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I.

NATURE, FORM, AND KINDS OF AGENCY held that CBIC is bound by the surety bond issued by its
agent who acted within the apparent scope of his
A. ELEMENTS- ART 1868 authority.
COUNTRY BANKERS INSURANCE CA affirmed.
CORPORATION VS. KEPPEL CEBU SHIPYARD
ISSUE:
FACTS:
W/N CBIC can be held liable for the acts of its agent who
Unimarine Shipping Lines, Inc. (Unimarine), a
exceeded the authority laid down in the SPA
corporation engaged in the shipping industry, contracted
the services of Keppel Cebu Shipyard for dry docking and RULING:
ship repair works on its vessel, the M/V Pacific Fortune.
NO.
Cebu Shipyard issued Bill No. 26035 to Unimarine in
The fact that Quinain was an agent of CBIC was never put
consideration for its services, which amounted
in issue. What has always been debated by the parties is
to P4,486,052.00. Negotiations between Cebu Shipyard
the extent of authority or, at the very least, apparent
and Unimarine led to the reduction of this amount
authority, extended to Quinain by CBIC to transact
to P3,850,000.00. The terms of this agreement were
insurance business for and in its behalf.
embodied in Cebu Shipyards letter to the
President/General Manager of Unimarine, Paul In a contract of agency, a person, the agent, binds himself
Rodriguez, who signed his conformity to said letter. to represent another, the principal, with the latters consent
or authority. Thus, agency is based on representation,
In compliance with the agreement, Unimarine, through
where the agent acts for and in behalf of the principal on
Paul Rodriguez, secured from Country Bankers Insurance
matters within the scope of the authority conferred upon
Corp. (CBIC), through the latters agent, Bethoven
him. Such acts have the same legal effect as if they were
Quinain (Quinain), CBIC Surety Bond No. G (16)
personally done by the principal. By this legal fiction of
29419 (the surety bond) in the amount of P3,000,000.00.
representation, the actual or legal absence of the principal
Then, Unimarine failed to pay. Demand were made by is converted into his legal or juridical presence.
Cebu Shipyard but such remained unheeded. This
Our law mandates an agent to act within the scope of his
prompted them to seek payment from CBIC, by virtue of
authority. The scope of an agent’s authority is what
the surety bond but the latter failed to pay. As a result,
appears in the written terms of the power of attorney
Cebu Shipyard filed a case.
granted upon him. Under Article 1878(11) of the Civil
CBIC, in its Answer, said that Cebu Shipyards complaint Code, a special power of attorney is necessary to
states no cause of action. CBIC alleged that the surety obligate the principal as a guarantor or surety.
bond was issued by its agent, Quinain, in excess of his
In the case at bar, CBIC could be held liable even if
authority. CBIC claimed that Cebu Shipyard should have
Quinain exceeded the scope of his authority only if
doubted the authority of Quinain to issue the surety bond
Quinains act of issuing Surety Bond No. G (16) 29419
based on the following:
is deemedto have been performed within the written
1. The nature of the bond undertaking (guarantee terms of the power of attorney he was granted.
payment), and the amount involved.
However, contrary to what the RTC held, the Special
2. The surety bond could only be issued in favor of the Power of Attorney accorded to Quinain clearly states the
Department of Public Works and Highways, as stamped limits of his authority and particularly provides that in
on the upper right portion of the face of the bond. This case of surety bonds, it can only be issued in favor of the
stamp was covered by documentary stamps. Department of Public Works and Highways, the National
Power Corporation, and other government agencies;
3. The issuance of the surety bond was not reported,
furthermore, the amount of the surety bond is limited
and the corresponding premiums were not remitted to
to P500,000.00.
CBIC.
Under Articles 1898 and 1910, an agents act, even if done
RTC ruled in favor of Cebu Shipyard. The RTC found
beyond the scope of his authority, may bind the principal
CBICs contention that Quinain acted in excess of his
if he ratifies them, whether expressly or tacitly. It must be
authority in issuing the surety bond untenable. The RTC
stressed though that only the principal, and not the agent,
can ratify the unauthorized acts, which the principal must terms of the said agreement. Moreover, both Unimarine
have knowledge of. However, in this case, neither and Paul Rodriguez could have inquired directly from
Unimarine nor Cebu Shipyard was able to repudiate CBIC to verify the validity and effectivity of the surety
CBICs testimony that it was unaware of the existence of bond and endorsement; but, instead, they blindly relied on
Surety Bond No. G (16) 29419 and Endorsement No. the representations of Quinain.
33152. There were no allegations either that CBIC should
In light of the foregoing, this Court is constrained to
have been put on alert with regard to Quinains business
release CBIC from its liability.
transactions done on its behalf. It is clear, and undisputed
therefore, that there can be no ratification in this case,
whether express or implied.
Article 1911, on the other hand, is based on the principle
of estoppel, which is necessary for the protection of third
persons. It states that the principal is solidarily liable with
the agent even when the latter has exceeded his authority,
if the principal allowed him to act as though he had full
powers. However, for an agency by estoppel to exist, the
following must be established:
1. The principal manifested a representation of the
agents authority or knowingly allowed the agent to
assume such authority;
2. The third person, in good faith, relied upon such
representation; and
3. Relying upon such representation, such third person
has changed his position to his detriment.
This Court cannot agree with the Court of Appeals
pronouncement of negligence on CBICs part. CBIC not
only clearly stated the limits of its agents powers in their
contracts, it even stamped its surety bonds with the
restrictions, in order to alert the concerned
parties. Moreover, its company procedures, such as
reporting requirements, show that it has designed a
system to monitor the insurance contracts issued by its
agents. CBIC cannot be faulted for Quinains deliberate
failure to notify it of his transactions with Unimarine. In
fact, CBIC did not even receive the premiums paid by
Unimarine to Quinain.
Unimarine undoubtedly failed to establish that it even
bothered to inquire if Quinain was authorized to agree to
terms beyond the limits indicated in his special power of
attorney. While Paul Rodriguez stated that he has done
business with Quinain more than once, he was not able to
show that he was misled by CBIC as to the extent of
authority it granted Quinain. Paul Rodriguez did not even
allege that he asked for documents to prove Quinains
authority to contract business for CBIC, such as their
contract of agency and power of attorney. It is also worthy
to note that even with the Indemnity Agreement, Paul
Rodriguez signed it on Quinains mere assurance and
without truly understanding the consequences of the
LINTOJA VS. ETERNIT CORP. When apprised of this development, the Litonjuas,
through counsel, wrote EC, demanding payment for
FACTS: damages they had suffered on account of the aborted sale.
The Eternit Corporation (EC) is a corporation duly EC, however, rejected their demand.
organized and registered under Philippine laws. Since
The Litonjuas then filed a complaint for specific
1950, it had been engaged in the manufacture of roofing
performance and damages against EC (now the Eterton
materials and pipe products. Its manufacturing operations
Multi-Resources Corporation) and the Far East Bank &
were conducted on eight parcels.
Trust Company, and ESAC in the RTC.
Ninety (90%) percent of the shares of stocks of EC were
In their answer to the complaint, EC and ESAC alleged
owned by Eteroutremer S.A. Corporation (ESAC), a
that since Eteroutremer was not doing business in the
corporation organized and registered under the laws
Philippines, it cannot be subject to the jurisdiction of
of Belgium. Glanville, an Australian citizen, was the
Philippine courts; the Board and stockholders of EC never
General Manager and President of EC, while Delsaux was
approved any resolution to sell subject properties nor
the Regional Director for Asia of ESAC. Both had their
authorized Marquez to sell the same; and the telex dated
offices in Belgium.
October 28, 1986 of Jack Glanville was his own personal
In 1986, the management of ESAC grew concerned about making which did not bind EC.
the political situation in the Philippines and wanted to
The trial court declared that since the authority of the
stop its operations in the country. The Committee for Asia
agents/realtors was not in writing, the sale is void and not
of ESAC instructed Adams, a member of ECs Board of
merely unenforceable, and as such, could not have been
Directors, to dispose of the eight parcels of
ratified by the principal. CA affirmed.
land. Adams engaged the services of realtor/broker
Marquez so that the properties could be offered for sale to ISSUE:
prospective buyers.
W/N the lower courts erred in their decision
Marquez thereafter offered the parcels of land and the
improvements thereon to Eduardo B. Litonjua, Jr. of the RULING:
Litonjua & Company, Inc. Marquez declared that he was NO.
authorized to sell the properties.
Anent the first issue, we agree with the contention of
The Litonjua siblings offered to buy the property respondents that the issues raised by petitioner in this case
for P20,000,000.00 cash. Marquez apprised Glanville of are factual. Whether or not Marquez, Glanville, and
the Litonjua siblings offer and relayed the same to Delsaux were authorized by respondent EC to act as its
Delsaux in Belgium, but the latter did not respond. agents relative to the sale of the properties of respondent
Glanville telexed Delsaux in Belgium, inquiring on his EC, and if so, the boundaries of their authority as agents,
position/ counterproposal to the offer of the Litonjua is a question of fact.
siblings. It was only on February 12, 1987 that Delsaux
sent a telex to Glanville stating that, based on the We have reviewed the records thoroughly and find that
Belgian/Swiss decision, the final offer was the petitioners failed to establish that the instant case falls
US$1,000,000.00 and P2,500,000.00 to cover all existing under any of the foregoing exceptions. Indeed, the
obligations prior to final liquidation. assailed decision of the Court of Appeals is supported by
the evidence on record and the law.
Marquez conferred with Glanville, and in a Letter,
confirmed that the Litonjua siblings had accepted the It was the duty of the petitioners to prove that respondent
counter-proposal of Delsaux. The Litonjua brothers EC had decided to sell its properties and that it had
deposited the amount of US$1,000,000.00. empowered Adams, Glanville and Delsaux or Marquez to
offer the properties for sale to prospective buyers and to
Meanwhile, with the assumption of Corazon C. Aquino as accept any counter-offer. Petitioners likewise failed to
President of the Republic of the Philippines, the political prove that their counter-offer had been accepted by
situation in the Philippines had improved. Marquez respondent EC, through Glanville and Delsaux. It must be
received a telephone call from Glanville, advising that the stressed that when specific performance is sought of a
sale would no longer proceed. contract made with an agent, the agency must be
established by clear, certain and specific proof.
of respondent EC; a board resolution evincing the grant
of such authority is needed to bind EC to any agreement
Indeed, a corporation is a juridical person separate and
regarding the sale of the subject properties. Such board
distinct from its members or stockholders and is not
resolution is not a mere formality but is a condition sine
affected by the personal rights,
qua non to bind respondent EC. Admittedly, respondent
obligations and transactions of the latter. It may act only
ESAC owned 90% of the shares of stocks of respondent
through its board of directors or, when authorized either
EC; however, the mere fact that a corporation owns a
by its by-laws or by its board resolution, through its
majority of the shares of stocks of another, or even all of
officers or agents in the normal course of business. The
such shares of stocks, taken alone, will not justify their
general principles of agency govern the relation between
being treated as one corporation.
the corporation and its officers or agents, subject to the
articles of incorporation, by-laws, or relevant provisions The petitioners cannot feign ignorance of the absence of
of law. any regular and valid authority of respondent EC
empowering Adams, Glanville or Delsaux to offer the
Under Section 36 of the Corporation Code, a corporation
properties for sale and to sell the said properties to the
may sell or convey its real properties, subject to the
petitioners. A person dealing with a known agent is not
limitations prescribed by law and the Constitution.
authorized, under any circumstances, blindly to trust the
The property of a corporation, however, is not the agents; statements as to the extent of his powers; such
property of the stockholders or members, and as such, person must not act negligently but must use reasonable
may not be sold without express authority from the board diligence and prudence to ascertain whether the agent acts
of directors. within the scope of his authority. The settled rule is that,
persons dealing with an assumed agent are bound at their
Physical acts, like the offering of the properties of the peril, and if they would hold the principal liable, to
corporation for sale, or the acceptance of a counter-offer ascertain not only the fact of agency but also the nature
of prospective buyers of such properties and the execution and extent of authority, and in case either is controverted,
of the deed of sale covering such property, can be the burden of proof is upon them to prove it. In this case,
performed by the corporation only by officers or agents the petitioners failed to discharge their burden; hence,
duly authorized for the purpose by corporate by-laws or petitioners are not entitled to damages from respondent
by specific acts of the board of directors. Absent such EC.
valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs A real estate broker is one who negotiates the sale of real
of the corporation, but not in the course of, or properties. His business, generally speaking, is only to
connected with, the performance of authorized duties of find a purchaser who is willing to buy the land upon terms
such director, are not binding on the corporation. fixed by the owner. He has no authority to bind the
principal by signing a contract of sale. Indeed, an
Agency may be oral unless the law requires a specific authority to find a purchaser of real property does not
form. However, to create or convey real rights over include an authority to sell.
immovable property, a special power of attorney is
necessary. Thus, when a sale of a piece of land or any Equally barren of merit is petitioners contention that
portion thereof is through an agent, the authority of the respondent EC is estopped to deny the existence of a
latter shall be in writing, otherwise, the sale shall be void. principal-agency relationship between it and Glanville or
Delsaux. For an agency by estoppel to exist, the following
In this case, the petitioners as plaintiffs below, failed to must be established: (1) the principal manifested a
adduce in evidence any resolution of the Board of representation of the agents authority or knowlingly
Directors of respondent EC empowering Marquez, allowed the agent to assume such
Glanville or Delsaux as its agents, to sell, let alone offer
for sale, for and in its behalf, the eight parcels of land authority; (2) the third person, in good faith, relied upon
owned by respondent EC including the improvements such representation; (3) relying upon such representation,
thereon. such third person has changed his position to his
While Glanville was the President and General Manager detriment. An agency by estoppel, which is similar to the
of respondent EC, and Adams and Delsaux were members doctrine of apparent authority, requires proof of reliance
of its Board of Directors, the three acted for and in behalf upon the representations, and that, in turn, needs proof
of respondent ESAC, and not as duly authorized agents that the representations predated the action taken in
reliance. Such proof is lacking in this case. In their
communications to the petitioners, Glanville and Delsaux
positively and unequivocally declared that they were
acting for and in behalf of respondent ESAC.
Neither may respondent EC be deemed to have ratified
the transactions between the petitioners and respondent
ESAC, through Glanville, Delsaux and Marquez. The
transactions and the various communications inter
se were never submitted to the Board of Directors of
respondent EC for ratification.
PETITION DENIED.
repudiated EDWINs power to sign the Deed of
Assignment. As EDWIN did not sufficiently notify it of
EUROTECH INDUSTRIAL the extent of his powers as an agent, petitioner claims that
TECHNOLOGIES, INC., VS. CUIZON he should be made personally liable for the obligations of
FACTS: his principal.

Petitioner is engaged in the business of importation and ISSUE:


distribution of various European industrial equipment for
W/N EDWIN is a real party in interest and thus, should
customers here in the Philippines. It has as one of its
be impleaded in this case.
customers Impact Systems Sales (Impact Systems) which
is a sole proprietorship owned by respondent ERWIN RULING:
Cuizon (ERWIN). Respondent EDWIN is the sales
NO.
manager of Impact Systems and was impleaded in the
court a quo in said capacity. The elements of the contract of agency are: (1) consent,
express or implied, of the parties to establish the
Respondents sought to buy from petitioner one unit of
relationship; (2) the object is the execution of a juridical
sludge pump with respondents making a down
act in relation to a third person; (3) the agent acts as a
payment. When the sludge pump arrived from the United
representative and not for himself; (4) the agent acts
Kingdom, petitioner refused to deliver the same to
within the scope of his authority.
respondents without their having fully settled their
indebtedness to petitioner. Thus, respondent EDWIN and Article 1897 reinforces the familiar doctrine that an agent,
Alberto de Jesus, general manager of petitioner, executed who acts as such, is not personally liable to the party with
a Deed of Assignment of receivables in favor of whom he contracts. The same provision, however,
petitioner. presents two instances when an agent becomes personally
liable to a third person. The first is when he expressly
Allegedly unbeknownst to petitioner, respondents,
binds himself to the obligation and the second is when he
despite the existence of the Deed of Assignment,
exceeds his authority. In the last instance, the agent can
proceeded to collect from Toledo Power
be held liable if he does not give the third party sufficient
Company. Alarmed by this development, petitioner made
notice of his powers. We hold that respondent EDWIN
several demands upon respondents to pay their
does not fall within any of the exceptions contained in this
obligations.
provision.
Because of respondent’s failure to abide by said final
The Deed of Assignment clearly states that respondent
demand letter, petitioner instituted a complaint for sum of
EDWIN signed thereon as the sales manager of Impact
money, damages, with application for preliminary
Systems. Applying the foregoing to the present case, we
attachment against herein respondents before the RTC.
hold that Edwin Cuizon acted well-within his authority
By way of special and affirmative defenses, respondent when he signed the Deed of Assignment. To recall,
EDWIN alleged that he is not a real party in interest in petitioner refused to deliver the one unit of sludge pump
this case. According to him, he was acting as mere agent unless it received, in full, the payment for Impact Systems
of his principal, which was the Impact Systems, in his indebtedness. EDWINs participation in the Deed of
transaction with petitioner and the latter was very much Assignment was reasonably necessary or was required in
aware of this fact. order for him to protect the business of his principal. Had
he not acted in the way he did, the business of his principal
Both the RTC and CA dropped EDWIN as a party to the
would have been adversely affected and he would have
case and ruled that the latter merely acted as an agent of
violated his fiduciary relation with his principal.
Impact Systems.
We likewise take note of the fact that in this case,
Petitioner contends that the Court of Appeals failed to
petitioner is seeking to recover both from respondents
appreciate the effect of ERWINs act of collecting the
ERWIN, the principal, and EDWIN, the agent.
receivables from the Toledo Power Corporation
notwithstanding the existence of the Deed of Assignment To reiterate, the first part of Article 1897 declares that the
signed by EDWIN on behalf of Impact Systems. While principal is liable in cases when the agent acted within the
said collection did not revoke the agency relations of bounds of his authority. Under this, the agent is
respondents, petitioner insists that ERWINs action completely absolved of any liability. The second part of
the said provision presents the situations when the agent
himself becomes liable to a third party when he expressly
binds himself or he exceeds the limits of his authority
without giving notice of his powers to the third
person. However, it must be pointed out that in case of
excess of authority by the agent, like what petitioner
claims exists here, the law does not say that a third person
can recover from both the principal and the agent.
As we declare that respondent EDWIN acted within his
authority as an agent, who did not acquire any right nor
incur any liability arising from the Deed of Assignment,
it follows that he is not a real party in interest who should
be impleaded in this case.
IN RE: PETITION FOR ISSUANCE OF SEPARATE authorized him to act on behalf of the children of Anatolio
CERTIFICATE OF TITLE. Buenconsejo, and, hence, it could not have possibly
JOSE A. SANTOS Y Diaz VS. BUENCONSEJO vested in him any property right in his own name; (2) the
children of Anatolio Buenconsejo had no authority to
FACTS: execute said power of attorney, because their father is still
It appears that the aforementioned Lot No. 1917 was alive and, in fact, he and his wife opposed the petition of
originally owned in common by Anatolio Buenconsejo to Santos; (3) in consequence of said power of attorney (if
the extent of ½ undivided portion and Lorenzo Bon and valid) and redemption, Santos could have acquired no
Santiago Bon to the extent of the other ½ ; that Anatolio more than the share pro indiviso of Anatolio Buenconsejo
Buenconsejo's rights, interests and participation over the in Lot No. 1917, so that petitioner cannot — without the
portion abovementioned were, by a Certificate of Sale conformity of the other co-owners (Lorenzo and Santiago
executed by the Provincial Sheriff of Albay, transferred Bon), or a judicial decree of partition issued pursuant to
and conveyed to Atty. Tecla San Andres Ziga, awardee in the provisions of Rule 69 of the new Rules of Court (Rule
the corresponding auction sale conducted by said Sheriff 71 of the old Rules of Court) which have not been
in connection with the execution of the decision of the followed By Santos — adjudicate to himself in fee simple
Juvenile Delinquency and Domestic Relations Court in a determinate portion of said Lot No. 1917, as his share
Civil Case, entitled "Yolanda Buenconsejo, et al. vs. therein, to the exclusion of the other co-owners.
Anatolio Buenconsejo"; that on December 26, 1961 and
by a certificate of redemption issued by the Provincial
Sheriff of Albay, the rights, interest, claim and/or or
participation which Atty. Tecla San Andres Ziga may
have acquired over the property in question by reason of
the aforementioned auction sale award, were transferred
and conveyed to the herein petitioner in his capacity as
Attorney-in-fact of the children of Anatolio Buenconsejo,
namely, Anastacio Buenconsejo, Elena Buenconsejo and
Azucena Buenconsejo.
It would appear, also, that petitioner Santos had redeemed
the aforementioned share of Anatolio Buenconsejo, upon
the authority of a special power of attorney executed in
his favor by the children of Anatolio Buenconsejo; that
relying upon this power of attorney and redemption made
by him, Santos now claims to have acquired the share of
Anatolio Buenconsejo in the aforementioned Lot No.
1917; that as the alleged present owner of said share,
Santos caused a subdivision plan of said Lot No. 1917 to
be made, in which the portion he claims as his share
thereof has been marked as Lot No. 1917-A; and that he
wants said subdivision at No. 1917-A to be segregated
from Lot No. 1917 and a certificate of title issued in his
name exclusively for said subdivision Lot No. 1917-A.
ISSUE:
W/N the certificate of title, covering the lot of Anatalio
Buenconsejo, be issued in the name of Santos by virtue of
the redemption made by him
RULING:
NO.
As correctly held by the lower court, petitioner's claim is
clearly untenable, for: (1) said special power of attorney