THE PRINCIPAL

Woodchild Holdings v. Roxas Electric

(MARK)
Facts:

The respondent Roxas Electric and

Construction
Company,
Inc.
(RECCI),
formerly
the
Roxas
Electric
and
Construction Company, was the owner of
two parcels of land. On May 17, 1991, the
respondents Board of Directors approved a
resolution authorizing the corporation,
through its president, Roberto B. Roxas, to
sell the lots at a price, and under such
terms and conditions, which he deemed
most reasonable and advantageous to the
corporation. He was likewise authorized to
execute, sign, and deliver the pertinent
sales documents and receive the proceeds
of the sale for and on behalf of the
company.

Petitioner WHI bought one of the lots and a

portion of the other. It was stipulated in
the Deed of Sale that the vendor agrees, in
the event that the right of way is
insufficient for the vendees use (ex entry
of a 45-foot container), to sell additional
square meters from its current adjacent
property.

WHI constructed a warehouse. Said

warehouse was leased by Ponderosa
Leather Goods Company subject to a
monthly rental of 300,000 php. In the
meantime, WHI complained to Roberto
Roxas that the vehicles of RECCI were
parked on a portion of the property over
which WHI had been granted a right of way.
Roxas promised to look into the matter. Dy
and Roxas discussed the need of WHI to
buy a 500-square-meter portion of the
other but Roxas died soon thereafter.

The WHI demanded that the RECCI sell a

portion of the other lot for its beneficial use
otherwise the appropriate action would be
filed against it. RECCI rejected the demand
of WHI. On June 17, 1992, the WHI filed a
complaint against the RECCI with the
Regional Trial Court of Makati, for specific
performance and damages.

under Article 1910 1of the New Civil Code,

acts done by such officers beyond the
scope of their authority cannot bind the
corporation unless it has ratified such acts
expressly or tacitly, or is estopped from
denying them. Evidently, Roxas was not
specifically authorized under the said
resolution to grant a right of way agree to
sell to the petitioner a portion thereof.
Neither may such authority be implied
from the authority granted to Roxas to sell
on such terms and conditions which he
deems
most
reasonable
and
advantageous.
Under paragraph 12,
Article 1878 of the New Civil Code, a
special power of attorney is required to
convey real rights over immovable
property. Article 1358 of the New Civil Code
requires that contracts which have for their
object the creation of real rights over
immovable property must appear in a
public document. The petitioner cannot
feign ignorance of the need for Roxas to
have been specifically authorized in writing
by the Board of Directors to be able to
validly grant a right of way and agree to
sell a portion of the adjacent lot. The rule
is that if the act of the agent is one which
requires authority in writing, those dealing
with him are charged with notice of that
fact.
For the principle of apparent authority to
apply, the petitioner was burdened to
prove the following: (a) the acts of the
respondent justifying belief in the agency
by the petitioner; (b) knowledge thereof by
the respondent which is sought to be held;
and, (c) reliance thereon by the petitioner
consistent
with
ordinary
care
and
prudence. In this case, there is no evidence
on record of specific acts made by the
respondent showing or indicating that it
had full knowledge of any representations
made by Roxas to the petitioner that the
respondent had authorized him to grant to
the respondent an option to buy a portion
of the other lot or to create a burden or lien
thereon, or that the respondent allowed
him to do so.

ISSUE: WON Roxas Electric is bound by the

provisions of the deed of absolute sale granting
to the WHI beneficial use and a right of way
over a portion of the other lot.
Held: No.

Generally, the acts of the corporate officers

within the scope of their authority are
binding on the corporation.
However,

Art. 1910. The principal must comply with all

the obligations which the agent may have
contracted within the scope of his authority.
As for any obligation wherein the agent has
exceeded his power, the principal is not bound
except when he ratifies it expressly or tacitly.

Rural Bank of Milaor v. Ocfemia, 325 SCRA

99 (JESSA)
Facts:

On April 10, 1996, Rural Bank was declared

in default on motion of the respondents for
failure to file an answer within the
reglementary-period after it was duly
served with summons

On April 26, 1996, bank filed a motion to

set aside the order of default with objection
thereto filed by respondents

On June 17, 1996, an order was issued

denying bank's motion to set aside the
order of default

On July 31, 1996, respondents filed a

motion to set case for hearing.

The bank did not file any opposition and so

respondents were allowed to present their
evidence ex-parte.

A certiorari case was filed by the bank with

the Court of Appeals but the petition was
denied in a decision and the same is now
final.

The
evidence
presented
by
the
respondents through the testimony of Nio,
one of the respondents in this case, shows
that:
she is the daughter of Francisca
Ocfemia, a co-respondent in this
case, and the late Renato Ocfemia
(deceased)
the parents of her father, Renato
Ocfemia, were Juanita Arellano
Ocfemia and Felicisimo Ocfemia
her other co-respondents Rowena
O. Barrogo, Felicisimo Ocfemia,
Renato Ocfemia, Jr. and Winston
Ocfemia are her brothers and
sisters

Nio knows the five (5) parcels of land

which are located in Bombon, Camarines
Sur and that they are the ones possessing
them which were originally owned by her
grandparents, Juanita Arellano Ocfemia and
Felicisimo Ocfemia.

During the lifetime of her grandparents,

respondents mortgaged the said five (5)
parcels of land and two (2) others to the
bank as shown by the Deed of Real Estate
Mortgage and the Promissory Note

The spouses Felicisimo Ocfemia and Juanita

Arellano Ocfemia were not able to redeem
the mortgaged properties consisting of
seven (7) parcels of land and so the
mortgage was foreclosed and thereafter
ownership thereof was transferred to the
bank.

Out of the seven (7) parcels that were

foreclosed, five (5) of them are in the
possession of the respondents because

these five (5) parcels of land were sold by

the bank to the parents of Nio as
evidenced by a Deed of Sale executed in
January 1988
The aforementioned five (5) parcels of land
subject of the deed of sale, have not been,
however transferred in the name of the
parents of Nio after they were sold to her
parents by the bank because according to
the Assessor's Office the five (5) parcels of
land, subject of the sale, cannot be
transferred in the name of the buyers as
there is a need to have the document of
sale registered with the Register of Deeds
of Camarines Sur.
Nio went to the Register of Deeds of
Camarines Sur with the Deed of Sale in
order to have the same registered.
The Register of Deeds, however, informed
her that the document of sale cannot be
registered without a board resolution of
bank.
Nio then went to the bank, showed to if
the Deed of Sale, the tax declaration and
receipt of tax payments and requested the
bank for a board resolution so that the
property can be transferred to the name of
Renato Ocfemia the husband of petitioner
Francisca Ocfemia and the father of the
other respondents having died already.
The bank refused her request for a board
resolution and made many alibis:
She was told that the bank had a
new manager and it had no record
of the sale; She was asked and she
complied with the request of the
bank for a copy of the deed of sale
and receipt of payment; The
president of the bank told her to
get an authority from her parents
and other respondents and receipts
evidencing
payment
of
the
consideration appearing in the
deed of sale; She complied with
said requirements and after she
gave all these documents, Nio
was again told to wait for two (2)
weeks because the bank would still
study the matter.
After two (2) weeks, Nio returned to the
bank and she was told that the resolution
of the board would not be released
because the bank had no records from the
old manager.
Because of this, Nio wrote to the bank
inquiring why no action was taken by the
board of the request for the issuance of the
resolution considering that the bank was
already fully paid for the consideration of

the sale since January 1988 as shown by

the deed of sale itself
On January 15, 1996 the bank answered
respondents' lawyer's letter informing the
latter that the request for board resolution
had already been referred to the board of
directors of the bank with another request
that the latter should be furnished with a
certified machine copy of the receipt of
payment covering the sale between the
respondents and the bank This request
of the bank was already complied with by
Nio even before she brought the matter to
her lawyer.
On January 23, 1996 respondents lawyer
wrote back the branch manager of the
bank informing the latter that they were
already furnished the receipts the bank
was asking for and that the respondents
wanted already to know the stand of the
bank whether the board would issue the
required board resolution as the deed of
sale itself already showed that the
respondents were clearly entitled to the
land subject of the sale
The manager of the bank received the
letter which was served personally to him
and the latter told Nio that since he was
the one himself who received the letter he
would not sign anymore a copy showing
him as having already received said letter
After several days from receipt of the letter
when Nio went to the bank again and
reiterated her request, the manager of the
bank told her that they could not issue the
required board resolution as the bank had
no records of the sale.
Because of this, this petition is filed
The respondents are interested in having
the property transferred to their names
because their mother and co-petitioner,
Francisca Ocfemia, is very sickly and they
want to mortgage the property for the
medical expenses of Francisca Ocfemia.
The illness of Francisca Ocfemia began
after her husband died and her suffering
from arthritis and pulmonary disease
already became serious before December
1995.
Nio declared that her mother is now in
serious condition and they could not have
her hospitalized for treatment as they do
not have any money and this is causing the
family sleepless nights and mental
anguish, thinking that their mother may die
because they could not submit her for
medication as they do not have money.
RTC: granted the petition
CA: affirmed

Issue: WON the bank manager was authorized

by the bank to sign on its behalf
Held:
YES. In failing to file its answer specifically
denying under oath the Deed of Sale, the bank
admitted the due execution of the said
contract. Such admission means that it
acknowledged
that
the
manager
was
authorized to sign the Deed of Sale on its
behalf.
The bank acknowledged, by its own acts or
failure to act, the authority of the manager to
enter into binding contracts. After the
execution of the Deed of Sale, respondents
occupied the properties in dispute and paid the
real estate taxes due thereon. If the bank
management believed that it had title to the
property, it should have taken some measures
to prevent the infringement or invasion of its
title thereto and possession thereof.
Likewise,
the
manager
had
previously
transacted business on behalf of the bank, and
the latter had acknowledged her authority. A
bank is liable to innocent third persons where
representation is made in the course of its
normal business by an agent like the manager,
even though such agent is abusing her
authority. Clearly, persons dealing with her
could not be blamed for believing that she was
authorized to transact business for and on
behalf of the bank.
Board of Liquidators v. Kalaw: Settled
jurisprudence has it that where similar acts
have been approved by the directors as a
matter of general practice, custom, and policy,
the general manager may bind the company
without formal authorization of the board of
directors. In varying language, existence of
such authority is established, by proof of the
course of business, the usages and practices of
the company and by the knowledge which the
board of directors has, or must be presumed to
have, of acts and doings of its subordinates in
and about the affairs of the corporation. So
also, authority to act for and bind a corporation
may be presumed from acts of recognition in
other instances where the power was in fact
exercised. Thus, when, in the usual course
of business of a corporation, an officer
has been allowed in his official capacity to
manage its affairs, his authority to
represent the corporation may be implied
from the manner in which he has been
permitted by the directors to manage its
business.

Notwithstanding the putative authority of the

manager to bind the bank in the Deed of Sale,
the bank has failed to file an answer to the
petition below within the reglementary period.
Thus, the bank is estopped from questioning
the authority of the bank manager to enter into
the contract of sale. If a corporation knowingly
permits one of its officers or any other agent to
act within the scope of an apparent authority, it
holds the agent out to the public as possessing
the power to do those acts; thus, the
corporation will, as against anyone who has in
good faith dealt with it through such agent, be
estopped from denying the agent's authority.
Unquestionably, petitioner has authorized
Tena to enter into the Deed of Sale.
Accordingly, it has a clear legal duty to
issue the board resolution sought by
respondent's.

Cuison v. CA, 227 SCRA 391 (TOPE)

Facts:

Petitioner
Kue
Cuison
is
a
sole
proprietorship engaged in the purchase
and sale of newsprint, bond paper and
scrap while
Private respondent Valiant
Investment Associates, on the other hand,
is a partnership duly organized and existing
under the laws.

From December 4, 1979 to February 15,

1980, respondent delivered various kinds
of
paper
products
amounting
to
P297,487.30 to a certain Lilian Tan of LT
Trading.

The deliveries were made by respondent

pursuant to orders allegedly placed by Tiu
Huy Tiac who was then employed in the
Binondo office of petitioner.

It was likewise pursuant to Tiac's

instructions that the merchandise was
delivered to Lilian Tan.

Upon delivery, Lilian Tan paid for the

merchandise by issuing several checks
payable to cash at the specific request of
Tiu Huy Tiac.

In turn, Tiac issued 9 postdated checks to

private respondent as payment for the
paper products.

Unfortunately, sad checks were later

dishonored by the drawee bank.

Respondent made several demands upon

petitioner to pay for the merchandise in
question, claiming that Tiu Huy Tiac was
duly authorized by petitioner as the
manager of his Binondo office, to enter into

the questioned transactions with private

respondent and Lilian Tan.
Respondent filed an action against
petitioner for the collection of P297,487.30
representing the price of the merchandise.
Trial court dismissed. Court of Appeals
reversed.

Issue: Whether or not Tiu Huy Tiac possessed

the required authority from petitioner sufficient
to hold the latter liable for the disputed
transaction.
Held: YES.

It is a well-established rule that one who

clothes another with apparent authority as
his agent and holds him out to the public
as such cannot be permitted to deny the
authority of such person to act as his
agent, to the prejudice of innocent third
parties dealing with such person in good
faith and in the honest belief that he is
what he appears to be.

It is evident from the records that by his

own acts and admission, petitioner held out
Tiu Huy Tiac to the public as the manager
of his store.

More particularly, petitioner explicitly

introduced Tiu Huy Tiac to Bernardino
Villanueva, respondent's manager, as his
(petitioner's) branch manager as testified
to by Bernardino Villanueva.

Secondly, Lilian Tan, who has been doing

business with petitioner for quite a while,
also testified that she knew Tiu Huy Tiac to
be the manager of petitioner's Sto. Cristo,
Binondo branch.

This general perception of Tiu Huy Tiac as

the manager of petitioner's Sto. Cristo
store is even made manifest by the fact
that Tiu Huy Tiac is known in the
community to be the "kinakapatid"
(godbrother) of petitioner.

Petitioner's unexplained delay in disowning

the transactions entered into by Tiu Huy
Tiac despite several attempts made by
respondent to collect the amount from him,
proved all the more that petitioner was
aware of the questioned commission was
tantamount to an admission by silence.

In a futile attempt to discredit Villanueva,

petitioner alleges that the former's
testimony is clearly self-serving inasmuch
as
Villanueva
worked
for
private
respondent as its manager.

Court said, The argument that Villanueva's

testimony is self-serving and therefore
inadmissible on the lame excuse of his
employment with private respondent
utterly misconstrues the nature of "'self-

serving evidence" and the specific ground

for its exclusion.
Petitioner cites Villanueva's failure, despite
his commitment to do so on crossexamination, to produce the very first
invoice of the transaction between
petitioner and private respondent as
another ground to discredit Villanueva's
testimony.
Court: it was petitioner's counsel himself
who withdrew the reservation to have
Villanueva produce the document in court.
In the same manner, petitioner assails the
credibility of Lilian Tan by alleging that Tan
was part of an intricate plot to defraud him.
However, petitioner failed to substantiate
or prove that the subject transaction was
designed to defraud him.
Moreover, petitioner's unexplained delay in
disowning the transactions entered into by
Tiu Huy Tiac despite several attempts
made by respondent to collect the amount
from him, proved all the more that
petitioner was aware of the questioned
commission was tantamount to an
admission by silence under Rule 130
Section 23 of the Rules of Court.
All of these point to the fact that at the
time of the transaction Tiu Huy Tiac was
admittedly the manager of petitioner's
store in Sto. Cristo, Binondo. Consequently,
the transaction in question as well as the
concomitant obligation is valid and binding
upon petitioner.
By his representations, petitioner is now
estopped from disclaiming liability for the
transaction entered by Tiu Huy Tiac on his
behalf. It matters not whether the
representations are intentional or merely
negligent so long as innocent, third persons
relied upon such representations in good
faith and for value.
Tiu Huy Tiac, therefore, by petitioner's own
representations
and
manifestations,
became an agent of petitioner by estoppel,
an admission or representation is rendered
conclusive upon the person making it, and
cannot be denied or disproved as against
the person relying thereon (Article 1431,
Civil Code of the Philippines).
Petitioner is liable for the transaction
entered into by Tiu Huy Tiac on his behalf.
Thus, even when the agent has exceeded
his authority, the principal is solidarily
liable with the agent if the former allowed
the latter to fact as though he had full
powers (Article 1911 Civil Code), as in the
case at bar.
Petition DENIED

De Castro v. CA, 384 SCRA 607 (IVY)

Sta. Romana v. Imperio, 15 SCRA 625
(IVY)
IV.

Modes of Extinguishment

A.

Articles 1919, 1920 (IVY)

Art. 1919. Agency is extinguished:

(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity or
insolvency of the principal or of the agent;
(4) By the dissolution of the firm or corporation
which entrusted or accepted the agency;
(5) By the accomplishment of the object or
purpose of the agency;
(6) By the expiration of the period for which the
agency was constituted. (1732a)
Art. 1920. The principal may revoke the agency
at will, and compel the agent to return the
document evidencing the agency. Such
revocation may be express or implied.

PNB v. Paz Agudelo y Gonzaga, et al.

(MAI)
Villareal, J.
Facts: On November 9, 1920, Paz Agudelo y
Gonzaga executed in favor of her nephew,
Mauro A. Garrucho, a document conferring
upon him a special power of attorney
sufficiently broad in scope to enable him to
sell, alienate and mortgage in the manner and
form he might deem convenient, all her real
estate situated in the municipalities of Murcia
and Bacolod, Occidental Negros, consisting in
lots Nos. 61 and 207 of the cadastral survey of
Bacolod, Occidental Negros, together with the
improvement thereon.
On December 22, 1920, Amparo A. Garrucho
executed a document whereby she conferred
upon her brother Mauro A Garrucho a special
power of attorney sufficiently broad in scope to
enable him to sell, alienate, mortgage or
otherwise encumber, in the manner and form
he might deem convenient, all her real estate
situated in the municipalities of Murcia and

Bago, Occidental Negros.

Johns, J.

Nothing in the aforesaid powers of attorney

expressly authorized Mauro A. Garrucho to
contract any loan nor to constitute a mortgage
on the properties belonging to the respective
principals, to secure his obligations.

FACTS: Harry Keeler is engaged in the electrical

business and is selling the Matthews plant in
the
Philippine
Islands.
One
day,
A.C
Montelibano went to the office of Harry Keeler
and told him that he could find purchasers of
the Matthews plant. Keeler agreed with the
understanding that for every customer that he
could find or any plant that he could sell, he
would be given a 10% commission if the sale
was
consummated.
Pursuant
to
this
agreement, Montelibano was able to negotiate
the sale of the the Matthews plant between
Keeler and Rodriguez. After the machine had
been installed, Rodriguez paid the purchase
price of P2513.55 to Montelibano, without the
knowledge of Keeler.
Keeler alleged that it was his employee Cenar
who installed the equipment in defendants
premises. Moreover, Keeler also claimed that it
was Cenar who gave him the statement of
account totaling P2563.95. Cenar did not make
any effort to collect the money since he was
assured by Rodriguez that he will pay it in
Manila.
On the other hand, Rodriguez alleged that he
paid the purchase price to Montelibano, since
he was the one who sold, delivered and
installed the electrical plant; that he was the
one who presented the account; that he was
assured by Montelibano that he was authorized
to collect the value of the plant.
The lower court decided in favor of Rodriguez,
holding that Montelibano was an agent
authorized to collect the purchase price.

Subsequently, Mauro A. Garrucho executed in

the favor of the Philippine National bank
several mortgages on Agudelos properties to
secure the payment of credits, loans,
commercial overdrafts, etc., together with
interest thereon, which he might obtain from
the bank, issuing the corresponding promissory
notes to that effect.
The mortgage deeds, as well as the
corresponding
promissory
notes,
were
executed in Mauro A. Garrucho's own name
and signed by him in his personal capacity,
authorizing
the mortgage
creditor,
the
Philippine National Bank, to take possession of
the mortgaged properties, by means of force if
necessary, in case he failed to comply with any
of the conditions stipulated therein
Issue: Whether or not Garrucho acted within
the authority given to him in obtaining the
mortgages
Held: NO.
A promissory note and two mortgages
executed by the agent for and on behalf of his
principal, in accordance with a power of
attorney executed by the principal in favor of
the agent, are valid, and as provided by article
1727 of contracted by the agent; but a
mortgage on real property of the principal not
made and signed in the name of the principal
is not valid as to the principal.
The records do not show that the loan obtained
by Mauro A. Garrucho, evidenced by the
promissory note, was for his principal Paz
Agudelo y Gonzaga. The special power of
attorney, does not authorize Mauro A. Garrucho
to constitute a mortgage on the real estate of
his principal to secure his personal obligations.
Therefore, in doing so by virtue of the
document, he exceeded the scope if his
authority and his principal is not liable for his
acts

THIRD PARTY DEALING W/ AGENT

Harry Keeler Electric Co. vs. Rodriguez
(EARLA)
November 11, 1922

ISSUE: WON Montelibano was the agent of

Harry Keeler.
HELD: No. According to the Court, there is
nothing in the receipt issued by Montelibano
that would indicate that he was authorized by
Keeler to collect the money. Accordingly, what
was contained therein were his personal
receipt and personal signature. There were no
more indications of his authority.
Moreover, the Court also ruled that the receipt
presented in evidence by Rodriguez actually
shows that it was Cenar who gave the
statement of accounts to him; otherwise, there
would have been no need to incur shipping
costs of P81.60 if it was Montelibano who
installed the plant in his premises.
In sum, there was no evidence that Keeler ever
delivered any statement to Montelibano or that
he was ever authorized to receive the money.
It is a settled principle in agency that a person
dealing with an agent must be careful in

ascertaining the fact of the agency and the

nature and extent of authority of the agent.
Accordingly, In approaching the consideration
of the inquiry whether an assumed authority
exists in a given case, there are certain
fundamental principles which must not be
overlooked. Among these are, as has been
seen,
(1) that the law indulges in no bare
presumptions that an agency exists: it must be
proved or presumed from facts;
(2) that the agent cannot establish his own
authority, either by the representations or by
assuming to exercise it;
(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
(5) that every authority must find its ultimate
source in some act or omission of the principal.
Thus, when Rodriguez paid to Montelibano, he
did so at his own peril. He is therefore, still
liable to pay Keeler the amount of the electric
plant.
a. Exceptions to the rule
Art. 1803. When the manner of management
has not been agreed upon, the following rules
shall be observed:
(1) All the partners shall be considered agents
and whatever any one of them may do alone
shall bind the partnership, without prejudice to
the provisions of Article 1801.
(2) None of the partners may, without the
consent of the others, make any important
alteration in the immovable property of the
partnership, even if it may be useful to the
partnership. But if the refusal of consent by the
other partners is manifestly prejudicial to the
interest of the partnership, the court's
intervention may be sought

NPC v. National Merchandising Corp

(ROG)
1982
Facts: This case is about the recovery of
liquidated damages from a seller's agent that
allegedly exceeded its authority in negotiating
the sale. NPC and National Merchandising Corp
(Namerco) of Manila, as the representative of
the International Commodities Corp of New
York City, executed in Manila a contract for the
purchase by NPC from the New York firm of 4k
long tons of crude sulfur for it s Maria Cristina
Fertilizer Plant in Iligan City. On that same date
a performance bond for P90k was executed by

Domestic Insurance CO in favor of NPC to

guarantee the seller's obligations.
It was stipulated in the contract of sale that
seller would deliver sulfur at Iligan City within
60days from notice of establishment in its
favor of a letter of credit for $212k and that
failure to effect delivery would subject seller
and it surety to payment of liquidated damages
at rate of 2/5 of 1% of the full contract price for
the first 30 days of default and 4/5 of 1% for
every day thereafter until complete delivery is
made.
NPC advised John Sycip, president of Namerco
of the opening of a letter of credit in favor of
Inter Commodities which would expire on Jan
31, 1957. Notice of the letter of credit was
received by cable by the New York firm on Nov
15, 1956. Thus the deadline for the delivery of
the sulfur was Jan 15, 1957.
The New York supplier was not able to deliver
the sulfur due to its inability to secure shipping
space. During period from Jan20-26, 1957 there
was a shutdown of the NPC's fertilizer plant
because there was no sulfur. Nor fertilizer was
produced.
NPC's general manager advised Namerco and
Domestic Insurance that under Art. 9 of the
contract of sale "nonavailability of bottom or
vessel" was not a fortuitous event that would
excuse non-performance and that NPC would
resort to legal remedies to enforce its rights.
Govt Corporate Counsel in his letter to Sycip
rescinded the contract of sale due to New York
supplier's non-performance of its obligations.
He also demanded from Namerco payment of
P360k as liquidated damages. He explained
that time was of the essence of the contract. A
similar demand also made upon the surety.
NPC sued the New York firm, Namerco and
Domestic Insurance Co for recovery of
stipulated liquidated damages.
TC: dismissed case as to New York firm for lack
of jurisdiction coz it was not doing business in
the Philippines. Namerco and Domestic
Insurance contend that delivery of sulfur was
conditioned on availability of a vessel to carry
the shipment and that Namerco acted within
scope of its authority as agent in signing the
contract of sale.
Issue: WON Namerco and Domestic Insurance
liable for liquidated damages? YES
Held:

1. Namerco acted beyond its authority as

agent of New York firm.
Documentary
evidence
belies
these
contentions. The invitation to bid issued by
NPC provides that nonavailability of a steamer
to transport the sulfur is a ground for payment
of liquidated damages in case of nonperformance by seller.
Namerco's bid or offer is even more explicit. It
provides that it was "responsible for availability
of bottom or vessel" and that it "guarantees
the availability of bottom or vessel to ship the
quantity of sulfur within the time specified in
this bid".
In the contract of sale itself, item 15 of the
invitation to bid is reproduced in Art. 9 which
provides that "it is clearly understood that in
no event shall seller be entitled to an extension
of time or be exempt from payment of
liquidated damages herein specified fro reason
of lack of bottom or vessel".
It is true that New York corp in its cable to
Namerco stated that sale was subject to
availability of a steamer. However, Namerco
did not disclose that cable to NPC and
contrary to its principal's instruction; it
agreed that nonavailability of a steamer
was not a justification for nonpayment of
liquidated damages.
TC rightly concluded that Namerco acted
beyond bounds of its authority because it
violated its principal's cabled instructions.
2. Namerco liable to NPC for damages.
Defendants: it was incumbent upon NPC to
inquire into extent of agent's authority and for
its failure to do so, it could not claim any
liquidated damages which were provided for
merely to make seller more diligent in looking
for a steamer to transport the sulfur.
NPC: Namerco should have advised NPC of the
limitations on its authority to negotiate the
sale.
SC: TC correct that Namerco liable for damages
because under Art. 1987 of NCC the agent who
exceeds the limits of his authority without
giving the party with whom he contracts
sufficient notice of his powers is personally
liable to such party.
The truth is that even before the contract of
sale was signed Namerco was already aware
that its principal was having difficulties in
booking shipping space. In a cable one day
before the contract of sale was signed, the New

York supplier advised Namerco that latter

should not sign the contract unless Namerco
wished to assume sole responsibility for the
shipment.
Sycip, Namerco's president replied that he had
no choice but to finalize the contract of sale
because the NPC would forfeit Namerco's
bidder's bond of P45k posted by Domestic
Insurance if the contract was not formalized.
Three days later the New York firm cabled
Namerco that it did not consider itself bound by
contract that Namerco signed on its own
responsibility. It informed Namerco in its letters
that since latter acted contrary to its
instructions, former disclaimed responbility for
the contract and that responsibility for the sale
rested on Namerco.
3. Rule that every person dealing with an
agent is put upon inquiry and must
discover upon his peril the authority of
agent would apply if principal is sought to
be held liable on the contract entered
into by the agent BUT It is not so in this
case.
Here it is the agent that is sought to be held
liable on a contract of sale which was expressly
repudiated by the principal because the agent
took chances, it exceeded its authority and in
effect, it acted in its own name.
Agent who exceeds limits of his authority is
personally liable and the third person who
contracts with the agent in such a case would
be defrauded if he would not be allowed to sue
the agent
3. Stipulation for liquidated damages is
enforceable even if executed by agent in
excess of his authority.
Art. 1403 "contract entered into in name of
another person by one who has acted beyond
his powers is unenforceable" refers to
unenforceability against the principal. HERE,
the contract containing stipulation not being
enforced against principal but against agent
and its surety.
Namerco never disclosed to NPC the cabled
instructions of its principal. For that reason and
because Namerco exceeded its authority, it
virtually acted in its own name and not as
agent and is therefore bound by contract of
sale which however is not enforceable against
principal.

If Namerco is bound under contract of sale,

then it follows it is bound by stipulation for
liquidated damages.

CA

to acquire purchase orders; (2) to engage in

trading; (3) to collect all receivables due or in
arrears; (4) to extend to any person or
company by substitution the same extent of
authority that is granted to Rene Savellon; (5)
in connection with the preceeding paragraphs
to execute and sign documents, contracts, and
other pertinent papers.

Facts: San Juan Structural and Steel Fabricators

Inc. entered into an agreement with Motorich
Sales Corporation for the transfer of the latters
parcel of land to the former. Nenita Gruenberg,
Motorichs treasurer, was the one who entered
the agreement for Motorich. She was, however,
not authorized by the board of directors. There
is also no evidence that she represented that
she was authorized. San Juan Structural and
Steel made a downpayment of P100,000.
However, the transfer did not push through
despite repeated demands made by San Juan
Structural and Steel.

In 1988, a Trip Charter Party was executed

between Bacaltos Coal Mines (represented by
Savellon) and San Miguel. The agreement was
that for Php 650,000 to be paid within seven
days after the execution of the contract, it
"lets, demises" the vessel to charterer SMC "for
three round trips to Davao." The vessel was
able to make only one trip, so SMC filed an
action for specific performance. Petitioners
alleged that Savellon was not their Chief
Operating Officer and that the powers granted
to him are only those clearly expressed in the
Authorization which do not include the power
to enter into any contract with SMC.

Ruling:
RTC dismissed.
CA dismissed. Nenita to refund the down
payment of 100,000 given by San Juan
Structural and Steel.

ISSUE: WON Savellon was duly authorized by

the petitioners to enter into the Trip Charter
Party.

San Juan
(JANCES)

Structural

and

Steel

Issue: WON sale is valid [NO]

HELD: Motorich cannot be bound by the
contract because it never authorized the sale.
The general principles of agency govern the
relation between the corporation and its
officers or agents, subject to the article of
incorporation, bylaws, or relevant provisions of
law. Consequently, Selling is foreign to a
corporate treasurers function. Neither is real
estate sale shown to be a normal business
activity of Motorich since its primary purpose
is marketing, distribution, export and import in
relation to a general merchandising business.
Moreover, Art 1874 states that a sale of a piece
of land through an agent must be in writing.
Nenita was not authorized. Neither is there any
proof that Motorich ratified, expressly or
impliedly, the contract.

Bacaltos Coal Mines v. CA (REG)

J. Davide
1995
FACTS: In an Authorization, petitioner
Bacaltos authorized Savellon, to use the coal
operating contract of Bacaltos Coal Mine of
which he is the proprietor, for any legitimate
purpose that it may serve and particularly: (1)

RULING: NO. The broadest scope of Savellon's

authority is limited to the use of the coal
operating contract and the clause cannot
contemplate any other power not included in
the enumeration or which are unrelated either
to the power to use the coal operating contract
or to those already enumerated. In short, while
the clause allows some room for flexibility, it
can comprehend only additional prerogatives
falling within the primary power and within the
same class as those enumerated.
There is no evidence at all that Bacaltos Coal
Mines as a coal mining company owns and
operates vessels, and even if it owned any
such vessels, that it was allowed to charter or
lease them.
Also, the Authorization is not a general power
of attorney. It is a special power of attorney for
it refers to a clear mandate specifically
authorizing the performance of a specific
power and of express acts subsumed therein.
Furthermore, had SMC exercised due diligence
and prudence, it should have known in no time
that there is absolutely nothing on the face of
the Authorization that confers upon Savellon
the authority to enter into any Trip Charter
Party.


K.

Article 1901 (ABBY)

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 agent's acts.
1. Effects of ratification and
expression of willingness to
ratify

If the principal does not ratify the acts of

the agent it is unenforceable and he is not
bound by it.
If the principal ratifies the acts of the
agent, i.e. authorizes, receives benefits,
the THIRD PERSON cannot set up the fact
that the agent has exceeded his authority.
The THRID PERSON may be compelled to
abide by his contract.
The ratification shall have a retroactive
effect.
It is only the PRINCIPAL NOT THE AGENT
who may stamp the imprimatur of
ratification.
Before ratification by the principal or
expression of willingness on his part to
ratify, the third person may repudiate the
acts of the agent.

2. Implied ratification

Where a person acts for another who

accepts or retains the benefits or proceeds
of his effort with knowledge of the material
facts surrounding the transaction, the latter
mus be DEEMED to have ratified the
methods employed.
Principle of Principal may not accept the
benefits of the transaction and repudiate
the burdens.

Article 1911 (REX)

Article 1911. Even when the agent has
exceeded his authority, the principal is
solidarily liable with the agent if the former
allowed the latter to act as though he had full
powers.
Lustan v. CA, 266 SCRA 663 (JESSA)
Facts:

Lustan is the registered owner of a parcel

of land

petitioner leased the property to Parangan

for a term of 10 years and an annual rent
of P1,000.00
During the period of lease, Parangan was
regularly extending loans in small amounts
to petitioner to defray her daily expenses
and to finance her daughter's education
petitioner executed an SPA in favor of
Parangan to secure an agricultural loan
from PNB with the aforesaid lot as
collateral
a second SPA was executed by petitioner,
by virtue of which, Parangan was able to
secure 4 additional loans
the last three loans were without the
knowledge of herein petitioner and all the
proceeds therefrom were used by Parangan
for
his
own
benefit
(but
these
encumbrances were duly annotated on the
certificate of title)
petitioner signed a Deed of Pacto de Retro
Sale in favor of Parangan which was
superseded by the Deed of Definite Sale
which petitioner signed upon Parangan's
representation that the same merely
evidences the loans extended by him unto
the former
For fear that her property might be
prejudiced by the continued borrowing of
Parangan, petitioner demanded the return
of her certificate of title.
Instead of complying with the request,
Parangan asserted his rights over the
property which allegedly had become his
by virtue of the aforementioned Deed of
Definite Sale. [Under said document,
petitioner conveyed the subject property
and all the improvements thereon unto
Parangan
absolutely
for
and
in
consideration of the sum of Seventy Five
Thousand (P75,000.00) Pesos]
Aggrieved, petitioner filed an action for
cancellation of liens, quieting of title,
recovery of possession and damages
against Parangan and PNB
RTC: Deeds of Sale (with pacto de retro
and absolute) are null and void equitable
mortgage
CA: reversed

Issues:
A. WON the Deed of Definite Sale is in reality
an equitable mortgage
B. WON petitioner's property is liable to
PNB for the loans contracted by
Parangan by virtue of the special
power of attorney
Held:

1.

YES. A contract is perfected by mere

consent. More particularly, a contract of
sale is perfected at the moment there is a
meeting of minds upon the thing which is
the object of the contract and upon the
price. This meeting of the minds speaks of
the intent of the parties in entering into the
contract respecting the subject matter and
the consideration thereof. If the words of
the contract appear to be contrary to the
evident intention of the parties, the latter
shall prevail over the former. In the case at
bench, the evidence is sufficient to warrant
a finding that petitioner and Parangan
merely intended to consolidate the
former's indebtedness to the latter in a
single instrument and to secure the same
with the subject property. Even when a
document appears on its face to be a sale,
the owner of the property may prove that
the contract is really a loan with mortgage
by raising as an issue the fact that the
document does not express the true intent
of the parties. In this case, parol evidence
then becomes competent and admissible
to prove that the instrument was in truth
and in fact given merely as a security for
the repayment of a loan.
Art. 1602, (6), in relation to Art 1604
provides that a contract of sale is
presumed to be an equitable mortgage in
any other case where it may be fairly
inferred that the real intention of the
parties is that the transaction shall secure
the payment of a debt or the performance
of any other obligation. That the case
clearly falls under this category can be
inferred
from
the
circumstances
surrounding the transaction as herein set
forth:
Petitioner had no knowledge that
the contract she signed is a deed of
sale. The contents of the same
were not read nor explained to her
so that she may intelligibly
formulate
in
her
mind
the
consequences of her conduct and
the nature of the rights she was
ceding in favor of Parangan.
Petitioner is illiterate and her
condition constrained her to merely
rely on Parangan's assurance that
the contract only evidences her
indebtedness to the latter. When
one of the contracting parties is
unable to read, or if the contract is
in a language not understood by
him, and mistake or fraud is
alleged, the person enforcing the
contract must show that the terms

thereof have been fully explained

to the former. Settled is the rule
that where a party to a contract is
illiterate or cannot read or cannot
understand the language in which
the contract is written, the burden
is on the party interested in
enforcing the contract to prove that
the
terms
thereof
are
fully
explained to the former in a
language understood by him. This
burden has not been satisfactorily
discharged.
2.

YES. Third persons who are not parties to a

loan may secure the latter by pledging or
mortgaging their own property. So long as
valid consent was given, the fact that the
loans were solely for the benefit of
Parangan
would
not
invalidate
the
mortgage with respect to petitioner's
property. In consenting thereto, even
granting that petitioner may not be
assuming personal liability for the debt, her
property shall nevertheless secure and
respond for the performance of the
principal obligation.
It is admitted that petitioner is the owner of
the parcel of land mortgaged to PNB on
five (5) occasions by virtue of the Special
Powers of Attorney executed by petitioner
in favor of Parangan. Petitioner argues that
the last three mortgages were void for lack
of authority. She totally failed to consider
that said Special Powers of Attorney
are a continuing one and absent a
valid revocation duly furnished to the
mortgagee, the same continues to
have force and effect as against third
persons who had no knowledge of
such lack of authority as provided in
Article 1921 of the Civil Code [Art. 1921. If
the agency has been entrusted for the
purpose of contracting with specified
persons, its revocation shall not prejudice
the latter if they were not given notice
thereof.]
The SPA by petitioner in favor of Parangan
duly authorized the latter to represent and
act on behalf of the former. Having done
so, petitioner clothed Parangan with
authority to deal with PNB on her behalf
and in the absence of any proof that the
bank had knowledge that the last three
loans were without the express authority of
petitioner, it cannot be prejudiced thereby.
As far as third persons are concerned, an
act is deemed to have been performed
within the scope of the agent's authority if

such is within the terms of the power of

attorney as written even if the agent has in
fact exceeded the limits of his authority
according to the understanding between
the principal and the agent. The SPA
particularly provides that the same is good
not only for the principal loan but also for
subsequent
commercial,
industrial,
agricultural loan or credit accommodation
that the attorney-in-fact may obtain and
until the power of attorney is revoked in a
public instrument and a copy of which is
furnished to PNB. Even when the agent has
exceeded his authority, the principal is
solidarily liable with the agent if the former
allowed the latter to act as though he had
full powers (Article 1911, Civil Code). The
mortgage
directly
and
immediately
subjects the property upon which it is
imposed. The property of third persons
which has been expressly mortgaged to
guarantee an obligation to which the said
persons are foreign, is directly and jointly
liable for the fulfillment thereof; it is
therefore subject to execution and sale for
the purpose of paying the amount of the
debt for which it is liable. However,
petitioner has an unquestionable right to
demand proportional indemnification from
Parangan with respect to the sum paid to
PNB from the proceeds of the sale of her
property in case the same is sold to satisfy
the unpaid debts.

Rallos vs. Yangco (EARLA)

Sept 27, 1911
Moreland, J.
FACTS: On November 27, 1907, Teodoro Yangco
sent a letter to Florentino Rallos, offering
Yangco his services. Accordingly, he has just
opened a shipping and commission department
for buying and selling tobacco leaf and other
native products in his steamship office in
Manila. He expressly indicated in his letter that
Florentino Collantes will act for and in his
behalf in transacting with Rallos. He further
stated that he has given Collantes a power of
attorney, notarized by Mr. Rodriguez.
On February 1909, Rallos sent to Collantes 218
bundles of tobacco in the leaf to be sold on
commission. After deducting the commission
(P206.96) from the total amount of P1744,
Rallos is entitled to P1537.08.
It appears that at the time Rallos gave the
tobacco to Collantes, he was not the agent of

Yangco anymore, Yangco having severed his

relationship with Collantes. This fact however
was not known to nor communicated with
Rallos. As a result, when Rallos tried to collect
from Yangco the P1537.08, Yangco refused to
pay him the amount, on the basis that
Collantes was already acting on his behalf at
the time he collected the 218 bundles of
tobacco.
ISSUE: WON Yangco is still liable to pay Rallos
the amount of P1537.
HELD: Yes. Having advertised the fact that
Collantes was his agent and having given them
a special invitation to deal with such agent, it
was the duty of the defendant on the
termination of the relationship of principal and
agent to give due and timely notice thereof to
the plaintiffs. Failing to do so, he is responsible
to them for whatever goods may have been in
good faith and without negligence sent to the
agent
without
knowledge,
actual
or
constructive, of the termination of such
relationship.
For his failure to inform Rallos of the
termination of the agency relationship with
Collantes, Yangco is liable.

Artciles 1924, 1925 - REX

Art. 1924. The agency is revoked if the
principal directly manages the business
entrusted to the agent, dealing directly with
third persons. (n)
Art. 1925. When two or more principals have
granted a power of attorney for a common
transaction, any one of them may revoke the
same without the consent of the others
CMS Logging v. CA (TOPE)
1992
J. Nocon
Facts:

Petitioner CMS is a forest concessionaire

engaged in the logging business, while
private respondent DRACOR is engaged in
the business of exporting and selling logs
and lumber. On August 28, 1957, CMS and
DRACOR entered into a contract of agency
whereby the former appointed the latter as
its exclusive export and sales agent for all
logs that the former may produce, for a
period of five (5) years.

One of the provisions indicated that

DRACOR was to handle all negotiations.

6 months before the CoAgency was about

to expire CMS president went to Tokyo and
found out that DRACOR sold CMS logs
through Shinko Trading and earned a
commission of $1 per 1000 bd. Ft. of logs.
CMS claimed that this commission paid to
Shinko was in violation of the agreement
and that it (CMS) is entitled to this amount
as part of the proceeds of the sale of the
logs. CMS contended that since DRACOR
had been paid the 5% commission under
the agreement, it is no longer entitled to
the additional commission paid to Shinko
as this tantamount to DRACOR receiving
double compensation for the services it
rendered.
CMS later shipped and sold directly to
Japanes buyers without the help of
DRACOR.
DRACOR
counterclaims
for
the
commissions on these transactions.
CA found no evidence that Shinko collected
the commissions

Issue:
1. WoN Shinko received the commissions
2. WoN
DRACOR
is
entitled
to
the
commissions on the Direct Sales of CMS to
Japanese buyers
Held:
1. Petition unmeritorious, no evidence. The
finding of fact was only based on a
summary from CMS itself.
Moreover, even if it was shown that Shinko did
in fact receive the commissions in question,
CMS is not entitled thereto since these were
apparently paid by the buyers to Shinko for
arranging the sale. This is therefore not part of
the gross sales of CMS's logs.
2.

No. We find merit in CMS's contention that

the appellate court erred in holding that
DRACOR was entitled to its commission
from the sales made by CMS to Japanese
firms.

The principal may revoke a contract of agency

at will, and such revocation may be express, or
implied, and may be availed of even if the
period fixed in the contract of agency as not
yet expired. As the principal has this absolute
right to revoke the agency, the agent can not
object thereto; neither may he claim damages
arising from such revocation, unless it is shown
that such was done in order to evade the
payment of agent's commission.
In the case at bar, CMS appointed DRACOR as
its agent for the sale of its logs to Japanese

firms. Yet, during the existence of the contract

of agency, DRACOR admitted that CMS sold its
logs directly to several Japanese firms. This act
constituted an implied revocation of the
contract of agency under Article 1924 of the
Civil Code, which provides:
Art. 1924 The agency is revoked if
the principal directly manages the
business entrusted to the agent,
dealing directly with third persons.
Since the contract of agency was revoked by
CMS when it sold its logs to Japanese firms
without the intervention of DRACOR, the latter
is no longer entitled to its commission from the
proceeds of such sale and is not entitled to
retain whatever moneys it may have received
as its commission for said transactions. Neither
would DRACOR be entitled to collect damages
from CMS, since damages are generally not
awarded to the agent for the revocation of the
agency, and the case at bar is not one falling
under the exception mentioned, which is to
evade the payment of the agent's commission.

Del Rosario v. Abad, 104 Phil 648 - ABBY

1958; Padilla
Facts:

Plaintiffs are the children and heirs of

Tiburcio del Rosario. Del Rosario was a
grantee of a homestead patent in Nueva
Ecija. The Certificate was issue Feb 11,
1937. He obtained a loan from Primitivo
Abad Feb 24, 1937 (remember the 5 yr
prohibition from encumbrance rule) for
P2000 at 12% pa payable Dec 1941.

The security for the payment was the

improvement on the parcel of land. An
irrevocable special power of attorney was
also executed authorizing Abad to sell and
convey the parcel of land.

December 1945 Tiburcio died leaving the

mortgage debt unpaid. Later,
Primitivo
sold the land to his son Teodorico Abad for
P1. Title now registered in Teodoricos
name.

Del Rosario heirs filed suit for recovery and

possession of the land.
Issue:
1. WoN Power of Attorney created an agency
coupled with an interest
2. WoN the land was sold validly
Held: No. The power of attorney executed by
the homesteader in favor of Abad did not
create an agency nor did it clothe the agency

with irrevocable character. A mere statement in

the power of attorney that it is coupled with an
interest is not enough. In what does such
interest consist must be stated in the power of
attorney. The mortgage has nothing to do with
the power of attorney and may be foreclosed
by the mortgagee upon the failure of the
mortgagor to comply with his obligation. As the
agency was not coupled with an interest, it was
terminated upon the death of the principal, and
the agent could no longer validly convey the
land. Hence, the sale was null and void.
Granting that the PoA in question was valid it
would subject the land to an encumbrance.
(executed within 5 yrs after issuance of the
patent, the same is null and void.)

Valenzuela v CA
Petitioner Arturo P. Valenzuela (Valenzuela for
short) is a General Agent of private respondent
Philippine
American
General
Insurance
Company, Inc. (Philamgen for short) since
1965. As such, he was authorized to solicit and
sell in behalf of Philamgen all kinds of non-life
insurance, and in consideration of services
rendered was entitled to receive the full
agent's commission of 32.5% from Philamgen.
From 1973 to 1975, Valenzuela solicited marine
insurance from one of his clients, the Delta
Motors,
Inc.
(Division
of
Electronics
Airconditioning and Refrigeration) in the
amount of P4.4 Million from which he was
entitled to a commission of 32% (Exhibit "B").
However, Valenzuela did not receive his full
commission which amounted to P1.6 Million
from the P4.4 Million insurance coverage of the
Delta Motors. During the period 1976 to 1978,
premium
payments
amounting
to
P1,946,886.00 were paid directly to Philamgen
and Valenzuela's commission to which he is
entitled amounted to P632,737.00.
Philamgen and its President, Bienvenido M.
Aragon insisted on the sharing of the
commission with Valenzuela at 50-50 sharing.
Valenzuela firmly reiterated his objection to the
proposals of respondents.
Because of the refusal of Valenzuela,
Philamgen and its officers took drastic action
against Valenzuela. They: (a) reversed the
commission due him by not crediting in his
account the commission earned from the Delta
Motors, Inc. insurance; (b) placed agency
transactions on a cash and carry basis; (c)
threatened the cancellation of policies issued
by his agency; and (d) started to leak out news
that Valenzuela has a substantial account with

Philamgen. All of these acts resulted in the

decline of his business as insurance agent.
Then, Philamgen terminated the General
Agency Agreement of Valenzuela.
The petitioners sought relief by filing the
complaint against the private respondents.
RTC: reinstate plaintiff Arturo P. Valenzuela as
its General Agent, and to pay plaintiffs.
CA: Plaintiff-appellee Valenzuela to pay
defendant-appellant Philamgen the sum of one
million nine hundred thirty two thousand five
hundred thirty-two pesos and seventeen
centavos (P1,902,532.17), with legal interest
thereon from the date of finality of this
judgment until fully paid.
SC: affirmed RTCs decision on the payments
but declared that the contractual relationship
between Arturo P. Valenzuela and Philippine
American General Insurance Company shall be
deemed terminated upon the satisfaction of
the judgment as modified.
In the insurance business in the Philippines, the
most difficult and frustrating period is the
solicitation and persuasion of the prospective
clients to buy insurance policies. Normally,
agents would encounter much embarrassment,
difficulties, and oftentimes frustrations in the
solicitation and procurement of the insurance
policies. To sell policies, an agent exerts great
effort, patience, perseverance, ingenuity, tact,
imagination, time and money. In the case of
Valenzuela, he was able to build up an Agency
from scratch in 1965 to a highly productive
enterprise with gross billings of about Two
Million
Five
Hundred
Thousand
Pesos
(P2,500,000.00) premiums per annum. The
records sustain the finding that the private
respondent started to covet a share of the
insurance business that Valenzuela had built
up, developed and nurtured to profitability
through over thirteen (13) years of patient
work and perseverance. When Valenzuela
refused to share his commission in the Delta
account, the boom suddenly fell on him.
The private respondents by the simple
expedient of terminating the General Agency
Agreement appropriated the entire insurance
business of Valenzuela. With the termination of
the General Agency Agreement, Valenzuela
would no longer be entitled to commission on
the renewal of insurance policies of clients
sourced from his agency. Worse, despite the
termination
of
the
agency,
Philamgen
continued to hold Valenzuela jointly and
severally liable with the insured for unpaid
premiums. Under these circumstances, it is
clear that Valenzuela had an interest in the
continuation of the agency when it was

unceremoniously terminated not only because

of the commissions he should continue to
receive from the insurance business he has
solicited and procured but also for the fact that
by the very acts of the respondents, he was
made liable to Philamgen in the event the
insured fail to pay the premiums due. They are
estopped by their own positive averments and
claims
for
damages.
Therefore,
the
respondents cannot state that the agency
relationship
between
Valenzuela
and
Philamgen is not coupled with interest. "There
may be cases in which an agent has been
induced to assume a responsibility or incur a
liability, in reliance upon the continuance of the
authority under such circumstances that, if the
authority be withdrawn, the agent will be
exposed to personal loss or liability" (See MEC
569 p. 406).
Furthermore, there is an exception to the
principle that an agency is revocable at will
and that is when the agency has been given
not only for the interest of the principal but for
the interest of third persons or for the mutual
interest of the principal and the agent. In these
cases, it is evident that the agency ceases to
be freely revocable by the sole will of the
principal.

Republic v Evangelista
Legaspi is the owner of a land located in Bigte,
Norzagaray, Bulacan. In November 1999,
petitioner Calimlim, representing the Republic
of the Philippines, and as then head of the
Intelligence Service of the Armed Forces of the
Philippines and the Presidential Security Group,
entered into a Memorandum of Agreement
(MOA) with one Ciriaco Reyes. The MOA
granted Reyes a permit to hunt for treasure in
a land in Bigte, Norzagaray, Bulacan.
On February 15, 2000, Legaspi executed a
special power of attorney (SPA) appointing his
nephew, private respondent Gutierrez, as his
attorney-in-fact. Gutierrez was given the power
to deal with the treasure hunting activities on
Legaspi's land and to file charges against those
who may enter it without the latter's authority.
egaspi agreed to give Gutierrez 40% of the
treasure that may be found in the land.
On February 29, 2000, Gutierrez filed a case for
damages and injunction against petitioners for
illegally entering Legaspi's land. He hired the
legal services of Atty. Homobono Adaza. Their
contract provided that as legal fees, Atty.
Adaza shall be entitled to 30% of Legaspi's
share in whatever treasure may be found in the
land. In addition, Gutierrez agreed to pay Atty.
Adaza P5,000.00 as appearance fee per court

hearing and defray all expenses for the cost of

the litigation.
On March 7, 2000, the SPA was revoked by
Legaspi through a deed of revocation.
RTC: Preliminary injunction is granted.
CA: affirmed RTC decision.
SC: Affirmed RTC and CA.
Art. 1868 of the Civil Code provides that by the
contract of agency, an agent binds himself to
render some service or do something in
representation or on behalf of another, known
as the principal, with the consent or authority
of the latter.
A contract of agency is generally revocable as
it is a personal contract of representation
based on trust and confidence reposed by the
principal on his agent. As the power of the
agent to act depends on the will and license of
the principal he represents, the power of the
agent ceases when the will or permission is
withdrawn by the principal. Thus, generally, the
agency may be revoked by the principal at will.
However, an exception to the revocability of a
contract of agency is when it is coupled with
interest, i.e., if a bilateral contract depends
upon the agency. The reason for its
irrevocability is because the agency becomes
part of another obligation or agreement. It is
not solely the rights of the principal but also
that of the agent and third persons which are
affected. Hence, the law provides that in such
cases, the agency cannot be revoked at the
sole will of the principal. It is clear that the
treasure that may be found in the land is the
subject matter of the agency; that under the
SPA, Gutierrez can enter into contract for the
legal services of Atty. Adaza; and, thus
Gutierrez and Atty. Adaza have an interest in
the subject matter of the agency, i.e., in the
treasures that may be found in the land. This
bilateral contract depends on the agency and
thus renders it as one coupled with interest,
irrevocable at the sole will of the principal
Legaspi.
When an agency is constituted as a clause in a
bilateral contract, that is, when the agency is
inserted in another agreement, the agency
ceases to be revocable at the pleasure of the
principal as the agency shall now follow the
condition
of
the
bilateral
agreement.
Consequently,
the
Deed
of
Revocation
executed by Legaspi has no effect. The
authority of Gutierrez to file and continue with
the prosecution of the case at bar is
unaffected.
On the second issue, we hold that the issuance
of the writ of preliminary injunction is justified.

A writ of preliminary injunction is an ancilliary

or preventive remedy that is resorted to by a
litigant to protect or preserve his rights or
interests and for no other purpose during the
pendency of the principal action.

Valera v. Velasco, 51 Phil 695 - JANCES

March 13, 1928
J. Villa-Real
Facts: Plaintiff appointed defendant as his
attorney-in-fact with authority to manage his
property consisting of usufruct of real property
in Manila. In the liquidation of the accounts
made my defendant, plaintiff was revealed to
owe defendant P1100. Misunderstanding arose
between them, thus the defendant brought suit
against the plaintiff. Judgment was rendered in
favor of defendant. The sheriff then levied
upon the plaintiff's right of usufruct, sold it at
public auction and adjudicated it to the
defendant in payment of all of his claim.
Plaintiff sold his right of redemption to a person
but recovered the same after some time. After
which, his right of redemption was sold by the
sheriff at a public auction to Vallejo due to
judgment rendered against plaintiff in another
civil case. Vallejo then sold this right to
defendant Velasco. Plaintiff then filed a
complaint against Velasco alleging that the
sale of the right to redemption to Velasco was
null and void since Velasco was still his agent,
there being no express renunciation.
Ruling: CFI dismissed complaint; no right of
action.
Issue: WON the agency was terminated despite
lack of express renunciation [YES}
HELD: When the agent filed a complaint
against his principal for recovery of a sum of
money arising from the liquidation of the
accounts between them in connection with the
agency, Federico Valera could not have
understood otherwise than that Miguel Velasco
renounced the agency; because his act was
more expressive than words and could not
have caused any doubt.
The fact that an agent institutes an action
against his principal for the recovery of the
balance in his favor resulting from the
liquidation of the accounts between them
arising from the agency, and renders and final
account of his operations, is equivalent to an
express renunciation of the agency, and
terminates the juridical relation between them.
Disposition: Judgment appealed from affirmed.

Rallos v. Felix Go Chan (MAI)

January 31, 1978
Muoz Palma, J.
FACTS: Concepcion and Gerundia Rallos were
sisters and registered co-owners of a parcel of
land known as Lot No. 5983. In 1954, they
executed a special power of attorney in favor of
their brother, Simeon Rallos, authorizing him to
sell for and in their behalf the aforementioned
parcel of land. On March 1955, Concepcion
Rallos died. On September 1955, Simeon Rallos
sold the undivided shares of his sisters in lot
5983 to Felix Go Chan and Sons Realty
Corporation. The deed of sale was registered
and the previous TCT was cancelled.
On May 1956, Ramos Rallos, as administrator
of the Intestate Estate of Concepcion Rallos,
filed a complaint with the CFI of Cebu, praying
(1) that the sale of the undivided share of the
deceased Concepcion Rallos be declared
unenforceable, and said share be reconveyed
to her estate; (2) that the TCT issued in the
name of Felix Go Chan and Sons Realty
Corporation be cancelled; and (3) that the
plaintiff be indemnified by way of attorneys
fees and payment of costs of suit.
The trial court rendered judgment declaring the
deed of sale null and void, insofar as the onehalf pro-indiviso share of Concepcion Rallos in
the property in question, and sentencing Juan
Borromeo, the administrator of the estate of
Simeon Rallos, to pay Felix Go Chan and Sons
Realty Corporation the sum representing the
price of one-half of the lot. The appellate court
reversed the decision and sustained the sale.
ISSUE: Whether or not the sale of the agent of
the principals property after the latters death
is valid
HELD: NO. The general rule in Article 1919 of
the NCC is that death is one of the causes for
the extinguishment of agency. There being an
integration of the personality of the principal
into that of the agent, it is not possible for the
representation to continue once the death of
either is established. There are certain
exceptions, however, Article 1931 being one of
them. Under this provision, an act done by the
agent after the death of the principal is valid
and effective if two conditions concur: (1) the
agent acted without knowledge of the death of
the principal; and (2) that the third person who
contracted with the agent acted in good faith.

But because it was established that Simeon

Rallos had knowledge of the death of his
principal when he made the sale, Article 1931
will not apply. The general rule shall apply then
that any act of an agent after the death of his
principal is void ab initio. Simeon Rallos act of
selling the share of Concepcion after her death
is therefore null and void.
AGENCY:
The relationship of agency is whereby one
party, called the principal (mandante),
authorizes
another,
called
the
agent
(mandatario), to act for and in his behalf in
transactions with third persons. The essential
elements of agency are: (1) there is consent,
express or implied of the parties to establish
the relationship; (2) the object is the execution
of a juridical act in relation to a third person;
(3) the agents acts as a representative and not
for himself, and (4) the agent acts within the
scope of his authority.
Agency is basically personal representative,
and derivative in nature. The authority of the
agent to act emanates from the powers
granted to him by his principal; his act is the
act of the principal if done within the scope of
the authority. Qui facit per alium facit se. "He
who acts through another acts himself".