#29

Nielson & Co v. Lepanto

26 SCRA 540

FACTS:
Nielson & Company, Inc. and Lepanto Consolidated Mining Company entered into a management
contract. Both agreed for a period of five years, with the right to renew for a like period. The principal and
paramount undertaking of Nielson under the management contract was the operation and development of the
mine and the operation of the mill. All the other undertakings mentioned in the contract are necessary or
incidental to the principal undertaking — these other undertakings being dependent upon the work on the
development of the mine and the operation of the mill.

Lepanto terminated the contract 2 years before its expiration. It took over and assumed exclusive management of
the work previously entrusted to Nielson under the contract.

Lepanto claims based on the contract, Nielson is destined to execute juridical acts not on its own behalf but on
behalf of Lepanto under the control of the Board of Directors of Lepanto "at all times". Hence Lepanto claims that
the contract is one of agency and is revocable at the will of the principal, regardless of period stipulated in the
contract, and Nielson as an agent is not entitled to damages since the law gives to the principal the right to
terminate the agency at will.

ISSUE:
Whether the management contract a contract of agency or a contract of lease of services.

HELD:
It is a Contract of Lease of Services. Nielson was not acting as an agent of Lepanto, but as one who was performing
material acts for an employer, for a compensation.

In both agency and lease of services one of the parties binds himself to render some service to the other party. The
basis of agency is representation, while in the lease of work or services the basis is employment. The lessor of
services does not represent his employer, while the agent represents his principal.

Furthermore, Agency is a preparatory contract, as agency does not stop with the agency because the purpose is to
enter into other contracts. The most characteristic feature of an agency relationship is the agent's power to bring
about business relations between his principal and third persons. The agent is destined to execute juridical acts
(creation, modification or extinction of relations with third parties). Lease of services contemplate only material
(non-juridical) acts.
#30
De La Cruz v. Northern Theatrical Enterprises
95 Phil 739

FACTS
The Northern Theatrical Enterprises Inc., (NTEI) operated a movie house in Laoag, Ilocos Norte. They hired
Domingo De La Cruz 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. As such guard, he carried a
revolver. While on his duty, he killed Benjamin Martin by reason of gate crashing the said premises. As a result, De
la Cruz was charged with homicide but was eventually dismissed. Thereafter, De la Cruz was again accused of the
same crime of homicide and was acquitted.

De la Cruz demanded from his former employer that he is entitled for reimbursement of his expenses on litigation
as he was an agent of NTEI based on agency (Arts. 1709-1729). CFI rejected that he was an agent, thus not entitled
for reimbursement.

ISSUE

HELD
De la Cruz was not employed to represent the defendant corporation in its dealings with third parties. He was
hired to perform a certain specific duty or task, that of acting as special guard and staying at the main entrance of
the movie house to stop gate crashers and to maintain peace and order within the premises.

Furthermore, the payment of the lawyer's fee did not flow directly from the performance of his duties. Had no
criminal charge been filed against him, there would have been no expenses incurred or damage suffered.
Theoretically, the heirs of the deceased and the State, for improper accusations, are the parties that may be held
responsible civilly for damages. Such responsibility can’t be transferred to the employer who in no way intervened,
much less initiated the criminal proceedings and whose only connection or relation to the whole affairs was that
he employed plaintiff to perform a special duty or task, which task or duty was performed lawfully and without
negligence.
#31
Fressel v Mariano Uy Chaco and Co.
34 Phil 122

FACTS
Merritt and defendant entered into a contract, where the latter undertook and agreed with the former to build for
the defendant a costly edifice in Manila. Stated in the contract, the defendant at any time, upon certain
contingencies, before the completion of said edifice could take possession of said edifice in the course of
construction and of all the materials in and about said premises acquired by Merritt for the construction.

Fressel delivered to Merritt certain materials, which Merritt had agreed to pay. Uy Chaco took possession of the
incomplete edifice in course of construction together with all the materials on said premises. Neither Merritt nor
Uy Chaco has paid for the materials. Fressel demanded the permission to enter the premises and retake unused
materials which was refused by defendant.

Appellants alleged that Merritt acted as agent of the defendant in purchasing the materials in question and that Uy
Chaco, by taking over and using such materials, accepted and ratified the purchase, thereby obligating itself to pay
for the same. Uy Chaco contends that Merritt as an independent contractor, is the only person liable for the
amount claimed.

ISSUE

HELD
NO. Merritt is an independent contractor and not an agent. Merritt was authorized to do the work
according to his own method and without being subject to the defendant's control, except as to the result of the
work. He could purchase his materials and supplies from whom he pleased and at such prices as he desired to pay.
It shows that there were no contractual relations whatever between the sellers and the defendant.

Furthermore, the stipulation that states Uy Chaco could, "upon certain contingencies," take possession of the
unfinished building and all materials on the ground, did not change Merritt from an independent contractor to an
agent. The absence of statute creating what is known as mechanics' liens, the owner of a building is not liable for
the value of materials purchased by an independent contractor either as such owner or as the assignee of the
contractor.
#32
Shell Company of the Phil v. Firemen’s Insurance
100 Phil 757

FACTS
Sison’s car was brought to Shell Gasoline and Service Station in Manila, for washing, greasing and spraying. The
operator of the station, agreed to do service and was placed on a hydraulic lifter. When servicing job was to be
completed, the lifter was lowered by Adriano. While doing so, the car fell because of lifter’s defective condition
which caused its damage.
It was reported to Manila Adjustor Company (MAC), adjustor of the Firemen's Insurance Company (FIC) and the
Commercial Casualty Insurance Company (CCIC), as the car was insured with them. It was inspected and taken to
Philippine Motors, Incorporated, for repair. It was restored to running condition and was delivered to Sison.
The insures together with Sison brought action against Shell Company of the Philippines, Ltd. and Porfirio de la
Fuente to recover from them, jointly and severally, the total amount of sum sought to be recovered on the ground
of negligence. De la Fuente contends that the fall of the car was an unforeseen event. Court dismissed the
complaint. CA reversed and sentenced the defendant to pay.

ISSUE
Was De la Fuente an agent or independent contractor?

HELD
He was an agent of the Shell Company of the Philippines, Ltd. He owed his position to the company and the latter
could remove or terminate his services at will; that the service station belonged to the company and bore its trade
name and the operator sold only the products of the company; that the equipment used by the operator belonged
to the latter and were just loaned to the operator and the company took charge of their repair and maintenance;
that an employee of the company supervised the operator and conducted periodic inspection of the company's
gasoline and service station; that the price of the products sold by the operator was fixed by the company.
As the act of the agent or his employees acting within the scope of his authority is the act of the principal, the
breach of the undertaking by the agent is one for which the principal is answerable. The Company's mechanic
failed to make a thorough check up of the lifter. The latter was negligent and the company must answer for the
negligent act of its mechanic which was the cause of the fall of the car from the hydraulic lifter.
#33
Africa v Caltex Phil Inc
16 SCRA 448

FACTS
A fire started at the Caltex service station at the corner of Antipolo St. and Rizal Ave. while gasoline was
being hosed from a tank truck into the underground storage. The fire spread to and burned several neighboring
houses, including the personal properties and effects inside them. Their owners, among them petitioners here,
sued Caltex and Mateo Boquiren, the first as alleged owner of the station and the second as its agent in charge of
operation. Petitioners contends that there was negligence on the part of both of them which caused the fire.
Petitioners failed to prove negligence and that respondents had exercised due care in the premises and with
respect to the supervision of their employees.

ISSUE
Whether Boquiren was an independent contractor or an agent of Caltex.

HELD
Boquiren was an agent of Caltex. Caltex presented a license agreement. Under said agreement Boquiren
would pay Caltex for the use of the premises and all the equipment therein. He could sell only Caltex Products.
Maintenance of the station and its equipment was in control of Caltex. Boquiren could not assign or transfer his
rights as licensee without the consent of Caltex. The license agreement was supposed to be from January 1, 1948
to December 31, 1948, and thereafter until terminated by Caltex upon two days prior written notice. Termination
of the contract was a right granted only to Caltex but not to Boquiren. These provisions of the contract show the
extent of the control of Caltex over Boquiren. The control was such that the latter was virtually an employee of the
former. Therefore, Caltex and Boquiren are held liable solidarily to appellants.
#34
De la Peña v Hidalgo
16 Phil 450
(PS mahaba po talaga yung case, hindi ko na siya mapaikli)

FACTS
Before Gomiz embarked for Spain, executed a power of attorney in favor of Federico Hidalgo, and three
others (Rocha, Roxas and Llado), so that, as his agents, they might represent him and administer properties he
owned and possessed in Manila. Federico took charge of the property and collected the rents and income which
he should have deposited in accordance with their verbal agreement in the treasury of the Spanish Government.
Federico did not remit or pay to Gomiz, during his lifetime, nor to any representative of the latter, wherefore has
he become liable to his principal and to the administrator for the sum together with its interest.
After several years, the Federico wrote to Gomiz requesting him to designate a person as his substitution
because he had to leave PH for Spain for reasons of health, as one of those appointed in the said power of
attorney had died and the others did not wish to take charge of the administration of the said property. However,
Gomiz did not answer his letters and did not appoint or designate another person who might substitute the
Federico. As a result, Federico informed Gomiz, by letter, that he turned over the administration of the latter’s
property to his cousin, Antonio Hidalgo, upon whom the writer had conferred a general power of attorney, but
asking, in case that this was not sufficient, that Gomiz send to Antonio a new power of attorney.
Ramon, on his arrival from Spain and without having any knowledge or information of the true condition
of affairs relative to the property of Gomiz and its administration, he delivered and paid to Federico at his request
the sum of P2,000, derived from the property of the deceased, which sum the defendant has not returned
notwithstanding the demands made upon him so to do.
Ramon prays that Federico be sentenced to refund what he has given. Defendant alleges that Gomiz
owed and had not paid the defendant, up to the date of his death. Wherefore, Federico prays that he be absolved
from the complaint.

ISSUE
Whether or not Federico had renounced his agency, thus, liable with the wrongful administration of the
subsequent agents.

HELD
NO. Federico had renounced his agency when he informed Gomiz that he is about to depart PH, turn over
the administration to Antonio and requested for a power of attorney be executed in favor of Antonio although in
the said letter, the word "renounce" was not employed in connection with the agency or power of attorney
executed in his favour.
Gomiz, in his silence, consented Antonio to administer his property, and in fact created in his favor an
implied agency, as the true and legitimate administrator. Antonio was the agent or administrator by virtue of an
implied agency, which is equivalent in its results to an express agency, executed by the owner of the property.
Consequently, Federico is not required to render accounts of the administration corresponding to the second
period mentioned, nor to pay the balance that such accounts may show to be owing.
The difference between agency and business management: The implied agency originated from contract
and is founded on the lack of contradiction or opposition, which constitutes simultaneous agreement on the part
of the presumed principal to the execution of the contract, while in the management of another's business it is
from a quasi-contract and there is no simultaneous consent, either express or implied, but a fiction or presumption
of consent because of the benefit received.
#35
Jai Alai Corp v BPI
66 SCRA 29

FACTS
Checks were deposited by petitioner in its account with BPI, all acquired from Ramirez, a regular bettor at
the jai-alai games and a sale agent of the Inter-Island Gas Service, Inc. (IIGSI). The deposits were all temporarily
credited to petitioner’s account based on the clause printed on the bank’s deposit slip. Subsequently, Ramirez
resigned and after the checks had been submitted to inter-bank clearing, IIGSI discovered that all indorsement
made and stamp reading "Inter-Island Gas Service, Inc.", were forgeries. Thus, it informed all the parties concerned
and filed a criminal complaint against its former employee. Upon the demands on the bank as the collecting bank,
it debited the account of petitioner. Thereafter, petitioner
tried to issue a check for payment of shares of stock but such was dishonored for insufficient funds.

ISSUE
Was the nature of relationship an agency or loan – creditor-debtor?

HELD
It was that of an agency. BPI acted within legal bounds when it debited the petitioner’s account. When the
petitioner deposited the checks with BPI, the nature of the relationship created at that stage was one of agency,
that is, the bank was to collect from the drawees of the checks the corresponding proceeds. It is true that the
respondent had already collected the proceeds of the checks when it debited the petitioner’s account, the
relationship between the parties had become that of creditor and debtor as to preclude the respondent from using
the petitioner’s funds to make payments not authorized by the latter. Therefore, no creditor-debtor relationship
was created between the parties.

(NIL): BPI, as a collecting bank which indorsed the checks to the drawee-banks for clearing, should be liable to the
latter for reimbursement because the indorsements had been forged prior delivery to the petitioner. Therefore,
payments made by drawee-banks to BPI on account of said checks were ineffective, therefore, the relationship of
creditor and debtor between the petitioner and BPI had not been validly effected, the checks not having been
properly and legitimately converted into cash. It is the obligation of the collecting bank to reimburse the drawee-
bank the value of the checks subsequently found to contain the forged indorsement of the payee. The reason is
that the bank with which the check was deposited has no right to pay the sum stated therein to the forger or
anyone else upon a forged signature. It was its duty to know, that [the payee's] endorsement was genuine before
cashing the check. The petitioner must in turn shoulder the loss of the amounts which the respondent; as its
collecting agent, had to reimburse to the drawee-banks.
#36
Quiroga v. Parsons Hardware
38 Phil. 501

FACTS:
Quiroga and J. Parsons, both merchants, entered into a contract, for the exclusive sale of "Quiroga" Beds
in Visayas. It provided for a discount of 25% as commission for the sales. Likewise, it was agreed that Parsons may
sell, or establish branches of his agency for the sale of "Quiroga" beds in Visayas where there are no exclusive
agents, and shall immediately report such action to Quiroga for his approval. Quiroga filed a complaint, Parsons
sold the beds at higher prices and failed to order the beds by dozen. He alleged that Parsons was his agent for the
sale of his beds, and that said obligations are implied in a contract of commercial agency.
ISSUE:
Whether Parsons was an agent of Quiroga for the sale of his beds.
HELD:
NO. The agreement between Quiroga and Parsons was that of a simple purchase and sale—not an agency.
Quiroga supplied beds, while Parsons had the obligation to pay their purchase price. These are characteristics of a
purchase and sale. In a contract of agency, the agent does not pay its price yet, and sells the products, remitting to
the principal its proceeds. Unsold products must also be returned to the principal. The provisions on commission
and the use of the word “agency” in the contract as well as the testimonies in court do not affect its nature.
Contracts are what the law defines it to be, not what the parties call it.
#36
Gonzalo Puyat and Sons v. Arco Amusement Co.
72 Phil. 402

FACTS:
Arco Amusement Company, engaged in the business of operating cinematographs intended to buy sound
reproducing equipment, approached Gonzalo Puyat & Sons, Inc. (GPSI), the exclusive agent in the Phils of the Starr
Piano Company of Richmond, Indiana, USA. It was agreed that GPSI would order the equipment from Starr Piano
and Arco would pay, in addition to the price of the equipment, a 10% commission, plus expenses, such as freight,
insurance, banking charges, cables etc.

GPSI was able to get a discounted price from Starr Piano but did not inform Arco. Arco paid the bills, and
then placed second order and paid the amount assessed by GPSI. Three years later, Arco discovered that the
quoted price by GPSI was not the net price but rather the list price and that latter obtained a discount from Starr
Piano. They sought for reimbursement. CFI of Manila held that the contract between the petitioner and the
respondent was one of outright purchase and sale, and absolved GPSI from the complaint. CA reversed, the
relation between GPSI and Arco was that of an agent and a principal, and ordered GPSI to reimburse Arco of all the
alleged overpayments.

ISSUE:
Whether the contract between GPSI and Arco is an agency to merit latter a reimbursement or a contract
of sale.

HELD:
It was a contract of sale. It is clear in their terms that Arco agreed to purchase from GPSI the equipment in
question at the prices indicated which are fixed and determinate. While the letters state that GPSI was to receive a
10% commission, this does not necessarily mean that it is an agent of Arco, as this provision is only an additional
price which it bound itself to pay, and which stipulation is incompatible with the pretended relation of agency
between the petitioner and the respondent, because in agency, the agent is exempted from all liability in the
discharge of his commission provided that he acts in accordance with the instructions received from his principal
and the principal must indemnify the agent for all damages which the latter may incur in carrying out the agency
without fault or imprudence on his part.
Furthermore, it is out of the ordinary for one to be the agent of both the vendor and the vendee. Thus,
GPSI is not bound to reimburse Arco for any difference between the cost price and the sales price, which
represents the profit realized by GPS out of the transaction.