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batch of Cases - ​THE CONCEPT OF AGENCY

1. G.R. No. 167552 April 23, 2007 EUROTECH INDUSTRIAL

TECHNOLOGIES, INC., Petitioner, vs. EDWIN CUIZON and ERWIN CUIZON, Respondents.

Principle – An agent, who acts as such, is not personally liable to the party with whom he
contracts, except when he expressly binds himself to the obligation or when he exceeds the
limits of his authority such party sufficient notice of his powers.

However, in case of excess of authority by the agent, the law does not say that a third
person can recover from both the principal and the agent.

FACTS​:

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., the petitioner, is engaged in the business of

importation and distribution of various European industrial equipment for customers here in the
Philippines. One of its customers is Impact Systems Sales, which is a sole proprietorship owned
by respondent ERWIN Cuizon, and the manager thereof is respondent EDWIN Cuizon. Both
Respondents are full-blooded brothers.

Respondents urgently sought to buy from petitioner 1-unit of sludge pump valued at ₱250,000.
However, petitioner refused to deliver the sludge pump to respondents without their having fully
settled their indebtedness to petitioner. Thus, EDWIN, as manager of Impact Systems Sales,
and ALBERTO, as general manager of petitioner, executed a Deed of Assignment of
receivables in favor of petitioner.

The Deed of Assignment states, among others, that said ASSIGNOR does hereby
ASSIGN, TRANSFER, and CONVEY unto the ASSIGNEE his receivables from Toledo Power
Corporation in the amount of ₱365,000, as payment for the purchase of one unit of Selwood
Spate Sludge Pump. Subsequently, petitioner delivered to respondents the sludge pump.

Despite the existence of the Deed of Assignment, the respondent-ERWIN proceeded to

collect from Toledo Power Company the amount of ₱365,135.29. Alarmed by this development,
petitioner’s counsel sent respondents a final demand letter which the respondents failed to
abide. Consequently, petitioner instituted a complaint for sum of money and damages with
application for preliminary attachment against the respondents before the Regional Trial Court.
Petitioner alleged therein, that while said collection did not revoke the agency relations of
respondents, ERWIN’s action repudiated EDWIN’s power to sign the Deed of Assignment. As
EDWIN did not sufficiently notify petitioner of the extent of his powers as an agent, petitioner
claims that he should be made personally liable for the obligations of his principal.
EDWIN filed his Answer in which he alleged that he is not a real party in interest in this case
because he was acting as a mere agent of Impact Systems Sales in his transaction with the
petitioner, and the latter was aware of such fact. Subsequently, the RTC issued an Order
dropping EDWIN as a party defendant in this case.
Aggrieved by the trial court’s Order, petitioner brought the matter to the Court of Appeals which,
however, affirmed in its Decision the Order of the trial court. Petitioner’s motion for
reconsideration was denied by the appellate court. Hence, petitioner filed a petition for review by
certiorari before the Supreme Court, assailing said Decision of the Court of Appeals.

ISSUE​:

Did EDWIN exceed his authority when he signed the Deed of Assignment and thereby
making him personally liable to petitioner.

RULING​:

No.

According to the Supreme Court, in the absence of an agreement to the contrary, a

managing agent may enter into any contracts that he deems reasonably necessary or require
for the protection of the interests of his principal entrusted to his management.

In this case, the Deed of Assignment clearly states that respondent EDWIN signed
thereon as the manager of Impact Systems. EDWIN entered into an Assignment of Contract
with petitioner because he deems it reasonably necessary so that the latter would then deliver
the sludge pump to respondents, without which, the business of EDWIN’s principal (ERWIN)
would have been adversely affected and in such case, EDWIN would have violated his fiduciary
relation with his principal-ERWIN.

Therefore, 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.

3. FABIOLA SEVERINO, plaintiff and appellee,

vs. GUILLERMO SEVERINO, defendant and appellant.
FELICITAS VILLANUEVA, intervenor and appellee.
G.R. No. 18058, January 16, 1923
Principle:
The relations of an agent to his principal are fiduciary and in regard to the property
forming the subject-matter of the agency, he is estopped from acquiring or asserting a title
adverse to that of the principal.
An action in personam will lie against an agent to compel him to return or retransfer to
his principal, or the latter's estate, the real property committed to his custody as such agent and
also to execute the necessary documents of conveyance to effect such retransfer.

Facts:
Defendant Guillermo Severino, after the death of his brother (Melecio Severino), was the
latter’s administrator and as such, continued to occupy the land owned by Melecio. Eventually,
cadastral proceedings were instituted for the registration of the land titles. Guillermo claimed
such land and since no opposition was presented, the court decreed the title in his favor.
Melecio’s daughter and sole heir, plaintiff Fabiola Severino, compelled Guillermo to
convey to her the land. It bears noting that Fabiola was a minor during the time of the cadastral
proceedings. Felicitas Villanueva, in her capacity as administratrix of the estate of Melecio
Severino, has filed a complaint in intervention claiming the same relief as the original plaintiff,
except in so far as she prays that the conveyance be made, or damages paid, to the estate
instead of to the plaintiff Fabiola Severino.

Issue:
Whether or not Guillermo can be compelled to convey the land to Fabiola even if there is
already a title in Guillermo’s name.

Ruling:
Yes. The relations of an agent to his principal are fiduciary. Guillermo’s position as agent
is analogous to that of a trustee and he cannot consistently, with the principles of good faith, be
allowed to create in himself an interest in opposition to that of his principal or cestui que trust.
Whatever a trustee does for the advantage of the trust estate inures to the benefit of the cestui
que trust.

A receiver, trustee, attorney, agent, or any other person occupying fiduciary relations
respecting property or persons, is utterly disabled from acquiring for his own benefit the property
committed to his custody for management. This rule is entirely independent of the fact whether
any fraud has intervened. No fraud in fact need be shown, and no excuse will be heard from the
trustee. It is to avoid the necessity of any such inquiry that the rule takes so general a form. The
rule stands on the moral obligation to refrain from placing one’s self in positions which ordinarily
excite conflicts between self-interest and integrity. It seeks to remove the temptation that might
arise out of such a relation to serve one’s self-interest at the expense of one’s integrity and duty
to another, by making it impossible to profit by yielding to temptation. It applies universally to all
who come within its principle.

4. Rallos vs. Felix Go Chan

G.R. No. L-24332, January 31, 1978

PRINCIPLE: ​"ART. 1919 of the Civil Code - Agency is extinguished:

 1. By the death, civil interdiction, insanity or insolvency of the principal or of the agent;
..."
​ ACTS:
F

On April 21, 1954, a Special Power of Attorney was executed by sisters Concepcion and
Gerundia in favor of their brother Simeon for the sale of a parcel of land co-owned by the two.
On September 12, 1955, 6 months after Conception died, Simeon sold the undivided shares of
his sisters to herein respondent Felix Go Chan & Realty Corp. Petitioner Ramon Rallos,
administrator of the late Concepcion’s estate, prayed that the sale of the undivided share of the
deceased be invalidated and a new certificate be issued in the name of respondent corporation
and Concepcion’s intestate estate, plus damages. CFI ruled in favor of petitioner and granted
the payers but CA reversed the decision. Respondent’s MR was further denied.

ISSUE:

Whether the sale entered into by an agent is valid although executed after death of the principal.

RULING:

No, the sale is void because Simeon’s authority as an agent of Concepcion was extinguished
upon her death.
Article 1317 provides that no one may contract in the name of another without being authorized
or unless he has, by law, a right to represent him. Article 1919 furthers that the death of the
principal terminates the agency.
The case at bar is also not among the exceptions whereby an agent’s acts bind the principal
even after the latter’s death because of Simeon’s knowledge of Concepcion’s death is material.
Hence, the sale was null and void.

5. ORIENT AIR SERVICES v. CA

Principles:
In an agent-principal relationship, the personality of the principal is extended through the facility
of the agent. Such a relationship can only be effected with the consent of the principal, which
must not, in any way, be compelled by law or by any court.
Facts:
American Airlines, Inc. and Orient Air Services entered into a General Sales Agency
Agreement, whereby the former authorized the latter to act as its exclusive general sales agent
within the Philippines for the sale of air passenger transportation.
American Airlines terminated the Agreement alleging that Orient Air failed to promptly remit net
proceeds of sales from January to March 1981.
American Air instituted a suit against Orient Air with CFI Manila for Accounting with Preliminary
Attachment/Garnishment, Mandatory Injunction and Restraining Order.
Orient Air answered with counterclaim denying the material allegation and contends the
following: American Air still owed Orient Air a balance in unpaid overriding commission. Orient
Air contends American Air’s precipitous conduct had occasioned prejudice to its business
interests.
Trial Court ruled in favor of Orient Air ordering American Air to reinstate defendant as its general
sales agent for passenger transportation in the Philippines in accordance with the said GSA
Agreement.
Court of Appeals affirmed the decision of the Trial Court.
Issue:
Whether the respondent appellate court correctly ruled that Orient Air be reinstated again as
sales agent of American Air
Ruling:
SC affirmed the decision of the CA however, set aside the portion of the ruling by the appellate
court reinstating Orient Air as agent of American air.
Such would be violative of the principles and essence of agency, defined by law as a contract
whereby "a person binds himself to render some service or to do something in representation or
on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER."
Such a relationship can only be effected with the consent of the principal, which must not, in any
way, be compelled by law or by any court.

6. Bordador v. Luz
G.R. No. 130148
December 15, 1997
Principle: “In contract of agency, there must be a consent or authority of the principal whom
represented by the agent in rendering his service or doing something on behalf of said
principal.” – Mura ra nag MU, ayaw sa pag-assume, siguradua sa kay masakitan lang niya ka.

Facts:
The Bordador’s were in the business of purchase and sale of jewelry, and Brigida Luz was
their regular customer. Deganos, the brother of Luz, received pieces of jewelry worth P382,
816.00, covered by seventeen receipts, eleven of them indicating that they were received on
behalf a certain Evelyn Aquino, and six indicated that they were received on behalf of Luz.

Deganos was supposed to sell the items, remit the proceeds, and return the unsold ones to
the Bordadors. However, he was only able to remit P53, 207.00, failing to pay the balance of the
sales proceeds and returning any unsold items. The Bordadors filed a complaint before the
barangay court, where Deganos along with the Bordador Luz signed a compromise agreement
promising to pay the unpaid account of P765, 463.98. Deganos, however, failed to comply.

A civil case for the recovery of sum of money was instituted against Deganos and Brigida
Luz in the Malolos RTC. Brigida’s husband, Ernesto was impleaded as well. Four years later in
1994, a criminal case for estafa was filed, which was still pending when this decision was
promulgated.
 Petitioners claimed that Deganos was acting as the agent of Luz and because he failed to
pay for the pieces of jewelry, the sps. Luz, as principals, are solidarily liable. The respondents
countered that only Deganos was liable, that Brigida never authorized him to receive jewelry on
her behalf, neither did she receive the articles in question.

The RTC ruled that there was no agency between Luz and Deganos. It was Bordador who
indicated that the items were received on behalf of Luz. Even if there was a contract of agency,
there was no memorandum to this effect and was therefore unenforceable.

CA affirmed the judgment.

Issue:
Whether or not the sps. Luz are liable for Bordador’s claim of money and damages.

Ruling:
No. Evidence doesn’t support Bordador’s claim that Deganos was an agent of Luz and that
the latter should be consequently be held solidarily liable with Deganos of his obligation to the
petitioners.

The basis for agency is representation. Here, there is no showing that Luz consented to the
acts of Deganos and authorized him to act on her behalf, much less with respect to the
particular transactions involved.

It was grossly and inexcusably negligent of the petitioners to entrust Deganos, not once or
twice but at least on 6 occasions, evidenced by 6 receipts, of several pieces of jewelries of
substantial value without requiring a written authorization from the alleged principal.

A person dealing with an agent is put upon inquiry and must discover upon his peril the
authority of the agent.

Records show that neither an expressed nor an implied agency was proven to have existed
between Deganos and Luz. Evidently, Bordadors who were negligent in their transactions with
Deganos cannot seek relief of the effects of their negligence by conjuring supposed agency
relation since they have no evidence to support the claim.
The Court also found that it was petitioner Lydia Bordador who indicated in the receipts that
the items were received by Deganos for Evelyn Aquino and Brigida Luz. Said Court was
persuaded that Luz was behind Deganos, but because there was no memorandum to this
effect, the agreement between the parties is unenforceable under the Statutes of Fraud.

7. APEX MINING CO., INC. ​vs. ​SOUTHEAST MINDANAO GOLD MINING CORP., G.R. Nos. 152613 &
152628 June 23, 2006
Topic: Concept of Agency
Principle: For a contract of agency to exist, it is essential that the principal consents that the
other party, the agent, shall act on its behalf, and the agent consents so as to act.

Facts:
Marcopper Mining Corporation (MMC) filed mining claims for areas adjacent to the area covered by the
mining claims of Banad and his group.

MMC filed Exploration Permit Application with the Bureau of Mines and Geo-Sciences (BMG), and the
BMG issued to MCC Exploration Permit No. 133 (EP 133). MMC filed a petition for cancellation of mining
claims of Apex and Small Scale Mining permits. BMG dismissed MMC’s petition on the ground that the
area covered by the Apex mining claims and MMC’s permit to explore was not a forest reservation. It
further declared null and void MMC’s EP 133 and sustained the validity of Apex mining claims over the
disputed area.

On appeal, the DENR reversed the decision of BMG and declared MMC’s EP 133 valid and subsisting.

MMC assigned EP 133 to Southeast Mindanao Gold Mining Corporation (SEM), a domestic corporation
which is alleged to be a 100% -owned subsidiary of MMC.

SME filed an MPSA application under EP 133. BMG accepted and registered SEM’s MPSA application
and the Deed of Assignment over EP 133 executed in its favor by MMC. Apex questions the validity of
MMC’s EP 133 and its subsequent transfer to SME asserting that MMC failed to comply with the terms
and conditions in its exploration permit, thus, MMC and its successor-in-interest SEM lost their rights in
the Diwalwal Gold Rush Area. Apex pointed out that MMC violated four conditions in its permit.

Similarly, the Mines Adjudication Board (MAB) underscores that SEM did not acquire any right from MMC
by virtue of the transfer of EP 133 because the transfer directly violates the express condition of the
exploration permit stating that "it shall be for the exclusive use and benefit of the permittee or his duly
authorized agents." According to the MAB, the assignment by MMC of EP 133 in favor of SEM did not
make the latter the duly authorized agent of MMC since the concept of an agent under EP 133 is not
equivalent to the concept of assignee.

Issue:
Whether or not the assignment of EP 133 was valid.

Ruling:
No. Condition number 6 of EP 133 categorically states that the permit shall be for the exclusive use and
benefit of MMC or its duly authorized agents. While it may be true that SEM, the assignee of EP 133, is a
100% subsidiary corporation of MMC, records are bereft of any evidence showing that the former is the
duly authorized agent of the latter. For a contract of agency to exist, it is essential that the principal
consents that the other party, the agent, shall act on its behalf, and the agent consents so as to act.

It is incumbent upon either MMC or SEM to prove that a contract of agency actually exists between them
so as to allow SEM to use and benefit from EP 133 as the agent of MMC. SEM did not claim nor submit
proof that it is the designated agent of MMC to represent the latter in its business dealings or
undertakings.
SEM cannot, therefore, be considered as an agent of MMC which can use EP 133 and benefit from it.
Since SEM is not an authorized agent of MMC, it goes without saying that the assignment or transfer of
the permit in favor of SEM is null and void as it directly contravenes the terms and conditions of the grant
of EP 133.

Furthermore, the concept of agency is distinct from assignment. In agency, the agent acts not on his own
behalf but on behalf of his principal. While in assignment, there is total transfer or relinquishment of right
by the assignor to the assignee The assignee takes the place of the assignor and is no longer bound to
the latter.

The Court did not lend recognition to the Court of Appeals’ theory that SEM, being a 100% subsidiary of
MMC, is automatically an agent of MMC. A corporation is an artificial being created by operation of law,
having the right of succession and the powers, attributes, and properties expressly authorized by law or
incident to its existence.36 It is an artificial being invested by law with a personality separate and distinct
from those of the persons composing it as well as from that of any other legal entity to which it may be
related. Resultantly, absent any clear proof to the contrary, SEM is a separate and distinct entity from
MMC.

8. Domingo De La Cruz vs. Northern Theatrical Enterprise Incorporation

G.R. No. L7089
Date: August 31, 1954

PRINCIPLE: ARTICLE 1886: By the contract of agency a person binds himself to render service
or to do something in representation or on behalf of another, with the consent or authority of the
latter.

Facts: Domingo De La Cruz hired as a special guard by Northern theatrical Enterprise

Incorporation whose duties were to guard the main entrance of the theater. In time of his duty,
Domingo carries with him a revolver. One afternoon, Benjamin Martin wanted to crash the main
entrance of the theater but then Domingo refused to let him in without fist presenting his ticket.
Angered by the refusal of Domingo, Benjamin attacked him with a bolo. By ways of defending
himself, Domingo shot Benjamin resulting to his death. Domingo was charged with two homicide
cases and was later on acquitted. Upon his acquittal, Domingo demanded that Northern
Theatrical to reimburse him of his expenses, a total of P15,000. His contention was that he was
an agent of Northern and being an agent he is entitled to reimbursement incurred by him in
connection with the agency.

Issue: Whether or not the relationship between Domingo and Northern is that of a principal and
agent.

Ruling: No, the relationship between the movie corporation and Domingo was not that of a
principal and an agent because the principle of representation was in no way involved. Under
Article 1886, by the contract of agency a person binds himself to render service or to do
something in representation or on behalf of another, with the consent or authority of the latter. In
the case at bar, Domingo was not employed to represent the corporation in its dealings with a
third party. He was merely an employee hired to perform a specific duty which is to guard the
main entrance of the Cine. Clearly Article 1886 is not applicable in this case.

9. Tuazon v Heirs of Ramos

G.R No. 156262
July 14, 2005
Principle:
The basis of agency is representation. There must be, on the part of the principal, an actual
intention to appoint, an intention naturally inferable from the principal’s words or actions.
Likewise, there must be an intention on the part of the agent to accept the appointment and act
upon it. Absent such mutual intent, there is generally no agency.

Facts:
This case involves a collection of a sum of money which results from the bouncing check issued
by Evangeline Santos, indorsed by the spouse Leonilo and Maria Tuazon in payment of the
remaining unpaid cavans of rice. Despite repeated demands from the heirs of Ramos, spouses
Tuazon failed to pay and instead claimed that they are merely acting as agents and should not
be held liable.

Issue:
WON spouses Tuazon are considered agents of Ramos?

Held:
NO. The declarations of agents alone are generally insufficient the fact of their authority as
agents. The law makes no presumption of agency. The person alleging must prove of the
existence, nature and extent of the authority given. In the case at bar, petitioner failed to prove
its existence.

10. VICTORIAS MILLING CO., INC v. CA​G.R. No. 117356​June 19, 2000
PRINCIPLE:
Article 1868: By the contract of agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter.

​The question of whether a contract is one of sale or agency depends on the intention of the
parties as gathered from the whole scope and effect of the language employed.

FACTS:

Petitioner Victorias Milling is in to regular dealings with St. Therese Merchandising (STM) in the
latter’s purchase of sugar. Petitioner issues a Shipping List/Delivery Receipts (SLDRs) as proof
of purchase. The subject in this instant case is SLDR No. 1214M whom STM sold to private
respondent Consolidated Sugar Corporation (CSC). CSC wrote petitioner that it had been
authorized by STM to withdraw the sugar covered by SLDR No. 1214M. Enclosed in the letter
was a letter of authority from STM authorizing CSC to “withdraw for and in our behalf the refined
sugar covered by SLDR No. 1214.”

ISSUE:

​Whether or not private respondent CSC was an agent of STM.

RULING:
​NO.

​Petitioner heavily relies upon STM’s letter of authority allowing CSC to withdraw sugar against
SLDR No. 1214M to show that the latter was STM’s agent. The pertinent portion of said letter
reads:

​“This is to authorize Consolidated Sugar Corporation or its representative to withdraw for and in
our behalf the refined sugar covered by Shipping List/Deliver Receipt = Refined Sugar (SDR)
No. 1214 dated October 16, 1989 in the total quantity of 25,000 bags.”

​It is clear from Article 1868 that the basis of agency is representation. On the part of the
principal, there must be an actual intention to appoint or an intention naturally inferable from his
words and actions; and on the part of the agent, there must be an intention to accept the
appointment and act on it, and in the absence of such intent, there is generally no agency. One
factor which most clearly distinguishes agency from other legal concepts is control; one person
– the agent – agrees to act under the control or direction of another – the principal. Indeed, the
very word “agency” has come to connote control by the principal. The control factor, more than
any other, has caused the courts to put contracts between principal and agent in separate
category.

​In the instant case, it appears plain to us that private responded CSC was a buyer of the SLDR
form, and not an agent of STM. Private respondent CSC was not subject to STM’s control. The
question of whether a contract is one of sale or agency depends on the intention of the parties
as gathered from the whole scope and effect of the language employed. That the authorization
given to CSC contained the phrase “for and in our (STM’s) behalf” did not establish an agency.
Ultimately, what is decisive is the intention of the parties. That no agency was meant to be
established by the CSC and STM is clearly shown by CSC’s communication to petitioner that
SLDR No. 1214M had been “sold and endorsed” to it. The use of the words “sold and endorsed”
means that STM and CSC intended a contract of sale, and not of agency. Hence, on this score,
no error was committed by CA when it held that CSC was not STM’s agent and could
independently sue petitioner.
12. WILLIAM UY and RODEL ROXAS, vs.​COURT OF APPEALS, HON. ROBERT BALAO
and NATIONAL HOUSING AUTHORITY,
G.R. No. 120465. September 9, 1999

Principle:
Article 1311. Contracts take effect only between the parties, their assigns and heirs, except in
case where the rights and obligations arising from the contract are not transmissible by their
nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the
property he received from the decedent.
If a contract should contain some stipulation in favor of a third person, he may demand its
fulfillment provided he communicated his acceptance to the obligor before its revocation. A
mere incidental benefit or interest of a person is not sufficient. The contracting parties must
have clearly and deliberately conferred a favor upon a third person.​
Article 1868. By the contract of agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter.
Facts:
William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land in Benguet. Uy and
Roxas offered to sell the parcels of land to NHA for a housing project. NHA passed a resolution
approving the acquisition of lands and they executed Deed of Absolute Sale. However, only 5 of
the 8 parcels of land were paid by NHA because of the report received by Land Geosciences
Bureau of DENR that the remaining areas are prone to landslide and therefore not suitable for
developing a housing project.NHA offered to pay danos perjuicios to the land owners. Uy and
Roxas filed a complaint for damages to NHA. They filed the complaint not in behalf of their
principals but in their own name as agents directly damages by the termination of the contract.
The damages consist mainly of “unearned income” and advances.
Issue:
​WON Uy and Roxas, as agents, can file a complaint for damages in their own name and in their
own behalf.
Ruling:
No, they are mere agents of the owners of the land subject for sale. As agents, they only render
some service or do something in representation or on behalf of their principals. They are not
parties to the contract of sale between their principals and NHA. They are not the real party in
interest. The petitioners have not also shown that they are assignees of their principals to the
subject contracts.

13. Laureano T. Angeles vs. Philippine National Railways (PNR) and Rodolfo Flores,
August 31, 2006 G.R. No. 150128

Facts:
Respondent Philippine National Railways (PNR) informed a certain GaudencioRomualdez
(Romualdez, hereinafter) that it has accepted the latter’s offer to buythe PNR’s
scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga at P1,300.00 and
P2,100.00 per metric ton, respectively, for the total amount of P96,600.00. Romualdez paid the
purchase price and addressed a letter to Atty. CiprianoDizon, PNR’s Acting Purchasing Agent.
The letter authorized LIZETTE R. WIJANCOto be his (Romualdez) lawful representative in the
withdrawal of the scrap/unserviceable rails awarded to him. Furthermore, the original copy of
the award which indicates the waiver of rights, interest and participation in favor of Lizetter R.
Wijanco was also given.
The Lizette R. Wijanco was petitioner's now deceased wife. That very same day, Lizette
requested the PNR to transfer the location of withdrawal for the reason that the
scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga were not ready for
hauling.The PNR granted said request and allowed Lizette to withdraw scrap/unserviceable rails
in Murcia, Capas and San Miguel, Tarlac instead. However, PNR subsequently suspended the
withdrawal in view of what it considered as documentary discrepancies coupled by reported
pilferages of over P500,000.00 worth of PNR scrap properties in Tarlac.Consequently, the
spouses Angeles demanded the refund of the amount of P96,000.00. The PNR, however,
refused to pay, alleging that as per delivery receipt duly signed by Lizette, 54.658 metric tons of
unserviceable rails had already been withdrawn. The spouses Angeles filed suit against the
PNR for specific performance and damages before the Regional Trial Court. Lizette W. Angeles
passed away and was substituted by her heirs, among whom is her husband, herein petitioner
Laureno T. Angeles.
The trial court, on the postulate that the spouses Angeles are not the real parties-in-interest,
rendered judgment dismissing their complaint for lack of cause of action. As held by the court,
Lizette was merely a representative of Romualdez in the withdrawal of scrap or unserviceable
rails awarded to him and not an assignee to the latter's rights with respect to the award.
Petitioner appealed with the Court of Appeals which dismissed the appeal and affirmed that of
the trial court.
Issue:
Whether or not the CA erred in affirming the trial court's holding that petitioner and his spouse,
as plaintiffs a quo, had no cause of action as they were not the real parties-in-interest in this
case.
Held:
No.The CA’s conclusion, affirmatory of that of the trial court, is that Lizette was not an assignee,
but merely an agent whose authority was limited to the withdrawal of the scrap rails, hence,
without personality to sue.Where agency exists, the third party's (in this case, PNR's) liability on
a contract is to the principal and not to the agent and the relationship of the third party to the
principal is the same as that in a contract in which there is no agent. Normally, the agent has
neither rights nor liabilities as against the third party. He cannot thus sue or be sued on the
contract. Since a contract may be violated only by the parties thereto as against each other, the
real party-in-interest, either as plaintiff or defendant in an action upon that contract must,
generally, be a contracting party.
The legal situation is, however, different where an agent is constituted as an assignee. In such a
case, the agent may, in his own behalf, sue on a contract made for his principal, as an assignee
of such contract. The rulerequiring every action to be prosecuted in the name of the real
party-in-interest recognizes the assignment of rights of action and also recognizesthat when one
has a right assigned to him, he is then the real party-in-interest and may maintain an action
upon such claim or right.

WHEREFORE, the petition is DENIED and the assailed decision of the CA is AFFIRMED.Costs
against the petitioner.

14. ONG v. CA
G.R. No. 119858; April 29, 2003

FACTS: That on or about July 23, 1990, Benito Ong, representing ARMAGRI International
Corporation, conspiring and confederating together did then and there willfully, unlawfully and
feloniously defraud the SOLIDBANK Corporation represented by its Accountant, DEMETRIO
LAZARO, in the following manner, to wit: the said accused received in trust from said
SOLIDBANK Corporation, 10,000 bags of urea valued at P, 2,050,000 specified in a Trust
Receipt Agreement and covered by a Letter of Credit No. DOM GD 90-009 in favor of the
Fertiphil Corporation.
Under the express obligation on the part of the said accused to account for said goods to
Solidbank Corporation and/or remit the proceeds of the sale thereof within the period specified
in the Agreement or return the goods, if unsold immediately or upon demand.
However, Ong, once in possession of said goods, far from complying with the aforesaid
obligation failed and refused and still fails and refuses to do so despite repeated demands made
upon him to that effect and with intent to defraud, willfully, unlawfully and feloniously misapplied,
misappropriated and converted the same or the value thereof to his own personal use and
benefit, to the damage and prejudice of the said Solidbank Corporation in the aforesaid amount
of P2,050,000.00 Philippine Currency.
Petitioner contends that in signing the trust receipts, he merely acted as an agent of ARMAGRI.
Petitioner asserts that nowhere in the trust receipts did he assume personal responsibility for
the undertakings of ARMAGRI which was the entrustee.

ISSUE: WON PETITIONER WAS NECESSARILY THE ONE RESPONSIBLE FOR THE
OFFENSE, BY THE MERE CIRCUMSTANCE THAT PETITIONER ACTED AS AGENT AND
SIGNED FOR THE ENTRUSTEE CORPORATION

HELD: No, ARMGAGRI Corp. did not violate the Trust Receipts Law
The Supreme Court held that the Trust Receipts Law recognizes the impossibility of imposing
the penalty of imprisonment on a corporation. Hence, if the entrustee is a corporation, the law
makes the officers or employees or other persons responsible for the offense liable to suffer the
penalty of imprisonment. The reason is obvious: corporations, partnerships, associations and
other juridical entities cannot be put to jail. Hence, the criminal liability falls on the human agent
responsible for the violation of the Trust Receipts Law.
In the instant case, the Bank was the entruster while ARMAGRI was the entrustee. Being the
entrustee, ARMAGRI was the one responsible to account for the goods or its proceeds in case
of sale. However, the criminal liability for violation of the Trust Receipts Law falls on the human
agent responsible for the violation.

Petitioner, who admits being the agent of ARMAGRI, is the person responsible for the offense
for two reasons. First, petitioner is the signatory to the trust receipts, the loan applications and
the letters of credit. Second, despite being the signatory to the trust receipts and the other
documents, petitioner did not explain or show why he is not responsible for the failure to turn
over the proceeds of the sale or account for the goods covered by the trust receipts.

15. PNB v. Ritratto – G.R. No. 142616 – 362 SCRA 216

Principle: The Doctrine of Piercing the Corporate veil is an equitable doctrine developed to
address situations where the separate corporate personality of a corporation is abused or used
for wrongful purposes. It applies when the corporate fiction is used to defeat public
convenience, justify wrong, protect fraud or defend crime, or when it is made a shield to confuse
the legitimate issues, or where a corporation is the mere alter ego or business conduit of a
person, or where the corporation is so organized and controlled and its affairs are so conducted
as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.

Facts:
​PNB-IFL, a subsidiary company of PNB extended credit to Ritratto and secured by the real
estate mortgages on four parcels of land. Since there was default, PNB-IFL thru PNB,
foreclosed the property and were subject to public auction. Ritratto Group filed a complaint for
injunction. PNB filed a motion to dismiss on the grounds of failure to state a cause of action and
the absence of any privity between respondents and petitioner.

Issue: WON PNB privy to the loan contracts entered into by respondent & PNB-IFL being that
PNB-IFL is owned by PNB?

Ruling:
​No. The contract questioned is one entered into between Ritratto and PNB-IFL. PNB was
admittedly an agent of the latter who acted as an agent with limited authority and specific duties
under a special power of attorney incorporated in the real estate mortgage.
​The mere fact that a corporation owns all of the stocks of another corporation, taken alone is not
sufficient to justify their being treated as one entity. If used to perform legitimate functions, a
subsidiary’s separate existence may be respected, and the liability of the parent corporation as
well as the subsidiary will be confined to those arising in their respective business. The courts
may, in the exercise of judicial discretion, step in to prevent the abuses of separate entity
privilege and pierce the veil of corporate entity.
​The Doctrine of Piercing the Corporate veil is an equitable doctrine developed to address
situations where the separate corporate personality of a corporation is abused or used for
wrongful purposes. It applies when the corporate fiction is used to defeat public convenience,
justify wrong, protect fraud or defend crime, or when it is made a shield to confuse the legitimate
issues, or where a corporation is the mere alter ego or business conduit of a person, or where
the corporation is so organized and controlled and its affairs are so conducted as to make it
merely an instrumentality, agency, conduit or adjunct of another corporation.
​Test in determining the applicability of the doctrine of piercing the veil:
1. Control, not mere majority or complete control, but complete domination, not only of finances
but of policy and business practice.
2. Such control must have been used by the defendant to commit fraud or wrong
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss
complained of.
​The absence of any one of these elements prevents piercing the corporate veil. In applying the
“instrumentality” or “alter ego” doctrine, the courts are concerned with reality and not form, with
how the corporation operated and the individual defendant’s relationship to the operation.
​Doctrine of piercing the veil based on alter ego or instrumentality finds no application in this
case for the following reasons:
​1. PNB-IFL is a wholly owned subsidiary of petitioner PNB.
​2. There is no showing of the indicative factors that the former corporation is a mere
instrumentality of the latter.
​3. There is no demonstration that any of the evils sought to be prevented by the doctrine of
piercing the corporate veil exists.

16. Case: FERNANDO vs GSIS GR. No. L-18287

Principle: Authority of a corporation to its officers and agents

FACTS

The plaintiff, Trinidad J. Francisco, in consideration of a loan mortgaged in favor of the

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

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

17. SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC. v. NLRC

SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC. v. NLRC
G.R. No. 161757; January 25, 2006
Ponente: J. Carpio-Morales

Principle: The agency is revoked if the principal directly manages the business entrusted to the
agent, dealing directly with third persons.

FACTS:

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

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

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

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

HELD:

No, the act of the foreigner-principal in renewing the contract of Divina is not attributable to
Sunace.

There being no substantial proof that Sunace knew of and consented to be bound under the
2-year employment contract extension, it cannot be said to be privy thereto. As such, it and its
"owner" cannot be held solidarily liable for any of Divina's claims arising from the 2-year
employment extension.

Furthermore, as Sunace correctly points out, there was an implied revocation of its agency
relationship with its foreign principal when, after the termination of the original employment
contract, the foreign principal directly negotiated with Divina and entered into a new and
separate employment contract in Taiwan.

19. G.R. No. 94071 March 31, 1992

NEW LIFE ENTERPRISES and JULIAN SY, petitioners,
vs.
HON. COURT OF APPEALS, EQUITABLE INSURANCE CORPORATION, RELIANCE
SURETY AND INSURANCE CO., INC. and WESTERN GUARANTY CORPORATION,
respondents.

Principle: Knowledge of the agent of the existence thereof, not knowledge of the insurance
company. The theory of imputed knowledge, that the knowledge of the agent is presumed to be
known by the principal is not enough.
Facts:
Julian Sy, owner of New Life Enterprises, insured his building in 3 different insurance agencies
for 350,000, 1,000,000, and 200,000. When his building and the goods inside burned down, he
claimed for insurance indemnities, but these were rejected by the three companies for violation
of policy conditions.
Sy filed for 3 different suits in the trial court, where he won all suits against the insurance
companies. The court of appeals reversed the decision of the trial court.
Julian Sy owner of New Life Enterprises, the partnership engaged in the sale of construction
materials insured the stocks in trade of New Life Enterprises with Western Guaranty
Corporation, Reliance Surety and Insurance Co., Inc., and Equitable Insurance Corporation.
When his building occupied by the New Life Enterprises was gutted by fire. , he claimed for
insurance indemnities, but these were rejected by the three companies for breach of policy
conditions which requires the insured to give notice of any insurance or insurances already
effected covering the stocks in trade.
Petitioners admit that the respective insurance policies issued by private respondents did not
state or endorse thereon the other insurance coverage obtained or subsequently effected on the
same stocks in trade for the loss of which compensation is claimed by petitioners. The
coverage by other insurance or co-insurance effected or subsequently arranged by petitioners
were neither stated nor endorsed in the policies of the three (3) private respondents.
Petitioners contend that they are not to be blamed for the omissions, alleging that insurance
agents knew about the existence of the additional insurance coverage and that they were not
informed about the requirement that such other or additional insurance should be stated in the
policy, as they have not even read policies.

Issue: W/N the petitioner was not to be blamed for the omissions alleging that the insurance
agents knew about the existence of the additional insurance coverage.

Ruling: NO.
The terms of the contract are clear and unambiguous. The insured is specifically required to
disclose to the insurer any other insurance and its particulars which he may have effected on
the same subject matter. The knowledge of such insurance by the insurer’s agents, even
assuming the acquisition thereof by the former, is not the "notice" that would estop the insurers
from denying the claim. Besides, the so-called theory of imputed knowledge, that is, knowledge
of the agent is knowledge of the principal, aside from being of dubious applicability here has
likewise been roundly refuted by respondent court whose factual findings we find acceptable.
Thus, it points out that while petitioner Julian Sy claimed that he had informed insurance agent
Alvarez regarding the co-insurance on the property, he contradicted himself by inexplicably
claiming that he had not read the terms of the policies; that Yap Dam Chuan could not likewise
have obtained such knowledge for the same reason, aside from the fact that the insurance with
Western was obtained before those of Reliance and Equitable; and that the conclusion of the
trial court that Reliance and Equitable are "sister companies" is an unfounded conjecture drawn
from the mere fact that Yap Kam Chuan was an agent for both companies which also had the
same insurance claims adjuster. Availment of the services of the same agents and adjusters by
different companies is a common practice in the insurance business and such facts do not
warrant the speculative conclusion of the trial court.

20. Caram vs Laureta

Principle:
Applying the principle of agency, Caram as principal, should also be deemed to have acted in
bad faith.

Facts:
On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land in favor of Laureta.
The deed of absolute sale was not registered because it was not acknowledged before a notary
public or any other authorized officer . At the time the sale was executed, there was no
authorized officer before whom the sale could be acknowledged inasmuch as the civil
government in Tagum, Davao was not as yet organized. However, Marcos Mata delivered to
Laureta the peaceful and lawful possession of the premises of the land together with the
pertinent papers thereof such as the Owner's Duplicate OCT, sketch plan, tax declaration, tax
receipts and other papers related thereto. Since the time of conveyance, Laureta had been in
continuous, adverse and notorious occupation of said land, without being molested, disturbed or
stopped by any of the defendants or their representatives.
On May 5, 1947, the same land was sold by Marcos Mata to Fermin Caram, Jr. The deed of
sale in favor of Caram was acknowledged before Atty. Abelardo Aportadera.
​Laureta filed in CFI Davao an action for nullity, recovery of ownership and/or reconveyance
against Mata, Caram and the Register of Deeds of Davao City. Mata answered by alleging that
Marcos was subjected to duress, threat and intimidation into selling his only property to Laureta.
Caram, on the other hand, alleged that he has no knowledge or information about the previous
encumbrances, transactions, and alienations until the filing of the complaints.
​Trial Court ruled in favor of Laureta, which the Court of Appeals also affirmed.
Issue:
1. Whether or not, Irespe and Aportadera were attorneys-in-fact of Caram for the purpose of
buying the property in question.
2. Whether or not, Irespe and Atty. Aportadera acted in Bad Faith.
3. Whether or not Caram can be considered to have acted in bad faith because of his agents.

Ruling:
1. YES.
The facts of record show that Mata, the vendor, and Caram, the second vendee had never met.
During the trial, Marcos testified that he knows Atty. Aportadera but did not know Caram. Thus,
the sale of the property could have only been through Caram's representatives, Irespe and
Aportadera. The petitioner, in his answer, admitted that Atty. Aportadera acted as his notary
public and attorney-in-fact at the same time in the purchase of the property.
2. YES.
The SC agreed with the Trial Court’s finding that Irespe and Aportadera, acting as agents of
Caram, purchased the property of Mata in bad faith. Even if Irespe and Aportadera did not have
actual knowledge of the first sale, still their actions have not satisfied the requirement of good
faith.
Irespe and Aportadera had knowledge of circumstances which ought to have put them on
inquiry. Both of them knew that Mata's certificate of title together with other papers pertaining to
the land was taken by soldiers under the command of Col. Laureta. Added to this is the fact that
at the time of the second sale Laureta was already in possession of the land. The rule of caveat
emptor requires the purchaser to be aware of the supposed title of the vendor and one who
buys without checking the vendor's title takes all the risks and losses consequent to such failure.
3. YES.
Applying the principle of agency, Caram as principal, should also be deemed to have acted in
bad faith.

22. DOMINION INSURANCE VS. CA

GR # 129919
February 6, 2002

Principle:

When a special power of attorney is required for the agent to do a certain act, the agent, in the
performance of such act, must comply with the specifications embodied in the special power of
attorney giving him authority to do such.

Facts:
​Guevarra (plaintiff) instituted a claim for sum of money against Dominion Insurance Corporation.
He sought to recover the sum of P156,473.90 which he claimed to have advanced in his
capacity as manager of defendant to satisfy certain claims filed by defendant’s clients. Dominion
denied any liability to Guevarra and instituted a counterclaim for premium allegedly unremitted
by Guevarra.

​Pre-trial conferences was scheduled but never pushed through over the course of six months.
When the case was again called for pre-trial, only Guevarra and counsel were present. The trial
court declared Dominion in default and denied any consideration. RTC ruled that Dominion was
to pay Guevarra in the amount of P156,473.90 claimed as the total amount advanced as
payment of the claims of Dominion’s client which was also affirmed by the CA.

Issue:
​Whether or not Guevarra acted within his authority as agent of Dominion?

Ruling:
​
No. By the contract of agency, a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter.
The basis for agency is representation. On the part of the principal, there must be an actual
intention to appoint or an intention naturally inferrable from his words or actions; and on the part
of the agent, there must be an intention to accept the appointment and act on it, and in the
absence of such intent, there is generally no agency.
A perusal of the “Special Power of Attorney” would show that Dominion and Guevarra intended
to enter into a principal-agent relationship. Despite the word “special,” the contents of the
document reveal that what was constituted was a general agency. The agency comprises all the
business of the principal, but, couched in general terms, is limited only to acts of administration.
A general power permits the agent to do all acts for which the law does not require a special
power. Art. 1878 enumerates the instances when a special power of attorney is required,
including (1) to make such payments as are not usually considered as acts of administration;
(15) any other act of strict dominion. The payment of claims is not an act of administration. The
settlement of claims is not included among the acts enumerated in the Special Power of
Attorney, neither is it of a character similar to the acts enumerated therein. A special power of
attorney would have been required before Guevarra could settle the insurance claims of the
insured. Guevarra’s authority to settle claims is embodied in the Memorandum of Management
Agreement which enumerated the scope of Guevarra’s duties and responsibilities. However, the
Memorandum showed the instruction of Dominion that payment of claims shall come from a
revolving fund. Having deviated from the instructions of the principal, the expenses that
Guevarra incurred in the settlement of the claims of the insured may not be reimbursed from
Dominion.

However, while the law on agency prohibits Guevarra from obtaining reimbursement, his right to
recovery may still be justified under the general law on Obligations and Contracts, particularly,
Art. 1236.

25. Duñgo v. Lopena G.R. No. L-18377 December 29, 1962

PRINCIPLE:

A third person cannot bind another to a compromise agreement unless he, the third person, has
obtained a special power of attorney for that purpose from the party intended to be bound.

FACTS:

Anastacio Duñgo and Rodrigo S. Gonzales purchased 3 parcels of land from Adriano Lopena
and Rosa Ramos with the remaining balance payable on installment secured by mortgage over
the same property. The vendees defaulted on the first installment. A compromise agreement
was submitted to the lower court for approval. It was signed by Adriano Lopena and Rosa
Ramos on one hand, and Rodrigo S. Gonzales, on the other. However, Rodrigo S. Gonzales
represented that his signature was for both himself and the herein petitioner. Anastacio Duñgo's
counsel was present at the preparation of the compromise agreement and this counsel affixed
his signature thereto. When Anastacio Duñgo and Rodrigo S. Gonzales failed to pay the
balance of their indebtedness the mortgage was foreclosed. Anastacio Duñgo filed a motion to
set aside all the proceedings on the ground that the compromise agreement was void ab initio
with respect to him because he did not sign the same. Consequently, he argued, all subsequent
proceedings under and by virtue of the compromise agreement, including the foreclosure sale
were void and null as regards him.

ISSUE:

Was the compromise agreement of January 15, 1960, the Order of the same date approving the
same, and, all the proceedings subsequent thereto, valid or void insofar as the petitioner herein
is concerned?

HELD:

The compromise agreement was valid and enforceable. Art. 1878 of the Civil Code, a third
person cannot bind another to a compromise agreement unless he, the third person, has
obtained a special power of attorney for that purpose from the party intended to be bound.
Although the Civil Code expressly requires a special power of attorney in order that one may
compromise an interest of another, it is neither accurate nor correct to conclude that its absence
renders the compromise agreement void. In such a case, the compromise is merely
unenforceable. Contracts are unenforceable, unless they are ratified. Here, Anastacio Duñgo
ratified the compromise agreement conclusively established by the Tri-Party Agreement. Also,
when it appears that the client, on becoming aware the compromise and the judgment thereon,
fails to repudiate promptly the action of his attorney, he will not afterwards be heard to contest
its validity. Also, compromise agreement, the principal provision of the said instrument was for
his benefit.

26. Vicente v. Geraldez

In 1967, HI Cement Corporation was granted authority to operate mining facilities in Bulacan.
However, the areas allowed for it to explore cover areas which were also being explored by
Ignacio Vicente, Juan Bernabe, and Moises Angeles. And so a dispute arose between the three
and HI Cement as neither side wanted to give up their mining claims over the disputed areas.
Eventually, HI Cement filed a civil case against the three. During pre-trial, the possibility of an
amicable settlement was explored where HI Cement offered to purchase the areas of claims of
Vicente et al at the rate of P0.90 per square meter. Vicente et al however wanted P10.00 per
square meter.
In 1969, the lawyers of HI Cement agreed to enter into a compromise agreement with the three
whereby commissioners shall be assigned by the court for the purpose of assessing the value of
the disputed areas of claim. An assessment was subsequently made pursuant to the
compromise agreement and the commissioners recommended a price rate of P15.00 per
square meter. One of the lawyers of HI Cement, Atty. Francisco Ventura, then notified the Board
of Directors of HI Cement for the approval of the compromise agreement. But the Board
disapproved the compromise agreement hence Atty. Ventura filed a motion with the court to
disregard the compromise agreement. Vicente et al naturally assailed the motion. Vicente et al
insisted that the compromise agreement is binding because prior to entering into the
compromise agreement, the three lawyers of HI Cement declared in open court that they are
authorized to enter into a compromise agreement for HI Cement; that one of the lawyers of HI
Cement, Atty. Florentino Cardenas, is an executive official of HI Cement; that Cardenas even
nominated one of the commissioners; that such act ratified the compromise agreement even if it
was not approved by the Board. HI Cement, in its defense, averred that the lawyers were not
authorized and that in fact there was no special power of attorney executed in their favor for the
purpose of entering into a compromise agreement. Judge Ambrosio Geraldez ruled in favor of
HI Cement.
ISSUE:
Whether or not a compromise agreement entered into by a lawyer purportedly in behalf of the
corporation is valid without a written authority.
HELD:
No. Corporations may compromise only in the form and with the requisites which may be
necessary to alienate their property. Under the corporation law the power to compromise or
settle claims in favor of or against the corporation is ordinarily and primarily committed to the
Board of Directors but such power may be delegated. The delegation must be clearly shown for
as a general rule an officer or agent of the corporation has no power to compromise or settle a
claim by or against the corporation, except to the extent that such power is given to him either
expressly or by reasonable implication from the circumstances. In the case at bar, there was no
special power of attorney authorizing the three lawyers to enter into a compromise agreement.
This is even if the lawyers declared in open court that they are authorized to do so by the
corporation (in this case, the transcript of stenographic notes does not show that the lawyers
indeed declare such in open court). The fact that Cardenas, an officer of HI Cement, acted in
effecting the compromise agreement, i.e. nominating a commissioner, does not ratify the
compromise agreement. There is no showing that Cardenas’ act binds HI Cement; no proof that
he is authorized by the Board; no proof that there is a provision in the articles of incorporation of
HI Cement that he can bind the corporation.

27. COSMIC LUMBER CORPORATION, Petitioner, v.

COURT OF APPEAL and ISIDRO PEREZ, Respondents.
G.R. No. 114311 November 29, 1996
First Division

PRINCIPLES:

No conferment of the power to sell can be validly inferred from the specific authority "to enter
into a compromise agreement" because of the explicit limitation fixed by the grantor that the
compromise entered into shall only be so far as it shall protect the rights and interest of the
corporation to physically possess the lots.

FACTS:
COSMIC LUMBER CORPORATION thru its General Manager executed on a Special Power of
Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact to initiate, institute and file any
court action for the ejectment of third persons and/or squatters of 443, for the said squatters to
remove their houses and vacate the premises in order that the corporation may take material
possession of the entire lot, and for this purpose, to appear at the pre-trial conference and enter
into any stipulation of facts and/or compromise agreement so far as it shall protect the rights
and interest of the corporation in the aforementioned lots.

In March 1985 Villamil-Estrada instituted an action for the ejectment of Perez from Lot No. 443
before the RTC of Dagupan, docketed as Civil Case No. D-7750.

In November 1985, Villamil-Estrada entered into a Compromise Agreement with respondent

Perez selling the 333 square meters portion of Lot 443 to Perez for a price of P80.00 per square
meter. The Compromise Agreement was approved by the trial court.

Although the decision became final and executory it was not executed within the 5-year period
from date of its finality allegedly due to the failure of Petitioner to produce the owner's duplicate
copy of the title. Thus in January 1993, Perez filed a complaint to revive the judgment, docketed
as Civil Case No. D-10459.

Petitioner asserts that it was only when the summons in Civil Case No. D-10459 for the revival
of judgment was served upon it that it came to know of the compromise agreement entered into
between Paz G. Villamil-Estrada and respondent Isidro Perez upon which the trial court based
its decision of 26 July 1993 in Civil Case No. D-7750.

Petitioner sought annulment of the decision before the CA on the ground that the compromise
agreement was void because: (a) the attorney-in-fact did not have the authority to sell the
property (b) the authority of the attorney-in-fact was confined to the institution and filing of an
ejectment case, the eviction of third persons/squatters from the lot; and (c) while the special
power of attorney made mention of an authority to enter into a compromise agreement, such
authority was in connection with, and limited to, the eviction of third persons/squatters thereat, in
order that the corporation may take material possession of the entire lot.

The CA dismissed the complaint on the basis of its finding that lack of authority to sell the
subject property is not as a ground for annulment of judgment because it does not affect the
jurisdiction of the trial court over the action nor does it amount to extrinsic fraud.

ISSUE/S:
Whether an authority to sell can be inferred from the authority to enter into a compromise
agreement when such authority to compromise is with explicit limitation that it be entered only in
so far as it shall protect the rights and interest of the grantor to physically possess lots.

RULING:

We agree with petitioner. The authority granted Villamil-Estrada under the special power of
attorney was explicit and exclusionary: for her to institute any action in court to eject all persons
foundo on Lot 443 so that petitioner could take material possession thereof, and for this
purpose, to appear at the pre-trial and enter into any stipulation of facts and/or compromise
agreement but only insofar as this was protective of the rights and interests of petitioner in the
property. Nowhere in this authorization was Villamil-Estrada granted expressly or impliedly any
power to sell the subject property nor a portion thereof. Neither can a conferment of the power
to sell be validly inferred from the specific authority "to enter into a compromise agreement"
because of the explicit limitation fixed by the grantor that the compromise entered into shall only
be "so far as it shall protect the rights and interest of the corporation in the aforementioned lots."
In the context of the specific investiture of powers to Villamil-Estrada, alienation by sale of an
immovable certainly cannot be deemed protective of the right of petitioner to physically possess
the same, more so when the land was being sold for a price of P80.00 per square meter, very
much less than its assessed value of P250.00 per square meter, and considering further that
petitioner never received the proceeds of the sale.

When the sale of a piece of land or any interest thereon is through an agent, the authority of the
latter shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to
execute a contract for the sale of real estate must be conferred in writing and must give him
specific authority, either to conduct the general business of the principal or to execute a binding
contract containing terms and conditions which are in the contract he did execute. A special
power of attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable consideration. The
express mandate required by law to enable an appointee of an agency (couched) in general
terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary
ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real
estate, a power of attorney must so express the powers of the agent in clear and unmistakable
language. When there is any reasonable doubt that the language so used conveys such power,
no such construction shall be given the document.

It is therefore clear that by selling to respondent Perez a portion of petitioner's land through a
compromise agreement, Villamil-Estrada acted without or in obvious authority. The sale ipso
jure is consequently void. So is the compromise agreement. This being the case, the judgment
based thereon is necessarily void.

28. ​Lilian Mercado, et al. v. Allied Banking Corporation

G.R. No. 171460, 27 July 2007
PRINCIPLE
A special power of attorney must be strictly construed and pursued. The instrument will be held
to grant only those powers which are specified therein, and the agent may neither go beyond
nor deviate from the power of attorney. Where powers and duties are specified and defined in
an instrument, all such powers and duties are limited and are confined to those which are
specified and defined, and all other powers and duties are excluded.
FACTS
A certain Perla Mercado, during her lifetime, owned several properties in the Philippines. On 28
May 1992, she executed a Special Power of Attorney in favor of her husband, Julian, over
several pieces of property under her name. Among those powers vested upon him was the
authority to mortgage Perla’s ​parcel of land covered by TCT NO. RT-106338 with an area of
805 square meters and registered with the Registry of Deeds of Pasig (now Makati).
By virtue of the said SPA, Julian obtained a loan twice from respondent Allied Banking, secured
by the same real estate mortgage constituted on ​TCT No. RT-18206 (106338) which covers a
parcel of land with an area of 805 square meters, registered with the ​Registry of Deeds of
Quezon City. However, it appears that there was no property identified in the SPA as TCT No.
RT-18206 (106338) and registered with the Registry of Deeds of Quezon City. What was
identified in the SPA instead was the property covered by TCT No. RT-106338 registered with
the Registry of Deeds of Pasig.
Subsequently, Julian defaulted payment of his loan obligation. Thus, respondent initiated
extra-judicial foreclosure proceedings over the subject property which was subsequently sold at
public auction wherein the respondent was declared as the highest bidder. A year later,
petitioners initiated with the RTC an action for the annulment of REM constituted over the
subject property on the ground that the same was not covered by the SPA and that the said
SPA, at the time the loan obligations were contracted, no longer had force and effect since it
was previously revoked by Perla on 10 March 1993, as evidenced by the Revocation of SPA
signedi by the latter.

The RTC declared the real estate mortgage constituted over the subject property null and void.
On appeal, the CA reversed the lower court’s decision and upheld the validity of the REM
constituted over the subject property on the strength of the SPA. Hence, this petition.

ISSUE
Whether or not the property subject to real estate mortgage was covered under the SPA
executed by Perla in favor of Julian.
RULING
NO. ​The Court is convinced that the ​property covered by TCT No. 106338 registered with the
Registry of Deeds of Pasig (now Makati) is the same as the subject property covered by TCT
No. RT-18206 (106338) registered with the Registry of Deeds of Quezon City. The records of
the case are stripped of supporting proofs to verify the respondent's claim that the two titles
cover the same property. It failed to present any certification from the Registries of Deeds
concerned to support its assertion. Neither did respondent take the effort of submitting and
making part of the records of this case copies of TCTs No. RT-106338 of the Registry of Deeds
of Pasig (now Makati) and RT18206 (106338) of the Registry of Deeds of Quezon City, and
closely comparing the technical descriptions of the properties covered by the said TCTs.

Having arrived at the conclusion that Julian was not conferred by Perla with the authority to
mortgage the subject property under the terms of the SPA, the real estate mortgages Julian
executed over the said property are therefore unenforceable. Assuming arguendo that the
subject property was indeed included in the SPA executed by Perla in favor of Julian, the said
SPA was revoked by virtue of a public instrument executed by Perla on 10 March 1993.

--------------------
The subject property was not among those enumerated therein. There was nothing in the
language of the SPA from which the Court could deduce the intention of Perla to include the
subject property therein. The further explained that they cannot attribute such intention to Perla
who executed the SPA when the language of the instrument is bare of any indication suggestive
of such intention. Otherwise, it would run afoul of the express tenor of the SPA and thus defeat
Perla’s true intention.

Equally relevant is the rule that a power of attorney must be strictly construed and pursued. The
instrument will be held to grant only those powers which are specified therein, and the agent
may neither go beyond nor deviate from the power of attorney. Where powers and duties are
specified and defined in an instrument, all such powers and duties are limited and are conned to
those which are specified and defined, and all other
powers and duties are excluded.

29. BPI vs De Coster GR NO. 23181

Principle: A power of attorney “to loan and borrow money” and to mortgage the
principal’s property does not carry with it or imply that the agent has a legal right to
make the principal liable for the personal debts of the agent.

Facts: While the de Coster is residing in Paris, France, Jean Poizat her husband
executed a promissory note for P292,000.00 for a loan and a real mortgage on her
behalf, making her liable jointly and severally along with her husband and his firm, by
virtue of a power of attorney that she left with her husband. In addition, a chattel
mortgage was also executed by Jean Poizat and J.M. Poizat & Co. on two steamships
belonging to the Poizat Vegetable Oil Mills. The note in question became long past due
and owing
 The lower court ruled that the defendants are liable to BPI. Wife returned to the
Philippines to question the validity of the service of the summons (since she has been
residing in Paris for 16 years now), the validity of the promissory note and the validity of
the real mortgage.

Issue: WON the principal wife is liable for the mortgage executed by her agent
husband.

Ruling: No. The note and mortgage show upon their face that at the time they were
executed, the agent-husband was attorney-in-fact for the defendant wife, and the bank
knew or should have known the nature and extent of his authority and the limitations
upon his power.

Par. 5 of the power of attorney authorizes the agent husband for and in the name of his
wife to “loan or borrow any sums of money or fungible things etc”. This is taken to mean
that he only had the power to loan his wife’s money and to borrow money for or on
account of his wife as her agent and attorney-in-fact, it does not carry with it or imply
that he had the legal right to make his wife liable as a surety for the preexisting debt of a
third person.

The note which binds the wife and upon which the mortgage was executed was found to
be for a preexisting debt of the husband and of his firm. The wife was not a party to this
original debt and the power of attorney does not authorize the husband to make the wife
liable as a surety to the debt of a third person.

The fact that an agent failed and neglected to perform his duties and to represent the
interests of his principal is not a bar to the principal obtaining legal relief for the
negligence of her agent, provided that the application for such a relief is duly and
properly made under the provisions of section 113 (Code of Civil Procedure).

When the note which a real mortgage is supposed to secure is found to be VOID as to
the principal, then it follows that the mortgageis also VOID as to the principal

30. ​PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. MAXIMO STA. MARIA, ET AL.,
defendant,
VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO and LEONILA, all surnamed STA.
MARIA,defendants-appellants.

PRINCIPLE: a special power of attorney to mortgage real estate is limited to such authority to
mortgage and does not bind the grantor personally to other obligations contracted by the
grantee, in the absence of any ratification or other similar act that would estop the grantor from
questioning or disowning such other obligations contracted by the grantee.

FACTS: Philippine National Bank (PNB) filed this action on February 10, 1961 against
defendant Maximo Sta. Maria and his six brothers and sisters, defendants-appellants,
Valeriana, Emeteria, Teofilo, Quintin, Rosario and Leonila, all surnamed Sta. Maria ( the Sta.
Marias’ ), and the Associated Insurance & Surety Co., Inc. as surety, for the collection of certain
amounts representing unpaid balances on two agricultural sugar crop loans due allegedly from
defendants.
The said sugar crop loans were obtained by defendant Maximo Sta. Maria from PNB under a
special power of attorney, executed in his favor by his six brothers and sisters,
defendants-appellants herein, ​to mortgage a 16-odd hectare parcel of land, jointly owned by all
of them, In addition, Valeriana Sta. Maria alone also executed in favor of her brother, Maximo, a
special power of attorney ​to borrow money and mortgage any real estate owned by her. By
virtue of the two above powers, Maximo Sta. Maria applied for two separate crop loans.

ISSUE: W/O Maximo Sta. Maria acted within the powers granted by the SPA.

HELD: No. Maximo Sta. Maria went beyond the powers granted to him by the SPA.
The authority granted by the Sta. Marias’ (except Valeriana) unto their brother, Maximo, was
merely to mortgage the property jointly owned by them. They did not grant Maximo any authority
to contract for any loans in their names and behalf. Maximo alone, with Valeriana who
authorized him to borrow money, must answer for said loans and the other
defendants-appellants' only liability is that the real estate authorized by them to be mortgaged
would be subject to foreclosure and sale to respond for the obligations contracted by Maximo.
But they cannot be held personally liable for the payment of such obligations, as erroneously
held by the trial court.

31. INSULAR DRUG CO. V. PHILIPPINE NATION BANK, G.R. NO. L-38816, NOVEMBER 3,
1933

Principle: “Any person taking checks made payable to a corporation, which can act only by
agent does so at his peril, and must same by the consequences if the agent who indorses the
same is without authority.”

Facts:
One hundred thirty-two (132) checks made out in the name of the Insular Drug Co., Inc.,
covering a total of ₱18,285.92 were brought to the branch office of the Philippine National Bank
(PNB) in Iloilo by Foerster, a salesman of Insular Drug. Co., Foerster’s wife, and Foerster’s
clerk. The checks placed in the personal account of Foerster. After the indorsement on the
checks was written by the Manager of PNB, the amounts stated were subsequently withdrawn
by U.E., Foerster, and Carmen E. de Foerster. However, upon the discovery of the anomalies
by the Manila Office of the drug company through its investigation of the transaction made by
Foerster, the latter committed suicide. There is no evidence showing that the bank knew that
Foerster was misappropriating the funds of his principal.
Issue:
Whether or not the bank incurred the liability to pay Insular Drug Co..
Held:
Yes.
A salesman (agent) who was given authority to collect money that belonged to his principal do
not have the implied authority to indorse checks received in payment. Further, “any person
taking checks made payable to a corporation, which can act only by agent does so at his peril,
and must same by the consequences if the agent who indorses the same is without authority.”
In this case, the bank could not be relieved of its responsibility by relying to the effect that
Foerster had implied authority to indorse all checks made out in the name of the Insular Drug
Co. Not only did the bank permit Foerster to indorse checks and then place them to his personal
account, but it went farther and permitted Foerster's wife and clerk to indorse the checks. The
right of an agent to indorse commercial paper is a very responsible power and will not be lightly
inferred.

32.:C.N. HODGES vs. CARLOTA SALAS and PAZ SALAS (GR No. G.R. No. L-42958.
October 21, 1936)

Facts:
The defendants, Salas and Salas, executed a Power of Attorney in favor of their brother-in law
Felix S. Yulo to enable him to obtain a loan and secure it with a mortgage on the real property
described in transfer certificate of title No. 3335. Under the said Power of Attorney, Yulo
obtained a loan, hence binding his principals jointly and severally to pay it within 10 years
subject to interest. In effect he signed a promissory note for the amount borrowed and executed
a deed of mortgage of the real property.
However, the amount loaned was not delivered to Yulo but rather the plaintiff and the agent,
Yulo had an agreement that the amount be used to pay the personal debts of the agent.
The defendants failed to pay at maturity the interest stipulated which should have been paid one
year in advance. Thus, plaintiff, Hodges therefore brought an action for foreclosure of the
mortgage. The defendants then counters such action that Yulo acted in excess of his authority.
Issue:
Whether or not, Felix Yulo, being the agent, was authorized to borrow money and use it as he
wished for his personal gain by virtue of the authority conferred by the defendants.
Ruling:
In the case of Manila Trading & Supply Co. vs. Uy Tiepo, the court held that an agent who used
the borrowed money for his personal gain or benefit is deemed to have exceeded the authority
conferred upon him under the power of attorney in which case should have been specific and
limited to a certain extent.
As substantially provided under Article 1881 of the Civil Code that an agent must act within the
scope of his authority and may do such acts as may be conducive to the accomplishment of the
purpose of the agency.
In the case at bar, Yulo exceeded the authority provided under the Power of Attorney by using
the loaned money for his personal benefit.

34. BRAVO-GUERRERO v. BRAVO

G.R. NO. 152658
July 29, 2005

Principle: ​There is no need to execute a separate and special power of attorney if the act or
transaction specified can be included in the general power

Facts: ​Grandparents-spouses Bravo owned two parcel of lands in Makati, the wife executed
GPA in favor of her husband. These properties were subsequently sold by the grandfather to
their grandchildren. Such properties were mortgaged to PNB and DBP and the
grandchildren-heirs assumed the payment. Later on, one of the grandchildren moved for the
partition of the properties as co-owners but the buyers refused. The grandchildren contested the
sale for lack of consideration. The trial court upheld the validity of the sale which was reversed
by CA for lack of consent on the part of the grandmother.
Issue​: WON the GPA granted by grandmother was valid
Held​: Yes. Sale of conjugal property by husband is only voidable if without wife’s consent. The
sale can only be contested by the wife, and this is not the case. The grandmother executed a
GPA specifying the authority of his husband, thus, meeting the requirement of authorization
specified in Art. 1878. There was no need to execute a separate and special power of attorney
as it can be included in the general power when it is specified therein the act or transaction for
which the special power is required.