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Eurotech Industrial Technologies, Inc. v.

Edwin Cuizon and Erwin Cuizon

Eurotech Industrial Technologies vs Cuizon
GR #167552


Edwin Cuizon, general manager of Impact Systems Sales owned by Erwin Cuizon, bought one equipment
from Petitioner Eurotech valued at Php 250,000.00, paying Php 50,000.00 as downpayment. When the
equipment arrived, petitioner refused to deliver it to the respondent without paying the balance.

Edwin and a general manager of Eurotech signed a deed of assignment, whereby Impact Systems assigns
its outstanding receivable amounting to Php 365,000.00 to Eurotech, which delivered the equipment

But Erwin, the proprietor, still collected the receivables despite the assignment. After partial payments
made, Eurotech made a final demand of Php 295,000.00, excluding interest and attorney's fees.

For failure to meet the demand, Eurotech filed a complaint for sum of money, damages, with application for
preliminary attachment.

Edwin alleged that he is not a real party in interest in the case for he merely acted as an agent of his
principal, Impact Systems.

RTC dropped respondent as a party defendant of the case. The CA affirmed the order, hence the appeal
was made.


Whether or not respondent, as sales manager, is acting merely as an agent for the sole proprietorship


Respondent Edwin merely acted as an agent.

In a contract of agency, a person binds himself to render some service or to do something in representation
or on behalf of another with the latters consent.

The underlying principle of the contract of agency is to accomplish results by using the services of others
to do a great variety of things like selling, buying, manufacturing, and transporting.

Its purpose is to extend the personality of the principal or the party for whom another acts and from whom
he or she derives the authority to act.

It is said that the basis of agency is representation, that is, the agent acts for and on behalf of the principal
on matters within the scope of his authority and said acts have the same legal effect as if they were
personally executed by the principal.

By this legal fiction, the actual or real absence of the principal is converted into his legal or juridical
presence qui facit per alium facit per se.

The elements of the contract of agency are:

(1) consent, express or implied, of the parties to establish the relationship;

(2) the object is the execution of a juridical act in relation to a third person;

(3) the agent acts as a representative and not for himself;

(4) the agent acts within the scope of his authority

In this case, the parties do not dispute the existence of the agency relationship between respondents
ERWIN as principal and EDWIN as agent. The only cause of the present dispute is whether respondent
EDWIN exceeded his authority when he signed the Deed of Assignment thereby binding himself personally
to pay the obligations to petitioner.

Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the
party with whom he contracts.

The same provision, however, presents two instances when an agent becomes personally liable to a third

(1) When he expressly binds himself to the obligation; and,

(2) When he exceeds his authority.

In the last instance, the agent can be held liable if he does not give the third party sufficient notice of his

We hold that respondent EDWIN does not fall within any of the exceptions contained in this

"...the position of manager is unique in that it presupposes the grant of broad powers with which to conduct
the business of the principal."

The powers of an agent are particularly broad in the case of one acting as a general agent or manager;
such a position presupposes a degree of confidence reposed and investiture with liberal powers for the
exercise of judgment and discretion in transactions and concerns which are incidental or appurtenant to the
business entrusted to his care and management. In the absence of an agreement to the contrary, a
managing agent may enter into any contracts that he deems reasonably necessary or requisite for the
protection of the interests of his principal entrusted to his management.

A real party in interest is one who "stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit."

2. Rallos v. Felix Go Chan & Realty Corp.

FACTS: An SPA was executed by sisters Concepcion and Gerundia in favo of their brother Simeon for the
sale of a parcel of land co-owned by the two. Months after Conception died, Simeon sold the undivided
shares of his sisters to herein respondent Felix Go Chan & Realty Corp. Petitioner Ramon Rallos,
administrator of he late Concepcion's estate, prayed that the sale of the undivided share of the deceased
be invalidated and a new certificate be issued in the name of respondent corporation and Concepion's
intestate estate, plus damages. CFI ruled in favor of petitioner and granted the payers but CA reversed the
decision. Respondent's MR was further denied.

ISSUE: Whete the sale entered into by an agent is valid alhough executed after death of the principal.

HELD: No, the sale is void because Simeon's authority as an agent of Concepcion was extinguished upon
her death. Article 1317 provides that no one may contract inthe name of another without being authorized
or unless he has, by law, a righ to represent him. Article 1919 urthers hat the death of the princpal
terminates the agency. The case at bar is also not among the exceptions whereby an agent's acts bind the
principal even after the latter's death because of Simeon's knowledge of Concepion's death is material.
CA's decision is reversed, CFI decision affimed. The sale was null and void.

3. Severino vs severino

Fabiola severino is a recognized natural daughter of melencio severino one of the heirs of several property
of the decease. Guillermo severino, so of the decease. A litigation ensued the heads of the decease and in
order to put an end to the litigation Guillermo took over the property and a compromise agreement was put
up, and agreeing to settle with an amount of 100000, and upon the execution of the agreement cntract and
amount of 40000 shall be paid to, Fabiola severino and Felecia's Villanueva, the whole amount is paid in
installment of 20000 every year up to the third year. To which Fabiola is entitled to 20000. Enrique enchaus
signed as guarantor in the agreement.

This case is now filed on RTC to recover the 20000. Enrique as a guarantor protested that the agreement is
lacking consideration on his part when he signed the agreement as a guarantor.

Issue: WON the agreement is invalid due to lack of consideration as a guarantor.

Hel: NO, The agreement as a guarantor is a accessory contract to the principal and as such the
consideration in the principal contract is the same as in the agreement signed by Enrique as guarantor.



American Air, an air carrier offering passenger and air cargo transportation, entered into a General Sales
Agency Agreement with Orient Air, authorizing the latter to act as its exclusive general sales agent for the
sale of air passenger transportation. Orient air failed to remit the net proceeds of sales for several months
prompting American Air to undertook the collection of the proceeds of tickets sold originally by Orient
Air and terminating their agreement. American air instituted suit against Orient Air for the settlement of past
outstanding funds in possession of the latter. Orient Air contended that because of the unpaid overriding
commissions it retained the sales proceeds before remitting the balance to American Air. American Air
contended that the sale must be made by Orient Air and the sale must be done with the use of American
Air's ticket stocks in order for it to be entitled to the overriding commission. On the other hand, Orient Air
contends that the contractual stipulation of a 3% overriding commission covers the total revenue of
American Air and not merely that derived from ticketed sales undertaken by Orient Air because it was an
exclusive General Sales Agent. CA held that Orient Air is entitled to commissions and ordered American Air
to reinstate Orient Air as its General Sales Agent.


Whether or not Orient Air is entitled to commissions.

Whether CA is correct in ordering reinstatement of Orient Air as an agent.


1. Yes. Orient Air was entitled to an overriding commission based on total flown revenue. American Air's
perception that Orient Air was remiss or in default of its obligations under the Agreement was, in fact, a
situation where the latter acted in accordance with the Agreementthat of retaining from the sales
proceeds its accrued commissions before remitting the balance to American Air. Since the latter was still
obligated to Orient Air by way of such commissions. Orient Air was clearly justified in retaining and refusing
to remit the sums claimed by American Air. The latter's termination of the Agreement was, therefore,
without cause and basis, for which it should be held liable to Orient Air.

2. No. CA in effect compels American Air to extend its personality to Orient Air. Such would be violative of
the principles and essence of agency, defined by law as a contract whereby "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. In an agent-principal relationship, the personality of the principal is
extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal,
authorized to perform all acts which the latter would have him do. Such a relationship can only be effected
with the consent of the principal, which must not, in any way, be compelled by law or by any court.

Petitioners(Bordadors) were engaged in the business of purchase and sale of jewelry and respondent
(Brigida D. Luz, also known as Aida D. Luz), was their regular customer.
On several occasions, respondent Narciso Deganos, the brother of Brigida D. Luz, received several
pieces of gold and jewelry from petitioners amounting to P382,816.00. [1]
These items and their prices were indicated in seventeen receipts covering the same. Eleven of the
receipts stated that they were received for a certain Evelyn Aquino, a niece of Deganos, and the remaining
six indicated that they were received for Brigida D. Luz. [2]
Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and return the
unsold items to petitioners.
Deganos remitted only the sum of P53,207.00. He neither paid the balance of the sales proceeds, nor
did he return any unsold item to petitioners.
The total of his unpaid account to petitioners, including interest, reached the sum ofP725,463.98. [3]
The primary issue in the instant petition is whether or not herein respondent spouses are liable to
petitioners for the latters claim for money and damages in the sum of P725,463.98, plus interests and
attorneys fees, despite the fact that the evidence does not show that they signed any of the subject
receipts or authorized Deganos to receive the items of jewelry on their behalf.
No error having been committed by the Court of Appeals in affirming the judgment of the court a
quo, its challenged decision and resolution are hereby AFFIRMED and the instant petition is DENIED, with
double costs against petitioners
No evidence support the theory of petitioners that Deganos was an agent of Brigida D. Luz and that the
latter should consequently be held solidarily liable with Deganos in his obligation to petitioners. While the
quoted statement in the findings of fact of the assailed appellate decision mentioned that Deganos
ostensibly acted as an agent of Brigida, the actual conclusion and ruling of the Court of Appeals
categorically stated that, (Brigida Luz) never authorized her brother (Deganos) to act for and in her behalf
in any transaction with Petitioners x x x.[15] It is clear, therefore, that even assuming arguendo that
Deganos acted as an agent of Brigida, the latter never authorized him to act on her behalf with regard to
the transactions subject of this case.
The Civil Code provides:

Art. 1868. 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

The basis for agency is representation. Here, there is no showing that Brigida consented to the acts of
Deganos or authorized him to act on her behalf, much less with respect to the particular transactions
involved. Petitioners attempt to foist liability on respondent spouses through the supposed agency relation
with Deganos is groundless and ill-advised.
Besides, it was grossly and inexcusably negligent of petitioners to entrust to Deganos, not once or
twice but on at least six occasions as evidenced by six receipts, several pieces of jewelry of substantial
value without requiring a written authorization from his alleged principal. A person dealing with an agent is
put upon inquiry and must discover upon his peril the authority of the agent.[16]
The records show that neither an express nor an implied agency was proven to have existed between
Deganos and Brigida D. Luz. Evidently, petitioners, who were negligent in their transactions with Deganos,
cannot seek relief from the effects of their negligence by conjuring a supposed agency relation between the
two respondents where no evidence supports such claim.
What was finally proven as a matter of fact is that there was no such contract between Brigida D. Luz
and Narciso Deganos, executed or partially executed, and no delivery of any of the items subject of this
case was ever made to the former.

6. Apex Mining Co., Inc. v. Southeast Mindanao Gold Mining Corp. (2006)

Facts:The case involves the Diwalwal Gold Rush Area (Diwalwal), a rich tract of mineral landlocated
inside the Agusan-Davao-Surigao Forest Reserve in Davao del Norte and Davao Oriental. Sincethe early
1980s, Diwalwal has been stormed by conflicts brought about by numerous mining claims over it.On March
10, 1986, Marcopper Mining Corporation (MMC) was granted an Exploration Permit(EP 133) by the Bureau
of Mines and Geo-Sciences (BMG). A long battle ensued between Apex andMMC with the latter seeking
the cancellation of the mining claims of Apex on the ground that suchmining claims were within a forest
reservation (Agusan-Davao-Surigao Forest Reserve) and thus theacquisition on mining rights should have
been through an application for a permit to prospect with theBFD and not through registration of a DOL with
the BMG. When it reached the SC in 1991, the Courtruled against Apex holding that the area is a forest
reserve and thus it should have applied for a permit to prospect with the BFD.On February 16 1994,

MMC assigned all its rights to EP 133 to Southeast Mindanao GoldMining Corporation (SEM), a domestic
corporation which is alleged to be a 100%-owned subsidiary of MMC. Subsequently, BMG registered
SEMs Mineral Production Sharing Agreement (MPSA)application and the Deed of Assignment. Several
oppositions were filed. The Panel of Arbitrators created by the DENR upheld the validity of EP 133. During
the pendency of the case, DENR AO No. 2002-18 was issued declaring anemergency situation in the
Diwalwal Gold Rush Area and ordering the stoppage of all miningoperations therein.

1. W/N EP 133 and its subsequent transfer to SEM is valid.2.W/N the DENR Secretary has authority to
issue DAO 66 declaring 729 hectares of the areascovered by the Agusan-Davao-Surigao Forest Reserve
as non-forest lands and open to small-scale mining purposes.3.Who (among petitioners Apex and Balite)
has priority right over Diwalwal?

1. INVALID. One of the terms and conditions of EP 133 is: That this permit shall be for the exclusive use
and benefit of the permittee or his duly authorized agentsn and shall be used for mineral exploration
purposes only and for no other purpose. While it may be true that SEM is a100% subsidiary corporation of
MMC, there is no showing that the former is the duly authorizedagent of the latter. As such, the
assignment is null and void as it directly contravenes the termsand conditions of the grant of EP 133.
a. The Deed of Assignment was a total abdication of MMCs rights over the permit.
It is not amere grant of authority to SEM as agent.
b. Reason for the stipulation. Exploration permits are strictly granted to entities or individuals
possessing the resources and capability to undertake mining operations. Without such acondition, non-
qualified entities or individuals could circumvent the strict requirementsunder the law by the simple
expediency of acquiring the permit from the original permittee.
c. Separate personality. The fact that SEM is a 100% subsidiary of MMC does notautomatically
make it an agent of MMC. A corporation is an artificial being invested by lawwith a personality separate and
distinct from persons composing it as well as from that of anyother legal entity to which it may be related.
Absent any clear proof to the contrary, SEM is aseparate and distinct entity from MMC.
d. Doctrine of piercing the corporate veil inapplicable.
Only in cases where the corporatefiction was used as a shield for fraud, illegality or inequity may the veil be
pierced andremoved. The doctrine of piercing the corporate veil cannot therefore be used as a vehicle to
commit prohibited acts. The assignment of the permit in favor of SEM is utilized tocircumvent the condition
of nontransferability of the exploration permit. To allow SEM to avail itself of this doctrine and to approve
the validity of the assignment is tantamount tosanctioning an illegal act which is what the doctrine precisely
seeks to forestall.
e. PD 463 requires approval of Secretary of DENR. Also, PD 463 (Mineral ResourcesDevelopment
Decree), which is the governing law when the assignment was executed,explicitly requires that the transfer
or assignment of mining rights, including the right toexplore a mining area, must be with the prior approval
of the Secretary of DENR. Such is not present in this case.
f. EP 133 expired by non-renewal.Although EP 133 was extended for 12 months until July 6,1994,
MMC never renewed its permit prior and after its expiration.With the expiration of EP 133 on July 6, 1994,
MMC lost any right to the Diwalwal Gold RushArea. SEM, on the other hand, has not acquired any right to
the said area because the transfer of EP 133 in its favor is invalid. Hence, both MMC and SEM have not
acquired any vested rightover the area covered by EP 133.

2. NO. The DENR Secretary has no power to convert forest reserves into non-forest reserves. Such power
is vested with the President. The DENR Secretary may only recommend to the Presidentwhich forest
reservations are to be withdrawn from the coverage thereof. Thus, DAO No. 66 isnull and void for having
been issued in excess of the DENR Secretarys authority.

3. (Since its been held that neither MMC nor SEM has any right over Diwalwal, it is thusnecessary to make
a determination of the existing right of the remaining claimants, petitioners Apex and Balite, in the dispute.)
The issue on who has priority right over Diwalwal is deemedovertaken by the issuance of Proclamation 297
and DAO No. 2002-18, both beingconstitutionally-sanctioned acts of the Executive Branch. Mining
operations in the DiwalwalMineral Reservation are now, therefore, within the full control of the State
through theexecutive branch. Pursuant to Sec. 5 of RA 7942, the State can either: (1) directly undertake
theexploration, development and utilization of the area or (2) opt to award mining operations in themineral
reservation to private entities including petitioners Apex and Balite, if it wishes. The exercise of this
prerogative lies with the Executive Department over which courts will notinterfere.



Stripped of nonessentials, the present case involves the collection of a sum of money. Specifically, this
case arose from the failure of petitioners to pay respondents predecessor-in-interest. This fact was shown
by the non-encashment of checks issued by a third person, but indorsed by herein Petitioner Maria Tuazon
in favor of the said predecessor. Under these circumstances, to enable respondents to collect on the
indebtedness, the check drawer need not be impleaded in the Complaint. Thus, the suit is directed, not
against the drawer, but against the debtor who indorsed the checks in payment of the obligation.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the July 31, 2002
Decision2 of the Court of Appeals (CA) in CA-GR CV No. 46535. The decretal portion of the assailed
Decision reads:

"WHEREFORE, the appeal is DISMISSED and the appealed decision is AFFIRMED."

On the other hand, the affirmed Decision3 of Branch 34 of the Regional Trial Court (RTC) of Gapan, Nueva
Ecija, disposed as follows:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants, ordering
the defendants spouses Leonilo Tuazon and Maria Tuazon to pay the plaintiffs, as follows:

"1. The sum of P1,750,050.00, with interests from the filing of the second amended complaint;

"2. The sum of P50,000.00, as attorneys fees;

"3. The sum of P20,000.00, as moral damages

"4. And to pay the costs of suit.

x x x x x x x x x"4

The Facts
The facts are narrated by the CA as follows:

"[Respondents] alleged that between the period of May 2, 1988 and June 5, 1988, spouses Leonilo and
Maria Tuazon purchased a total of 8,326 cavans of rice from [the deceased Bartolome] Ramos
[predecessor-in-interest of respondents]. That of this [quantity,] x x x only 4,437 cavans [have been paid for
so far], leaving unpaid 3,889 cavans valued at P1,211,919.00. In payment therefor, the spouses Tuazon
issued x x x [several] Traders Royal Bank checks.


[B]ut when these [checks] were encashed, all of the checks bounced due to insufficiency of funds.
[Respondents] advanced that before issuing said checks[,] spouses Tuazon already knew that they had no
available fund to support the checks, and they failed to provide for the payment of these despite repeated
demands made on them.

"[Respondents] averred that because spouses Tuazon anticipated that they would be sued, they conspired
with the other [defendants] to defraud them as creditors by executing x x x fictitious sales of their
properties. They executed x x x simulated sale[s] [of three lots] in favor of the x x x spouses Buenaventura
x x x[,] as well as their residential lot and the house thereon[,] all located at Nueva Ecija, and another
simulated deed of sale dated July 12, 1988 of a Stake Toyota registered with the Land Transportation
Office of Cabanatuan City on September 7, 1988. [Co-petitioner] Melecio Tuazon, a son of spouses
Tuazon, registered a fictitious Deed of Sale on July 19, 1988 x x x over a residential lot located at Nueva
Ecija. Another simulated sale of a Toyota Willys was executed on January 25, 1988 in favor of their other
son, [co-petitioner] Alejandro Tuazon x x x. As a result of the said sales, the titles of these properties issued
in the names of spouses Tuazon were cancelled and new ones were issued in favor of the [co-]defendants
spouses Buenaventura, Alejandro Tuazon and Melecio Tuazon. Resultantly, by the said ante-dated and
simulated sales and the corresponding transfers there was no more property left registered in the names of
spouses Tuazon answerable to creditors, to the damage and prejudice of [respondents].

"For their part, defendants denied having purchased x x x rice from [Bartolome] Ramos. They alleged that it
was Magdalena Ramos, wife of said deceased, who owned and traded the merchandise and Maria Tuazon
was merely her agent. They argued that it was Evangeline Santos who was the buyer of the rice and issued
the checks to Maria Tuazon as payments therefor. In good faith[,] the checks were received [by petitioner]
from Evangeline Santos and turned over to Ramos without knowing that these were not funded. And it is for
this reason that [petitioners] have been insisting on the inclusion of Evangeline Santos as an indispensable
party, and her non-inclusion was a fatal error. Refuting that the sale of several properties were fictitious or
simulated, spouses Tuazon contended that these were sold because they were then meeting financial
difficulties but the disposals were made for value and in good faith and done before the filing of the instant
suit. To dispute the contention of plaintiffs that they were the buyers of the rice, they argued that there was
no sales invoice, official receipts or like evidence to prove this. They assert that they were merely agents
and should not be held answerable."5

The corresponding civil and criminal cases were filed by respondents against Spouses Tuazon. Those
cases were later consolidated and amended to include Spouses Anastacio and Mary Buenaventura, with
Alejandro Tuazon and Melecio Tuazon as additional defendants. Having passed away before the pretrial,
Bartolome Ramos was substituted by his heirs, herein respondents.

Contending that Evangeline Santos was an indispensable party in the case, petitioners moved to file a
third-party complaint against her. Allegedly, she was primarily liable to respondents, because she was the
one who had purchased the merchandise from their predecessor, as evidenced by the fact that the checks
had been drawn in her name. The RTC, however, denied petitioners Motion.

Since the trial court acquitted petitioners in all three of the consolidated criminal cases, they appealed only
its decision finding them civilly liable to respondents.

Ruling of the Court of Appeals

Sustaining the RTC, the CA held that petitioners had failed to prove the existence of an agency between
respondents and Spouses Tuazon. The appellate court disbelieved petitioners contention that Evangeline
Santos should have been impleaded as an indispensable party. Inasmuch as all the checks had been
indorsed by Maria Tuazon, who thereby became liable to subsequent holders for the amounts stated in
those checks, there was no need to implead Santos.

Hence, this Petition.6


Petitioners raise the following issues for our consideration:

"1. Whether or not the Honorable Court of Appeals erred in ruling that petitioners are not agents of the

"2. Whether or not the Honorable Court of Appeals erred in rendering judgment against the petitioners
despite x x x the failure of the respondents to include in their action Evangeline Santos, an indispensable
party to the suit."7

The Courts Ruling

The Petition is unmeritorious.

First Issue:


Well-entrenched is the rule that the Supreme Courts role in a petition under Rule 45 is limited to reviewing
errors of law allegedly committed by the Court of Appeals. Factual findings of the trial court, especially
when affirmed by the CA, are conclusive on the parties and this Court.8 Petitioners have not given us
sufficient reasons to deviate from this rule.

In a contract of agency, one binds oneself to render some service or to do something in representation or
on behalf of another, with the latters consent or authority.9 The following are the elements of agency: (1)
the parties consent, express or implied, to establish the relationship; (2) the object, which is the execution
of a juridical act in relation to a third person; (3) the representation, by which the one who acts as an agent
does so, not for oneself, but as a representative; (4) the limitation that the agent acts within the scope of his
or her authority.10 As the basis of agency is representation, there must be, on the part of the principal, an
actual intention to appoint, an intention naturally inferable from the principals words or actions. In the same
manner, there must be an intention on the part of the agent to accept the appointment and act upon it.
Absent such mutual intent, there is generally no agency.11

This Court finds no reversible error in the findings of the courts a quo that petitioners were the rice buyers
themselves; they were not mere agents of respondents in their rice dealership. The question of whether a
contract is one of sale or of agency depends on the intention of the parties.12

The declarations of agents alone are generally insufficient to establish the fact or extent of their authority.13
The law makes no presumption of agency; proving its existence, nature and extent is incumbent upon the
person alleging it.14 In the present case, petitioners raise the fact of agency as an affirmative defense, yet
fail to prove its existence.

The Court notes that petitioners, on their own behalf, sued Evangeline Santos for collection of the amounts
represented by the bounced checks, in a separate civil case that they sought to be consolidated with the
current one. If, as they claim, they were mere agents of respondents, petitioners should have brought the
suit against Santos for and on behalf of their alleged principal, in accordance with Section 2 of Rule 3 of the
Rules on Civil Procedure.15 Their filing a suit against her in their own names negates their claim that they
acted as mere agents in selling the rice obtained from Bartolome Ramos.

Second Issue:

Indispensable Party
Petitioners argue that the lower courts erred in not allowing Evangeline Santos to be impleaded as an
indispensable party. They insist that respondents Complaint against them is based on the bouncing checks
she issued; hence, they point to her as the person primarily liable for the obligation.

We hold that respondents cause of action is clearly founded on petitioners failure to pay the purchase
price of the rice. The trial court held that Petitioner Maria Tuazon had indorsed the questioned checks in
favor of respondents, in accordance with Sections 31 and 63 of the Negotiable Instruments Law.16 That
Santos was the drawer of the checks is thus immaterial to the respondents cause of action.

As indorser, Petitioner Maria Tuazon warranted that upon due presentment, the checks were to be
accepted or paid, or both, according to their tenor; and that in case they were dishonored, she would pay
the corresponding amount.17 After an instrument is dishonored by nonpayment, indorsers cease to be
merely secondarily liable; they become principal debtors whose liability becomes identical to that of the
original obligor. The holder of a negotiable instrument need not even proceed against the maker before
suing the indorser.18 Clearly, Evangeline Santos -- as the drawer of the checks -- is not an indispensable
party in an action against Maria Tuazon, the indorser of the checks.

Indispensable parties are defined as "parties in interest without whom no final determination can be had."19
The instant case was originally one for the collection of the purchase price of the rice bought by Maria
Tuazon from respondents predecessor. In this case, it is clear that there is no privity of contract between
respondents and Santos. Hence, a final determination of the rights and interest of the parties may be made
without any need to implead her.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioners.


St. Therese Merchandising (STM), who regularly bought sugar from Victorias Milling Co. (VMC), was
issued Shipping List/Delivery Receipts (SLDRs) by the latter as proof of purchases for bags of sugar.
Thereafter, STM sold to Consolidated Sugar Co. (CSC) its rights in one of the SLDRs. CSC communicated
to VMC that it had been authorized by STM to withdraw the sugar covered by SLDR. Enclosed in the letter
were a copy of SLDR and a letter of authority from STM authorizing CSC "to withdraw for and in our behalf
the refined sugar covered by SLDR. CSC surrendered the SLDR to VMCs warehouse and was allowed to
withdraw sugar but after several bags were released, it was later on refused to allow further withdrawals of
sugar. CSC communicated to VMC to allow it to withdraw sugar because the SLDR had been sold and
endorsed to it by STM. VMC contended that it could not allow any further withdrawals of sugar against
SLDR because STM had already withdrawn sugar covered by cleared checks. CSC filed complaint against
VMC. VMC contended that it had no privity of contract with CSC, the dealings between it and STM were
part of a series of transactions involving only one account or one general contract of sale because CSC
was an agent of STM. CSC countered that the sugar purchases involving SLDR were separate and
independent transactions.


Whether or not CSC was an agent of STM.


No. CSC was a buyer of the SLDR form, and not an agent of STM. CSC was not subject to STM's control.
The question of whether a contract is one of sale or agency depends on the intention of the parties as
gathered from the whole scope and effect of the language employed. That the authorization given to CSC
contained the phrase "for and in our (STM's) behalf" did not establish an agency. CSC communicated to
VMC that the SLDR had been sold and endorsed to it by STM. The use of the words "sold and endorsed"
means that STM and CSC intended a contract of sale, and not an agency.
The basis of agency is representation. On the part of the principal, there must be an actual intention to
appoint or an intention naturally inferable from his words or actions; and on the part of the agent, there
must be an intention to accept the appointment and act on it, and in the absence of such intent, there is
generally no agency. One factor which most clearly distinguishes agency from other legal concepts is
control; one person - the agent - agrees to act under the control or direction of another - the principal.
Indeed, the very word "agency" has come to connote control by the principal. The control factor, more than
any other, has caused the courts to put contracts between principal and agent in a separate category.


FACTS: On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted a civil case for collection of sum of
money against defendant Dominion Insurance Corporation. Plaintiff sought to recover the sum of
P156,473.90 which he claimed to have advanced in his capacity as manager of defendant to satisfy certain
car insurance claims filed by defendants clients. The CA affirmed trial courts decision for Dominion to pay
plaintiff Guevarra. Dominion filed a motion for reconsideration with the Court of Appeals which was denied,
hence, this appeal.

ISSUES: Dominion assails whether respondent Guevarra acted within his authority as agent for petitioner,
and whether respondent Guevarra is entitled to reimbursement of amounts he paid out of his personal
money in settling the claims of several insured.

HELD: The petition is without merit. By the contract of agency, a person binds himself to render some
service or to do something in representation or on behalf of another, with the consent or authority of the
latter. The basis for agency is representation. On the part of the principal, there must be an actual intention
to appoint or an intention naturally inferable from his words or actions; and on the part of the agent, there
must be an intention to accept the appointment and act on it, and in the absence of such intent, there is
generally no agency. A perusal of the Special Power of Attorney would show that petitioner Dominion and
respondent Guevarra intended to enter into a principal-agent relationship. Despite the word special in the
title of the document, the contents reveal that what was constituted was actually a general agency. The
agency comprises all the business of the principal, but, couched in general terms, it is limited only to acts of
administration. A general power permits the agent to do all acts for which the law does not require a special
power. Thus, the acts enumerated in or similar to those enumerated in the Special Power of Attorney do
not require a special power of attorney.
Article 1878, Civil Code, enumerates the instances when a special power of attorney is required.
The payment of claims is not an act of administration. The settlement of claims is not included among the
acts enumerated in the Special Power of Attorney, neither is it of a character similar to the acts enumerated
therein. A special power of attorney is required before respondent Guevarra could settle the insurance
claims of the insured. Nevertheless, Guevarras authority to settle claims is embodied in the Memorandum
of Management Agreement which enumerates the scope of respondent Guevarras duties and
responsibilities as agency manager for San Fernando, Pampanga. In settling the claims mentioned,
Guevarras authority is further limited by the written standard authority to pay, which states that the
payment shall come from Guevarras revolving fund or collection. Therefore, the instruction of Dominion as
the principal could not be any clearer. Respondent Guevarra was authorized to pay the claim of the
insured, but the payment shall come from the revolving fund or collection in his possession. Having
deviated from the instructions of the principal, the expenses that respondent Guevarra incurred in the
settlement of the claims of the insured may not be reimbursed from petitioner Dominion. This conclusion is
in accord with Article 1918, Civil Code, which states that: The principal is not liable for the expenses
incurred by the agent in the following cases: (1) If the agent acted in contravention of the principals
instructions, unless the latter should wish to avail himself of the benefits derived from the contract;
However, while the law on agency prohibits respondent Guevarra from obtaining reimbursement, his right
to recover may still be justified under the general law on obligations and contracts (on unjust enrichment).
Thus, to the extent that the obligation of the petitioner has been extinguished, respondent Guevarra may
demand for reimbursement from his principal. To rule otherwise would result in unjust enrichment of

10. Doles vs. Angeles, GR 149353, 06/26/2006

Facts: Doles alleges that she referred her friends to Angeles, who lends money in exchange for personal
checks thru her capitalist Pua. Her friends, absconded payment, prompting Angeles to threaten Doles, who
issued personal checks for payment despite knowledge of insufficiency of funds, with a criminal case,
forcing the latter to execute a deed of sale of her Cavite property. RTC held that the sale was void for lack
of consideration and dismissed the RTC case, but this was reversed by the CA.

Issue: WON there was a contract of agency as to both parties and their principals.

Held: Yes. Doles as to her friends, Angeles as to her capitalist. They are not creditors and debtors of each
other. It is not material if respective principals do not meet, for the purpose of agency is to extend
personality thru the facility of agents. Agents are estopped from denying the existence of agency if their
actions prove otherwise. Sale of property is void due to lack of cause, because the property belonged to
HDC, the special power of attorney given to Doles and her father was cancelled.

11. De La Cruz v. Northern Theatrical Enterprises

Facts: Northern Theatrical Enterprises Inc., a domestic corporation operated a movie house in Laoag,
Ilocos Norte, and among the persons employed by it was the plaintiff Domingo De La Cruz, hired as a
special guard whose duties were to guard the main entrance of the cine, to maintain peace and order and
to report the commission of disorders within the premises. He carried a revolver. One day, a Benjamin
Martin wanted to enter without a ticket but dela Cruz refused him entrance. Infuriated, Martin attacked him
with a bolo and in order to save his life, dela Cruz shot and killed Martin. Martin, thereafter, was charged
with homicide which, after re-investigation, was dismissed. A few years later, dela Cruz again figured in a
homicide case related to his work as security guard for the theater. He was acquitted for the second
charge. In both instances, dela Cruz employed a lawyer. He thereafter demanded reimbursement for his
litigation expenses but was refused by the theater. After which, he filed an action for reimbursement plus
damages. The Court found for Northern Theater and dismissed the complaint saying that dela Cruz had no
cause of action.

Issue: Whether or not the relationship involved bet. Northern and De La Cruz is that of a principal and an

Held: No. The trial court was correct in rejecting the theory of dela Cruz that he was an agent of the
defendants and that as such agent he was entitled to reimbursement for the expenses incurred by him in
connection with the agency. The relationship between the theater and the plaintiff was not that of principal
and agent because the principle of representation was not involved. He was not employed to represent
defendant corporation in its dealings with third parties. He was merely an employee hired to guard the
cinema. Issue is primarily one of employer employee. Whether an employee who in line with the
performance of his duty incur expenses caused not directly by his employer or fellow employees but by a
third party or stranger, may recover against his employer. In this case, theres no legal obligation on the
part of the employer, it might yet be regarded as a moral obligation. Since employer not legally obligated to
give legal assistance, plaintiff naturally cannot recover the amount from defendant. The damage incurred
did not flow from the performance of his duties but only indirectly. Filing of the criminal charges was the
efficient, intervening cause. As such, plaintiff cannot fix civil responsibility to the defendant.

12. Prudential Bank vs. CA

Facts: The complaint in this case arose when private respondent Aurora F. Cruz, with her sister as co-
depositor, invested P200, 000.00 in Central Bank bills with the Prudential Bank at its branch in Quezon
Avenue, Quezon City, on June 23, 1986. Susan Quimbo, the Bank employee assisted her on all her
dealings. One of such dealing involves Cruz withdrawal from her Savings Account No. 2546 and applying
such amount to the investment with the same bank. Cruz was asked to sign a Withdrawal Slip for P196,
122.98, representing the amount to be re-invested after deduction of the prepaid interest. Quimbo
explained this was a new requirement of the bank. Several days later, Cruz received another Confirmation
of Sale and a copy of the Debit Memo coming from Quimbo. On October 27, 1986, Cruz returned to the
bank and sought to withdraw her P200, 000.00. After verification of her records, however, she was
informed that the investment appeared to have been already withdrawn by her on August 25, 1986. There
was no copy on file of the Confirmation of Sale and the Debit Memo allegedly issued to her by Quimbo.
Quimbo herself was not available for questioning as she had not been reporting for the past week.
Prompted by the event Cruz's reaction was to file a complaint for breach of contract against Prudential
Bank in the Regional Trial Court of Quezon City. She demanded the return of her money with interest, plus
damages and attorney's fees. Cruz won the case in both the RTC and CA. Issue: Does the fault of bank
employee bind the Bank particularly in cases where the bank employee created blunder or, worse,
intentionally cheat the depositor?
The liability of the principal for the acts of the agent is not debatable. Law and jurisprudence are clearly and
absolutely against the petitioner. Such liability dates back to the Roman Law maxim, Qui per alium facit per
seipsum facere videtur. "He who does a thing by an agent is considered as doing it himself." This rule is
affirmed by the Civil Code thus: Art. 1910. The principal must comply with all the obligations which the
agent may have contracted within the scope of his authority. Art. 1911. 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. Conformably, we have declared in countless decisions that the principal is liable for
obligations contracted by the agent. The agent's apparent representation yields to the principal's true
representation and the contract is considered as entered into between the principal and the third person.
WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED.

13. Uy and Roxas v. CA

FACTS: Petitioners Uy and Roxas were authorized agents for the sale of 8 parcels of land. The land was
offered to NHA and the acquisition of he same was approved by an NHA resolution, deeds of sale were
executed thereafter. However, only 5/8 of the land was paid because a report from DENR stated that only 5
parcels among the 8 are conducive to housing. NHA issued anothe resolution cancelling the sale of the
unpaid land and offered to pay damages. Petitioners filed a case in their own capacities a agens agains
NHA for damages. RTC ruled in favor of NHA. CA afirmed the decizion but deleted the award thereafter.

ISSUE: Whether petitioner agents are real parties in interest for damage claim in the case at bar.

HELD: No, the petitioners are not the proper parties in the case. An action shall be prosecuted in the name
of the party who, by the substantive law, has the right sought to be enforced. Petitioners are not parties to
the contract of sale between their principals and NHA. They are mere agents of the owners of the land
subject of the sale. As agents, they only render some service or do something in representation or on
behalf of their principals. The rendering of such service did not make them parties to the contracts of sale
executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each
other, the real parties-in-interest, either as plaintiff or defendant, in an action upon that contract must,
generally, either be parties to said contract. Petitioners have not shown that they are assignees of their
principals to the subject contracts. While they alleged that they made advances and that they suffered loss
of commissions, they have not established any agreement granting them "the right to receive payment and
out of the proceeds to reimburse [themselves] for advances and commissions before turning the balance
over to the principal[s]."

14. 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 Gaudencio Romualdez (Romualdez,
hereinafter) that it has accepted the latters offer to buy the PNRs scrap/unserviceable rails located in Del
Carmen and Lubao, Pampanga at P1,300.00 andP2,100.00 per metric ton, respectively, for the total
amount of P96,600.00. Romualdez paid the purchase price and addressed a letter to Atty. Cipriano Dizon,
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 Lizette 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 railsin 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 rule requiring every action to be prosecuted in the name
of the real party-in-interest recognizes the assignment of rights of action and also recognizes that 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.

respondents., G.R. No. 119858. April 29, 2003Case Digest


Petitioner, representing ARMAGRI, applied for a letter of credit for P2,532,500.00 with SOLIDBANK
Corporation to finance the purchase of differential assemblies from Metropole Industrial Sales. On 6 July
1990, petitioner, representing ARMAGRI, executed a trust receipt acknowledging receipt from the Bank of
the goods valued at P2,532,500.00.
On 12 July 1990, petitioner and Benito Ong, representing ARMAGRI, applied for another letter of credit
for P2,050,000.00 to finance the purchase of merchandise from Fertiphil Corporation. The Bank approved
the application, opened the letter of credit and paid to Fertiphil Corporation the amount
of P2,050,000.00. On 23 July 1990, petitioner, signing for ARMAGRI, executed another trust receipt in
favor of the Bank acknowledging receipt of the merchandise.
Both trust receipts contained the same stipulations. Under the trust receipts, ARMAGRI undertook to
account for the goods held in trust for the Bank, or if the goods are sold, to turn over the proceeds to the
Bank. ARMAGRI also undertook the obligation to keep the proceeds in the form of money, bills or
receivables as the separate property of the Bank or to return the goods upon demand by the Bank, if not
When the trust receipts became due and demandable, ARMAGRI failed to pay or deliver the goods to
the Bank despite several demand letters. Consequently, as of 31 May 1991, the unpaid account under the
first trust receipt amounted to P1,527,180.66, while the unpaid account under the second trust receipt
amounted to P1,449,395.71

Assistant City Prosecutor Dina P. Teves of the City of Manila charged petitioner and Benito Ong with two
counts of estafa.

WON Ong may be held liable for estafa as he was only acting as agent.

The Trust Receipts Law is violated whenever the entrustee fails to: (1) turn over the proceeds of the
sale of the goods, or (2) return the goods covered by the trust receipts if the goods are not sold. The mere
failure to account or return gives rise to the crime which is malum prohibitum. There is no requirement to
prove intent to defraud.
The Trust Receipts Law recognizes the impossibility of imposing the penalty of imprisonment on a
corporation. Hence, if the entrustee is a corporation, the law makes the officers or employees or other
persons responsible for the offense liable to suffer the penalty of imprisonment. The reason is obvious:
corporations, partnerships, associations and other juridical entities cannot be put to jail. Hence, the criminal
liability falls on the human agent responsible for the violation of the Trust Receipts Law.
In the instant case, the Bank was the entruster while ARMAGRI was the entrustee. Being the
entrustee, ARMAGRI was the one responsible to account for the goods or its proceeds in case of sale.
However, the criminal liability for violation of the Trust Receipts Law falls on the human agent responsible
for the violation. Petitioner, who admits being the agent of ARMAGRI, is the person responsible for the
offense for two reasons. First, petitioner is the signatory to the trust receipts, the loan applications and the
letters of credit. Second, despite being the signatory to the trust receipts and the other documents,
petitioner did not explain or show why he is not responsible for the failure to turn over the proceeds of the
sale or account for the goods covered by the trust receipts.
The Bank released the goods to ARMAGRI upon execution of the trust receipts and as part of the loan
transactions of ARMAGRI. The Bank had a right to demand from ARMAGRI payment or at least a return of
the goods. ARMAGRI failed to pay or return the goods despite repeated demands by the Bank.
It is a well-settled doctrine long before the enactment of the Trust Receipts Law, that the failure to
account, upon demand, for funds or property held in trust is evidence of conversion or misappropriation.
Under the law, mere failure by the entrustee to account for the goods received in trust constitutes estafa.
The Trust Receipts Law punishes dishonesty and abuse of confidence in the handling of money or goods to
the prejudice of public order. The mere failure to deliver the proceeds of the sale or the goods if not sold
constitutes a criminal offense that causes prejudice not only to the creditor, but also to the public interest.
Evidently, the Bank suffered prejudice for neither money nor the goods were turned over to the Bank.
The Trust Receipts Law expressly makes the corporations officers or employees or other persons
therein responsible for the offense liable to suffer the penalty of imprisonment. In the instant case, petitioner
signed the two trust receipts on behalf of ARMAGRI as the latter could only act through its agents. When
petitioner signed the trust receipts, he acknowledged receipt of the goods covered by the trust receipts. In
addition, petitioner was fully aware of the terms and conditions stated in the trust receipts, including the
obligation to turn over the proceeds of the sale or return the goods to the Bank
True, petitioner acted on behalf of ARMAGRI. However, it is a well-settled rule that the law of
agency governing civil cases has no application in criminal cases. When a person participates in the
commission of a crime, he cannot escape punishment on the ground that he simply acted as an agent of
another party. In the instant case, the Bank accepted the trust receipts signed by petitioner based on
petitioners representations. It is the fact of being the signatory to the two trust receipts, and thus a direct
participant to the crime, which makes petitioner a person responsible for the offense.




Philippine National Bank is a domestic corporation organized and existing under Philippine law. Ritratto
Group, Inc., Riatto International, Inc. and Dadasan General Merchandise are domestic corporations,
likewise, organized and existing under Philippine law.

On 1996 PNB International Finance Ltd. (PNB-IFL), a subsidiary pf PNB, established a branch and
operated in Hong Kong, where it extended letters of credit to Rittrato, in increasing amoubts, with the final
total of USD1.4M in 1998. The loan was secured by a real estate mortgage of four parcel of lands in

However, as of 1998, Rittrato's outstanding balance is stil at USD1.4M. Pursuant to the terms of their real
estate mortgage, PNB-ICL thru its attorney-in-fact PNB caused the foreclosure and auction of the real
estates on 1999.

Ritratto filed for a writ of preliminary injunction with RTC as against PNB, where they were granted and thus
issued a TRO. PNB then filed motion to dismiss but was likewise rejected. Hence the appeal to SC,
alleging that they are not really party to the case, hence such action must not proper.

ISSUE: WON PNB is a party to the case being merely the attorney-in-fact authorized to enforce ancillary

No, PNB is just the attorney-in-fact for PNB-IFL. As a rule, a suit as against the agent is not a suit against
the principal. For the suit to prosper, the petitioner must implead the proper party to the case. Even Ritratto
et al admit that petitioner is a mere attorney-in-fact for the PNB-IFL with full power and authority to, inter
alia, foreclose on the properties mortgaged to secure their loan obligations with PNB-IFL. In other words,
PNB is an agent with limited authority and specific duties under a special power of attorney incorporated in
the real estate mortgage. It is not privy to the loan contracts entered into by respondents and PNB-IFL,
hence, not a party to the case.


FACTS: Trinidad J. Francisco, in consideration of a loan in the amount of P400,000.00, out of which the
sum of P336,100.00 was released to her, mortgaged in favor of GSIS a parcel of land with 21 bungalows,
known as Vic-Mari Compound, located at QC.
- Upon failure to pay, GSIS foreclosed the mortgage and bought the property.
- But then, Trinidads father, Atty. Vicente Francisco, wrote a letter to GSIS offering that he pay P30k off the
loan and then allow GSIS to administer the mortgaged property instead of foreclosing it; that thereafter,
GSIS shall receive rents from the tenants of the land until the arrears are paid and the account is made
current or up to date (because the total of the monthly rents is bigger than the monthly loan payments
supposed to be paid by Trinidad to GSIS).
- GSIS, through its general manager Rodolfo Andal, accepted Vicentes offer. GSIS did not take over the
- But Francisco collected rents and turned them over to GSIS.
-Then in 1960, GSIS demanded Francisco to pay off the loan. Vicente then reminded GSIS that the
agreement in 1959 which is actually a compromise is binding upon GSIS. GSIS then averred that the letter
sent to Vicente in response to his offer was not sent in error because Andals secretary sent the poorly
worded response without Andals knowledge.

ISSUE: Whether or not a corporation like GSIS is bound by the acts of its officers acting in their apparent

HELD Yes. If a corporation knowingly permits one of its officers, or any other agent, to do acts within the
scope of an apparent authority, and thus holds him out to the public as possessing power to do those acts,
the corporation will, as against anyone who has in good faith dealt with the corporation through such agent,
be estopped from denying his authority. At any rate, even if the compromise agreement is void because of
the unauthorized telegram, GSISs silence and acceptance of the subsequent remittances of the
Franciscos ratified the compromise agreement.


FACTS:Petitioner, Sunace International Management Services (Sunace), deployed to Taiwan Divina A.

Montehermozo (Divina) as a domestic helper under a 12-month contract effective February 1, 1997. The
deployment was with the assistance of a Taiwanese broker, Edmund Wang, President of Jet Crown
International Co., Ltd. After her 12-month contract expired on February 1, 1998, Divina continued working
for her Taiwanese employer, Hang Rui Xiong, for two more years, after which she returned to the
Philippines on February 4, 2000. Shortly after her return or on February 14, 2000, Divina filed a complaint
before the National Labor Relations Commission (NLRC) against Sunace, one Adelaide Perez, the
Taiwanese broker, and the employer-foreign principal alleging that she was jailed for three months and that
she was underpaid

Reacting to Divina's Position Paper, Sunace filed on April 25, 2000 an ". . . ANSWER TO
COMPLAINANT'S POSITION PAPER" alleging that Divina's 2-year extension of her contract was without
its knowledge and consent, hence, it had no liability attaching to any claim arising therefrom, and Divina in
fact executed a Waiver/Quitclaim and Release of Responsibility and an Affidavit of Desistance, copy of
each document was annexed to said

The Labor Arbiter, rejected Sunace's claim that the extension of Divina's contract for two more years was
without its knowledge and consent.

ISSUE: Whether the act of the foreigner-principal in renewing the contract of Divina be attributable to

HELD: No, the act of the foreigner-principal in renewing the contract of Divina is not attributable to Sunace.
There being no substantial proof that Sunace knew of and consented to be bound under the 2-year
employment contract extension, it cannot be said to be privy thereto. As such, it and its "owner" cannot be
held solidarily liable for any of Divina's claims arising from the 2-year employment extension. Furthermore,
as Sunace correctly points out, there was an implied revocation of its agency relationship with its foreign
principal when, after the termination of the original employment contract, the foreign principal directly
negotiated with Divina and entered into a new and separate employment contract in Taiwan.


FACTS: The General Manager, Paz G. Villamil-Estrada, of Cosmic Lumber Corporation on behalf of the
company instituted an action for ejectment against Isidro Perez to recover a portion of Lot No. 443 before
the Regional Trial Court of Dagupan, docketed as Civil Case No. D-7750.2 on 11 March 1985. She was
appointed as Attorney-in-fact through a Special Power of Attorney (28 January 1985) to do the following:
x x x to initiate, institute and file any court action for the ejectment of third persons and/or squatters
of the entire lot 9127 and 443 and covered by TCT Nos. 37648 and 37649, for the said squatters to remove
their houses and vacate the premises in order that the corporation may take material possession of the
entire lot, and for this purpose, to appear at the pre-trial conference and enter into any stipulation of facts
and/or compromise agreement so far as it shall protect the rights and interest of the corporation in the
aforementioned lots.
On 25 November 1985 Villamil-Estrada entered into a Compromise Agreement with respondent
Perez, the terms of which follow:
1. That as per relocation sketch plan dated June 5, 1985 prepared by Engineer Rodolfo dela Cruz
the area at present occupied by defendant wherein his house is located is 333 square meters on the
easternmost part of lot 443 and which portion has been occupied by defendant for several years now;
2. That to buy peace said defendant pays unto the plaintiff through herein attorney-in-fact the sum
of P26,640.00 computed at P80.00/square meter;
3. That plaintiff hereby recognizes ownership and possession of the defendant by virtue of this
compromise agreement over said portion of 333 square m. of lot 443 which portion will be located on the
easternmost part as indicated in the sketch as annex A;
4. Whatever expenses of subdivision, registration, and other incidental expenses shall be
shouldered by the defendant.
On 27 November 1985 the "Compromise Agreement" was approved by the trial court and judgment
was rendered in accordance with its terms. However, after five years from the date of its finality (even if the
decision became final and executory), Paz G. Villamil-Estrada failed to produce the owner's duplicate copy
of Title No. 37649 needed to segregate from Lot No. 443 the portion she sold as attorney-in-fact. Hence, on
25 January 1993 Isidro Perez filed a complaint to revive the judgment, docketed as Civil Case No. D-

ISSUE: Whether or Not the actions of Paz G. Villamil-Estrada as attorney-in-fact bind the principal, Cosmic
Lumber Corporation, in the compromise agreement she entered into with Isidro Perez?

HELD: A special power of attorney for an agent to institute any action in court to eject all persons in the
principal's lots so that the principal could take material possession thereof, and for this purpose, to appear
at the pre-trial and enter into any stipulation of facts and/or compromise agreement but only insofar as this
is protective of the rights and interests of the principal in the property, does not grant any power to the
agent to sell the subject property nor a portion thereof.We agree with petitioner. The authority granted
Villamil-Estrada under the special power of attorney was explicit and exclusionary: for her to institute any
action in court to eject all persons found on Lots Nos. 9127 and 443 so that petitioner could take material
possession thereof, and for this purpose, to appear at the pre-trial and enter into any stipulation of facts
and/or compromise agreement but only insofar as this was protective of the rights and interests of petitioner
in the property. Nowhere in this authorization was Villamil-Estrada granted expressly or impliedly any power
to sell the subject property nor a portion thereof. Neither can a conferment of the power to sell be validly
inferred from the specific authority "to enter into a compromise agreement" because of the explicit limitation
fixed by the grantor that the compromise entered into shall only be "so far as it shall protect the rights and
interest of the corporation in the aforementioned lots" In the context of the specific investiture of powers to
Villamil-Estrada, alienation by sale of an immovable certainly cannot be deemed protective of the right of
petitioner to physically possess the same, more so when the land was being sold for a price of P80.00 per
square meter, very much less than its assessed value of P250.00 per square meter, and considering
further that petitioner never received the proceeds of the sale.
The express mandate required by law to enable an appointee of an agency (couched) in general terms to
sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the
action mentioned.When the sale of a piece of land or any interest thereon is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to
execute a contract for the sale of real estate must be conferred in writing and must give him specific
authority, either to conduct the general business of the principal or to execute a binding contract containing
terms and conditions which are in the contract he did execute. A special power of attorney is necessary to
enter into any contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration. The express mandate required by law to enable an appointee
of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes
a sale as a necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to
sell real estate, a power of attorney must so express the powers of the agent in clear and unmistakable
language. When there is any reasonable doubt that the language so used conveys such power, no such
construction shall be given the document.

DECISION: The petition is GRANTED. The decision and resolution of respondent Court of Appeals dated
29 October 1993 and 10 March 1994, respectively, as well as the decision of the Regional Trial Court of
Dagupan City in Civil Case No. D-7750 dated 27 November 1985, are NULLIFIED and SET ASIDE. The
"Compromise Agreement" entered into between Attorney-in-fact Paz G. Villamil-Estrada and respondent
Isidro Perez is declared VOID. This is without prejudice to the right of petitioner to pursue its complaint
against private respondent Isidro Perez in Civil Case No. D-7750 for the recovery of possession of a portion
of Lot No. 443.


New Life Enterprises and Sy vs Court of Appeals

GR #94071
31 March 1992


Julian Sy and Jose Sy Bang formed a partnership under a business name New Life Enterprises, engaged
in the sale of construction materials. The stocks in trade of the business were insured with Western
Guaranty Corporation, Reliance Surety and Insurance, and Equitable Insurance Corporation for an
aggregate amount of Php 1.55 million.

On 19 October 1982, the building occupied by NLE was gutted with fire. The insurance companies denied
the plaintiff's claim for payment on the ground of breach of policy conditions, specifically, failure to notify
insurers of other insurances already effected or subsequently effected covering the same stocks in trade.
Petitioners, however, argued that the agents of the insurance companies knew of the existence of the
additional insurance coverage and that they were not informed about the said requirement, as they have
not even read the policies.


Whether or not the knowledge of the agent satisfies the requirement of the condition


The knowledge of such insurance by the insurer's agents, even assuming the acquisition thereof by the
former, is not the "notice" that would estop the insurers from denying the claim.

The theory of imputed knowledge, that is, knowledge of the agent is knowledge of the principal, is not
applicable in this case.
Post Script:

What is the Theory of Imputed Knowledge?

A rule in insurance law that any information material to the transaction, either possessed by the agent at
the time of the transaction or acquired by him before its completion, is deemed to be the knowledge of the
principal, at least so far as the transaction is concerned, even though in fact the knowledge is not

21. Caram vs Laureta

*Petition for Certiorari to review the decision of CA which affirmed the decision of CFI Davao in favor of
Claro Laureta ( as plaintiff to that case).

Facts: Marcos Mata conveyed an agricultural land in favor of respondent, Claro Laureta. Despite of the fact
that the Deed of Absolute Sale was not registered, the former delivered to respondent peaceful and lawful
possession of the premises of the land together with the pertinent documents thereof, such as, Original
Certificate of title, tax declarations receipts and other papers related thereto. Subsequently, the same land
was sold by Mata to herein plaintiff, Fermin Caram through his agents Irispe and Atty. Aportadera who
allegedly had knowledge of the existence of unregistered prior sale between Mata and Respondent as the
time of second sale the respondent was already in possession of the land. Nevertheless, the second sale
was properly registered to Registry of Property and thereafter a new Certificate of Title was issued in favor
of plaintiff. The plaintiff denied any knowledge of the encumbrances, conveyance and alienation of the
property in favor of the respondent.

Issue: WON the purchase of property in bad faith by Irispe and Atty. Aportadera should also impugn

Held: YES. There is no doubt then that Irespe and Aportadera, acting as agents of Caram, and the said
agents purchased the property of Mata in bad faith. Applying the principle of agency, Caram as principal,
should also be deemed to have acted in bad faith. Furthermore, Article 1544 of the New Civil Code
provides that:

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be movable

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith
first recordered it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good
Since Caram was a registrant in bad faith, the situation is as if there was no registration at all. And the
respondent being the first in possession of the property is deemed as possessor in good faith as the law
defines a possessor in good faith is one who is not aware that there exists in his title or mode of acquisition
any flaw which invalidates it.

22. VELOSO v. CA, G.R. No. 102737; August 21, 1996

Petitioner Francisco Veloso was the owner of a parcel of land situated in the district of Tondo, Manila, with
an area of 177 square meters. The title was registered in the name of Francisco A. Veloso. The said title
was subsequently cancelled and a new one issued in the name of Aglaloma B. Escario, married to
Gregorio L. Escario, on May 24, 1988.

On August 24, 1988, petitioner Veloso filed an action for annulment of documents, reconveyance of
property with damages and preliminary injunction and/or restraining order. Petitioner alleged therein that he
was the absolute owner of the subject property and he never authorized anybody, not even his wife, to sell
it. He alleged that he was in possession of the title but when his wife, Irma, left for abroad, he found out that
his copy was missing. He then verified with the Registry of Deeds of Manila and there he discovered that
his title was already canceled in favor of defendant Aglaloma Escario.

The transfer of property was supported by a General Power of Attorney dated November 29, 1985 and
Deed of Absolute Sale, dated November 2, 1987, executed by Irma Veloso, wife of the petitioner and
appearing as his attorney-in-fact, and defendant Aglaloma Escario.

Petitioner Veloso, however, denied having executed the power of attorney and alleged that his signature
was falsified. He also denied having seen or even known Rosemarie Reyes and Imelda Santos, the
supposed witnesses in the execution of the power of attorney. He vehemently denied having met or
transacted with the defendant. Thus, he contended that the sale of the property, and the subsequent
transfer thereof, were null and void.

Defendant Aglaloma Escario in her answer 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 of Irma Veloso
which was sufficient in form and substance and was duly notarized.

ISSUE: Whether there was a valid sale of the subject property

HELD: Yes, the sale of the subject property is valid. The Supreme Court held that an examination of the
records showed that 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.

Respondent Aglaloma relied on the power of attorney presented by petitioner's 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. Thus, having had no inkling on any irregularity and having no participation
thereof, private respondent was a buyer in good faith. It has been consistently held that 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.

Aguila for petitioner.
In this petition for certiorari with prayer for the issuance of a writ of preliminary injunction, the petitioner

(1) that Judgment be rendered annulling or modifying the Judgment, dated October
19, 1977, of the Respondent Judge rendered in Civil Case No. 11716, City Court of
Caloocan City. (2) That a Writ of Preliminary Injunction be issued requiring Private
Respondents, and all persons acting in their behalf, to refrain from the Execution of
the Judgment, dated October 19, 1977, of the City Court of Caloocan City in Civil
Case No. 11716 until further order.

The basis of the judgment, subject matter of the petition, is a compromise agreement entered into between
the petitioner, represented by her son, George Hung and the private respondent Conchita Liao Tan both
parties assisted by their respective counsel, during the October 19, 1977 hearing of Civil Case No. 11716
for unlawful detainer. The complaint for unlawful detainer was filed in the court a quo on August 12, 1977
by the private respondents against the petitioner. The judgment incorporating the compromise agreement
reads as follows:

When this case was caged for hearing this afternoon, October 19, 1977, plaintiffs and
defendant, the latter acting thru her son, George Hung, as her duly authorized
representative, assisted by their respective counsels, personally appeared before this
Court and mutually agreed as follows:

1. The parties admit that the stipulated rental for the leased premises is as follows:

(a) For the months of April and May, 1977, at P1,500.00 a month;
thereafter a monthly increase of P500.00 until the rent al reaches to P
5,000.00 by December, 1977,

2. That defendant admits having been in arrears in the payment of her rental
obligation since April, 1977 and that as of October, 1977, her total accrued rentals
already amounted to P18,000.00, broken down as follows:

April, 1977.........................P 1,500.00

May, 1977............................. 1,500.00

June, 1977............................. 2,000.00

July,1977............................... 2,500.00

August,1977......................... 3,000.00


October,1977........................ 4,000.00

TOTAL P18,000.00

3. That defendant binds herself to pay in full said accrued rentals of P18,000.00 and
attorney's fee of P 2,000.00, not later than October 31, 1977.

4. That the rental for November, 1977, shall be P4,500.00 a month while the rentals
for December, 1977 and for the succeeding months thereafter shall be P5,000.00,
payable at the residence of plaintiff within five (5) days of the current month.

5. That the Plaintiff hereby agrees to allow the defendant to remain in the leased
premises at the rental herein agreed upon.
6. That should defendant fails to pay her accrued rental of P18,000.00, plus
attorney's fee of P2,000.00 by October 31, 1977, Plaintiff shall be entitled to an
immediate writ of execution to enforce defendant's ejectment from the leased
premises and the collection of all rental in arrears;

7. Defendant's representative, George Hung, affirmed before this court and the same
is confirmed by defendant's counsel, that he (George Hung) has the full authority of
her mother, the herein defendant, to act for her and to sign for and in behalf this
amicable settlement.

WHEREFORE, this Court, as prayed for, hereby approves the foregoing compromise
agreement and consequently renders Judgment in accordance with the precise terms
and conditions hereof. (Annex "D")

Spouses Conchita Liao Tan and Tan Cho Hua alleged in their complaint for unlawful detainer that the
plaintiff Conchita Liao Tan, as owner of a parcel of registered land with improvements located at Francisco
Street, Caloocan City, had leased a portion of it, more particularly known as 91 Francisco Street, Caloocan
City to defendant Lim Pin on a month to month basis but that the latter starting April, 1977 had not paid the
agreed rental stipulated for such month and the succeeding months thereafter based on the following
schedule of payments: a) For the month of April, 1977 P 1,500-00; b) For the month of May, 1977
P1,500-00: c) Commencing on the month of June, 1977 and for each calendar month thereafter P6,000.00
per month; and that despite demand, the defendant refused to vacate the leased premises. In addition to
the actual damages, the plaintiffs asked for an attorney's fee in the amount of P3,000.00.

On August 25, 1977, the defendant Lim Pin, filed her Answer denying the material allegations of the
complaint and protesting the alleged highly "unconscionable and unreasonable" increase of rental
demanded by plaintiffs. As a counterclaim, she asked for an attorney's fee in the amount of P5,000.00. The
counterclaim was denied in the plaintiffs' Answer to Counterclaim, dated September 1, 1982.

The initial hearing set for September 1, 1977 was reset to September 14, 1977 upon the joint motion of the
parties who were trying to work out a possible amicable settlement. Upon the failure of the parties to reach
an amicable settlement, the September 14, 1977 hearing proceeded as scheduled during which plaintiff
Conchita Liao Tan testified. For lack of material time, Conchita Liao Tan's cross-examination was set for
September 27, 1970 but this hearing was again cancelled and reset to October 19, 1977.

On the scheduled October 19, 1977 hearing, defendant Lim Pin was absent. Her son George Hung who
attended with his mother all the previous hearings was present together with the defendant's counsel.
Plaintiff Conchita Liao Tan together with her counsel was also present. Through the initiative of the court a
quo, the subject compromise agreement was formulated and executed and it finally became the basis of
the October 19, 1977 judgment in Civil Case No. 11716.

The aforesaid judgment was the subject of a motion for reconsideration filed on October 28, 1977 by
defendant Lim Pin on the following grounds: 1) that she never authorized her son nor her counsel on record
(Atty. Pastor Mamaril) to enter into such compromise agreement and 2) that had she been present when
said agreement was prepared, she would not have acceded thereto.

The motion prompted the plaintiffs to file an "Opposition To Motion for Reconsideration With Prayer that
defendant's son George Hung and Atty. Pastor P. Mamaril be cited for contempt" in the event they should
belatedly deny that George Hung was duly authorized by his mother to enter into the compromise
agreement dated November 5, 1982.

In the meantime, the plaintiffs, on November 3, 1977 filed an "Urgent Motion For Immediate Execution of
Judgment dated October 19, 1977."

All the foregoing motions were resolved by the respondent court in its Order dated January 26, 1978.

The dispositive portion of the Order reads:

IN VIEW OF ALL THE FOREGOING, defendants' 'Motion For Reconsideration,' is
hereby DENIED, For reason hereinbefore mentioned, defendant's son George Hung,
is hereby declared in direct contempt of court and is hereby sentenced to pay a fine
of TWO HUNDRED (P200.00) Pesos, with subsidiary imprisonment in case of
insolvency. Finding the explanations given by Atty. Mamaril during the hearing of
November 18, 1977, to be meritorious, this Court finds no basis to hold him in
contempt. As prayed for by plaintiffs in their motion for execution, which this Court
finds justified, let a writ of execution be issued in this case.

A writ of execution was issued by the respondent court on the same date. Pursuant to the writ of execution,
the City Sheriff of Caloocan City, Metro Manila served a "Notice of Ejectment" and "Notice to Levy", both
dated February 3, 1978, which were received by the plaintiff on February 3, 1978. Hence, this petition.

On February 8, 1978, We issued a temporary restraining order "enjoining respondent judge from enforcing
the execution of the judgment dated October 19, 1977 issued in Civil Case No. 11714." The petitioner
raises two issues in this petition:

1) Whether the respondent Judge committed grave abuse of discretion in allowing

the October 19, 1977 compromise agreement in the absence of the petitioner; and

2) Whether the respondent Judge committed grave abuse of discretion amounting to

lack of jurisdiction in denying the petitioner's motion for reconsideration on the
October 19, 1977 judgment and in granting the issuance of execution thereto upon
motion of the private respondents.

Anent the first issue, the petitioner argues that the respondent Judge should not have allowed her son
George Hung and her then counsel, Atty. Pastor Mamaril in her absence to enter into the October 19, 1977
compromise agreement with the private respondent Conchita Liao Tan assisted by her counsel. She further
argues that "... considering that such compromise agreement would impose onerous obligations upon
Petitioner, such as a tremendous increase of rentals in the premises being leased from Private
Respondents from P1,500.00 a month to P5,000.00 a month," and that said agreement contained
admissions by petitioner, the respondent Judge should have required a written authority and power of
attorney from her son and counsel. Her objections to the validity of the compromise agreement are
premised on Article 1878 of the Civil Code and Rule 138, Section 23 of the Rules of Court.

The arguments are not well taken.

Article 1878 is found in Title X of the Civil Code on Agency. It states that a special power of attorney is
necessary to compromise, to submit questions to arbitration, to renounce the right to appeal from a
judgment, to waive objections to the venue of an action or to abandon a prescription already acquired.

Section 23 of Rule 138 on Attorneys and Admission to the Bar governs the authority of attorneys to bind
their clients and provides that "Attorneys have authority to bind their clients in any case by any agreement
in relation thereto made in writing, and in taking appeal, and in an matters of ordinary Judicial Procedure,
but they cannot, without special authority, compromise their clients' litigation or receive anything in
discharge of their clients' claims but the full amount in cash."

The requirements of a special power of attorney in Article 1878 of the Civil Code and of a special authority
in Rule 138 of the Rules of Court refer to the nature of the authorization and not its form. The requirements
are met if there is a clear mandate from the principal specifically authorizing the performance of the act. As
early as 1906, this Court in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be
either oral or written, the one vital thing being that it shall be express. And more recently, We stated that, if
the special authority is not written, then it must be duly established by evidence:

... the Rules require, for attorneys to compromise the litigation of their clients, a
special authority. And while the same does not state that the special authority be in
writing the Court has every reason to expect that, if not in writing, the same be duly
established by evidence other than the self-serving assertion of counsel himself that
such authority was verbally given him. (Home Insurance Company vs. United States
lines Company, et al., 21 SCRA 863; 866: Vicente vs. Geraldez, 52 SCRA 210; 225).

We are satisfied from the records of this case that Judge Cancio C. Garcia took the necessary
precautionary measures and acted on the basis of satisfactory evidence when he allowed the compromise
agreement to be executed by George Hung the petitioner's son.

The records show that prior to the October 19, 1977 hearing, the petitioner as defendant in Civil Case No.
11-116 had repeatedly asked that the respondent Judge approve her proposals for a monthly increase of
P500.00 starting April, 1977 and that the increases be pegged at that rate until the monthly rental reaches
the sum of P5,000.00 on December, 1977. Such a proposal was not acceptable at the time to the private
respondents. Only at the October 19, 1977 hearing did private respondent Conchita Liao Tan have a
change of mind. She expressed a willingness to accomodate the proposals originating from the petitioner
prompting the court to suspend proceedings and initiate the execution of the compromise agreement
between the parties. Whereupon the following took place: (1) The court asked George Hung whether he
was willing to enter into the compromise agreement and whether he had the authority of his mother to enter
into such a compromise agreement; (2) The defendant's counsel confirmed in open court the assurance of
George Hung that he had the full authority of his mother to enter into a compromise agreement: (3) After
the formulation of the compromise agreement the Judge explained in Tagalog to both parties, including
George Hung its terms and conditions after which the same was reduced into writing; (4) George Hung
willingly signed the compromise agreement, the terms and conditions of which were those originally
proposed by the petitioner herself. Hung was all the while assisted by their counsel.

There were other reasons which led the lower court to a finding that George Hung had the full authority to
enter into the compromise. The court itself observed during the earlier hearings and it is not disputed that ...
defendant Lim Pin could not decide on anything without first consulting her son." George Hung's later denial
that he never manifested his authority to represent his mother was rejected by the court. As a matter of
fact, this sudden turnabout of George Hung led the court to cite him for contempt. He was fined Two
Hundred Pesos. The citation for contempt was never appealed.

And finally, even assuming that George Hung and the petitioner's counsel acted without authority, the
compromise agreement itself was not null and void. It would be merely unenforceable, capable of being
ratified. (Dungo v. Lapena, 6 SCRA 1007). The compromise agreement was ratified by the petitioner when,
on October 24, 1977, a few days after the promulgation of the questioned judgment and before the filing of
a motion for reconsideration, she filed an "Ex-Parte Motion To Withdraw Deposits" in Civil Case No. 11709,
a consignation case pending before the same court between the same parties. The ex-parte motion in part

xxx xxx xxx

3. That there is another case with this court assigned in Branch I docketed as Civil
Case No. 11716, for unlawful detainer, involving the same parties and subject
property and in the said case, parties have entered into a compromise agreement
whereby, among others, petitioner herein shall pay the accrued monthly rentals to
respondent (plaintiff in the aforementioned case);

4. That in order to implement the aforementioned compromise agreement, it is

necessary that the deposits made by petitioner be withdrawn, the same to be paid to
respondent Conchita Liao Tan. (Annex "2" for the private respondents, p. 71, rollo).

The second ground for this petition is consequently unmeritorious. The Petitioner alleged that the
respondent Judge acted with grave abuse of discretion amounting to lack of jurisdiction when he denied the
motion for reconsideration of the October 19, 1977 judgment. The motion was based on the same alleged
absence of authority of the petitioner's son and her counsel. A similar allegation regarding the writ of
execution is likewise without merit. It is a well-settled rule that a compromise judgment is final and
executory and unappealable. We also note that on or before June 26, 1978 the petitioner abandoned the
disputed property, notwithstanding our February 8, 1978 temporary restraining order enjoining enforcement
of the writ of execution.
WHEREFORE, the instant petition is hereby DISMISSED for lack of merit. The temporary restraining order
issued by this Court dated February 8, 1978 is LIFTED. The judgment appealed from is AFFIRMED with
costs against the petitioner.


On challenge via petition for review on certiorari is the Court of Appeals Decision of December 8, 2004 and
Resolution of April 14, 2005 in CA-G.R. CV No. 763091 reversing the trial courts decision2 against Jose
Teofilo T. Mercado a.k.a. Don Pepito Mercado (respondent) and accordingly dismissing the complaint of
Jesus M. Gozun (petitioner).

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

Petitioner delivered the campaign materials to respondents headquarters along Gapan-Olongapo Road in
San Fernando, Pampanga.8

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

Petitioner later sent respondent a Statement of Account11 in the total amount of P2,177,906 itemized as
follows: P640,310 for JMG Publishing House; P837,696 for Metro Angeles Printing; P446,900 for St.
Joseph Printing Press; and P253,000, the "cash advance" obtained by Lilian.

On August 11, 1995, respondents wife partially paid P1,000,000 to petitioner who issued a receipt12

Despite repeated demands and respondents promise to pay, respondent failed to settle the balance of his
account to petitioner.

Petitioner and respondent being compadres, they having been principal sponsors at the weddings of their
respective daughters, waited for more than three (3) years for respondent to honor his promise but to no
avail, compelling petitioner to endorse the matter to his counsel who sent respondent a demand letter.13
Respondent, however, failed to heed the demand.14

Petitioner thus filed with the Regional Trial Court of Angeles City on November 25, 1998 a complaint15
against respondent to collect the remaining amount of P1,177,906 plus "inflationary adjustment" and
attorneys fees.

In his Answer with Compulsory Counterclaim,16 respondent denied having transacted with petitioner or
entering into any contract for the printing of campaign materials. He alleged that the various campaign
materials delivered to him were represented as donations from his family, friends and political supporters.
He added that all contracts involving his personal expenses were coursed through and signed by him to
ensure compliance with pertinent election laws.

On petitioners claim that Lilian, on his (respondents) behalf, had obtained from him a cash advance of
P253,000, respondent denied having given her authority to do so and having received the same.
At the witness stand, respondent, reiterating his allegations in his Answer, claimed that petitioner was his
over-all coordinator in charge of the conduct of seminars for volunteers and the monitoring of other matters
bearing on his candidacy; and that while his campaign manager, Juanito "Johnny" Cabalu (Cabalu), who
was authorized to approve details with regard to printing materials, presented him some campaign
materials, those were partly donated.17

When confronted with the official receipt issued to his wife acknowledging her payment to JMG Publishing
House of the amount of P1,000,000, respondent claimed that it was his first time to see the receipt, albeit
he belatedly came to know from his wife and Cabalu that the P1,000,000 represented "compensation [to
petitioner] who helped a lot in the campaign as a gesture of goodwill."18

Acknowledging that petitioner is engaged in the printing business, respondent explained that he sometimes
discussed with petitioner strategies relating to his candidacy, he (petitioner) having actively volunteered to
help in his campaign; that his wife was not authorized to enter into a contract with petitioner regarding
campaign materials as she knew her limitations; that he no longer questioned the P1,000,000 his wife gave
petitioner as he thought that it was just proper to compensate him for a job well done; and that he came to
know about petitioners claim against him only after receiving a copy of the complaint, which surprised him
because he knew fully well that the campaign materials were donations.19

Upon questioning by the trial court, respondent could not, however, confirm if it was his understanding that
the campaign materials delivered by petitioner were donations from third parties.20

Finally, respondent, disclaiming knowledge of the Comelec rule that if a campaign material is donated, it
must be so stated on its face, acknowledged that nothing of that sort was written on all the materials made
by petitioner.21

As adverted to earlier, the trial court rendered judgment in favor of petitioner, the dispositive portion of
which reads:

WHEREFORE, the plaintiff having proven its (sic) cause of action by preponderance of
evidence, the Court hereby renders a decision in favor of the plaintiff ordering the defendant
as follows:

1. To pay the plaintiff the sum of P1,177,906.00 plus 12% interest per annum from the filing
of this complaint until fully paid;

2. To pay the sum of P50,000.00 as attorneys fees and the costs of suit.


Also as earlier adverted to, the Court of Appeals reversed the trial courts decision and dismissed the
complaint for lack of cause of action.

In reversing the trial courts decision, the Court of Appeals held that other than petitioners testimony, there
was no evidence to support his claim that Lilian was authorized by respondent to borrow money on his
behalf. It noted that the acknowledgment receipt23 signed by Lilian did not specify in what capacity she
received the money. Thus, applying Article 131724 of the Civil Code, it held that petitioners claim for
P253,000 is unenforceable.

On the accounts claimed to be due JMG Publishing House P640,310, Metro Angeles Printing
P837,696, and St. Joseph Printing Press P446,900, the appellate court, noting that since the owners of
the last two printing presses were not impleaded as parties to the case and it was not shown that petitioner
was authorized to prosecute the same in their behalf, held that petitioner could not collect the amounts due

Finally, the appellate court, noting that respondents wife had paid P1,000,000 to petitioner, the latters
claim of P640,310 (after excluding the P253,000) had already been settled.

Hence, the present petition, faulting the appellate court to have erred:
1. . . . when it dismissed the complaint on the ground that there is no evidence, other than
petitioners own testimony, to prove that Lilian R. Soriano was authorized by the respondent
to receive the cash advance from the petitioner in the amount of P253,000.00.


2. . . . when it dismissed the complaint, with respect to the amounts due to the Metro
Angeles Press and St. Joseph Printing Press on the ground that the complaint was not
brought by the real party in interest. x x x x25

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.

Lim Pin v. Liao Tian, et al.30 held that the requirement of a special power of attorney refers to the nature of
the authorization and not to its form.

. . . The requirements are met if there is a clear mandate from the principal specifically
authorizing the performance of the act. As early as 1906, this Court in Strong v. Gutierrez-
Repide (6 Phil. 680) stated that such a mandate may be either oral or written. The one thing
vital being that it shall be express. And more recently, We stated that, if the special authority
is not written, then it must be duly established by evidence:

"the Rules require, for attorneys to compromise the litigation of their clients, a special
authority. And while the same does not state that the special authority be in writing the Court
has every reason to expect that, if not in writing, the same be duly established by evidence
other than the self-serving assertion of counsel himself that such authority was verbally
given him."31 (Emphasis and underscoring supplied)

Petitioner submits that his following testimony suffices to establish that respondent had authorized Lilian to
obtain a loan from him, viz:

Q : Another caption appearing on Exhibit "A" is cash advance, it states given on 3-31-95
received by Mrs. Lilian Soriano in behalf of Mrs. Annie Mercado, amount P253,000.00, will
you kindly tell the Court and explain what does that caption means?

A : It is the amount representing the money borrowed from me by the defendant when
one morning they came very early and talked to me and told me that they were not able
to go to the bank to get money for the allowances of Poll Watchers who were having a
seminar at the headquarters plus other election related expenses during that day, sir.

Q : Considering that this is a substantial amount which according to you was taken by Lilian
Soriano, did you happen to make her acknowledge the amount at that time?

A : Yes, sir.32 (Emphasis supplied)

Petitioners testimony failed to categorically state, however, whether the loan was made on behalf of
respondent or of his wife. While petitioner claims that Lilian was authorized by respondent, the statement of
account marked as Exhibit "A" states that the amount was received by Lilian "in behalf of Mrs. Annie
Invoking Article 187333 of the Civil Code, petitioner submits that respondent informed him that he had
authorized Lilian to obtain the loan, hence, following Macke v. Camps34 which holds that one who clothes
another with apparent authority as his agent, and holds him out to the public as such, respondent
cannot be permitted to deny the authority.

Petitioners submission does not persuade. As the appellate court observed:

. . . Exhibit "B" [the receipt issued by petitioner] presented by plaintiff-appellee to support his
claim unfortunately only indicates the Two Hundred Fifty Three Thousand Pesos
(P253,0000.00) was received by one Lilian R. Soriano on 31 March 1995, but without
specifying for what reason the said amount was delivered and in what capacity did Lilian R.
Soriano received [sic] the money. The note reads:









Nowhere in the note can it be inferred that defendant-appellant was connected with the said
transaction. Under Article 1317 of the New Civil Code, a person cannot be bound by
contracts he did not authorize to be entered into his behalf.35 (Underscoring supplied)

It bears noting that Lilian signed in the receipt in her name alone, without indicating therein that she was
acting for and in behalf of respondent. She thus bound herself in her personal capacity and not as an agent
of respondent or anyone for that matter.

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 x36 (Emphasis and underscoring

On the amount due him and the other two printing presses, petitioner explains that he was the one who
personally and directly contracted with respondent and he merely sub-contracted the two printing
establishments in order to deliver on time the campaign materials ordered by respondent.

Respondent counters that the claim of sub-contracting is a change in petitioners theory of the case which
is not allowed on appeal.

In Oco v. Limbaring,37 this Court ruled:

The parties to a contract are the real parties in interest in an action upon it, as consistently
held by the Court. Only the contracting parties are bound by the stipulations in the contract;
they are the ones who would benefit from and could violate it. Thus, one who is not a party
to a contract, and for whose benefit it was not expressly made, cannot maintain an action on
it. One cannot do so, even if the contract performed by the contracting parties would
incidentally inure to one's benefit.38 (Underscoring supplied)
In light thereof, petitioner is the real party in interest in this case. The trial courts findings on the matter
were affirmed by the appellate court.39 It erred, however, in not declaring petitioner as a real party in
interest insofar as recovery of the cost of campaign materials made by petitioners mother and sister are
concerned, upon the wrong notion that they should have been, but were not, impleaded as plaintiffs.

In sum, respondent has the obligation to pay the total cost of printing his campaign materials delivered by
petitioner in the total of P1,924,906, less the partial payment of P1,000,000, or P924,906.

WHEREFORE, the petition is GRANTED. The Decision dated December 8, 2004 and the Resolution dated
April 14, 2005 of the Court of Appeals are hereby REVERSED and SET ASIDE.

The April 10, 2002 Decision of the Regional Trial Court of Angeles City, Branch 57, is REINSTATED
mutatis mutandis, in light of the foregoing discussions. The trial courts decision is modified in that the
amount payable by respondent to petitioner is reduced to P924,906.



FACTS : Anastacio Dugo and Rodrigo S. Gonzales purchased 3 parcels of land from Adriano Lopena and
Rosa Ramos with the remaining balance payable on installment secured by mortgage over the same
-The vendees defaulted on the first installment.
-A compromise agreement was submitted to the lower court for approval. It was signed by Adriano Lopena
and Rosa Ramos on one hand, and Rodrigo S. Gonzales, on the other. However, Rodrigo S. Gonzales
represented that his signature was for both himself and the herein petitioner. Anastacio Dugo's counsel
was present at the preparation of the compromise agreement and this counsel affixed his signature thereto.
-When Anastacio Dugo and Rodrigo S. Gonzales failed to pay the balance of their indebtedness the
mortgage was foreclosed.
- Anastacio Dugo filed a motion to set aside all the proceedings on the ground that the compromise
agreement was void ab initio with respect to him because he did not sign the same. Consequently, he
argued, all subsequent proceedings under and by virtue of the compromise agreement, including the
foreclosure sale were void and null as regards him.
Was the compromise agreement of January 15, 1960, the Order of the same date approving the same,
and, all the proceedings subsequent thereto, valid or void insofar as the petitioner herein is concerned?
Art. 1878 of the Civil Code, a third person cannot bind another to a compromise agreement unless he, the
third person, has obtained a special power of attorney for that purpose from the party intended to be bound.
Although the Civil Code expressly requires a special power of attorney in order that one may compromise
an interest of another, it is neither accurate nor correct to conclude that its absence renders the
compromise agreement void. In such a case, the compromise is merely unenforceable. Contracts are
unenforceable, unless they are ratified.
Here, Anastacio Dugo ratified the compromise agreement conclusively established by the Tri-Party
Agreement. Also, when it appears that the client, on becoming aware the compromise and the judgment
thereon, fails to repudiate promptly the action of his attorney, he will not afterwards be heard to contest its
Also, compromise agreement, the principal provision of the said instrument was for his benefit.


52 SCRA 210 Business Organization Corporation Law Delegation of Corporate Powers
Compromise Agreement

In 1967, HI Cement Corporation was granted authority to operate mining facilities in Bulacan. However, the
areas allowed for it to explore cover areas which were also being explored by Ignacio Vicente, Juan
Bernabe, and Moises Angeles. And so a dispute arose between the three and HI Cement as neither side
wanted to give up their mining claims over the disputed areas. Eventually, HI Cement filed a civil case
against the three. During pre-trial, the possibility of an amicable settlement was explored where HI Cement
offered to purchase the areas of claims of Vicente et al at the rate of P0.90 per square meter. Vicente et al
however wanted P10.00 per square meter.

In 1969, the lawyers of HI Cement agreed to enter into a compromise agreement with the three whereby
commissioners shall be assigned by the court for the purpose of assessing the value of the disputed areas
of claim. An assessment was subsequently made pursuant to the compromise agreement and the
commissioners recommended a price rate of P15.00 per square meter.

One of the lawyers of HI Cement, Atty. Francisco Ventura, then notified the Board of Directors of HI
Cement for the approval of the compromise agreement. But the Board disapproved the compromise
agreement hence Atty. Ventura filed a motion with the court to disregard the compromise agreement.
Vicente et al naturally assailed the motion. Vicente et al insisted that the compromise agreement is binding
because prior to entering into the compromise agreement, the three lawyers of HI Cement declared in open
court that they are authorized to enter into a compromise agreement for HI Cement; that one of the lawyers
of HI Cement, Atty. Florentino Cardenas, is an executive official of HI Cement; that Cardenas even
nominated one of the commissioners; that such act ratified the compromise agreement even if it was not
approved by the Board. HI Cement, in its defense, averred that the lawyers were not authorized and that in
fact there was no special power of attorney executed in their favor for the purpose of entering into a
compromise agreement. Judge Ambrosio Geraldez ruled in favor of HI Cement.

ISSUE: Whether or not a compromise agreement entered into by a lawyer purportedly in behalf of the
corporation is valid without a written authority.

HELD: No. Corporations may compromise only in the form and with the requisites which may be necessary
to alienate their property. Under the corporation law the power to compromise or settle claims in favor of or
against the corporation is ordinarily and primarily committed to the Board of Directors but such power may
be delegated. The delegation must be clearly shown for as a general rule an officer or agent of the
corporation has no power to compromise or settle a claim by or against the corporation, except to the
extent that such power is given to him either expressly or by reasonable implication from the
circumstances. In the case at bar, there was no special power of attorney authorizing the three lawyers to
enter into a compromise agreement. This is even if the lawyers declared in open court that they are
authorized to do so by the corporation (in this case, the transcript of stenographic notes does not show that
the lawyers indeed declare such in open court).

The fact that Cardenas, an officer of HI Cement, acted in effecting the compromise agreement, i.e.
nominating a commissioner, does not ratify the compromise agreement. There is no showing that
Cardenas act binds HI Cement; no proof that he is authorized by the Board; no proof that there is a
provision in the articles of incorporation of HI Cement that he can bind the corporation.

27. Mercado vs. Allied Bank digest sales G.R. No. 171460

Perla executed a Special Power of Attorney (SPA) in favor of her husband, Julian D. Mercado over
several pieces of real property registered under her name, authorizing the latter to perform the following
1. To act in my behalf, to sell, alienate, mortgage, lease and deal otherwise over the different
parcels of land.
2. To sign for and in my behalf any act of strict dominion or ownership any sale, disposition,
mortgage, lease or any other transactions including quit-claims, waiver and relinquishment of rights x x x
3. To exercise any or all acts of strict dominion or ownership over the above-mentioned properties,
rights and interest therein.
On the strength of the aforesaid SPA, Julian obtained a loan from the respondent. Still using the
subject property as security, Julian obtained an additional loan from the respondent. It appears, however,
that there was no property identified in the SPA and registered with the Registry of Deeds. What was
identified in the SPA instead was the property different from the one used as security for loan. Julian
defaulted on the payment of his loan obligations. Thus, respondent initiated extra- judicial foreclosure
proceedings over the subject property which was subsequently sold at public auction wherein the
respondent was declared as the highest bidder. Petitioners initiated an action for the annulment of REM
constituted over the subject property on the ground that the same was not covered by the SPA and that the
said SPA, at the time the loan obligations were contracted, no longer had force and effect since it was
previously revoked by Perla. In the absence of authority to do so, the Real Estate Mortgage constituted by
Julian over the subject property was null and void; thus, petitioners likewise prayed that the subsequent
extra-judicial foreclosure proceedings and the auction sale of the subject property be also nullified.



Julian was not conferred by Perla with the authority to mortgage the subject property under the
terms of the SPA, the real estate mortgages Julian executed over the said property are therefore
unenforceable. The SPA will be held to grant only those powers which are specified therein, and the agent
may neither go beyond nor deviate from the power of attorney. Where powers and duties are specified and
defined in an instrument, all such powers and duties are limited and are confined to those which are
specified and defined, and all other powers and duties are excluded.


Article 1919, an agency is extinguished, among others, by its revocation

Article 1920, the principal may revoke the agency at will, and compel the agent to return the
document evidencing the agency. Such revocation may be express or implied. In this case, the
revocation of the agency or Special Power of Attorney is expressed and by a public document
executed on March 10, 1993.

Given that Perla revoked the SPA as early as 10 March 1993, and that she informed the
Registry of Deeds of Quezon City of such revocation in a letter dated 23 January 1996 and received
by the latter on 7 February 1996, then third parties to the SPA are constructively notified that the
same had been revoked and Julian no longer had any authority to mortgage the subject property.

28. BPI vs. De Coster

# 28 BPI vs. GABRIELA ANDREA DE COSTER y ROXAS, et al. (G.R. No. L-23181. March 16, 1925)

The Bank of the Philippine Islands (BPI) filed a complaint against defendants Gabriela Andrea de Coster y
Roxas, her husband Jean M. Poizat and their partnership J.M. Poizat & Co. for failure to deliver a mortgage
on a real property in Manila. The Court of First Instance (CFI) of Manila rendered that the defendants be
jointly and severally liable for Php 292,000 with an interest of 9% per annum and other damages.

BPI filed later for the immediate possession of the property and sell the same according to the Chattel
Mortgage Law.

Spouses De Coster and Poizat, as well as J.M. Poizat & Co., were all declared in default by the court for
their failure to appear or file their answer. Without notifying the defendants, and after introducing evidence,
rendered an opinion that the property should be sold and the proceeds should be used for the satisfaction
of respective judgments.

De Coster filed a suit to absolve her from the liability and to request for the reopening of the case because:
(1) She resided in Paris from 1908 to April 30, 1924 and was not notified even by her husband regarding
the case; (2) Her husband executed the mortgage transactions without her consent.

Whether or not the transactions entered by Poizat, as an agent of his wife valid?


NO. Paragraph 5 of the power of attorney authorizes the husband for in the name of his wife to loan or
borrow any sums of money or fungible things, etc. This should be construed to mean that the husband had
power only to his wifes money and not to borrow money for or on account of his wife as her agent and
attorney-in-fact. That 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.

Anent her contention that the promissory note was void, the High Court agreed with her that under the
power of attorney given by De Coster to her husband, he had no authority to execute a joint and several
note nor to make her liable as an accommodation maker or surety, as the case may be. The money owed
to BPI was Jean Poizat and his companys alone, and she was not a party to such loan, and therefore, was
not obligated to pay it. The old, original debts of her husband and his company to the bank were all taken
up and merged in the new note in question.

Furthermore, the bank knew that not a dollar was loaned nor borrowed on the strength of the note. It was
actually given at the banks urgent and pressing demand to obtain security for the previous indebtedness of
Jean Poizat

Considering these facts, De Coster had a valid defense against the payment of the questioned note, and
thus, she is not liable to pay it or the original notes. In addition, the note and mortgage show on their face
that De Costers husband as her attorney-in-fact executed them. The bank knew or should have known the
nature and extent of Jean Poizats authority and the limitations on his power. The fact is, there is no
provision in the husbands power of attorney that empowers or authorizes him to sign anything or to do
anything that will make his wife liable as a surety for a pre-existing debt.

On the question of the void mortgage: The same is true of the real estate mortgage. The note being void as
to De Coster, it follows that as to her, the real estate mortgage is also void for want of power to execute it.

Hence, the SC reversed the lower courts ruling and remanded the case to said court for trial on the merits.

29. Insular Drug Co. Inc. vs PNB

Facts: 132 checks made out in the name of the Insular Drug Co., Inc., were brought to the branch office of
the Philippine National Bank in Iloilo by Foerster, a salesman of the drug company, Foerster's wife, and
Foerster's clerk. And said bank credited those checks to the personal account of Foerster and permitted
him amd his wife to make withdrawals.
Eventually the Manila office of the drug company investigated the transactions of Foerster. Upon the
discovery of anomalies, Foerster committed suicide. But there is no evidence showing that the bank knew
that Foerster was misappropriating the funds of his principal. The Insular Drug Company claims that it
never received the face value of 132 checks.

Issue: WON PNB shall be held liable for permitting Foerster to indorse and withdraw the checks of his
principa, Insular Druga Co. Inc.

Yes. The bank could tell by the checks themselves that the money belonged to the Insular Drug Co., Inc.,
and not to Foerster or his wife or his clerk. Moreover, the bank did not only permit Foerster to indorse
checks and then place them to his personal account, but it went farther and permitted Foerster's wife and
clerk to indorse the checks. The right of an agent to indorse commercial paper is a very responsible power
and will not be lightly inferred. A salesman with authority to collect money belonging to his principal does
not have the implied authority to indorse checks received in payment. And it suffices to state in conclusion
that bank will have to stand the loss occasioned by the negligence of its agents.

30. Hodges v. Salas and Salas

Facts: In 1923, Salas executed a power of attorney in favor of their brother-in-law, Felix Yulo. Said P.A.
enables Yulo 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. This loan is secured with a mortgage over a real property. However, the
P28,000 loan was not delivered to Yulo. Instead, an agreement between Yulo 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. Salas then counters such action arguing that
Yulo acted in excess of his authority, hence such loan is invalid. Hodges then contends that Salas, thru
power of attorney, ratified the action of Yulo.

Issue: WON 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. In Manila Trading & Supply Co., vs. Uy Tiepo, the Court held that an agent who applied loaned
money for his own benefit is deemed to have exceeded his authority as provided under the power of
attorney. The power of attorney which authorizes an agent for a specific undertaking has limited term.
In this case, Yulo exceeded the authority provided under the power of attorney since he applied portion of
the money loaned for his own benefit.

Note: 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).

31. Bravo-Guerrero vs. Bravo, GR 152658, 07/29/2005

Facts: Grandparents-spouses Bravo owned two parcel of land in Makati, the wife executed GPA in favor of
her husband. These properties were subsequently sold by the grandfather to their grandchildren. Such
properties were mortgaged to PNB and DBP and the grandchildren-heirs assumed the payment. Later on,
one of the grandchildren moved for the partition of the properties as co-owners but the buyers refused. The
grandchildren contested the sale for lack of consideration. The trial court upheld the validity of the sale,
which was reversed by CA for lack of the consent on the part of the grandmother.

Issue: WON the GPA granted by grandmother was valid.

Held: Yes. Sale of conjugal property by husband is only voidable if without wifes consent. The sale can
only be contested by the wife, and this is not the case. The grandmother executed a GPA specifying the
authority (i.e. mortgae, sell, assign, dispose, etc) of his husband, thus meeting the requirement of
authorization specified in Art. 1878 (nature, and not the form of power). There was no need to execute a
separate and special power of attorney as it can be included in the general power when it is
specified therein the act or transaction for which the special power is required. The SC divided the
co-owned properties between heirs of the buyers. Gross inadequacy of price will not affect sal.


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 IrmaVeloso, 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 plaintiff

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.

Was the General Power of Attorney valid?

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.

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 cannot 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."

33. Siasat v. IAC

Facts: Nacianceno was able to convince the Department of Education and Culture to purchase without
bidding Philippine Flags. When she followed-up the Department of Budget regarding such purchase, the
latter informed her that purchase order cannot be released until a formal offer to deliver the flags is given.
Due this, she contacted Siasat, the owner of the United Flag Ind. The latter then issued a document
authorizing Nacianceno to deal with any entity regarding the marketing of the products of the UFI. They
also agreed that Nacianceno shall be entitled to a commission of 30%. The purchase order was then
released in favor of UFI. After the first delivery was made, UFI gave Nacianceno her commission amounting
to 5% of the amount purchased. UFI then revoked the authorization given to Nacianceno. After such
revocation, another delivery was made by UFI to the DEC. Because of this, Nacianceno demanded that her
full 30% from the first delivery be given as well as her commission for the second delivery. UFI then
contended, among others, that she has no right over the commission since the agency contract is special in
character (as it is limited to the marketing of the UFI products only).

Issue: WON the agency contract authorizing of Nacianceno is special in character.

Held:B No. A special agent is one authorized to do some particular act or to act upon some particular
occasion while a general agent is 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.
In this case, it is clear from the document 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.

34. Urban Bank v. Pea

Facts: Atty. Magdaleno Pea was formerly a stockholder, director and corporate secretary of Isabel Sugar
Company, Inc. (ISCI). ISCI owned a parcel of land. ISCI leased the land. Without its consent and in
violation of the lease contract, the lessee subleased the land to several tenants, who in turn put up
nightclubs inside the compound. Before the expiration of the lease contract, ISCI informed the lessee and
his tenants that the lease would no longer be renewed because the land will be sold. ISCI and Urban Bank
executed a Contract to Sell, and they agreed that the final installment released by the bank upon ISCIs
delivery of full and actual possession of the land, free from any tenants.ISCI then instructed Pea, to act as
its agent and handle the eviction of the tenants. The lessee left, but the unauthorized sub-tenants refused
to leave. Pea had the gates of the property closed and he also posted security guardsservices for which
he advanced payments. Despite the closure of the gates and the posting of the guards, the sub-tenants
would force open the gates, and proceed to carry on with their businesses. Pea then filed a complaint with
the RTC, which issued a TRO. At the time the complaint was filed, a new title to the had already been
issued in the name of Urban Bank. When information reached the judge that the had already been
transferred by ISCI to Urban Bank, the trial court recalled the TRO and issued a break-open order for the
property. Pea immediately contacted ISCIs presidentand told him that because of the break-open order
of the RTC, he (Pea) would be recalling the security guards he had posted to secure the property. The
President asked him to suspend the withdrawal of the posted guards, so that ISCI could get in touch first
with Urban Bank. Pea also called Urban Banks President. The President allegedly assured him that the
bank was going to retain his services, and that the he should not give up possession of the subject land.
Thereafter, Pea, in representation of Urban Bank, filed a separate complaint with the RTC-Makati City, to
enjoin the tenants from entering the Pasay property. Acting on Urban Banks preliminary prayer, the RTC-
Makati City issued a TRO. While the 2nd complaint was pending, Pea made efforts to settle the issue of
possession of the with the sub-tenants. During the negotiations, he was exposed to several civil and crimal
cases and received several threats against his life. The sub-tenants eventually agreed to stay off the
property for a total consideration of 1.5M. Pea advanced the payment for the full and final settlement of
their claims against Urban Bank. Pea formally informed Urban Bank that it could already take possession
of the Pasay property. There was however no mention of the compensation due and owed to him for the
services he had rendered. The bank subsequently took actual possession of the property and installed its
own guards at the premises. Pea thereafter made several attempts to contact Urban Bank, but the bank
officers would not take any of his calls. Pea formally demanded from Urban Bank the payment of the 10%
compensation and attorneys fees allegedly promised to him during his telephone conversation with Urban
Banks President for securing and maintaining peaceful possession of the property. Urban Bank and
individual bank officers and directors argued that it was ISCI, the original owners of the Pasay property, that
had engaged the services of Pea in securing the premises; and, consequently, they could not be held
liable for the expenses Pea had incurred.

ISSUE: Whether or not Pea is entitled to payment for the services he rendered as agent of Urban Bank.

HELD: Yes.

Pea should be paid for services rendered under the agency relationship that existed between him and
Urban Bank based on the civil law principle against unjust enrichment, and not on the basis of the
purported oral contract. Whether or not an agency has been created is determined by the fact that one is
representing and acting for another. The law makes no presumption of agency; proving its existence,
nature and extent is incumbent upon the person alleging it.
Agency is presumed to be for compensation. Unless the contrary intent is shown, a person who acts as an
agent does so with the expectation of payment according to the agreement and to the services rendered or
results effected. In the instant case, theres no evidence that Urban Bank agreed to pay Pea a specific
amount or percentage of amount for his services, so the court applies the principle against unjust
enrichment and on the basis of quantum meruit. The agency of Pea comprised of services ordinarily
performed by a lawyer who is tasked with the job of ensuring clean possession by the owner of a property.
The court measured the amount Pena is entitled to for the services he rendered (as opposed to the 10%
compensation demanded by Pena).

35. Westmont Investment Corp. v Francia

FACTS: Amos Francia, convinced by the bank manager of Westmont Bank, made an investment in
Westmont Investment. Amos also invited his siblings to join in the investment since the interest rate offered
was impressive. They invested an aggregate amount of P3.9M. When the Francia siblings demanded the
retirement of their investment on its maturity, Westmont Investment told them that they have no funds at the
moment and requested for an extension. They also advised the Francias that their money was borrowed by
Pearlbank. When the period of extension given to Westmont Investment expired, they were still not able to
pay the Francias resulting to a suit filed by the latter against Westmont Investment, impleading Pearlbank
as well in the complaint.

Westmont Investment contends that they were merely acting as an agent of Pearlbank which authorized
them to borrow money on its behalf. They averred that they merely brokered a loan transaction between
Pearlbank and the Francias. Westmont provided documents to support their claim showing that Pearlbank
borrowed an amount equivalent to the investment of the Francias.

ISSUE: Whether or not Westmont Investment is an agent of Pearlbank.

HELD: No. The fact that Pearlbank questioned Westmont Investments practice of naming Pearlbank as a
borrower of certain investments made by other investors with Westmont Investment only shows that
AUTHORITY from Pearlbank is absent. The evidence presented is not sufficient to prove that Westmont
Investment was authorized by Pearlbank to borrow money for it and that an agency existed therefrom.
Neither was there a ratification, expressly or impliedly, that it had authorized or consented to said

Also, the Francias had no personal knowledge of Pearlbank. The Francias maintained that they only
transacted with Westmont Investment and Pearlbank was never mentioned by Westmont Investment until
the time they knew that the latter does not have any funds pointing then Pearlbank as the borrower of their
investment. The fact that the Francias impleaded Pearlbank in their suit does not defeat the fact that they
only transact with Westmont Investment. They only did so to protect their interest when they found out that
Westmont was already bankrupt.

Francisco vs GSIS (1963)

Facts: The plaintiff, Trinidad J. Francisco, in consideration of a loan mortgaged in favor of the defendant, Government
Service Insurance System a parcel of land known as Vic-Mari Compound, located at Baesa, Quezon City. The System
extrajudicially foreclosed the mortgage on the ground that up to that date the plaintiff-mortgagor was in arrears on her
monthly instalments. The System itself was the buyer of the property in the foreclosure sale. The plaintiffs father, Atty.
Vicente J. Francisco, sent a letter to the general manager of the defendant corporation, Mr. Rodolfo P. Andal. And
latter the System approved the request of Francisco to redeem the land through a telegram. Defendant received the
payment and it did not, however, take over the administration of the compound. The System then sent a letter to
Francisco informing of his indebtedness and the 1 year period of redemption has been expired. And the System
argued that the telegram sent to Francisco saying that the System has approved the request in redeeming the
property is incorrect due to clerical problems.

Issue: WON the System is liable for the acts of its employees regarding the telegram?

Held: Yes. There was nothing in the telegram that hinted at any anomaly, or gave ground to suspect its veracity, and
the plaintiff, therefore, can not be blamed for relying upon it. There is no denying that the telegram was within Andals
apparent authority. Hence, even if it were the board secretary who sent the telegram, the corporation could not evade
the binding effect produced by the telegram. Knowledge of facts acquired or possessed by an officer or agent of a
corporation in the course of his employment, and in relation to matters within the scope of his authority, is notice to the
corporation, whether he communicates such knowledge or not. Yet, notwithstanding this notice, the defendant System
pocketed the amount, and kept silent about the telegram not being in accordance with the true facts, as it now alleges.
This silence, taken together with the unconditional acceptance of three other subsequent remittances from plaintiff,
constitutes in itself a binding ratification of the original agreement.