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WEEK 1 Art. 1901. A third person cannot set up the fact that the agent has exceeded his
powers, if the principal has ratified, or has signified his willingness to ratify the
DEFINITION agent's acts.
Art. 1868. By the contract of agency a person binds himself to render some Art. 1910. The principal must comply with all the obligations which the agent may
service or to do something in representation or on behalf of another, with the have contracted within the scope of his authority.
consent or authority of the latter.
As for any obligation wherein the agent has exceeded his power, the principal is
Art. 1869. Agency may be express, or implied from the acts of the principal, from not bound except when he ratifies it expressly or tacitly.
his silence or lack of action, or his failure to repudiate the agency, knowing that
another person is acting on his behalf without authority. Art. 1317. No one may contract in the name of another without being authorized
by the latter, or unless he has by law a right to represent him.
Agency may be oral, unless the law requires a specific form.
Art. 1870. Acceptance by the agent may also be express, or implied from his acts A contract entered into in the name of another by one who has no authority or
which carry out the agency, or from his silence or inaction according to the legal representation, or who has acted beyond his powers, shall be unenforceable,
circumstances. unless it is ratified, expressly or impliedly, by the person on whose behalf it has
been executed, before it is revoked by the other contracting party.
Art. 1871. Between persons who are present, the acceptance of the agency may
also be implied if the principal delivers his power of attorney to the agent and the Art. 1403 (1). The following contracts are unenforceable, unless they are
latter receives it without any objection. ratified:
Art. 1872. Between persons who are absent, the acceptance of the agency (1) Those entered into in the name of another person by one who has
cannot be implied from the silence of the agent, except: been given no authority or legal representation, or who has acted
beyond his powers;
(1) When the principal transmits his power of attorney to the agent, who receives
it without any objection; Rallos v. Felix Go Chan, 81 SCRA 251
(2) When the principal entrusts to him by letter or telegram a power of attorney Facts: Concepcion and Gerundia Rallos were sisters and registered co-owners of
with respect to the business in which he is habitually engaged as an agent, and he the parcel of land in issue. They executed a special power of attorney in favor of
did not reply to the letter or telegram. their brother, Simeon Rallos, authorizing him to sell such land for and in their
behalf. After Concepcion died, Simeon Rallos sold the undivided shares of his
Art. 1898. If the agent contracts in the name of the principal, exceeding the sisters Concepcion and Gerundia to Felix Go Chan & Sons Realty Corporation for
scope of his authority, and the principal does not ratify the contract, it shall be the sum of P10,686.90. New TCTs were issued to the latter.
void if the party with whom the agent contracted is aware of the limits of the Petitioner Ramon Rallos, administrator of the Intestate Estate of Concepcion filed a
powers granted by the principal. In this case, however, the agent is liable if he complaint praying (1) that the sale of the undivided share of the deceased
undertook to secure the principal's ratification. Concepcion Rallos in lot 5983 be unenforceable, and said share be reconveyed to
her estate; (2) that the Certificate of 'title issued in the name of Felix Go Chan &
Sons Realty Corporation be cancelled and another title be issued in the names of
Laws on agency, the terms of which are clear and unmistakable leaving no room Orient Air Services v. CA, 197 SCRA 645
for an interpretation contrary to its tenor, should apply, the law provides that
death of the principal ipso jure extinguishes the authority of the agent to sell Facts:
rendering the sale to a third person in good faith unenforceable unless at the American Airlines, Inc. (American Air), an air carrier offering passenger and air
agent had no knowledge of the principal’s death at that time (exception under Art. cargo transportation in the Philippines, and Orient Air Services and Hotel
1931) Representatives (Orient Air), entered into a General Sales Agency Agreement
(Agreement), whereby the former authorized the latter to act as its exclusive
Dispositive: CA Decision reversed, CFI decision affirmed. Sale was null and void. general sales agent within the Philippines for the sale of air passenger
transportation. In the agreement, Orient Air shall remit in United States dollars to
(Court discussed relevant principles first) American the ticket stock or exchange orders, less commissions to which Orient Air
Relationship of Agency (concept arising from principles under Art 1317 and 1403)- Services is entitled, not less frequently than semi-monthly. On the other hand,
one party, caged the principal (mandante), authorizes another, called the agent American will pay Orient Air Services commission on transportation sold by Orient
(mandatario), to act for and in his behalf in transactions with third persons. Air Services or its sub-agents. Thereafter, American alleged that Orient Air had
-derivative in nature, power emanating from principal reneged on its obligations under the Agreement by failing to promptly remit the
-agent’s acts are acts of the principal net proceeds of sales for the months of January to March 1981 in the amount of
US $254,400.40, American Air by itself undertook the collection of the proceeds of
Essential Elements: tickets sold originally by Orient Air and terminated forthwith the Agreement in
(1) there is consent, express or implied of the parties to establish the accordance with paragraph 13 which authorize the termination of the thereof in
relationship; case Orient Air is unable to transfer to the United States the funds payable by
(2) the object is the execution of a juridical act in relation to a third person; Orient Air Services to American. American Air instituted suit against Orient Air
(3) the agents acts as a representative and not for himself, and with the Court of First Instance of Manila “for Accounting with Preliminary
(4) the agent acts within the scope of his authority. Attachment or Garnishment, Mandatory Injunction and Restraining Order” averring
the aforesaid basis for the termination of the Agreement as well as therein
Orient Air denied the material allegations of the complaint with respect to Uy v.CA,314 SCRA 69
plaintiff's entitlement to alleged unremitted amounts, contending that after
application thereof to the commissions due it under the Agreement, plaintiff in fact Facts: Teodoro Jardeleza, petitioner, filed a petition in the matter of the
still owed Orient Air a balance in unpaid overriding commissions. Further, the guardianship of Dr. Ernesto Jardeleza, Sr., upon learning that one piece of real
defendant contended that the actions taken by American Air in the course of property belonging to the latter spouses was about to be sold. The petitioner
terminating the Agreement as well as the termination itself were untenable. The averred therein that the present physical and mental incapacity of Dr. Ernesto
trial court ruled in its favor which decision was affirmed with modification by Court Jardeleza Sr. prevent him from competently administering his properties, in order
of Appeals. It held the termination made by the latter as affecting the GSA to prevent the loss and dissipation of the Jardeleza’s real and personal assets,
agreement illegal and improper and ordered the plaintiff to reinstate defendant as there was a need for a court-appointed guardian to administer said properties.
its general sales agent for passenger transportation in the Philippines in
accordance with said GSA agreement. Gilda Jardeleza, respondent, filed a petition regarding the declaration of incapacity
of Dr. Ernesto Jardeleza Sr., assumption of sole powers of administration of
Issue: conjugal properties and authorization to sell the property. She alleged that her
Whether the Court of Appeals erred in ordering the reinstatement of the husband’s medical treatment and hospitalization expenses were piling up and that
defendant as its general sales agent for passenger transportation in the she need to sell one piece of real property and its improvements. She prayed for
Philippines in accordance with said GSA Agreement authorization from the court to sell said property.
RTC of Iloilo City rendered its decision, finding that it was convinced that Dr.
Held: Ernesto Jardeleza Sr. was truly incapacitated to participate in the administration of
the conjugal properties. However, Teodoro filed his opposition to the proceedings
Yes. By affirming this ruling of the trial court, respondent appellate being unaware and not knowing that a decision has already been rendered on the
court, in effect, compels American Air to extend its personality to Orient case. He also questioned the propriety of the sale of the lot and its improvements
Air. Such would be violative of the principles and essence of agency, thereon supposedly to pay the accumulated financial obligations and
defined by law as a contract whereby "a person binds himself to render hospitalization.
some service or to do something in representation or on behalf of
another, WITH THE CONSENT OR AUTHORITY OF THE LATTER . In an Issue: Whether or not Gilda Jardeleza may assume sole powers of
agent-principal relationship, the personality of the principal is extended through administration of the conjugal property.
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 Ruling: The CA, which the SC affirmed, ruled that in the condition of Dr. Ernesto
a relationship can only be effected with the consent of the principal, which must Jardeleza Sr., the procedural rules on summary proceedings in relation to Article
not, in any way, be compelled by law or by any court. The Agreement itself 124 of the Family Code are not applicable. Because he was unable to take care of
between the parties states that "either party may terminate the himself and manage the conjugal property due to illness that had rendered him
Agreement without cause by giving the other 30 days' notice by letter, telegram or comatose. In such case, the proper remedy is a judicial guardianship proceeding
cable." (emphasis supplied) We, therefore, set aside the portion of the ruling of under Rule 93 of the 1964 Revised Rules of Court.
The bases of the petitioner’s liability are Arts. 1910 and 1911 of the Civil The lower court declared that since the authority of the agents/realtors
Code. The agent’s apparent representation yields to the principal’s true was not in writing, the sale is void and not merely unenforceable.
representation and the contract is considered as entered into between the
principal and the third person. Issue: WON the appellate court committed grave error of law in holding
that Marquez needed a written authority from respondent ETERNIT
The Court also had previously held that banks are liable to innocent 3rd before the sale can be perfected.
persons where the representation is made in the course of its business by an
agent acting within the general scope of his authority, notwithstanding the fact Held: Respondents maintain that Glanville, Delsaux and Marquez had no authority
that the latter may already be abusing his authority in order to commit fraud. from the stockholders of EC and its Board of Directors to offer the properties for
sale to the petitioners.
The bank’s relationship with the public is fiduciary. The bank should have
immediately repaired the injury caused to Cruz. The misdeeds of employees must Petitioners assert that there was no need for a written authority from the
be readily acknowledged and rectified. Board of Directors of EC for Marquez to validly act as broker. As broker, Marquez
was not an ordinary agent because his only job as a broker was to look for a buyer
Litonjua, Jr. v. Eternit Corp. 490 SCRA 204 and to bring together the parties to the transaction. He was not authorized to sell
the properties; hence, petitioners argue, Article 1874 of the New Civil Code does
Facts: The Eternit Corporation (EC) manufactures roofing materials and pipe not apply.
products. Ninety (90%) percent of the shares of stocks of EC were owned by
Eteroutremer S.A. Corporation (ESAC), a corporation registered under the laws of
Art. 1869. Agency may be express, or implied from the acts of the principal, from
The trial court, on the postulate that the spouses Angeles are not the real
his silence or lack of action, or his failure to repudiate the agency, knowing that
parties-in-interest, rendered judgment dismissing their complaint for lack of cause
another person is acting on his behalf without authority.
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
Agency may be oral, unless the law requires a specific form.
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
Art. 1874. When a sale of a piece of land or any interest therein is through an
court.
agent, the authority of the latter shall be in writing; otherwise, the sale shall be
void.
Daluyong Gabriel, through his lawyer, sent a letter on August 30, 1989 to the De Thus, it was incumbent upon appellees to explain what actually convinced them to
los Reyes couple demanding that they cease and desist from continuing with their buy the land from Renato, and because they failed to do so, no proper basis can
construction and to immediately vacate the premises, asserting that the be found to uphold the alleged sale made by Renato as it cannot be determined
construction was unauthorized and that their occupancy of the subject portion was with certainty in what capacity Renato acted. And even assuming that he (Renato)
not covered by any lease agreement. already succeeded to whatever hereditary right or participation he may have over
On September 20, 1989, spouses Claudio and Lydia de los Reyes through counsel the estate of his father, he is still considered a co-owner with his two sisters of the
sent their letter reply explaining that the De los Reyeses are the innocent party subject property and that prior to its partition, Renato cannot validly sell or
who entered into the lease agreement and subsequent sale of subject portion of alienate a specific or determinate part of the property owned in common.
land in good faith and upon the assurance made by the former administratrix,
Maria Rita G. Rey, her nephew Tony Rey, Mrs. Fe S. Gabriel and Mr. Daluyong Renato Gabriel was neither the owner of the subject property nor a duly
Gabriel himself that Renato Gabriel is the new administrator authorized to enter designated agent of the registered owner (Daluyong Gabriel) authorized to sell
into such agreements involving the subject property. subject property in his behalf, and there was also no sufficient evidence adduced
to show that Daluyong Gabriel subsequently ratified Renato's act. In this
Dissatisfied with the explanation, Daluyong Gabriel commenced an action on connection it must be pointed out that pursuant to Article 1874 of the Civil Code,
November 14, 1989 against spouses Claudio and Lydia de los Reyes for the when the sale of a piece of land or any interest therein is through an agent, the
recovery of the subject portion of land before the Regional Trial Court. authority of the latter shall be in writing; otherwise the sale shall be void. In
other words, for want of capacity (to give consent) on the part of Renato
ISSUE: Gabriel, the oral contract of sale lacks one of the essential requisites for
Whether or not the sale between the Spouses Delos Reyes and Reynato its validity prescribed under Article 1318, supra and is therefore null and
Gabriel in the name of his deceased father is valid. void ab initio.
Held:
No. the contract of sale cannot be upheld, mainly because Renato
Gabriel, as vendor, did not have the legal capacity to enter and to give
consent to the agreement, he, being neither the authorized agent (of
Legal Doctrine: Persons dealing with an assumed agent, whether the assumed STATEMENT Folio No. 2494
agency be a general or special one, are bound at their peril, if they would hold the Mr. DOMINGO RODRIGUEZ,
principal, to ascertain not only the fact of the agency but the nature and extent of Iloilo, Iloilo, P.I.
the authority, and in case either is controverted, the burden of proof is upon them In account with
to establish it. HARRY E. KEELER ELECTRIC COMPANY, INC.
221 Calle Echaque, Quiapo, Manila, P.I.
Facts: MANILA, P.I., August 18, 1920.
Plaintiff is Harry E. Keeler Electric Co., a domestic corporation based The answer alleges and the receipt shows upon its face that the plaintiff
in Manila engaged in the electrical business, and among other things sold the plant to the defendant, and that he bought it from the plaintiff. The
in the sale of what is known as the "Matthews" electric plant. receipt is signed as follows:
Defendant is Domingo Rodriguez a resident of Talisay, Occidental Received payment
Negros HARRY E. KEELER ELECTRIC CO. Inc.,
Montelibano, a resident of Iloilo, went to Keeler Electric and made Recibi
arrangement with the latter wherein: (Sgd.) A. C. MONTELIBANO.
o He claimed that he could find purchaser for the "Matthews"
plant Witness (Juan Cenar):
o Keeler Electric told Montelibano that for any plant that he o Cenar was sent by Keeler Electric to install the plant in Rodriguez’s
could sell or any customer that he could find he would be premises in Iloilo
paid a commission of 10% for his services, if the sale was o He brought with him a statement of account for Rodriguez but the
consummated. latter said that he would pay in Manila.
Through Montelibano’s efforts, Keeler was able to sell to Rodriguez one of ***Lower Court: In favor of Rodriguez. It held that:
the "Matthews" plants o Keeler Electric had held out Montelibano to Rodriguez as an agent
Rodriguez paid Montelibano (the purchase price of P2,513.55), after the authorized to collect
installation of the plant and without the knowledge of Keeler Electric, o Payment to Montelibano would discharge the debt of Rodriguez
Keeler Electric filed an action against Rodriguez for the payment of the o The bill was given to Montelibano for collection purposes
purchase price. Keeler Electric appealed. It alleged that:
Rodriguez: Claimed that he already paid the price of the plant. In o Montelibano had no authority to receive the money.
addition, he alleged that: o His services were confined to the finding of purchasers for the
o Montelibano sold and delivered the plant to him, and "was the one "Matthews" plant
who ordered the installation of that electrical plant" o Montelibano was not an electrician, could not install the plant and
o There were evidences: a statement and receipt which did not know anything about its mechanism.
Montelibano signed to whom he paid the money.
b. It was Juan Cenar, and not Montelibano who sold the plant to b. On whether an assumed authority exist – Certain principles must be
Rodiguez considered: (Mechem on Agency, volume I, section 743)
− (1) that the law indulges in no bare presumptions that an agency
o The evidence is in direct conflict with Rodriguez’s own pleadings exists: it must be proved or presumed from facts;
and the receipt statement which he offered in evidence. This − (2) that the agent cannot establish his own authority, either by his
statement also shows upon its face that P81.60 of the bill is round representations or by assuming to exercise it;
trip fare and machine’s transportation costs. − (3) that an authority cannot be established by mere rumor or
general reputation;
− (4)that even a general authority is not an unlimited one; and
Art. 1690. The head of the family shall furnish, free of charge, to the house (1) If the compensation is paid by the day, notice may be given
helper, suitable and sanitary quarters as well as adequate food and medical on any day that the service shall end at the close of the following day;
attendance.
(2) If the compensation is paid by the week, notice may be given,
Art. 1691. If the house helper is under the age of eighteen years, the head of the at the latest on the first business day of the week, that the service shall be
family shall give an opportunity to the house helper for at least elementary terminated at the end of the seventh day from the beginning of the week;
education. The cost of such education shall be a part of the house helper's
compensation, unless there is a stipulation to the contrary. (3) If the compensation is paid by the month, notice may be given, at the latest,
on the fifth day of the month, that the service shall cease at the end of the month.
Art. 1692. No contract for household service shall last for more than two years.
However, such contract may be renewed from year to year. Art. 1699. Upon the extinguishment of the service relation, the house helper may
demand from the head of the family a written statement on the nature and
Art. 1693. The house helper's clothes shall be subject to stipulation. However, duration of the service and the efficiency and conduct of the house helper.
any contract for household service shall be void if thereby the house helper cannot
afford to acquire suitable clothing. B. Employer-employee
Art. 1700. The relations between capital and labor are not merely contractual.
Art. 1694. The head of the family shall treat the house helper in a just and They are so impressed with public interest that labor contracts must yield to the
humane manner. In no case shall physical violence be used upon the house common good. Therefore, such contracts are subject to the special laws on labor
helper. unions, collective bargaining, strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects.
Art. 1695. House helper shall not be required to work more than ten hours a day.
Every house helper shall be allowed four days' vacation each month, with pay. C. Lease of service
Art. 1644. In the lease of work or service, one of the parties binds himself to
Art. 1696. In case of death of the house helper, the head of the family shall bear execute a piece of work or to render to the other some service for a price certain,
the funeral expenses if the house helper has no relatives in the place where the but the relation of principal and agent does not exist between them.
head of the family lives, with sufficient means therefor.
D. Independent contractor
Art. 1697. If the period for household service is fixed neither the head of the Art. 1713. By the contract for a piece of work the contractor binds himself to
family nor the house helper may terminate the contract before the expiration of execute a piece of work for the employer, in consideration of a certain price or
the term, except for a just cause. If the house helper is unjustly dismissed, he compensation. The contractor may either employ only his labor or skill, or also
shall be paid the compensation already earned plus that for fifteen days by way of furnish the material.
indemnity. If the house helper leaves without justifiable reason, he shall forfeit any
salary due him and unpaid, for not exceeding fifteen days.
E. Trust
Art. 1698. If the duration of the household service is not determined either by Art. 1440. A person who establishes a trust is called the trustor; one in whom
stipulation or by the nature of the service, the head of the family or the house confidence is reposed as regards property for the benefit of another person is
H. Negotiorum gestio/quasi-contract This was firmed up by two resolutions of the board of directors of Tourist World
Art. 2144. Whoever voluntarily takes charge of the agency or management of the Service, Inc. dated Dec. 2, 1961, the first abolishing the office of the manager and
business or property of another, without any power from the latter, is obliged to vice-president of the Tourist World Service, Inc., Ermita Branch, and the second,
continue the same until the termination of the affair and its incidents, or to require authorizing the corporate secretary to receive the properties of the Tourist World
the person concerned to substitute him, if the owner is in a position to do so. This Service then located at the said branch office. It further appears that on Jan. 3,
juridical relation does not arise in either of these instances: 1962, the contract with the appellees for the use of the Branch Office premises
(1) When the property or business is not neglected or abandoned; was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees
no longer used it. As a matter of fact appellants used it since Nov. 1961. Because
(2) If in fact the manager has been tacitly authorized by the owner. of this, and to comply with the mandate of the Tourist World Service, the
corporate secretary Gabino Canilao went over to the branch office, and, finding
In the first case, the provisions of Articles 1317, 1403, No. 1, and 1404 regarding the premises locked, and, being unable to contact Lina Sevilla, he padlocked the
unauthorized contracts shall govern. premises on June 4, 1962 to protect the interests of the Tourist World Service.
In the second case, the rules on agency in Title X of this Book shall be applicable.
When neither the appellant Lina Sevilla nor any of her employees could enter the
Art. 2145. The officious manager shall perform his duties with all the diligence of locked premises, a complaint was filed by the herein appellants against the
a good father of a family, and pay the damages which through his fault or appellees with a prayer for the issuance of mandatory preliminary injunction. Both
negligence may be suffered by the owner of the property or business under appellees answered with counterclaims. For apparent lack of interest of the parties
management. therein, the trial court ordered the dismissal of the case without prejudice.
The courts may, however, increase or moderate the indemnity according to the ISSUE:
circumstances of each case. Whether the act of Tourist World Service in abolishing its Ermita branch
proper
No, the act of Tourist World Service in abolishing its Ermita branch is not proper. ISSUE:
The Supreme Court held that when the petitioner, Lina Sevilla, agreed to manage WON Dela Fuente is merely an agent of Shell Co.
Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a
contract of agency. HELD:
In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of Yes. De la Fuente was the operator of the station "by grace" of the Defendant
her principal, Tourist World Service, Inc. As compensation, she received 4% of the Company which could and did remove him as it pleased; that all the equipments
proceeds in the concept of commissions. And as we said, Sevilla herself, based on needed to operate the station was owned by the Defendant Company which took
her letter of November 28, 1961, presumed her principal's authority as owner of charge of their proper care and maintenance, despite the fact that they were
the business undertaking. We are convinced, considering the circumstances and loaned to him; that the Defendant company did not leave the fixing of price for
from the respondent Court's recital of facts, that the parties had contemplated a gasoline to De la Fuente; That the service station belonged to the company and
principal-agent relationship, rather than a joint management or a partnership. bore its trade name and the operator sold only the products of the company; that
the equipment used by the operator belonged to the company and were just
But unlike simple grants of a power of attorney, the agency that we hereby loaned to the operator and the company took charge of their repair and
declare to be compatible with the intent of the parties, cannot be revoked at will. maintenance.
The reason is that it is one coupled with an interest, the agency having been
created for the mutual interest of the agent and the principal. Accordingly, the As the act of the agent or his employees acting within the scope of his authority is
revocation complained of should entitle the petitioner, Lina Sevilla, to damages. the act of the principal, the breach of the undertaking by the agent is one for
which the principal is answerable. The latter was negligent and the company must
Shell v. Firemen's Insurance Co., 100 Phil. 757 answer for the negligent act of its mechanic which was the cause of the fall of the
car from the hydraulic lifter.
FACTS: This case is about an action for recovery of sum of money, based on the
alleged negligence of the defendants. Dela Cruz v. Northern Theatrical Enterprises, 95 Phil. 739
A car was brought to a Shell gasoline station owned by Dela Fuente for washing Facts: 1941, The Northern Theatrical Enterprises Inc., a domestic corporation
and greasing. The car was placed on a hydraulic lifter for greasing. As some parts operated a movie house in Laoag, Ilocos Norte. Domingo De La Cruz was
of the car couldn’t be reached by the greaseman, the lifter was lowered. employed whose duties were to guard the main entrance, to maintain peace and
Unfortunately, for unknown reasons (probably due to mechanical failure or human order and to report the commission of disorders within premises. He carried a
error), while the lifter was being lowered, the car swung and fell from the revolver.
platform. Said car was insured against loss or damage by Firemen's Insurance
Company of Newark, New Jersey, and Commercial Casualty Insurance Company Benjamin Martin wanted to crash the gate or entrance of the movie house.
jointly for the sum of P10,000. The insurance companies after paying the sum Infuriated by the refusal of De la Cruz to let him in without first providing himself
of P1,651.38 for the damage and charging the balance of P100.00 to Salvador with a ticket, Martin attacked him with a bolo. De la Cruz defendant himself as
Sison, in accordance with the terms of the insurance contract, filed this action best he could until he was cornered, at which moment to save himself he shot
Martin, resulting in Benjamin Martin’s death.
After trial, the court a quo rendered a decision dismissing the complaint with costs. Held: Article 1709 of the Old Civil Code, defining contract of agency, provides that
The court stated that it did not find sufficient evidence to establish LEPANTO's "By the contract of agency, one person binds himself to render some service or do
counterclaim and so it likewise dismissed the same. NIELSON appealed. The something for the account or at the request of another." Article 1544, defining
Supreme Court reversed the decision of the trial court and enter in lieu thereof contract of lease of service, provides that "In a lease of work or services, one of
another, ordering Lepanto to pay Nielson (1) 10% share of cash dividends of the parties binds himself to make or construct something or to render a service to
December, 1941 in the amount of P17,500.00, with legal interest thereon from the the other for a price certain." In both agency and lease of services one of the
date of the filing of the complaint; (2) management fee for January, 1942 in the parties binds himself to render some service to the other party. Agency, however,
amount of P2,500.00, with legal interest thereon from the date of the filing of the is distinguished from lease of work or services in that the basis of agency is
complaint; (3) management fees for the sixty-month period of extension of the representation, while in the lease of work or services the basis is employment. The
management contract, amounting to P150,000.00, with legal interest from the lessor of services does not represent his employer, while the agent represents his
date of the filing of the complaint; (4) 10% share in the cash dividends during the principal. Further, agency is a preparatory contract, as agency "does not stop with
period of extension of the management contract, amounting to P1,400,000.00, the agency because the purpose is to enter into other contracts." The most
with legal interest thereon from the date of the filing of the complaint; (5) 10% of characteristic feature of an agency relationship is the agent's power to bring about
the depletion reserve set up during the period of extension, amounting to business relations between his principal and third persons. "The agent is destined
P53,928.88, with legal interest thereon from the date of the filing of the complaint; to execute juridical acts (creation, modification or extinction of relations with third
(6) 10% of the expenses for capital account during the period of extension, parties). Lease of services contemplate only material (non-juridical) acts." Herein,
amounting to P694,364.76, with legal interest thereon from the date of the filing the principal and paramount undertaking of Nielson under the management
of the complaint; (7) to issue and deliver to Nielson and Co. Inc. shares of stock of contract was the operation and development of the mine and the operation of the
Lepanto Consolidated Mining Co. at par value equivalent to the total of Nielson's mill. All the other undertakings mentioned in the contract are necessary or
10% share in the stock dividends declared on November 28, 1949 and August 22, incidental to the principal undertaking — these other undertakings being
1950, together with all cash and stock dividends, if any, as may have been dependent upon the work on the development of the mine and the operation of
declared and issued subsequent to November 28, 1949 and August 22, 1950, as the mill. In the performance of this principal undertaking Nielson was not in any
fruits that accrued to said shares; provided that if sufficient shares of stock of way executing juridical acts for Lepanto, destined to create, modify or extinguish
Lepanto's are not available to satisfy this judgment, Lepanto shall pay Nielson an business relations between Lepanto and third persons. In other words, in
amount in cash equivalent to the market value of said shares at the time of performing its principal undertaking Nielson was not acting as an agent of
default, that is, all shares of stock that should have been delivered to Nielson Lepanto, in the sense that the term agent is interpreted under the law of agency,
before the filing of the complaint must be paid at their market value as of the date but as one who was performing material acts for an employer, for a compensation.
of the filing of the complaint; and all shares, if any, that should have been It is true that the management contract provides that Nielson would also act as
delivered after the filing of the complaint at the market value of the shares at the purchasing agent of supplies and enter into contracts regarding the sale of
Art. 1903. The commission agent shall be responsible for the goods received by Art. 1911. Even when the agent has exceeded his authority, the principal is
him in the terms and conditions and as described in the consignment, unless upon solidarily liable with the agent if the former allowed the latter to act as though he
receiving them he should make a written statement of the damage and had full powers.
deterioration suffered by the same.
Art. 1921. If the agency has been entrusted for the purpose of contracting with
Art. 1904. The commission agent who handles goods of the same kind and mark, specified persons, its revocation shall not prejudice the latter if they were not
which belong to different owners, shall distinguish them by countermarks, and given notice thereof.
designate the merchandise respectively belonging to each principal.
Art. 1922. If the agent had general powers, revocation of the agency does not
Art. 1905. The commission agent cannot, without the express or implied consent prejudice third persons who acted in good faith and without knowledge of the
of the principal, sell on credit. Should he do so, the principal may demand from revocation. Notice of the revocation in a newspaper of general circulation is a
him payment in cash, but the commission agent shall be entitled to any interest or sufficient warning to third persons.
benefit, which may result from such sale.
Art. 1906. Should the commission agent, with authority of the principal, sell on
credit, he shall so inform the principal, with a statement of the names of the
Art. 1869. Agency may be express, or implied from the acts of the principal, from DOCTRINE: The general doctrine holds the power of a principal to revoke the
his silence or lack of action, or his failure to repudiate the agency, knowing that authority of his agent at will, in the absence of a contract fixing the duration of the
another person is acting on his behalf without authority. agency however, the principal cannot deprive his agent of the commission agreed
upon by canceling the agency and, thereafter, dealing directly with the buyer.
Agency may be oral, unless the law requires a specific form.
FACTS: Sometime in 1974, respondent Teresita Nacianceno succeeded in
Art. 1884 (2). The agent is bound by his acceptance to carry out the agency, and convincing officials of the then Department of Education and Culture, to purchase
is liable for the damages which, through his non-performance, the principal may without public bidding, one million pesos worth of national flags for the use of
suffer. public schools throughout the country. And for her service, she was entitled to a
commission of thirty (30%) percent.
He must also finish the business already begun on the death of the
principal, should delay entail any danger. On October 16, 1974, the first delivery of 7,933 flags was made by the
United Flag Industry. The next day, on October 17, 1974, the respondent's
Art. 1930. The agency shall remain in full force and effect even after the death of authority to represent the United Flag Industry was revoked by petitioner Primitivo
the principal, if it has been constituted in the common interest of the latter and of Siasat. According to the findings of the courts below, Siasat, after receiving the
the agent, or in the interest of a third person who has accepted the stipulation in payment of P469,980.00 on October 23, 1974 for the first delivery, tendered the
his favor. amount of P23,900.00 or five percent (5%) of the amount received, to the
respondent as payment of her commission. The latter allegedly protested. She
Art. 1931. Anything done by the agent, without knowledge of the death of the refused to accept the said amount insisting on the 30% commission agreed upon.
principal or of any other cause which extinguishes the agency, is valid and shall be The respondent was prevailed upon to accept the same because of the assurance
fully effective with respect to third persons who may have contracted with him in of the petitioners that they would pay the commission in full after they delivered
good faith. the other half of the order. The respondent states that she later on learned that
petitioner Siasat had already received payment for the second delivery of 7,833
D. UNIVERSAL, GENERAL, AND SPECIAL flags. When she confronted the petitioners, they vehemently denied receipt of the
payment, at the same time claiming that the respondent had no participation
Art. 1876. An agency is either general or special. whatsoever with regard to the second delivery of flags and that the agency had
already been revoked. She then filed a case in court.
The former comprises all the business of the principal. The latter, one or more
specific transactions. The trial court decided in favor of the respondent.
In assailing the appellate court's decision, the petition tenders the following
E. DURABLE AGENCY arguments: first, the authorization making the respondent the petitioner's
representative merely states that she could deal with any entity in connection with
Art. 1930. The agency shall remain in full force and effect even after the death of the marketing of their products for a commission of 30%. There was no specific
the principal, if it has been constituted in the common interest of the latter and of authorization for the sale of 15,666 Philippine flags to the Department; second,
the agent, or in the interest of a third person who has accepted the stipulation in there were two transactions involved evidenced by the separate purchase orders
his favor. and separate delivery receipts, The revocation of agency effected by the parties
with mutual consent on October 17, 1974, therefore, forecloses the respondent's
The payment of claims is not an act of administration which requires a (6) To make gifts, except customary ones for charity or those made to employees
special power of attorney before Guevarra could settle the insurance claims of in the business managed by the agent;
the insured.
(7) To loan or borrow money, unless the latter act be urgent and indispensable for
Also Guevarra was instructed that the payment for the insured must come the preservation of the things which are under administration;
from the revolving fund or collection in his possession, Gueverra should not have
paid the insured through his own capacity. Under 1918 of civil code an agent who (8) To lease any real property to another person for more than one year;
acted in contravention of the principal’s instruction the principal will not be liable
for the expenses incurred by the agent. (9) To bind the principal to render some service without compensation;
(b) YES. Even if the law on agency prohibits Gueverra from obtaining (10) To bind the principal in a contract of partnership;
reimbursement his right to recover may be justified under the article 1236 of the
civil code.[1] Thus Guevarra must be reimbursed but only to the extent that (11) To obligate the principal as a guarantor or surety;
Dominion has benefited without interest or demand for damages.
(12) To create or convey real rights over immovable property;
F. COUCHED IN GENERAL TERMS; COUCHED IN SPECIFIC TERMS
(13) To accept or repudiate an inheritance;
Art. 1877. An agency couched in general terms comprises only acts of
administration, even if the principal should state that he withholds no power or (14) To ratify or recognize obligations contracted before the agency;
that the agent may execute such acts as he may consider appropriate, or even
though the agency should authorize a general and unlimited management. (15) Any other act of strict dominion.
Art. 1878. Special powers of attorney are necessary in the following cases: Art. 1879. A special power to sell excludes the power to mortgage; and a special
power to mortgage does not include the power to sell.
(1) To make such payments as are not usually considered as acts of
administration; Art. 1880. A special power to compromise does not authorize submission to
arbitration.
(2) To effect novations which put an end to obligations already in existence at the
time the agency was constituted; MORTGAGE
Art. 1878 (12)
(3) 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;
· Under the Art. 1207, Valeriana is only jointly liable with Maximo
o (Ako lang nag-infer nito) When the note which a real mortgage is supposed May 3, 1924 - Upon plaintiff’s motion, Gabriela, Jean Poizat, and J.M. Poizat &
to secure is found to be VOID as to the principal (meaning the agent had no Co. were declared in default for failure to appear or answer.
power to execute the note on the principal’s behalf), then it follows that the
mortgage is also VOID as to the principal. June 4, 1924 – W/o giving notice to defendants, the lower court ruled in favor of
BPI and La Orden de Dominicos and ordered the sale of the properties.
o Notes to BPI: The sheriff admitted that the summons for Gabriela was given to her husband, Mr.
1. It does not represent any money paid to the defendant by the bank. J. M. Poizat, at her usual place of residence in the City of Manila on March 13,
2. It is exclusively the personal debt of Jean Poizat and J.M. Poizat & Co. 1924. If this were the case of the wife being in Paris on a pleasure or a business
3. It was executed by her husband because the bank asked for more security on trip, then her residence would have continued to be that of her husband. This is
the debt. not the case here.
4. It was executed by her husband in excess of the powers given to him under his
power of attorney. Upon the admitted facts, the Court is clearly of the opinion that the residence of
5. It was the result of a collusion between BPI and Jean Poizat for the purpose of the husband was not the usual place of residence of the wife. Giving full force and
making her liable for the obligation of a third person. effect to the legal presumption that the usual place of residence of the wife is that
of her husband, that presumption is overcome by the admitted fact that the wife
o Mortgage with BPI: was "residing in the City of Paris, France, since the year 1908 up to April 30,
1. It was executed to secure a void obligation. 1924." Without placing a limitation upon the length of time sufficient to overcome
2. Does not guarantee any loan made to Gabriela. the legal presumption, suffice it to say that sixteen years is amply sufficient.
3. Executed without the express marital consent which the law requires.
4. Executed through collusion. It follows that the substituted service (of summons) attempted to be made is NULL
and VOID and by such service, the court never acquired jurisdiction of the person
Gabriela prayed for the annulment of the judgment and for the case to be of the defendant wife.
reopened so she can file her answer. She prayed for the case to be tried on its
merit and that a final judgment absolving her from all liability be rendered.
2. On August 25, 1903, Gabriela gave her husband a power of attorney, which This decision as to the bank on this motion is based on the assumption that the
gives him the following powers: facts are true as set forth and alleged in the petition to set aside and vacate the
“5. Loan or borrow any sums of money or fungible things xxxx and making all judgment as to the wife, but the Court is not making any finding as to the actual
these transactions with or without mortgages, pledges or personal guaranty. truth of such facts. That remains for the defendant wife to prove such alleged
facts when the case is tried on its merits.
Jean Poizat did sign a promissory note on behalf of his wife in Dec 1921 and a real
mortgage afterward, also as his wife’s attorney in fact. But facts show that Jean DISPOSITIVE:
owed BPI P290,050.02 prior to July 1921 and thereafter his debt to BPI was 1. Lower court’s opinion in refusing to set aside and vacate the judgment for BPI
converted into 6 promissory notes aggregating to P308,458.58 of which P16,180 against Gabriela is REVERSED; such judgment is set aside and REMANDED to the
were paid; thus the balance of P292,278.58. What happened in Dec 1921 is that lower court for further proceedings.
these 6 promissory notes were cancelled and substituted by a joint and several 2. Judgment of lower court in favor of La Orden de Dominicos is REVERSED,
note signed by Jean in his personal capacity, as an agent of his wife, and as a without prejudice to its right to file an original suit to foreclose its mortgage or to
member of the firm J.M. Poizat & Co. file a good and sufficient plea as intervenor in the instant suit.
Villamor, J., concurring and dissenting: - He agrees that the lower court’s
Under the power of attorney, the husband had no authority for and on behalf of judgment should be set aside so that Gabriela would be given the opportunity to
the wife to execute a joint and severalnote or to make her liable as an appear and to defend herself.
accommodation maker. The debt in question was a preexisting debt of her - But he does not agree with the attempts of the majority to decide on certain
husband and of the firm of which she was not a party and she was not obliged to features of the case raised by defendant- appellant (Gabriela), without waiting for
pay. No new or additional money was lent when the note (of which wife is already the outcome of the new trial wherein the other parties will have the opportunity to
a party) was signed in Dec 1921. There is nothing in the power of attorney which present their defenses against the facts alleged by appellant.
gives the husband the authority to make his wife liable as a surety for the
payment of the preexisting debt of a third person. - The merits of the question should not now be discussed without giving the trial
court an opportunity to pass upon the allegations and evidence of the parties.
3. The real mortgage to the bank was given to secure the note in question and
was not given for any other purpose. The note being void as to the wife, it follows
that as to her the real mortgage to the bank is also void for want of power to
execute it.
Before the motion was filed, there were certain negotiations done between the
wife’s camp (and her lawyer) and BPI. BPI now claims that the wife is estopped to
Hodges v. Salas, 63 Phil. 567 Strong v. Gutierrez Rupide, 6 Phil. 680 (main opinion only)
Facts: On September 2, 1923, the defendants executed a power of attorney in FACTS: Among the lands comprising the friar lands are the Dominican
favor of their brother-in-law Felix S. Yulo to enable him to obtain a loan and lands, the only valuable asset owned by the corporation Philippine Sugar Estates
secure it with a mortgage on the real property described in transfer certificate of Development Company Limited (Philippine Sugar Estates). Francisco Gutierrez
title No. 3335. The power of attorney was registered in the registry of deeds of the Repide (Repide), defendant, was the majority stockholder and one of the five
Province of Occidental Negros. Acting under said power of attorney, Felix S. Yulo, directors of Philippine Sugar Estates. He was likewise elected by the board as the
on March 27, 1926, obtained a loan of P28,000 from the plaintiff, binding his agent and administrator general of such company. The factual backdrop being
principals jointly and severally, to pay it within ten (10) years, together with during US occupation, the US Government wanted to secure title over the friar
interest thereon at 12 per cent per annum payable annually in advance, to which lands. To accomplish this objective, Governor for the Philippines entered into
effect he signed a promissory note for said amount and executed a deed of negotiations for the purchase of the Dominican lands, during which Repide
mortgage of the real property. It was stated in the deed that in case the represented Philippine Sugar Estates. The first offer of the Governor was to
defendants failed to pay the stipulated interest and the taxes on the real property purchase the subject lands in the amount of $6, 043,219.47. As the majority
mortgaged and if the plaintiff were compelled to bring an action to recover his stockholder of Philippine Sugar Estates and without prior consultation with the
credit, said defendants would be obliged to pay 10 per cent more on the unpaid other stockholders, Repide rejected the offer. For the second offer, the purchase
capital, as fees for the plaintiff's attorneys. The mortgage so constituted was price was increased to $7,535,000.
registered in the registry of deeds of the Province of Occidental Negros and noted
on the back of the transfer certificate of title.The defendants failed to pay at While negotiations for the second offer were ongoing and while still holding out for
maturity the interest stipulated which should have been paid one year in a higher price of the Dominican lands, Repide took steps to purchase the 800
advance. Plaintiff therefore brought an action for foreclosure of the mortgage. The shares of stock of Philippine Sugar Estates. These shares were owned by Mrs.
trial court ordered in favor of the defendants and held that the loan and the Eleanor Strong (Strong) which were then in the possession of her agent, F. Stuart
mortgage were illegal. Jones (Jones). Repide, instead of seeing Jones, employed Kauffman who later on
employed Sloan, a broker, to purchase the shares of Strong. Jones sold the 800
Issue: Whether or not the loan obtained and the mortgage executed by shares of Strong for 16,000 Mexican currency. For this sale transaction a check of
Yulo was valid and therefore defendants are bound to pay? one Rueda Ramos was issued. Later on, the negotiations for the purchase of the
Dominican lands were concluded and a contract of sale was subsequently
Ruling: Yes. The loan obtained and the mortgage executed by Yulo was valid and executed. This sale transaction increased the value of the shares of stocks
therefore defendants are bound to pay for it. By virtue of the authority conferred originally owned by Strong from 16,000 Mexican currency to 76,256 US currency.
by the defendants by executing a power of attorney, agent Yulo was authorized to During the negotiations regarding the purchase of the shares of stock of Strong,
borrow money and invest it as he wished, without being obliged to apply it not one word of the facts affecting the value of this stock was made known to her
necessarily for the benefit of his principals. nor her agent, Jones. After the sale of Dominican lands and after the purchase of
the 800 shares of Strong, Repide became the owner of 30,400 out of the 42,030
shares of Philippine Sugar Estates. Strong filed a complaint for the recovery of her
800 shares. She argued that her agent Jones had no authority to sell her shares
and that Repide fraudulently concealed the facts affecting their value.
RULING: Yes. With the factual circumstances of this case, it became the Po Sun Suy and Po Ching are owners of the commercial firm Tai Hing Co.)
duty of Repide, acting in good faith, to state the facts before making the purchase
of Strong’s shares. That Repide was one of the directors of Philippine Sugar FACTS: Po Ejap was the owner of a titled land w/c was mortgaged to PNB in
Estates was but one of the facts upon which liability is asserted. He was not only a 1919-1921, Po Tecsi executed a general power of attorney in favor of his brother
director, but he owned three-fourths of the shares of its stock, and was, at the Po Ejap to perform on his behalf the ff: "to buy, sell, or barter, assign, admit in
time of the purchase of the stock, administrator general of the company with large acquittance or in any other manner to acquire or convey all sorts of property, real
powers and engaged in the negotiations which finally led to the sale of the and personal, businesses and industries, credits, rights, and actions belonging to
company’s lands at a price which greatly enhanced the value of the stock. He was me, for whatever prices and under the conditions which he may stipulate, paying
the negotiator for the sale of the Dominican lands and was acting substantially as and receiving payment in cash or in installments, and to execute the proper
the agent of the shareholders of Philippine Sugar Estates by reason of his instruments with the formalities provided by the law."
ownership of the shares in the company. Because of such ownership and agency,
no one knew as well as he does about the exact condition of the negotiations. He Po Ejap then sold the said land with its improvements to his brother Po Tecsi for
was the only one who knew of the probability of the sale of the Dominican lands the sum of P10,000. In 1923, making use of the power conferred by his brother,
to the government and of the probable purchase price. Under these Po Ejap sold absolutely said land to Katigbak. After said sale, Po Tecsi leased the
circumstances, Repide employed an agent to purchase the stock of Strong, property sold, from Gabino Barreto Po Ejap, who administered it in the name of
concealed his own identity and his knowledge of the state of negotiations and their Jose M. Katigbak, at a rental of P1,500 per month, payable in advance, leaving
probable result. The concealment of his identity while procuring the purchase of unpaid the rents accrued from that date until his death which occurred on
the stock, by his agent, was in itself strong evidence of fraud on the part of November 26, 1926, having paid the accrued rents up to October 22, 1925; from
Repide. By such means, the more easily was he able to avoid questions relative to November 26, 1926, the defendants Po Sun Suy and Po Ching leased said land for
the negotiations for the sale of Dominican lands and actual misrepresentations the sum of P1,500 per month; on February 11, 1927, Po Sun Suy was appointed
regarding that subject. He kept up the concealment as long as he could by giving administrator of the estate of his father Po Tecsi, and filed with the court an
the check of a third person Rueda Ramos, for the purchase money. This move of inventory of said estate including the land inquestion; and on May 23, 1927, Jose
Repide was a studied and intentional omission to be characterized as part of the M. Katigbak sold the same property to Po Sun Boo, Katigbak filed this action for
deceitful machinations to obtain the purchase without giving any information the recovery of the rent. Po Sun Suy contends that Katigbak is not the owner of
whatever as to the state and probable result of the negotiations and to obtain a the property (so not entitled to rents) because Po Ejap was not authorized under
lower price for the shares of Strong. After the purchase of stock, he continued the power executed by Po Tecsi to sell said land, because said power had been
negotiations for the sale of the Dominican lands as the administrator general and executed before Po Ejap sold said land to Tecsi.
eventually entered into a contract of sale. The whole transaction gives conclusive
evidence of the overwhelming influence Repide had in the negotiations and it is ISSUES: WON Po Ejap cannot have sold the property (on behalf of Tecsi)
clear that the final consummation was in his hands at all times. because the power was executed by Tecsi before Tecsi owned the
property.
OBITER DICTUM:
The directors are declared to be mandatories of the society and that they are RULING: The power is general and authorizes Gabino Po Ejap to sell any kind of
prohibited from acquiring by purchase, even at public or judicial auction, the realty "belonging" (pertenezcan) to the principal. The use of the subjunctive
property the administration or sale of which, may have been entrusted to them, "pertenezcan" (might belong) and not the indicative "pertenecen" (belong), means
and that this is the extent of the prohibition. that Po Tecsi meant not only the property he had at the time of the execution of
Vicente v. Geraldez, 52 SCRA 210 o Had a surveyor survey the location and relocate borders
Facts o The report found that Angeles’ and Vicente’s properties were totally covered by
• Private respondent Hi Cement Corporation filed with CFI Bulacan a complaint for Corporation’s claim while Bernabe’s property was only partially covered – report
injunction and damages against petitioners. was approved "with the conformity of all the parties in this case.”
• Plaintiff filed a motion for new trial on the ground that the decision of above o Thus it has been stated, that as a general rule an officer or agent of the
decision is null and void because it was based on the Compromise Agreement corporation has no power to compromise or settle a claim by or against the
which was itself null and void for want of a special authority by the plaintiff's corporation, except to the extent that such power is given to him either expressly
lawyers to enter into the said agreement. or by reasonable implication from the circumstances.
OTHER ACTS OF STRICT DOMINION – ART. 1878(12) Art. 1881. The agent must act within the scope of his authority. He may do such
acts as may be conducive to the accomplishment of the purpose of the agency.
Insular Drug Co. v. National Bank, 58 Phil. 684
Art. 1882. The limits of the agent's authority shall not be considered exceeded
Facts: 132 checks made out in the name of the Insular Drug Co., Inc., were should it have been performed in a manner more advantageous to the principal
brought to the branch office ofthe Philippine National Bank in Iloilo by Foerster, a than that specified by him.
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 permittedhim amd Art. 1887. In the execution of the agency, the agent shall act in accordance with
his wife to make withdrawals. Eventually the Manila office of the drug company the instructions of the principal.
investigated the transactions of Foerster. Upon the discovery of anomalies,
Foerster committed suicide. But there is no evidence showing that the bank In default thereof, he shall do all that a good father of a family would do,
knewthat Foerster was misappropriating the funds of his principal. The Insular as required by the nature of the business
Drug Company claims that itnever received the face value of 132 checks.
Issue: WON PNB shall be held liable for permitting Foerster to indorse CARRY OUT THE AGENCY
and withdraw the checks of hisprincipa, Insular Druga Co. Inc.
Art. 1884. The agent is bound by his acceptance to carry out the agency, and is
Held:Yes. The bank could tell by the checks themselves that the money belonged liable for the damages which, through his non-performance, the principal may
to the Insular Drug Co., Inc., and not to Foerster or his wife or his clerk. Moreover, suffer.
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 He must also finish the business already begun on the death of the
indorse the checks. The right of an agent to indorse commercial paper is a very principal, should delay entail any danger.
responsible power and will not be lightly inferred. A sales man with authority to
collect money belonging to his principal does not have the implied authority to Art. 1928. The agent may withdraw from the agency by giving due notice to the
indorse checks received in payment. And it suffices to state in conclusion that bank principal. If the latter should suffer any damage by reason of the withdrawal, the
will have to stand the loss occasioned by the negligence of its agents. agent must indemnify him therefor, unless the agent should base his withdrawal
upon the impossibility of continuing the performance of the agency without grave
detriment to himself.
WEEK 5
Art. 1929. The agent, even if he should withdraw from the agency for a valid
OBLIGATIONS AND LIABILITIES OF AGENTS TO THEIR PRINCIPALS reason, must continue to act until the principal has had reasonable opportunity to
take the necessary steps to meet the situation.
ACT WITHIN SCOPE OF AUTHORITY
NOT TO CARRY OUT THE AGENCY
Art. 1879. A special power to sell excludes the power to mortgage; and a special
power to mortgage does not include the power to sell. Art. 1888. An agent shall not carry out an agency if its execution would
manifestly result in loss or damage to the principal.
Art. 1880. A special power to compromise does not authorize submission to
arbitration. LOYALTY
Art. 1889. The agent shall be liable for damages if, there being a conflict SOLIDARY LIABILITY
between his interests and those of the principal, he should prefer his own.
Art. 1894. The responsibility of two or more agents, even though they have been
Art. 1890. If the agent has been empowered to borrow money, he may himself appointed simultaneously, is not solidary, if solidarity has not been expressly
be the lender at the current rate of interest. If he has been authorized to lend stipulated.
money at interest, he cannot borrow it without the consent of the principal.
Art. 1895. If solidarity has been agreed upon, each of the agents is responsible
Art. 1891. Every agent is bound to render an account of his transactions and to for the non-fulfillment of agency, and for the fault or negligence of his fellows
deliver to the principal whatever he may have received by virtue of the agency, agents, except in the latter case when the fellow agents acted beyond the scope
even though it may not be owing to the principal. of their authority.
Every stipulation exempting the agent from the obligation to render an
account shall be void.
PAY INTEREST
DILIGENCE
Art. 1896. The agent owes interest on the sums he has applied to his own use
Art. 1885. In case a person declines an agency, he is bound to observe the from the day on which he did so, and on those which he still owes after the
diligence of a good father of a family in the custody and preservation of the goods extinguishment of the agency.
forwarded to him by the owner until the latter should appoint an agent or take
charge of the goods. FRAUD; NEGLIGENCE
Art. 1887. In the execution of the agency, the agent shall act in accordance with Art. 1909. The agent is responsible not only for fraud, but also for negligence,
the instructions of the principal. which shall be judged with more or less rigor by the courts, according to whether
the agency was or was not for a compensation.
In default thereof, he shall do all that a good father of a family would do,
as required by the nature of the business. SPECIFIC OBLIGATIONS OF COMMISSION AGENTS
Art. 1909. The agent is responsible not only for fraud, but also for negligence, Art. 1903. The commission agent shall be responsible for the goods received by
which shall be judged with more or less rigor by the courts, according to whether him in the terms and conditions and as described in the consignment, unless upon
the agency was or was not for a compensation. receiving them he should make a written statement of the damage and
deterioration suffered by the same.
ACCOUNT/DELIVER
Art. 1904. The commission agent who handles goods of the same kind and mark,
Art. 1891. Every agent is bound to render an account of his transactions and to which belong to different owners, shall distinguish them by countermarks, and
deliver to the principal whatever he may have received by virtue of the agency, designate the merchandise respectively belonging to each principal.
even though it may not be owing to the principal.
Art. 1905. The commission agent cannot, without the express or implied consent
Every stipulation exempting the agent from the obligation to render an of the principal, sell on credit. Should he do so, the principal may demand from
account shall be void.
Art. 1907. Should the commission agent receive on a sale, in addition to the A court finding that a robbery has happened would not necessary mean that those
ordinary commission, another called a guarantee commission, he shall bear the accused in the criminal action should be found guilty of the crime; nor would a
risk of collection and shall pay the principal the proceeds of the sale on the same ruling that those actually accused did not commit the robbery be inconsistent with
terms agreed upon with the purchaser. a finding that a robbery did take place.
Art. 1908. The commission agent who does not collect the credits of his principal
at the time when they become due and demandable shall be liable for damages, No. In 1961, when the robbery in question did take place, for at that time
unless he proves that he exercised due diligence for that purpose. criminality had not by far reached the levels attained in the present day. The
diligence that Abad portrayed when she went home before she was robbed was
Art. 1909. The agent is responsible not only for fraud, but also for negligence, not a sign of negligence on her part.
which shall be judged with more or less rigor by the courts, according to whether
the agency was or was not for a compensation. PNB v. Manila Surety, 14 SCRA 776
Facts: The PNB opened a letter of credit and advanced $120,000.00 to Edington Oil
Refinery for 8,000 tons of hot asphalt, of which 2,000 tons worth P279,000.00
Maria G. Abad received from Guillermo Austria one (1) pendant with diamonds to were delivered to Adams & Taguba Corp. (ATACO) under a trust receipt
be sold on commission basis or to be returned on demand. Maria Abad while guaranteed by Manila Surety & Fidelity Co. To pay for the asphalt ATACO
walking home, two men snatched her purse containing jewelry and cash, and ran constituted PNB its assignee and attorney-in-fact to receive and collect payments
away. Thus, Abad failed to return the jewelry or pay its value notwithstanding from the Bureau of Public Works. ATACO delivered asphalt worth P431,466.52 to
demands. Austria filed an action against Abad and Abad’s husband for recovery of the Bureau of Public Works, PNB regularly collected the payments amounting to
the pendant or of its value, and damages. Abad raised the defense that the P106,382.01, until they ceased to collect payments. Then in 1962 PNB found that
alleged robbery had extinguished their obligation. there were more payables to ATACO from the Bureau of Public Works. PNB sued
ATACO and the Surety, to recover the balance of P158,563.18 when their
Issue/s: demands for payment were refused. The trial court ordered ATACO and the Surety
to pay PNB the sum of P174,462.34, and the total amount payable by the Surety
1. Whether or not in a contract of agency (consignment of good for shall not exceed P75,000.00. PNB recoursed to the Court of Appeals, which
sole) it is necessary that there be prior conviction for robbery rendered an adverse decision and modified the judgement of the court of origin
before the loss of the article shall exempt the consignee from as to the Surety’s liability. Motions for reconsideration were also denied.
liability for such loss.
2. Whether or not Abad was negligent.
Municipal Council of Iloilo v. Evangelista, 55 Phil. 290 1. Yes. In paragraph VI of the power of attorney, Tan Boon Tiong is
authorized to employ and contract for the services of lawyers upon such
FACTS: In March 1924, Tan Ong Vda. De Tantoco (Tantoco) won in conditions as he may deem convenient, to take charge of any actions
Civil Case 3154 that she filed against the Municipality of Iloilo wherein she necessary or expedient for the interests of his principal, and to defend suits
sought to recover from the latter the value of strip of land that she owned brought against her. This power necessarily implies the authority to pay for
which was taken by the Municipality of Iloilo to widen a public street. The the professional services thus engaged. In the present case, Tantoco had
judgment entitled Tantoco to recover P42,966.40 from the Municipality of to pay Atty. Soriano for services rendered in other cases, for her interests
Iloilo . The CA affirmed the trial court’s decision and the case was and her other co-heirs. Since the judgment money that was recovered in
Joseph asked for the return of the three films, including Monte Carlo Madness, but OBLIGATIONS AND LIABILITIES OF AGENTS TO THIRD PARTIES
the said film could not be returned because it was to be shown in Cebu.
Thereafter, the bodega of Lyric Film Exchange was burned, including the film, AGENT ACTING WITHIN SCOPE OF AUTHORITY
which was not insured.
Art. 1883. If an agent acts in his own name, the principal has no right of action
Issue: against the persons with whom the agent has contracted; neither have such
W/N Lyric Film Exchange is liable to International Films for the the persons against the principal.
destruction of the film by fire.
Art. 1901. A third person cannot set up the fact that the agent has exceeded his Ruling: Garrucho did not act within the authority given to him in obtaining the
powers, if the principal has ratified, or has signified his willingness to ratify the mortgages. His special power of attorney does not authorize him to constitute a
agent's acts. mortgage to secure his personal obligations.
Without notice to third parties 1717 of the Civil Code provides the following:
"The provisions of this article shall be understood to be without prejudice to Under Art. 1897 of the New Civil Code, “The agent who acts as such is not
actions between principal and agent." personally liable to the party with whom he contracts, unless he expressly binds
himself or exceeds the limits of his authority without giving such party sufficient
Garrucho executed the promissory notes evidencing the aforesaid loans, under his notice of his power."
own signature, without authority from his principals and, therefore, were not
binding upon the latter. Neither is there anything to show that he executed the There is no proof that as agents they exceeded the limits of their authority. The
promissory notes in question for the account, and at the request, of his respective principal, who should be the one to raise the point, never raised it, denied its
principals. liability on the ground of excess of authority. Art. 1897 does not hold that in cases
of excess of authority, both the agent and the principal are liable to the other
Mauro A. Garrucho and not Paz Agudelo y Gonzaga is personally liable for the contracting party.
amount of the promissory note.
The trial court rendered a judgment holding Zurich liable but absolved Baylin and The NPC sued the New York firm, National Merchandising Corporation and the
Crame. Philippine Products Company appealed the decision as regards the Domestic Insurance Company for the recovery of damages. The trial court in its
dismissal of the three defendants. Philippine Products Company alleges that Zurich
National Bank & Welch Fairchild, 44 Phil. 780 The agent in any event must be precluded from doing any positive act that could
prevent performance on the part of his principal. This much, ordinary good faith
FACTS: La Compañía Naviera, a shipping company, was instituted in Manila in towards the other contracting party requires. The situation before us in effect is
1918. Among its shareholders was respondent Welch, Fairchild & Co. La Compañia one where, notwithstanding the promise held out jointly by principal and agent in
Naviera applied to the Philippine National Bank for a loan of $125,000.00 with the letter of August 8, the two have conspired to make an application of the
which to purchase a boat called Benito Juarez. It was the president of Welch which proceeds of the insurance entirely contrary to the tenor of said letters.
helped in the transfer of the Benito Juarez to Philippine registry.
However, the vessel needed repairs before it could be dispatched; and it became
impracticable to deliver the bill of sale and insurance policy that were required by
A debt thus incurred by the agent is binding directly upon the principal, provided HELD: The court ruled in favor of PAL. The court held that the ticket issued by
the former acted, as in the present case, within the scope of his authority. PAL constituted the contract between the parties. It was clear and undisputed as
to the expiration date of the ticket. The main issue is whether the validity became
Grupe was authorized by Vargas to mortgage the said property to satisfy any extended by the act of the PAL agents. The court ruled in the negative.
amount advanced to his wife, Orozco. He was therefore, acting within the scope of
his authority when he obtained the debt. Furthermore, it has been accepted that Under Article 1898 of the New Civil Code, the acts of an agent beyond the scope
Orozco received the amount of 2,200 pesos when she signed the instrument of of his authority do not bind the principal, unless the later ratifies the same
debt and mortgage which was subsequently registered. expressly or impliedly. Furthermore, when the third person (herein petitioner)
knows that the agent was acting beyond his power or authority, the principal
The fact that the agent has also bound himself to pay the debt does not relieve cannot be held liable for the acts of the agent. If the said third person is aware of
from liability the principal for whose benefit the debt was incurred. The individual such limits of authority, he is to blame, and is not entitled to recover damages
liability of the agent constitutes in the present case a further security in favor of from the agent, unless the latter undertook to secure the principal’s ratification.
the creditor and does not affect or preclude the liability of the principal. In the From appellant’s own testimony, it was clear that he knew from the start that said
present case the latter’s liability was further guaranteed by a mortgage upon his agents had no authority to extend the validity of the tickets. He himself testified
property. The law does not provide that the agent cannot bind himself personally that he was informed by the Legal Department of PAL before he left the
to the fulfillment of an obligation incurred by him in the name and on behalf of his Philippines that to secure an extension, he would have to file a written request at
principal. On the contrary, it provides that such act on the part of an agent would the PAL’s office. Despite this knowledge, he still persisted to use the ticket in
be valid. question.
Since the PAL agents are not privy to the said Agreement and petitioner knew that HELD: Yes, the contract of agency between the plaintiff and the defendant is
a written request to the legal counsel of PAL was necessary, he cannot use what validly revoked. Barretto was not really dismissed or removed by Santa Marina.
the PAL agents did to his advantage. The said agents, according to the Court of Rather, Barretto resigned as the defendants’s agent and manager as evidenced by
Appeals acted without authority when they confirmed the flight of the petitioner. the letter he sent to the defendant.
AGENT ACTING IN HIS OWN NAME Accordingly, the principal may, at his will, revoke the power and compel the agent
to return the instrument containing the same in which the authority was given.
Art. 1883. If an agent acts in his own name, the principal has no right of action (Art 1733 Civil Code)
against the persons with whom the agent has contracted; neither have such
persons against the principal. Art 279 of the Code of Commerce provides: the principal may revoke the
commission entrusted to an agent at any stage of the transaction, advising him
In such case the agent is the one directly bound in favor of the person with whom thereof, but always being liable for the result of the transactions which took place
he has contracted, as if the transaction were his own, except when the contract before the latter was informed of the revocation.
involves things belonging to the principal.
The contract of agency can subsist only so long as the principal has confidence in
The provisions of this article shall be understood to be without prejudice to the his agent, because from the moment such confidence disappears and although
actions between the principal and agent. there be a fixed period for the exercise of the office of agency, the principal has a
perfect right to revoke the power he had given to the agent.
Barreto v. Sta. Marina, 26 Phil. 440
Diolosa v. CA, 130 SCRA 350
FACTS: The plaintiff, Antonio M.A. Barreto, was an agent and manager of Jose
Sta. Maria, the defendant, a resident of Spain and the owner and proprietor of the FACTS: Baterna is a licensed real estate broker. The spouses Diolosa owned the
business known as the La Insular Cigar and Cigarette Factory. The petitioner Villa Alegre Subdivision. On June 20, 1968, they entered into an agreement that
alleged that the defendant, without reason, justification or pretext and in violation Baterna would be their exclusive sales agent to sell the lots of the subdivision
of the contract of agency, summarily and arbitrarily dispensed with the plaintiff’s “until all the property is fully disposed.” On September 27, 1968 the spouses
services and removed him from the management of the business. terminated the services of Baterna because the remaining unsold lots were
reserved for their 6 grandkids. (27 lots remained unsold). Baterna is claiming that
The evidence showed that the plaintiff Barretto’s renunciation or resignation of the under the terms of their contract, he had irrevocable authority to sell the lots until
position he held as an agent and manager of the said factory was freely and all were disposed. The recession of the contract contravenes their agreement. He
voluntarily made by him on the occasion of the insolvency and disappearance of a also claims to be entitled to a commission on the lots unsold because of the
Chinese man who had bought from the factory products and without paying this rescission. The spouses argue that they are within their legal right to terminate the
large debt, disappeared and has not been seen since. Barretto sent a letter of agency because they needed the undisposed lots for the use of their family. They
resignation to Santa Marina and Santa Marina did not immediately reply and tell also say that Baterna has no legal right to a commission to unsold lots. CFI
him of his decision on the matter. After several months, Barretto was informed dismissed, CA says that notwithstanding NCC 1920, that the principal may revoke
that the power conferred upon him by the defendant has been revoked and the the agency at will, spouses could not terminate the agency agreement without
latter had already appointed J. McGavin to substitute him. paying damages on the ground that the agency agreement expressly stipulated
“until all the property was fully disposed”, the testimony of a certain Roberto
ISSUE: Whether the contract of agency was validly revoked Malundo that Baterna agreed to the intention of Mrs. Diolosa to reserve some lots
ISSUE: Whether or not the spouse can terminate the agency without Del Rosario v. Abad, 104 Phil. 648
paying damages
Coleongco v. Claparols, 10 SCRA 577
HELD: No, under the contract, the spouses allowed the real estate broker to sell,
cede, etc. until all lots are fully disposed. The authority to sell is not extinguished
until all lots are disposed. When they revoked the contract, they became liable to WEEK 7
the real estate broker for damages for breach of contract. Since the agency
agreement is a valid contract, it may only be rescinded on the grounds specified OBLIGATIONS AND LIABILITIES OF PRINCIPALS TO AGENTS
under Art 1381 and Art 1882 of the new Civil Code.
ADVANCE/REIMBURSE
Art 1381 the following contracts are rescissible:
Art. 1912. The principal must advance to the agent, should the latter so request,
1) Those which are entered into by guardians whenever the wards whom the sums necessary for the execution of the agency.
they represent suffer lesion by more than one-fourth of the value of the
things which are the object thereof; Should the agent have advanced them, the principal must reimburse him
2) Those agreed upon in representation of absentees, if the latter suffer the therefor, even if the business or undertaking was not successful, provided the
lesion stated in the preceding number; agent is free from all fault.
3) Those undertaken in fraud of creditors when the latter cannot in any other
name collect the claims due them, The reimbursement shall include interest on the sums advanced, from the
4) Those which refer to things under litigation if they have been entered into day on which the advance was made.
by the defendant without the knowledge and approval of the litigants or of
competent judicial authority; Art. 1914. The agent may retain in pledge the things which are the object of the
agency until the principal effects the reimbursement and pays the indemnity set
Art 1382 Payments made in a state of insolvency for obligations to whose forth in the two preceding articles.
fulfillment the debtor could not be compelled at the time they were affected, are
also rescissible. Art. 1918. The principal is not liable for the expenses incurred by the agent in the
following cases:
In this case, not one of the grounds are present. Petition denied (1) If the agent acted in contravention of the principal's instructions, unless the
latter should wish to avail himself of the benefits derived from the contract;
New Manila v. Republic, 107 Phil. 824 (2) When the expenses were due to the fault of the agent;
(3) When the agent incurred them with knowledge that an unfavorable result
Dy Buncio v. Ong Guan, 60 Phil. 606 would ensue, if the principal was not aware thereof;
(4) When it was stipulated that the expenses would be borne by the agent, or that
Garcia v. De Manzano, 39 Phil. 577 the latter would be allowed only a certain sum.
INDEMNIFY
OBLIGATIONS AND LIABILITIES OF PRINCIPALS TO THIRD PARTIES
Art. 1913. The principal must also indemnify the agent for all the damages which
the execution of the agency may have caused the latter, without fault or AGENT ACTING WITHIN SCOPE OF AUTHORITY
negligence on his part.
Art. 1883. If an agent acts in his own name, the principal has no right of action
SOLIDARY LIABILITY against the persons with whom the agent has contracted; neither have such
persons against the principal.
Art. 1915. If two or more persons have appointed an agent for a common
transaction or undertaking, they shall be solidarily liable to the agent for all the In such case the agent is the one directly bound in favor of the person
consequences of the agency. with whom he has contracted, as if the transaction were his own, except when the
contract involves things belonging to the principal.
COMPENSATION
The provisions of this article shall be understood to be without prejudice
Art. 1875. Agency is presumed to be for a compensation, unless there is proof to to the actions between the principal and agent.
the contrary.
Art. 1910. The principal must comply with all the obligations which the agent may
AGENT’S LIEN have contracted within the scope of his authority.
Art. 1914. The agent may retain in pledge the things which are the object of the As for any obligation wherein the agent has exceeded his power, the
agency until the principal effects the reimbursement and pays the indemnity set principal is not bound except when he ratifies it expressly or tacitly.
forth in the two preceding articles.
Art. 1917. In the case referred to in the preceding article, if the agent has acted
Macondray v. Sellner, 33 Phil. 370 in good faith, the principal shall be liable in damages to the third person whose
contract must be rejected. If the agent acted in bad faith, he alone shall be
Danon v. Brim & Co.. 42 Phil. 133 responsible.
Inland Realty v. CA, 273 SCRA 70 Art. 1900. So far as third persons are concerned, an act is deemed to have been
performed within the scope of the agent's authority, if such act is within the terms
Infante v. Cunanan, 93 Phil. 691 of the power of attorney, as written, even if the agent has in fact exceeded the
limits of his authority according to an understanding between the principal and the
Prats v. CA, 81 SCRA 360 agent.
Uniland Resources v. DBP, 200 SCRA 757 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
Domingo v. Domingo, supra had full powers.
Art. 1916. When two persons contract with regard to the same thing, one of
them with the agent and the other with the principal, and the two contracts are
incompatible with each other, that of prior date shall be preferred, without
prejudice to the provisions of Article 1544.
Art. 1917. In the case referred to in the preceding article, if the agent has acted
in good faith, the principal shall be liable in damages to the third person whose
contract must be rejected. If the agent acted in bad faith, he alone shall be
responsible.