Jocelyn B. Doles vs. Ma.
Aura Tina Angeles In this case, petitioner knew that the financier of the respondent is
G.R. No. 149353. June 26, 2006.
Facts:
Petitioner executed a Deed of Absolute Sale ceding a parcel of land
in favor of respondent to satisfy the alleged indebtedness of the
former in the amount of P405,430.00. Since the said land was
mortgaged to the National Home Mortgage Finance Corporation,
they further agreed that respondent assume the remaining balance
of the loan. Learning that the petitioner still has arrearages,
respondent demanded that the arrearages be paid first. Petitioner
did not heed, thus a case was filed by the respondent.
In answer, the petitioner alleged that sale was void for lack of
consideration and that she was not indebted to the respondent as
she only referred her friends to respondent whom she knew to be
engaged in the business of lending money in exchange for personal
checks through her capitalist Arsenio Pua. Further petitioner
contended that since the respondent is also an agent, she does not
have the capacity to sue her.
It is an admitted fact by both petitioner and defendant, based on
their testimonies, that respondent knew that the money will be
used by the friends of the petitioner; that the respondent was
merely representing Arsenio Pua; and that before the supposed
friends of the petitioner defaulted in payment, each issued their
personal checks in the name of Arsenio Pua for the payment of
their debt.
Issue/s:
Whether or not petitioner and respondent were acting on their
personal capacity or as mere agents.
Ruling:
The question whether an agency has been created is ordinarily a
question which may be established in the same was as any other
fact, either by direct or circumstantial evidence. Agency may be
implied from the words and conduct of the parties and the
circumstances of the particular case. Though the fact or extent of
authority of the agents may not, as a general rule, be established
from the declarations of the agents alone, if one frofessed to act as
agent for another, she may be stopped to deny her agency both as
against the asserted principal and the third persons interested in
the transaction in which he or she is engaged.
Pua, and respondent knew that the borrowers are friends of
petitioner. It is sufficient that petitioner disclosed to respondent
that the former was acting in behalf of her principals, her friends.
For an agency to arise, it is not necessary that the principal
personally encounter the third person with whom the agent
interacts.
Here, both petitioner and respondent have undeniably disclosed to
each other that they are representing someone else and so both of
them are estopped to deny the same.
That both parties acted as mere agents is shown by the undisputed
fact that the friends of the petitioner issued checks in payment of
the loan in the name of Arsenio Pua.
Rallos v. Yangco, 20 Phil 269
FACTS: Yangco sent Rallos a letter inviting the latter to be the
consignor in buying and selling leaf tobacco and other native
products. Terms and conditions were also contained in the letter.
Accepting the invitation, Rallos proceeded to do a
considerable business with Yangco through the said Collantes, as
his factor, sending to him as agent for Yangco a good deal of
produce to be sold on commission.
Rallos sent to the said Collantes, as agent for Yangco, 218
bundles of tobacco in the leaf to be sold on commission, as had
been other produce previously.
The said Collantes received said tobacco and sold it for the
sum of P1,744. The charges for such sale were P206.96, leaving in
the hands of said Collantes the sum of 1,537.08 belonging to
Rallos. This sum was, apparently, converted to his own use by said
agent.
 It appears, however, that prior to the sending of said
tobacco Yangco had severed his relations with Collantes and that
the latter was no longer acting as his factor. This fact was not
known to Rallos; and it is conceded in the case that no notice of
any kind was given by Yangco of the termination of the relations
between Yangco and his agent, Collantes.
Yangco thus refused to pay the said sum upon demand of
Rallos, placing such refusal upon the ground that at the time the
said tobacco was received and sold by Collantes, he was acting
personally and not as agent of Yangco.
ISSUE: Whether or not Yangco as principal is liable brought by the
sale of the produce
RULING: Yes. Yangco, as principal is liable. Having advertised the
fact that Collantes was his agent and having given special notice to
Rallos of that fact, and having given them a special invitation to
deal with such agent, it was the duty of Yangco on the termination
of the relationship of the principal and agent to give due and timely
notice thereof to Rallos. Failing to do so, he is responsible to them
for whatever goods may have been in good faith and without
negligence sent to the agent without knowledge, actual or
constructive, of the termination of such relationship.
JESUS M. GOZUN, vs. JOSE TEOFILO T. MERCADO a.k.a. DON
PEPITO MERCADO, respondent.
FACTS: In the local elections of 1995, respondent vied for the
gubernatorial post in Pampanga. Upon respondents request,
petitioner, owner of JMG Publishing House, a printing shop located
in San Fernando, Pampanga, submitted to respondent draft samples
and price quotation of campaign materials.
By petitioners claim, respondents wife had told him that
respondent already approved his price quotation and that he could
start printing the campaign materials, hence, he did print campaign
materials like posters bearing respondents photograph, 3 leaflets
containing the slate of party candidates, 4 sample ballots,5 poll
watcher identification cards,6 and stickers.
Given the urgency and limited time to do the job order, petitioner
availed of the services and facilities of Metro Angeles Printing and
of St. Joseph Printing Press, owned by his daughter Jennifer Gozun
and mother Epifania Macalino Gozun, respectively.7
Meanwhile, on March 31, 1995, respondents sister-in-law, Lilian
Soriano (Lilian) obtained from petitioner "cash advance" of
P253,000 allegedly for the allowances of poll watchers who were
attending a seminar and for other related expenses. Lilian
acknowledged on petitioners 1995 diary9 receipt of the amount.10 .
ISSUE: W/N Lilian R. Soriano was authorized by the respondent to
receive the cash advance from the petitioner in the amount of
P253,000.00.
Held: By the contract of agency a person binds himself to render
some service or to do something in representation or on behalf of
another, with the consent or authority of the latter. 26 Contracts
entered into in the name of another person by one who has been
given no authority or legal representation or who has acted beyond
his powers are classified as unauthorized contracts and are
declared unenforceable, unless they are ratified.27
Generally, the agency may be oral, unless the law requires a
specific form.28 However, a special power of attorney is necessary
for an agent to, as in this case, borrow money, unless it be urgent
and indispensable for the preservation of the things which are
under administration.29 Since nothing in this case involves the
preservation of things under administration, a determination of
whether Soriano had the special authority to borrow money on
behalf of respondent is in order.
It is a general rule in the law of agency that, in order to bind the
principal by a mortgage on real property executed by an agent, it
must upon its face purport to be made, signed and sealed in the
name of the principal, otherwise, it will bind the agent only. It is not
enough merely that the agent was in fact authorized to make the
mortgage, if he has not acted in the name of the principal. x x x 36
(Emphasis and underscoring supplied)
Laureano T. Angeles vs. Philippine National Railways (PNR)
and Rodolfo Flores, August 31, 2006 G.R. No. 150128
Facts:
Respondent Philippine National Railways (PNR) informed a certain
GaudencioRomualdez (Romualdez, hereinafter) that it has accepted
the latters offer to buythe PNRs scrap/unserviceable rails located
in Del Carmen and Lubao, Pampanga at P1,300.00 and P2,100.00
per metric ton, respectively, for the total amount of P96,600.00.
Romualdez paid the purchase price and addressed a letter to Atty.
CiprianoDizon, PNRs Acting Purchasing Agent. The letter
authorized LIZETTE R. WIJANCOto be his (Romualdez) lawful
representative in the withdrawal of the scrap/unserviceable rails
awarded to him. Furthermore, the original copy of the award which
indicates the waiver of rights, interest and participation in favor of
Lizetter R. Wijanco was also given.
The Lizette R. Wijanco was petitioner's now deceased wife. That
very same day, Lizette requested the PNR to transfer the location
of withdrawal for the reason that the scrap/unserviceable rails
located in Del Carmen and Lubao, Pampanga were not ready for
hauling.The PNR granted said request and allowed Lizette to
withdraw scrap/unserviceable rails in Murcia, Capas and San
Miguel, Tarlac instead. However, PNR subsequently suspended the
withdrawal in view of what it considered as documentary
discrepancies coupled by reported pilferages of over P500,000.00
worth of PNR scrap properties in Tarlac.Consequently, the spouses
Angeles demanded the refund of the amount of P96,000.00. The
PNR, however, refused to pay, alleging that as per delivery receipt
duly signed by Lizette, 54.658 metric tons of unserviceable rails
had already been withdrawn. The spouses Angeles filed suit against
the PNR for specific performance and damages before the Regional
Trial Court. Lizette W. Angeles passed away and was substituted by
her heirs, among whom is her husband, herein petitioner Laureno T.
Angeles.
The trial court, on the postulate that the spouses Angeles are not
the real parties-in-interest, rendered judgment dismissing their
complaint for lack of cause of action. As held by the court, Lizette
was merely a representative of Romualdez in the withdrawal of
scrap or unserviceable rails awarded to him and not an assignee to
the latter's rights with respect to the award. Petitioner appealed
with the Court of Appeals which dismissed the appeal and affirmed
that of the trial court.
Issue:
Whether or not the CA erred in affirming the trial court's holding
that petitioner and his spouse, as plaintiffs a quo, had no cause of
action as they were not the real parties-in-interest in this case.
Held:
No.The CAs conclusion, affirmatory of that of the trial court, is that
Lizette was not an assignee, but merely an agent whose authority
was limited to the withdrawal of the scrap rails, hence, without
personality to sue.Where agency exists, the third party's (in this
case, PNR's) liability on a contract is to the principal and not to the
agent and the relationship of the third party to the principal is the
same as that in a contract in which there is no agent. Normally, the
agent has neither rights nor liabilities as against the third party. He
cannot thus sue or be sued on the contract. Since a contract may
be violated only by the parties thereto as against each other, the
real party-in-interest, either as plaintiff or defendant in an action
upon that contract must, generally, be a contracting party.
The legal situation is, however, different where an agent is
constituted as an assignee. In such a case, the agent may, in his
own behalf, sue on a contract made for his principal, as an assignee
of such contract. The rulerequiring every action to be prosecuted in
the name of the real party-in-interest recognizes the assignment of
rights of action and also recognizesthat when one has a right
assigned to him, he is then the real party-in-interest and may
maintain an action upon such claim or right.
WHEREFORE, the petition is DENIED and the assailed decision of
the CA is AFFIRMED.Costs against the petitioner.
PRIMITIVO SIASAT and MARCELINO SIASAT, petitioners,
vs.
INTERMEDIATE APPELLATE COURT and TERESITA
NACIANCENO, respondents.
GUTIERREZ, JR., J.:
FACTS: Sometime in 1974, respondent Teresita Nacianceno
succeeded in convincing officials of the then Department of
Education and Culture, to purchase without public bidding, one
million pesos worth of national flags for the use of public schools
throughout the country. And for her service, she was entitled to a
commission of thirty (30%) percent.
On October 16, 1974, the first delivery of 7,933 flags was made by
the United Flag Industry. The next day, on October 17, 1974, the
respondent's authority to represent the United Flag Industry was
revoked by petitioner Primitivo Siasat.
According to the findings of the courts below, Siasat, after receiving
the payment of P469,980.00 on October 23, 1974 for the first
delivery, tendered the amount of P23,900.00 or five percent (5%)
of the amount received, to the respondent as payment of her
commission. The latter allegedly protested. She refused to accept
the said amount insisting on the 30% commission agreed upon. The
respondent was prevailed upon to accept the same because of the
assurance of the petitioners that they would pay the commission in
full after they delivered the other half of the order. The respondent
states that she later on learned that petitioner Siasat had already
received payment for the second delivery of 7,833 flags. When she
confronted the petitioners, they vehemently denied receipt of the
payment, at the same time claiming that the respondent had no
participation whatsoever with regard to the second delivery of flags
and that the agency had already been revoked. She then filed a
case in court.
The trial court decided in favor of the respondent.
In assailing the appellate court's decision, the petition tenders the
following arguments: first, the authorization making the respondent
the petitioner's representative merely states that she could deal
with any entity in connection with the marketing of their products
for a commission of 30%. There was no specific authorization for
the sale of 15,666 Philippine flags to the Department; second, there
were two transactions involved evidenced by the separate
purchase orders and separate delivery receipts, The revocation of
agency effected by the parties with mutual consent on October 17,
1974, therefore, forecloses the respondent's claim of 30%
commission on the second transaction; and last,regarding damages
and attorneys fees.
ISSUE: Whether or not respondent is an agent of petitioners.
HELD: YES, Respondent is indeed their agent. There are several
kinds of agents. First, a universal agent one who is authorized to
do all acts for his principal which can lawfully be delegated to an
agent. Second, a general agent one authorized to do all acts
pertaining to a business of a certain kind or at a particular place, or
all acts pertaining to a business of a particular class or series. And
third, a special agent one authorized to do some particular act or
act upon some particular occasion. He acts usually in accordance
with specific instructions the respondent is upon close scrutiny be
classified as a general agent.
Indeed, it can easily be seen by the way general words were
employed in the agreement that no restrictions were intended as to
the manner the agency was to be carried out or in the place where
it was to be executed. The power granted to the respondent was so
broad that it practically covers the negotiations leading to, and the
execution of, a contract of sale of petitioners' merchandise with any
entity or organization.

A cardinal rule of evidence embodied in Section 7 Rule 130 of our
Revised Rules of Court states that "when the terms of an
agreement have been reduced to writing, it is to be considered as
containing all such terms, and, therefore, there can be between the
parties and their successors-in-interest, no evidence of the terms of
the agreement other than the contents of the writing", except in
cases specifically mentioned in the same rule. Petitioners have
failed to show that their agreement falls under any of these
exceptions. The petitioners' evidence is overcome by other pieces
of evidence proving that there was only one transaction.
Since only one transaction was involved, we deny the petitioners'
contention that respondent Nacianceno is not entitled to the
stipulated commission on the second delivery because of the
revocation of the agency effected after the first delivery. The
revocation of agency could not prevent the respondent from
earning her commission because as the trial court opined, it came
too late, the contract of sale having been already perfected and
partly executed.
We do not mean to question the general doctrine as to the power of
a principal to revoke the authority of his agent at will, in the
absence of a contract fixing the duration of the agency however,
The principal cannot deprive his agent of the commission agreed
upon by canceling the agency and, thereafter, dealing directly with
the buyer.
The petitioners are ordered to pay the respondent the amount of
ONE HUNDRED FOURTY THOUSAND NINE HUNDRED AND NINETY
FOUR PESOS (P140,994.00) as her commission on the second
delivery of flags with legal interest from the date of the trial court's
decision. No pronouncement as to costs.
SO ORDERED.
FRANCISCO A. VELOSO, Petitioner, v. CA, AGLALOMA B.
ESCARIO, assisted by her husband GREGORIO L. ESCARIO,
the REGISTER OF DEEDS -MANILA, Respondent.
DOCTRINE: The special power of attorney can be included in the
general power when it is specified therein the act or transaction for
which the special power is required.
"Whether the instrument be denominated as "general power of
attorney" or "special power of attorney," what matters is the extent
of the power or powers contemplated upon the agent or attorney in
fact. If the power is couched in general terms, then such power
cannot go beyond acts of administration. However, where the
power to sell is specific, it not being merely implied, much less
couched in general terms, there can not be any doubt that the
attorney in fact may execute a valid sale. An instrument may be
captioned as "special power of attorney" but if the powers granted
are couched in general terms without mentioning any specific
power to sell or mortgage or to do other specific acts of strict
dominion, then in that case only acts of administration may be
deemed conferred."
FACTS: TORRES, JR., J.:
Petitioner Francisco Veloso owns a parcel of land in Tondo,
Manila covered by a TCT issued by the Registry of Deeds-Manila.
He acquired the subject property before he got married from
Philippine Building Corporation. Hence, the property did not
belong to the conjugal partnership.
The said title was subsequently canceled and a new one was
issued in the name of Aglaloma B. Escario.
Subsequently, petitioner filed an action for annulment of
documents, reconveyance of property with damages and
preliminary injunction alleging that he was the absolute owner
of the subject property and he never authorized anybody to sell
it. He alleged that when his wife left for abroad, he found out
that his copy was missing.
 The transfer of property was supported by a General Power of
Attorney and Deed of Absolute Sale, executed by Irma Veloso,
wife of the petitioner.
Petitioner denied executing the power of attorney and alleged
that his signature was falsified. He also denied having known
the supposed witnesses in the execution of the power of
attorney. Thus, he contended that the sale of the property, and
the subsequent transfer were null and void.
Defendant Aglaloma Escario alleged that she was a buyer in
good faith and denied any knowledge of the alleged irregularity.
She allegedly relied on the general power of attorney which was
sufficient in form and substance and was duly notarized.
Witness for the plaintif Atty. Julian G. Tubig denied any
participation in the execution of the general power of attorney,
and attested that he did not sign.
RTC ruled in favor of Escaro as the lawful owner of the property
as she was deemed an innocent purchaser for value. The trial
court ruled that there was no need for a special power of
attorney when the special power was already mentioned in the
general one.
CA affirmed in toto the findings of the trial court.
ISSUE: Was the General Power of Attorney valid?
HELD: The assailed power of attorney was valid and regular on its
face. It was notarized and as such, it carries the evidentiary weight
conferred upon it with respect to its due execution. While it is true
that it was denominated as a general power of attorney, a perusal
thereof revealed that it stated an authority to sell.
"2. To buy or sell, hire or lease, mortgage or otherwise
hypothecate lands, tenements and hereditaments ."
Thus, there was no need to execute a separate and special power
of attorney since the general power of attorney had expressly
authorized the agent or attorney in fact the power to sell the
subject property.
The general power of attorney was accepted by the Register of
Deeds when the title to the subject property was canceled and
transferred in the name of private Respondent.
RE FALSIFIED SIGNATURE:
SC found that the basis presented by the petitioner was inadequate
to sustain his allegation of forgery. Mere variance of the signatures
cannot be considered as conclusive proof that the same were
forged. Forgery cannot be presumed.
RE INNOCENT PURCHASER FOR VALUE:
SC agrees with the conclusion of the lower court that private
respondent was an innocent purchaser for value. Respondent
Aglaloma relied on the power of attorney presented by petitioners
wife, Irma. Being the wife of the owner and having with her the title
of the property, there was no reason for the private respondent not
to believe in her authority. Moreover, the power of attorney was
notarized and as such, carried with it the presumption of its due
execution.
A purchaser in good faith is one who buys property of another,
without notice that some other person has a right to, or interest in
such property and pays a full and fair price for the same, at the
time of such purchase, or before he has notice of the claim or
interest of some other person in the property. The questioned
power of attorney and deed of sale, were notarized and therefore,
presumed to be valid and duly executed.
Atty. Tubig denied having notarized the said documents and alleged
that his signature had also been falsified. Just like the petitioner,
witness Atty. Tubig merely pointed out that his signature was
different from that in the power of attorney and deed of sale.
Even granting for the sake of argument, that the petitioners
signature was falsified and consequently, the power of attorney and
the deed of sale were null and void, such fact would not revoke the
title subsequently issued in favor of private respondent.
The right of an innocent purchaser for value must be respected and
protected, even if the seller obtained his title through fraud. The
REMEDY of the person prejudiced is to bring an action for damages
against those who caused or employed the fraud, and if the latter
are insolvent, an action against the Treasurer of the Philippines may
be filed for recovery of damages against the Assurance Fund.

RE ESTOPPEL:
The trial court did not err in applying equitable estoppel in this
case. The principle of equitable estoppel states that where one or
two innocent persons must suffer a loss, he who by his conduct
made the loss possible must bear it. From the evidence adduced, it
should be the petitioner who should bear the loss.
The fact remains that the Certificate of Title, as well as other
documents necessary for the transfer of title were in the possession
of Irma, consequently leaving no doubt or any suspicion on the part
of the defendant as to her authority. Under Section 55 of Act 496,
Irmas possession and production of the TCT to defendant operated
as conclusive authority from the plaintiff to the Register of Deeds to
enter a new certificate.
ACCORDINGLY, the petition for review is hereby DENIED for lack of
merit.
CUISON vs. CA and Valiant
G.R. No. 88539
October 26, 1993
FACTS: Kue Cuison is a sole proprietorship engaged in the purchase
and sale of newsprint, bond paper and scrap.
Valiant Investment Associates delivered various kinds of paper
products to a certain Tan. The deliveries were made by Valiant
pursuant to orders allegedly placed by Tiac who was then employed
in the Binondo office of petitioner. Upon delivery, Tan paid for the
merchandise by issuing several checks payable to cash at the
specific request of Tiac. In turn, Tiac issued nine (9) postdated
checks to Valiant as payment for the paper products. Unfortunately,
sad checks were later dishonored by the drawee bank.
Thereafter, Valiant made several demands upon petitioner to pay
for the merchandise in question, claiming that Tiac was duly
authorized by petitioner as the manager of his Binondo office, to
enter into the questioned transactions with Valiant and Tan.
Petitioner denied any involvement in the transaction entered into
by Tiac and refused to pay Valiant.
Left with no recourse, private respondent filed an action against
petitioner for the collection of sum of money representing the price
of the merchandise. After due hearing, the trial court dismissed the
complaint against petitioner for lack of merit. On appeal, however,
the decision of the trial court was modified, but was in effect
reversed by the CA. CA ordered petitioner to pay Valiant with the
sum plus interest, AF and costs.
ISSUE: WON Tiac possessed the required authority from petitioner
sufficient to hold the latter liable for the disputed transaction
HELD:
YES. As to the merits of the case, it is a well-established rule that
one who clothes another with apparent authority as his agent and
holds him out to the public as such cannot be permitted to deny the
authority of such person to act as his agent, to the prejudice of
innocent third parties dealing with such person in good faith and in
the honest belief that he is what he appears to be
It matters not whether the representations are intentional or merely
negligent so long as innocent, third persons relied upon such
representations in good faith and for value. Article 1911 of the Civil
Code provides:
Even when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to act
as though he had full powers.
The above-quoted article is new. It is intended to protect the rights
of innocent persons. In such a situation, both the principal and the
agent may be considered as joint tortfeasors whose liability is joint
and solidary.
It is evident from the records that by his own acts and admission,
petitioner held out Tiac to the public as the manager of his store in
Binondo. More particularly, petitioner explicitly introduced to
Villanueva, Valiants manager, as his (petitioners) branch manager
as testified to by Villanueva. Secondly, Tan, who has been doing
business with petitioner for quite a while, also testified that she
knew Tiac to be the manager of the Binondo branch. Even
petitioner admitted his close relationship with Tiu Huy Tiac when he
said that they are like brothers There was thus no reason for
anybody especially those transacting business with petitioner to
even doubt the authority of Tiac as his manager in the Binondo
branch.
 Tiac, therefore, by petitioners own representations and
manifestations, became an agent of petitioner by estoppel, an
admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person
relying thereon (Article 1431, Civil Code of the Philippines). A party
cannot be allowed to go back on his own acts and representations
to the prejudice of the other party who, in good faith, relied upon
them. Taken in this light,. petitioner is liable for the transaction
entered into by Tiac on his behalf. Thus, even when the agent has
exceeded his authority, the principal is solidarily liable with the
agent if the former allowed the latter to fact as though he had full
powers (Article 1911 Civil Code), as in the case at bar.
Finally, although it may appear that Tiac defrauded his principal
(petitioner) in not turning over the proceeds of the transaction to
the latter, such fact cannot in any way relieve nor exonerate
petitioner of his liability to private respondent. For it is an equitable
maxim that as between two innocent parties, the one who made it
possible for the wrong to be done should be the one to bear the
resulting loss
Rural Bank of Bombon v CA
G.R. No. 95703 | August 3, 1992
Quick Summary:
Ederlinda Gallardo transacted with Rufino Aquino, contracting him
to be her agent and providing him with a Special Power of Attorney
authorizing him to mortgage her property in her behalf for the
purpose of securing loans from banks. She provided him with the
TCT to the property as well.
Rufino Aquino secured a loan from Rural Bank of Bombon for the
amount of PhP350,000.00 as principal and chargeable with a 14%
interest per annum. In the contract of mortgage, he represented
himself to be the attorney-in-fact of Gallardo, but proceeded to sign
his name as mortgagor. He even got his wife to sign the documents
as wife of mortgagor.
Gallardo, upon knowing of the transaction, went to court to secure
the annulment of such contract since she was allegedly surprised
to find out that her property was already mortgaged and
correspondence regarding the contract of mortgage were not being
sent to her, and instead sent to the address of Aquino, who has
since disappeared from Bulacan and now resides in Camarines Sur.
Further, the mortgage was secured to pay off personal loans of
Aquino and to establish his personal fishpond business.
RTC issued a TRO restraining Rural Bank of Bombon to foreclose the
mortgage. In his Answer, Aquino alleged that Gallardo owed him
money and it was already the responsibility of Aquino to take care
of payments due. RTC ruled in favor of Aquino and Bank of Bombon.
CA reversed the ruling of the RTC and held that the Deal of Real
Estate Mortgage was not valid. It not binding on the principal
Gallardo since it was executed not in her name as principal but in
the personal capacity of the Aquino spouses.
Issue:
WON the Deed of Real Estate Mortgage executed by Rufino S.
Aquino as attorney-in-fact of Ederlinda Gallardo in favor of the Rural
Bank of Bombon is valid.
Held:
No. Aquino signed the Deed of Real Estate Mortgage in his name
alone as mortgagor, without any indication that he was signing for
and in behalf of the property owner, Ederlinda Gallardo. He bound
himself alone in his personal capacity as a debtor of the petitioner
Bank and not as the agent or attorney-in-fact of Gallardo.
Ratio:
It is a general rule in the law of agency that, in order to bind
the principal by a mortgage on real property executed by
an agent, it must upon its face purport to be made, signed
and sealed in the name of the principal, otherwise, it will
bind the agent only.
It is not enough merely that the agent was in fact authorized to
make the mortgage, if he has not acted in the name of the
principal. Neither is it ordinarily sufficient that in the mortgage the
agent describes himself as acting by virtue of a power of attorney,
if in fact the agent has acted in his own name and has set his own
hand and seal to the mortgage. This is especially true where the
agent himself is a party to the instrument. However clearly the
body of the mortgage may show and intend that it shall be the act
of the principal, yet, unless in fact it is executed by the agent for
and on behalf of his principal and as the act and deed of the
principal, it is not valid as to the principal. (Philippine Sugar Estates
Development Co. vs. Poizat)

Bank cannot rely on Article 1883 to bind the principal Gallardo. It is
not applicable to the case at bar. Article 1883 states in such case
the agent is the one directly bound in favor of the person with
whom he has transacted, as if the transaction was his own, except
when the contract involves things belonging to the principal.
There is no principle of law by which a person can become liable on
a real mortgage which she never executed either in person or by
attorney in fact. Here, Aquino acted purportedly as an agent of
Gallardo, but actually acted in his personal capacity. Involved
herein are properties titled in the name of respondent Gallardo
against which the Bank proposes to foreclose the mortgage
constituted by an agent (Aquino) acting in his personal capacity.
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
COURT OF APPEALS and the ESTATE OF THE LATE JUAN B.
DANS, represented by CANDIDA G. DANS, and the DBP
MORTGAGE REDEMPTION INSURANCE POOL, respondents.
G.R. No. L-109937 March 21, 1994
QUIASON, J.
Facts: In May 1987, Juan B. Dans, together with his wife Candida,
his son and daughter-in-law, applied for a loan of P500,000.00 with
the Development Bank of the Philippines (DBP), Basilan Branch. As
the principal mortgagor, Dans, then 76 years of age, was advised
by DBP to obtain a mortgage redemption insurance (MRI) with the
DBP Mortgage Redemption Insurance Pool (DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by
DBP on August 4, 1987 and released on August 11, 1987. From the
proceeds of the loan, DBP deducted the amount of P1,476.00 as
payment for the MRI premium. On August 15, 1987, Dans
accomplished and submitted the MRI Application for Insurance
and the Health Statement for DBP MRI Pool.
On August 20, 1987, the MRI premium of Dans, less the DBP
service fee of 10 percent, was credited by DBP to the savings
account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was
advised of the credit.
On September 3, 1987, Dans died of cardiac arrest. The DBP,
upon notice, relayed this information to the DBP MRI Pool. On
September 23, 1987, the DBP MRI Pool notified DBP that
Dans was not eligible for MRI coverage, being over the
acceptance age limit of 60 years at the time of application.
On October 21, 1987, DBP apprised Candida Dans of the
disapproval of her late husbands MRI application. The DBP offered
to refund the premium of P1,476.00 which the deceased had paid,
but Candida Dans refused to accept the same, demanding payment
of the face value of the MRI or an amount equivalent to the loan.
She, likewise, refused to accept an ex gratia settlement of
P30,000.00, which the DBP later offered.
On February 10, 1989, respondent Estate, through Candida
Dans as administratrix, filed a complaint with the Regional
Trial Court, Branch I, Basilan, against DBP and the
insurance pool for Collection of Sum of Money with
Damages. Respondent Estate alleged that Dans became
insured by the DBP MRI Pool when DBP, with full knowledge
of Dans age at the time of application, required him to
apply for MRI, and later collected the insurance premium
thereon. Respondent Estate therefore prayed: (1) that the sum of
P139,500.00, which it paid under protest for the loan, be
reimbursed; (2) that the mortgage debt of the deceased be
declared fully paid; and (3) that damages be awarded.
On March 10, 1990, the trial court rendered a decision in
favor of respondent Estate and against DBP. The DBP MRI
Pool, however, was absolved from liability, after the trial
court found no privity of contract between it and the
deceased. The trial court declared DBP in estoppel for having led
Dans into applying for MRI and actually collecting the premium and
the service fee, despite knowledge of his age ineligibility.
Issue: 1) Whether or not there is a contract made between DBP
MRI Pool and the late Juan Dans;
2) Whether or not DBP should be held liable.
Held: 1) No. When Dans applied for MRI, he filled up and
personally signed a Health Statement for DBP MRI Pool (Exh. 5-
Bank) with the following declaration:
I hereby declare and agree that all the statements and answers
contained herein are true, complete and correct to the best of my
knowledge and belief and form part of my application for insurance.
It is understood and agreed that no insurance coverage shall be
effected unless and until this application is approved and the full
premium is paid during my continued good health (Records, p. 40).
Under the aforementioned provisions, the MRI coverage shall take
effect: (1) when the application shall be approved by the
insurance pool; and (2) when the full premium is paid
during the continued good health of the applicant. These
two conditions, being joined conjunctively, must concur.
Undisputably, the power to approve MRI applications is
lodged with the DBP MRI Pool. The pool, however, did not
approve the application of Dans. There is also no showing
that it accepted the sum of P1,476.00, which DBP credited
to its account with full knowledge that it was payment for
Dans premium. There was, as a result, no perfected contract of
insurance; hence, the DBP MRI Pool cannot be held liable on a
contract that does not exist.
2) Yes. As an insurance agent, DBP made Dans go through
the motion of applying for said insurance, thereby leading
him and his family to believe that they had already fulfilled
all the requirements for the MRI and that the issuance of
their policy was forthcoming. Apparently, DBP had full
knowledge that Dans application was never going to be
approved. The maximum age for MRI acceptance is 60 years as
clearly and specifically provided in Article 1 of the Group Mortgage
Redemption Insurance Policy signed in 1984 by all the insurance
companies concerned (Exh. 1-Pool).
Under Article 1987 of the Civil Code of the Philippines, the agent
who acts as such is not personally liable to the party with
whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party
sufficient notice of his powers.
The DBPs liability, however, cannot be for the entire value
of the insurance policy. To assume that were it not for DBPs
concealment of the limits of its authority, Dans would have secured
an MRI from another insurance company, and therefore would have
been fully insured by the time he died, is highly speculative.
Considering his advanced age, there is no absolute
certainty that Dans could obtain an insurance coverage
from another company. It must also be noted that Dans died
almost immediately, i.e., on the nineteenth day after applying for
the MRI, and on the twenty-third day from the date of release of his
loan.
One is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved (Civil
Code of the Philippines, Art. 2199).
WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV
No. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to
REIMBURSE respondent Estate of Juan B. Dans the amount of
P1,476.00 with legal interest from the date of the filing of the
complaint until fully paid; and (2) to PAY said Estate the amount of
Fifty Thousand Pesos (P50,000.00) as moral damages and the
amount of Ten Thousand Pesos (P10,000.00) as attorneys fees.
With costs against petitioner.
GREEN VALLEY POULTRY & ALLIED PRODUCTS INC v
INTERMEDIATE APPELLATE COURT and E.R. SQUIBB & SONS
PHIL. CORP.
SUMMARY: Green Valley Poulty and E.R. Squibb & Sons entered
into a letter agreement. The details of the agreement state that
Green Valley will be the nonexclusive distributor of the products of
Squibb Veterinary Products. Squibb filed a suit to collect for goods
delivered to Green Valley but unpaid. The trial court and CA ruled in
favor of E.R. Squibb, holding that the agreement was a sales
contract. The Court upheld the ruling of the TC and CA, but it
discussed that even if the contract is an agency to sell, Green
Valley will be liable to E.R. Squibb because in such contract, the
agent is liable to pay the principal for goods sold by the agent
without the principals consent.
DOCTRINE: In an agency to sell, the agent is liable to pay the
principal for goods sold by the agent without the principals
consent. The commission agent cannot without the express or
implied consent of the principal, sell on credit. Should he do so, the
principal may demand from him payment in cash, but the
commission agent shall be entitled to any interest or benefit, which
may result from such sale.
FACTS:
On November 3, 1969, Squibb and Green Valley entered into a
letter agreement, which stipulates the following: (see notes for
full letter)
o E.R. Squibb & Sons Phil Corp. appoints Green Valley Poultry
as a non-exclusive distributor for Squibb Veterinary
Products, as recommended by Dr. Leoncio Rebong Jr. and Dr.
J.G. Cruz, Animal Health Division Sales Supervisor.
o As a distributor, Green Valley is entitled to a discounts
o Green Valley Poultry will distribute only for the Central Luzon
and Northern Luzon including Cagayan Valley areas.
o Squibb will not allow any transfer or stocks in the said areas
covered by Squibbs other appointed Distributors.
o The maximum discount that Green Poultry can give to their
direct and turnover accounts will not go beyond 10%
o Payment for purchases from Squibb will be due 60 days from
date of invoice, etc.
Squibb filed a suit to collect for good delivered to Green Valley
but unpaid.
Trial court and CA ruled in favor of Squibb
o Ruled that the agreement between the parties was a sales
contract.
RULING: Petition is dismissed
Whether Green Valley is liable to Squibb YES
Whether Green Valley is an agent of Squibb NO (Court did
not answer categorically but it upheld the ruling of CA)
PETITIONERS ARGUMENTS:
o The contract is an agency to sell; hence, it is not liable to
Squibb
RESPONDENTS ARGUMENTS:
o Its relationship with Green Valley is a mere contract of sale
as evidenced by the stipulation that Green Valley was
obligated to pay for the goods received upon the expiration
of the 60-day credit period.
COURT
We do not have to categorize the contract. Whether viewed as
an agency to sell or as a contract of sale, Green Valley is liable.
If it is a contract of sale then the Green Valley is liable by just
merely enforcing the clear words of the contract.
Adopting Green Valleys theory that the contract is an agency to
sell, it is liable because it sold on credit without authority from
its principal.
Art. 1905. The commission agent cannot, without the express or
implied consent of the principal, sell on credit. Should he do so,
the principal may demand from him payment in cash, but the
commission agent shall be entitled to any interest or benefit,
which may result from such sale.
NOTES:
Letter Agreement:
E.R. Squibb & Sons Philippine Corporation is pleased to appoint
Green Valley Poultry & Allied Products, Inc. as a non-exclusive
distributor for Squibb Veterinary Products, as recommended by Dr.
Leoncio D. Rebong, Jr. and Dr. J.G. Cruz, Animal Health Division
Sales Supervisor.
As a distributor, Green Valley Poultry & Allied Products, Inc. wig be
entitled to a discount as follows:
Feed Store Price (Catalogue)
Less 10% - Wholesale Price
Less 10% - Distributor Price
There are exceptions to the above price structure. At present, these
are:
1. Afsillin Improved 40 lbs. bag
The distributor commission for this product size is 8% off P120.00
2. Narrow Spectrum Injectible Antibiotics
These products are subject to price fluctuations. Therefore, they are
invoiced at net price per vial.
3. Deals and Special Offers are not subject to the above distributor
price structure. A 5% distributor commission is allowed when the
distributor furnishes copies for each sale of a complete deal or
special offer to a feedstore, drugstore or other type of account.
Deals and Special Offers purchased for resale at regular price
invoiced at net deal or special offer price.
Prices are subject to change without notice. Squibb will endeavor to
advise you promptly of any price changes. However, prices in effect
at the tune orders are received by Squibb Order Department will
apply in all instances.
Green Valley Poultry & Allied Products, Inc. win distribute only for
the Central Luzon and Northern Luzon including Cagayan Valley
areas. We will not allow any transfer or stocks from Central Luzon
and Northern Luzon including Cagayan Valley to other parts of
Luzon, Visayas or Mindanao which are covered by our other
appointed Distributors. In line with this, you will follow strictly our
stipulations that the maximum discount you can give to your direct
and turnover accounts will not go beyond 10%.
It is understood that Green Valley Poultry and Allied Products, Inc.
will accept turn-over orders from Squibb representatives for
delivery to customers in your area. If for credit or other valid
reasons a turn-over order is not served, the Squibb representative
will be notified within 48 hours and hold why the order will not be
served.
It is understood that Green Valley Poultry & Allied Products, Inc. will
put up a bond of P20,000.00 from a mutually acceptable bonding
company.
Payment for Purchases of Squibb Products will be due 60 days from
date of invoice or the nearest business day thereto. No payment
win be accepted in the form of post-dated checks. Payment by
check must be on current dating.
It is mutually agreed that this non-exclusive distribution agreement
can be terminated by either Green Valley Poultry & Allied Products,
Inc. or Squibb Philippines on 30 days notice.
I trust that the above terms and conditions will be met with your
approval and that the distributor arrangement will be one of mutual
satisfaction.
If you are agreeable, please sign the enclosed three (3) extra
copies of this letter and return them to this Office at your earliest
convenience.
Thank you for your interest and support of the products of E.R.
Squibb & Sons Philippines Corporation.
SEVILLA v. CA
FACTS: On the strength of a contract, Tourist World Service
Inc. (TWS) leased the premises belonging to Mrs. Segundina
Noguera for the formers use as a branch office. Lina Sevilla bound
herself solidarily liable with TWS for the prompt payment of the
monthly rentals thereon. When the branch office was opened, it
was run by appellant Sevilla payable to TWS by any airline for any
fare brought in on the efforts of Sevilla, 4% was to go to Sevilla and
3% was to be withheld by TWS.
TWS appears to have been informed that Sevilla was
connected with a rival firm, the Philippine Travel Bureau, and, since
the branch office was anyhow losing, the TWS considered closing
down its office. Two resolutions of the TWS board of directors were
passed to abolish the office of the manager and vice president of
the branch office and authorizing the corporate secretary to receive
the properties in the said branch office.
Subsequently, the corporate secretary went to the branch
office, and finding the premises locked and being unable to contact
Sevilla, padlocked the premises to protect the interests of TWS.
When neither Sevilla nor her employees could enter the
locked premises, she filed a complaint against TWS with a prayer
for the issuance of a mandatory preliminary injunction.
The trial court dismissed the case holding that TWS, being
the true lessee, was within its prerogative to terminate the lease
and padlock the premises. It likewise found that Sevilla was a mere
employee of TWS and as such, was bound by the acts of her
employer.
The CA affirmed. Hence this petition.

ISSUES
1. Whether or not there was an employer-employee relationship
between TWS and Sevilla?
2. Whether or not the padlocking of the premises by TWS without
the knowledge and consent of Sevilla entitled the latter to the relief
of damages prayed for?
HELD 1. NO. It was a principal-agent relationship. In this
jurisdiction, there has been no uniform test to determine the
existence of an employer-employee relation. In general, We
have relied on the so-called right of control test, where the
person for whom the services are performed reserves a right to
control not only the end to be achieved but also the means to
be used in reaching such end. In addition, the existing
economic conditions prevailing between the parties, like
the inclusion of the employee in the payrolls, are also
considered in determining the existence of an employer-
employee relationship.
Sevilla was not subject to control by TWS either as to the result
of the enterprise or as to the means used in connection
therewith.
Under the contract of lease, Sevilla bound herself in solidum for
the rental payments; an arrangement that would belie the
claims of a master-servant relationship for a true employee
cannot be made to part with his own money in pursuance of his
employers business, or otherwise assume liability thereof.
Sevilla was not in the companys payroll. She retained 4% in
commissions from airline bookings, the remaining 3% going to
TWS. Unlike an employee who usually earns a fixed salary, she
earned compensation in fluctuating amounts depending on her
booking successes.
The fact that Sevilla has been designated branch manager
does not make her, ergo, TWS employee. Employment is
determined by the right of control test and certain economic
parameters. Titles are weak indicators.
When Sevilla agreed to man TWS Ermita branch office, she did
so pursuant to a contract of agency. It is the essence of this
contract that the agent renders services in representation or
on behalf of another. In the case at bar, Sevilla solicited airline
fares, but she did so for and on behalf of her principal, TWS.
2. YES. For its unwarranted revocation of the contact of agency,
TWS should be sentenced to pay damages.
Sevilla had acquired a personal stake in the business itself,
and necessarily, in the equipment pertaining thereto.
Sevilla was not a stranger to that contract of lease having
been explicitly named therein as third party in charge of
rental payments. She could not be ousted from possession
summarily as one would eject an interloper.
The Court is satisfied with the chronicle of events, there was
indeed some malevolent design to put the petitioner Sevilla in a
bad light following the disclosures that she had worked for a rival
firm.
Valenzuela v CA G.R. No. 83122 October 19, 1990
Facts:
Petitioner Valenzuela, a General Agent respondent Philamgen, was
authorized to solicit and sell all kinds of non-life insurance. He had
a 32.5% commission rate. From 1973 to 1975, Valenzuela solicited
marine insurance from Delta Motors, Inc. in the amount of P4.4
Million from which he was entitled to a commission of 32%.
However, Valenzuela did not receive his full commission which
amounted to P1.6 Million from the P4.4 Million. Premium payments
amounting to P1,946,886.00 were paid directly to Philamgen.
Valenzuelas commission amounted to P632,737.00.
Philamgen wanted to cut Valenzuelas commission to 50% of the
amount. He declined.
When Philamgen offered again, Valenzuela firmly reiterated his
objection.
Philamgen took drastic action against Valenzuela. They: reversed
the commission due him, threatened the cancellation of policies
issued by his agency, and started to leak out news that Valenzuela
has a substantial debt with Philamgen. His agency contract was
terminated.
The petitioners sought relief by filing the complaint against the
private respondents. The trial court found that the principal cause
of the termination as agent was his refusal to share his Delta
commission.
The court considered these acts as harassment and ordered the
company to pay for the resulting damage in the value of the
commission. They also ordered the company to pay 350,000 in
moral damages.
The company appealed. The CA ordered Valenzuela to pay the
entire amount of the commission. Hence, this appeal by Valenzuela.
Issue:
1. WON the agency contract is coupled with interest on the part of
agent Valenzuela.
2. Whether or not Philamgen can be held liable for damages due to
the termination of the General Agency Agreement it entered into
with the petitioners.
3. WON Valenzuela should pay the premiums he collected.
Held: Yes. Yes. Petition granted
Ratio:
1. In any event the principal's power to revoke an agency at will is
so pervasive, that the Supreme Court has consistently held that
termination may be effected even if the principal acts in bad faith,
subject only to the principal's liability for damages.
The Supreme Court accorded great weight on the trial courts
factual findings and found the cause of the conflict to be
Valenzuelas refusal to share the commission. Philamgen told the
petitioners of its desire to share the Delta Commission with them. It
stated that should Delta back out from the agreement, the
petitioners would be charged interests through a reduced
commission after full payment by Delta.
Philamgen proposed reducing the petitioners' commissions by 50%
thus giving them an agent's commission of 16.25%. The company
insisted on the reduction scheme. The company pressured the
agents to share the income with the threat to terminate the agency.
The petitioners were also told that the Delta commissions would
not be credited to their account. This continued until the agency
was terminated.
Records also show that the agency is one "coupled with an
interest," and, therefore, should not be freely revocable at the
unilateral will of the company.
The records sustain the finding that the private respondent started
to covet a share of the insurance business that Valenzuela had built
up, developed and nurtured. The company appropriated the entire
insurance business of Valenzuela. Worse, despite the termination of
the agency, Philamgen continued to hold Valenzuela jointly and
severally liable with the insured for unpaid premiums.
Under these circumstances, it is clear that Valenzuela had an
interest in the continuation of the agency when it was
unceremoniously terminated not only because of the commissions
he procured, but also Philamgens stipulation liability against him
for unpaid premiums. The respondents cannot state that the
agency relationship between Valenzuela and Philamgen is not
coupled with interest.
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 also for the mutual interest of the
principal and the agent. The principal may not defeat the agent's
right to indemnification by a termination of the contract of agency.
Also, if a principal violates a contractual or quasi-contractual duty
which he owes his agent, the agent may as a rule bring an
appropriate action for the breach of that duty.
2. Hence, if a principal acts in bad faith and with abuse of right in
terminating the agency, then he is liable in damages. The Civil
Code says 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, Civil Code).
3. As to the issue of whether or not the petitioners are liable to
Philamgen for the unpaid and uncollected premiums which the
appellate court ordered Valenzuela to pay, the respondent court
erred in holding Valenzuela liable.
Under Section 77 of the Insurance Code, the remedy for the non-
payment of premiums is to put an end to and render the insurance
policy not binding.
Philippine Phoenix- non-payment of premium does not merely
suspend but puts an end to an insurance contract since the time of
the payment is peculiarly of the essence of the contract.
Section 776 of the insurance Code says that no contract of
insurance by an insurance company is valid and binding unless and
until the premium has been paid, notwithstanding any agreement
to the contrary
Since the premiums have not been paid, the policies issued have
lapsed. The insurance coverage did not go into effect or did not
continue and the obligation of Philamgen as insurer ceased. Philam
cant demand from or sue Valenzuela for the unpaid premiums.
The court held that the CAs giving credence to an audit that
showed Valenzuela owing Philamgen P1,528,698.40 was
unwarranted. Valenzuela had no unpaid account with Philamgen.
But, facts show that the beginning balance of Valenzuela's account
with Philamgen amounted to P744,159.80. 4 statements of account
were sent to the agent.
It was only after the filing of the complaint that a radically different
statement of accounts surfaced in court. Certainly, Philamgen's
own statements made by its own accountants over a long period of
time and covering examinations made on four different occasions
must prevail over unconfirmed and unaudited statements made to
support a position made in the course of defending against a
lawsuit.
The records of Philamgen itself are the best refutation against
figures made as an afterthought in the course of litigation.
Moreover, Valenzuela asked for a meeting where the figures would
be reconciled. Philamgen refused to meet with him and, instead,
terminated the agency agreement.
commissioned by Philamgen is unreliable since its results are
admittedly based on an unconfirmed and unaudited beginning
balance of P1,758,185.43.
Philamgen has been appropriating for itself all these years the
gross billings and income that it took away from the petitioners. A
principal can be held liable for damages in cases of unjust
termination of agency. This Court ruled that where no time for the
continuance of the contract is fixed by its terms, either party is at
liberty to terminate it at will, subject only to the ordinary
requirements of good faith. The right of the principal to terminate
his authority is absolute and unrestricted, except only that he may
not do so in bad faith.
The circumstances of the case, however, require that the
contractual relationship between the parties shall be terminated
upon the satisfaction of the judgment. No more claims arising from
or as a result of the agency shall be entertained by the courts after
that date.

After off-setting the amount, Valenzuela had overpaid Philamgen

the amount of P530,040.37 as of November 30, 1978. Philamgen
cannot later be heard to complain that it committed a mistake in its
computation. The alleged error may be given credence if
committed only once. But as earlier stated, the reconciliation of
accounts was arrived at four (4) times on different occasions where
Philamgen was duly represented by its account executives. On the
basis of these admissions and representations, Philamgen cannot
later on assume a different posture and claim that it was mistaken
in its representation with respect to the correct beginning balance
as of July 1977 amounting to P744,159.80. The audit report