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AGENCY | ATTY.

OBIETA | 2D 2012

IMPERIAL | DE LUZURIAGA | HIPOLITO 1
(1) BPI V. DE COSTER

FACTS: Defendant Gabriela Andrea de Coster y Roxas
executed a Special Power of Attorney in favor of her
husband. This authority gave Jean M. Poizat (agent-
husband) the power to loan and borrow money in her
behalf. The agent was able to obtain a loan from BPI,
secured by a chattel mortgage on the steamers of his
company, Poizat Vegetable Oil Mills and a real mortgage
over a property, which is also subject to another
mortgage in favor of La Orden de Dominicos.
Defendants defaulted on their obligations to BPI and La
Orden de Dominicos. Thus, both creditors prayed for the
forclosure of the mortgaged properties.
RTC declared the defendants in default for their failure
to appear and ruled in favor of he plaintiffs.
De Coster alleges that she never had any knowledge of
the actual facts until she read about her default in the
newspapers, since she was not in the Philippines when
the summons were served; that her husband fled the
country; that the mortgages executed by her agent-
husband was without marital consent; and that he did
not have any authority to make her liable as surety on
the debt of a third personit being a personal debt of
her husband and his company.

ISSUE: W/N the principal-wife, Gabriela De Coster y
Roxas, is liable for the mortgage executed by her agent-
husband, Jean Poizat

HELD: NO. The note and mortgage show upon their face
that at the time they were executed, the agent-husband
was attorney-in-fact for the defendant wife, and the
bank knew or should have known the nature and extent
of his authority and the limitations upon his power.
Par. 5 of the Power of Attorney authorizes the agent-
husband for and in the name of his wife to loan or
borrow any sums of money or fungible things, etc. This
is taken to mean that he only had the power to loan his
wifes money and to borrow money for or on account of
his wife as her agent and attorney-in-fact. It does not
carry with it or imply that he had the legal right to make
his wife liable as a surety for the preexisting debt of a
third person.
It is fundamental rule of construction that where in an
instrument powers and duties are specified and defined,
that all of such powers and duties are limited and
confined to those which are specified and defined, and
that all other powers and duties are excluded.
The fact that the agent-husband failed and neglected
to perform his duties and to represent the interests of his
principal is NOT a bar to the principal obtaining legal
relief for the negligence of her agent.
It is apparent from the face of the instrument that the
whole purpose and intent of the power of attorney was
to empower and authorize the agent-husband to look
after and protect the interests of the wife and for her
and in her name to transact any and all of her business.
But nowhere does it provide or authorize him to make
her liable as a surety for the payment of the preexisting
debt of a third person.
Thus, the agent-husband does not have the authority to
sign the note and to execute the mortgage for and on
behalf of the wife as her act and deed, and that as to her
the note is void for want of power of her husband to
execute it.


(2) TAN TIONG TECK V. LA COMISION DE VALORES Y
BOLSAS, y CUA OH & COMPANY.

El caso es en espaol. No puedo entender.
The case is in Spanish. I cannot understand.


(3) VICENTE SY-JUCO AND CIPRIANA VIARDO V.
SANTIAGO V. SY-JUCO


FACTS: In 1902, defendant-son was appointed by the
plaintiffs-parents as administrator of their property and
acted as such until 1916, when his authority was
cancelled. Plaintiffs-parents allege that during his
administration, the defendant-son acquired the property
claimed in the complaint in his capacity as plaintiffs
administrator with their money and for their benefit.
RTC ruled in favor of plaintiffs-parents and ordered the
return of the launch Malabon, casco, 1 and automobile.
However, the RTC also absolved the defendant-son from
returning casco 2, house occupied by the defendant,
typewriting machine, price of the piano, and a rendition
of accounts of his administration of the property.

ISSUE: W/N RTCs decision is correct (both parties
alleged that RTC erred in deciding whatever is
unfavorable to them)

HELD: YES.
(1) Launch Malabon belongs to the plaintiffs-parents.
Although it is defendant-son who bought the
property, he nonetheless bought it on behalf of the
plaintiffs-parents. However, the question is not in
whose favor the document of sale of the launch is
executed nor in whose name it was registered, but
with whose money was used to buy said launch. It was
proved that what was used was the plaintiffs-parents
money because immediately after the sale, the
launch had to be repaired at their expense. If the
launch was not bought for the plaintiffs-parents and
with their money, it is not explained why they had to
pay for its repairs.
By the agency between the plaintiffs-parents and
defendant-son, the former clothed the latter with
their representation in order to purchase the launch.
A power of attorney to loan and borrow money
and to mortgage the principals property does
NOT carry with it or imply that the agent has a
legal right to make the principal liable for the
personal debts of the agent.
By virtue of the agency, agent is bound to transfer to
principal all the rights which he received from the
vendor, and principal have the right to be subrogated
in all the effects of the sale.
AGENCY | ATTY. OBIETA | 2D 2012

IMPERIAL | DE LUZURIAGA | HIPOLITO 2
However, the defendant-son acted without this
representation and bought the launch in his own
name violating the agency.
Moreover, Art. 1717 of Civil Code states that when
an agent acts in his own name, the principal shall
have no right of action against the person in whom
the agent has contracted, except for cases involving
things belonging to the principal. Defendant-sons
apparent representation yields to the principals true
representation and that, in reality and in effect, the
contract must be considered as entered into between
the plaintiffs-parents and the seller; and
consequently, if the obligations belong to the
plaintiffs-parents, to them alone must also belong the
rights arising from the contract. The money with
which the launch was bought having come from the
plaintiffs-parents, the exception is deemed
applicable.
(2) Casco 1 belongs to the plaintiffs-parents. It is
admitted that the plaintiff-father himself constructed
it in his shipyard. Defendant-sons allegation that it
was constructed at his instance and with his money is
not supported by evidence. Moreover, when the casco
was constructed, he did not have enough money to
pay the expense of the construction.
(3) Automobile belongs to the plaintiffs-parents. There
was sufficient evidence to show that the price for the
purchase of the car was paid with plaintiffs-parents
money.
(4) Casco 2 was leased and sunk when in the possession
of the lessee. Upon the examination of the evidence,
it was found out that the plaintiffs-parents validly
sold casco 2 to defendant-son and that there was no
deceit that accompanied such sale. Thus, being the
owner of casco 2, defendant-son is entitled to
damages and interest from the lessee.
(5) Wood, windows and doors of the house occupied by
the defendant-son belong to the defendant-son since
these were given to him by the plaintiffs-parents.
(6) Rendition of accounts is not necessary to be made by
the defendant-son because evidence showed that
defendant-son used to render accounts of his agency
after each transaction to the plaintiffs-parents
satisfaction.


(4) FELISA NEPOMUCENO AND MARCIANA CANON V.
GENARO HEREDIA


FACTS: As the business adviser of plaintiff Canon,
defendant had in his possession for administration P1,500
(property of Marciana Canon). Felisa Nepo, on the other
hand, had an unsecured debt due her for P500 from
Marcelo Leano. To secure this debt, the latter proposed
to give her a deed of conditional sale to a certain tract of
land with buildings and improvements thereon, in
consideration of P2000. The P500 debt is to be credited
in Nepos favor and that she advance the balance of
P1500. Knowing that defendant had P1500 of Canon,
Nepo proposed to Canon that they make a joint
investment in the land.
Plaintiffs alleged that defendant took the deed to the
land in his own name without their knowledge or
consent; that defendant undertook to extend the
repurchase period without their express authority.

ISSUES: W/N defendant-agent acted without authority
and consent from plaintiffs-principal in the purchase of
the land

HELD: NO. It was clearly established at the trial that the
defendant was acting merely as the agent for the
plaintiffs throughout the entire transaction; that the
purchase of the land was made not only with their full
knowledge and consent, but at their suggestion; and that
after the purchase had been effected, the plaintiffs-
principal, with full knowledge of the facts, approved and
ratified the actions of the defendant-agent in the
premises. There is nothing in the record, which would
indicate that defendant-agent failed to exercise
reasonable care and diligence in the performance of his
duty as such agent, or that he undertook to guarantee
the vendors title to the land purchased by direction of
plaintiffs-principal.


(5) HODGES V. SALAS AND SALAS
FACTS: In 1923, defendants executed a power of attorney
in favor of their brother-in-law, Felix Yulo, to enable him
to obtain a loan and secure it with a mortgage on real
property.
Acting under said power of attorney, Yulo obtained a
loan of P28,000 from Hodges, binding his principals
jointly and severally to pay it within 10 years with 12%
interest p.a. This loan is secured with a mortgage over a
real property.
However, the P28,000 loan was not delivered to agent
Yulo. Instead, an agreement between him and Hodges
indicate that the P28,000 loan was applied to pay his
personal debts to Hodges, amounting to P10,188.29.
Defendants failed to pay the interests at maturity,
which should have been paid one year in advance.
Hodges, now seeks to have the property subject of
mortgage foreclosed.

ISSUE: W/N agent Yulo was authorized to borrow money
and invest it as he wished, without being obliged to apply
it necessarily for the benefit of the principals, by virtue
of the authority conferred by the defendants

HELD: NO. The terms of the power of attorney are
limited. The agent was thereby authorized only to
Agent cannot be held liable for hidden defects in
the title to the land purchased.
With respect to a power of attorney of a special
character, it cannot be interpreted as
authorizing the agent to use the money as he
pleased, particularly when it does not appear
that such was the intention of the principals.
The agent is obliged to turn over the money to
the principals, or at least, place it at their
disposal.

AGENCY | ATTY. OBIETA | 2D 2012

IMPERIAL | DE LUZURIAGA | HIPOLITO 3
borrow any amount of money, which he deemed
necessary. There is nothing, however, to indicate that
the defendants had authorized him to convert the money
obtained by him to his personal use. With respect to a
power of attorney of a special character, it cannot be
interpreted as authorizing the agent to use the money as
he pleased, particularly when it does not appear that
such was the intention of the principals, and in applying
such funds to pay his personal obligations, he exceeded
his authority.
Moreover, there is nothing in the document, which
implied that the defendants ratified or approved the
agents acts, contrary to what the Hodges contended.
As to the payment of the loan, the Court ordered that
defendants pay Hodges the balance of P17,811.71, since
P10,188.29 was applied by agent Yulo to the payment of
his personal debt to Hodges. As to the interest, since
defendants already paid to Hodges a total of P18,138.77,
which includes a usurious interest, they are still indebted
to pay P4,321.79 (defendants have to pay P22, 460.56
interest12% p.a. from 1926 to 1936less P3,000
attorneys fees).


(6) DEL ROSARIO AND COSTA V. LA BADENIA

FACTS:
! Spouses Del Rosario and Costa seek to recover from
La Badenia (Tobacco Co.) P1,795.25 for services
rendered and expenses incurred in the sale of its
products in Legaspi, Albay.
! Celestino Aragon is the general agent of La Badenia
and is the one in charge of their campaign in
Southern Luzon. He established a central distributing
agency or depot in Legaspi at the residence of Del
Rosario (using the lower portion of their house a the
storage facility).
! Their relationship extended from Feb. 1, 1911-
March 24, 1912. All goods sent to Legaspi were
charged by the head office (which was in Manila)
against the general agent Aragon. The books kept by
Aragon showed that the products were then charged
against the plaintiffs. The business at Legaspi
appears to have been that of a distributing agency
actively in charge of the plaintiffs under the
supervision of the general agent.
! March 24, 1912: Aragon had a settlement with the
plaintiffs and acknowledged over his signature that
these books (his record books of the business)
showed a balance in favpr of the plaintiffs
amounting to P1,795.25.
! La Badenia refused to pay Del Rosario/ Costa the
amount stating that they were merely merchants
who purchased the goods at fixed wholesale prices
and sold them on their own account and were never
employed as agents.
! Spouses countered by stating that they were in fact
agents who received commissions on the sales and
that they were authoirzed to extend a reasonable
credit under the supervision of the general agent
Aragon.
! Lower Court: Opinion was that the specific goods
sold to delinquent debtors whose unpaid accounts
form basis of this litigation had already been paid for
by the plaintiffs and that this was conclusive
evidence that the plaintiffs were not acting as
agents and that in effect the purpose of the suit was
to recover money already paid for the goods
purchased and sold by the plainitiffs.

ISSUE: W/N Del Rosario and Costa are agents of La
Badenia and are entitiled to the balance of P1,795.25

HELD: YES

! The SC cannot agree with the findings of the lower
court. First, It is undisputed that Aragon was the
duly appointed general agent of the area. It is not
clear what the precise terms of the arrangement
made by Aragon with the plainitiffs were. The record
does not show what limitations, if any, were placed
upon his powers to act for the corporation. Secondly,
The head office in Manila was fully informed of
plaintiffs relation with the general agent in
extending the sales of its productsnd they did not
seem to make any distinction between the business
done by Aragon or the plaintiffs- evidenced by 2
letters (Exhibit A and B) from La Badenia addressed
to the plaintiffs clearly recognizing them as agents
of the company (Exhibit B states: By the steamer
Cebu we are sending, according to the attached
invoice, 3 boxes of small cigars for the agency in
your charge.). Thirdly, looking at the books of
Aragon shows that the plainitiffs were given credit
on various items, such as advertising expenses.
! In view of the fact that plainitiffs are only seeking to
enforce the payment of a balance admitted by the
general agent of the defendant corporation to be
rightly due them, SC fails to see how it can be
reasonably urged that plainitiffs are attempting to
saddle these unpaid claims on the defendant
corporation.
! Therefore, judgment reversed. Plainitiffs win.


(7) MUNICIPAL COUNCIL OF ILOILO V. EVANGELISTA


The Principal is liable upon sub-agency contracts
entered into by the general agent in the name of
the principal, when it appears that the general
agent was clothed with such broad powers as to
justify the inference that he was authorized to
execute contracts of this kind, and it not appearing
from the record what limitations, if any, were
placed upon his powers to act for his principal.
An agent or atty.-in-fact empowered to pay the
debts of the principal, and to employ lawyers to
defend the latter's interests, is impliedly
empowered to pay the lawyer's fees for services
rendered in the interest of said principal, and
may satisfy them by assignment of a judgment
rendered in favor of said principal.

AGENCY | ATTY. OBIETA | 2D 2012

IMPERIAL | DE LUZURIAGA | HIPOLITO 4
FACTS:
! Tan Toco sought to recover from the Municipality of
Iloilo the value of a strip of land belonging to her
which was taken by the municipality to widen a
public street. Tan Toco was able to recover P42,
966.40.
! After the judgement had become final, several
parties appeared to claim their respective shares:
Atty. Evangelista in his own behalf and as
administratrix of Jose Ma. Arroyo's intestate estate
filed a claim for professional services; PNB asked
that the amoun be deposited to it because the land
was mortgaged to it; Antero Soriano claimed the
amount as assigned to him and which he
subsequently assigned to Mauricio Cruz & Co.
! Court after hearing the adverse claims ordered:
Atty's lien in the amount of 15% of the judgment be
recorded in favor of Atty. Evangelista; directed the
Minicipality of Iloilo to file an action for
interpleading against PNB, Antero Soriano, Mauricio
Cruz & Co., Jose Evangelista, Jose Arroyo.
! Municipal Treasurer of Iloilo paid Antero Soriano
P6,000 as part payment (assigned to him by Tan
Boon Tiong- Tan Toco's Atty.); deposited P6,000 with
CFI who then paid it to Atty. Evangelista (who then
waived the remaining P444.69); the remaining
amount (P30,966.40) was adjudicated to Mauricio
Cruz & Co.
! The appeal is confined to the claim of Mauricio Cruz
& Co. (as assignee of the rights of the late Atty.
Antero Soriano) for services rendered by him to Tan
Toco and her coheirs (in connection with other
cases).
! Tan Toco contends that: 1. Atty. Soriano has already
been paid for his professional services. However, this
was rebutted by the court by invalidating the
evidence she presented (receipts) and by the fact
that she still wired money to Atty. Soriano at a later
date. 2. that Art. 1459 prohibits certain persons
(lawyers included) from acquiring property in
litigation which they may take part in by virtue of
their profession. However, Antero Soriano was Tan
Toco's counsel for other cases not connected with
the property in question. Therefore, there was no
client-atty. relationship between them for this
particular case.

ISSUE: W/N it was legal for Tan Boon Tiong as atty- in-
fact of Tan Toco to assign to Atty. Soriano all the credits,
rights, and interest belonging to Tan Toco by virtue of
the judgment rendered for her in her case v. Municipality
of Iloilo.

HELD: YES
! It was legal for Tan Boon Tiong to do so. He is
authoirzed to employ and contract the services of
lawyers upon such condition as he may deem
convenient, to take charge of any actions necessary
or expedient for the interest of his principal, and to
defend suits against her. This power necessarily
implies the authority to pay for professional services
thus engaged.


(8) LYONS V. ROSENSTOCK
FACTS:
! Lyons is bringing this action against Rosenstock (as
executor of the estate of Elser-deceased) to recover
446 2/3 shares of stock of J.K. Pickering and Co. Ltd
together with the sum of about P125,000
representing dividends accrued with laeful interest.
! Elser was a resident of Manila enggaged in buying
and selling Real Estate. Lyons (who was a Methodist
Episcopalian Missionary) and Elser bought a piece of
property in Carriedo St., Manila. Lyons then went to
the states and was gone for nearly a year and a half.
! Before Lyons went away, he executed a general
power of atty in favor of Elser to manage and
dispose of property as he saw fit (they co-owned 3
properties originally. What was left was the Carriedo
property).
! Meanwhile, Elser wanted to bay a 1,500,000 sq.m
land in Manila (San Juan Estate) for P570,000. To
obtain necessary amount, he loaned from Uy Siuliong
(loan was secured through Uy Cho Yee) and in order
to get the money it was necessary for Elser to give a
personal note signed by himself (and his 2 other
associates) and by Fidelity and Surety Co. (Fidelity)-
who in turn had him mortgage the Carriedo property
as security (Elser did this with the presumption that
Lyons would eventually join him in the San Juan
venture).
! With this loan together with his own money, he
purchased the San Juan property and built a limited
partnership- J.K. Pickering & Co. He was the primary
capitalist with 3,290 shares.
! Elser wrote Lyons inviting him to join but Lyons
replied that he did not think he would be able to (1.
He was not sure that he would still go back to
Manila, 2. His religious congregation did not approve
of his independent investments).
! Upon buying the San Juna property, Elser discovered
that he owed Lyons P11,669.72 as accrued earnings
from varied investments they had. As payment, he
issued to Lyons 200 shares (which Lyons sold for his
benefit) of Pickering which amounted to P8,000
more than what he owed Lyons. Also, after realizing
that Lyons would not be joining him in the San Juan
venture, he replaced the mortgage of the Carriedo
property with 2 other properties he owned so as not
to burden Lyons.
! Before the Carriedo mortgage was replaced, Lyons
then arrived back in Manila and eventually told Elser
to let the Carriedo mortgage remain (as testified to
by Mrs. Elser).
! Upon the death of Elser, Lyons is bringing this action
under the presumption that since part of the money
used to obtain the San Juan property was a loan
granted upon the mortgage of the Carriedo property
of which he co-owns with Elser- he is entitled to a
part (shares) of Pickering.

No partnerhip is formed when it is contrary to
the express determination of one of the parties.
8

AGENCY | ATTY. OBIETA | 2D 2012

IMPERIAL | DE LUZURIAGA | HIPOLITO 5
ISSUE: W/N Lyons is a limited partner of Pickering by
virtue of the Carriedo property, which was used as
security for the loan.

HELD:
! The contention of Lyons is untenable.
! The mortgage of the Carriedo property was
specifically allowed by Lyons. The risk he might have
been exposed to is negligible considering that the
shares issued to Lyons was greater than what Elser
owed him.
! Elser actually used only his own money to purchase
the San Juan property and no danger ever came to
the investment of Lyons.
! What cannot be denied is that Elser and Lyons were
coparticipants in various real estate ventures in the
past. However, in the case of the San Juan Estate
venture- no partnership between Lyons and Elser
existed and the law cannot be distorted into a
proposition which would make Lyons a participant in
this deal contrary to his express determination.


(9) NFA V. IAC


FACTS:
! Gil Medalla (acting as commission agent for Superior
Shipping Corporation) entered into a contract for
hire of ship known as MV Sea Runner with National
Grains Authority (NGA).
! Medalla obligated to transport on the MV Sea Runner
8,550 sacks of rice belonging to NGA from San Jose,
Occidental Mindoro to Malabon, Metro Manila.
! Upon completion of the delivery of rice, Superior
Shipping Corp. (SSC) wrote NGA (on Oct. 17,1979)
requesting that it be allowed to collect the amount
written on its Statement of Account
(Freightage+Demurrage+Stevedoring) amounting to
P93,538.70.- [Demurrage: Amount of money the
charterer will have to pay the shipowner for its extra
time/use of the vessel; Stevedore: man who loads
ships]
! November 15, 79: SSC wrote NGA again specifically
saying that payment should be made to them (SSC)
and not to Medalla because it is SSC who owns MV
Sea Runner.
! NGA replied that it could not grant its request since
SSC did not disclose that Medalla was acting as a
mere agent of the company and that (on Nov. 19,79)
they already paid Medalla P25, 974.90 for the service
rendered.
! Dec. 4, 1979: SSC wrote Medalla demanding the sum
amounting to P27,000.xx. Medalla ignored this
demand.
! SSC filed this complaint against NGA.
! Judgment rendered in favor of SSC. IAC affirmed the
decision. Hence, this petition.
! NFA claims it is not liable since it had no knowledge
of the fact of agency between SSC and Medalla. It
claims that an undisclosed principal cannot maintain
an action upon a contract made by his agent unless
such principal was disclosed in such contract.

ISSUE: W/N the instant case falls within the exception of
the general rule provided in A.1883 of the Civil Code.
A1883: If an agent acts in his own name, the
principal has no right of action against the person
with whom the agent has contracted; neither have
such persons against the principal.
In such case the agent is the one directly bound in favor
of the person with whom he has contracted, as if the
transaction were his own, except when the contract
involves things belonging to the principal.
The provision of this article shall be understood to be
without prejudice to the actions between the principal
and agent

HELD: NO. NFA's contention incorrect.
! The agent's authority acting in his own name must
yield to the principal's true representation (since
what is involved is a thing belonging to the
principal). In reality and in effect, the contract must
be considered as entered into between the principal
and the 3
rd
person . If the principal can be obliged to
perform his duties under the contract, he can also
demand the enforcement of his rights.
! Therefore SSC wins. Petition denied and TC/IAC
decision upheld.


(10) PNB V. MANILA SURETY & FIDELITY CO., INC.

FACTS: Adams & Taguba Corporation (ATACO) constituted
PNB as its assignee and attorney-in-fact to receive and
collect from the Bureau of Public Works the amount to
pay for the asphalt delivered to it under a trust receipt
guaranteed by Manila Surety.
ATACO delivered to BPW asphalt worth P431,466.52. Of
this amount, PNB was able to regularly collect a total of
P106,382.01. However, due to unexplained reasons, PNB
was not able to collect until the investigators found out
that more money were payable to ATACO from BPW. The
latter allowed another creditor to collect funds due to
ATACO under the same purchase order, to a total of
P311,230.41.
An agent is required to act with the care of a
good father of a family and becomes liable for
the damages, which the principal may suffer
through his non-performance.
A bank is answerable for negligence in failing to
collect the sums due its debtor from the latters
own debtor, contrary to said banks duty as
holder of an exclusive and irrevocable power of
attorney to make such collections.
The general rule under A1883 is that an agent who
acts in his own name is a bar against the right of
action of the principal against the person to whom
the agent has contracted with. In this case, the agent
is the one primarily bound.

Exception: When the contract invloves things
belonging to the principal.

AGENCY | ATTY. OBIETA | 2D 2012

IMPERIAL | DE LUZURIAGA | HIPOLITO 6
Thus, PNB sued both ATACO and Manila Surety to
recover the balance of P158,563.18, plus interests and
damages.
CA ruled that PNB was negligent in having stopped
collecting from BPW before ATACOs debt is fully
collected, thereby allowing funds to be taken by other
creditors to the prejudice of the surety.
PNB asserts that the power of attorney executed in it is
favor from ATACO was merely an additional security; that
it was the duty of the surety to see to it that the obligor
fulfills his obligation; and that PNB has no obligation to
the surety to collect any sum from ATACO.

ISSUE: W/N PNB is negligent as an agent-creditor of
ATACO in collecting sums due to it

HELD: YES. The CA did not hold PNB responsible for its
negligence in failing to collect from ATACO for its debt to
PNB, but for ITS NEGLECT IN COLLECTING SUMS DUE TO
ATACO FROM BPW. An agent is required to act with the
care and diligence of a good father of a family and
becomes liable for the damages, which the principal may
suffer through its non-performance. PNBs power to
collect was expressly made irrevocable so that BPW could
very well refuse to make payments to ATACO itself, and
reject any demands by the surety.


(11) US V. KIENE
FACTS: Defendant Kiene was an insurance agent. As such
agent there was paid over to him for the account of his
employers, China Mutual Life Insurance Company
(CMLIC), the sum of P1,539.20 which he failed to turn
over to them. He was convicted of the crime of Estafa in
the CFI of Manila and sentenced to be imprisoned for 1
year and 6 mos in Bilibid and to pay the costs of trial.
On appeal, defendant alleges the failure of the
prosecution to establish the existence of a duty or
obligation imposed on defendant to turn over to his
principal the funds which he is charged for appropriating
to his own use. His counsel contends that the trial court
erroneously admitted in evidence a certain document
purporting to be a contract of agency signed by
defendant. The name of the accused is attached to this
document, and one of the witnesses, the district agent of
the CMLIC, stated that it was indeed the contract but
failed to state specifically that the signature attached
thereto was the signature of defendant.
It is contended that that the trial court failed to
establish the execution of such document and that it
erred in taking into consideration one of its provisions
whereby the defendant appears to have expressly
obligated himself to deliver to CMLIC the funds collected
on its account.

ISSUE: W/N the document purporting to be the contract
of agency should have been admitted as evidence?

HELD: The SC held that it is not necessary to review the
action of the court in admitting the evidence because the
obligation of the defendant (agent) to deliver the funds
in question to his employers is determined by the
provision of Art. 1720 of the CC:
Every agent is bound to give an account of his
transactions and pay to the principal all that he may
have received by virtue of the agency, even though what
was received is not owed to the principal.
The existence of agency and the collection of funds on
account of the principal having been established, the
obligation to deliver these funds to the principal must be
held to have been imposed upon the agent by virtue of
the contract of agency.


(12) SEVERINO V. SEVERINO

FACTS: Plaintiff Fabiola Severino, the daughter and sole
heir of Melecio Severino, is praying for the court to
compel defendant Guillermo Severino, Melecios brother
to convey the four parcels of land in question to her
favor.
Melecio Severino died in 1915. Some 428 hectares of
land were recorded in the Mortgage Law Register in his
name. During his lifetime, the land was worked by the
defendant, Guillermo as administrator for and on behalf
of Melecio.
In 1916, cadastral proceedings were instituted for the
registration of land titles. The land was described as 4
separate lots. Roque Hofilena, as lawyer for Guillermo,
filed answers in behalf of the latter, claiming the lot in
question as the property of his client. No opposition was
presented and the court therefore decreed the title in
Guillermos favor.
It should be noted that during the cadastral
proceeding, plaintiff Fabiola was only a minor and that
Guillermo did not appear personally in the proceedings
and the only testimony in support of his claim was that of
Hofilenas sworn statement that the former inherited the
land from his father and that he has possessed the land
for 30 years.

ISSUE: W/N defendant Guillermo is an agent of Melecio
and was guilty of fraud in procuring title to the lands in
question thereby compelling him to convey the lands in
favor of Fabiola as the sole heir.

HELD: Conveyance of the land to Fabiola is proper.
Guillermo alleges that one year having passed since the
entry of the final decree adjudicating the land to his
name, said decree cannot now be opened.
The SC said that this is not an action to set aside the
decree under the Land Registration Act but is an action
in personam against an agent to compel him to return, or
retransfer, to the heirs or the estate of its principal, the
property commited to his custody as such agent, to
Agent has the obligation to deliver to his
principal all funds collected on his account.
The relations of an agent and his principal are
fiduciary and in regard to his property forming
the subject-matter of the agency, he is estopped
from acquiring or asserting a title adverse to
that of the principal.
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IMPERIAL | DE LUZURIAGA | HIPOLITO 7
execute the necessary documents of conveyance to
effect such retransfer or, in default thereof, to pay
damages.
It cannot be disputed that Guillermo came into the
possession if the property as only the agent of the
deceased. In his testimonies in a similar case involving
the same land, he testified that he was the administrator
of the land and that he had always known the land as
property of Melecio.
The relations of an agent to his principal are fiduciary
and it is an elementary and very old rule that in regard
to property forming the subject matter of agency, he is
estopped from acquiring or asserting title adverse to that
of the principal.
The principals right of action to compel a
reconveyance is not extinguished through the registration
of the land in favor of the agent. Though such
registration may not be reopened, there appears no
reason why the agent should not be compelled, through a
suit in equity, to make such reparation as may lie within
his power for the breach of trust committed by him, and
as long as the land stands registered in his name such
reparation may take the form of a conveyance or transfer
of title to the cestui que trust, i.e. the principal.


(13) SMITH, BELL & CO. V. CA

A resident agent of a foreign insurance company is
only tasked on behalf of its principal to receive
processes and not to answer personally for any
insurance claims therefore it cannot be held solidarily
liable with the principal.

FACTS:
! Plaintiff, doing business under the business name of
Tic Hin Chiong, importer, bought and imported to the
Philippines 50 metric tons of Dicalcium phosphate,
feed grade F-15% at US$19,500.00. These were
contained in 1,250 bags to be shipped from Taiwan to
the Philippines. Such shipment is insured by First
Insurance Co. against all risks at port of departure
and with Smith, Bell and Co stamped at the lower left
side as Claim agent.
! When the cargo arrived, Chua had the cargo surveyed
and found 600 bags were damaged by tearing at the
sides of the container bags and it weighed 18,546.0
kg short
! Plaintiff filed with Smith, Bell and Co., a formal
statement of claim for settlement of the
corresponding losses but the latter informed the
former that its principal is only willing to pay 50% of
the claim on the ground of discrepancy between the
amounts contained in the shipping agents reply and
that of Metroport, the local arrastre contractor.
! Chua refused the offer contending that the
discrepancy was a result of loss from vessel to
arrastre to consignees warehouse which losses were
still within the all risk insurance cover. Since no
settlement was made, Chua instituted the instant
petition.
! RTC: ruled in favor of Chua, finding that he the
liability of the insurance firm was fully established
and since Smith, Bell and Co is a claim agent of the
foreign insurance firm, justice is better served if said
agent is made liable without prejudice to the right of
action against the principal
! CA: affirmed the decision of the RTC thus the case at
bar.

ISSUE: W/N Smith, Bell can be held solidarily liable
with First Insurance Co, the principal

HELD: NO
! There is only solidary liability when the obligation
expressly so states. It cannot be lightly inferred. The
insurance code is quite clear as to the purpose and
role of a resident agent which is what Smith, Bell and
Co is in the case at bar. Such agent, as representative
of the foreign insurance company, is tasked only to
receive processes on behalf of its principal and not to
answer to answer personally for any insurance claims.
! Also, a settling agent acting within the scope of its
authority, cannot be held personally and/or solidarily
liable for the obligations of its disclosed principal
merely because there is allegedly a need for speedy
settlement of the claim of Chua. When an adjustment
and settlement agent adjusts or settles a claim he is
no different from any other agent in that he also acts
in a representative capacity. He acts in behalf of his
principal and his acts are binding upon such principal.
! Contracts are binding only upon the parties who
execute them. The only involvement of Smith Bell in
the contract of insurance was having its name
stamped in the bottom left portion as claim agent. It
cannot be interpreted to mean that it participated in
the contract. Since there is no privity of contract
then there is no obligation or liability and Chua has
no cause of action against Smith Bell.


(14) DBP V. CA

An agent acting as such is not personally liable unless
he expressly binds himself or exceeds his authority.

FACTS:
! Juan Dans, together with his wife Candida, applied
for a loan of P500K with the DBP. He was 76 at that
time. He was advised by DBP to obtain a mortgage
redemption insurance with the DBP Mortage
Redemption Insurance Pool (DBP MRI pool)
! The loan was approved at a reduced amount of
P300K. DBP also deducted P1,476 as payment of the
MRI premium. After than, Dans accomplished the
application for Insurance and Health statement for
the DBP MRI pool. The premium minus a 10% service
fee was credited by DBP to the account of DBP MRI
pool.
! And then, Dans died of cardiac arrest. DBP MRI Pool
notified DBP that he was not eligible for MRI coverage
for being over the acceptance age limit of 60 years at
the time of the application.
! DBP informed Candida of the disapproval of her late
husbands application and offered to refund that
premium of P1,476 but she refused. She also refused
the ex gratia settlement of P30,000.
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IMPERIAL | DE LUZURIAGA | HIPOLITO 8
! Candida, as administratix of her late husbands
estate, filed a complaint for collection of sum of
money with damages. The RTC rules in her favor but
absolved DBP MRI Pool from liability for there was no
privity of contract between it and the deceased. The
RTC also found DBP in estoppel for having led Dans
into applying despite knowledge of the age
ineligibility. The CA affirmed thus the case at bar.

ISSUE: W/N DBP is liable

HELD: YES
! In dealing with Dans, DBP was wearing 2 hats, one,
that of a lender and two that of an insurance agent.
It required the borrower, as a matter of policy and
practice, to secure MRI coverage but instead of
allowing Dans to look for his own insurance carrier,
DBP compelled him to apply with the DBP MRI Pool. It
also deducted from the proceeds of the loan, MRI
premium and deducted from this 10% as service fee
for the application form and his health statement. As
an insurance agent, DBP made Dans go through the
motion of applying for said insurance despite knowing
that his application would never be approved for
being over the age limit.
! Art. 1897 provides that the agent who acts as such is
not personally liable to the party with whom he
contracts, unless he expressly binds himself or
exceeds the limit of his authority without giving such
party sufficient notice of his powers.
! DBP exceeded the scope of its authority when it
accepted Dans application for it is not authorized to
accept applications for MRI when its clients are over
60 years of age. Also there is no showing that Dans
knew of the limitation on DBPs authority to solicit
applications for MRI. If the 3
rd
person dealing with an
agent is unaware of the limits of the authority
conferred by the principal on the agent and the 3
rd

person has been deceived by the non-disclosure by
the agent, the latter is liable for damages to him.
! But DBP cannot be liable for the entire value of the
insurance policy. Considering his advanced age, there
is no absolute certainty that Dans could obtain an
insurance coverage from another company since he
died almost immediately. But Dans is entitled to
moral damages.


(15) BA FINANCE CORP. V. CA

Persons dealing with an assumed agent, whether the
assumed agency be a general one or special one are
bound at their peril, if they would hold the principal
liable, to ascertain not only the fact of agency but
also the nature and extent of authority and in case
either is controverted, the burden of proof is upon
them to establish it.

FACTS:
! Renato Gaytano, under the name of Gebbs
International, applied for and was granted a loan with
Traders Royal Bank for P60,000. As security for the
payment of the loan, the Gaytano Spouses executed a
deed of suretyship. Also Philip Wong, as credit
administrator of BA Finance Corp., sent a letter to
Traders Royal Bank stating that BA Finance
undertakes to guarantee the loan of the spouses.
! Partial payments on the loan were made leaving only
a balance of 85,807.25. The spouses refused to pay so
TRB filed a complaint for collection of sum of money
against the spouses and BA Finance as alternative
defendant. BA Finance contends as defense the lack
of authority of Wong to bind the corporation.
! The RTC ruled in favor of TRB ruling that the spouses
are solidarily liable to pay which was modified by the
CA to include BA Finance solidarily liable as well since
it was estopped from asserting otherwise the
guaranty made by its credit administrator thus the
case at bar.

ISSUE: W/N BA Finance is liable by the acts of its
credit administrator

HELD: NO
! It is settled that persons dealing with an assumed
agent, whether the assumed agency be a general one
or special one are bound at their peril, if they would
hold the principal liable, to ascertain not only the
fact of agency but also the nature and extent of
authority and in case either is controverted, the
burden of proof is upon them to establish it.
! The burden is on TRB to satisfactorily prove that the
credit administrator with whom they transacted acted
within the authority given to him by his principal. The
only evidence presented by Wong was a memorandum
authorizing him to approve loans but nothing in the
document shows authority to make guarantees. It
cannot be held to be included in the term
contingent commitment. An authority of an agent
should not be inferred from the use of vague or
general words. Guaranty is not presumed, it must be
expressed and cannot be extended beyond its
specified limits.
! TRB has not shown any evidence aside from the
testimony of Wong that their transaction was entered
into the official records of the corporation thus it
would be unfair to hold BA Finance guilty of estoppel.
Wong acted beyond the scope of his authority
therefore he should personally be liable.


(16) NPC V. NATIONAL MERCHANDISING CORP.

The agent who exceeds the limits of his authority
without giving the party with whom he contracts
sufficient notice of his powers is personally liable to
such party.

FACTS:
! National Merchandising Corp, as representative of
International Commodities Corp, and National Power
Corp (NPC) executed a contract for the purchase by
NPC of 4000 long tons of crude sulfur for its Ma.
Cristina Fertilizer Plant. Domestic Insurance Co.
executed a performance bond in the sum of
P90,143.20 to guarantee the Namercos obligation.
! In the contract of sale, it was stipulated that delivery
should be made within 60 days from the
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IMPERIAL | DE LUZURIAGA | HIPOLITO 9
establishment on Namercos favor of a letter of credit
otherwise it would be liable for the payment of
liquidated damages.
! The letter of credit was opened and was received by
cable by the New York firm thereby making Jan. 15,
1957 the deadline for the delivery of the sulfur. The
New York supplier was not able to deliver due to its
inability to secure shipping space. Because of this
from Jan 20-26, there was a shutdown of NPCs
fertilizer plant because there was no sulfur. It could
not produce fertilizer.
! NPC advices Namerco that under Art. 9 of the
contract of sale, non-availability of bottom or
vessel was not a fortuitous event that would excuse
non-performance. The Govt Corporate Counsel
informed Namerco that it rescinded the contract of
sale and demanded payment of P360, 572.80. NPC
sued for recovery of stipulated liquidated damages
against the New York firm, Namerco and the Domestic
Insurance Company.
! The CFI dismissed the case as to the New York firm
for lack of jurisdiction because it was not doing
business in the Philippines. It then ordered Namerco
and the Domestic Insurance Corp to pay solidarily
reduced liquidated damages. Both parties appealed to
the SC which was consolidated thus the case at bar.

ISSUE: W/N Namerco can be held liable

HELD: YES
! Art. 1897 provides that an agent who exceeds the
limits of his authority without giving the party with
whom he contracts sufficient notice of his powers is
personally liable to such party. This provision is
complemented by Art. 1898 in which it states that if
the agent contracts in the name of the principal,
exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void
if the party with whom the agent contracted is aware
of the limits of the powers granted by the principal.
! Namerco acted beyond the bounds of its authority
therefore it is personally liable to the party with
whom he contracted. Namercos principal expressly
provided instructions that the sale would be subject
to the availability of a steamer. Even before the
signing of the contract of sale, Namerco was aware
that its principal was having difficulty in booking
shipping space. It was also advised not to sign the
contract unless it would assume full responsibility for
the shipment. However, the president of Namerco
had no choice but to sign for NPC would forfeit the
bidders bond if the contract was not formalized. Also
NPC was not aware of the limitations on the powers
of Namerco. Since Namerco exceeded the limits of its
authority, it virtually acted in its own name and is not
being held liable under the contract of sale and is
bound by the stipulation for liquidated damages.


(17) CERVANTES V. CA

When 3
rd
persons knows that the agent was acting
beyond his power or authority, the principal cannot be
held liable for the acts of the agent. 17

FACTS:
! By virtue of a compromise agreement between
Philippine Airlines (PAL) and Nicholas Cervantes, the
latter was issued a round trip plane ticket for Manila-
Honolulu-Los Angeles- Honolulu-Manila which ticket
expressly provides that it would expire on March 27,
1990 or 1 year after its issuance.
! 4 days before the expiry of the ticket. Cervantes used
it. Upon arrival in Lon Angeles, he immediately
booked his Los Angeles-Manila return ticket with the
PAL office and it was confirmed for the April 2, 1990
flight.
! Upon learning that his flight would make a stop-over
in San Francisco, he made arrangements to board
instead in San Francisco instead of Los-Angeles since
he would be there on said date. On April 2, when the
checked in at the counter of PAL, he was not allowed
to board and his ticket was marked with TICKET NOT
ACCEPTED DUE EXPIRATION OF VALIDITY. He then
filed a complaint for damages for breach of contract
of carriage but was dismissed by the RTC for lack of
merit which was affirmed by the CA thus the case at
bar.

ISSUE: W/N the acts of the PAL agent confirming his
ticket extended the period of validity

HELD: NO
! The agents had no authority to do so. And Cervantes
was aware of this from the start when he called up
the Legal Department of PAL before the left for the
US. He was informed that if he wants to secure an
extension, he would have to file a written request for
extension at the PALs office in the Philippines. The
PAL agents acted without authority but as provided
by Art. 1898, the acts of an agent beyond the scope
of his authority do not bind the principal, unless the
latter ratifies the same expressly or impliedly. When
the 3
rd
person was aware that the agent was acting
beyond his power or authority, the principal cannot
be held liable for the acts of the agent. Therefore,
since he was aware of the need to file a written
request and still persisted on using the ticket, he only
has himself to blame and he is not entitled to recover
damages from PAL.

* END *