NGJC

Aniceto G. Saludo, Jr., Petitioner, vs. Philippine National Orient Air contended that because of the unpaid overriding
Bank, Respondent commissions it retained the sales proceeds before remitting the
Citation: G.R. No. 193138, August 20, 2018 balance to American Air. American Air contended that the sale
must be made by Orient Air and the sale must be done with the
Facts: use of American Air’s ticket stocks in order for it to be entitled
SAFA Law Office entered into a Contract of Lease with PNB, to the overriding commission. On the other hand, Orient Air
whereby the latter agreed to lease the second floor of the PNB contends that the contractual stipulation of a 3% overriding
Financial Center Building in Quezon City for a period of three commission covers the total revenue of American Air and not
years. The rental fee is subject to a yearly escalation rate of merely that derived from ticketed sales undertaken by Orient
10%. SAFA Law Office then occupied the leased premises and Air because it was an exclusive General Sales Agent. CA held
paid advance rental fees and security deposit. When the that Orient Air is entitled to commissions and ordered American
Contract of Lease expired, SAFA Law Office continued to Air to reinstate Orient Air as its General Sales Agent.
occupy the leased premises but discontinued paying its
monthly rental obligations after Consequently, PNB sent a Issue
demand letter for SAFA Law Office to pay its outstanding 1) Whether or not Orient Air is entitled to commissions.
unpaid rents. SAFA Law Office sent a letter datedproposing a 2) Whether CA is correct in ordering reinstatement of Orient Air
settlement by providing a range of suggested computations of as an agent.
its outstanding rental obligations, with deductions for the value
of improvements it introduced in the premises and among Ruling
others. Saludo, in his capacity as managing partner of SAFA 1.) Yes. Orient Air was entitled to an overriding commission
Law Office, filed an amended complaint1 for accounting based on total flown revenue. American Air’s perception that
and/or recomputation of unpaid rentals and damages against Orient Air was remiss or in default of its obligations under the
PNB in relation to the Contract of Lease. Agreement was, in fact, a situation where the latter acted in
accordance with the Agreement—that of retaining from the
Issue: Whether or not SAFA Law office is juridical entity and sales proceeds its accrued commissions before remitting the
the real party-in- interest in the suit. balance to American Air. Since the latter was still obligated to
Orient Air by way of such commissions. Orient Air was clearly
Held: Affirmative. The Court held that a partnership for the justified in retaining and refusing to remit the sums claimed by
practice of law, constituted in accordance with the Civil Code American Air. The latter’s termination of the Agreement was,
provisions on partnership, acquires juridical personality by therefore, without cause and basis, for which it should be held
operation of law. Having a juridical personality distinct and liable to Orient Air.
separate from its partners, such partnership is the real
party-in-interest in a suit brought in connection with a contract 2.) No. CA in effect compels American Air to extend its
entered into in its name and by a person authorized to act on personality to Orient Air. Such would be violative of the
its behalf. Under Article 1767 of the Civil Code provides that by principles and essence of agency, defined by law as a contract
a contract of partnership, two or more persons bind themselves whereby “a person binds himself to render some service or to
to contribute money, property, or industry to a common fund, do something in representation or on behalf of another, WITH
with the intention of dividing the profits among themselves. THE CONSENT OR AUTHORITY OF THE LATTER. In an
Two or more persons may also form a partnership for the agent-principal relationship, the personality of the principal is
exercise of a profession. Under Article 1771, a partnership may extended through the facility of the agent. In so doing, the
be constituted in any form, except where immovable property agent, by legal fiction, becomes the principal, authorized to
or real rights are contributed thereto, in which case a public perform all acts which the latter would have him do. Such a
instrument shall be necessary. Article 1784, on the other hand, relationship can only be effected with the consent of the
provides that a partnership begins from the moment of the principal, which must not, in any way, be compelled by law or
execution of the contract, unless it is otherwise stipulated. by any court.

Having settled that SAFA Law Office is a partnership, we hold Eurotech Industrial Technologies Inc. vs. Cuizon
that it acquired juridical personality by operation of law. Thus, Citation: 521 SCRA 584
Article 1768 of the Civil Code provides: The partnership has a
juridical personality separate and distinct from that of each of
the partners, even in case of failure to comply with the Facts: From January to April 1995, petitioner sold to Impact
requirements of Article 1772, first paragraph. Article 44 of the Systems various products. Respondents sought to buy from
Civil Code likewise provides that partnerships are juridical petitioner one unit of sludge pump valued at ₱250,000.00 with
persons xxxx. respondents making a down payment of ₱50,000.00. When the
sludge pump arrived from the United Kingdom, petitioner
refused to deliver the same to respondents without their having
Orient Air Services & Hotel Representatives vs. Court of
fully settled their indebtedness to petitioner. Respondent
Appeals EDWIN and Alberto de Jesus, general manager of petitioner,
Citation: 197 SCRA 645 executed a Deed of Assignment of receivables in favor of
petitioner. Following the execution of the Deed of Assignment,
Facts American Air, an air carrier offering passenger and air petitioner delivered to respondents the sludge pump.
cargo transportation, entered into a General Sales Agency
Agreement with Orient Air, authorizing the latter to act as its RTC Ruling The trial court granted petitioner’s prayer for the
exclusive general sales agent for the sale of air passenger issuance of writ of preliminary attachment. A study of the
transportation. Orient air failed to remit the net proceeds of complaint shows that in the Deed of Assignment, defendant
sales for several months prompting American Air to undertake Edwin B. Cuizon acted in behalf of or represented Impact
the collection of the proceeds of tickets sold originally by Systems Sales; that Impact Systems Sale is a single
Orient Air and terminating their agreement. proprietorship entity and the complaint shows that defendant
Erwin H. Cuizon is the proprietor; that plaintiff corporation is
American air instituted suit against Orient Air for the represented by its general manager Alberto de Jesus in the
settlement of past outstanding funds in possession of the latter. contract which is dated June 28, 1995. Another study reveals
 NGJC
that Impact Systems Sales which is owned solely by defendant Hence, Edwin did not act beyond the authority granted by his
Erwin H. Cuizon, made a down payment of ₱50,000.00, thereby principal.
showing that Impact Systems Sales ratified the act of Edwin B.
Cuizon; the records further show that plaintiff knew that Other laws/rulings/cases used in this case:
Impact Systems Sales, the principal, ratified the act of Edwin B.
Cuizon, the agent, when it accepted the down payment of In a contract of agency, a person binds himself to render some
₱50,000.00. Plaintiff, therefore, cannot say that it was deceived service or to do something in representation or on behalf of
by defendant Edwin B. Cuizon, since in the instant case the another with the latter’s consent. The underlying principle of
principal has ratified the act of its agent and plaintiff knew the contract of agency is to accomplish results by using the
about said ratification. Plaintiff could not say that the subject services of others – to do a great variety of things like selling,
contract was entered into by Edwin B. Cuizon in excess of his buying, manufacturing, and transporting. Its purpose is to
powers since [Impact] Systems Sales made a down payment of extend the personality of the principal or the party for whom
₱50,000.00 two days later. In view of the Foregoing, the Court another acts and from whom he or she derives the authority to
directs that defendant Edwin B. Cuizon be dropped as party act. It is said that the basis of agency is representation, that is,
defendant. the agent acts for and on behalf of the principal on matters
within the scope of his authority and said acts have the same
CA Ruling: Aggrieved by the adverse ruling of the trial court, legal effect as if they were personally executed by the
petitioner brought the matter to the Court of Appeals which, principal.
however, affirmed the 29 January 2002 Order of the court a
quo. Petitioner’s motion for reconsideration was denied by the The elements of the contract of agency are:
appellate court. (1) consent, express or implied, of the parties to establish the
relationship;
Issue: WON respondent EDWIN acted beyond the authority (2) the object is the execution of a juridical act in relation to a
granted by his principal? third person;
(3) the agent acts as a representative and not for himself;
SC Ruling: No, Edwin did not act beyond the authority granted (4) the agent acts within the scope of his authority.
by his principal.
Siy vs. Tomlin
Ratio: “Art. 1897. The agent who acts as such is not personally Citation: 824 SCRA 106
liable to the party with whom he contracts, unless he expressly
binds himself or exceeds the limits of his authority without Facts: Petitioner William Anghian Siy filed before the Regional
giving such party sufficient notice of his powers”. Trial Court of Quezon City (RTC) a Complaint for Recovery of
Possession with Prayer for Replevin against Tomlin et al.
Article 1897 reinforces the familiar doctrine that an agent, who In his Complaint, petitioner alleged that he is the owner of a
acts as such, is not personally liable to the party with whom he 2007 model Range Rover with Plate Number ZMG 272 which he
contracts. The same provision, however, presents two instances purchased from Alberto Lopez III (Lopez) on July 22, 2009;
when an agent becomes personally liable to a third person. The that in 2010, he entrusted the said vehicle to Ong, a
first is when he expressly binds himself to the obligation and businessman who owned a second-hand car sales showroom
the second is when he exceeds his authority. In the last ("Motortrend" in Katipunan, Quezon City) after the latter
instance, the agent can be held liable if he does not give the claimed that he had a prospective buyer therefor; that Ong
third-party sufficient notice of his powers. failed to remit the proceeds of the purported sale nor return
the vehicle; that petitioner later found out that the vehicle had
The powers of an agent are particularly broad in the case of been transferred to Chua; that in December, 2010, petitioner
one acting as a general agent or manager; such a position filed a complaint before the Quezon City Police District's
presupposes a degree of confidence reposed and investiture Anti-Camapping Section; that Ong, upon learning of the
with liberal powers for the exercise of judgment and discretion complaint, met with petitioner to arrange the return of the
in transactions and concerns which are incidental or vehicle RTC issued the writ of replevin after posting a bond of 8
appurtenant to the business entrusted to his care and million.
management. In the absence of an agreement to the contrary,
a managing agent may enter into any contracts that he deems Respondent filed an Omnibus Motion seeking to quash the Writ
reasonably necessary or requisite for the protection of the of Replevin, dismiss the Complaint, and turn over or return the
interests of his principal entrusted to his management. vehicle to him. Respondent claimed that he is the lawful and
registered owner of the subject vehicle, having bought the
Application: Edwin Cuizon acted well-within his authority when same and caused registration thereof in his name on March 7,
he signed the Deed of Assignment. To recall, petitioner refused 2011; that the Complaint should be dismissed for failure to pay
to deliver the one unit of sludge pump unless it received, in full, the correct amount of docket fees; that the Complaint is
the payment for Impact Systems’ indebtedness. The significant defective for failing to allege the correct and material facts as
amount of time spent on the negotiation for the sale of the to ownership, possession/ detention by defendant, warranty
sludge pump underscores Impact Systems’ perseverance to get against distraint/ levy/ seizure, and actual value of the vehicle;
hold of the said equipment. There is, therefore, no doubt in our and that the implementation of the writ was attended by
mind that respondent EDWIN’s participation in the Deed of procedural irregularities. RTC Denied the Motion so Respondent
Assignment was "reasonably necessary" or was required in filed a Petition for Certiorari
order for him to protect the business of his principal. Had he
not acted in the way he did, the business of his principal would ISSUES:
have been adversely affected and he would have violated his
fiduciary relation with his principal. It must be pointed out that 1. Whether Siy remained the owner of the vehicle and
in case of excess of authority by the agent, like what petitioner was entitled to possess it.
claims exists here, the law does not say that a third person can 2. Whether Tomlin was a buyer in bad faith, given his
recover from both the principal and the agent knowledge of Siy's complaints filed with the police.
 NGJC
Ruling: unlawfully appropriating the same for himself without paying
for it are unavailing.
The Supreme Court ruled that because Ong had sold the vehicle
to Chua, who then transferred it to Tomlin, Siy ceased to be the Bank of the Philippine Islands vs. Laingo
owner and lost his right of possession. Although Siy claimed Citation: 787 SCRA 541
that Tomlin was a buyer in bad faith due to his knowledge of
the prior police complaint, the Court found this argument Facts: On July 20, 1999, Rheozel Laingo opened a "Platinum
unavailing. As a buyer who registered the vehicle, Tomlin was
2-in-1 Savings and Insurance" account with Bank of the
deemed the rightful owner under the law, and thus entitled to Philippine Islands (BPI) in its Claveria, Davao City branch. This
its possession. Consequently, Siy’s remedy lay in a personal account provided automatic insurance coverage against
claim against Ong for the sale proceeds, not the recovery of the
disability or death, issued by FGU Insurance Corporation (later
vehicle. The petition was denied, and the vehicle was ordered known as BPI/MS Insurance Corporation). Rheozel received a
returned to Tomlin passbook corresponding to his savings account and was issued
a Personal Accident Insurance Coverage Certificate, with his
.The Supreme Court emphasized the nature of the agency mother, Yolanda Laingo, named as the beneficiary.
created between Siy and Ong. Under Article 1869 of the Civil
Code of the Philippines, "agency may be express, or implied
On September 25, 2000, Rheozel died in a vehicular accident.
from the acts of the principal, from his silence or lack of action,
or his failure to repudiate the agency, knowing that another Shortly after, Laingo, with assistance from the family’s personal
person is acting on his behalf without authority." Agency does secretary, inquired about Rheozel’s account at BPI and was
allowed to withdraw ₱995,000. A BPI employee, Ms. Laura
not need to be formally documented and may be inferred from
circumstances and conduct. Article 1870 further provides that Cabico, brought documents to Rheozel’s wake for Laingo to
"acceptance by the agent may also be express, or implied from sign to facilitate the withdrawal. Over two years later, on
January 21, 2003, Rheozel’s sister found the Personal Accident
his acts which carry out the agency, or from his silence or
inaction according to the circumstances." Insurance Coverage Certificate while going through his
belongings. Laingo then sent letters to BPI and FGU Insurance
requesting to claim the insurance benefits, but FGU Insurance
In this case, Siy’s actions impliedly created an agency
relationship with Ong. Siy handed over the vehicle, the blank denied her claim, citing failure to file within the required
deed of sale, and all pertinent documents with the three-month period after Rheozel’s death, as specified under
Paragraph 15 of the insurance policy.
understanding that Ong would sell it on his behalf. Ong
accepted this implied agency by taking possession of the
vehicle and issuing two guarantee checks, although these The trial court ruled in favor of Laingo, but the Court of
checks eventually bounced. By surrendering all documents and Appeals reversed this decision, holding her to the policy's filing
allowing Ong to hold a deed of sale in blank, Siy gave Ong deadline.
authority to represent him in the sale of the vehicle, thus
binding Siy to the subsequent sale to Chua and, by extension, ISSUE: Whether Yolanda Laingo, as the named beneficiary
to Tomlin. without knowledge of the insurance contract, is bound by the
three-month deadline for filing a notice of claim following the
Art. 1869. Agency may be express, or implied from the acts of insured's death.
the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on RULING: No, Laingo is not bound by the three-month deadline,
his behalf without authority. as she had no knowledge of the insurance policy or its
Agency may be oral, unless the law requires a specific form. requirements.

Art. 1870. Acceptance by the agent may also be express, or RATIO: The Court held that while petitioners argued the
implied from his acts which carry out the agency, or from his insurance contract language, particularly Paragraph 15, was
silence or inaction according to the circumstances. (Emphasis
clear and left no room for interpretation, Laingo’s lack of
and underscoring supplied. knowledge about the policy negated any basis for requiring her
to comply with the deadline. Laingo contended that BPI and
"The basis of agency is representation and the same may be
FGU Insurance did not inform her of the insurance policy
constituted expressly or impliedly. In an implied agency, the attached to Rheozel’s account, thus making it impossible for
principal can be bound by the acts of the implied agent." her to file a timely claim.
Since Ong was able to sell the subject vehicle to Chua,
petitioner thus ceased to be the owner thereof. Nor is he
entitled to the possession of the vehicle; together with his The Court noted that BPI acted as FGU Insurance’s agent in
ownership, petitioner lost his right of possession over the offering this 2-in-1 savings and insurance product, with
obligations under Civil Code Articles 1884 and 1887. Article
vehicle.
1884 mandates that an agent must carry out their duties
Considering that he was no longer the owner or rightful responsibly to avoid causing harm to the principal, while Article
1887 requires an agent to act in a way that would be expected
possessor of the subject vehicle at the time he filed Complaint
for Recovery of Possession in July, 2011, petitioner may not of a "good father of a family," indicating a fiduciary
seek a return of the same through replevin. Quite the contrary, relationship built on trust and good faith. Since BPI facilitated
the account and permitted Laingo to access the funds, it had
respondent, who obtained the vehicle from Chua and registered
the transfer with the Land Transportation Office, is the rightful an obligation to inform her of the insurance policy and its
owner thereof, and as such, he is entitled to its possession. terms.
Petitioner cannot be allowed to cut his losses by ostensibly
securing the recovery of the subject vehicle in lieu of its price, By failing to inform Laingo of the insurance policy upon her
which Ong failed and continues to fail to remit. On the other inquiry following her son’s death, BPI breached its duty as
hand, Ong's declarations contained in his Affidavit, to the effect FGU’s agent. Therefore, Laingo was justified in her delayed
that petitioner remains the owner of the vehicle, and that Chua filing, and FGU Insurance’s denial of the claim based on
came into illegal possession and ownership of the same by untimely filing was invalid. The Court ruled in favor of Laingo,
 NGJC
exempting her from the three-month notice requirement and
entitling her to claim the insurance benefits. Relevant Civil Code Provisions on Agency
Article 1868 defines agency as "a contract whereby a person
Ong vs. Court of Appeals (the agent) binds himself to render some service or to do
Citation: 401 SCRA 684 something in representation or on behalf of another (the
principal), with the consent or authority of the latter."
FACTS:
Article 1884 holds that an agent is obligated to carry out the
That on or about July 23, 1990, Benito Ong, representing
ARMAGRI International Corporation, conspiring and agency responsibly and can be held liable for any damages the
confederating together did then and there willfully, unlawfully principal or third parties may suffer due to the agent's
non-performance.
and feloniously defraud the SOLIDBANK Corporation
represented by its Accountant, DEMETRIO LAZARO, in the
following manner, to wit: the said accused received in trust Applying these principles, the Supreme Court held that as
ARMAGRI's agent, Ong had personal accountability under the
from said SOLIDBANK Corporation, 10,000 bags of urea valued
at P, 2,050,000 specified in a Trust Receipt Agreement and Trust Receipts Law for failing to fulfill ARMAGRI’s obligations in
covered by a Letter of Credit No. DOM GD 90-009 in favor of the trust receipt agreement. By signing the trust receipts and
being involved in the transaction, Ong assumed responsibility
the Fertiphil Corporation.
as the corporation’s human representative. Since ARMAGRI
Under the express obligation on the part of the said accused to (the corporate entrustee) was unable to fulfill its obligations,
the law imposes criminal liability on Ong, the human agent,
account for said goods to Solidbank Corporation and/or remit
the proceeds of the sale thereof within the period specified in who was directly responsible for ensuring that ARMAGRI
the Agreement or return the goods, if unsold immediately or accounted for the goods or remitted proceeds to Solidbank.
upon demand.
Key Points of Agency in the Case
However, Ong, once in possession of said goods, far from Accountability of the Agent: While Ong acted on behalf of
ARMAGRI, as an agent, he bore the responsibility to ensure
complying with the aforesaid obligation failed and refused and
still fails and refuses to do so despite repeated demands made compliance with the trust receipt obligations, especially since
upon him to that effect and with intent to defraud, willfully, he signed the trust receipts and associated documents.
unlawfully and feloniously misapplied, misappropriated and
converted the same or the value thereof to his own personal Personal Liability: Under the Civil Code and Trust Receipts Law,
use and benefit, to the damage and prejudice of the said if an agent fails to fulfill the duties assigned by the principal
(ARMAGRI), especially when these duties involve third parties
Solidbank Corporation in the aforesaid amount of
P2,050,000.00 Philippine Currency. like Solidbank, the agent may be held personally liable.
Petitioner contends that in signing the trust receipts, he merely
Fiduciary Duty: As an agent, Ong had a fiduciary duty under
acted as an agent of ARMAGRI. Petitioner asserts that nowhere
in the trust receipts did he assume personal responsibility for Articles 1884 and 1887 to execute the agency responsibly and
the undertakings of ARMAGRI which was the entrustee. in accordance with the law, particularly regarding financial
transactions and trust receipt obligations. His failure to fulfill
ISSUE: these duties led to his criminal liability.
Whether ARMAGRI Corp. violated the Trust Receipts Law

HELD: Tuazon vs. Heirs of B. Rampos

No, ARMGAGRI Corp. did not violate the Trust Receipts Law Citation: 463 SCRA 408 (2005)

The Supreme Court held that the Trust Receipts Law FACTS: Respondents alleged that on a relevant date,
recognizes the impossibility of imposing the penalty of spouses Tuazon purchased from their predecessor-in-interest
imprisonment on a corporation. Hence, if the entrustee is a cavans of rice. That on the total number of cavans, only a
corporation, the law makes the officers or employees or other certain portion has been paid for. In payment thereof, checks
persons responsible for the offense liable to suffer the penalty have been issued but on presentment, the checks were
of imprisonment. The reason is obvious: corporations, dishonored. Respondents alleged that since spouses
partnerships, associations and other juridical entities cannot be anticipated the forthcoming suit against them, they made
put to jail. Hence, the criminal liability falls on the human agent fictitious sales over their properties. As defense, the spouses
responsible for the violation of the Trust Receipts Law. averred that it was the wife of Bartolome who effected the sale
In the instant case, the Bank was the entruster while ARMAGRI and that Maria was merely her agent in selling the rice. The
was the entrustee. Being the entrustee, ARMAGRI was the one true buyer of the cavans was Santos. The spouses further
responsible to account for the goods or its proceeds in case of averred that when Ramos got the check from Santos, she took
sale. However, the criminal liability for violation of the Trust it in good faith and didn't knew that the same were unfunded.
Receipts Law falls on the human agent responsible for the
violation. HELD: First, there is no contract of agency. If it was truly the
intention of the parties to have a contract of agency, then
Petitioner, who admits being the agent of ARMAGRI, is the when the spouses sued Santos on a separate civil action, they
person responsible for the offense for two reasons. First, should have instituted the same on behalf and for the
petitioner is the signatory to the trust receipts, the loan respondents. They didn't do so. The filing in their own names
applications and the letters of credit. Second, despite being the negate their claim that they acted as mere agents in selling the
signatory to the trust receipts and the other documents, rice.
petitioner did not explain or show why he is not responsible for
the failure to turn over the proceeds of the sale or account for Second, the spouses are liable on the check. As indorser,
the goods covered by the trust receipts. Under the Civil Code,
Tuazon warranted that upon due presentment, according
Articles 1868 and 1884 specifically delineate the responsibilities to their tenor, and that in case they were dishonored, she
of an agent towards the principal and third parties. would pay the corresponding amount. After the instrument
 NGJC
is dishonored by non-payment, indorsers cease to be leading the respondent to reasonably believe in Bacani’s
merely secondarily liable. They became principal debtors authority.
whose liability becomes identical to that of the original
obligor. The holder of a negotiable instrument need not Relation to Agency under Civil Code
even proceed against the maker before suing the
indorser. Santos is not an indispensable party to the suit
This case highlights principles of agency under the Civil Code,
against the spouses. specifically Articles 1868 and 1910:

Domingo vs. Robles Article 1868 defines agency as an arrangement where a person
Citation: 453 SCRA 812
(the agent) is authorized to act on behalf of another (the
principal), with the latter’s consent. Here, Bacani acted as the
Facts: Petitioner sought to sell her property located in Marikina. petitioner’s agent when she entrusted him with her TCT for the
Bacani volunteered to act as her agent for the sale, so the purpose of selling her property.
petitioner entrusted him with her owner's copy of the Transfer
Certificate of Title (TCT). Later, Bacani informed the petitioner Article 1910 provides that the principal is bound by the actions
that the TCT was lost. To reconstitute the lost title, petitioner of an agent acting within the scope of authority conferred upon
gave Bacani her receipts for real estate tax payments. Bacani
them. Bacani’s possession of the TCT, combined with the
also asked her to sign a document, which she recalled as a petitioner's provision of documents needed for the title’s
"record of exhibits." After this, Bacani disappeared, and reconstitution, created the appearance of authority. The
petitioner was left waiting.
petitioner’s reliance on Bacani without proper oversight
allowed him to transfer the property to an innocent purchaser.
Subsequently, the petitioner visited her property and found
respondents constructing a house on the lot. When she checked Doctrine of Ostensible Agency: By placing Bacani in
with the Register of Deeds (ROD), she discovered that her title
possession of the TCT and supporting documents, the
had already been reconstituted and canceled, with a new TCT petitioner gave the appearance of authority, which the
issued in the respondent’s name, based on a Deed of Absolute respondents reasonably relied upon. This doctrine holds that
Sale purportedly executed by the petitioner in favor of the
the principal is liable for the acts of an agent if they created
respondents. The petitioner claimed that she had never met the appearance of authority and led a third party to rely on it
any of the respondents or signed any sale document in good faith.
transferring the property.

In conclusion, under the Civil Code’s agency principles, the

Respondents, however, claimed to be innocent purchasers for petitioner’s entrustment of the TCT to Bacani allowed him to
value and in good faith. They asserted that Bacani, as the appear as an authorized agent. This representation bound the
petitioner’s agent, offered them the lot. When they were ready
petitioner to the actions performed under Bacani’s ostensible
to purchase, Bacani introduced them to an individual he authority, barring her from nullifying the sale to respondents
claimed was the owner. A Deed of Absolute Sale was presented who acted in good faith.
to them, already signed and ready for respondent Yolanda
Robles' signature. They paid the full purchase price and
received the owner’s duplicate of the TCT. The petitioner then Rural Bank of Milaor vs. Ocfemia
filed a complaint for nullity and reconveyance. However, both Citation: 325 SCRA 99
the Regional Trial Court (RTC) and the Court of Appeals (CA)
dismissed her complaint, affirming the validity of the sale. FACTS: The evidence presented by the respondents through the
testimony of Marife O. Niño, shows that she is the daughter of
Issue: Whether or not the petitioner is entitled to nullify the Francisca Ocfemia and the late Renato Ocfemia who died on
July 23, 1994. The parents of her father, Renato Ocfemia, were
sale and recover ownership of her property.
Juanita Arellano Ocfemia and Felicisimo Ocfemia.
Ruling: No, the petitioner is not entitled to nullify the sale or
recover the property. Marife O. Niño knows the five (5) parcels of land which are
located in Bombon, Camarines Sur and that they are the ones
possessing them which were originally owned by her
The Supreme Court ruled that a notarized instrument, such as grandparents. During the lifetime of her grandparents,
the Deed of Absolute Sale, enjoys a prima facie presumption of respondents mortgaged the said five (5) parcels of land and
authenticity and due execution. To invalidate this presumption,
two (2) others to the Rural Bank of Milaor.
clear and convincing evidence is necessary. Forgery cannot be
assumed; mere allegations of forgery, unsupported by concrete
proof, are insufficient. In this case, the petitioner bore the The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia
were not able to redeem the mortgaged properties consisting
burden of proving that the Deed of Absolute Sale was forged,
but she failed to provide adequate evidence. The sale was of 7 parcels of land and so the mortgage was foreclosed and
conducted through Bacani, whom the petitioner had authorized thereafter ownership thereof was transferred to the bank. Out
of the 7 parcels that were foreclosed, 5 of them are in the
as her agent and who possessed the owner’s duplicate
Certificate of Title, which was free from liens or encumbrances. possession of the respondents because these 5 parcels of land
were sold by the bank to the parents of Marife O. Niño as
evidenced by a Deed of Sale executed in January 1988.
The signatures of the petitioner and her husband were present
on the Deed of Absolute Sale, and her husband had met with
respondent Yolanda Robles to receive payment. Additionally, The aforementioned 5 parcels of land subject of the deed of
under the Torrens Act, the presentation of the owner’s sale, have not been, however transferred in the name of the
parents of Merife O. Niño after they were sold to her parents by
certificate of title and the instrument of conveyance is required
for registration. By giving Bacani the TCT and executed the bank because according to the Assessor's Office the five (5)
documents, the petitioner effectively represented to third parcels of land, subject of the sale, cannot be transferred in the
parties that Bacani was authorized to transact on her behalf,
 NGJC
name of the buyers as there is a need to have the document of Held: No agreement of agency between Tri-realty and Lines &
sale registered with the Register of Deeds of Camarines Sur. Spaces, but rather a provider for the latter’s cement needs. All
the pedantry about whether Lines & Spaces acted as agent of
In view of the foregoing, Marife O. Niño went to the Register of private respondent is absurd because Amon took orders from
Deeds of Camarines Sur with the Deed of Sale in order to have Eleanor Sanchez who, after all, was the one who paid them the
the same registered. The Register of Deeds, however, informed manager’s checks for the purchase of cement.
her that the document of sale cannot be registered without a
board resolution of the Bank. Marife Niño then went to the Since line space is not agent of tri-realty, no vinculum could be
bank, showed to it the Deed of Sale, the tax declaration and said to exist between Amon and tri-realty.
receipt of tax payments and requested the bank for a board
resolution so that the property can be transferred to the name Sunace International Management Services, Inc. vs. National
of Renato Ocfemia the husband of petitioner Francisca Labor Relations Commission
Ocfemia and the father of the other respondents having died Citation: 480 SCRA 146 (2006)
already.
FACTS: Petitioner, Sunace International Management Services
Despite several requests, the bank refused her request for a (Sunace), deployed to Taiwan Divina A. Montehermozo (Divina)
board resolution and made many alibis. She was told that the as a domestic helper under a 12-month contract effective
bank had a new manager and it had no record of the sale. February 1, 1997. The deployment was with the assistance of a
Taiwanese broker, Edmund Wang, President of Jet Crown
ISSUE: Whether the board of directors of a rural banking International Co., Ltd.
corporation be compelled to confirm a deed of absolute sale of
real property which deed of sale was executed by the bank After her 12-month contract expired on February 1, 1998, Divina
manager without prior authority of the board of directors of continued working for her Taiwanese employer, Hang Rui
the rural banking corporation Xiong, for two more years, after which she returned to the
Philippines on February 4, 2000.
HELD: Yes, the board of directors can be compelled to confirm
a deed of absolute sale even though the bank manager Shortly after her return or on February 14, 2000, Divina filed a
executed such deed without prior authority from the banking complaint before the National Labor Relations Commission
corporation. (NLRC) against Sunace, one Adelaide Perez, the Taiwanese
broker, and the employer-foreign principal alleging that she
The Supreme Court ruled that the bank acknowledged, by its was jailed for three months and that she was underpaid
own acts or failure to act, the authority of the manager to enter
into binding contracts. After the execution of the Deed of Sale, Reacting to Divina's Position Paper, Sunace filed on April 25,
respondents occupied the properties in dispute and paid the 2000 an ". . . ANSWER TO COMPLAINANT'S POSITION PAPER"
real estate taxes due thereon. If the bank management alleging that Divina's 2-year extension of her contract was
believed that it had title to the property, it should have taken without its knowledge and consent, hence, it had no liability
some measures to prevent the infringement or invasion of its attaching to any claim arising therefrom, and Divina in fact
title thereto and possession thereof. executed a Waiver/Quitclaim and Release of Responsibility and
an Affidavit of Desistance, copy of each document was
In this light, the bank is estopped from questioning the annexed to said
authority of the bank manager to enter into the contract of
sale. If a corporation knowingly permits one of its officers or The Labor Arbiter, rejected Sunace's claim that the extension of
any other agent to act within the scope of an apparent Divina's contract for two more years was without its knowledge
authority, it holds the agent out to the public as possessing the and consent.
power to do those acts; thus, the corporation will, as against
anyone who has in good faith dealt with it through such agent, ISSUE: Whether the act of the foreigner-principal in renewing
be estopped from denying the agent's authority. the contract of Divina be attributable to Sunace

Unquestionably, petitioner has authorized Tena to enter into HELD: No, the act of the foreigner-principal in renewing the
the Deed of Sale. Accordingly, it has a clear legal duty to issue contract of Divina is not attributable to Sunace. There being no
the board resolution sought by respondents. Having authorized substantial proof that Sunace knew of and consented to be
her to sell the property, it behooves the bank to confirm the bound under the 2-year employment contract extension, it
Deed of Sale so that the buyers may enjoy its full use. cannot be said to be privy thereto. As such, it and its "owner"
cannot be held solidarily liable for any of Divina's claims
Amon Trading vs. Court of Appeals arising from the 2-year employment extension.
Citation: 477 SCRA 582
Furthermore, as Sunace correctly points out, there was an
Facts: Eleanor Bahia Sanchez (represent Lines & Spaces) order implied revocation of its agency relationship with its foreign
from petitioner Amon Trading Corporation, and from Juliana principal when, after the termination of the original
Marketing bags of cement for Tri-Reality development and employment contract, the foreign principal directly negotiated
construction, but it found out that both cannot deliver all its with Divina and entered into a new and separate employment
balance and refunded the amount of undelivered bags of contract in Taiwan.
cement to Eleanor Sanchez, but Sanchez had already fled
abroad, private respondent (Tri-realty) filed this case for sum Angeles vs. Philippine National Railways
of money against petitioners and Lines & Spaces. Tri-realty Citation: 500 SCRA 744 (2006)
contended that Lines & Spaces is their agent; hence they are
entitled for the money involved.
Facts: Respondent Philippine National Railways (PNR) informed
a certain Gaudencio Romualdez (Romualdez, hereinafter) that
Issue: Whether or not Lines & Spaces is the Tri-realty’s agent
 NGJC
it has accepted the latter's offer to buythe PNR's WHEREFORE, the petition is DENIED and the assailed decision
scrap/unserviceable rails located in Del Carmen and Lubao, of the CA is AFFIRMED.Costs against the petitioner.
Pampanga at P1,300.00 and P2,100.00 per metric ton,
respectively, for the total amount of P96,600.00. Romualdez Games and Garments Developers Inc. vs. Allied Banking
paid the purchase price and addressed a letter to Atty. Cipriano Corp.
Dizon, PNR's Acting Purchasing Agent. The letter authorized Citation: 762 SCRA 447 (2015)
LIZETTE R. WIJANCOto be his (Romualdez) lawful
representative in the withdrawal of the scrap/unserviceable Facts: Bienvenida, married to Benedicto Pantaleon, agreed to
rails awarded to him. Furthermore, the original copy of the purchase a parcel of land from Games and Garments
award which indicates the waiver of rights, interest and Developers, Inc. (GGDI), for the sums of P14,000,000.00.
participation in favor of Lizetter R. Wijanco was also given. Mercado (Branch Manager of Allied Bank-Pasong Tamo) wrote
a letter to GGDI that the Sps. Pantaleon have a loan of 11M
The Lizette R. Wijanco was petitioner's now deceased wife. That with Allied Bank, and that the portion of the proceeds of which
very same day, Lizette requested the PNR to transfer the shall be used to partially liquidate the account with GGDI.
location of withdrawal for the reason that the
scrap/unserviceable rails located in Del Carmen and Lubao, To secure her loan for P14,000,000.00 approved by Allied Bank,
Pampanga were not ready for hauling. The PNR granted said Bienvenida executed a Real Estate Mortgage over the subject.
request and allowed Lizette to withdraw scrap/unserviceable Bienvenida paid GGDI using 2 Allied bank checks. When GGDI
rails in Murcia, Capas and San Miguel, Tarlac instead. However, deposited the two Allied Bank checks dated March 28, 1997
PNR subsequently suspended the withdrawal in view of what it issued by Bienvenida, said checks were dishonored for being
considered as documentary discrepancies coupled by reported "Drawn Against Insufficient Funds."
pilferages of over P500,000.00 worth of PNR scrap properties
in Tarlac.Consequently, the spouses Angeles demanded the
refund of the amount of P96,000.00. The PNR, however, refused GGDI filed before the RTC a Complaint for Breach of Contract
to pay, alleging that as per delivery receipt duly signed by (Rescission) and Damages with prayer for Preliminary
Lizette, 54.658 metric tons of unserviceable rails had already Attachment against the spouses Pantaleon, Mercado, and
been withdrawn. The spouses Angeles filed suit against the PNR Allied Bank RTC ruled in favor of GGDI.
for specific performance and damages before the Regional
Trial Court. Lizette W. Angeles passed away and was CA reversed RTC. The Court of Appeals adjudged that Allied
substituted by her heirs, among whom is her husband, herein Bank should not be held liable under the MOA and Deed of Sale
petitioner Laureno T. Angeles. executed between the spouses Pantaleon and GGDI for the
bank was not a party or a witness to the said documents.
The trial court, on the postulate that the spouses Angeles are Neither should Allied Bank be held liable under the letters of
not the real parties-in-interest, rendered judgment dismissing guaranty Mercado executed. GGDI appealed to SC.
their complaint for lack of cause of action. As held by the court,
Lizette was merely a representative of Romualdez in the Issue:
withdrawal of scrap or unserviceable rails awarded to him and
not an assignee to the latter's rights with respect to the award. WON Allied Bank is liable as guarantor of Sps. Pantaleon by
Petitioner appealed with the Court of Appeals which dismissed virtue of Mercado's letter? - NO (It wasn't even a letter of
the appeal and affirmed that of the trial court. guaranty)

Issue: Whether or not the CA erred in affirming the trial court's Held:
holding that petitioner and his spouse, as plaintiffs a quo, had
no cause of action as they were not the real parties-in-interest Sec. 74. No bank or banking institution shall enter, directly, or
in this case. indirectly, into any contract of guaranty or suretyship, or shall
guarantee the interest or principal of any obligation of any
Held: No. The CA's conclusion, affirmatory of that of the trial person, copartnership, association, corporation or other entity.
court, is that Lizette was not an assignee, but merely an agent The provisions of this section shall, however, not apply to the
whose authority was limited to the withdrawal of the scrap following: (a) borrowing of money by banking institution
rails, hence, without personality to sue. Where agency exists, through the rediscounting of receivables; (b) acceptance of
the third party's (in this case, PNR's) liability on a contract is to drafts or bills of exchange; (c) certification of checks; (d)
the principal and not to the agent and the relationship of the transactions involving the release of documents attached to
third party to the principal is the same as that in a contract in items received for collection; (e) letters of credit transaction,
which there is no agent. Normally, the agent has neither rights including stand-by arrangements; (f) repurchase agreements;
nor liabilities as against the third party. He cannot thus sue or (g) shipside bonds; (h) ordinary guarantees or indorsements in
be sued on the contract. Since a contract may be violated only favor of foreign creditors where the principal obligation
by the parties thereto as against each other, the real involves loans and credits extended directly by foreign firms or
party-in-interest, either as plaintiff or defendant in an action persons to domestic borrowers for capital investment purposes;
upon that contract must, generally, be a contracting party. and (i) other transactions which the Monetary Board may, by
regulation, define or specify as not covered by the prohibition.
The legal situation is, however, different where an agent is
constituted as an assignee. In such a case, the agent may, in It is undisputed that Mercado wrote two "letters of guaranty".
his own behalf, sue on a contract made for his principal, as an Although Mercado's letters used the words "guarantee" and
assignee of such contract. The rulerequiring every action to be "guaranty," the same do not constitute contracts of guaranty
prosecuted in the name of the real party- in-interest recognizes covered by the prohibition under Section 74 of the General
the assignment of rights of action and also recognizes that Banking Act, as amended.
when one has a right assigned to him, he is then the real
party-in-interest and may maintain an action upon such claim There was no express undertaking in Mercado's letters to pay
or right. Bienvenida's debt to GGDI in case Bienvenida failed to do so.
 NGJC
In said letters, Mercado merely acknowledged that Bienvenida A special power of attorney is necessary to enter into any
and/or her company had an approved real contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable
Mactan Cebu International Airport Authority vs. Unchuan consideration. The express mandate required by law to enable
Citation: 791 SCRA 581 (2016) an appointee of an agency (couched) in general terms to sell
must be one that expressly mentions a sale or that includes a
FACTS: Unchuan alleged, among others, that he was the legal sale as a necessary ingredient of the act mentioned. For the
and rightful owner of Lot No. 4810-A, with an area of177,176 principal to confer the right upon an agent to sell real estate, a
square meters, and Lot No. 4810-B, with an area of 2,740 power of attorney must so express the powers of the agent in
square meters, both located in Barrio Buaya, Lapu-Lapu City, clear and unmistakable language. When there is any
and covered by Original Certificate of Title (OCT) No. R0-1173. reasonable doubt that the language so used conveys such
Unchuan further alleged that he came to know that Atanacio power, no such construction shall be given the document.
Godinez (Atanacio), the supposed attorney-in-fact of all the
registered owners and their heirs, already sold both lots to Civil Oesmer vs. Paraiso Development Corporation
Aeronautics Administration (CAA); the predecessor of MCIAA Citation: 514 SCRA 228 (2007)
that the sale covered by the Deed of Absolute Sale, was null
and void because the registered owners and their heirs did not FACTS: Petitioners together with Adolfo Oesmer and Jesus
authorize Atanacio to sell their undivided shares in the subject Oesmer, are brothers and sisters, and the co-owners of
lots in favor of CAA. That no actual consideration was paid to undivided shares of two parcels of agricultural and tenanted
the said registered owners or their heirs, despite promises that land which were acquired by right of succession.
they would be paid; that the deed of absolute sale did not bear
the signature of the CAA representative; that there was no Respondent Paraiso Development Corporation is known to be
proof that the Secretary of the Department of Public Works and engaged in the real estate business.
Highways approved the sale; and that his
predecessors-in-interest merely tolerated the possession by This case originated when Ernesto Oesmer, one of the
CAA and, later, by MCIAA. co-owners of the subject land, met with the President of
respondent corporation for the purpose of brokering the sale of
RTC rendered judgment in favor of Unchuan. RTC held that petitioners' properties to respondent corporation. Pursuant to
Atanacio was not legally authorized to act as the the said meeting, a Contract to Sell was drafted whereby
attorney-in-fact of his brothers and sisters and to transact on petitioners Ernesto and Enriqueta subsequently signed the
their behalf because he was not clothed with a special power of aforesaid Contract to Sell. A check in the amount of
attorney granting him authority to sell the disputed lots. CA P100,000.00, payable to Ernesto, was given as option money.
affirmed the RTC decision. Atanacio had no authority to act as Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and
an agent for the other registered owners and their heirs absent Librado also signed the said Contract to Sell. However, two of
the special power of attorney specifically executed for such the brothers, Adolfo and Jesus, did not sign the document.
purpose.
Later on, petitioners informed the respondent, through a letter,
ISSUE: W/N the decision of the RTC affirmed by the CA is valid. of their intention to rescind the Contract to Sell and to return
the amount of P100,000.00 given by respondent as option
RULING: money. Respondent did not respond to the aforesaid letter.
Afterwards, herein petitioners, together with Adolfo and Jesus,
YES but with MODIFICATIONS. The petition is PARTIALLY filed a Complaint for Declaration of Nullity or for Annulment of
GRANTED. Court finds that the sale transaction executed Option Agreement or Contract to Sell with Damages before the
between Atanacio, acting as an agent of his fellow registered RTC.
owners, and the CAA was indeed void insofar as the other
registered owners were concerned. They were represented The trial court held that the assailed Contract to Sell is valid
without a written authority from them clearly in violation of the and binding only to the undivided proportionate share of
requirement under Articles 1874 and 1878 of the Civil Code. Ernesto who signed the document and received the check.
Ernesto was ordered to execute the Contract of Absolute Sale
a. Art. 1874. When a sale of a piece of land or any interest concerning his 1/8 share over the subject two parcels of land in
therein is through an agent, the authority of the latter shall be favor of respondent.
in writing; otherwise, the sale shall be void.
On appeal, the Court of Appeals modified the decision of RTC
b. Art. 1878. Special powers of attorney are necessary in the whereby it declared that the Contract to Sell is valid and
following cases: XXX binding with respect to the undivided proportionate share of
the six signatories of the document.
(5) To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for ISSUE: Whether or not the contract to sell binds the co-owners
a valuable consideration. of Ernesto as agent.

In the case of Dizon v. CA, when the sale of a piece of land or HELD: Yes.
any interest thereon is through an agent, the authority of the
latter shall be in writing; otherwise, the sale shall be void. Thus When a sale of a piece of land or any interest therein is through
the authority of an agent to execute a contract for the sale of an agent, the authority of the latter shall be in writing;
real estate must be conferred in writing and must give him otherwise, the sale shall be void.
specific authority, either to conduct the general business of the
principal or to execute a binding contract containing terms and The law itself explicitly requires a written authority before an
conditions which are in the contract he did execute. agent can sell an immovable. The conferment of such an
 NGJC
authority should be in writing, in as clear and precise terms as To deprive Saban of his commission subsequent to the sale
possible. It is worth noting that petitioners signatures are which was consummated through his efforts would be a breach
found in the Contract to Sell. The Contract is absolutely silent of his contract of agency with Ybañez which expressly states
on the establishment of any principal-agent relationship that Saban would be entitled to any excess in the purchase
between the five petitioners and their brother and co-petitioner price after deducting the P200,000.00 due to Ybañez and the
Ernesto as to the sale of the subject parcels of land. transfer taxes and other incidental expenses of the sale.

However, despite petitioner Emestos lack of written authority In Macondray & Co. v. Sellner, the Court recognized the right of
from the five petitioners to sell their shares in the subject a broker to his commission for finding a suitable buyer for the
parcels of land, the supposed Contract to Sell remains valid and seller's property even though the seller himself consummated
binding upon the latter. the sale with the buyer.24 The Court held that it would be in the
height of injustice to permit the principal to terminate the
Lim vs. Saban contract of agency to the prejudice of the broker when he had
Citation: 447 SCRA 232 (2004) already reaped the benefits of the broker's efforts.

FACTS: Edwardo Ybanez (owner of lot), entered into an Agency Murao vs. People
Agreement (Agreement and Authority to Negotiate and Sell) Citation: 462 SCRA 366 (2005)
with Saban. Under the said agreement, Ybanez authorized
Saban to look for a buyer of the lot for 200k and to mark up FACTS: Petitioner Pablito Murao is the sole owner of Lorna
the selling price to include the amounts needed for payment of Murao Industrial Commercial Enterprises (LMICE), a company
taxes, transfer of title and other expenses incident to the sale, engaged in selling and refilling fire extinguishers, while Neilo
as well as Saban's commission for the sale. Heurtazuela was the branch manager of LMICE in Puerto
Princesa, Palawan. On September 1, 1994, Murao and private
Through Saban's efforts, Ybanez and his wife were able to sell complainant Chito Federico entered into a Dealership
the lot to petitioner Lim. The price of the lot, as indicated in the Agreement for marketing, distribution, and refilling of fire
Deed of Sale is 200k. It appears, however, that the vendees extinguishers within Puerto Princesa, granting Federico a 50%
agreed to purchase the lot at the price of600k, inclusive of discount provided he sets up his own sales force, issues his own
taxes and other incidental expenses of the sale. After the sale, sales invoice, and posts a bond with LMICE to secure the credit
Lim remitted to Saban the amounts of One Hundred Thirteen line extended to him.
Thousand Two Hundred Fifty Seven Pesos (P113,257.00) for
payment of taxes due on the transaction as well as Fifty Private complainant Federico failed to comply with the 3
Thousand Pesos (P50,000.00) as broker's commission. Lim also conditions, yet was still allowed to act as a part-time sales
issued in the name of Saban four postdated checks in the agent for LMICE with Federico insisting that he should receive
aggregate amount of Two Hundred Thirty Six Thousand Seven 50% sales commission and petitioners insisting on 30%
Hundred Forty Three Pesos (P236,743.00). commission (Part-time sales agent were entitled to 25%
commission but since Federico helped in establishing their
Subsequently, Ybañez sent a letter dated June 10, 1994 Puerto Princesa branch, they gave him the 30% commission
addressed to Lim. In the letter Ybañez asked Lim to cancel all full-time agents received). Federico then facilitated the refill of
the checks issued by her in Saban's favor and to "extend 202 fire extinguishers for the City Government of Puerto
another partial payment" for the lot in his (Ybañez's) favor. Princesa and because of the considerable cost, the transaction
was split into two purchase orders.
After the four checks in his favor were dishonored upon
presentment, Saban filed a Complaint for collection of sum of The problem started when petitioner Heurtazuela obtained the
money and damages against Ybañez and Lim with the RTC. first check for 300K for 99 fire extinguisher-refills from the City
Government of Puerto Princesa and deposited it under the
Saban alleged that Ybañez told Lim that he (Saban) was not LMICE account with PCI Bank, with Federico demanding
entitled to any commission for the sale since he concealed the 154.5K as his commission and Heurtazuela refusing to pay.
actual selling price of the lot from Ybañez and because he was
not a licensed real estate broker. Ybañez was able to convince • Thus, Federico filed a Complaint for Estafa against petitioners
Lim to cancel all four checks. for converting the check to their personal use and benefit
without giving Federico the 50% he was entitled to. • RTC fould
petitioners guilty of Estafa with unfaithfulness or abuse of
Saban further averred that Ybañez and Lim connived to
deprive him of his sales commission by withholding payment of confidence through (1) converting or misappropriating goods,
the first three checks. He also claimed that Lim failed to make despite (2) holding in trust and duty to deliver the same <ruled
that Federico and LMICE had no fiduciary relationship but
good the fourth check which was dishonored because the
account against which it was drawn was closed. relation involved a duty>, (3) to the prejudice and (4) after
demand is made by offended party. [Elements]
ISSUE: WON there was valid revocation of the agency NO
CA affirmed but extended the minimum term of imprisonment
to 8 years and 1 day and deleted attorney's fee of 30k.
HELD: The Court affirms the appellate court's finding that the
agency was not revoked since Ybañez requested that Lim make
stop payment orders for the checks payable to Saban only ISSUE: Whether or not the CA erred in convicting the officers
of Principal LMICE of Estafa for not giving their Sales Agent
after the consummation of the sale on March 10, 1994. At that
time, Saban had already performed his obligation as Ybañez's Federico 154K he was supposedly entitled to from the refilling
agent when, through his (Saban's) efforts, Ybañez executed the of Third Party Government of Puerto Princesa's fire
extinguishers?
Deed of Absolute Sale of the lot with Lim and the Spouses Lim.
 NGJC
HELD: Yes, Federico's right to a commission does not make him The Baloloys appealed, but the CA affirmed the decision of the
a joint owner of the money due LMICE but merely establishes a trial court and denied the petition.
principal-agent relation.
• The Baloloys argue that the sale by Virginia to respondent is
·Although Federico did not operate as a dealer of LMICE under not binding. Rubio did not authorize Virginia to transact
their dealership agreement, he was given authority to act as a business in his behalf pertaining to the property. The SPA was
sales agent based on an oral contract. constituted in favor of Llamas, and the latter was not
empowered to designate a substitute attorney-in-fact. Llamas
Federico may claim commission, allegedly equivalent to 50%, even disowned her signature appearing on the "Joint Special
but he is not the automatic owner of the 50% portion. Power of Attorney," which constituted Virginia as her true and
lawful attorney- in-fact in selling Rubio's properties.
Heurtazuela, with permission owner Murao, had no duty in
relation to Federico, therefore, the elements of trust or duty to • Dealing with an assumed agent, Lim should ascertain not only
deliver of Estafa with abuse of confidence were not present. the fact of agency, but also the nature and extent of the
former's authority. Besides, Virginia exceed the authority for
Obligation of LMICE to pay Federico does not arise from duty failing to comply with her obligations under the "Joint Special
to deliver or return money, but rather from the duty of a Power of Attorney."
principal to give just compensation; while petitioners may have
no criminal liability, they admit civil liability whether 30% or ISSUE: WON the contract of sale between the petitioners and
50% of gross sales commission to Federico with this Court respondents is valid?
precluded from determining such.
HELD: YES. Art. 1892 of the CC provides: "The agent may
All profits made and any advantage gained by an agent should appoint a substitute if the principal has not prohibited him
belong to the principal. from doing so; but he shall be responsible for the acts of the
substitute: (1) When he was not given the power to appoint
one."
CA Decision REVERSED and SET ASIDE.

Escueta vs. Lim • Applying this provision to the SPA executed by Rubio in favor
Citation: 512 SCRA 411 (2006) of his daughter Llamas, it is clear that she is not prohibited
from appointing a substitute. By authorizing Virginia Lim to sell
the subject properties, Patricia merely acted within the limits of
FACTS: Rufina Lim filed an action to remove cloud on, or quiet the authority given by her father, but she will have to be
title to, real property with preliminary injunction and issuance "responsible for the acts of the sub-agent" among which is
of a hold-departure order from the Philippines against Ignacio
precisely the sale of the subject properties in favor of
Rubio. respondent.

Lim averred that she bought the hereditary shares (consisting 。 Even assuming that Virginia Lim has no authority to sell the
of 10 lots) of Ignacio Rubio and the heirs of Luz Bololoy, and
subject properties, the contract she executed in favor of Lim is
other co-heirs; that said vendors executed a contract of sale in not void, but simply unenforceable under Art. 1317(2).
her favor; that Ignacio Rubio and the heirs received a down
payment or earnest money in the amount of P102K and P450K
o Rubio merely denies the contract of sale. He claims, without
respectively; that it was agreed in the contract of sale that the
vendors would secure certificates of title covering their substantiation, that what he received was a loan, not the down
respective hereditary shares; that the balance of the purchase payment for the sale of the subject properties. o His
acceptance and encashment of the check, however, constitute
price would be paid to each heir upon presentation of their
individual certificates of title, but Rubio refused to receive the ratification of the contract of sale and "produce the effects of
other half of the down-payment which is P100K as well as to an express power of agency." "[H]is action necessarily implies
that he waived his right of action to avoid the contract, and,
deliver the certificates of title covering his share on the two lots
and the shares of the other co- heirs. consequently, it also implies the tacit, if not express,
confirmation of the said sale effected" by Virginia Lim in favor
of respondent.
Petitioner Corazon Escueta, in spite of her knowledge that the
disputed lots have already been sold by Rubio to Lim, it is
alleged that a simulated deed of sale involving said lots was o Similarly, the Baloloys have ratified the contract of sale when
effected by Rubio in her favor; and that the simulated deed of they accepted and enjoyed its benefits. "The doctrine of
estoppel applicable to petitioners here is not only that which
sale by Rubio to Escueta has raised doubts and clouds over
Lim's title. prohibits a party from assuming inconsistent positions, based
on the principle of election, but that which precludes him from
repudiating an obligation voluntarily assumed after having
• Escueta says there is no cause of action, because Rubio has
accepted benefits therefrom. To countenance such repudiation
not entered into a contract of sale with her; that he has would be contrary to equity, and would put a premium on fraud
appointed his daughter Patricia Llamas to be his attorney-in- or misrepresentation."
fact and not in favor of Virginia Rubio Laygo Lim who was the
one who represented him in the sale of the disputed lots in
favor of Lim; that the P100K Lim claimed Rubio received as o Indeed, Virginia Lim and respondent have entered into a
down payment for the lots is a simple transaction by way of a contract of sale. Not only has the title to the subject properties
passed to the latter upon delivery of the thing sold, but there is
loan with Lim. The trial court ruled in favor of Lim and ordered
the Baloloys to execute a Deed of Absolute Sale over their also no stipulation in the contract that states the ownership is
hereditary shares in favor of Lim. to be reserved in or "retained by the vendor until full payment
of the price."
 NGJC
• Applying Article 1544 of the Civil Code, a second buyer of the when he was authorized to act according to his discretion, that
property who may have had actual or constructive knowledge discretion must not conflict with prior Board orders, resolutions
of such defect in the seller's title, or at least was charged with and instructions. The evidence shows that the IVO Board knew
the obligation to discover such defect, cannot be a registrant in nothing of the 1986 contracts and that it did not authorize
good faith. Such second buyer cannot defeat the first buyer's Monteverde to enter into speculative contracts.
title.
Safic can not rely on the doctrine of implied agency because
o Consequently, Ignacio Rubio could no longer sell the subject before the controversial 1986 contracts, IVO did not enter into
properties to Escueta, after having sold them to Lim. The identical contracts with Safic. The basis for agency is
records do not show that Rubio asked for a rescission of the representation and a person dealing with an agent is put upon
contract. What he adduced was a belated revocation of the SPA inquiry and must discover upon his peril the authority of the
he executed in favor of Patricia Llamas. agent.

Safic Alcan & Cie vs. Imperial Vegetable Oil Co., Inc. Under Article 1898 of the Civil Code, the acts of an agent
Citation: 355 SCRA 55 (2001) beyond the scope of his authority do not bind the principal
unless the latter ratifies the same expressly or impliedly. It also
Facts: Petitioner Safic Alcan & Cie (hereinafter, "Safic") is a bears emphasizing that when the third person knows that the
French corporation engaged in the international purchase, sale agent was acting beyond his power or authority, the principal
and trading of coconut oil. can not be held liable for the acts of the agent. If the said third
person is aware of such limits of authority, he is to blame, and
is not entitled to recover damages from the agent, unless the
Petitioner Safic alleged that on July 1, 1986 and September 25,
1986, it placed purchase orders with IVO for 2,000 long tons of latter undertook to secure the principal's ratification
crude coconut oil, valued at US$222.50 per ton to be delivered
within the month of January 1987. Private respondent, however, Pahud vs. Court of Appeals
failed to deliver the said coconut oil and, instead, offered a Citation: 597 SCRA 13 (2009)
"wash out" settlement, whereby the coconut oil subject of the
purchase contracts were to be "sold back" to IVO at the Facts: During their lifetime, spouses Pedro San Agustin and
prevailing price in the international market at the time of wash Agatona Genil were able to acquire a 246-square meter parcel
out. Thus, IVO bound itself to pay to Safic the difference of land situated in Barangay Anos, Los Baños, Laguna and
between the said prevailing price and the contract price of the covered by Original Certificate of Title (OCT) No. O-(1655) 0-15
2,000 long tons of crude coconut oil, which amounted to Agatona Genil died on September 13, 1990 while Pedro San
US$293,500.00. IVO failed to pay this amount despite repeated Agustin died on September 14, 1991. Both died intestate,
oral and written demands. survived by their eight (8) children: respondents Eufemia, Raul,
Ferdinand, Zenaida, Milagros, Minerva, Isabelita and Virgilio.
Safic alleged that on eight occasions between April 24, 1986
and October 31, 1986, it placed purchase orders with IVO for a Sometime in 1992, Eufemia, Ferdinand and Raul executed a
total of 4,750 tons of crude coconut oil. When IVO failed to Deed of Absolute Sale of Undivided Shares conveying in favor
honor its obligation under the wash out settlement narrated of petitioners (the Pahuds, for brevity) their respective shares
above, Safic demanded that IVO make marginal deposits from the lot they inherited from their deceased parents for
within forty-eight hours on the eight purchase contracts in P525,000.00 Eufemia also signed the deed on behalf of her four
amounts equivalent to the difference between the contract (4) other co- heirs, namely: Isabelita on the basis of a special
price and the market price of the coconut oil, to compensate it power of attorney executed on September 28, 1991 and also for
for the damages it suffered when it was forced to acquire Milagros, Minerva, and Zenaida but without their apparent
coconut oil at a higher price. IVO failed to make the prescribed written authority. The deed of sale was also not notarized.9
marginal deposits on the eight contacts, in the aggregate
amount of US$391,593.62, despite written demands. On July 21, 1992, the Pahuds paid P35,792.31 to the Los Baños
Rural Bank where the subject property was mortgaged. The
Hence, Safic prayed that IVO be ordered to pay the sums of bank issued a release of mortgage and turned over the owner's
US$293,500.00 and US$391,593.62, plus attorney's fees and copy of the OCT to the Pahuds. Over the following months, the
litigation expenses. Pahuds made more payments to Eufemia and her siblings
totaling to P350,000.00. They agreed to use the remaining
IVO raised the following special affirmative defenses: Safic had P87,500.00 to defray the payment for taxes and the expenses in
no legal capacity to sue because it was doing business in the transferring the title of the property. When Eufemia and her
Philippines without the requisite license or authority; the co-heirs drafted an extra-judicial settlement of estate to
subject contracts were speculative contracts entered into by facilitate the transfer of the title to the Pahuds, Virgilio refused
IVO's then President, Dominador Monteverde, in contravention to sign it
of the prohibition by the Board of Directors against engaging
in speculative paper trading, and despite IVO's lack of the On July 8, 1993, Virgilio's co-heirs filed a complaint" for judicial
necessary license from Central Bank to engage in such kind of partition of the subject property before the RTC of Calamba,
trading activity. Laguna. On November 28, 1994, in the course of the
proceedings for judicial partition, a Compromise Agreement
ISSUE: Whether the act of Dominador Monteverde binds IVO was signed with seven (7) of the co-heirs agreeing to sell their
undivided shares to Virgilio for P700,000.00. The compromise
HELD: No, the act of Dominador Monteverde without the agreement was, however, not approved by the trial court
because Atty. Dimetrio Hilbero, lawyer for Eufemia and her six
authorization of the Board of Directors did not bind IVO.
(6) co-heirs, refused to sign the agreement because he knew of
the previous sale made to the Pahuds.lawphil.net
The Supreme Court ruled that Monteverde had no blanket
authority to bind IVO to any contract. He must act according to
the instructions of the Board of Directors. Even in instances
 NGJC
On December 1, 1994, Eufemia acknowledged having received and not liable to creditors for obligations beyond their
P700,000.00 from Virgilio. Virgilio then sold the entire property contribution
to spouses Isagani Belarmino and Leticia Ocampo 4. Limited partners may ask for return of their capital
(Belarminos) sometime in 1994. The Belarminos immediately contribution
constructed a building on the subject property. 5. Partnership debts are paid out of common fund and
individual properties of the general partners
Aggrieved,

Alarmed and bewildered by the ongoing construction on the lot GENERAL PARTNER LIMITED PARTNER
they purchased, the Pahuds immediately confronted Eufemia
who confirmed to them that Virgilio had sold the property to ● Personally liable for ● Liability extends only to
the Belarminos the Pahuds filed a complaint in intervention in partnership obligations his capital contribution
the pending case for judicial partition. lavvphil ● All general partners have ● No share in the
equal right in management management
After trial, the RTC upheld the validity of the sale to petitioners. of business ● Must contribute cash or
● A general partner may property but not services
ISSUE: Whether or not the sale of the subject property by contribute money, property LP is not a proper party to
Eufemia and her co-heirs to the Pahuds is valid and or industry proceeding by or against a
enforceable? ● Party to proceedings by or partnership
against a partnership ● LP’s interest is freely
Ruling: ● General partner’s interest assignable
may not be assigned ● Name of LP must not
● Name of general partner appear in the firm’s name
Yes. Article 1874 of the Civil Code plainly provides:
may appear in the firm ● No prohibition as to
● General partner is engagement in the same
Art. 1874. When a sale of a piece of land or any interest therein prohibited in engaging in a business
is through an agent, the authority of the latter shall be in business which is of the ● LP does not have the same
writing; otherwise, the sale shall be void. Also, under Article same kind of business in the effect executor or
1878, a special power of attorney is necessary for an agent to partnership is engaged administrator shall have
enter into a contract by which the ownership of an immovable ● Retirement, death, insanity the rights of a limited
property is transmitted or acquired, either gratuitously or for a or insolvency of a GP partner for the purpose of
valuable consideration. Such stringent statutory requirement dissolved the partnership selling his estate
has been explained in Cosmic Lumber Corporation v. Court of
Appeals.

It is a basic rule in the law of agency that a principal is subject

to liability for loss caused to another by the latter's reliance PROS CONS
upon a deceitful representation by an agent in the course of his
employment (1) if the representation is authorized; (2) if it is
•You get access to skills and •General partners have
within the implied authority of the agent to make for the
expertise of general partners unlimited liability for
principal; or (3) if it is apparently authorized, regardless of
and financial resources of business debt •Limited
whether the agent was authorized by him or not to make the
limited partners •Financial partners cannot contribute
representation
liability of limited partners is to business decisions •More
limited to their investment compliance and paperwork
By their continued silence, Zenaida, Milagros and Minerva have amount •Management has no required than general
caused the Pahuds to believe that they have indeed clothed interference in decision-making partnerships •Limited
Eufemia with the authority to transact on their behalf. Clearly, from investors •Limited partners can be liable for
the three co-heirs are now estopped from impugning the partners can retire without expenses incurred due to
validity of the sale from assailing the authority of Eufemia to affecting management •Easier their actions
enter into such transaction. taxation; taxed only once

SLIDES FROM LECTURE AND CODAL PROVISIONS

SPECIFIC RIGHTS OF A LIMITED PARTNER (ART. 1851)

LIMITED PARTNERSHIP ART. 1843- 1867 1. to require that the partnership books be kept at the principal
place of business of the partnership
ARTICLE 1843. A limited partnership is one formed by two or 2. to inspect and copy at a reasonable hour partnership books
more persons under the provisions of the following article, or any of them
having as members one or more general partners and one or 3. to demand true and full information of all things affecting
more limited partners. The limited partners as such shall not be the partnership
bound by the obligations of the partnership. 4. to demand a formal account of partnership affairs whenever
circumstances render it just and reasonable
CHARACTERISTICS OF LIMITED PARTNERSHIP 5. to ask for dissolution and winding up by decree of court
1. Formed by compliance with statutory requirements (cannot 6. to receive a share of the profits or other compensation
be created orally) byway of income
2. One or more general partner/s control the business and are 7. to receive the return of his contribution provided the
personally liable to creditors partnership assets are in excess of all its liabilities
3. One or more limited partner/s contribute to the capital and
share in the profits but do not participate in the management ART. 1854 A limited partner also may loan money to and
transact other business with the partnership, and, unless he is
 NGJC
also a general partner, receive on account of resulting claims ANSWER:
against the partnership, with general creditors, a pro rata 1. Due to 3rd party creditors P50,000.00
share of the assets. 2. For taxes P15,000.00
3. Payment to D (loan) P35,000.00
No limited partner shall in respect to any such claim: Total P100,000.00
(1) Receive or hold as collateral security any partnership
property, or P150,000.00 – P100,000.00 = P50,000.00
(2) Receive from a general partner or the partnership any
payment, conveyance, or release from liability, if at the Contribution of E can be returned to him P20,000.00
time the assets of the partnership are not sufficient to
discharge partnership liabilities to persons not claiming ARTICLE 1858. A LIMITED PARTNER IS LIABLE TO THE
as general or limited partners. PARTNERSHIP:

The receiving of collateral security, or payment, conveyance, or (1) For the difference between his contribution as actually
release in violation of the foregoing provisions is a fraud on the made and that stated in the certificate as having been made,
creditors of the partnership and
(2) For any unpaid contribution which he agreed in the
ARTICLE 1857. A LIMITED PARTNER SHALL NOT RECEIVE certificate to make in the future at the time and on the
FROM A GENERAL PARTNER OR OUT OF PARTNERSHIP conditions stated in the certificate.
PROPERTY ANY PART OF HIS CONTRIBUTIONS UNTIL:
(1) All liabilities of the partnership, except liabilities to general A limited partner holds as trustee for the partnership:
partners and to limited partners on account of their (1) Specific property stated in the certificate as contributed by
contributions, have been paid or there remains property of the him, but which was not contributed or which has been
partnership sufficient to pay them; wrongfully returned, and
(2) The consent of all members is had, unless the return of the (2) Money or other property wrongfully paid or conveyed to
contribution may be rightfully demanded under the provisions him on account of his contribution.
of the second paragraph; and
(3) The certificate is canceled or amended so as to set forth the The liabilities of a limited partner as set forth in this article can
withdrawal or reduction. be waived or compromised only by the consent of all members;
but a waiver or compromise shall not affect the right of a
Subject to the provisions of the first paragraph, a limited creditor of a partnership who extended credit or whose claim
partner may rightfully demand the return of his contribution: arose after the filing and before a cancellation or amendment
(1) On the dissolution of a partnership, or of the certificate, to enforce such liabilities.
(2) When the date specified in the certificate for its return has
arrived, or When a contributor has rightfully received the return in whole
(3) After he has given six months’ notice in writing to all other or in part of the capital of his contribution, he is nevertheless
members, if no time is specified in the certificate, either for the liable to the partnership for any sum, not in excess of such
return of the contribution or for the dissolution of the return with interest, necessary to discharge its liabilities to all
partnership. creditors who extended credit or whose claims arose before
such return.
In the absence of any statement in the certificate to the
contrary or the consent of all members, a limited partner, DISSOLUTION OF A LIMITED PARTNERSHIP
irrespective of the nature of his contribution, has only the right Causes: - the same way as ordinary partnership
to demand and receive cash in return for his contribution. a. Misconduct of a general partner
b. Fraud practiced on the limited partner by the general
A limited partner may have the partnership dissolved and its partner
affairs wound up when: c. Retirement, death of a general partner (Art. 1860)
(1) He rightfully but unsuccessfully demands the return of his d. When all limited partners ceased to be such (Art. 1864)
contribution, or e. Expiration of the term for which it was to exist (Art. 1844)
(2) The other liabilities of the partnership have not been paid, f. By mutual consent of the partners before the expiration of
or the partnership property is insufficient for their payment as the firm’s original term
required by the first paragraph, No. 1, and the limited partner
would otherwise be entitled to the return of his contribution
ARTICLE 1863. IN SETTLING ACCOUNTS AFTER
EXAMPLE: DISSOLUTION THE LIABILITIES OF THE PARTNERSHIP
After operating for some time as a limited partnership, ABC SHALL BE ENTITLED TO PAYMENT IN THE FOLLOWING
Ltd. Composed of A, B, and C as general partners, who ORDER:
contributed P30,000.00 each and D & E as limited partners who (1) Those to creditors, in the order of priority as provided by
contributed P20,000.00 each. The partnership has a total assets law, except those to limited
of P150,000.00. partners on account of their contributions, and to general
partners;
With the following liabilities: (2) Those to limited partners in respect to their share of the
Due to 3rd party creditors P50,000.00 profits and other
Loan extended by C P25,000.00 compensation by way of income on their contributions;
Loan Extended by D P35,000.00 (3) Those to limited partners in respect to the capital of their
Taxes P15,000.00 contributions;
Indemnity to B for damages suffered in consequence of (4) Those to general partners other than for capital and profits;
management P10,000.00 (5) Those to general partners in respect to profits;
(6) Those to general partners in respect to capital.
Can E demand for the return of his contribution? Subject to any statement in the certificate or to subsequent
agreement, limited partners
 NGJC
share in the partnership assets in respect to their claims for (f)To act in accordance with the instructions of the principal,
capital, and in respect to and in default thereof, to do all that a good father of a family
their claims for profits or for compensation by way of income would do. (Art. 1887);
on their contribution (g)Not to carry out the agency if its execution would manifestly
respectively, in proportion to the respective amounts of such result in loss or damage to the principal (Art. 1888)
claims. (h)To answer for damages if there be a conflict between his
interests and those of the principal, he should prefer his own.
ARTICLE 1864. THE CERTIFICATE SHALL BE CANCELLED (Art. 1889)
WHEN THE PARTNERSHIP IS DISSOLVED OR ALL LIMITED (i)Not to loan to himself if he has been authorized to lend
PARTNERS CEASE TO BE SUCH. money at interest. (Art. 1890)
A certificate shall be amended when: (j)To render an account of his transactions and to deliver to the
(1) There is a change in the name of the partnership or in the principal whatever he may have received by virtue of the
amount or character of the contribution of any limited partner; agency. (Art. 1891)
(2) A person is substituted as a limited partner; (k) To distinguish goods by countermarks, and designate the
(3) An additional limited partner is admitted; merchandise respectively belonging to each principal in case of
(4) person is admitted as a general partner; commission agent who handles goods of the same kind and
(5) A general partner retires, dies, becomes insolvent or insane, mark, which belong to different owners; (Art. 1904)
or is sentenced to civil interdiction and the business is (l) To be responsible in certain cases for the act of the
continued under article 1860; substitute appointed by him. (Art. 1892)
(6) There is a change in the character of the business of the (m)To pay interest on funds he has applied to his own use.
partnership; (Article 1896)
(7) There is a false or erroneous statement in the certificate; (n) To inform the principal, where an authorized sale of credit
(8) There is a change in the time as stated in the certificate for has been made, of such sale (Art. 1906)
the dissolution of the partnership or for the return of a (o)To bear the risk of collection, should he receive also on a sale
contribution; a guarantee commission (Art. 1907)
(9) A time is fixed for the dissolution of the partnership, or the (p) To indemnify the principal for damages for his failure to
return of a contribution, no time having been specified in the collect the credits of his principal (Art. (1908); and
certificate, or (q) To be responsible for fraud or negligence. (Art. 1909)
(10) The members desire to make a change in any other
statement in the certificate in order that it shall accurately Summary: Obligations of the agent
represent the agreement among them. 1. To carry out the agency in accordance with its terms [Article
1884, Civil Code];
The Certificate shall be canceled, not merely amended: 2. To answer for the damages which through his
non-performance the principal may suffer [Article 1884, Civil
a. When the partnership is dissolved other than by reason of Code];
the expiration of the term of the partnership; or 3. To act in accordance with the instructions of the principal
[Article 1887, Civil Code];
b. When all the limited partners cease to be such. A limited 4. Not to carry out the agency if its execution would manifestly
partnership cannot exit as such if there are no more limited result in loss or damage to the principal [Article 1888, Civil
partners (Art. 1843) Code];
5. To answer for damages should he prefer, in case of conflict,
In all other cases only an amendment of the certificate is his own interests to those of the principal [Article 1889, Civil
required (Art. 1864, Nos. 1-10) Code];
6. To render an account of his transactions and to deliver to the
ARTICLE 1884 principal whatever he may have received by virtue of the
The agent is bound by his acceptance to carry out the agency agency [Article 1891, Civil Code];
and is liable for the damages which, through his 7. To be responsible for the goods received by him, to sell on
non-performance, the principal may suffer. He must also finish credit only with the consent of the principal and to collect with
the business already begun on the death of the principal, due diligence the credits of the principal [Articles 1903-1908,
should delay entail any danger. Civil Code]; and
8. To answer for his fraud or negligence. [Article 1909, Civil
GENERAL Obligations of an agent to his principal: Code]
(a)To act with the utmost good faith and loyalty for the
furtherance and advancement of the interests of the principal; ARTICLE 1885
(b)To obey the principal’s instructions; and In case a person declines an agency, he is bound to observe
(c)To exercise reasonable care. the diligence of a good father of a family in the custody and
preservation of the goods forwarded to him by the owner until
Specific Obligations: the latter should appoint an agent. The owner shall as soon as
(a)To carry out the agency he has accepted. practicable either appoint an agent or take charge of the
(b)To answer for damages which through his non-performance goods.
the principal may suffer.
(c)To finish the business already begun on the death of the ARTICLE 1886
principal should delay entail danger. Should there be a stipulation that the agent shall advance the
(d)To observe the diligence of a good father of a family in the necessary funds, he shall be bound to do so except when the
custody and preservation of the goods forwarded to him by the principal is insolvent.
owner in case he declines an agency, until an agent is
appointed. (Art. 1885) ARTICLE 1887
(e)To advance the necessary funds should there be a stipulation In the execution of the agency, the agent shall act in
to do so. (Art. 1886) accordance with the instructions of the principal. In default
thereof, he shall do all that a good father of a family would do,
as required by the nature of the business.
 NGJC
‘ principal. In this case, however, the agent is liable if he
ARTICLE 1888 undertook to secure the principal’s ratification.
An agent shall not carry out an agency if its execution would
manifestly result in loss or damage to the principal. ARTICLE 1899
If the duly authorized agent acts in accordance with the orders
ARTICLE 1889 of the principal, the latter cannot set up the ignorance of the
The agent shall be liable for damages if, its execution would agent as to circumstances whereof he himself was, or ought to
manifestly result in loss or damage to the principal. have been aware.

ARTICLE 1890 ARTICLE 1900

If the agent has been empowered to borrow money, he may So far as third persons are concerned, an act is deemed to
himself be the lender at the current rate of interest. If he has have been performed within the scope of the agent’s authority,
been authorized to lend money at interest, he cannot borrow it if such act is within the terms of the power of attorney, as
without the consent of the principal. written, even if the agent has in fact exceeded the limits of this
authority according to an understanding between the principal
ARTICLE 1891 and the agent.
Every agent is bound to render an account of his transactions
and to deliver to the principal whatever he may have received ARTICLE 1901
by virtue of the agency, even though it may not be owing to the A third person cannot set up the fact that the agent has
principal. exceeded his powers, if the principal has ratified, or has
Every stipulation exempting the agent from the obligation to signified his willingness to ratify the agent’s acts.
render an account shall be void.
ARTICLE 1902
ARTICLE 1892 A third person with whom the agent wishes to contract on
The agent may appoint a substitute if the principal has not behalf of the principal may require the presentation of the
prohibited him from doing so; but he shall be responsible for power of attorney, or the instructions as regards the agency.
the acts of the substitute: Private or secret orders and instructions of the principal do not
prejudice third persons who have relied upon the power of
1. When he was not given the power to appoint one; attorney or instructions shown them.
2. When he was given such power, but without designating
the person, and the person appointed was notoriously ARTICLE 1903
incompetent or insolvent. The commission agent shall be responsible for the goods
received by him in the terms and conditions and as described
All acts of the substitute appointed against the prohibition of in the consignment, unless upon receiving them he should make
the principal shall be void. a written statement of the damage and deterioration suffered
by the same.
ARTICLE 1893
In cases mentioned in 1892, Nos. 1 & 2, the principal may ARTICLE 1904
furthermore bring an action against the substitute with respect The commission agent who handles goods of the same kind
to the obligations which the latter has contracted under the and mark, which belong to different owners, shall distinguish
substitution them by countermarks, and designate the merchandise
respectively belonging to each principal.
ARTICLE 1894
The responsibility of two or more agents, even though they ARTICLE 1905
have been appointed simultaneously, is not solidary, if The commission agent cannot, without the express or implied
solidarity has not been expressly stipulated. consent of the principal, sell on credit. Should he do so, the
principal may demand from him payment in case, but the
ARTICLE 1895 commission agent shall be entitled to any interest or benefit,
If solidarity has been agreed upon, each of the agents is which may result from such sale.
responsible for the non-fulfillment of agency, and for the fault
or negligence of his fellow agents, except in the latter case ARTICLE 1906
when the fellow agents acted beyond the scope of their Should the commission agent, with authority of the principal,
authority sell on credit, he shall inform the principal, with a statement of
the names of the buyers. Should he fail to do so, the sale shall
ARTICLE 1896 be deemed to have been made for in cash insofar as the
The agent owes interest on the sums he has applied to his own principal is concerned.
use from the day on which he did so, and on those which he still
owes after the extinguishment of the agency. ARTICLE 1907
Should the commission agent receive on a sale, in addition to
ARTICLE 1897 the ordinary commission, another called a guarantee
The agent who acts as such is not personally liable to the party commission, he shall bear the risk of collection and shall pay
with whom he contracts unless he expressly binds himself or the principal the proceeds of the sale on the same terms
exceeds the limits of his authority without giving such party agreed upon with the purchaser.
sufficient notice of his powers
ARTICLE 1908
ARTICLE 1898 The commission agent who does not collect the credits of his
If the agent contracts in the name of the principal, exceeding principal at the time they become due and demandable shall
the scope of his authority, and the principal does not ratify the be liable for damages, unless he proves that he exercised due
contract, it shall be void if the party with whom the agent diligence for that purpose.
contracted is aware of the limits of the powers granted by the
 NGJC
ARTICLE 1909 Art. 1544. If the same thing should have been sold to
The agent is responsible not only for fraud, but also for different vendees, the ownership shall be transferred to
negligence, which shall be judged with more or less rigor by the the person who may have first taken possession thereof
courts, according to whether the agency was or was not for a in good faith, if it should be movable property.
compensation.
Should it be immovable property, the ownership shall
Summary: Obligations of the Agent belong to the person acquiring it who in good faith first
1. To carry out the agency in accordance with its terms [Article recorded it in the Registry of Property.
1884, Civil Code];
2. To answer for the damages which through his Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the
non-performance the principal may suffer [Article 1884, Civil
possession; and, in the absence thereof, to the person
Code];
who presents the oldest title, provided there is good faith.
3. To act in accordance with the instructions of the principal
[Article 1887, Civil Code];
Art. 1917. In the case referred to in the preceding article, if the
4. Not to carry out the agency if its execution would manifestly
agent has acted in good faith, the principal shall be liable in
result in loss or damage to the principal [Article 1888, Civil
damages to the third person whose contract must be rejected.
Code];
If the agent acted in bad faith, he alone shall be responsible.
5. To answer for damages should he prefer, in case of conflict,
his own interests to those of the principal [Article 1889, Civil
Summary: Obligations of the Principal:
Code];
a. To comply with all the obligations which the agent may have
6. To render an account of his transactions and to deliver to the
contracted within the scope of his authority [Articles 1868
principal whatever he may have received by virtue of the
&1883, Civil Code];
agency [Article 1891, Civil Code];
7. To be responsible for the goods received by him, to sell on
b. To advance to the agent, should the latter so request, the
credit only with the consent of the principal and to collect with
sums necessary for the execution of the agency [Article 1912,
due diligence the credits of the principal [Articles 1903-1908,
Civil Code];
Civil Code]; and
8. To answer for his fraud or negligence. [Article 1909, Civil
c. To reimburse the agent for all advances made by him
Code]
provided the agent is free from fault [Ibid];
OBLIGATIONS OF THE PRINCIPAL
d. To indemnify the agent for all damages which the execution
of the agency may have caused the later without fault or
Art. 1910. The principal must comply with all the obligations
negligence on his part [Article 1913, Civil Code]; and
which the agent may have contracted within the scope of his
authority.
e. To pay the agent the compensation agreed upon, or if no
As for any obligation wherein the agent has exceeded his
compensation was specified, the reasonable value of the
power, the principal is not bound except when he ratifies it
agent’s services. [Articles, 1875 and 1306]
expressly or tacitly.

Art. 1911. Even when the agent has exceeded his authority, the
Principles to take note in instances when third parties or
principal is solidarily liable with the agent if the former allowed
customers affected by the principal-agent relationship:
the latter to act as though he had full powers.
1. If the agent acts with authority and on behalf of the
Art. 1912. The principal must advance to the agent, should the
principal, the transaction is valid. Hence, the principal is liable
latter so request, the sums necessary for the execution of the
to the third party while the agent is not personally liable unless
agency. Should the agent have advanced them, the principal
he bound himself [Article 1897, Civil Code].
must reimburse him therefore, even if the business or
undertaking was not successful, provided the agent is free from
2. If the agent acts with authority but in his own name, it is not
all fault. The reimbursement shall include interest on the sums
binding on the principal who has no right of action against
advanced, from the day on which the advance was made.
third persons with whom the agent has contracted. Neither
have such persons against the principal. In such case, the
Art. 1913. The principal must also indemnify the agent for all
agent is the one directly bound in favor of the person with
the damages which the execution of the agency may have
whom he has contracted, as if the transaction were his own,
caused the latter, without fault or negligence on his part.
except when the contract involves things belonging to the
principal. This shall be without prejudice to the actions between
Art. 1914. The agent may retain in pledge the things which are
the principal and agent. [Article 1883, Civil Code] If it involves
the object of the agency until the principal effects the
things belonging to the principal, then the contract must be
reimbursement and pays the indemnity set forth in the two
considered as entered into between the principal and the third
preceding articles.
person and consequently, if the obligations belong to the
former, to him alone must also belong the rights arising from
Art. 1915. If two or more persons have appointed an agent for
the contract. [Sy-Juco and Viardo vs. Sy-Juco, 40 Phil. 634,
a common transaction or undertaking, they shall be solidarily
1920]
liable to the agent for all the consequences of the agency.
3. If the agent acted without authority and in his own name, it
Art. 1916. When two persons contract with regard to the same
will not bind the principal. However, it shall be valid, as regards
thing, one of them with the agent and the other with the
the agent, whether or not the thing belongs to the principal,
principal, and the two contracts are incompatible with each
provided that at the time of delivery to the third party, the
other, that of prior date shall be preferred, without prejudice to
agent can legally transfer the ownership of the thing (such as
the provisions of Article 1544.
when the agent becomes the owner of the thing). Otherwise,
the agent shall be liable to the third party for breach of
 NGJC
warranty against eviction or damages. [National Bank vs.
Aguledo, 58 Phil. 655, 1933]

4. If the principal refuses to reimburse the agent for advances

made by the latter necessary to carry out the agency or does
not indemnify the agent for damages that the latter suffered in
executing the agency without fault or negligence, the agent
may retain in pledge the goods and merchandise until the
principal effects the reimbursement. [Article 1914, Civil Code]

However, it must be noted that under Art. 1918 of the Civil

Code, the principal is not liable for the expenses incurred by
the agent in the following cases:

(a) If the agent acted in contravention of the principal’s

instructions, unless the latter should wish to avail himself of the
benefits derived from the contract;

(b) When the expenses were due to the fault of the agent;

(c) When the agent incurred them with knowledge that an

unfavorable result would ensue, if the principal was not aware
thereof; and

(d) When it was stipulated that the expenses would be borne by

the agent, or that the latter would be allowed only a certain
sum.