of leasehold. They
religiously delivered their rental payments to Bacaling as agricultural lessor. In 1980,
they secured certificates of land transfer in their names for the one hundred ten (110)
sub-lots. They have made various payments to the Land Bank of the Philippines as
amortizing owners-cultivators of their respective tillage.

In 1977, however, the City Council of Iloilo enacted Zoning Ordinance No. 212
declaring the one hundred ten (110) sub-lots as "residential" and "non-agricultural,"
which was consistent with the conversion effected in 1955 by the NUPC and the
Bureau of Lands. In 1978, Nelita Bacaling was able to register the subject property as
the Bacaling-Moreno Subdivision with the National Housing Authority and to obtain
therefrom a license to sell the subject one hundred ten (110) sub-lots comprising the
said subdivision to consummate the original and abiding design to develop a low-cost
residential community.
In August 21, 1990, petitioner Jose Juan Tong, together with Vicente Juan and
Victoria Siady, bought from Nelita Bacaling the subject one hundred ten (110) sub-lots
for One Million Seven Hundred Thousand Pesos (P1,700,000.00).

The said sale was
effected after Bacaling has repurchased the subject property from the Government
Service Insurance System. To secure performance of the contract of absolute sale
and facilitate the transfer of title of the lots to Jose Juan Tong, Bacaling appointed him
in 1992 as her attorney-in-fact, under an irrevocable special power of attorney with the
following mandate-
1. To file, defend and prosecute any case/cases involving lots nos. 1 to 110 covered
by TCT Nos. T-10664 to T-10773 of the Register of Deeds of the City of Iloilo;
2. To assume full control, prosecute, terminate and enter into an amicable settlement
and compromise agreement of all cases now pending before the DARAB, Region VI,
Iloilo City, which involved portion of Lots 1 to 110, covered by TCT Nos. T-10664 to T-
10773 of the Register of Deeds of Iloilo City, which were purchased by Jose Juan
Tong, Vicente Juan Tong and Victoria Siady;
3. To hire a lawyer/counsel which he may deem fit and necessary to effect and attain
the foregoing acts and deeds; handle and prosecute the aforesaid cases;
4. To negotiate, cause and effect a settlement of occupation and tenants on the
aforesaid lots;
5. To cause and effect the transfer of the aforesaid lots in the name of the VENDEES;
6. To execute and deliver document/s or instrument of whatever nature necessary to
accomplish the foregoing acts and deeds.
Agency; February 25, 2014 31
It is significant to note that ten (10) years after the perfection and execution of the
sale, or on April 26, 2000, Bacaling filed a complaint to nullify the contract of sale. The
suit was, however, dismissed with prejudice and the dismissal has long become final
and executory.

Following the sale of the one hundred ten (110) sub-lots and using the irrevocable
special power of attorney executed in his favor, petitioner Tong (together with
Bacaling) filed a petition for cancellation of the certificates of land transfer against
respondents and a certain Jaime Ruel with the Department of Agrarian Reform (DAR)
Region VI Office in Iloilo City. The DAR, however, dismissed the petition on the
ground that there had been no legitimate conversion of the classification of the 110
sub-lots from agricultural to residential prior to October 21, 1972 when Operation Land
Transfer under P.D. No. 72 took effect. Bacaling and Tong appealed to the DAR
Central Office but their appeal was similarly rejected. The motion for reconsideration
failed to overturn the ruling of the Central Office Order.

Bacaling and Tong appealed the adverse DAR Orders to the Office of the President
which reversed them in toto.The subject landholdings declared exempt from coverage
of the CARL.

Respondents elevated the OP Decision to the Court of Appeals. Before the petition
was resolved, or on December 2, 1999, Nelita Bacaling manifested to the appellate
court that she was revoking the irrevocable power of attorney in favor of Jose Juan
Tong and that she was admitting the status of respondents as her tenants of the one
hundred ten (110) sub-lots which allegedly were agricultural in character. The
manifestation was however characterized by an obvious streak of ambivalence when
her prayer therein urged the Court of Appeals to decide the case, curiously, on the
basis of the clear intent of Private Respondent and in accordance with the perception
of this Honorable Court. Court of Appeals reversed the OP Decision and validated the
certificates of land transfers in favor of respondents without however promulgating a
ruling on petitioner Tong's supposedly ensuing lack of material interest in the
controversy as a result of the manifestation. The appellate court refused to recognize
the 1955 NUPC and Bureau of Lands classification of the subject lots as residential
subdivision. Tong moved for reconsideration of the CA Decision which Bacaling did
not oppose despite her manifestation. CA denied the motion for reconsideration.

ISSUE:
Does petitioner Tong have the requisite interest to litigate this petition for
review on certiorari?

HELD:
The Court hold that petitioner Jose Juan Tong possesses adequate and legitimate
interest to file the instant petition. Under our rules of procedure, interest means
material interest, that is, an interest in issue and to be affected by the judgment,
[37]
while a real party in interest is the party who would be benefited or injured by the
judgment or the party entitled to the avails of the suit.
[38]
There should be no doubt that
as transferee of the one hundred ten (110) sub-lots through a contract of sale and as
the attorney-in-fact of Nelita Bacaling, former owner of the subject lots, under an
irrevocable special power of attorney, petitioner Tong stands to be benefited or injured
by the judgment in the instant case as well as the orders and decisions in the
proceedings a quo. The deed of sale categorically states that petitioner Tong and his
co-sellers have fully paid for the subject parcels of land. The said payment has been
duly received by Bacaling. Hence, it stands to reason that he has adequate and
material interest to pursue the present petition to finality.

Respondents put too much weight on the motion to dismiss/withdraw filed by Nelita
Bacaling. Under the facts obtaining in this case, the motion should be treated
cautiously, and more properly, even skeptically. It is a matter of law that when a party
adopts a certain theory in the court below, he will not be permitted to change his
theory on appeal, for to permit him to do so would not only be unfair to the other party
but it would also be offensive to the basic rules of fair play, justice and due process.
Bacaling's motion to dismiss the instant petition comes at the heels of her admission
that she had immensely benefited from selling the said one hundred ten (110) sub-lots
to petitioner Tong and of the dismissal with prejudice of the civil case which she had
earlier filed to nullify the sale.
[40]
It appears that the motion to dismiss is a crude and
belated attempt long after the dismissal of the civil case to divest Tong of his
indubitable right of ownership over the one hundred ten (110) sub-lots through the
pretext of revoking the irrevocable special power of attorney which Bacaling had
executed in his favor hoping that in the process that her act would cause the assailed
orders of the DAR to become final and executory.
The records also bear out the fact that Bacaling's design to dispossess petitioner Tong
of material interest in the subject matter of the instant petition appears to be subtly
coordinated with respondents' legal maneuvers when it began as a side pleading (a
mere Manifestation) in the proceedings before the Court of Appeals (CA-G.R. SP No.
54413 and CA-G.R. SP No. 54414) but which was never pursued to its ultimate
conclusion until it again surfaced before this Court long after respondents' voluminous
comment to the instant petition had been filed. Under these circumstances, we
certainly cannot place our trust upon such an unsolicited motion having dubious roots,
character and purpose.

Substantively, we rule that Bacaling cannot revoke at her whim and pleasure the
irrevocable special power of attorney which she had duly executed in favor of
petitioner Jose Juan Tong and duly acknowledged before a notary public. The
agency, to stress, is one coupled with interest which is explicitly irrevocable since the
deed of agency was prepared and signed and/or accepted by petitioner Tong and
Bacaling with a view to completing the performance of the contract of sale of the one
hundred ten (110) sub-lots. It is for this reason that the mandate of the agency
constituted Tong as the real party in interest to remove all clouds on the title of
Bacaling and that, after all these cases are resolved, to use the irrevocable special
power of attorney to ultimately cause and effect the transfer of the aforesaid lots in
the name of the vendees [Tong with two (2) other buyers] and execute and deliver
document/s or instrument of whatever nature necessary to accomplish the foregoing
acts and deeds.

The fiduciary relationship inherent in ordinary contracts of agency is
replaced by material consideration which in the type of agency herein established bars
the removal or dismissal of petitioner Tong as Bacalings attorney-in-fact on the
ground of alleged loss of trust and confidence.

While Bacaling alleges fraud in the performance of the contract of agency to justify its
revocation, it is significant to note that allegations are not proof, and that proof
requires the intervention of the courts where both petitioners Tong and Bacaling are
Agency; February 25, 2014 32
heard. Stated otherwise, Bacaling cannot vest in herself just like in ordinary contracts
the unilateral authority of determining the existence and gravity of grounds to justify
the rescission of the irrevocable special power of attorney. In Sevilla v. Court of
Appeals

we thus held-

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 xxx [Petitioner's] interest, obviously, is not
limited to the commissions she earned as a result of her business transactions, but
one that extends to the very subject matter of the power of management delegated to
her. It is an agency that, as we said, cannot be revoked at the pleasure of the
principal. Accordingly, the revocation complained of should entitle the petitioner x x x
to damages.

The requirement of a judicial process all the more assumes significance in light of the
dismissal with prejudice, hence, res judicata, of Bacaling's complaint to annul the
contract of sale which in turn gave rise to the irrevocable special power of attorney. It
is clear that prima facie there are more than sufficient reasons to deny the revocation
of the said special power of attorney which is coupled with interest. Inasmuch as no
judgment has set aside the agency relationship between Bacaling and Tong, we rule
that petitioner Tong maintains material interest to prosecute the instant petition with or
without the desired cooperation of Bacaling.

Respondents Felomino Muya, Crispin Amor, Wilfredo Jereza, Rodolfo Lazarte and
Nemesio Tonocante together with their assigns and successors in interest are ordered
to vacate and surrender peacefully the possession of the one hundred ten (110) sub-
lots, covered by TCT Nos. T-10664 to T-10773-Iloilo City, to petitioner Jose Juan Tong
within thirty (30) days from notice of this Decision.



3. If a partner is appointed manager of a partnership in the contract of
partnership and his removal from the management is unjustifiable

Coleongco v. Claparols, 10 SCRA 577, 581-582 (1964) RANESES

DOCTRINE:
- It is not open to serious doubt that the irrevocability of the power of attorney
may not be used to shield the perpetration of acts in bad faith, breach of confidence,
or betrayal of trust, by the agent for that would amount to holding that a power coupled
with an interest authorizes the agent to commit frauds against the principal.
- powers of a partner, appointed as manager, in the articles of co-partnership are
irrevocable without just or lawful cause; and an agent with power coupled with an
interest can not stand on better ground than such a partner in so far as irrevocability of
the power is concerned.


FACTS:
- Since 1951, defendant-appellee, Eduardo L. Claparols, operated a factory for
the manufacture of nails in Talisay, Occidental Negros, under the style of "Claparols
Steel & Nail Plant"
- The financing was handled by Import Control Commission and Central Bank
- The marketing of the nails was handled by the "ABCD Commercial" of Bacolod,
which was owned by a Chinaman named Kho To.
- Losses compelled Claparols in 1953 to look for someone to finance his imports
of nail wires. At first, Kho To agreed to do the financing, but on April 25, 1953, the
Chinaman introduced his compadre, appellant Vicente Coleongco, to the appellee,
recommending said appellant to be the financier in the stead of Kho To.
- Claparols agreed, and on April 25 of that year a contract (Exhibit B) was
perfected between them whereby Coleongco undertook to finance and put up the
funds required for the importation of the nail wire, which Claparols bound himself to
convert into nails at his plant.
- It was agreed that Coleongco would have the exclusive distribution of the
product, and the "absolute care in the marketing of these nails and the promotion of
sales all over the Philippines", except the Davao Agency
- Coleongco would "share the control of all the cash" from sales or deposited in
banks; that he would have a representative in the management; that all contracts and
transactions should be jointly approved by both parties; that proper books would be
kept and annual accounts rendered; and that profits and losses would be shared "on a
50-50 basis". The contract was renewed from one year to year until 1958, and
Coleongco's share subsequently increased by 5% of the net profit of the factory
- Two days after the execution of the basic agreement, Exhibit "B", on April 27,
1953, Claparols executed in favor of Coleongco, at the latter's behest a special power
of attorney (Exhibit C) to open and negotiate letters of credit, to sign contracts, bills of
lading, invoices, and papers covering transactions; to represent appellee and the nail
factory; and to accept payments and cash advances from dealers and distributors.
- Thereafter, Coleongco also became the assistant manager of the factory, and
took over its business transactions, while Claparols devoted most of his time to the
nail manufacture processes
- Around mid-November of 1956, appellee Claparols was disagreeably surprised
by service of an alias writ of execution to enforce a judgment obtained against him by
the Philippine National Bank
- Apparently, Coleongco went behind Claparols back and wrote to the said bank
with the ff:
o In connection with the verbal offer for the acquisition by me of the whole
interest of Mr. Eduardo L. Claparols in the Claparols Steel & Nail Plant and the
Claparols Hollow Blocks Factory
o In my humble personal opinion I presume that Mr. Eduardo L. Claparols is
not serious in meeting his obligations with your bank, otherwise he had not taken
these machines and equipments a sign of bad faith since the factory is making a
satisfactory profit of my administration
- Claparols was able to lift the levy against his properties and revoked the power
of attorney in lieu of Coleongcos act of disloyalty.
- Coleongco protested and argued that that the power of attorney (Exhibit "C")
was made to protect his interest under the financing agreement (Exhibit "B") and was
one coupled with an interest that the appellee Claparols had no legal power to revoke.
- Colenogco further posited that he is entitled to a share in the profits of the
business and moral damages
Trial Court held in favour of Claparols
Agency; February 25, 2014 33

ISSUE: WON Claparols can revoke the agency contract?

HELD: YES!

RATIO:
- financing agreement itself already contained clauses for the protection of
appellant's interest, and did not call for the execution of any power of attorney in favor
of Coleongco
- a power of attorney can be made irrevocable by contract only in the sense that
the principal may not recall it at his pleasure; but coupled with interest or not, the
authority certainly can be revoked for a just cause, such as when the attorney-in-fact
betrays the interest of the principal, as happened in this case
- It is not open to serious doubt that the irrevocability of the power of attorney
may not be used to shield the perpetration of acts in bad faith, breach of confidence,
or betrayal of trust, by the agent for that would amount to holding that a power coupled
with an interest authorizes the agent to commit frauds against the principal.
- Our new Civil Code, in Article 1172, expressly provides the contrary in
prescribing that responsibility arising from fraud is demandable in all obligations, and
that any waiver of action for future fraud is void. It is also on this principle that the Civil
Code, in its Article 1800, declares that the powers of a partner, appointed as manager,
in the articles of co-partnership are irrevocable without just or lawful cause; and an
agent with power coupled with an interest can not stand on better ground than such a
partner in so far as irrevocability of the power is concerned.

DECISION: petition denied. Coleongco lost.



Philex Mining Corp. v. Commissioner of Internal Revenue, 551 SCRA 428 (2008).
SANA

Facts:

Philex Mining and Baguio Gold entered into a Power of Attorney. The important parts
of said document stated that: (1) within 3 years BG shall make available to Philex up
to P11M for use in the Sto. Nino Mine; (2) Whenever Philex deems necessary and
convenient, the may transfer their own funds or property to the project provided that, it
shall be known as the Manager's Account, it does not exceed 11M, they shall not be
thereafter withdrawn, and the account shall not accrue interest; and (3) Compensation
of Philex shall be 50% of the net profit from the project.

Philex made advances, but because of the continued losses suffered by the project,
they withdrew as managers. The parties executed 2 compromises for the payment of
BG's indebtedness to Philex. Philex deducted from its gross income the amount owed
as loss on settlement of receivable from BG.

The BIR disallowed the amount as deduction for bad dent and assessed petitioner a
deficiency income tax of P62, 811,161. 89. Philex asserts that the bad debt deduction
represented advances made by petitioner which, pursuant to the management
contract, formed part of Baguio Gold's pecuniary obligation to petitioner.

BIR 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 consideration that, under the
management contract, Philex was to be paid 50% of the project's net profit. Court of
Tax Appeal affirmed.

Issue:

WON the Power of Attorney is a contract of agency?

Held:

An examination of the Power of Attorney reveals that a partnership or joint venture
was indeed intended by the parties. Under a contract of partnership, two or more
persons bind themselves to contribute money, property, or industry to a common fund,
with the intention of dividing the profits among themselves. While a corporation like
petitioner, cannot generally enter into a contract of partnership unless authorized by
law or its charter, it has been held that it may enter into a join venture which is akin to
a particular partnership.

Petitioner asserts that the withdrawal of funds clause is an indication of an agency
coupled with an interest. 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 in the contract 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.



Article 1921 When It Affects Dealing with Specified Third Parties

Rallos v. Yangco, 20 Phil 269 (1911) SUPAPO
DOCTRINE: The general rule is that, when the relationship of principal and agent is
established, and the principal gives notice of the agency and holds out the agent as
his authorized representative, upon the termination of the agency it is the duty of the
principal to give due and timely notice thereof, otherwise, he will be held liable to third
parties acting in good faith and properly relying upon such agency. (This is not found
in the case)

FACTS: (Principal: Yangco | Agent: Collantes)
Yangco opened his steamship office, a shipping and commission department for
buying and selling leaf tobacco and other native products. He wrote an invitation to
Rallos. As stated, Yangco introduce Mr. Florentino Collantes as his agent, upon whom
he have conferred public power of attorney, to perform in Yangcos name and on his
behalf all acts necessary for carrying out Yangcos plans. Mr. Collantes will sign by
power of attorney.
Agency; February 25, 2014 34

Accepting this invitation, the plaintiffs proceeded to do a considerable business with
the defendant through the said Collantes, as his factor, sending to him as agent for the
defendant a good deal of produce to be sold on commission. Later, and in the month
of February, 1909, the plaintiffs sent to the said Collantes, as agent for the defendant,
218 bundles of tobacco in the leaf to be sold on commission, as had been other
produce previously. The said Collantes received said tobacco and sold it for the sum
of P1,744. The charges for such sale were P206.96. leaving in the hands of said
Collantes the sum of P1,537.08 belonging to the plaintiffs. This sum was, apparently,
converted to his own use by said agent.

It appears, however, that prior to the sending of said tobacco the defendant had
severed his relations with Collantes and that the latter was no longer acting as his
factor. This fact was not known to the plaintiffs; and it is conceded in the case that no
notice of any kind was given by the defendant to the plaintiffs of the termination of the
relations between the defendant and his agent. The defendant refused to pay the said
sum upon demand of the plaintiffs, placing such refusal upon the ground that at the
time the said tobacco was received and sold by Collantes he was acting personally
and not as agent of the defendant.

RTC and CA: not mentioned

ISSUE: Whether Yangco is liable to Rallos although the contract of agency has been
terminated

HELD: YES. (Please see the doctrine)
We are of the opinion that the defendant is liable. Having advertised the fact that
Collantes was his agent and having given them a special invitation to deal with such
agent, it was the duty of the defendant on the termination of the relationship of
principal and agent to give due and timely notice thereof to the plaintiffs. Failing to do
so, he is responsible to them for whatever goods may have been in good faith and
without negligence sent to the agent without knowledge, actual or constructive, of the
termination of such relationship.


Lustan v. CA, 266 SCRA 663 (1997) VILLAFUERTE

Doctrine: Absent a valid revocation duly furnished to the mortgagee, Special Powers
of Attorney continue to have force and effect as against third persons who had no
knowledge of such lack of authority.

Facts: Petitioner Adoracion Lustan is the registered owner of a parcel of land in
Calinog, Iloilo. Petitioner executed a Special Power of Attorney in favor of Parangan to
secure an agricultural loan from private respondent Philippine National Bank (PNB)
with the aforesaid lot as collateral.

A second Special Power of Attorney was executed by petitioner, by virtue of which,
Parangan was able to secure four (4) additional loans. The last three loans were
without the knowledge of herein petitioner and all the proceeds therefrom were used
by Parangan for his own benefit. These encumbrances were duly annotated on the
certificate of title. Petitioner signed a Deed of Pacto de Retro Sale in favor of
Parangan which was superseded by the Deed of Definite Sale which petitioner signed
upon Parangan's representation that the same merely evidences the loans extended
by him unto the former.

For fear that her property might be prejudiced by the continued borrowing of
Parangan, petitioner demanded the return of her certificate of title. Instead of
complying with the request, Parangan asserted his rights over the property which
allegedly had become his by virtue of the aforementioned Deed of Definite Sale.
Under said document, petitioner conveyed the subject property and all the
improvements thereon unto Parangan absolutely for and in consideration of the sum
of P75,000.00.

Petitioner filed an action for cancellation of liens, quieting of title, recovery of
possession and damages against Parangan and PNB in the Regional Trial Court of
Iloilo City.

RTC:
1. Ordered cancellation by the Register of Deeds of the Province of Iloilo, of the
unauthorized loans, the liens and encumbrances appearing in the Transfer Certificate
of Titles.
2. Declared the Deed of Pacto de Retro Sale and the Deed of Definite Sale, both
documents executed by Adoracion Lustan in favor of Nicolas Parangan, as null and
void, declaring the same to be Deeds of Equitable Mortgage;
3. Ordered defendant Nicolas Parangan to pay all the loans he secured from
defendant PNB using thereto as security the lot of plaintiff and defendant PNB to
return lot to plaintiff;
4. Ordered defendant Nicolas Parangan to return possession of the land in question to
plaintiff upon payment of the sum of P75,000.00 by plaintiff to defendant Parangan.

CA: reversed the trial court's decision. Hence this petition

Issue: Whether or not petitioner's property is liable to PNB for the loans contracted by
Parangan by virtue of the special power of attorney.

Held: Yes.

Third persons who are not parties to a loan may secure the latter by pledging or
mortgaging their own property. So long as valid consent was given, the fact that the
loans were solely for the benefit of Parangan would not invalidate the mortgage with
respect to petitioner's property. In consenting thereto, even granting that petitioner
may not be assuming personal liability for the debt, her property shall nevertheless
secure and respond for the performance of the principal obligation. It is admitted that
petitioner is the owner of the parcel of land mortgaged to PNB on five (5) occasions by
virtue of the Special Powers of Attorney executed by petitioner in favor of Parangan.
Petitioner argues that the last three mortgages were void for lack of authority. She
totally failed to consider that said Special Powers of Attorney are a continuing one and
absent a valid revocation duly furnished to the mortgagee, the same continues to have
force and effect as against third persons who had no knowledge of such lack of
authority. Article 1921 of the Civil Code provides:
Agency; February 25, 2014 35

Art. 1921. If the agency has been entrusted for the purpose of contracting with
specified persons, its revocation shall not prejudice the latter if they were not given
notice thereof.

The Special Power of Attorney executed by petitioner in favor of Parangan duly
authorized the latter to represent and act on behalf of the former. Having done so,
petitioner clothed Parangan with authority to deal with PNB on her behalf and in the
absence of any proof that the bank had knowledge that the last three loans were
without the express authority of petitioner, it cannot be prejudiced thereby. As far as
third persons are concerned, an act is deemed to have been performed within the
scope of the agent's authority if such is within the terms of the power of attorney as
written even if the agent has in fact exceeded the limits of his authority according to
the understanding between the principal and the agent. The Special Power of
Attorney particularly provides that the same is good not only for the principal loan but
also for subsequent commercial, industrial, agricultural loan or credit accommodation
that the attorney-in-fact may obtain and until the power of attorney is revoked in a
public instrument and a copy of which is furnished to PNB. Even when the agent has
exceeded his authority, the principal is solidarily liable with the agent if the former
allowed the latter to act as though he had full powers (Article 1911, Civil Code). The
mortgage directly and immediately subjects the property upon which it is imposed. The
property of third persons which has been expressly mortgaged to guarantee an
obligation to which the said persons are foreign, is directly and jointly liable for the
fulfillment thereof; it is therefore subject to execution and sale for the purpose of
paying the amount of the debt for which it is liable. However, petitioner has an
unquestionable right to demand proportional indemnification from Parangan with
respect to the sum.

WHEREFORE, premises considered, the judgment of the lower court is hereby
REINSTATED with the following MODIFICATIONS:
1. DECLARING THE DEED OF DEFINITE SALE AS AN EQUITABLE MORTGAGE;
2. ORDERING PRIVATE RESPONDENT NICOLAS PARANGAN TO RETURN THE
POSSESSION OF THE SUBJECT LAND UNTO PETITIONER UPON THE LATTER'S
PAYMENT OF THE SUM OF P75,000.00 WITHIN NINETY (90) DAYS FROM
RECEIPT OF THIS DECISION;
3. DECLARING THE MORTGAGES IN FAVOR OF PNB AS VALID AND
SUBSISTING AND MAY THEREFORE BE SUBJECTED TO EXECUTION SALE.
4. ORDERING PRIVATE RESPONDENT PARANGAN TO PAY PETITIONER THE
AMOUNT OF P15,000.00 BY WAY OF ATTORNEY'S FEES AND TO PAY THE
COSTS OF THE SUIT.



Article 1929 Obligation of Agent to Continue to Act Even After Withdrawing
From Agency

Death of the Principal



Rallos v. Felix Go Chan & Sons Realty Corp., 81 SCRA 251 (1978) ATIENZA

Doctrine
The two requisites of Article 1931 (1) want of knowledge of the agent of the death of
the principal and (2) Corporation is a buyer in good faith (Must not know of the death)
must concur and the absence of one will render the act of the agent invalid and
unenforceable

Facts

Concepcion and Gerundia both surnamed Rallos were sisters and registered co-
owners of a parcel of land known as Lot No. 5983

On April 21, 1954, the sisters executed a special power of attorney in favor of their
brother, Simeon Rallos, authorizing him to sell for and in their behalf lot 5983. On
March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold
the undivided shares of his sisters Concepcion and Gerundia in lot 5983 to Felix Go
Chan & Sons Realty Corporation for the sum of P10,686.90.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of
Concepcion Rallos filed a complaint to the Court of First Instance of Cebu, praying (1)
that the sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be
declared unenforceable for being sold after the death of Rallos.

RTC

Declared the deed of sale null and void insofar as the one-half share of Concepcion
Rallos in the property in question

CA

The appellate tribunal resolved the appeal on November 20, 1964 in favor of the
appellant corporation sustaining the sale in question based on the ground of the
Company acting in good faith.

ISSUE

WON the sale was enforceable

HELD

NO.

According to the SC, by reason of the very nature of the relationship between Principal
and agent, agency is extinguished by the death of the principal or the agent. It is the
contention of respondent corporation which was sustained by respondent court that
notwithstanding the death of the principal Concepcion Rallos the act of the attorney-in-
fact, Simeon Rallos in selling the former's sham in the property is valid and
enforceable inasmuch as the corporation acted in good faith in buying the property in
question.

Agency; February 25, 2014 36
Using ART. 1931 which states that: Anything done by the agent, without knowledge of
the death of the principal or of any other cause which extinguishes the agency, is valid
and shall be fully effective with respect to third persons who may have contracted with
him in good faith, the SC explains that these two requisites must concur and the
absence of one will render the act of the agent invalid and unenforceable.

In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the
death of his principal at the time he sold the latter's share in Lot No. 5983 to
respondent corporation. The knowledge of the death is clearly to be inferred from the
pleadings filed by Simon Rallos before the trial court. That Simeon Rallos knew of the
death of his sister Concepcion is also a finding of fact of the court a quo and of
respondent appellate court when the latter stated that Simon Rallos 'must have known
of the death of his sister, and yet he proceeded with the sale of the lot in the name of
both his sisters Concepcion and Gerundia Rallos without informing appellant (the
realty corporation) of the death of the former.

On the basis of the established knowledge of Simon Rallos concerning the death of
his principal Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law
expressly requires for its application lack of knowledge on the part of the agent of the
death of his principal; it is not enough that the third person acted in good faith


Lavina v. Court of Appeals, 171 SCRA 691 (1988)BUENAVENTURA

DOCTRINE: The estate of a dead person may only be summoned through the
executor or administrator of his estate for it is the executor or administrator who may
sue or be sued and who may bring or defend actions for the recovery or protection of
the property or rights of the deceased. The general power of attorney appointing
Remedios as Carmen's agent or attorney-in- fact was extinguished upon Carmen's
demise.

FACTS: On April 6, 1983, Maria Carmen Gabriel y Paterno, single, 72 years old,
executed a donation mortis causa in favor of her widowed sister-in-law, Josefina C.
Gabriel, 75 years of age, over a 3,081 square-meter parcel of land with improvements
in Sampaloc, Manila, covered by Transfer Certificate of Title No. 155865 in Carmen's
name. The donation was thumbmarked by Carmen before Notary Public Jose T.
Constantino. It was accepted by the donee in the same instrument.
-August 11, 1983, Carmen, who was already gravely ill with breast cancer, executed a
Last Will And Testament in which she bequeathed the same Sampaloc property to her
cousin and companion, Remedios C. Muyot, and willed a small 240-square-meter lot
in Antipolo to Josefina. She named a friend, Concepcion M. De Garcia, as executrix of
her will.
-August 15, 1983, Carmen executed a General Power of Attorney appointing
Remedios M. Muyot, as her attorney-in-fact (NOTE: To administer, take charge,
and manage for my sole benefit, all my properties, whether real or personal,
wheresoever located;)
-November 3, 1983, Josefina registered an adverse claim on the title of the Sampaloc
property based on the donation made by Carmen in her favor
-November 4, 1983, Remedios Muyot, as Carmen's attorney- in-fact, hired Atty. Celso
D. Lavia, as Carmen's counsel
-November 19, 1983, Carmen thumbmarked an "AFFIDAVIT OF DENIAL" repudiating
the donation of the Sampaloc property to Josefina because it was allegedly procured
through fraud and trickery. She alleged that in April 1983, she still could sign her
name, and that she had no intention of donating the property to Josefina who had not
done her any favor and in fact abandoned her during her illness. On the same
occasion, she thumbmarked a "REVOCATION OF DONATION" before a Notary
Public.
-November 21, 1983, Remedios Muyot, as Carmen's attorney-in-fact, sold the
Sampaloc property to Virgilio D. Cebrero for an alleged consideration of P2,664,655
-November 29, 1983, Carmen passed away
-December 1, 1983, the "REVOCATION OF DONATION" was registered on the back
of Carmen's TCT No. 155865

Josefina filed a complaint in the RTC against the estate of Carmen and the RD of
Manila to annul the revocation of donation due to her allegations of fraud and trickery
in acquiring said revocation. Josefina further impleaded Muyot (Carmens atty-in-fact)
and the spouses Cerbero.

Atty. Lavina filed an answer in behalf of the estate of Carmen and Muyot. Thereupon,
Josefina filed a motion to disqualify him on the ground that his authority as
counsel for Carmen was extinguished upon her death. She also assailed the
service of summons to the decedent's Estate through Muyot and reiterated her
motion for the appointment of a special administrator for the Estate.

CA: Court of Appeals held that Attorney Lavia may not appear "as counsel for the
estate of Carmen P. Gabriel because his authority as her counsel was extinguished
upon Carmen's death" (Art. 1919, Civil Code). It also held that "respondent Remedios
Muyot was not capacitated to receive summons for the estate because the general
power of attorney constituting her as agent of the deceased became inoperative upon
the death of the principal.

ISSUE: 1. WON Attorney Celso Lavia's authority as counsel for Carmen P. Gabriel
was extinguished upon her death
2. WON Muyot was capacitated to receive summons notwithstanding the
death of the Principal

HELD: 1. YES. Carmen's death divested Attorney Lavia of authority to represent her
as counsel. A dead client has no personality and cannot be represented by an
attorney.
2. NO. The estate of a dead person may only be summoned through the executor
or administrator of his estate for it is the executor or administrator who may sue or be
sued and who may bring or defend actions for the recovery or protection of the
property or rights of the deceased. The general power of attorney appointing
Remedios as Carmen's agent or attorney-in- fact was extinguished upon Carmen's
demise.Thereafter, Remedios was bereft of authority to represent Carmen.

The petitioner's contention that the agency was "constituted in the common interest of
the principal and the agent" and that hence it was not extinguished by the death of the
principal (Art. 1930, Civil Code) is refuted by the instrument itself which explicitly
provided that the powers conferred on the agent were to be exercised for the "sole
Agency; February 25, 2014 37
benefit" of the principal, Carmen P. Gabriel

Article 1930 Agency Continues Despite the Death of the Principal

Perez v. PNB, 17 SCRA 833 (1966) CAMERINO

DOCTRINE: The power of foreclosure is not an ordinary agency that contemplates
exclusively the representation of the principal by the agent but is primarily an authority
conferred upon the mortgagee for the latters own protection. It is, in fact, an ancillary
stipulation supported by the same cause or consideration for the mortgage and forms
an essential and inseparable part of that bilateral agreement.

The power to foreclose extra judicially survives the death of the mortgagor.

FACTS: Vicente Perez mortgaged a lot to PNB to secure payment of a loan of P2,500
plus interest. He died intestate survived by his wife and children, during which there
was an outstanding balance of P1,917 and corresponding interest on the mortgage.
Thereafter, the widow of Perez instituted Special Proceedings on CFI of Occidental
Negros for settlement of the estate of the deceased. The widow was appointed
Administratrix and notice was duly published to creditors. PNB did not file a claim. The
property was partitioned and thereafter distributed accordingly.

The Bank afterwards caused for the extrajudicial foreclosure of the mortgaged
properties, which was sold at auction and subsequently bought by the bank. After the
lapse of the year of redemption, the Certificate of Title was also transferred in the
name of the Bank.

The widow and heirs of Perez then filed a complaint against the Bank seeking to annul
the extrajudicial foreclosure sale and the transfer of the Certificate of Title.

TC DECISION: The trial court rendered judgment favoring the Perez' holding that,
according to the doctrine of Pasco v. Ravina (54 Phil. 382), the Bank should have
foreclosed its mortgage in court; that the power to sell contained in the deed of
mortgage had terminated upon the death of the mortgagor. Trial court declared the
sale null and void.

The Bank appealed to SC.

ISSUES:

1. W/N the power to sell (extra judicially) contained in a deed of mortgage terminates
upon the death of the mortgagor.

SC DECISION/HELD:

1. NO, the power to foreclose is not an ordinary agency that contemplates exclusively
the representation of the principal by the agent but is primarily an authority conferred
upon the mortgagee for the latter's own protection. It is, in fact, an ancillary stipulation
supported by the same cause or consideration for the mortgage and forms an
essential and inseparable part of that bilateral agreement.

Nevertheless, Bank was late in foreclosing property (Bank was informed of death
since 1947; property partitioned in 1956; Bank foreclosed in 1962). SC ruled:

it is our view that both justice and equity would be served by permitting herein
appellees to redeem the foreclosed property within a reasonable time, by paying the
capital and interest of the indebtedness up to the time of redemption, plus foreclosure
and useful expenses, less any rents and profits obtained by the Bank from and after
the same entered into its possession.

NOTE: SC in deciding, relied on Pasno v. Ravina which in turn relied on Sec. 7, Rule
87, of the original Rules of Court (Sec. 7, Rule 86 of Revised Rules of Court) which
presented three ways wherein a creditor may hold a claim against a deceased when
secured by a mortgage, to wit: (1) to waive the mortgage and claim the entire debt
from the estate of the mortgagor as an ordinary claim; (2) to foreclose the mortgage
judicially and prove any deficiency as an ordinary claim; and (3) to rely on the
mortgage exclusively, foreclosing the same at any time before it is barred by
prescription, without right to file a claim for any deficiency.

Pasno ruled that #3 should not be applied for equitable purposes. Dissent on same
case ruled otherwise (duh). BOTH decisions acknowledged the fact that the power to
foreclose extra judicially survives the death of the mortgagor. SC relied on the
dissenting opinion in its ruling.

Wherefore, the judgment appealed from is hereby modified, as follows:

(1) Declaring valid and effective the extra-judicial foreclosure of the mortgage over Lot
286-E of the Kabankalan Cadastre;

(2) Upholding and confirming the cancellation of Transfer Certificate of Title No. 29350
of the Registry of Deeds of Occidental Negros in the name of the late Vicente Perez,
as well as its replacement by Certificate of Title T-32066 of the same Registry in the
name of appellant Philippine National Bank;

(3) Declaring the appellees herein, widow and other heirs of Vicente Perez entitled to
redeem the property in question by paying or tendering to the Bank the capital of the
debt of Vicente Perez, with the stipulated interest to the date of foreclosure, plus
interest thereafter at 12% per annum; and reimbursing the Bank the value of any
useful expenditures on the said property but deducting from the amounts thus payable
the value of any rents and profits derived by the appellee National Bank from the
property in question. Such payment to be made within sixty (60) days after the
balance is determined by the court of origin.

Neither party to recover damages or costs.

Let the records be returned to the court of origin for further proceedings in conformity
with this decision. So ordered.