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Safic Alcan &Cie v. Imperial Vegetable Oil Co. Inc., G.R. No. 126751, 28 March 2001 When the President enters into speculative contracts, without prior board approval, and without subsequent submission of those contracts to the Board for approval or ratification, nor were the transactions included in the reports of the corporation, such contracts do not bind the corporation. It must be pointed out that the Board of Directors, not the President, exercises corporate powers. Safic Alcan & Cie v. Imperial Vegetable Oil Co., Inc. , 355 SCRA 559 (2001). It is the Board of Directors, not the President, that exercises corporate powers. It must be emphasized that the basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. Safic Alcan & Cie v. Imperial Vegetable Oil Co., Inc., 355 SCRA 559 (2001). Cervantes v. CA FACTS: PAL issued to Cervantes a round trip ticket for Manila-Honolulu-Los Angeles-Honolulu-Manila. This ticket expresslyprovided an expiry date of 1 year from issuance or until March 27, 1990.The ticket was issued in compliance w/ a Compromise Agreement entered between PAL & Cervantes in 2 previous suitsbetween them.On March 3, 1990, days before the expiry date, Cervantes used it. Upon his arrival to LA, on the same day, heimmediately booked his LA-Manila return ticket w/ PAL office which was confirmed for April 2, 1990 flight.Cervantes learned that the same PAL plane would make a stop-over in San Francisco and because he would be in SanFrancisco on April 2, 1990, he made arrangements w/ PAL for him to board the flight in San Francisco instead of boarding it in LA.When Cervantes checked in at PAL counter in San Francisco he was not allowed to board. PAL personnel made anotation on his ticket TICKET NOT ACCEPTED DUE TO EXPIRATION OF VALIDITY.Aggrieved, Cervantes filed a complaint for damages for Breach of Contract of Carriage. complaintw/c was upheld by the CA. ISSUE: 1 . WON the act of the PAL agents in confirming the ticket of Cervantes extended the period of validity. RULING: The SC ruled in the negative. The plane ticket itself provides that it is not valid after March 27, 1990. It is also stipulated in paragraph 8 of theConditions of Contract that 8. This ticket is good for carriage for one year from date of issue, except as otherwiseprovided in this ticket, in carrier's tariffs, conditions of carriage, or related regulations. The fare for carriage hereunder issubject to change prior to commencement of carriage. Carrier may refuse transportation if the applicable fare has notbeen paid. In the case of Lufthansa vs. Court of Appeals, the SC held that the "ticket constitute the contract between the parties. Itis axiomatic that when the terms are clear and leave no doubt as to the intention of the contracting parties, contractsare to be interpreted according to their literal meaning."In his effort to evade this inevitable conclusion, petitioner theorized that the confirmation by the PAL's agents in LosAngeles and San Francisco changed the compromise agreement between the parties.As aptly by the appellate court:. . . on March 23, 1990, he was aware of the risk that his ticket could expire, as it did, before he returned to thePhilippines.'The 2 personnel from PAL did not have an authority to extend the validity of the ticket. Cervantes knew this from thestart when he called up the Legal Department of appellee in the Philippines before he left for the United States of America. He had first hand knowledge that the ticket in question would expire on March 27, 1990 and that to secure anextension, he would have to file a written request for extension at the PAL's office in the Philippines. ). Despite thisknowledge, he persisted to use the ticket The RTC dismissed the

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in question."Since the PAL agents are not privy to the said Agreement and Cervantes knew that a written request to the legal counselof PAL was necessary, he cannot use what the PAL agents did to his advantage. The said agents, according to the Court of Appeals, acted without authority when they confirmed the flights of the petitioner. Under Article 1989of the New Civil Code, the acts an agent beyond the scope of his authority do not bind the principal,unless the latter ratifies the same expressly or impliedly. Furthermore, when the third person (herein petitioner) knowsthat the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from theagent, unless the latter undertook to secure the principal's ratification. agreed upon. To convince Atty. Linsangan, Baluyotexecuted a document confirming that while the contract price is P132,250.00, Atty. Linsangan wouldpay only the original price of P95,000.00. On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled forreasons the latter could not explain, and presented to him another proposal for the purchase of anequivalent property. He refused the new proposal and insisted that Baluyot and MMPCI honor theirundertaking. MMPCI alleged that Contract No. 28660 was cancelled conformably with the terms of the contractbecause of nonpayment of arrearages. MMPCI stated that Baluyot was not an agent but anindependent contractor, and as such was not authorized to represent MMPCI or to use its nameexcept as to the extent expressly stated in the Agency Manager Agreement. Moreover, MMPCI wasnot aware of the arrangements entered into by Atty. Linsangan and Baluyot, as it in fact received adown payment and monthly installments as indicated in the contract. Official receipts showing theapplication of payment were turned over to Baluyot whom Atty. Linsangan had from the beginningallowed to receive the same in his behalf.

Manila Memorial Park Cemetery, Inc. (MMPCI) v. Pedro Linsangan FACTS: FlorenciaBaluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the Holy CrossMemorial Park owned by MMPCI. A former owner of a memorial lot under Contract No. 25012 was nolonger interested in acquiring the lot and had opted to sell his rights subject to reimbursement of theamounts he already paid. The contract was for P95,000.00. Baluyot reassured Atty. Linsangan thatonce reimbursement is made to the former buyer, the contract would be transferred to him. Atty.Linsangan agreed and gave Baluyot P35,295.00 representing the amount to be reimbursed to theoriginal buyer and to complete the down payment to MMPCI. Subsequently, Baluyot brought an Offer to Purchase a different memorial lot denominated asContract No. 28660 with a listed price of P132,250.00. Atty. Linsangan objected to the new contractprice, as the same was not the amount previously

ISSUE: WON MMPCI allowed Baluyot to act as though she had full powers to be held solidarilyliable with thelatter HELD: No. By the contract of agency, a person binds himself to render some service or to do something inrepresentation or on behalf of another, with the consent or authority of the latter. The elements of agency are (i) consent, express or implied, of the parties to establish the relationship; (ii) the objectis the execution of a juridical act in relation to a third person; (iii) the

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agent acts as a representativeand not for himself; and (iv) the agent acts within the scope of his authority. MMPCI cannot be bound by the contract procured by Atty. Linsangan and solicited by Baluyot. Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces obtainedon forms provided by MMPCI. The terms of the offer to purchase, therefore, are contained in suchforms and, when signed by the buyer and an authorized officer of MMPCI, becomes binding on bothparties. The Offer to Purchase duly signed by Atty. Linsangan, and accepted and validated by MMPCI showeda total list price of P132,250.00. Likewise, it was clearly stated therein that Purchaser agrees thathe has read or has had read to him this agreement, that he understands its terms and conditions,and that there are no covenants, conditions, warranties or representations other than thosecontained herein. By signing the Offer to Purchase, Atty. Linsangan signified that he understood itscontents. That he and Baluyot had an agreement different from that contained in the Offer toPurchase is of no moment, and should not affect MMPCI, as it was obviously made outside Baluyotsauthority. To repeat, Baluyots authority was limited only to soliciting purchasers. She had noauthority to alter the terms of the written contract provided by MMPCI. The document/letterconfirming the agreement that Atty. Linsangan would have to pay the old price was executed byBaluyot alone. Nowhere is there any indication that the same came from MMPCI or any of its officers. It has not been established that Atty. Linsangan even bothered to inquire whether Baluyot wasauthorized to agree to terms contrary to those indicated in the written contract, much less bindMMPCI by her commitment with respect to such agreements. Even if Baluyot was Atty. Linsangansfriend and known to be an agent of MMPCI, her declarations and actions alone are not sufficient toestablish the fact or extent of her authority. Atty. Linsangan as a practicing lawyer for a relativelylong period of time when he signed the contract should have been put on guard when theiragreement was not reflected in the contract. More importantly, Atty. Linsangan should have beenalerted by the fact that Baluyot failed to effect the transfer of rights earlier promised, and wasunable to make good her written commitment, nor convince MMPCI to assent thereto, as evidencedby several attempts to induce him to enter into other contracts for a higher consideration. He did not even bother to ask for official receipts of his payments, nor inquire from MMPCI directly toascertain the real status of the contract, blindly relying on the representations of Baluyot. A lawyerby profession, he knew what he was doing when he signed the written contract, knew the meaningand value of every word or phrase used in the contract, and more importantly, knew the legal effectswhich said document produced. He is bound to accept responsibility for his negligence. MMPCI cannot be held liable based on ratification and estoppels. (See Arts. 1898, 1910 and 1911.) Ratification adoption or confirmation by one person of an act performed on his behalf by anotherwithout authority. Ordinarily, the principal must have full knowledge at the time of ratification of allthe material facts and circumstances relating to the unauthorized act of the person who assumed toact as agent. Thus, if material facts were suppressed or unknown, there can be no valid ratificationand this regardless of the purpose or lack thereof in concealing such facts and regardless of theparties between whom the question of ratification may arise. Nevertheless, this principle does notapply if the principals ignorance of the material facts and circumstances was willful, or that theprincipal chooses to act in ignorance of the facts. However, in the absence of circumstances puttinga reasonably prudent man on inquiry, ratification cannot be implied as against the principal who isignorant of the facts. No ratification can be implied in this case.

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The real arrangement between Baluyot and Atty. Linsangan was for the latter to pay a monthlyinstallment of P1,800.00 whereas Baluyot was to shoulder the counterpart amount of P1,455.00 tomeet the P3,255.00 monthly installments as indicated in the contract. Thus, every time aninstallment falls due, payment was to be made through a check from Atty. Linsangan for P1,800.00and a cash component of P1,455.00 from Baluyot. However, it appears that while Atty. Linsanganissued the postdated checks, Baluyot failed to come up with her part of the bargain. If MMPCI wasaware of the arrangement, it would have refused the latters check payments for being insufficient. Itwould not have applied to his account the P1,800.00 checks. Moreover, the fact that Baluyot had topractically explain to MMPCIs Sales Manager the details of her arrangement with Atty. Linsanganand admit to having made an error in entering such arrangement confirm that MMCPI had noknowledge of the said agreement. There is also no agency by estoppel in this case. (See elements of agency by estoppels, infra.) Thereis no indication that MMPCI let the public, or specifically, Atty. Linsangan to believe that Baluyot hadthe authority to alter the standard contracts of the company. One who claims the benefit of anestoppel on the ground that he has been misled by the representations of another must not havebeen misled through his own want of reasonable care and circumspection. The agreement, insofar as the P95,000.00 contract price is concerned, is void and cannot beenforced as against MMPCI. Neither can he hold Baluyot liable for damages under the same contract,since there is no evidence showing that Baluyot undertook to secure MMPCIs ratification. At best,the agreement between Baluyot and Atty. Linsangan bound only the two of them. As far as MMPCIis concerned, it bound itself to sell its interment space to Atty. Linsangan for P132,250.00 underContract No. 28660, and had in fact received several payments in accordance with the samecontract. If the contract was cancelled due to arrearages, Atty. Linsangans recourse should only beagainst Baluyot who personally undertook to pay the difference between the true contract price of P132,250.00 and the original proposed price of P95,000.00. Franciscov. GSIS NATURE Appeal by the Government Service Insurance Systemfrom the decision of the Court of First Instance of Rizal. FACTS - CFI ordered GSIS to abide by the terms of the contractcreated by plaintiff's offer and its unconditionalacceptance, with costs against the GSIS. Trinidad J.Francisco (plaintiff) appealed separately (L18155),because the trial court did not award the P535,000.00damages and attorney's fees she claimed. - October 10,1956: Trinidad J. Francisco mortgaged infavor of Government Service Insurance System (GSIS) aparcel of land containing an area of 18,232 squaremeters, with twenty-one (21) bungalows, known as Vic-Mari Compound. This was in consideration of a loan inthe amount of P400K, out of which the sum of P336,100.00 was released to her.- January 6, 1959: GSIS extrajudicially foreclosed themortgage on the ground that up to that date Franciscowas in arrears on her monthly installments in theamount of P52,000.00. Payments made by the plaintiff at the time of foreclosure amounted to P130,000.00.GSIS itself was the buyer of the property in theforeclosure sale. - February 20, 1959: the plaintiff's father, Atty. Vicente J. Francisco, sent a letter to the general manager of thedefendant corporation, Mr. Rodolfo P. Andal, proposingto pay said amount of P30,000 to the GSIS if it wouldagree that after such payment the foreclosure of mydaughter's mortgage would be set aside. As for thebalance, Atty. Francisco proposed for GSIS to take overthe administration of the mortgaged property and tocollect the monthly installments, amounting to aboutP5,000, until the balance is paid.

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- February 20 1959: Atty. Francisco received a telegramcontaining an approval of his request. It was signed byAndal.- February 28 1959: Atty. Francisco remitted to GSIS,through Andal, a check for P30K. GSIS received theamount of P30K, and issued an official receipt No.1209874, dated 4 March 1959. It did not, however, takeover the administration of the compound (as wasproposed by Atty. Francisco). - Remittances, all accompanied by letters,corresponding to the months of March, April, May, and June, 1960 and totalling P24,604.81 were also sent byFrancisco to GSIS from time to time, all of which werereceived and duly receipted for. - Then the System sent three (3) letters, one dated 29 January 1960, which was signed by its assistant generalmanager, and the other two letters, dated 19 and 26February 1960, respectively, which were signed byAndal, asking the plaintiff for a proposal for thepayment of her indebtedness, since according to theSystem the one-year period for redemption hadexpired. Respondents Comment > The remittances previously made by Atty. Franciscowere allegedly not sufficient to pay off her daughter'sarrears, including attorney's fees incurred by thedefendant in foreclosing the mortgage. ISSUES 1. WON the telegram generated a contract that is validand binding upon the parties 2. WON Francisco is entitled to damages (moraldamages in the outline) HELD 1. YES, the contract is binding. Ratio If a corporation knowingly permits one of itsofficers, or any other agent, to do acts within the scopeof an apparent authority, and thus holds him out to thepublic as possessing power to do those acts, thecorporation will, as against anyone who has in goodfaith dealt with the corporation through such agent, beestopped from denying his authority. Reasoning - GSIS does not disown the telegram, and even assertsthat it came from its offices, as may be gleaned fromthe letter, dated 31 May 1960, to Atty. Francisco, andsigned "R. P. Andal, general manager by LeovigildoMonasterial, legal counsel. - In remitting the payment of P30,000 advanced by herfather, Trinidads letter to Mr. Andal quoted verbatimthe telegram of acceptance Mr. Andal sent. - Notwithstanding this notice, the defendant Systempocketed the amount, and kept silent about thetelegram not being in accordance with the true facts,as it now alleges. This silence, taken together with theunconditional acceptance of three other subsequentremittances from plaintiff, constitutes in itself a bindingratification of the original agreement. 2. NO, Francisco is not entitled to damages. - The court a quo correctly refused to award such actual or compensatory damages because it could not determine with reasonable certainty the difference between the offered price and the actual value of the property. - Without proof the Court cannot assume, or take judicial notice, as suggested by the plaintiff, that the practice of lending institutions in the country is to give out as loan 60% of the actual value of the collateral.- There was no error in the appealed decision in denying moral damages, not only on account of the plaintiff's failure to take the witness stand and testify to her social humiliation, wounded feelings, anxiety, etc., as the decision holds, but primarily because a breach of contract like that of defendant, not being malicious or

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fraudulent, does not warrant the award of moral damages under Article 2220 of the Civil Code.ART. 2220 Disposition The appealed decision if affirmed, withcosts against GSIS. Woodchild Holdings, Inc. v. Roxas Electric and Construction Company, Inc., (Callejo, Sr.G.R. | August 12, 2004) The doctrine of apparent authority was not applicable in this case because the president of the company was given a specific authority by virtue of a board resolution to sell a particular land. Any actions of the president outside such vested authority shall not bind the corporation with third party. FACTS: Respondent owned 2 parcels of land both covered by TCTs. A portion of Lot 1abutted Lot 2 and was a dirt road accessing Sumulong highway. At a special meeting, the Board of Directors of respondent authorized the corporation through its president, Roberto Roxas, to SELL Lot 2. Petitioner wanted to buy Lot 2 where it wanted to build a warehouse, and a portionof Lot 1 to allow its 45-foot container van to readily enter and leave its property. Itspresident, Jonathan Dy, wrote a letter to Roxas offering to buy Lot 2. The offer wasaccepted. On Sept. 5, 1991, a Deed of Absolute receipt of P5,000,000 was acknowledged given a right of way from the highway to the event that the same be insufficient, more. The vendor undertook to eject weeksfrom the signing of the Deed. Sale was executed and by Roxas. Petitioner was the property, and that in the vendoragrees to sell the squatters within 2 was accepted by petitioner but construction was not commenced until April 1992 after a renegotiation in the light of the expiration of the period contemplated. The construction commenced without a building permit. On Sept. 16, 1991, Ponderosa Leather Goods Co. confirmed its lease of the warehouse to be constructed. Ponderosa emphasized the need for the ware house to be ready for occupancy before April 1, 1992. ISSUES & ARGUMENTSW/N respondents are liable for (a) the delay in the construction of the warehouse, and (b) for unearned income from the lease agreement with Ponderosa. HOLDING & RATIO DECIDENDI (a) Yes. Petitioner could not be expected to file its application for a building permit before April 1992 because the squatters were still occupying the property. Because of the respondent's failure to cause their eviction as agreed upon, the petitioner's contractor failed to commence the construction of the warehouse in October 1991 for the agreed price of P8,649,000. In the meantime, costs of construction materials spiraled. Under the construction contract entered into between the petitioner and the contractor, the petitioner was obliged to pay P11,804,160, including the additional work costing P1,441,500, or a net increase of P1,712,980. The respondent is liable for the difference between the original cost of construction and the increase thereon, conformably to Article 1170 of the New Civil Code. (b) Yes. Petitioner lost the amount of P3,900,000 by way of unearned incomefrom the lease of the property to the Ponderosa Leather Goods Company. The respondent is liable to the petitioner for the said amount, under Articles 2200and 2201 of the New Civil Code: Art. 2200. Indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain . Art. 2201. In contracts and quasicontracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable

On Sept. 10, 1991, Wimbeco Builders Inc. (WBI) offered to construct the warehouse for P8,649,000, with construction commencing Oct. 1, 1991 and turnover of the warehouse on Feb. 29, 1992. The offer

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consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation A. Liability Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency. (1731) (4) When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum. (n) (2) When the expenses were due to the fault of the agent;

(3) When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof;

DIOLOSA v. CA (1984, Relova, J.) Art. 1916. When two persons contract with regard to the same thing, one of them with the agent and the other with the principal, and the two contracts are incompatible with each other, that of prior date shall be preferred, without prejudice to the provisions of Article 1544. (n) PETS (PRINCIPAL): Mariano Diolosa, Alegria Villanueva-Diolosa RESP: CA, Quirino Baterna (proprietor of Quin Baterna Realty) FACTS (largely based on the pre-trial order) Baterna is a licensed real estate broker. On June 20, 1968, an agency agreement (Exh. A) was entered into between him and the Diolosas, whereby the former was constituted as the exclusive sales agent of the latter, to dispose of, sell, cede, transfer and convey the lots included in the Villa Alegre Subdivision owned by the Diolosas, and pursuant to said agreement, Baterna acted for and in behalf of the Diolosas as their agent in the sale of the lots included in the said subdivision. Pertinent provisions of Exh. A: o The Diolosas are the lawful and absolute owners in fee simple of Villa Alegre Subdivision situated in the District of Mandurriao, Iloilo City, which parcel of land is more particularly described as follows: A parcel of land, Lot No. 2110-b-2-C, PSD 74002, TCT No. T_____ situated in the District of Mandurriao, Iloilo, Phils., containing 39,016 sqm, more or less, with improvements thereon. o The Diolosas, by virtue of these presents, to enhance the sale of the lots of the above-described subdivision, is engaging as their EXCLUSIVE SALES AGENT the Quin Baterna Realty, its successors, heirs and assigns to dispose of, sell, cede, transfer and convey the above-described

Art. 1917. In the case referred to in the preceding article, if the agent has acted in good faith, the principal shall be liable in damages to the third person whose contract must be rejected. If the agent acted in bad faith, he alone shall be responsible. (n)

Art. 1918. The principal is not liable for the expenses incurred by the agent in the following cases:

(1) 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;

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property in whatever manner and nature Baterna Realty, with the concurrence of the Diolosas, may deem wise and proper under the premises, whether it be in cash or installment basis, until all the subject property as subdivided is fully disposed of. Sept. 27, 1968: The Diolosas terminated the services of Baterna as their exclusive sales agent per a letter ( Exh. B) signed by Alegria Diolosa for the reason that the lots remained unsold were reserved for their grandchildren. Baterna instituted in the CFI Iloilo a case of recovery of unpaid commission against the Diolosas over some of the lots subject of the agency agreement that were not sold. DISMISSED. BATERNA: He had sold the lots comprised in several subdivisions (Greenfield Subd.; the Villa Beach Subd.; the Juntado Subd.; the St. Joseph Village; the Ledesma Subd.; the Brookside Subd.; the Villa Alegre Subd.; and Cecilia Subd.; all in Iloilo). o Under the terms of Exh. A, he had unrevocable authority to sell all the lots included in the Villa Alegre Subdivision and to act as exclusive sales agent of the Diolosas until all the lots shall have been disposed of. o The rescission of the contract under Exh. B contravenes the agreement of the parties. o As a licensed real estate broker, he has been seriously damaged by the action of the Diolosas in rescinding Exh. A for which he suffered moral damages (P50K), damages to his good will (P100K), for attorney's fees (P10K) to protect his rights and interests, plus exemplary damages to be fixed by the Court. Likewise, he should be entitled to a commission on the lots unsold because of the rescission of the contract. DIOLOSAS: Baternas complaint was filed to make money out of the suit from them, to harrass and to molest them. o They were within their legal right to terminate the agency on the ground that they needed the undisposed lots for the use of the family. o o Baterna has no right in law to case for commission on lots that they have not sold. Because of the unjustified and unfounded complaint, they suffered moral damages (P50K) and that for the public good, the court may order Baterna to pay them exemplary damages (P20K) plus attorney's fees (P10K). CA: REVERSED, ordered the Diolosas to pay Baterna Realty P10K as damages and P2K as attorney's fees. o Art. 1920 notwithstanding, the Diolosas could not terminate the agency agreement at will without paying damages. Exh. A expressly stipulates: * * * until all the subject property as subdivided is fully disposed of. o The testimony of Roberto Malundo that Baterna agreed to the intention of Mrs. Diolosa to reserve some lots for her own family use cannot prevail over the clear terms of the agency agreement. Moreover, Baterna denied that there was an agreement to reserve any of the lots for the family of the defendants. o There are 27 subdivision lots which remained unsold on the date the Diolosas rescinded the agency agreement. On that day they had only 6 grandchildren. That they wanted to reserve the 27 lots for the 6 grandchildren is not a legal reason for them to rescind the agency agreement. There would still be 21 lots available for sale. Besides it is undisputed that the Diolosas have other lands which could be reserved for their grandchildren.

ISSUE/HELD: Whether the Diolosas could terminate the agency agreement (Exh. A) without paying damages to the Baterna. NO. RATIO Under Exh. A, the Diolosas allowed Baterna to dispose of, sell, cede, transfer and convey until all the subject property as subdivided is fully disposed of. The authority to sell is not extinguished until all the lots have been disposed of. When, therefore, the Diolosas revoked the contract with Baterna in Exh. B, they became liable to Baterna for damages for breach of contract. Since Exh. A is a valid contract, the same may be rescinded only on grounds specified in Arts. 1381 and 1382: o Art. 1381. The following contracts are rescissible: (1) Those which are entered in to by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof; (2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number; (3) Those undertaken in fraud of creditors when the latter cannot in any other name collect the claims due them;

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(4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority; (5) All other contracts specially declared by law to be subject to rescission. o Art. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible. HERE: Not one of the grounds mentioned above is present which may be the subject of an action of rescission, much less can the Diolosas say that Baterna violated the terms of their agreement - such as failure to deliver to them (subdivision owners) the proceeds of the purchase price of the lots. commission due him, placed agency transactions on a cash and carry basis thus removing the 60-day credit for premiums due, threatened to cancel policies issued by his agency and leaked out the news that he has substantial accounts with Philamgen. December 27, 1978: His agency with Philamgen was terminated Valenzuela sought relief from the RTC RTC: favored Valenzuela with reinstatement, commission with interest, monthly compensatory damages, moral damages, attorney's fees and cost of suit CA modified by holding Philamgen and Valenzuela jointly and severally liable for the premium ISSUE(s): WON Philamgen liable to Valenzuela? HELD/RATIO: YES There is an exception to the principle that an agency is revocable at will and that is when the agency has been given not only for the interest of the principal but for the interest of third persons or for the mutual interest of the principal and the agent. In these cases, it is evident that the agency ceases to be freely revocable by the sole will of the principal. It is evident from the records that the agency involving petitioner and private respondent is one "coupled with an interest," and, therefore, should not be freely revocable at the unilateral will of the latter. The private respondents by the simple expedient of terminating the General Agency Agreement appropriated the entire insurance business of Valenzuela. With the termination of the General Agency Agreement, Valenzuela would no longer be entitled to commission. Worse, despite the termination of the agency, Philamgen continued to hold Valenzuela jointly and severally liable with the insured for unpaid premiums. Under these circumstances, it is clear that Valenzuela had an interest in the continuation of the agency. The pivotal factor rendering Philamgen and the other private respondents liable in damages is that the termination by them of the General Agency Agreement was tainted with bad faith. Hence,

DISPOSITIVE: Petition DISMISSED. Valenzuela v CA (1990, Gutierrez, Jr.) PARTIES: Arturo Valenzuela, Plaintiff- Petitioners Bienvenido Aragon, Robert Parnell, Philippine General Insurance Company, Inc., Respondents-Defendants FACTS: Arturo Valenzuela was a general agent of Philippine American General Insurance Company, Inc (Philamgen) under a General Agency Agreement. Valenzuela was authorized to sell in behalf of Philamgen solicited marine insurance from Delta Motors, Inc. amounting to P4.4M entitling him to a 32% commission or P1.6M 1976-1978: premium payments of P1,946,886 were paid directly to Philamgen. Philamgen wanted a 50% share of Valenzuela's commission but Valenzuela refused. Because of his refusal, the officers of Philamgen reversed his

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if a principal acts in bad faith and with abuse of right in terminating the agency, then he is liable in damages. This is in accordance with the precepts in Human Relations enshrined in our Civil Code that "every person must in the exercise of his rights and in the performance of his duties act with justice, give every one his due, and observe honesty and good faith: (Art. 19, Civil Code), and every person who, contrary to law, wilfully or negligently causes damages to another, shall indemnify the latter for the same (Art. 20). "Any person who wilfully causes loss or injury to another in a manner contrary to morals, good customs and public policy shall compensate the latter for the damages" (Art. 21). DISPOSITIVE: ACCORDINGLY, the petition is GRANTED. The impugned decision of January 29, 1988 and resolution of April 27, 1988 of respondent court are hereby SET ASIDE. The decision of the trial court dated January 23, 1986 in Civil Case No. 121126 is REINSTATED with the MODIFICATIONS that the amount of FIVE HUNDRED TWENTY ONE THOUSAND NINE HUNDRED SIXTY-FOUR AND 16/100 PESOS (P521,964.16) representing the petitioners Delta commission shall earn only legal interests without any adjustments under Article 1250 of the Civil Code and that the contractual relationship between Arturo P. Valenzuela and Philippine American General Insurance Company shall be deemed terminated upon the satisfaction of the judgment as modified. Constante Amor De Castro v. CA FACTS: Appellantswere co-owners of four (4) lots located atEDSA corner New York and Denver Streets in Cubao, QuezonCity. In a letter dated January 24, 1984 (Exhibit "A-1, p. 144,Records), appelleewas authorized by appellants to act asreal estate broker in the sale of these properties for theamount of P23,000,000.00, five percent (5%) of which will begiven to the agent as commission. It was appellee who firstfound Times Transit Corporation, represented by its presidentMr. Rondaris, as prospective buyer which desired to buy two(2) lots only, specifically lots 14 and 15. Eventually,sometime in May of 1985, the sale of lots 14 and 15 wasconsummated. Appellee received from appellants P48,893.76as commission. It was then that the rift between the contending parties soonemerged. Appellee apparently felt short changed becauseaccording to him, his total commission should beP352,500.00 which is five percent (5%) of the agreed price of P7,050,000.00 paid by Times Transit Corporation toappellants for the two (2) lots, and that it was he whointroduced the buyer to appellants and unceasinglyfacilitated the negotiation which ultimately led to theconsummation of the sale. Hence, he sued below to collectthe balance of P303,606.24 after having received P48,893.76in advance. On the other hand, appellants completely traverseappellee's claims and essentially argue that appellee isselfishly asking for more than what he truly deserved ascommission to the prejudice of other agents who were moreinstrumental in the consummation of the sale. Althoughappellants readily concede that it was appellee who firstintroduced Times Transit Corp. to them, appellee was notdesignated by them as their exclusive real estate agent butthat in fact there were more or less eighteen (18) otherswhose collective efforts in the long run dwarfed those of appellee's, considering that the first negotiation for the salewhere appellee took active participation failed and it wasthese other agents who successfully brokered inthe second negotiation. But despite this and out of appellants' "pure liberality, beneficence and magnanimity",appellee nevertheless was given the largest cut in thecommission (P48,893.76), although on the principle of quantum meruit he would have certainly been entitled toless. So appellee should not have been heard to complain of getting only a pittance when he actually got the lion's shareof the commission and worse, he should not have beenallowed to get the entire commission. Furthermore, thepurchase price for the two lots was only P3.6 million asappearing in the deed of sale and not P7.05 million asalleged by appellee. Thus, even assuming that appellee isentitled to the entire commission, he would only be getting5% of the P3.6 million, or P180,000.00."

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Private respondent Francisco Artigo ("Artigo" forbrevity) sued petitioners Constante A. De Castro ("Constante"for brevity) and Corazon A. De Castro ("Corazon" for brevity)to collect the unpaid balance of his broker's commission fromthe De Castros. The Trial Court finds defendants Constanteand Corazon Amor de Castro jointly and solidarily liable to plaintiff. The Court of Appeals affirmed in toto the decision of the RTC. Hence, this petition. ISSUE:Whether the complaint merits dismissal for failure toimplead other co-owners as indispensable parties. HELD: The De Castros argue that Artigo's complaint shouldhave been dismissed for failure to implead all the co-ownersof the two lots. The De Castros claim that Artigo always knewthat the two lots were co-owned by Constante and Corazonwith their other siblings Jose and Carmela whom Constantemerely represented. The De Castros contend that failure toimplead such indispensable parties is fatal to the complaintsince Artigo, as agent of all the four coowners, would bepaid with funds co-owned by the four co-owners. The De Castros' contentions are devoid of legalbasis. An indispensable party is one whose interest will beaffected by the court's action in the litigation, and without whom no final determination of the case can be had. The joinder of indispensable parties is mandatory and courtscannot proceed without their presence.Whenever it appearsto the court in the course of a proceeding that anindispensable party has not been joined, it is the duty of thecourt to stop the trial and order the inclusion of such party.However, the rule on mandatory joinder of indispensableparties is not applicable to the instant case. There is no dispute that Constante appointed Artigo in ahandwritten note dated January 24, 1984 to sell theproperties of the De Castros for P23 million at a 5 percentcommission. The authority was on a first come, first servebasis. Constante signed the note as owner and asrepresentative of the other co-owners. Under this note, acontract of agency was clearly constituted betweenConstante and Artigo. Whether Constante appointed Artigoas agent, in Constante's individual or representativecapacity, or both, the De Castros cannot seek the dismissalof the case for failure to implead the other co-owners asindispensable parties.The De Castros admit that theother coowners are solidarily liable under thecontract of agency,citing Article 1915 of the Civil Code,which reads: Art. 1915. If two or more persons have appointed anagent for a common transaction or undertaking, theyshall be solidarily liable to the agent for all the consequences of the agency. The solidary liability of the four co-owners, however, militatesagainst the De Castros' theory that the other coownersshould be impleaded as indispensable parties. When the law expressly provides for solidarity of theobligation, as in the liability of co-principals in a contract of agency, each obligor may be compelled to pay the entireobligation.The agent may recover the whole compensationfrom any one of the co-principals, as in this case. Indeed, Article 1216 of the Civil Code provides that acreditor may sueany of the solidary debtors. This articlereads: Art. 1216. The creditor may proceed against any oneof the solidary debtors or some or all of themsimultaneously. The demand made against one of them shall not be an obstacle to those which maysubsequently be directed against the others, so longas the debt has not been fully collected. Thus, the Court has ruled inOperators Incorporated vs. American Biscuit Co., Inc.that "x xxsolidarity does not make a solidary obligor an indispensable party in a suit filed by the creditor. Article 1216 of the Civil Code saysthat the creditor `may proceed against anyone of thesolidary

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debtors or supplied) some or all of themsimultaneously'." (Emphasis It was only on November 19, 1979 when defendantpaid Medalla the sum of P25,974.90 for freightcharges. Plaintiff then filed the instant complaint. TC: in favor of plaintiff. Defendant appealed to IAC on the sole issue of w/nhe is jointly and severally liable with Medallaforfreightage. IAC affirmed judgment.

National Food Authority v. IAC (1990) Legal Doctrine When things belonging to the principal are dealtwith, the agent is bound to the principal although hedoes not assume the character of such agent andappears acting in his own name. In other words, theagents apparent representation yields to theprincipals true representation and that, in reality andin effect, the contract must be considered as enteredinto between the principal and the third person (Sy-juco v. Sy-juco).

Issue W/N the instant case falls within the exception of thegeneral rule provided for in NCC 1883. Defendants Contention * It is not liable since it had no knowledge of the fact of agency between plaintiff and Medalla. Held Yes. Defendants contention holds no water. Ratio When things belonging to the principal (in this case,the plaintiff) are dealt with, the agent is bound to theprincipal although he does not assume the characterof such agent and appears acting in his own name. Inother words, the agents apparent representationyields to the principals true representation and that,in reality and in effect, the contract must beconsidered as entered into between the principal andthe third person (Sy-juco v. Sy-juco). GOLD STAR MINING CO., INC., petitioner, vs. MARTA LIMJIMENA, CARLOS JIMENA, GLORIA JIMENA, AURORA JIMENA, JAIME JIMENA, DANTE JIMENA, JORGE JIMENA, JOYCE JIMENA,

Facts On September 6, 1979, Gil Medalla, as commissionagent of plaintiff Superior Shipping Corp., entered intoa contract with defendant National Grains Authority.Under said contract, Medalla obligated to transport onthe MV Sea Runner (owned by plaintiff) 8550 sacks of rice belonging to defendant from San Jose, OccidentalMindoro to Malabon, Metro Manila. Upon completion of delivery, plaintiff wrote a letterto defendant requesting that it be allowed to collectamount stated in its statement account, whichincluded not only a claim for freightage but also claimsfor demurrage and stevedoring charges amounting toP93,538.70. On November 5, 1979, plaintiff wrote again todefendant, this time requesting that the payment forfreightage and other charges be made to it and not toMedalla because plaintiff was the owner of the vessel. In reply, defendant on November 16, 1979 informedplaintiff that it could not grant its request because thecontract to transport the rice was entered into bydefendant and Medalla, who did not disclose that hewas acting as a mere agent of plaintiff.

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as legal heirs of the deceased VICTOR JIMENA, and JOSE HIDALGO, respondents. REYES, J.B.L., J.: FACTS In 1937, Ananias Isaac Lincallo bound himself in writing to turn to Victor Jimena one-half (1/2) of the proceeds from all mining claims that he would purchase with the money to be advanced by the latter. This agreement was later on modified (in a 1939 notarial instrument duly registered with the Register of Deeds of Marinduque in his capacity as mining recorder) so as to include in the equal sharing arrangement not only of the proceeds from several mining claims , which by that time had already been purchased by Lincallo with various sums totalling P5,800.00 supplied by Jimena, but also the lands constituting the same, and so as to bind thereby their "heirs, assigns, or legal representatives." Apparently, the mining rights over part of the claims were assigned by Lincallo to Gold Star Mining Co., Inc., sometime before World War Il because in 1950 the corporation paid him P5,000 in consideration of, and as a quitclaim for, pre-war royalties. On several occasions thereafter, the mining claims in question were made subject-matter of contracts entered into by Lincallo in his own name and for his benefit alone without the slightest intimation of Jimena's interests over the same. On 19 September 1951, Lincallo and one Alejandro Marquez, as separate owners of particular mining claims, entered into an agreement with Gold Star Mining Co., Inc., the assignee thereof, regarding allotment to Lincallo of 45% of the royalties due from the corporation. Four months later, Lincallo, Marquez and Congressman Panfilo Manguerra, again as owners, leased certain mining claims to Jacob Cabarrus, who, in turn, transferred to Marinduque Iron Mines Agents, Inc., his rights under the lease contract. By virtue of still another contract executed by these lessors on 29 February 1952, 43% of the royalties due from Marinduque Iron Mines Agents, Inc., were agreed upon to be paid to Lincallo. As early as August, 1939 and down to September, 1952, Jimena repeatedly apprised Gold Star Mining Co., Inc., and Marinduque Iron Mines Agents, Inc., of his interests over the mining claims so assigned and/or leased by Lincallo and, accordingly, demanded recognition and payment of his one-half share in all the royalties, allocated and paid and, thereafter, to be paid to the latter. Both corporations, however, ignored Jimena's demands. Payment of the P5,800 advanced for the purchase of the mining claims, as well as the one-half share in the royalties paid by the two corporations, were also repeatedly demanded by Jimena from Lincallo. Acknowledging Jimena's contractual claim, Lincallo off and on promised to settle his obligations . And on 14 July 1952, Lincallo promised for the last time, to settle everything on or before the 30th day of the same month. Lincallo, however, did not only fail to settle his accounts with Jimena but transferred on 16 August 1952, a month after he promised to pay Jimena, 35 of his 45% share in the royalties due from Gold Star Mining Co., Inc., to one Gregorio Tolentino, a salaried employee, for an alleged consideration of P10,000.00. Jimena commenced a suit against Lincallo for recovery of his advances and his one-half share in the royalties. Gold Star Mining Co., Inc., and Marinduque Iron Mines, Inc., together with Tolentino, were later joined as defendants. The TC issued, upon petition of Jimena, a writ of preliminary injunction restraining Gold Star Mining Co., Inc., and Marinduque Iron Mines Agents, Inc., from paying royalties during the pendency of the case to Lincallo, his assigns or legal representatives. Despite the injunction, Gold Star Mining Co., Inc., was found out to have paid P30, 691.92 to Lincallo and Tolentino. Said corporation claimed later on (on appeal) that the injunction had been superseded and/or dissolved on 25 May 1955 by the trial court's grant of Jimena's petition for a writ of preliminary attachment "to supersede the writ of preliminary injunction previously issued." But as the grant was conditioned upon filing of a bond to be approved by the trial court, no writ of attachment was issued because the bond offered by Jimena was disapproved. Jimena and Tolentino died successively during the pendency of the case in the trial court and were, accordingly, substituted by their respective widows and children. TC: rendered decision in favor of Jimena From this judgment, all four defendants, namely, Lincallo, the widow and children of Tolentino, and the two corporations, appealed to the CA. CA: the Court of Appeals handed down a decision sustaining in its entirety that of the trial court.

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Petitioner Gold Star Mining Co., Inc., argues that the CAs decision finding that respondents Jimenas have a cause of action against it, and condemning it to pay the sum of P30,691.92 for violation of an allegedly non-existent injunction, are reversible errors. Reasons: As to respondents Jimena's cause of action, the same does not allegedly appear in the complaint filed against petitioner corporation. And as to the P30,691.92 penalty for violation of the injunction, the same can not allegedly be imposed because (1) the sum of P30,691.92 was not prayed for, (2) the injunction in question had already been superseded and/or dissolved by the trial court's grant of Jimena's petition for writ of preliminary attachment; and (3) the corporation was never charged, heard, nor found guilty in accordance with, and pursuant to, the provisions, of Rule 64 of the (Old) Rules of Court. ISSUE: won Jimenas have a cause of action against Gold Star SC: YES We are of the same opinion with the Court of Appeals that respondents Jimenas have a cause of action against petitioner corporation and that the latter's joinder as one of the defendants before the trial court is fitting and proper. CA: There first assigned error is the Trial Court erred in not dismissing this instant action as "there is no privity of contract between Gold Star and Jimena." This contention is without merit. The situation at bar is similar to the status of the first and second mortgagees of a duly registered real estate mortgage. While there exists no privity of contract between them, yet the common subject-matter supplies the juridical link. Borrowing the Spanish maxim cited by Jimena's counsel, "el deudor de mi deudor es deudor mio," this legal maxim finds sanction in Article 1177, new Civil Code which provides that "creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter (debtor) for the same purpose, save those which are inherent in his person; they may also impugn the acts which the debtor may have done to defraud them (1111)." . . . it can be said that Lincallo, in transferring the mining claims to Gold Star (without disclosing that Jimena was a co-owner although Gold Star had knowledge of the fact as shown by the proofs heretofore mentioned) acted as Jimena's agent with respect to Jimena's share of the claims. Under such conditions, Jimena has an action against Gold Star, pursuant to Article 1883, New Civil Code, which provides that the principal may sue the person with whom the agent dealt with in his (agent's) own name, when the transaction "involves things belonging to the principal." As counsel for Jimena has correctly contended, "the remedy of garnishment suggested by Gold Star is utterly inadequate for the enforcement of Jimena's right against Lincallo because Jimena wanted an accounting and wanted to receive directly his share of the royalties from Gold Star. That recourse is not open to Jimena unless Gold Star is made a party in this action." Considering that no writ of preliminary attachment was issued by the trial court, the condition for its issuance not having been met by Jimena, nothing can be said to have superseded the writ of preliminary injunction in question. The preliminary injunction was, therefore, subsisting and evidently violated by petitioner corporation when it paid the sum of P30,691.92 to Lincallo and Tolentino. By sentencing Gold Star Mining Co., Inc., to pay, for the account of Lincallo, the sum aforesaid, the court merely endeavoured to prevent its award from being rendered pro tanto nugatory and ineffective, and thus make it conformable to law and justice.

That the questioned award was not intended to be a penalty against appellant Gold Star Mining Co., Inc., is shown by the provision in the judgment that the P30,691.92 to be paid by it to Jimena is "to be imputed to Lincallo's liability under this judgment." The court thus left the way open for Gold Star Mining Co., Inc., to recover later the whole amount from Lincallo, whether by direct action against him or by deducting it from the royalties that may fall due under his 1951 contract with appellant. CA decision affirmed. Concepcion, C.J., Dizon, Makalintal, Sanchez, Castro, Angeles, Fernando and Capistrano, JJ., concur. Zaldivar, J., is on leave. Sy-Juco&Viardo v. Sy-Juco(1920)

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Legal Doctrine Decision by the Supreme Court of Spain, May 1,1900: From the rule established in OCC 1717, thatwhen an agent acts in his own name, the principalshall have no right of action against the person withwhom the agent has contracted,cases involvingthings belonging to the principal are excepted.According to this exception,the agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name. Held & Ratio No. The relation of principal and agent, which existsbetween the plaintiffs and defendant in the presentcase, did not exist in the case of Martinez v. Martinez. Therefore, the latter does not apply to the former. Issue W/N the launch Malabon should belong to thedefendant. Held: No. Ratio Decision by the Supreme Court of Spain, May 1,1900: From the rule established in OCC 1717, thatwhen an agent acts in his own name, the principalshall have no right of action against the person withwhom the agent has contracted,cases involvingthings belonging to the principal are excepted.According to this exception,the agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name. This means that in the case of this exception, theagents apparent representation yields to theprincipals true representation and that, in reality andin effect, the contract must be considered as enteredinto between the principal and the third person; andconsequently, if the obligations belong to the former;to him alone must also belong the rights arising fromthe contract.

Facts In 1902, Santiago Sy-juco (defendant) was appointedas administrator of properties belonging to his parents,Vicente Syjuco and CiprianaViardo (plaintiffs). In July 1914, defendant bought the launch Malabon inhis own name from Pacific Commercial Co., andafterwards registered it at the Customs House. But thisdoes not necessarily show that he bought it for himself and with his own money, as he claims. This transactionwas within the agency which he had received from theplaintiffs. However, the plaintiffs testify that the launchMalabon was bouth with their money and this issupported by the fact that, immediately after itspurchase, the launch had to be repaired at theirexpense. The plaintiffs then instituted this action to recoverthe launch Malabon from the defendant. The defendant invokes the case of Martinez v.Martinez wherein it was decided that a vesselregistered in the name of a person belongs to himeven though the money used for the purchase belongsto another.

Reasoning The money with which the launch was bought havingcome from the plaintiffs, the exception established inOCC 1717 is applicable to the instant case.

Issue W/N Martinez v. Martinez applies to the instant case. Philippine National Bank v. Agudelo (1933)

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Legal Doctrine The exception to the general rule in OCC 1717 (now1883) is applicable only when the agent, acting in hisown name in connection with the properties of hisprincipal, does so within the scope of hisauthority. Ratio OCC 1717 (now, 1883): When an agent acts in his ownname, the principal shall have no right of actionagainst the persons with whom the agent hascontracted, nor the said persons against the principal.In such case, the agent is directly liable to the personwith whom he has contracted, as if the transactionwere his own. Cases involving things belonging to the principal are excepted. The provisions of this article shall be understood to bewithout prejudice to actions between principal andagent. Reasoning He executed the promissory notes evidencing theaforesaid loans, under his own signature, withoutauthority from his principals and, therefore, were notbinding upon the latter. Neither is there anything to show that he executedthe promissory notes in question for the account, andat the request, of his respective principals. It is further claimed that inasmuch as the propertiesmortgaged by Mauro belong to Paz Agudelo, the latter is responsible for the acts of the former although heacted in his own name, in accordance with theexception contained in OCC 1717. It would be anexception if the agent, acting in his own name inconnection with the properties of his principal,doesso within the scope of his authority. The special power of attorney does not authorizeMauro to constitute a mortgage on the real estate of his principal to securehis personal obligations. Therefore, in doing so, he exceeded the scope of hisauthority and his principal is not liable for his acts.

Facts Paz Agudelo y Gonzaga and AmparoGarrucho bothexecuted separately special powers of attorney infavor of Mauro Garrucho to sell, alienate and mortgagein the manner and form he might deem convenient alltheir real estate situated in Murcia, Bacolod and Bagoin Occidental Negros. Nothing in the said powers of attorney expresslyauthorized Mauro Garrucho to contract any loan nor toconstitute a mortgage on the properties belonging tothe respective principals,to secure his [own]obligations. Subsequently, Mauro Garrucho contracted loans withPhilippine National Bank (PNB), whereby constitutedmortgages on properties included in theaforementioned special powers of attorney. However, Mauro failed to pay his loans to PNB, andthus, PNB instituted an action. The lower court ruled that since Paz Agudelo is theowner of the subject properties mortgaged to PNB, sheis liable to the former for Mauros outstanding loans.

Issue W/N Paz Agudelo is liable for the payment of the loansobtained by Mauro Garrucho from PNB for the securityof which he constituted a mortgage on a real estatebelonging to Paz. Held: No.

Disposition However, the court held that Paz Agudelo is still liablesubsidiarily to PNB because she gave consent to thelien on her real estate.

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