AGENCY Digest Cases

7/25/2019 AGENCY Digest Cases

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AGENCY- CASE DIGEST

Raisa G. Marasigan

MANILA MEMORIAL PARK CEMETERY, INC.vs.

PEDRO L. LINSANGAN

FACTS:

Florencia Baluyot offered Atty. Pedro L. Linsangan a

lot called Garden State at the Holy Cross Memorial

Park owned by petitioner (MMPCI). According to

Baluyot, a former owner of a memorial lot under

Contract No. 25012 was no longer interested in

acquiring the lot and had opted to sell his rights

subject to reimbursement of the amounts he already

paid. The contract was for P95,000.00. Baluyot

reassured Atty. Linsangan that once reimbursement

is made to the former buyer, the contract would be

transferred to him.

Atty. Linsangan agreed and gave Baluyot P35,295.00

representing the amount to be reimbursed to the

original buyer and to complete the down payment to

MMPCI. Baluyot issued handwritten and typewritten

receipts for these payments. Contract No. 28660 has

a listed price of P132,250.00. Atty. Linsangan

objected to the new contract price, as the same was

not the amount previously agreed upon. To convince

Atty. Linsangan, Baluyot executed a document

confirming that while the contract price is

P132,250.00, Atty. Linsangan would pay only the

original price of P95,000.00.

Later on, Baluyot verbally advised Atty. Linsangan

that Contract No. 28660 was cancelled for reasons

the latter could not explain. For the alleged failure of

MMPCI and Baluyot to conform to their agreement,

Atty. Linsangan filed a Complaint for Breach of

Contract and Damages against the former.

MMPCI alleged that Contract No. 28660 was

cancelled conformably with the terms of the contract

because of non-payment of arrearages. MMPCI

stated that Baluyot was not an agent but an

independent contractor, and as such was notauthorized to represent MMPCI or to use its name

except as to the extent expressly stated in the

Agency Manager Agreement. Moreover, MMPCI was

not aware of the arrangements entered into by Atty.

Linsangan and Baluyot, as it in fact received a down

payment and monthly installments as indicated in

the contract.

The trial court held MMPCI and Baluyot jointly and

severally liable. The Court of Appeals affirmed the

decision of the trial court.

ISSUES:

1. Whether or not there was a contract of agency

between Baluyot and MMPCI?

2. Whether or not MMPCI should be liable for

Baluyots act?

HELD:

Yes. 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. As properly found

both by the trial court and the Court of Appeals,

Baluyot was authorized to solicit and remit to

MMPCI offers to purchase interment spaces

obtained on forms provided by MMPCI. The terms of

the offer to purchase, therefore, are contained in

such forms and, when signed by the buyer and an

authorized officer of MMPCI, becomes binding on

both parties.

No. While there is no more question as to the agency

relationship between Baluyot and MMPCI, there is

no indication that MMPCI let the public, or

specifically, Atty. Linsangan to believe that Baluyot

had the authority to alter the standard contracts of

the company. Neither is there any showing that prior

to signing Contract No. 28660, MMPCI had anyknowledge of Baluyot's commitment to Atty.

Linsangan. Even assuming that Atty. Linsangan was

misled by MMPCI's actuations, he still cannot invoke

the principle of estoppel, as he was clearly negligent

in his dealings with Baluyot, and could have easily

determined, had he only been cautious and prudent,

whether said agent was clothed with the authority to

change the terms of the principal's written contract.

To repeat, the acts of the agent beyond the scope of

his authority do not bind the principal unless the

latter ratifies the same. It also bears emphasis that

when the third person knows that the agent was

acting beyond his power or authority, the principalcannot be held liable for the acts of the agent. If the

said third person was aware of such limits of

authority, he is to blame and is not entitled to

recover damages from the agent, unless the latter

undertook to secure the principal's ratification.

IR FRANCE vs. COURT OF APPEALS

G.R. No. 76093/ March 21, 1989

FACTS:

Atty. Narciso Morales, a lawyer, thru his

representative purchased an airline ticket from

Aspac Management Corporation, petitioner's General

Sales Agent in Makati. The itinerary covered by the

ticket included several cities, with certain segments

thereof restricted by markings of "non endorsable'

and 'valid on Air France only. While in New York,

U.S.A., Atty. Morales suffered an ear infection which

necessitated medical treatment. He obtained three

medical certificate. From New York, he flew to Paris,

Stockholm and then Copenhagen where he made

representations with petitioner's office to shorten his

trip by deleting some of the cities in the itinerary.

Atty. Morales was informed that, as a matter of

procedure, confirmation of petitioner's office inManila (as ticketing office) must be secured before

shortening of the route(already paid for). The Air

France Manila replied in negative with the request of

Atty. Morales to shorten his trip. After reiterating his

need to flying home on a shorter route due to his ear

infection, and presentation of supporting medical

certificates, again, the airline office made the

CASE DIGEST|AGENCY 1


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necessary request to Manila a Hamburg, Paris,

Geneva, Rome, Paris, Hongkong and Manila route.

Still, the request was denied. Atty. Morales,

therefore, had to buy an entirely new set of tickets,

paying 1,914 German marks for the homeward

route. Upon arrival in Manila, Atty. Morales filed a

complaint for breach of contract of carriage and

damages. The CFI found Air France was in evident

bad faith for violation of the contract of carriage,

aggravated by the threatening attitude of its

employees in Hamburg. On appeal the Court of

Appeals affirmed the CFI's decision with

modifications on the award of damages. Questioning

the factual findings of the CA Air France filed a

petition for review..

ISSUE:

Whether or not Air France is guilty of Breach of

Contract of Carriage.

HELD:No, Air France is not guilty of Breach of Contract of

Carriage. The respondent court's ruling that there

was breach of contract of carriage is premised on

petitioner's refusal to re-route Atty. Morales and, in

effect, requiring him to purchase a new set of tickets.

International Air Transportation Association (IATA)

Resolution No. 275 e, 2., special note reads:

"Where a fare is restricted and such restrictions are

not clearly evident from the required entries on the

ticket, such restrictions may be written, stamped or

reprinted in plain language in the

Endorsement/Restrictions" box of the applicable

flight coupon(s); or attached thereto by use of anappropriate notice." Voluntary changes to

tickets,while allowable, are also covered by (IATA)

Resolution No. 1013, Art. II, which provides: "1.

changes to the ticket requested by the passenger will

be subject to carriers regulations. Considering the

original restrictions on the ticket, it was not

unreasonable for Air France to deny the request. It is

essential before an award of damages that the

claimant must satisfactorily prove during the trial

the existence of the factual basis of the damages and

its causal connection to defendant's acts. Atty.

Morales failed to substantiate his claim due tofailure to present a medical certificate that he indeed

had undergone medical examination upon arrival in

Manila. Furthermore, Air France employees in

Hamburg informed Atty. Morales that his tickets

were partly stamped "non-endorsable" and "valid on

Air France only." The mere refusal to accede to the

passenger's wishes does not necessarily translate

into damages in the absence of bad faith. Atty.

Morales has failed to show wanton, malevolent or

reckless misconduct imputable to petitioner in its

refusal to re-route. Omissions by ordinary

passengers may be condoned but more is expected of

members of the bar who cannot feign ignorance ofsuch limitations and restrictions. An award of moral

and exemplary damages cannot bes ustained under

the circumstances, but petitioner has to refund the

unused coupons in the Air France ticket to the

private respondent.

RALLOS v FELIX GO CHAN & REALTY COPR.,

Munoz-Palma

Plaintiff: Ramon Rallos

Defendant: Felix Go Chan & Sons Realty Corporation

Facts: Concepcion and Gerundia Rallos were

sisters and registered co-owners of the parcel of land

in issue. They executed a special power of attorney

in favor of their brother, Simeon Rallos, authorizing

him to sell such land for and in their behalf. After

Concepcion died, Simeon Rallos sold the undivided

shares of his sisters Concepcion and Gerundia to

Felix Go Chan & Sons Realty Corporation for the

sum of P10,686.90. New TCTs were issued to the

latter.Petitioner Ramon Rallos, administrator of the

Intestate Estate of Concepcion filed a complaint

praying (1) that the sale of the undivided share of

the deceased Concepcion Rallos in lot 5983 beunenforceable, and said share be reconveyed to her

estate; (2) that the Certificate of 'title issued in the

name of Felix Go Chan & Sons Realty Corporation be

cancelled and another title be issued in the names of

the corporation and the "Intestate estate of

Concepcion Rallos" in equal undivided and (3) that

plaintiff be indemnified by way of attorney's fees and

payment of costs of suit.

Issues:

Whether or not the sale fell within the exception to

the general rule that death extinguishes the

authority of the agent

Held/Ratio:

Yes the sale is void. The court held that no one may

contract in the name of another without being

authorized by the latter, or unless he has by law a

right to represent him (Art. 1317 of the Civil

Code). Simons authority as agent was extinguished

upon Concolacions death. The sale did not fall

under the exceptions to the general rule that death

ipso jure extinguishes the authority of the agent.

Art.1930 inapplicable since SPA in favor of Simon

Rallos was not coupled with interest and Art. 1931inapplicable because Rallos knew of principal

Concepcions death. For Art 1931 to apply, both

requirements must be present Laws on agency, the

terms of which are clear and unmistakable leaving

no room for an interpretation contrary to its tenor,

should apply, the law provides that death of the

principal ipso jure extinguishes the authority of the

agent to sell rendering the sale to a third person in

good faith unenforceable unless at the agent had no

knowledge of the principals death at that time

(exception under Art. 1931)

Dispositive: CA Decision reversed, CFI decision

affirmed. Sale was null and void.



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ORIENT AIR SERVICES & HOTEL

REPRESENTATIVES v. COURT OF APPEALS and

AMERICAN AIR-LINES INCORPORATED

G.R. No. 76933 May 29, 1991

PADILLA, J.:

Facts:

American Airlines, Inc. (American Air), an air carrier

offering passenger and air cargo transportation in

the Philippines, and Orient Air Services and Hotel

Representatives (Orient Air),entered into a General

Sales Agency Agreement (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. In the

agreement, Orient Air shall remit in United States

dollars to American the ticket stock or exchange

orders, less commissions to which Orient Air

Services is entitled, not less frequently than semi-monthly. On the other hand, American will pay

Orient Air Services commission on transportation

sold by Orient Air Services or its sub-agents.

Thereafter, American alleged that Orient Air had

reneged on its obligations under the Agreement by

failing to promptly remit the net proceeds of sales for

the months of January to March 1981 in the

amount of US $254,400.40, American Air by itself

undertook the collection of the proceeds of tickets

sold originally by Orient Air and terminated

forthwith the Agreement in accordance with

paragraph 13 which authorize the termination of the

thereof in case Orient Air is unable to transfer to the

United States the funds payable by Orient Air

Services to American. American Air instituted suit

against Orient Air with the Court of First Instance of

Manila for Accounting with Preliminary Attachment

or Garnishment, Mandatory Injunction and

Restraining Order averring the aforesaid basis for

the termination of the Agreement as well as therein

defendant's previous record of failures "to promptly

settle past outstanding refunds of which there were

available funds in the possession of the

defendant, . . . to the damage and prejudice of

plaintiff. Orient Air denied the material allegationsof the complaint with respect to plaintiffs

entitlement to alleged unremitted amounts,

contending that after application thereof to the

commissions due it under the Agreement, plaintiff in

fact still owed Orient Air a balance in unpaid

overriding commissions. Further, the defendant

contended that the actions taken by American Air in

the course of terminating the Agreement as well as

the termination itself were untenable. The trial court

ruled in its favor which decision was affirmed with

modification byCourt of Appeals. It held the

termination made by the latter as affecting the GSA

agreementillegal and improper and ordered theplaintiff to reinstate defendant as its general sales

agent for passenger transportation in the Philippines

in accordance with said GSA agreement.

ISSUE:

The principal issue for resolution by the Court is the

extent of Orient Air's right to the 3% overriding

commission.

HELD:

We agree with the findings of the respondent

appellate court. As earlier established, Orient Air

was entitled to an overriding commission based on

total flown revenue. American Air's perception that

Orient Air was remiss or in default of its obligations

under the Agreement was, in fact, a situation where

the latter acted in accordance with the Agreement

that of retaining from the sales proceeds its accrued

commissions before remitting the balance to

American Air. Since the latter was still obligated to

Orient Air by way of such commissions. Orient Air

was clearly justified in retaining and refusing to

remit the sums claimed by American Air. The latter's

termination of the Agreement was, therefore, without

cause and basis, for which it should be held liable toOrient Air.

On the matter of damages, the respondent appellate

court modified by reduction the trial court's award of

exemplary damages and attorney's fees. This Court

sees no error in such modification and, thus, affirms

the same.

It is believed, however, that respondent appellate

court erred in affirming the rest of the decision of

the trial court.1wphi1 We refer particularly to the

lower court's decision ordering American Air to

"reinstate defendant as its general sales agent forpassenger transportation in the Philippines in

accordance with said GSA Agreement."

By affirming this ruling of the trial court,

respondent appellate court, in effect, compels

American Air to extend its personality to Orient 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 . 17 (emphasis

supplied) In an agent-principal relationship, the

personality of the principal is extended through the

facility of the agent. In so doing, the agent, by legal

fiction, becomes the principal, authorized to perform

all acts which the latter would have him do. Such 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. The Agreement

itself between the parties states that "either party

may terminate the Agreement without cause by

giving the other 30 days' notice by letter, telegram or

cable." (emphasis supplied) We, therefore, set aside

the portion of the ruling of the respondent appellatecourt reinstating Orient Air as general sales agent of

American Air.

WHEREFORE, with the foregoing modification, the

Court AFFIRMS the decision and resolution of the

respondent Court of Appeals, dated 27 January

1986 and 17 December 1986, respectively. Costs

against petitioner American Air.



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Sevilla vs CA

G..R. No. L-41182-3 April 16, 1988

Facts:

The petitioners invoke the provisions on human

relations of the Civil Code in this appeal by

certiorari.

Mrs. Segundina Noguera, party of the first part; the

Tourist World Service, Inc., represented by Mr. Eliseo

Canilao as party of the second part, and hereinafter

referred to as appellants, the Tourist World Service,

Inc. leased the premises belonging to the party of the

first part at Mabini St., Manila for the former-s use

as a branch office. In the said contract the party of

the third part held herself solidarily liable with the

party of the part for the prompt payment of themonthly rental agreed on. When the branch office

was opened, the same was run by the herein

appellant Una 0. Sevilla payable to Tourist World

Service Inc. by any airline for any fare brought in on

the efforts of Mrs. Lina Sevilla, 4% was to go to Lina

Sevilla and 3% was to be withheld by the Tourist

World Service, Inc.

On November 24, 1961 the Tourist World Service,

Inc. appears to have been informed that Lina Sevilla

was connected with a rival firm, the Philippine Travel

Bureau, and, since the branch office was anyhow

losing, the Tourist World Service considered closingdown its office.

On June 17,1963, appellant Lina Sevilla refiled her

case against the herein appellees and after the

issues were joined, the reinstated counterclaim of

Segundina Noguera and the new complaint of

appellant Lina Sevilla were jointly heard following

which the court ordered both cases dismiss for lack

of merit.

In her appeal, Lina Sevilla claims that a joint

bussiness venture was entered into by and between

her and appellee TWS with offices at the Ermita

branch office and that she was not an employee of

the TWS to the end that her relationship with TWS

was one of a joint business venture appellant made

declarations.

Issue:

Whether or not the padlocking of the premises by

the Tourist World Service, Inc. without the

knowledge and consent of the appellant Lina Sevilla

entitled the latter to the relief of damages prayed for

and whether or not the evidence for the saidappellant supports the contention that the appellee

Tourist World Service, Inc. unilaterally and without

the consent of the appellant disconnected the

telephone lines of the Ermita branch office of the

appellee Tourist World Service, Inc.?

Held:

The trial court held for the private respondent on the

premise that the private respondent, Tourist World

Service, Inc., being the true lessee, it was within its

prerogative to terminate the lease and padlock the

premises. It likewise found the petitioner, Lina

Sevilla, to be a mere employee of said Tourist World

Service, Inc. and as such, she was bound by the acts

of her employer. The respondent Court of Appeal

rendered an affirmance.

In this jurisdiction, there has been no uniform test

to determine the evidence of an employer-employee

relation. In general, we have relied on the so-called

right of control test, "where the person for whom the

services are performed reserves a right to control not

only the end to be achieved but also the means to be

used in reaching such end." Subsequently, however,

we have considered, in addition to the standard of

right-of control, the existing economic conditions

prevailing between the parties, like the inclusion ofthe employee in the payrolls, in determining the

existence of an employer-employee relationship.

the Decision promulgated on January 23, 1975 as

well as the Resolution issued on July 31, 1975, by

the respondent Court of Appeals is hereby

REVERSED and SET ASIDE. The private

respondent, Tourist World Service, Inc., and Eliseo

Canilao, are ORDERED jointly and severally to

indemnify the petitioner, Lina Sevilla, the sum of

25,00.00 as and for moral damages, the sum of

P10,000.00, as and for exemplary damages, and the

sum of P5,000.00, as and for nominal and/ortemperate damages.

GREEN VALLEY POULTRY & ALLIED PRODUCTS,

INC., vs. THE INTERMEDIATE APPELLATE

COURT and E.R. SQUIBB & SONS PHILIPPINE

CORPORATION.

FACTS:

On November 3, 1969, Squibb and Green Valley

entered into a letter agreement the text of which

reads: E.R. Squibb & Sons Philippine Corporation is

pleased to appoint Green Valley Poultry & AlliedProducts, Inc. as a non-exclusive distributor for

Squibb Veterinary Products, as recommended by Dr.

Leoncio D. Rebong, Jr. and Dr. J.G. Cruz, Animal

Health Division Sales Supervisor. A stipulation in

the agreement specifies that:

Payment for Purchases of Squibb Products will be

due 60 days from date of invoice or the nearest

business day thereto. No payment win be accepted in

the form of post-dated checks. Payment by check

must be on current dating. It is mutually agreed that

this non-exclusive distribution agreement can be

terminated by either Green Valley Poultry & AlliedProducts, Inc. or Squibb Philippines on 30 days

notice. For goods delivered to Green Valley but

unpaid, Squibb filed suit to collect. Green Valley

claimed that the contract with Squibb was a mere

agency to sell; that it never purchased goods from

Squibb; that the goods received were on

consignment only with the obligation to turn over



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the proceeds, less its commission, or to return the

goods if not sold, and since it had sold the goods but

had not been able to collect from the purchasers

thereof, the action was premature. Upon the other

hand, Squibb claimed that the contract was one of

sale so that Green Valley was obligated to pay for the

goods received upon the expiration of the 60-day

credit period. TC and CA upheld the claim of Squibb

that the agreement between the parties was a sales

contract.

ISSUE:

WON the contract is an agency to sell or a contract

of sale.

HELD:

CONTRACT OF SALE. Green Valley is liable because

it sold on credit without authority from its principal.

The Civil Code has a provision...

Ker and Co., LTD vs LingadGR No. L-20871 April 30, 1971

Facts:

CIR assessed the sum of P20,272.33 as the

commercial brokers percentage tax, surcharge, and

compromise penalty against Ker & Co. Ker and Co.

requested for the cancellation of the assessment and

filed a petition for review with the Court of Tax

Appeals. The CTA ruled that Ker and Co is liable as

a commercial broker. Ker has a contract with US

rubber. Ker is the distributor of the said company.

Ker was precluded from disposing the products

elsewhere unless there has been a written consent

from the company. The prices, discounts, terms of

payment, terms of delivery and other conditions of

sale were subject to change in the discretion of the

Company.

Issue:

Whether the relationship of Ker and Co and US

rubber was that of a vendor- vendee or principal-

broker

Ruling:

The relationship of Ker and Co and US rubber wasthat of a principal-broker/ agency. Ker and Co is

only an agent of the US rubber because it can

dispose of the products of the Company only to

certain persons or entities and within stipulated

limits, unless excepted by the contract or by the

Rubber Company, it merely receives, accepts and/or

holds upon consignment the products, which remain

properties of the latter company, every effort shall be

made by petitioner to promote in every way the sale

of the products and that sales made by petitioner are

subject to approval by the company. Since the

company retained ownership of the goods, even as it

delivered possession unto the dealer for resale tocustomers, the price and terms of which were

subject to the companys control, the relationship

between the company and the dealer is one of

agency.

LIM vs. PEOPLE

G.R. No. L-34338 November 21, 1984

RELOVA,J

FACTS:

Lourdes Lim went to the house of Maria de Guzman

and proposed to sell the latters tobacco.

Maria agreed with the proposal. Hence the execution

of a receipt manifesting that Lourdes received 615

kilos of tobacco to be sold at P1.30 per kilo, the

overprice for which would be received by Lourdes.

The receipt also states that the proceeds will be

given to Mariaas soon as it was sold. However,

Lourdes paid only P240, despite repeated demands.

5. Thus, Maria filed a complaint, and Lourdes was

found guilty of estafa. (Estafa is present where

contract to sell constituted another as mere agent)

Lourdes argued that the receipt was a contract of

sale and not a contract of agency to sell.

ISSUE:Is Lourdes argument tenable?

RULING:

NO. The contract was not a contract of sale because

there was no transfer of ownership of the goods to

Lourdes. Instead, the agreement was a contract of

agency to sell for it constituted Lourdes as agent

with the obligation to give the proceeds of the sale to

Maria as soon as the same was sold. The obligation

was immediately demandable as soon as the tobacco

was disposed of. Consequently, there is no need for

the court to fix the duration of the obligation, as

contended by Lourdes.

NARIC vs. CA

G.R. No. L-32320, July 16, 1979

FACTS:

The National Rice and Corn Corporation (Naric) had

on stock 8000 metric tons of corn which it could not

dispose of due to its poor quality. Naric called for

bids for the purchase of the corn and rice. But

precisely because of the poor quality of the corn, a

direct purchase of said corn even with the privilege

of importing commodities did not attract good offers.Davao Merchandising Corporation (Damerco) came

in with its offer to act as agent in the exportation of

the corn, with the agent answering for the price

thereof and shouldering all expenses incidental

thereto, provided it can import commodities, paying

the NARIC therefor from the price it offered for the

corn. Damerco was to open a domestic letter of

credit, which shall be available to the NARIC drawing

therefrom through sight draft without recourse. The

availability of said letter or letters of credit to the

NARIC was dependent upon the issuance of the

export permit. The payment therefor depended on

the importation of the collateral goods, that is afterits arrival.

The first half of the collateral goods were

successfully imported. Due to the inferior quality of

the corn, it had to be replaced with more acceptable

stock. This caused such delay that the letters of

credit expired without the NARIC being able to draw



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the full amount therefrom. Checks and PN were

issued by DAMERCO for the purpose of securing the

unpaid part of the price of the corn and as guaranty

that DAMERCO will purchase the corresponding

collateral goods.

But because of the change of administration in the

government, barter transactions were suspended.

Hence, DAMERCO was not able to import the

remaining collateral goods. NARIC instituted in the

CFI of Manila against DAMERCO and Fieldmens

Insurance Co. Inc. an action for recovery of a sum of

money representing the balance of the value of corn

and rice exported by DAMERCO. The trial court

rendered in favor of NARIC ordering DAMERCO and

Fieldmens Insurance Co. Inc., to pay, jointly and

severally. CA reversed the trial courts decision and

rendered a new judgement dismissing the complaint

as premature and for lack of cause of action. Hence

this petition for certiorari.

ISSUE:

Whether DAMERCO only acted as an agent of NARIC

or is a buyer

HELD:

The petition for review is denied and the resolution

of the CA appealed from is hereby affirmed

AGENT

Clearly from the contract between NARIC and

DAMERCO: bids were previously called for by theNARIC for the purchase of corn and rice to be

exported as well as of the imported commodities that

will be brought in, but said biddings did not succeed

in attracting good offers. Subsequently, Damerco

made an offer. Now, to be sure, the contract

designates the Naric as the seller and the Damerco

as the buyer. These designations, however, are

merely nominal, since the contract thereafter sets

forth the role of the buyer (Damerco) as agent of

the seller in exporting the quantity and kind of corn

and rice as well as in importing the collateral goods

thru barter and to pay the aforementioned collateral

goods.

The contract between the NARIC and the DAMERCO

is bilateral and gives rise to a reciprocal obligation.

The said contract consists of two parts: (1) the

exportation by the DAMERCO as agent for the

NARIC of the rice and corn; and (2) the importation

of collateral goods by barter on a back to back letter

of credit or no-dollar remittance basis. It is evident

that the DAMERCO would not have entered into the

agreement were it not for the stipulation as to the

importation of the collateral goods which it could

purchase.

It appears that we were also misled to believe that

the Damerco was buying the corn. A closer look at

the pertinent provisions of the contract, however,

reveals that the price as stated in the contract was

given tentatively for the purpose of fixing the price in

barter. It should likewise be stressed that the

aforesaid exportation and importation was on a no-

dollar remittance basis. In other words, the agent,

herein defendant Damerco, was not to be paid by its

foreign buyer in dollars but in commodities.

Damerco could not get paid unless the commodities

were imported, and Damerco was not exporting and

importing on its own but as agent of the plaintiff,

because it is the latter alone which could export and

import on barter basis according to its charter.

Thus, unless Damerco was made an agent of the

plaintiff, the former could not export the corn and

rice nor import at the same time the collateral

goods. This was precisely the intention of the

parties.

He is not to be considered a buyer, who should be

liable for the sum sought by NARIC because the

contract itself clearly provides the Damerco was to

export the rice and corn, AND TO BUY THE

collateral goods. There is nothing in the contract

providing unconditionally that Damerco was buyingthe rice and corn. To be more specific, if the

agreement was just a sale of corn to Damerco, the

contract need not specify that Damerco was to buy

the collateral goods.

SSS vs. CA(120 SCRA 707)

FACTS:

Spouses David and Socorro Cruz, applied and

granted a real estate loan by the SSS with residential

lot located at Pateros, Rizal as collateral. The

spouses Cruz complied with their monthlypayments. When delayed were incurred in their

monthly payments SSS filed a petition for foreclosure

of their real estate mortgage executed by the spouses

Cruz on the ground that the spouses Cruz defaulted

in payment, Pursuant for these application for

foreclosure notices were published on the second

notice the counsel for spouses Cruz sent a letter to

SSS informing the latter that his clients are up to

date in their payment of the monthly amortization

and the SSS should discontinued the publication of

the notices of foreclosure. This request remain

unheeded, this spouses Cruz filed an action fordamages against SSS before RTC in Rizal. SSS

invoking its immunity from suit being an agency of

the government performing government function.

The trial court and court of appeal nevertheless

awarded damages in favor of spouses Cruz which

was affirmed by court of appeal, Hence this petition.

ISSUE:

Whether or not SSS is immune from suit?

HELD:

Negative.The SSS has a distinct legal personality and

it can be sued for damages. The SSS does not enjoyimmunity from suit by express statutory consent. It

has corporated power separate and distinct from the

government. SSS own organic act specifically

provides that it can sue and be sued in court. These

words sue and be sued embrace all civil process

incident to a legal action. So that even assuming

that the SSS, as it claims, enjoys immunity from suit



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as an entity performing governmental function, by

virtue of the explicit provision of the afore cited

enabling law, the government must be deemed to

have waived immunity in respect of the SSS,

although it does not thereby concede its liability that

statutory law has given to the private citizen a

remedy for the enforcement and protection of his

rights. The SSS thereby has been required to submit

to the jurisdiction of the court; subject to its right to

interpose any lawful defense.

Jai-Alai Corp. of the Phil. vs. Bank of the Phil.

Islands

G.R. No. L-29432 August 6, 1975 66 SCRA 29

FACTS:

Petitioner deposited 10 checks in its current account

with BPI. The checks which were acquired by

petitioner from Ramirez, a sales agent of the Inter-

Island Gas were all payable to Inter-Island Gas

Service, Inc. or order. After the checks had beensubmitted to Inter-bank clearing, Inter-Island Gas

discovered that all the indorsements made on the

checks purportedly by its cashiers were forgeries.

BPI thus debited the value of the checks against

petitioner's current account and forwarded to the

latter the checks containing the forged indorsements

which petitioner refused to accept.

ISSUE:

Whether BPI had the right to debit from petitioner's

current account the value of the checks with the

forged indorsements.

RULING:

BPI acted within legal bounds when it debited the

petitioner's account. Having indorsed the checks to

respondent bank, petitioner is deemed to have given

the warranty prescribed in Section 66 of the NIL that

every single one of those checks "is genuine and in

all respects what it purports to be." Respondent

which relied upon the petitioner's warranty should

not be held liable for the resulting loss.

**The depositor of a check as indorser warrants that

it is genuine and in all respects what it purports tobe. Having indorsed the checks to respondent bank,

petitioner is deemed to have given the warranty

prescribed in Section 66 of the NIL that every single

one of those checks " is genuine and in all respects

what it purports to be."

Conde V. CA

RATIO DECIDENDI

| Melencio-Herrera, J. (1982)

The purpose of the rule is to give stability to written

agreements, and to remove the temptation and

possibility of perjury, which would be afforded if

parol evidence was admissible.

FACTS

Margarita Conde, Bernardo Conde and

Dominga Conde sold with a right of repurchase,

within 10 years from, a parcel of agricultural land to

the Altera Spouses.

o The contract provided that: If at the end of

10 years the said land is not repurchased, a new

agreement shall be made between the parties and in

no case title and ownership shall be vested in the

hand of the party of the Second Part (Alteras).

The Cadastral Court of Leyte then

adjudicated the lot to the Alteras subject to the right

of redemption counting from 7 April 1938 after

returning the amount of PHP 165.00

On 28 November 1945, Paciente Cordero,

son-in-law of the Alteras signed a document allowing

Eusebio Amarille, the representative of the Condes,

to repurchase the land.

On 30 June 1965, Pio Altera sold the

disputed lot to the spouses Ramon Conde and

Catalina Conde. (Relationship to the other Condes

were not shown)

Dominga then filed a Complaint for quieting

of title to property.

ISSUE/HELD

WoN Dominga Conde validly repurchased the said lot

- YES

RATIO

An implied agency was created from the

silence or lack of action, or their failure to repudiate

the agreement.

The Alteras did not repudiate the agreement

that their son-in-law signed.

From the execution of the repurchase

document in 1945, possession, which heretofore hadbeen with the Alteras, has been in the hands of

Dominga Conde as stipulated therein.

Land taxes has already been paid for by

Dominga Conde.

Ramon and Catalina Conde are not

purchasers in good faith.

o The OCT in the name of the Alteras

specifically contained the condition that it was

subject to the right of repurchase within 10 years

from 1938.

o Although the 10 year period had lapsed in

1965, and there was no annotation of any

repurchase by Dominga Conde, neither had the title

been cleared of the encumbrance.

They were put on notice that some other

person could have a right to or interest in said

property.

The Conde spouses conends that Paciente

Cordero signed the document of repurchase merely

to show that he had no objection to the repurchase.

They introduced evidence for this purpose.

o There is nothing in the document of

repurchase to show that Paciente Cordero had

signed the same merely to indicate that he had no

objection to Dominga Condes right of repurchase.o At the same time, he had no personality to

object.

o To uphold his oral testimony on that point,

would be a departure from the parol evidence rule

and would defeat the purpose for which the doctrine

is intended.



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The purpose of the rule is to give stability to

written agreements, and to remove the temptation

and possibility of perjury, which would be afforded if

parol evidence was admissible.

Naguiat vs CA and Queao

GR No. 118375, 03 October 2003

412 SCRA 591

FACTS

Queao applied with Naguiat a loan for P200,000,

which the latter granted. Naguiat indorsed to

Queao Associated bank Check No. 090990 for the

amount of P95,000 and issued also her own

Filmanbank Check to the order of Queao for the

amount of P95,000. The proceeds of these checks

were to constitute the loan granted by Naguiat to

Queao. To secure the loan, Queao executed a

Deed of Real Estate Mortgage in favor of Naguiat,

and surrendered the owners duplicates of titles of

the mortgaged properties. The deed was notarizedand Queao issued to Naguiat a promissory note for

the amount of P200,000. Queao also issued a post-

dated check amounting to P200,000 payable to the

order of Naguait. The check was dishonoured for

insufficiency of funds. Demand was sent to Queao.

Shortly, Queao, and one Ruby Reubenfeldt met

with Naguiat. Queao told Naguiat that she did not

receive the loan proceeds, adding that the checks

were retained by Reubenfeldt, who purportedly was

Naguiats agent.

Naguiat applied for extrajudicial foreclosure of the

mortgage. RTC declared the Deed as null and voidand ordered Naguiat to return to Queao the owners

duplicates of titles of the mortgaged lots.

ISSUE

Whether or not the issuance of check resulted in the

perfection of the loan contract.

HELD

The Court held in the negative. No evidence was

submitted by Naguiat that the checks she issued or

endorsed were actually encashed or deposited. The

mere issuance of the checks did not result in theperfection of the contract of loan. The Civil Code

provides that the delivery of bills of exchange and

mercantile documents such as checks shall produce

the effect of payment only when they have been

cashed. It is only after the checks have been

produced the effect of payment that the contract of

loan may have been perfected.

Article 1934 of the Civil Code provides: An accepted

promise to deliver something by way of commodatum

or simple loan is binding upon the parties, but the

commodatum or simple loan itsel shall not be

perfected until the delivery of the object of thecontract. A loan contract is a real contract, not

consensual, and as such, is perfected only upon the

delivery of the objects of the contract.

Prats v. Court of Appeals G.R. No. L-39822,

January 31, 1978,

Fernandez, J.

Facts:

In 1968, Antonio Prats, under the name of

Philippine Real Estate Exchange instituted against

Alfonso Doronilla and PNB a case to recover a sum of

money and damages. Doronilla had for sometime

tried to sell his 300 ha land and he had designated

several agents for that purpose at one time. He

offered the property to the Social Security System

but was unable to consummate the sale.

Subsequently he gave a written authority in writing

to Prats to negotiate the sale of the property. Such

authorization was published by Prats in the Manila

Times. The parties agreed that Prats will be entitled

to 10% commission and if he will be able to sell it

over its price, the excess shall be credited to the

latter plus his commission. Thereafter, Prats

negotiated the land to the SSS. SSS invited Doronilla

for a conference but the latter declined and insteadinstructed that the former should deal with Prats

directly. Doronilla had received the full payment

from SSS. When Prats demanded from him his

professional fees as real estate broker, Doronilla

refused to pay. Doronilla alleged that Prats had no

right to demand the payment not rendered according

to their agreement and that the authority extended

to Prats had expired prior to the closing of the sale..

Issue:

Whether petitioner was the efficient procuring cause

in bringing about the sale of respondents land to

the SSS.

Ruling:

The Supreme Court ruled that Prats was not the

efficient procuring cause of the sale. It was not

categorical that it was through Prats efforts that

meeting with the SSS official to close the sale took

place. The court concluded that the meeting took

place independently because the SSS had

manifested disinterest in Prats intervention.

However, in equity, the court noted that Prats had

diligently taken steps to bring back togetherDoronilla and SSS. Prats efforts somehow were

instrumental in bringing them together again and

finally consummating the sale although such

finalization was after the expiration of Prats

extended exclusive authority. Doronilla was ordered

to pay Prats for his efforts and assistance in the

transaction.

AF Realty & Development, Inc. vs Dieselman

Freight Services, Co

Facts:

In 1988, Manuel Cruz, Jr., a board member of

Dieselman Freight Services, Co. (DFS) authorized

Cristeta Polintan to sell a 2,094 sq. m. parcel of land

owned by DFS. Polintan in turn authorized

Felicisima Noble to sell the same lot. Noble then

offered AF Realty & Development, Co., represented

by Zenaida Ranullo, the land at the rate of



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P2,500.00 per sq. m. AF Realty accepted the offer

and issued a P300,000 check as downpayment.

However, it appeared that DFS did not authorize

Cruz, Jr. to sell the said land. Nevertheless, Manuel

Cruz, Sr. (father) and president of DFS, accepted the

check but modified the offer. He increased the selling

price to P4,000.00 per sq. m. AF Realty, in its

response, did not exactly agree nor disagree with the

counter-offer but only said it is willing to pay the

balance (but was not clear at what rate). Eventually,

DFS sold the property to someone else.

Now AF Realty is suing DFS for specific performance.

It claims that DFS ratified the contract when it

accepted the check and made a counter-offer.

ISSUE:

Whether or not the sale made through an agent was

ratified.

HELD:

No. There was no valid agency created. The Board of

Directors of DFS never authorized Cruz, Jr. to sell

the land. Hence, the agreement between Cruz, Jr.

and Polintan, as well as the subsequent agreement

between Polintan and Noble, never bound the

corporation. Therefore the sale transacted by Noble

purportedly on behalf of Polintan and ultimately

purportedly on behalf of DFS is void.

Being a void sale, it cannot be ratified even if Cruz,

Sr. accepted the check and made a counter-offer.

(Cruz, Sr. returned the check anyway). Under Article1409 of the Civil Code, void transactions can never

be ratified because they were void from the very

beginning.

Manotoc vs. CA | May 30, 1986

FACTS:

Ricardo Manotoc Jr. was one of the two principal

stockholders of Trans-Insular Management Inc. and

the Manotoc Securities Inc. (stock brokerage house).

He was in US for a certain time, went home to file apetition with SEC for appointment of a management

committee for both businesses. Such was granted.

However, pending disposition of a case filed with

SEC, the latter requested the Commissioner of

Immigration not to clear him for departure.

Consequently, a memorandum to this effect was

issued.

There was a torrens title submitted to and accepted

by Manotoc Securities Inc which was suspected to be

fake. 6 of its clients filed separate criminal

complaints against the petitioner and Leveriza,

President and VP respectively. He was charged withestafa and was allowed by the Court to post bail.

Petitioner filed before each trial court motion for

permission to leave the country stating his desire to

go to US relative to his business transactions and

opportunities. Such was opposed by the

prosecution and was also denied by the judges. He

filed petition for certiorari with CA seeking to annul

the prior orders and the SEC communication

request denying his leave to travel abroad.

According to the petitioner, having been admitted to

bail as a matter of right, neither the courts that

granted him bail nor SEC, which has no jurisdiction

over his liberty, could prevent him from exercising

his constitutional right to travel.

ISSUE:

WON petitioners constitutional right to travel was

violated.

HELD:

NO. The court has power to prohibit person admitted

to bail from leaving the country because this is a

necessary consequence of the nature and function ofa bail bond. The condition imposed upon petitioner

to make himself available at all times whenever the

court requires his presence operates as a valid

restriction on his constitutional right to travel. In

case he will be allowed to leave the country without

sufficient reason, he may be placed beyond the

reach of courts.

Furthermore, petitioner failed to satisfy trial court

and CA of the urgency of his travel, duration thereof,

as well as consent of his surety to the proposed

travel. He was not able to show the necessity of his

travel abroad. He never indicated that no other

person in his behalf could undertake such business

transaction.

Article 3 Sec6: The liberty of abode and of changing

the same shall not be impaired except upon lawful

order of the court. According to SC, the order of

trial court in releasing petitioner on bail constitutes

such lawful order as contemplated by the provision

on right to travel.

SIASAT vs. INTERMEDIATE APPELLATE COURT

G.R. No. L-67889, October 10, 1985

GUTIERREZ, JR.,

J.

FACTS:

Teresita Nacianceno succeeded in convincing

officials of the Department of Education and Culture

to purchase without public bidding, one million

pesos worth of national flags for the use of public

schools throughout the country. Nancianceno was

able to expedite the approval of the purchase. All the

legal requirements had been complied with, except

the release of the purchase orders. She was

informed by the Chief of the Budget Division of the

Department that the purchase orders could not be

released unless a formal offer to deliver the flags was

first submitted for approval. She contacted the

owners of the United Flag Industry. Mr. Primitivo



10/31

Siasat, owner and general manager of United Flag

Industry came up with a document which read:

Mrs. Tessie Nacianceno,

This is to formalize our agreement for you to

represent United Flag Industry to deal with any

entity or organization, private or government in

connection with the marketing of our products-flags

and all its accessories. For your service, you will be

entitled to a commission of thirty (30%) percent.

Signed Mr. Primitive Siasat Owner and Gen.

Manager

The first delivery of 7,933 flags was made by the

United Flag Industry.

Then, Nanciancenos authority to represent the

United Flag Industry was revoked by Primitivo Siasat

on theground that she was not authorized to sell 16,

666 Philippine flags to the Department.Nanciancenosaid that for the first delivery, United Flag Industry

tendered the amount of P23,900.00 or five percent

(5%) of the amount received as payment of her

commission. She refused to accept the said amount

insisting on the 30% commission agreed upon. She

later learned that petitioner Siasat had already

received payment for the second delivery of 7,833

flags. When she confronted the petitioners, they

vehemently denied receipt of the payment, at the

same time claimed that the respondent had no

participation whatsoever with regard to the second

delivery of flags and that the agency had already

been revoked. Nancianceno filed an action in theCourt of First Instance of Manila to recover the

following commissions: 25%, as balance on the first

delivery and 30%, on the second delivery.

The trial court decided in favor of the respondent.

The decision was affirmed in toto by the

Intermediate Appellate Court.

ISSUE:

1. Did Nancianceno have the capacity to represent

United Flag in the transaction with the Department?

2. Did the revocation of agency foreclose the

respondent's claim of 30% commission on the

second transaction?

RULING:

YES, she had the capacity to represent United Flag

In fact, she was a general agent. There are several

kinds of agents. An agent may be (1) universal: (2)

general, or (3) special. A universal; agent is one

authorized to do all acts for his principal which can

lawfully be delegated to an agent. So far as such a

condition is possible, such an agent may be said to

have universal authority. A general agent is oneauthorized to do all acts pertaining to a business of

a certain kind or at a particular place, or all acts

pertaining to a business of a particular class or

series. He has usually authority either expressly

conferred in general terms or in effect made general

by the usages, customs or nature of the business

which he is authorized to transact.

An agent, therefore, who is empowered to transact all

the business of his principal of a particular kind or

in a particular place, would, for this reason, be

ordinarily deemed a general agent A special agent is

one authorized to do some particular act or to act

upon some particular occasion. lie acts usually in

accordance with specific instructions or under

limitations necessarily implied from the nature of

the act to be done.

By the way general words were employed in the

agreement, no restrictions were intended as to the

manner the agency was to be carried out or in the

place where it was to be executed. The power granted

to the respondent was so broad that it practically

covers the negotiations leading to, and the execution

of, a contract of sale of petitioners' merchandise with

any entity or organization. There was nothing to

prevent the petitioners from stating in the contract

of agency that the respondent could represent themonly in the Visayas or to state that the Department

of Education and Culture and the Department of

National Defense, which alone would need a million

pesos worth of flags, are outside the scope of the

agency. 2.

NO, the revocation did not foreclose the respondents

claimed of 30% commission on the second

transaction. The revocation of agency could not

prevent the Nancianceno from earning her

commission because the contract of sale had been

already perfected and partly executed. The principal

cannot deprive his agent of the commission agreedupon by cancelling the agency and, thereafter,

dealing directly with the buyer.

Shoppers Paradise Realty & Development

Corporation vs. Felipe Roque

(G.R. No. 148775, January 13, 2004, 419 SCRA 93)

FACTS:

On 23 December 1993, petitioner Shoppers Paradise

Realty & Development Corporation, represented by

its president, Veredigno Atienza, entered into a

twenty-five year lease with Dr. Felipe C. Roque, nowdeceased, over a parcel of land. Simultaneously,

petitioner and Dr. Roque likewise entered into a

memorandum of agreement for the construction,

development and operation of a commercial building

complex on the property. Conformably with the

agreement, petitioner issued a check for another

P250,000.00 "downpayment" to Dr. Roque.

The contract of lease and the memorandum of

agreement, both notarized, were to be annotated on

TCT No. 30591 within sixty (60) days from 23

December 1993 or until 23 February 1994. The

annotations, however, were never made because ofthe untimely demise of Dr. Felipe C. Roque. The

death of Dr. Roque on 10 February 1994 constrained

petitioner to deal with respondent Efren P. Roque,

one of the surviving children of the late Dr. Roque,

but the negotiations broke down due to some

disagreements. Respondent then filed a case for

CASE DIGEST|AGENCY10


11/31

annulment of the contract of lease and the

memorandum of agreement, with a prayer for the

issuance of a preliminary injunction.

Efren P. Roque alleged that he had long been the

absolute owner of the subject property by virtue of a

deed of donation inter vivos executed in his favor by

his parents, Dr. Felipe Roque and Elisa Roque, on 26

December 1978, and that the late Dr. Felipe Roque

had no authority to enter into the assailed

agreements with petitioner. The donation was made

in a public instrument duly acknowledged by the

donor-spouses before a notary public and duly

accepted on the same day by respondent before the

notary public in the same instrument of donation.

The title to the property, however, remained in the

name of Dr. Felipe C. Roque, and it was only

transferred to and in the name of respondent sixteen

years later, or on 11 May 1994.

The trial court dismissed the complaint of therespondent, explaining that "(o)rdinarily, a deed of

donation need not be registered in order to be valid

between the parties. Registration, however, is

important in binding third persons. Thus, when

Felipe Roque entered into a leased contract with

defendant corporation, plaintiff Efren Roque (could)

no longer assert the unregistered deed of donation

and say that his father, Felipe, was no longer the

owner of the subject property at the time the lease

on the subject property was agreed upon."

On appeal, the Court of Appeals reversed the

decision of the trial court, explaining that petitionerwas not a lessee in good faith having had prior

knowledge of the donation in favor of respondent,

and that such actual knowledge had the effect of

registration insofar as petitioner was concerned.

HELD:

The existence, albeit unregistered, of the donation in

favor of respondent is undisputed. The trial court

and the appellate court have not erred in holding

that the non-registration of a deed of donation does

not affect its validity. As being itself a mode of

acquiring ownership, donation results in an effective

transfer of title over the property from the donor to

the donee. In donations of immovable property, the

law requires for its validity that it should be

contained in a public document, specifying therein

the property donated and the value of the charges

which the donee must satisfy. The Civil Code

provides, however, that "titles of ownership, or other

rights over immovable property, which are not duly

inscribed or annotated in the Registry of Property

(now Registry of Land Titles and Deeds) shall not

prejudice third persons." It is enough, between the

parties to a donation of an immovable property, that

the donation be made in a public document but, inorder to bind third persons, the donation must be

registered in the registry of Property (Registry of

Land Titles and Deeds). Consistently, Section 50 of

Act No. 496 (Land Registration Act), as so amended

by Section 51 of P.D. No. 1529 (Property Registration

Decree), states:

"SECTION 51. Conveyance and other dealings by

registered owner.- An owner of registered land may

convey, mortgage, lease, charge or otherwise deal

with the same in accordance with existing laws. He

may use such forms of deeds, mortgages, leases or

other voluntary instruments as are sufficient in law.

But no deed, mortgage, lease, or other voluntary

instrument, except a will purporting to convey or

affect registered land shall take effect as a

conveyance or bind the land, but shall operate only

as a contract between the parties and as evidence of

authority to the Register of Deeds to make

registration.

"The act of registration shall be the operative act to

convey or affect the land insofar as third persons are

concerned, and in all cases under this Decree, the

registration shall be made in the office of the

Register of Deeds for the province or city where theland lies."

Petition denied.

BA Finance Corp vs. CA

GR 61464, May 28 1988

FACTS:

Augusto Yulo secured a loan from the petitioner in

the amount of P591,003.59 as evidenced by a

promissory note he signed in his own behalf and as

a representative of A&L Industries. Augustopresented an alleged special power of attorney

executed by his wife, Lily Yulo, who managed the

business and under whose name the said business

was registered, purportedly authorized the husband

to procure the loan and sign the promissory note.

2months prior the procurement of the loan, Augusto

left Lily and their children which in turn abandoned

their conjugal home. When the obligation became

due and demandable, Augusto failed to pay the

same.

The petitioner prayed for the issuance of a writ of

attachment alleging that said spouses were guilty of

fraud consisting of the execution of Deed of

Assignment assigning the rights, titles and interests

over a construction contract executed by and

between the spouses and A. Soriano Corporation.

The writ hereby prayed for was issued by the trial

court and not contented with the order, petitioner

filed a motion for the examination of attachment

debtor alleging that the properties attached by the

sheriff were not sufficient to secure the satisfaction

of any judgment which was likewise granted by the

court.

ISSUE:

WON A&L Industries can be held liable for the

obligations contracted by the husband.

HELD:



12/31

A&L Industries is a single proprietorship, whose

registered owner is Lily Yulo. The said

proprietorship was established during the marriage

and assets were also acquired during the same.

Hence, it is presumed that the property forms part

of the conjugal partnership of the spouses and be

held liable for the obligations contracted by the

husband. However, for the property to be liable, the

obligation contracted by the husband must have

redounded to the benefit of the conjugal partnership.

The obligation was contracted by Augusto for his

own benefit because at the time he incurred such

obligation, he had already abandoned his family and

left their conjugal home. He likewise made it appear

that he was duly authorized by his wife in behalf of

the company to procure such loan from the

petitioner. Clearly, there must be the requisite

showing that some advantage accrued to the welfare

of the spouses.

Thus, the Court ruled that petitioner cannot enforcethe obligation contracted by Augusto against his

conjugal properties with Lily. Furthermore, the writ

of attachment cannot be issued against the said

properties and that the petitioner is ordered to pay

Lily actual damages amouting to P660,000.00.

Bicol Savings and Loan Association vs. CA

Facts:

Juan de Jesus was the owner of a parcel of land in

Naga City. He executed a Special Power of

Attorney in favor of Jose de Jesus, his son, whereinthe latter could negotiate and mortgage the formers

property in any bank preferably in the Bicol Savings

and Loan Association. By virtue of such document,.

Jose was able to obtain P20,000 from Bicol Savings.

To secure payment, he executed a deed of mortgage

wherein it was stipulated that upon the mortgagors

failure or refusal to pay the obligation, the mortgagee

may immediately foreclose the property. Juan de

Jesus died and the loan obligation was not paid. As

a result, Bicol Savings extrajudicially foreclosed the

mortgaged property. The bank won as the highest

bidder during the auction sale. Jose and the otherheirs failed to redeem the property. Thereafter,

theytried to negotiate with Bicol Savings but the

parties did not come up to an agreement. Bicol

Savings sold the property to another person. Hence,

Jose filed for annulment of the foreclosure sale. The

lower court dismissed the case. On appeal, the CA

reversed RTCs decision. Hence, this appeal.

Issue:

Whether or not the extrajudicial foreclosure sale of

the property was valid.

Ruling.

Yes. Art 1879 of the CC which states that special

power to sell excludes the power to mortgageand vice

versa is inapplicable in the case. What it proscribes

is a voluntary and independent contract of sale and

not an auction sale resulting from extrajudicial

foreclosure caused by the default of themortgagor.

The power to foreclose is not an ordinary agency but

is primarily conferred upon themortgagee for its

protection. The right of the bank to foreclose is

independent of the mortgage contract asit is

recognized by the Rules of Court.

Rural Bank of Bombon v CA

G.R. No. 95703 | August 3, 1992

Ederlinda Gallardo transacted with Rufino Aquino,

contracting him to be her agent and providing him

with a Special Power of Attorney authorizing him to

mortgage her property in her behalf for the purpose

of securing loans from banks. She provided him with

the TCT to the property as well. Rufino Aquino

secured a loan from Rural Bank of Bombon forthe

amount of PhP350,000.00 as principal and

chargeable with a 14% interest per annum. In the

contract of mortgage, he represented himself to be

the attorney-in-fact of Gallardo, but proceeded tosign his name as mortgagor. He even got his wife to

sign the documents as wife of mortgagor. Gallardo,

upon knowing of the transaction, went to court to

secure the annulment of such contract since she

was allegedly surprised to find out that her property

was already mortgaged and correspondence

regarding the contract of mortgage were not being

sent to her, and instead sent to the address of

Aquino, who has since disappeared from Bulacan

and now resides in Camarines Sur. Further, the

mortgage was secured to pay off personal loans of

Aquino and to establish his personal fishpond

business. RTC issued a TRO restraining Rural Bankof Bombon to foreclose the mortgage. In his Answer,

Aquino alleged that Gallardo owed him money and it

was already the responsibility of Aquino to take care

of payments due. RTC ruled in favor of Aquino and

Bank of Bombon.CA reversed the ruling of the RTC

and held that the Deal of Real Estate Mortgage was

not valid. It not binding on the principal Gallardo

since it was executed not in her name as principal

but in the personal capacity of the Aquino spouses.

Issue:

WON the Deed of Real Estate Mortgage executed by

Rufino S.Aquino as attorney-in-fact of Ederlinda

Gallardo in favor of the Rural Bank of Bombon is

valid.

Held:

No. Aquino signed the Deed of Real Estate Mortgage

in his name alone as mortgagor, without any

indication that he was signing for and in behalf of

the property owner, Ederlinda Gallardo. He bound

himself alone in his personal capacity as a debtor of

the petitioner Bank and not as the agent or attorney-

in-fact of Gallardo:

It is a general rule in the law of agency that, in order

to bind the principal by a mortgage on real property

executed by an agent, it must upon its face purport

to be made, signed and sealed in the name of the

principal, otherwise, it will bind the agent only. It is



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not enough merely that the agent was in fact

authorized to make the mortgage, if he has not acted

in the name of the principal. Neither is it ordinarily

sufficient that in the mortgage the agent describes

himself as acting by virtue of a power of attorney, if

in fact the agent has acted in his own name and has

set his own hand and seal to the mortgage. This is

especially true where the agent himself is a party to

the instrument. However clearly the body of the

mortgage may show and intend that it shall be the

act of the principal, yet, unless in fact it is executed

by the agent for and on behalf of his principal and as

the act and deed of the principal, it is not valid as to

the principal. (Philippine Sugar Estates Development

Co. vs. Poizat)Bank cannot rely on Article 1883 to

bind the principal Gallardo. It is not applicable to

the case at bar. Article 1883statesin such case the

agent is the one directly bound in favor of the person

with whom he has transacted, as if the transaction

was his own, except when the contract involves

things belonging to the principal.There is no principle of law by which a person can

become liable on a real mortgage which she never

executed either in person or by attorney in fact.

Here, Aquino acted purportedly as an agent of

Gallardo, but actually acted in his personal capacity.

Involved herein are properties titled in the name of

respondent Gallardo against which the Bank

proposes to foreclose the mortgage constituted by an

agent (Aquino)acting in his personal capacity.

G.R. No. L-32116 April 2l, 1981 RURAL BANK OF

CALOOCAN, INC. and JOSE O. DESIDERIO, JR.,

petitioners, vs. THE COURT OF APPEALS and

MAXIMA CASTRO, respondents.

FACTS:

Maxima Castro, accompanied by Severino Valencia,

went to the Rural Bank of Caloocan to apply for a

loan. Valencia arranged everything about the loan

with the bank. He supplied to the latter the personal

data required for Castro's loan application. After the

bank approved the loan for the amount of

P3,000.00, Castro, accompanied by the Valencia

spouses, signed a promissory note corresponding to

her loan in favor of the bank. On the same day, theValencia spouses obtained from the bank an equal

amount of loan for P3,000.00. They signed another

promissory note (Exhibit "2") corresponding to their

loan in favor of the bank and had Castro affixed

thereon her signature as co-maker. Both loans were

secured by a real-estate mortgage on Castro's house

and lot. Later, the sheriff of Manila sent a notice to

Castro, saying that her property would be sold at

public auction to satisfy the obligation covering the

two promissory notes plus interest and attorney's

fees. Upon request by Castro and the Valencias and

with conformity of the bank, the auction sale was

postponed, but was nevertheless auctioned at a laterdate. Castro claimed that she is a 70-year old widow

who cannot read and write in English. According to

her, she has only finished second grade. She needed

money in the amount of P3,000.00 to invest in the

business of the defendant spouses Valencia, who

accompanied her to the bank to secure a loan of

P3,000.00. While at the bank, an employee handed

to her several forms already prepared which she was

asked to sign, with no one explaining to her the

nature and contents of the documents. She also

alleged that it was only when she received the letter

from the sheriff that she learned that the mortgage

contract which was an encumbrance on her property

was for P6.000.00 and not for P3,000.00 and that

she was made to sign as co-maker of the promissory

note without her being informed. Castro filed a suit

against petitioners contending that thru mistake on

her part or fraud on the part of Valencias she was

induced to sign as co-maker of a promissory note

and to constitute a mortgage on her house and lot to

secure the questioned note. At the time of filing her

complaint, respondent Castro deposited the amount

of P3,383.00 with the court a quo in full payment of

her personal loan plus interest. Castro prayed for: (1)

the annulment as far as she is concerned of the

promissory note (Exhibit "2") and mortgage (Exhibit

"6") insofar as it exceeds P3,000.00; and that shewas made to sign as co-maker of the promissory

note without her being informed. Castro filed a suit

against petitioners contending that thru mistake on

her part or fraud on the part of Valencias she was

induced to sign as co-maker of a promissory note

and to constitute a mortgage on her house and lot to

secure the questioned note. At the time of filing her

complaint, respondent Castro deposited the amount

of P3,383.00 with the court a quo in full payment of

her personal loan plus interest. Castro prayed for:(1)

the annulment as far as she is concerned of the

promissory note (Exhibit "2") and mortgage (Exhibit

"6") insofar as it exceeds P3,000.00; and(2) for thedischarge of her personal obligation with the bank

by reason of a deposit of P3,383.00 with the court a

quo upon the filing of her complaint.

ISSUE:

Whether or not respondent court correctly affirmed

the lower court in declaring the promissory note

(Exhibit 2) invalid insofar as they affect respondent

Castro vis-a-vis petitioner bank, and the mortgage

contract (Exhibit 6) valid up to the amount of

P3,000.00 only.

HELD:

Yes While the Valencias defrauded Castro by making

her sign the promissory note and the mortgage

contract, they also misrepresented to the bank

Castro's personal qualifications in order to secure its

consent to the loan. Thus, as a result of the fraud

upon Castro and the misrepresentation to the bank

inflicted by the Valencias both Castro and the bank

committed mistake in giving their consents to the

contracts.In other words, substantial mistake

vitiated their consents given. For if Castro had beenaware of what shesigned and the bank of the true

qualifications of the loan applicants, it is evident

that they would not have given their consents to the

contracts. Article 1342 of the Civil Code which

provides: Art. 1342. Misrepresentation by a third

person does not vitiate consent, unless such



14/31

misrepresentation has created substantial mistake

and the same is mutual. We cannot declare the

promissory note valid between the bank and Castro

and the mortgage contract binding on Castro beyond

the amount of P3,000.00, for while the contracts

may not be invalidated insofar as they affect the

bank and Castro on the ground of fraud because the

bank wasnot a participant thereto, such may

however be invalidated on the ground of substantial

mistake mutually committed by them as a

consequence of the fraud and misrepresentation

inflicted by the Valencias. Thus, in the case of Hill

vs. Veloso, this Court declared that a contract may

be annulled on the ground of vitiated consent if

deceit by a third person, even without connivance or

complicity with one of the contracting parties,

resulted in mutual error on the part of the parties to

the contract. The fraud particularly averred in the

complaint, having been proven, is deemed sufficient

basis for the declaration of the promissory note

invalid insofar as it affects Castro vis-a-vis the bank,and the mortgage contract valid only up to the

amount of P3,000.00

Ignacio Vicente vs Ambrosio Geraldez

FACTS:

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 claimsover 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 compromiseagreement 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 primarilycommitted 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 doesnot 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.

Vda de Chua vs. CAGR No. 70909, January 5, 1994

FACTS:

Roberto Lim Chua, during his lifetime, lived out of

wedlock with private respondent Florita A. Vallejo

from 1970-1981. The couple had two illegitimate

children, Roberto Rafson Alonzo and Rudyard Pride

Alonzo, all surnamed Chua. Roberto died intestate

in Davao City on May 28, 1992. Vallejo filed on July

2, 1992 with RTC-Cotabato a petition for declaration

of guardianship of the two child and their properties

worth P5,000,000.00.

Antonietta Garcia Vda De Chua, the petitioner, filed

a motion alleging that she was the true wife of

Roberto. However, according to Vallejo, she is not

the surviving spouse of the latter but a pretender to



15/31

the estate since the deceased never contracted

marriage with any woman and died a bachelor.

ISSUE:

Whether petitioner is indeed the true wife of Roberto

Chua.

HELD:

The court ruled that petitioner was not able to prove

her status as wife of the decedent. She could not

produce the original copy or authenticated copy of

their marriage certificate. Furthermore, a

certification from the Local Civil Registrar was

presented that no such marriage contract between

petitioner and Roberto Chua was ever registered with

them, attested by Judge Augusto Banzali, the alleged

person to have solemnized the alleged marriage, that

he has not solemnized such alleged marriage.

Hence, it is clear that petitioner failed to establish

the truth of her allegation that she was the lawful

wife of the decedent. The best evidence is a valid

marriage contract which she failed to produce.

NAPOCOR v. NATIONAL MERCHANDISING Corp.

G.R. Nos. L-33819 and L-33897; October 23, 1982

Ponente: J. Aquino

FACTS:

Plaintiff-appellant National Power Corporation (NPC)

and defendant- appellant National Merchandising

Corporation (NAMERCO), the Philippine

representative of New York-based International

Commodities Corporation, executed a contract of

sale of sulfur with a stipulation for liquidated

damages in case of breach.

Defendant-appellant Domestic Insurance Company

executed a performance bond in favor of NPC to

guarantee the seller's obligation. In entering into the

contract, Namerco, however, did not disclose to NPC

that Namerco's principal, in a cabled instruction,

stated that the sale was subject to availability of asteamer, and contrary to its principal's instruction,

Namerco agreed that non-availability of a steamer

was not a justification for non-payment of liquidated

damages.

The New York supplier was not able to deliver the

sulfur due to its inability to secure shipping space.

Consequently, the Government Corporate Counsel

rescinded the contract of sale due to the supplier's

non-performance of its obligations, and demanded

payment of liquidated damages from both Namerco

and the surety. Thereafter, NPC sued for recovery of

the stipulated liquidated damages. After trial, theCourt of First Instance rendered judgment ordering

defendants-appellants to pay solidarity to the NPC

reduced liquidated damages with interest.

ISSUE:

Whether NaMerCo exceeded their authority

HELD:

Yes, NaMerCo exceeded their authority. The Supreme

Court held that before the contract of sale was

signed Namerco was already aware that its principal

was having difficulties in booking shipping space.

It is being enforced against the agent because article1897 implies that the agent who acts in excess of his

authority is personally liable to the party with whom

he contracted. Moreover, the rule is complemented

by article 1898 of the Civil Code which provides that

"if the agent contracts in the name of the principal,

exceeding the scope of his authority, and the

principal does not ratify the contract, it shall be void

if the party with whom the agent contracted is aware

of the limits of the powers granted by the principal".

Namerco never disclosed to the Napocor the cabled

or written instructions of its principal. For that

reason and because Namerco exceeded the limits of

its authority, it virtually acted in its own name andnot as agent and it is, therefore, bound by the

contract of sale which, however, is not enforceable

against its principal.

Veloso vs La Urbana

Facts:

Veloso was the owner of some portions of certain

parcels of lands. Her brother in law, Jose Maria del

Mar forged two powers of attorney supposedly made

by Veloso and her husband which gave him the

authority to mortgage their interests/participation in

the said properties. These powers of attorney were

registered in the registry of deeds.

Using the powers of attorney, he mortgaged the

participations to La Previsoa Filipina but he

subsequently transferred the mortgage to La Urbana

with whom he executed another deed of mortgage for

an additional loan. When he violated the conditions

of mortgage, La Urbana foreclosed the mortgage and

sold it at a public auction. It was only then that

Velasco found out about the fraudulent transactions.

Issue:W/N mortgage is valid

Held:

No, mortgage is null and void. Even though Del Mar

had powers of attorney, La Urbana should have

exerted effort to ascertain the genuineness of the

instruments. Every person dealing with an agent has

the responsibility to ascertain the authority of an

agent.

NATIONAL FOOD AUTHORITY vs. INTERMEDIATE

APPELLATE COURT

GR NO. 75640, April 5, 1990

FACTS:

Paras


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