B2017 Agency Midterms Reviewer Complete

8/16/2019 B2017 Agency Midterms Reviewer Complete

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ENCY NDP RTNERSHIPMIDTERMS REVIEWER

TIMELESS REVIEWERS | PROF. RY N OLIV | BLOCK B 2017

I. INTRODUCTION

. HOW IS ENCY DEFINED?

rt. 1868. By the contract of agency a person binds himself torender some service or to do something in representation or

on behalf of another, with the consent or authority of the latter.

Agency – derived from the Latin verb ago, agere; the noun

agens, agentis

Art. 1868 refers to “agency” as a type of contract.

Art. 1869 refers to it in two different senses:

1. May be express or implied (manner by which

relationship is established)

2. May be oral (manner by which authorization or

acceptance is made)

The term can also be used to refer to the business itself.

As a juridical concept, “agency” can refer to a legal

relationship or a contract.

a. Legal relationship

”Legal relation” pertains to the connection in law between

one person or entity and another. Agency, as such, is the

connection between principal and agent

Agency is a legal relation, founded upon the express or

implied contract of the parties, or created by law, by virtue

of which one party (agent) is employed and authorized to

represent and act for the other (principal) in business

dealings with third persons. (Mechem )

The relationship of agency is one whereby “one party, calledthe principal (mandante) authorizes another, called the

agent (mandatario) to act for and in his behalf in transactions

with third persons. (Rallos v Felix Go Chan )

Agency is a fiduciary relationship. (Restatement; American

Jurisprudence; Severino v Severino)

As fiduciary, the agent is obliged to act primarily for the

benefit of his principal in matters related to his agency.

b. Contract

Being a contract, agency requires the essential elements of

consent, subject matter and cause.

1. Consent.

R:no consent, no contract of agency

XPN: when the legal relationship of agency is created

by law, in which case, the consent of either principal

or agent need not be present

2. Subject matter

The performance of acts by the agent in

representation of the principal.

Jurisprudence clarified that representation is th

juridical basis of agency. The mere rendering o

service does not create agency.

3. Cause.

Agency is presumed to be for compensation.

A person may also request appointment as an agen

to protect his interests.

Purpose

To allow a person to act on behalf of another.

a. accomplishment of more tasks

b. multiple and simultaneous areas of activity

c. improved performance

d. multiple businesses

Elements

Two elements under Art. 1868:

1. A person must bind himself to render some service or t

do something in representation or on behalf of anothe

person; and

2. With the consent of the other person.

However, the Court has enumerated four elements:

1. Consent;

2. Object;

3. Agent acts as a representative and not for himself; and

4. Agent acts within the scope of his authority (Rallos

Felix Go Chan)

C SIS: Elements #3 and #4 are consequences of the agenc

relationship and not conditions for its existence. Thus, while

some cases list four elements of a contract of agency, in reality

there are only two: 1) consent on the part of the principal and

agent to establish an agency relationship and 2) the purpose othe contract is representation.

Effect: Integration and Extension

The establishment of an agency relationship results in:

1. Integration of the personality of the principal into that o

the agent

2. Extension of the personality of the principal through th

agent

Consequences/Effects:

1. The agent, by legal fiction, becomes the principal, an

is authorized to perform all acts which the latter would

have him do.2. Agent is not a real party-in-interest in the contract with

third person.

Angeles v PNR: The legal situation is different where

an agent is constituted as an assignee. In such a case

the agent may, in his own behalf, sue on a contrac

made for his principal, as an assignee of such contract

3. Notice to the agent is notice to the principal, but notic





to the principal does not mean notice to the agent.

R: the principal is chargeable with and bound by the

knowledge of or notice to his agent (Cosmic Lumber v

CA)

XPN: where the conduct and dealings of the agent

are such as to raise a clear presumption that he will

not communicate to the principal the facts in

controversy.4. Bad faith of the agent is bad faith of the principal.

1. Consent

rt. 1869. Agency may be express, or implied from the acts of

the principal, from his silence or lack of action or his failure to

repudiate the agency, knowing that another person is acting

on his behalf without authority.

Agency may be oral, unless the law requires a specific form.

rt. 1870. Acceptance by the agent may also be express, orimplied from his acts which carry out the agency, or from his

silence or inaction according to the circumstances.

rt. 1871. Between persons who are present, the acceptance

of the agency may also be implied if the principal delivers his

power of attorney to the agent and the latter receives it

without any objection.

rt. 1872. Between persons who are absent, the acceptance of

the agency cannot be implied from the silence of the agent,

except:

1. When the principal transmits his power of attorney to the

agent, who receives it without any objection;

2. When the principal entrusts to him by letter or telegram a

power of attorney with respect to the business in which he

is habitually engaged as an agent, and he did not reply to

the letter or telegram.

rt. 1898. 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 power

granted by the principal. In this case, however, the agent is

liable if he undertook to secure the principal’s ratification.

rt. 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.

rt. 1910. The principal must comply with all the obligations

which the agent may have contracted within the scope of his

authority.

rt. 1317.No one may contract in the name of another withou

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

to represent him.

A contract entered into in the name of another by one who ha

no authority or legal representation, or who has acted beyondhis powers, shall be unenforceable, unless it is ratified

expressly or impliedly, by the person on whose behalf it ha

been executed, before it is revoked by the other contracting

party.

rt. 1403. The following contracts are unenforceable unles

they are ratified:

1. Those entered into the name of another person by on

who has been given no authority or legal representation

or who has acted beyond his powers;

2. xxx

Absent any showing of consent on the part of the alleged

principal for the alleged agent to act on her behalf, n

agency relationship was established. (Bordador v Luz )

Mere closeness of relationship does not mean that an

agency relationship exists absent consent of the parties.

There must be, on the part of the principal, an actua

intention to appoint, an intention naturally inferable from the

principal’s words or actions. In the same manner, there mus

be an intention on the part of the agent to accept th

appointment and act upon it. (Tuazon v Heirs of Ramos )

The fact that the parties intended an agency relationship wi

not necessarily prevent the Court from ruling that anothe

type of contract existed if it believes that the necessar

elements of such contract exists.





ENCY

EXPRESS

IMPLIED

From:

1. Acts of the principal2. Silence, lack of action, or failure to repudiate the agency

Note: Principal must know that another person is acting on his

behalf without his authority

CCEPT NCE

BY ENT

EXPRESS

IMPLIED

From:

1. Agent’s acts which

carry out the agency

2. Silence or inaction

according to the

Between persons

who are present

Between persons

who are absent

If principal delivers his

power of attorney to the

agent and the latter

accepts it without

objection

R:Acceptance cannot

be implied from silence

of agent

XPN:

1. Principal transmitsPOA to agent and the

latter receives it

without objection

2. When principal

entrusts to agent by

letter or telegram a

POA with respect to

the business in which

he is habitually

engaged as an agent,

and he did not reply





4

2. Object – the execution of a juridical act in

relation to a third person

The subject matter and basis of agency is representation.

It is not necessary that the third person with whom the agent

is to transact be identified nor is it required that the specific

juridical relation be specified upon establishment of the

agency.

In an ER-EE relationship, for as long as an employee has thepower to represent his employer and enter into binding

transactions, he is both an employee and an agent.

3 . Con side ration

rt. 1875. Agency is assumed to be for compensation, unless

there is proof to the contrary.

B. WHO RE THE P RTIES TO THE CONTR CT OF

ENCY?

1. Principal – one whom the agent represents and fromwhom he derives his authority; and

2. Agent – one who acts for and represents the principal,

having derivative authority in carrying out the business of

the latter.

Other terms: “attorney-in-fact”, “proxy”, “delegate”, or

“representative”

Juridical persons such as corporations and partnerships

can be principals and agents (Art. 1919(4) ).

C. MUST THE P RTIES BE C P CIT TED?

The principal must have capacity to contract (Arts. 1327 and 1329 ), and may either be a natural or juridical person (Art.

1919[4] ).

Since a contract of agency is first and foremost a contract in

itself, the parties (both principal and agent) must have legal

capacities to validly enter into an agency. However, if one of

the parties has no legal capacity to contract, then the

contract of agency is not void, but merely voidable.

A voidable agency will produce legal consequences, when it

is pursued to enter into juridical relations with third parties. If

the principal is the one who has no legal capacity to contract,

and his agent enters into a contractual relationship in the

principal’s name with a third party, the resulting contract is

voidable and subject to annulment. On the other hand, if the

principal has legal capacity, and it is the agent that has no

legal capacity to contract, the underlying agency

relationship is voidable; and when the incapacitated agent

enters into a contract with a third party, the resulting

contract would be valid, for the agent’s incapacity is

irrelevant, the contract having been entered into, for and in

behalf of the principal, who has full legal capacity.

If during the term of the agency, the principal or agent dies

is placed under civil interdiction, or becomes insane o

insolvent, the agency is ipso jure extinguished (Art. 1919(3)

CC ).

It is therefore only logical to conclude that if the loss o

legal capacity of the agent extinguishes the agency, then

necessarily any of those cause that have the effect oremoving legal capacity on either or both the principa

and agent at the time of perfection would not bring abou

a contract of agency.

Legal capacity

Principal gent Underlying

agency

relationship

Resulting

contract with

third parties

✓ ✓ Valid Valid

✓ Voidable Valid

✓ Voidable Voidable

Cases:

Rallos v Felix o Chan (1978)

Brief Facts: Simeon, the attorney-in-fact of his sister

Concepcion and Gerundia, sold the parcel of land he wa

previously authorized to sell despite knowing that Concepcio

already died. Concepcion’s administrator went to court to hav

the sale declared unenforceable and to recover the disposed

share. The trial court granted the relief prayed for, but o

appeal, the Court of Appeals upheld the validity of the sale

and dismissed the complaint.

Doctrine: The sale was null and void because, although the

buyer may have been a purchaser in good faith, said sale wa

made with the agent's knowledge of his principal's death. The

general rule is that death of the principal or the agen

extinguishes the agency and this case does not fall under an

of the exceptions to the general rule.

Orient ir Services v C (1991)

Brief Facts: American Airlines, Inc, an air carrier offerin

passenger and air cargo transportation in the Philippines, and

Orient Air Services and Hotel Representatives entered into aGeneral Sales Agency Agreement whereby AA authorized

Orient to act as its exclusive general sales agent within PH fo

the sale of air passenger transportation. Alleging that Orien

had reneged on its obligations under the Agreement by failing

to remit the net proceeds of sale in the amount of USD 254,400

AA undertook the collection of the proceeds of tickets sold

originally by Orient and terminated the Agreement. TC





ordered AA to reinstate Orient as its general sales agent.

Doctrine: 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 bylaw or by any court.

Uy v C (1999)

Brief Facts: Agents of landowners are suing the NHA because

NHA decided not to buy 3 out of 8 parcels of land negotiated

by the parties. Apparently, the land was at a landslide area and

not suitable for housing. SC ruled that the agents were not the

real parties-in-interest so the landowners would have to be

impleaded as plaintiffs. Moreover, the cancellation of the

contract was justified as the cause of NHA for buying the land

was negated.

Doctrine: Agents Uy and Roxas are not parties, heirs, assignees,

or beneficiaries of a stipulation pour autrui under the contracts

of sale, and because of this, they do not possess the right they

seek to enforce and are not the real parties-in-interest in the

case.

Macke v Camps (1907)

Brief Facts: Macke and Chandler delivered goods to Camps’

business. Camps refused to pay for the balance of the goods

so he was sued. The goods were ordered and received by

Ricardo Flores, representing himself to be the agent of Camps.SC ruled that evidence is sufficient to sustain a finding that

Flores was an agent with authority to bind Camps for the

payment of goods.

Doctrine: One who clothes another 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.

Prudential Bank v C (1993)

Brief Facts: Aurora Cruz is suing Prudential Bank because it

would not release to her the 200K which she deposited.

Prudential is insisting that Cruz had already withdrawn the

amount from her account. Through the assistance of bank

personnel Susan Quimbo, Cruz signed a withdrawal slip

thinking it was required for the process of renewing an

investment she made with the bank.

Doctrine: A banking corporation is liable to innocent thir

persons where the representation is made in the course of it

business by an agent acting within the general scope of hi

authority even though, in the particular case, the agent i

secretly abusing his authority and attempting to perpetrate a

fraud upon his principal or some other person, for his ow

ultimate benefit.

Litonjua, Jr v Eternit Corp (2006)

Brief Facts: The sale of 8 parcels of land between Litonjuas and

EC were cancelled. The Litonjuas are suing because there wa

a perfected contract of sale and that they are entitled t

damages. SC ruled that the Litonjuas failed to discharge the

burden of proving that EC empowered the agents to act fo

them. Absent a board resolution, the contract is void.

Doctrine: Any sale of real property of a corporation by

person purporting to be an agent thereof but without writte

authority from the corporation is null and void. When a sale o

a piece of land or any portion thereof is through an agent, the

authority of the latter shall be in writing, otherwise, the sale

shall be void.

Spouses Viloria v Continental irlines (2012)

Brief Facts: Sps. Viloria, relying on the alleged

misrepresentation of Holiday’s Travel’s employee that ther

were no available seats at Amtrak, purchased 2 round-tri

tickets on board Continental Airlines from Holiday Travel. Sps

Viloria filed a complaint against CAI, claiming that they ar

entitled to a refund in view of the misrepresentation made bHoliday’s employee. The spouses claim that a principal-agen

relationship exists between CAI and Holiday.

Doctrine: Art. 1869 provides that agency may be implied from

the acts of the principal, from his silence or lack of action, o

his failure to repudiate the agency, knowing that anothe

person is acting on his behalf without authority. Since CA

never refuted that it gave Holiday the power and authority to

conclude contracts of carriage on its behalf prior to the Sp

Viloria’s filing of a complaint, it is now estopped from denyin

that Holiday is its agent.





6

II. WH T IS THE FORM OF THE

CONTR CT OF ENCY?

. OR L

rt. 1869. Agency may be express, or implied from the acts of

the principal, from his silence or lack of action, or his failure to




Simplicity of agency relationship is demonstrated by the

case of Air France v CA (1983)

Brief Facts: Gana sought Teresita’s assistance for the

extension of the validity of the former’s tickets, which were

due to expire on May 8, 1971. Teresita enlisted the help of

Ella, Manager of the Philippine Travel Bureau. Ella warnedTeresita of the expiration of said tickets. Notwithstanding

the warnings, the Ganas still departed for Osaka on board

Air France. The tickets expired and the Ganas had to

purchase new ones. Air France refused to honor the

tickets as the same could not be extended beyond the

period of their validity without paying the fare differentials

and additional travel taxes.

SC: The Ganas cannot contend lack of knowledge of the

said rules since Teresita was duly informed by Ella. For all

legal intents and purposes, Teresita was the agent of the

Ganas and notice to her of the rejection of the request for

extension of the validity of the tickets was notice to theGanas, her principals. Based on this case, a simple request

for assistance made by one which was accepted by

another may be enough under circumstances to constitute

an agency relationship.

R: an agency relationship may be constituted orally.

However, the difficulty is in proving the existence of an oral

agreement establishing an agency.

If either party disputes the agency relationship orally

constituted, the acts of the parties contemporaneous with

or subsequent to the alleged agreement would have to be

considered.

B. W

RITTEN

rt. 1874.When a sale of a piece of land or any interest therein

is through an agent, the authority of the latter shall be in

writing; otherwise, the sale shall be void.

When should the authorization of the agent be in writing?

1. When the power vested in the agent involves the sale of

piece of land

2. When the power vested in the agent involves the sale o

any interest on a piece of land (e.g. usufruct, mortgage)

What if the authority of the agent to sell land is not in writing?

The contract is void. However, this does not mean that theagency relationship does not exist or that the agency contrac

is invalid. The effect of absence of written authority only goes

into the validity of the sale.

Note:While the rule requiring a written authorization admit

no exception, in Pahud v CA (2009) , the SC upheld a deed o

sale even if the agent did not have any written authority on

the following grounds:

Admission by the principals regarding the sale of th

property

Failure of the principals to assail the validity of th

transaction

Apparent authority given by the principals to the agent b

reason of the former’s continued silence

Justice Carpio-Morales’ dissent: Estoppel, being a principl

in equity, cannot be applied in the presence of a law clearly

applicable to the case. Rationale behind the requirement o

written authority:

1. To safeguard the interest of an unsuspecting owne

from being prejudiced by the unauthorized act o

another

2. To caution the buyer to assure himself of the specifi

authorization of the putative agent

C SIS: Even assuming that an implied agency or an agency

by estoppel was created, the contract would still be void

because what is required is a written authority to sell. Themere existence of an agency relationship is not sufficient to

validate the sale.

Form of the authority in writing

Art. 1874 does not prescribe a particular form. As such, i

should be sufficient that the authority in writing should

reflect the identity of the agent, a proper description of the

land, and terms of sale, if any. In effect, such an instrumen

would be a special power of attorney.

However, in the case where the principal is a corporation

jurisprudence explains that the written authorization

generally must be in the form of a board resolution.





Cases:

ngeles v Philippine National Railways (2006)

Brief facts: Lizette Angeles, Laureano’s wife, was authorized by

Gaudencio Romualdez to be his representative in the

withdrawal of scrap rails awarded to him in a contract of sale

with PNR. When the hauling of said rails were suspended dueto documentary discrepancies and reported pilferages,

Angeles demanded a refund which PNR refused. Lizette and

Laureano sued PNR. The TC and CA dismissed the complaint

holding that the spouses were not the real parties-in-interest

as Lizette was merely a representative of Romualdez and not

an assignee to the latter’s rights with respect to the award.

Laureano maintains that the authorization letter was not in the

form of a special power of attorney, implying that Romualdez

had not intended to merely authorize his wife to perform an

act (haul the rails) for him.

Doctrine: A valid power of attorney is an instrument in writing

by which a person, as principal, appoints another as his agent

and confers upon him the authority to perform certain

specified acts on behalf of the principal. In the absence of a

statute, no form or method of execution is required for its

validity. It may be in any form clearly showing on its face the

agent’s authority.

Jimenez v Rabot (1918)

Brief Facts: Gregorio owned three properties assigned to him

as one of the heirs in the division of the estate of his father.

While he was in Vigan, he wrote to Nicolasa that he was

pressed for money and requested her to sell one of the parcelsof land and send the proceeds to pay for his debts. The sister

sold the land to Pedro Rabot. Gregorio now claims that his

sister did not have valid authority to sell the parcel of land.

Doctrine: Where the owner of real property desires to confer

upon an attorney-in-fact authority to sell the same, it is

necessary that the authority should be expressed in writing. It

is not required that the property to be sold should be precisely

as described, only that the authority should be so expressed as

to determine without doubt the limits of the agent’s authority.

City-Lite Realty Corporation v C (2000)

Brief Facts: FP holdings owned a property with a total lot area

of 71,754 m2. A portion of which measuring 9,192 m 2 was sold

through Metro Drug to City Lite. F.P. Holdings refused to sell it

to City-Lite as it only requested Metro Drug’s assistance in

finding buyers for the property.

Doctrine: The authority to sell a piece of land or any interes

therein through an agent should be in writing; otherwise, the

sale shall be void.

Cosmic Lumber v C (1996)

Brief Facts: Agent exceeded authority of SPA, which did no

include any specific authority allowing her to alienate/seprincipal’s property.

Doctrine:

rt 1874: When the sale of a piece of land or any interes

thereon is through an agent, the authority of the latter sha

be in writing; otherwise, the sale shall be void.

Said power of attorney must also express the powers of th

agent in clear and unmistakable language.

San Juan Structural Steel v C (1998)

Brief Facts: San Juan entered into a sale agreement of a parce

of land with Nenita Gruenberg (Mrs. Gruenberg), treasurer o

Motorich. San Juan already paid P100k as earnest money

However, the sale did not push through. San Juan then want

to compel Motorich to sell the land to them.

Doctrine: A corporate treasurer, by herself and without an

authorization from the board of directors, CANNOT validly se

a parcel of land owned by the corporation. A written SPA i

required in order for an agent to be allowed to sell a piece o

land or any interest therein (Art 1874 & 1878).

Delos Reyes v C (1999)

Brief facts: Renato orally sold a portion of his father’s propert

to Delos Reyes (one of the lessees). When his father learned

about the sale, an action was immediately filed to recover it.

Doctrine: An oral contract of sale is void ab initio. Moreover

there is said to be no consent, and consequently, no contrac

when the agreement is entered into by one in behalf o

another who has never given him authorization therefor unles

he has by law a right to represent the latter.

F Realty v Dieselman Freight (2002)

Brief Facts: Cruz Jr. as a member of Dieselman’s BOD, bu

without a written authority from Dieselman, issued an Authorit

to Sell Real Estate to Polintan who later authorized Noble to

sell a parcel of Dieselman’s lot. Noble offered to sell it to A

Realty and the latter partially paid. Cruz, Sr. (president o

Dieselman) however terminated the contract. AF Realty the

filed a case for specific performance. Dieselman subsequentl





executed a Deed of Absolute Sale with Midas for said property.

Midas filed a Motion to Intervene in the case between AF

Realty and Dieselman.

Doctrine: The sale of land through an agent without any

written authority is void. Art. 1874: “When a sale of piece of

land or any interest therein is through an agent, the authority

of the latter shall be in writing; otherwise, the sale shall bevoid.”





9

III.WHO H S THE

OBLI TION TO

DETERMINE EXISTENCE

ND SCOPE OF ENCY?

The person dealing with the agent must act with ordinary

prudence and reasonable diligence. Obviously, if he knows

or has good reason to believe that the agent is exceeding

his authority, he cannot claim protection [Keeler Electric v

Rodriguez (1922)].

R: Agency must exist as a fact. The law makes no

presumption thereof. The person alleging it has the burden

of proof to show, not only the fact of its existence, but also

its nature and extent [People v Yabut (1977)].

Cases:

Keeler Electric Co. v Rodriguez (1922)

Brief Facts: Keeler delivered and installed a plant (through it’s

employee Cenar) at Iloilo where it was tested and approved by

Rodriguez. Cenar gave a statement of account to Rodriguez

before he went back to Manila. Keeler requested payment

from Rodriguez for which Rodriguez replied that he already

paid to Montelibano (also an employee of Keeler) assuming

that he was authorized to collect payment for the plant.

Doctrine: Persons dealing with an assumed agent, whether the

assumed be a general or special one, are bound at their peril,

if they hold the principal, to ascertain not only the fact of theagency but the nature and extent of the authority, and in case

either is controverted, the burden of proof is upon them to

establish it. It is, moreover, in any case entirely within the

power of the person dealing with the agent to satisfy himself

that the agent has authority he assumes to exercise, or to

decline to its relations with him.

Yu Eng Cho v Pan merican (2000)

Brief Facts: Spouses Yu booked two round-trip tickets for their

business trip from Pan-Am through Claudia Tagunicar so that

they can go to San Francisco from Manila with Hongkong and

Tokyo as their stop-overs. However when they reached TokyoPan-Am informed them that their names were not in the

manifest forcing them to buy tickets to Taipei instead. When

they reached Taipei there were no flights available for San

Francisco within the next 72 hours constraining them to go

back to Manila. Because they did not arrive in San Francisco on

the required date, their business partner cancelled their option

to buy certain materials they needed for their business. A

complaint for damages was then filed by the Spouses Y

against Pan-Am, Tagunicar and a certain Canilao.

Doctrine: It is a settled rule that persons dealing with a

assumed agent are bound at their peril, if they would hold th

principal liable, to ascertain not only the fact of agency bu

also the nature and extent of authority, and in case either icontroverted, the burden of proof is upon them to establish it.





1

IV. HOW IS ENCY

DISTIN UISHED FROM

OTHER CONTR CTS/

REL TIONSHIPS?

In eneral

The need to distinguish should not be interpreted to mean

that once a contract is determined to be an agency contract,

it could not be also another type of contract.

1. Determined by acts

The manner by which parties refer to their contract or to

themselves in relation to the contract does not determine

the nature of the contract.

What is determinative is the nature of the acts performed by

the parties or the nature of the relationship between the

parties.

If an act done by one person in behalf of another is in its

essential nature one of agency, the former is the agent of

the latter notwithstanding he or she is not so called. The

question is to be determined by the fact that one represents

and is acting for another, and if relations exist which will

constitute an agency, it will be an agency whether the

parties understood the exact nature of their relation or not.

(Doles v Angeles (2006) )

2. The element of control

rt. 1887. In the execution of the agency, the agent shall act inaccordance with the instructions of the principal.

In default thereof, he shall do all that a good father of a family

would do, as required by the nature of the business.

Victorias Milling v CA: One factor which most clearly

distinguishes agency from other legal concepts is control;

one person – the agent – agrees to act under the control or

direction of another – the principal.

American Jurisprudence : a prime element of an agency

relationship is the existence of some degree of control by

the principal over the conduct and activities of the agent.

Casis: It is not accurate to say that control is the main

distinguishing factor. It would be more accurate to say that

representation is the distinguishing factor.

Victorias Milling : It is clear from Art. 1868 that the basis of

agency is representation… The question of whether a

contract is one of… agency depends on the intention of

the parties as gathered from the whole scope and effect

of the language employed.

The rule requiring the consideration of intent of the

parties should temper the earlier quoted statement in the

same case, that control is the distinguishing factor in

contract of agency.

. M STER-SERV NT

rt. 1689. Household service shall always be reasonabl

compensated. Any stipulation that household service is withou

compensation shall be void. Such compensation shall be i

addition to the house helper’s lodging, food, and medica

attendance.

rt. 1690. The head of the family shall furnish, free of charge

to the house helper, suitable and sanitary quarters as well a

adequate food and medical attendance.

rt. 1691. If the house helper is under the age of eighteeyears, the head of the family shall give an opportunity to the

house helper for at least elementary education. The cost o

such education shall be a part of the house helper’

compensation, unless there is a stipulation to the contrary.

rt. 1692. No contract for household service shall last for mor

than two years. However, such contract may be renewed from

year to year.

rt. 1693. The house helper’s clothes shall be subject t

stipulation. However, any contract for household service sha

be void if thereby the house helper cannot afford to acquire

suitable clothing.

rt. 1694. The head of the family shall treat the house helper in

a just and humane manner. In no case shall physical violence

be used upon the house helper.

rt. 1695. House helpers shall not be required to work more

than ten hours a day. Every house helper shall be allowed fou

days vacation each month with pay.

rt. 1696. In case of death of the house helper, the head of thefamily shall bear the funeral expenses if the house helper ha

no relatives in the place where the head of the family lives, wit

sufficient means therefor.

rt. 1697. If the period for household service is fixed neithe

the head of the family nor the house helper may terminate the

contract before the expiration of the term, except for a jus





1

cause. If the house helper is unjustly dismissed, he shall be

paid the compensation already earned plus that for fifteen

days by way of indemnity. If the house helper leaves without

justifiable reason, he shall forfeit any salary due him and

unpaid, for not exceeding fifteen days.

rt. 1698. If the duration of the household service is not

determined either by stipulation or by the nature of theservice, the head of the family or the house helper may give

notice to put an end to the service relation, according to the

following rules:

1. If the compensation is paid by the day, notice may be

given on any day that the service shall end at the close of

the following day;

2. If the compensation is paid by the week, notice may be

given, at the latest, on the first business day of the week,

that the service shall be terminated at the end of the

seventh day from the beginning of the week;

3. If the compensation is paid by the month, notice may begiven, at the latest, on the fifth day of the month, that the

service shall cease at the end of the month.

rt. 1699. Upon the extinguishment of the service relation, the

house helper may demand from the head of the family a

written statement on the nature and duration of the service

and the efficiency and conduct of the house helper.

B. EMPLOYER-EMPLOYEE

rt. 1700. The relation between capital and labor are not

merely contractual. They are so impressed with public interestthat labor contracts must yield to the common good.

Therefore, such contracts are subject to the special laws on

labor unions, collective bargaining, strikes and lockouts, closed

shop, wages, working conditions, hours of labor and similar

subjects.

Sevilla v C (1988)

Brief Facts: Lina Sevilla agreed to man Tourist World Service’s

Ermita office. She received 4% commission whenever she

solicited airline fares. When Tourist found out she was working

for a competitor, they terminated the lease contract they had

with Noguera, disconnected the telephone lines, and

padlocked the branch. Sevilla says their relationship was a joint

business venture while Tourist maintains it was merely

employer-employee so Sevilla was bound by her employer’s

acts.

Doctrine: The parties had contemplated a principal-agen

relationship, rather than a joint management or a partnership

Sevilla solicited airline fares, but she did so for and on behalf o

her principal, Tourist World. Sevilla is entitled to damage

because the agency created is compatible with the intent o

the parties, and cannot be revoked at will. The reason is that i

is one coupled with an interest, the agency having bee

created for the mutual interest of the agent and the principal.

Dela Cruz v Northern Theatrical Enterprises Inc (1954)

Brief Facts: The guard employed by Northern Theatrica

figured in a shooting incident and incurred expenses during

the litigation filed against him. The employee wants to recove

from the employer invoking the concept of agency.

Doctrine: The relationship between the movie corporation and

the guard was not that of principal and agent because th

principle of representation was in no way involved.

C. LE SE OF SERVICE

rt. 1644. In the lease of work or service, one of the partie

binds himself to execute a piece of work or to render to the

other some service for a price certain, but the relation o

principal and agent does not exist between them.

Distinguished from service providers

A lessor of work or services cannot be an agent.

Since the essence of agency is representation, thi

implies that a lessor of work or services cannot perform

juridical acts which bind the principal. If, while performing his services, legal injury is suffered b

another, then the lessee may be held liable. But the lesso

cannot transact business or enter into contracts on beha

of the lessee.

Nielson & Co v Lepanto (1968)

Brief Facts: Lepanto owned the mining properties that ar

operated and maintained by Neilson. The war broke out and

mining was suspended. Mining resumed it operation only in

1948. Lepanto claims that the contract already expired in 1947

The question WON the contract of management is in fact

contract of agency arose in order to determine the validity othe termination of contract.

Doctrine: In both agency and lease of services, one of th

parties binds himself to render some service to the other party

Agency, however, is distinguished from lease of work o

services in that the basis of agency is representation, while in





1

the lease of work or services the basis is employment. The

lessor of services does not represent his employer, while the

agent represents his principal. There is another obvious

distinction between agency and lease of services. Agency is a

preparatory contract, as agency “does not stop with the

agency because the purpose is to enter into other contracts.”

D. I

NDEPENDENT

C

ONTR CTOR

rt. 1713. By the contract for a piece of work the contractor

binds himself to execute a piece of work for the employer, in

consideration of a certain price or compensation. The

contractor may either employ only his labor or skill, or also

furnish the material.

Fressel v Mariano UyChaco Sons & Co. (1916)

Doctrine: There was no principal-agent relationship. The

contractor was authorized to do work according to his own

method and without being subject to the defendant’s control,except as to the result of the work. The contractor could also

purchase his materials and supplies from whom he pleased

and at such prices as he desired to pay.

Shell v Firemen’s Insurance (1957)

Brief Facts: Sison’s car fell from a hydraulic lift while it was

being greased in a Shell station. The car insurers and Sison are

suing Shell and the Shell operator for damages incurred.

Doctrine: Only Shell was made liable because the operator of a

gasoline and service station owed his position to the company

and the latter could remove him or terminate his services at will.

Therefore, he is an agent of the company and not an

independent contractor.

Manila Memorial v Linsangan (2004)

Doctrine: The alleged agent was an independent contractor

because the person was authorized to solicit and remit to

Manila Memorial offers to purchase interment spaces

belonging to and sold by the latter, and that such person was

authorized to solicit orders solely for and in behalf of MM. The

person was an agent “having represented the interest of the

latter, and having been allowed by MM to represent it indealings with clients/buyers.

Nogales v Capitol Medical (2007)

R: A hospital is not liable for the negligence of an

independent contractor-physician.

XPN: When physician is the ostensible agent of the hospital.

E. TRUST

rt. 1440. A person who establishes a trust is called the trusto

one in whom confidence is reposed as regards property for th

benefit of another person is known as the trustee; and th

person for whose benefit the trust has been created is referred

to as the beneficiary.

F. S LE

rt. 1458.By the contract of sale, one of the contracting partie

obligated himself to transfer the ownership of and to deliver

determinate thing and the other to pay therefor a price certai

in money or its equivalent.

The question of whether a contract is one of sale or o

agency depends on the intention of the parties. ( Tuazon

Heirs of Ramos (2005) )

Quiroga v Parsons Hardware Co. (1918)

Brief Facts: Quiroga and Parsons entered into a contract wher

the former granted the latter the exclusive right to sell his bed

in Visayas. Quiroga sued Parsons alleging noncompliance with

obligations which were not written in the contract. He claimed

that Parsons was his agent and argued that said obligations ar

implied in a contract of commercial agency.

Doctrine: To classify a contract, due regard must be given to

its essential clauses. 1In an agency, the agent receives the thin

to sell it. He does not pay its price, but delivers to the principa

the price he obtains from the sale of the thing to a third personIf he does not succeed in selling the thing, he returns it.

Casis’ comments: It was found that the alleged buyer returned

beds it couldn’t sell (implies an agency relationship). Othe

facts imply intention to create agency relationship:

1. Corporate officer testified that the purpose of the contrac

was for the Parsons to be an agent for the beds and to

collect a commission on sales.

2. Terms of contract:

a. Quiroga granted Parsons exclusive right to sell his beds;

b. Parsons was entitled to 25% commission;

1 In Chua Ngo v Universal Trading (1950) , the Court looked at the

essential clauses of the contract as well as the surrounding

circumstances in order to determine whether the contract was one of

sale or agency. The Court held that it was a sale. In American Rubber v

CIR (1975) , meanwhile, the Court took notice of the acts of the parties

and held that there was a contract of agency. (See Week 2 reviewer for

the digests.)





1

c. Parsons bound himself not to sell any other kind of bed

except the bed of Quiroga;

d.Parsons may sell, or establish branches of his agency for

the sale of Quiroga beds in all other towns where there

are no exclusive agents.

The Court itself said that in order to classify a contract, due

regard must be given to its essential clauses, but it ignored

such clauses and ruled that none of the clauses conveys theidea of agency.

The Court implies that a hierarchy exists between contracts

of sales and agency such that if the basic elements of a sale

are present, it is a contract of sale even if features of a

contract of agency are present.

Ker & Co., Ltd. v Lingad (1971)

Brief Facts: Ker and Co. had an agreement with US Rubber

International whereby the former is to sell the products of the

latter. The said products were to remain under the ownership

of US Rubber until sold to third parties and that US Rubber

would control the manner of the sales by Ker and Co. Ker and

Co. was later taxed as a broker which the former opposed. The

CTA agreed with the Commissioner of Internal Revenue that

Ker and Co. is a broker.

Doctrine: The difference between an a contract of sale and of

agency is that in the former, the ownership of the goods is

transferred and the vendor has no control over how the

vendee manages and sells the goods while in agency, the

principal retains ownership of the goods despite delivery to

the agent and the manner by which the agent manages and

sells the goods is under the control of the principal.

onzalo Puyat & Sons, Inc. v. rco musement Company

(1941)

Brief Facts: Puyat, on behalf of Arco, ordered sound

reproducing equipment and machinery from Starr Piano

Company. The former agreed to pay 10% commission plus all

other incidental expenses. Years later, Arco discovered that

the price quoted to them by Puyat was not the net price, but

rather the list price, and that latter obtained a discount from

Starr. Arco sued Puyat to obtain reimbursement. The TC

absolved Puyat and held that the contract was one of purchase

and sale. The CA held that the contract was that of an agencyand ordered Puyat to reimburse the overpayment.

Doctrine: There can be no agency where the person is both

the agent of the vendor and the purchaser.

Lim v People (1984)

Brief Facts: An agreement is reached where Lim would se

Ayroso’s tobacco, and the proceeds will be given to the latte

upon sale. Only P240 of the total value of P799.50 was remitted

Ayroso sues for estafa.

Lim: the agreement is not of agency but a sale, hence ther

can be no estafa. SC: agreement is of agency; Lim guilty as charged.

Doctrine: The determination of whether an agreement is of

sale or of an agency to sell is a question of fact.

. P RTNERSHIP

rt. 1767. By the contract of partnership two or more person

bind themselves to contribute money, property, or industry to

a common fund, with the intention of dividing the profit

among themselves.

Two or more persons may also form a partnership for th

exercise of a profession.

Distinguished from partnership

Partnership and agency are distinct contracts. The overla

exists in the nature of the relationship between the partner

and between the partnership and the partners, which is one

of agency.

There is mutual agency among the partners.

See Sevilla v CA (1988) , p. 10

H. N

E OTIORUM ESTIO

/

QU SI

-

CONTR CT

rt. 2144. Whoever voluntarily takes charge of the agency o

management of the business or property of another, withou

any power from the latter, is obliged to continue the same unt

the termination of the affair and its incidents, or to require th

person concerned to substitute him, if the owner is in

position to do so. This juridical relation does not arise n eithe

of these instances:

1) When the property or business is not neglected o

abandoned;

2) If in fact the manager has been tacitly authorized by the

owner

In the first case, the provisions of Articles 1317, 1403, No. 1

and 1404 regarding unauthorized contracts govern.

In the second case, the rules on agency in Title X of this Boo

shall be applicable.





1

rt. 2145. The officious manager shall perform his duties with

all the diligence of a good father of a family, and pay the

damages which through his fault or negligence may be

suffered by the owner of the property or business under

management.

The courts may, however, increase or moderate the indemnityaccording to the circumstances of each case. (1889a)

I. JUDICI L DMINISTR TOR

Bouvier’s Law Dictionary : An administrator is a person

lawfully appointed, with his assent, by an officer having

jurisdiction, to manage and settle the estate of a deceased

person who has left no executor, or one who is for the time

incompetent or unable to act.2

J. B

ROKER

City Lite , p. 39: This obviously meant that Meldin Al G. Roy

and/or Metro Drug was only to assist FP Holdings in looking

for buyers and referring to them possible prospects whom

they were supposed to endorse to FP Holdings. But the final

evaluation, appraisal and acceptance of the transaction

could be made only by FP Holdings

Distinguished from Brokerage

Reyes v Rural Bank : A broker is “one who is engaged, for

others, on a commission, negotiating contracts relative to

property with the custody of which he has no concern; the

negotiator between other parties, never acting in his own

name but in the name of those who employed him… a

broker is one whose occupation is to bring the parties

together, in matters of trade, commerce or navigation.”

Bouvier’s Law Dictionary : Brokerage refers to “the trade or

occupation of a broker.

Pacific Commercial v Yatco (1939)

Brief facts: Pacific was taxed from the sale of sugar. It was

alleged that there was double taxation because Victorias, for

whom they sold the sugar, was already taxed in its capacity as

manufacturer and owner of the sugar. SC held that there wasno double taxation; the 2nd tax was for industry or occupation .

Also, it ruled that PCC acted as commission merchant, and as

broker in its different ways of selling the sugar.

2 I don’t remember how this was defined in class so I just looked for the

definition of “administrator”. Hehe. -Mitch

Doctrine: A commission merchant is one engaged in the

purchase or sale for another of personal property which, fo

this purpose, is placed in his possession and at his disposal. O

the other hand, the broker, unlike the commission merchant

has no relation with the thing he sells or buys. He is merely a

intermediary between the purchaser and the vendor. H

acquires neither the possession nor the custody of the thing

sold.

Hahn v Court of ppeals (1997)

Brief Facts: Hahn is the exclusive dealer of BMW in the

Philippines. However, due to his poor performance, BMW had

to find another dealer which Hahn did not agree to and thus

filed for specific performance with other remedies. Summon

were issued to BMW via the DTI and BMW later filed a motio

to dismiss questioning the jurisdiction of the QC RTC over it

person alleging that it was not doing business in th

Philippines. RTC deferred the motion to dismiss and the CA

later ruled that the RTC gravely abused its discretion.

Doctrine: The difference between an agent and a broker is tha

an agent receives a commission upon the successfu

conclusion of a sale while a broker earns his pay merely b

bringing the buyer and the seller together, even if no sale i

eventually made.





1

V. SOME CL SSES OF

ENTS

Three relationships dealt with in the law of gency (Mechem)

1. Principal and agent (§12) Agent – represents his principal contractually

If properly authorized, agent makes contracts or other

negotiations of a business nature on behalf of his principal

and by which his principal is bound

The principal is normally not liable for torts committed by

the agent, although the agent at the moment was working

on the principal’s business

2.Master and servant (§13)

Servant – one who works physically for another, subject to

the control of that other, who is called the master

Servant has no power to bind the master in contract

Note: a person can be employed in a capacity where he is

simultaneously a servant and an agent

3. Employer and independent contractor (§14)

Independent contractor – one who performs services for

the constituent, but neither as a servant nor as an agent

Function of the independent contractor is to do a job for

the price. The finished job must meet certain

specifications but the manner and control of doing it is up

to the contractor.

Independent contractor has no power to represent the

principal contractually and has no power to create tort or

contract obligations against the latter

. TTORNEYS- T-L W

An attorney-at-law is one whose business is to represent

clients in legal proceedings.

The attorney at law is an officer of the court in which he

practices, and is, in some sense, an officer of the state. The

relationship of the attorney to his client, however, is largely

governed by the law of Agency. (§76)

No formal authorization is ordinarily necessary. The

attorney’s authority may be shown by the same kind of

evidence which would suffice in other cases (may be inferredfrom conduct subsequent ratification may cure lack of

precedent authorization)

When a duly admitted attorney appears for a party, the

law presumes that his appearance was authorized.

An attorney has authority “to do all acts in or out of court

necessary or incidental to the prosecution or management

of the suit, and which affect the remedy only, and not the

cause of action.” (§77)

B. UCTIONEERS

An auctioneer is one whose business is to sell property fo

others to the highest bidder at a public sale.

C. BROKERS

A broker is one whose business is to act as intermediar

between two other parties such as insurance broker and rea

estate broker.

The real estate broker barely qualifies as being technicall

an agent at all; his real position is more that of one to whom

an offer is made which the broker tries to accept (§560)

Offer: to pay a commission on the performance of

certain service

The broker has ordinarily no power to contract on behaof the owner (§563)

The broker’s right to commission is in many states limited

by one or both of two types of statutes (§561):

1. Statute of frauds

requires that contracts to pay a broker’s commissio

shall not be valid unless in writing

2. Statute providing for the qualification and licensing o

brokers and prohibits unlicensed brokers from carrying o

business

The commission will be earned if, and only if, the broke

produces a buyer ready, able and willing to buy on th

owner’s terms before the offer is revoked or the land is sol

by the owner or another broker (§563)

The owner may refuse to contract with the prospectiv

buyer, but he will remain bound to pay the commission

the broker has tendered proper performance.

The broker’s right to a commission is not affected even i

the asking price is not obtained in a situation where the

owner, as a result of dickering with the prospective buyer

finally sells to the latter for less or on different terms than

those originally specified (§564, qualifying §563)

o Exception to qualification: if it is stipulated in th

listing contract that the amount of the broker’

commission may be affected by the price actually paid

Limitation to owner’s power to revoke: he may not “ibad faith” revoke the broker’s authority and then proceed to

sell to a buyer discovered by the broker and with whom the

broker is negotiating. (§565)

“exclusive agency” v “exclusive sale” (§568)

Exclusive agency – owner retains the right to sell himsel

though not by another agent

Exclusive right of sale – owner relinquishes for the





1

duration of the listing the right to sell even without the

intervention of another agent

D. F CTORS; COMMISSION MERCH NTS

rt. 1903. The commission agent shall be responsible for the

goods received by him in the terms and conditions and as

described in the consignment, unless upon receiving them heshould make a written statement of the damage and

deterioration suffered by the same.

rt. 1904. The commission agent who handles goods of the

same kind and mark, which belong to different owners, shall

distinguish them by counter-marks, and designate the

merchandise respectively belonging to each principal.

rt. 1905. The commission agent cannot, without the express

or implied consent of the principal, sell on credit. Should he do

so, the principal may demand from him payment in cash, but

the commission agent shall be entitled to any interest orbenefit, which may result from such sale.

rt. 1906. Should the commission agent, with authority of the

principal, sell on credit, he shall so inform the principal, with a

statement of the names of the buyers. Should he fail to do so,

the sale shall be deemed to have been made for cash insofar

as the principal is concerned.

rt. 1907. Should the commission agent receive on a sale, in

addition to the ordinary commission, another called a

guarantee commission, he shall bear the risk of collection and

shall pay the principal the proceeds of the sale on the sameterms agreed upon with the purchaser.

rt. 1908. The commission agent who does not collect the

credits of his principal at the time when they become due and

demandable shall be liable for damages, unless he proves that

he exercised due diligence for that purpose.

A factor or commission merchant is one whose business is to

receive and sell goods for a commission, being entrusted

with the possession of the goods involved in the transaction.





1

VI. WH T RE THE

CL SSIFIC TIONS OF

ENCY CONTR CTS?

. E

XPRESS ENCY

;

IMPLIED ENCY

1. Express gency

Created by the express act of the principal authorizing

the agent to act on his behalf and by the express act of the

agent accepting such authority → usual manner by which an

agency is established.

2. Implied gency

a. Implied from acts of principal

Manifested by either: (1) silence, (2) lack of action or (3)failure to repudiate the agency knowing that another person

on his behalf without authority. (See p. 3)

That a person is not authorized may mean either that

there is no contract of agency or that the act performed is

beyond the scope of the contract.

Requisites for implied agency to be established:

a. Alleged principal should be aware of the acts of the

alleged agent.

b. Alleged principal has had reasonable opportunity under

the circumstances to repudiate the acts of the alleged

agent.

c. A third party has transacted with the alleged agent

without being made aware of the alleged agent’s lack of

authority.

d.There were no facts/circumstances that should have raised

any suspicion on the part of the third person that the

agent was not authorized.

Uniland Resources v DBP: Art. 1869 does not apply when

both principal and agent knew that there’s no contract of

agency and no third person was prejudiced by the non-

recognition of the agency.

b. Implied from acts of agent

Art. 1870 applies only to situations wherein the principalexpressly appoints the agent but the latter only impliedly

accepts.

Implied agency is established through silence or inaction

of the agent if the latter does not inform the principal of his

rejection of the agency:

a. within a reasonable amount of time under the

circumstances; and

b.prior to the principal suffering damage as a result of th

delay on the part of the agent in informing the principal o

such rejection of the agency relationship.

rt. 1871.Between persons who are present, the acceptance

of the agency may also be implied if the principal delivers his

power of attorney to the agent and the latter receives itwithout any objection.

rt. 1872. Between persons who are absent, the acceptance o

the agency cannot be implied from the silence of the agent

except:

1) When the principal transmits his power of attorney to th

agent, who receives it without any objection;

2) When the principal entrusts to him by letter or telegram

power of attorney with respect to the business in which he

is habitually engaged as an agent, and he did not reply to

the letter or telegram.

Difference between the two:

1871: the agent impliedly accepts the agency in the

presence of the principal

1872: indicates that the GR is that an acceptance canno

be implied if the non-objection of the agent is not made i

the presence of the principal

Note:

1871: To be reasonable, the agent must be aware of th

contents of the document.

1872: In case of transmittal – it is not required that th

power of attorney should pertain to a business that the

agent is habitually engaged in

B. ENCY BY ESTOPPEL; NO CONSENT

rt. 1900. So far as third persons are concerned, an act i

deemed to have been performed within the scope of th

agent’s authority, if such act is within the terms of the power o

attorney, as written, even if the agent has in fact exceeded the

limits of his authority according to an understanding between

the principal and the agent.

rt. 1911. Even when thee agent has exceeded his authority

the principal is solidarily liable with the agent if the forme

allowed the later to act as though he had full powers.

rt. 1921. If the agency has been entrusted for the purpose o

contracting with specified persons, its revocation shall no

prejudice the latter if they were not given notice thereof.

rt. 1922. If the agent had general powers, revocation of th





1

agency does not prejudice third persons who acted in good

faith and without knowledge of the revocation. Notice of the

revocation in a newspaper of general circulation is a sufficient

warning to third persons.

1. Based on Statute

Implied gency vs gency by Estoppel: in the former, an

actual agency exists (with consent of the parties). In the latter,agency only exists with respect to a third person who relied

on the representations of the alleged principal/agent.

Agency by estoppel is created to protect the interests of

a third person against an alleged principal.

Agency by estoppel may be transformed into an implied

agency when:

The agent carries out the agency, in which case the

situation falls under Art 1870 CC; or

The alleged agent is made aware of the specific

information/advertisement and he is silent/fails to act

according to the circumstances.

There is no rule in case a person claims that he is anagent of another either by specific info or public

advertisement BUT

An implied agency under Art. 1869 may be created if the

principal finds out and does nothing

If the principal is completely unaware, the 3rd person has

no recourse against him.

2. Based on Jurisprudence

Pahud v CA: Despite the absence of written authority,

they are barred from questioning the authority of their

alleged agent because they clothed him with authority by

their silence. The court here applied Art 14313

CC.

Requisites (Litonjua vs Eternit )

a. MANIFESTATION: The principal manifested a

representation of the agent’s authority or knowingly

allowed the agent to assume such authority.

b.REPRESENTATION: Third person, in good faith, relied

upon such representation.

c. DETRIMENT: Third person changed his position to his

detriment.

Similar to doctrine of apparent authority (based on US

jurisprudence) which requires proof of reliance upon the

representations and that the representations predated the

actions taken in reliance.

Liability of hospitals for negligence of independent contractor-

physician (Nogales v Capitol Medical Center (2006) )

3 rt. 1431.Through 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.

R: a hospital is not liable for the negligence of a

independent contractor-physician

XPN:doctrine of apparent authority

For a hospital to be liable under the doctrine of apparen

authority, a plaintiff must prove the following:

1. The hospital, or its agent, acted in a manner that would

lead a reasonable person to conclude that the individua

who was alleged to be negligent was an employee oagent of the hospital;

2. Where the acts of the agent create the appearance o

authority, the plaintiff must also prove that the hospita

had knowledge of and acquiesced to them; and

3. The plaintiff acted in reliance upon the conduct of th

hospital or its agent, consistent with ordinary care and

prudence. (Gilbert v Sycamore Municipal Hospital)

Requisites to create an agency by estoppel against hospital

in relation to independent contractor-physician:

1. Manifestation

2. Reliance

C. ENCY BY OPER TION OF L W

rt. 1869. Agency may be express, or implied from the acts o

the principal, from his silence or lack of action, or his failure to




rt. 1884. The agent is bound by his acceptance to carry ou

the agency and is liable for the damages which, through hi

non-performance, the principal may suffer.

He must also finish the business already begun on the death o

the principal, should delay entail any danger.

rt. 1930. The agency shall remain in full force and effect even

after the death of the principal, if it has been constituted in th

common interest of the latter and of the agent, or in th

interest of a third person who has accepted the stipulation in

his favor.

rt. 1931. Anything done by the agent, without knowledge o

the death of the principal or of any other cause whic

extinguished the agency, is valid and shall be fully effectivewith respect to third persons who may have contracted with

him in good faith.





1

D. UNIVERS L, ENER L, SPECI L

rt. 1876.An agency is either general or special.

The former comprises all the business of the principal. The

latter, one or more specific transactions.

1. Distinguishing “ eneral gency” and “ gency

Couched in eneral Terms”

eneral agency – refers to scope of business covered.

gency couched in general terms – refers to type of

authority conferred on the agent.

a. s to scope: eneral gency

Comprises all the business of the principal.

Two ways of interpreting “business of a principal”:

1. If a principal owns several businesses, a general agent

would manage all of them.

2. The general agent is one who manages the entirety of a

particular business of the principal.

US Law : a general agent is authorized to do all acts

connected with the business or employment in which he or

she is engaged. But what is determinative of his general

agency is his continuity of service rather than extent of

responsibility.

b. s to authority: gency Couched in eneral

Terms

Only grants the agent the authority to perform acts of

administration, even if the principal should state that he

withholds no power or that the agent may execute such acts

as he may consider appropriate, or even though the agency

should authorized a general and unlimited management.

It is an act of administration if the nature of the business

requires the agent to perform certain acts repeatedly and

without need of express authorization from the principal for

each transaction.

2. Distinguishing Special gency and gency

Couched in Specific Terms

a. s to scope: Special gency

Comprises one or more specific transactions.

The agent does not handle all of the business of the

principal, but specific aspects of his business. Otherwise he

would be a general agent.

b. s to authority: Special Power of ttorney

i. Transactions covered

A special power of attorney is not the name of a

document, but a description of the nature of the power

granted to the agent. If the authority granted to the agent is

a power involving strict dominion, then it is SPA.

(demonstrated in Veloso v CA (1996) )

To be authorized to perform any of these transactions

agent must be specifically authorized to do so. Authorit

must be ‘couched in specific terms’.

ii. Effect of absence of specific authorization

Art. 1878 does not provide for the consequence fo

failure to comply with the requirement for a specifiauthorization but only states that a special power of attorney

is “necessary” in the listed cases.

rt. 1878. Special powers of attorney are necessary in th

following cases:

1) To make such payments as are not usually considered a

acts of administration;

2) To effect novations which put an end to obligation

already in existence at the time the agency wa

constituted;

3) To compromise, to submit questions to arbitration, t

renounce the right to appeal from a judgment, to waive

objections to the venue of an action or to abandon a

prescription already acquired;

4) To waive any obligation gratuitously;

5) To enter into any contract by which the ownership of a

immovable is transmitted or acquired either gratuitousl

or for a valuable consideration;

6) To make gifts, except customary ones for charity o

those made to employees in the business managed by

the agent;

7) To loan or borrow money, unless the latter act b

urgent and indispensable for the preservation of th

things which are under administration;

8) To lease any real property to another person for morthan one year;

9) To bind the principal to render some service withou

compensation;

10) To bind the principal in a contract of partnership;

11) To obligate the principal as a guarantor or surety;

12) To create or convey real rights over immovable

property;

13) To accept or repudiate an inheritance;

14) To ratify or recognize obligations contracted before th

agency;

15) Any other act of strict dominion.

Dungo v Lopena (1962): A third person cannot bind anothe

to a compromise agreement unless he has obtained a SPA

for that purpose from the party intended to be bound. Bu

although the CC expressly requires a SPA in order that one

may compromise an interest of another, it is not correct to

conclude that its absence renders the compromis

agreement void. Since the compromise agreement is





2

contract, it must be governed by the rules and the law

merely states that it is merely unenforceable.

Vicente v Geraldez (1973): Attorneys have authority to bind

their clients in any case by any agreement in relation thereto

made in writing, and in taking appeals, and in all matters of

ordinary judicial procedure, but they cannot, without special

authority, compromise their clients’ litigation.

Cosmic Lumber v CA (1996): When the sale of a piece of land or any interest thereon is through an agent, the

authority of the latter shall be in writing, otherwise the sale is

void.

Mercado v Allied Banking Corp. (2007): A power of attorney

must be strictly construed and pursued. The instrument will

be held to grant only those powers which are specified

therein, and the agent may neither go beyond nor deviate

from the power of attorney.

3. Clarifying the terms

An instrument or power of attorney cannot create a

general and special agency at the same time.

In contrast, it is possible for a single instrument or power

of attorney to embody both general and special powers of

attorney.

It may be best to limit the use of “general agency” and

“special agency” as referring to the mutually exclusive terms

referring to the scope of transactions covered by agency.

Siasat v I C (1985)

Brief Facts: Nacianceno was authorized by the Siasats to

represent the United Flag Industry to deal with any entity or

organization in connection with the marketing of the latter’s

products for a commission of 30%. When Nacianceno did notget a commission for the second delivery made by UFI to the

Department of Education and Culture, the former filed an

action to recover against the Siasats. The Siasats claimed that

Nacianceno has no capacity to represent UFI in the transaction

with the DEC as there was no specific authorization for the sale

of the Philippine flags to the said department.

Doctrine: Where general words were employed in an

agreement that 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, a general agency is constituted.

C SIS: The justification does not seem to correspond to the

code’s definition of a general agency but seems to be

describing an agency couched in general terms.

Dominion Insurance v C (2002)

Brief Facts: Acting as agent for Dominion, Guevarra pai

P156,473.90 in settling the claims of several insured clients o

petitioner out of his personal money. Guevarra thereafter filed

a civil case for sum of money to recover said amount.

Doctrine: The principal is not liable for expenses incurred bythe agent who acted in contravention of the principal'

instructions. However, while the law on agency prohibit

reimbursement in such case, the agent’s right to recover ma

still be justified under Art. 1236, par. 2 of the Civil Code. Unde

this provision, the agent may demand reimbursement from th

principal to the extent the payment has been beneficial to th

latter.

E. DUR BLE ENCY


after the death of the principal, if it has been constituted in thcommon interest of the latter and of the agent, or in th


his favor.

F. COUCHED IN ENER L TERMS; COUCHED IN

SPECIFIC TERMS

rt. 1877. An agency couched in general terms comprises onl

acts of administration, even if the principal should state that he

withholds no power or that the agent may execute such acts as

he may consider appropriate, or even though the agenc

should authorize a general and unlimited management. (n)


following cases:

1) To make such payments as are not usually considered a

acts of administration;

2) To effect novations which put an end to obligation

already in existence at the time the agency wa

constituted;

3) To compromise, to submit questions to arbitration, t

renounce the right to appeal from a judgment, to waive


prescription already acquired;4) To waive any obligation gratuitously;

5) To enter into any contract by which the ownership of a



6) To make gifts, except customary ones for charity o

those made to employees in the business managed by





2

the agent;

7) To loan or borrow money, unless the latter act be

urgent and indispensable for the preservation of the

things which are under administration;

8) To lease any real property to another person for more

than one year;

9) To bind the principal to render some service without

compensation;10) To bind the principal in a contract of partnership;

11) To obligate the principal as a guarantor or surety;

12) To create or convey real rights over immovable

property;

13) To accept or repudiate an inheritance;

14) To ratify or recognize obligations contracted before the

agency;

15) Any other act of strict dominion.

rt. 1879. A special power to sell excludes the power to

mortgage; and a special power to mortgage does not include

the power to sell. (n)

rt. 1880. A special power to compromise does not authorize

submission to arbitration. (1713a)

1. Mortgage

rt. 1878. Special powers of attorney are necessary in the

following cases:

(12) To create or convey real rights over immovable property;

PNB v Sta. Maria (1969)

Brief Facts: 6 siblings of Maximo Sta Maria granted him an SPA

to mortgage a16-hectare parcel of land in Bataan jointly

owned by all of them. In addition, Valeriana, Maximo’s sister,

granted him authority to borrow money. Maximo obtained 2

sugar crop loans from PNB secured by the land jointly owned

by them. PNB sued Maximo, his siblings and Associated

Insurance for the collection of unpaid balance on sugar crop

loans. RTC held them jointly and severally liable to PNB. The

siblings appealed.

Doctrine: An SPA to mortgage real estate is limited to such

authority to mortgage and does not bind the grantor

personally to other obligations contracted by the grantee, inthe absence of any ratification or other similar act that would

estop the grantor from questioning or disowning such other

obligations contracted by the grantee.

Bank of PI v DeCoster (1925)

Brief Facts: Wife issued power of atty to husband. Husban

then signed promissory note with BPI and executed chatte

and real estate mortgages in bank’s favor. Note became due

and unpaid so bank filed action. CFI ruled in bank’s favo

Spouses did not pay for the judgment so BPI went to cour

again asking for foreclosure of property mortgaged anauction to settle debt. Wife assailed that husband had n

authority to make her liable as surety on the debt of a third

person and that debt was exclusively made by husband and hi

firm. SC agreed with wife.

Doctrine: Where in an instrument powers and duties ar

specified and defined, that all of such powers and duties are

limited and confined to those which are specified and defined

and that all other powers and duties are excluded.

2. Loan/borrow


following cases:

(7) To loan or borrow money, unless the latter act be urgen

and indispensable for the preservation of the thing

which are under administration;

Hodges v Salas (1936)

Brief Facts: Yulo was authorized to contract a loan and execut

a real estate mortage on behalf of the principals but used par

of the loan to pay off his debts. The creditor (plaintiff) filed

petition for a foreclosure of mortgage but the CFI ruled tha

the defendants are not liable for the full amount of the loan.

Doctrine: The obligation of an agent who was authorized to

procure a loan is to turn over the money to the principals or, a

least, place it at their disposal. In case, the full amount was no

delivered to the principals, the principals would be liable onl

as to the amount that was actually placed at their disposal.

3. Sell


following cases:

(5) To enter into any contract by which the ownership of an







2

Strong v utierrez Repide (1906)

Brief Facts: Mrs. Strong’s shares in a company were sold by his

general agent. There was no specific authority granted to him

in writing.

Doctrine: There is no sufficient proof of an effective power

given to Jones to dispose of this stock. Acts of agents, beyondthe limitation of their power, are null. Power to sell should have

been expressly made and never assumed. The buyer should’ve

also inquired as to the extent of the power of the agent.

Katigbak v Tai Hing Co. (1928)

Brief Facts: Gabino, as attorney-in-fact of Po Tecsi, sold the

land to Katgbak. After said sale, Po Tecsi leased the property

sold, from Gabino, who administered it in the name of Jose M.

Katigbak, at a rental of P1,500 per month, payable in advance,

leaving unpaid the rents accrued from that date until his death

which occurred on November 26, 1926, having paid the

accrued rents up to October 22, 1925. From November 26,

1926, the defendants Po Sun Suy and Po Ching leased said

land for the sum of P1,500 per month. On Feb 11, 1927, Po Sun

Suy was appointed administrator of the estate of his father Po

Tecsi, and filed with the court an inventory of said estate

including the land in question. On May 23,1927, Katigbak sold

the same property to Po Sun Boo.

Doctrine: The power of attorney given by the principal

authorizing the agent to sell any kind of realty that "might

belong" to the principal. The use of the subjunctive

"pertenezcan" (might belong) and not the indicative

"pertenecen" (belong) means that the authority given by theprincipal referred not only to the property he had at the time

the power was conferred, but also to such as he might

afterwards have during the time it was in force. While it is true

that a power of attorney not recorded in the registry of deeds

is ineffective in order that an agent or attorney-in-fact may

validly perform acts in the name of his principal, and that any

act performed by the agent by virtue of said power with

respect to the land is ineffective against a third person who, in

good faith, may have acquired a right thereto, it does, however,

bind the principal to acknowledge the acts performed by his

attorney-in-fact regarding said property.

4. Lease


following cases:

(8) To lease any real property to another person for more

than one year;

Chua v I C (1994)

Brief Facts: Herrera and On executed a lease contract over

parcel of land and On subsequently built a house over it. On

sold the house to Bok. Bok and Herrera thru Reynes (w/ou

SPA), executed a new lease contract (5 years) with a right o

first refusal. After expiration of the lease, Bok's successors-in

interest continued to occupy. Herrera sold the lot to the SpsGo who sought to eject the Chuas.

Doctrine: An agent must have a special power of atty. in orde

to execute a lease which covers a period of more than 1 year.

5. Compromise


following cases:

(3) To compromise, to submit questions to arbitration, t

renounce the right to appeal from a judgment, to waiv


prescription already acquired;

Dungo v Lopena (1962)

Brief Facts: Dungo purchased land from Lopena and Ramos

He and a co-debtor defaulted on payment so the property wa

foreclosed. A compromise agreement and tri-party agreemen

was then executed but Dungo still failed to pay. Dungo now

assails the compromise agreement because he did not sig

the same.

Doctrine: Under Article 1878 of the Civil Code, a third perso

cannot bind another to a compromise agreement unless ththird person has obtained a special power of attorney for tha

purpose from the party intended to be bound. Howeve

although the Civil Code expressly requires a special power o

attorney in order that one may compromise an interest o

another, it is neither accurate nor correct to conclude that it

absence renders the compromise agreement void. In such a

case, the compromise is merely unenforceable. This result

from its nature as a contract.

Vicente v eraldez (1973)

Brief Facts: Hi Cement had a mining claim over lands ownedby Vicente, Angeles and Bernabe. Lawyers of Hi Cemen

executed a compromise agreement wherein Hi Cement wi

buy the land from the owners. LC denied the motion fo

execution because of Hi Cement’s allegation that the

compromise agreement was void for want of a specia

authority of the Hi Cement lawyers to enter into the agreement





2

Doctrine: 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.

6 . Other acts of Stric t dom in ion


following cases:

(12) To create or convey real rights over immovable

property;

Insular Drug Co. v National Bank (1933)

Brief Facts: Foerster was a salesman and collector of Insular

Drug. He subsequently indorsed all checks made out in the

name of the Insular Drug. Foerster and his wife withdrew the

amount. After the company discovered the anomaly, Foerster

comitted suicide. The company sued the bank for the amountwithdrawn by Foerster.

Doctrine: Salesman with authority to collect money belonging

to his principal does not have the implied authority to indorse

checks received in payment.





2

VII. WH T RE THE

OBLI TIONS ND LI BILITIES

OF ENTS TO THEIR

PRINCIP LS?

. Rights of gents

1. Compensation

- Agent does not need to prove that he accepted the agency

for a fee.

- Principal must prove if he disputes that agency is not for

compensation.

- As to compensation: agent may need to prove the amount

agreed upon.

o Otherwise, customary rate given to agents under

similar circumstances or transactions may be applied

- Art. 1875 also implies that agency may exist without

compensation to the agent. Thus, compensation is not an

element of the contract of agency.

- Advantage of an agent without a fee: may be adjudgedwith less rigor for liability for fraud or negligence pursuant

to Art. 1909.

a. ProcuringCause

In Danon v Brimo & Co. (1921):

Antonio Brimo asked Julio Danon to sell his factory (Holland

American Oil Co.) for P1.2M with the promise to pay s 5%

commission. Danon was also informed that there was another

broker, Sellner, who was trying to find the factory. Sellner

found a purchaser for the same property who bought it for

P1.3M. Court held that, all that was proven was that Danon

found a person who might have bought the factory if Brimo

had not sold it to someone else. The evidence did not show

that the Prieto had definitely decided to buy the property at

the fixed price. Danon’s services did not contribute towards

bringing about the sale of the factory and was therefore not

the efficient agent or procuring cause of the sale. Although

Danon could have effected the sale had it not been sold to

someone else, he is not entitled to the commission because h

had no hand in the sale in question.

DOCTRINE: The agent must be the efficient procuring caus

of a sale in order to be entitled to commission.

In Hahn v. CA (1997) DOCTRINE: The distinction between an agent and a broker a

regards entitlement to commission:

- An agent receives a commission upon the successfu

conclusion of a sale.

- A broker earns his pay merely by bringing the buye

and seller together, even if no sale is eventually made

C SIS: Based on this ruling, in the earlier case of Danon, he

may have a reason for asking for a commission if he was merely

a broker. Note that in that case, Danon was referred to as a

broker.

In Tan v. Gullas (2002):

Sps. Eduardo & Norma Gullas executed an SPA authorizin

Manuel Tan and his associates to negotiate for the sale of the

land at P550/m2 at a commission of 3% of the gross price. Tan

contacted the Sisters of Mary of Banneaux, Inc., a religiou

organization interested in acquiring the property. The spouse

Gullas agreed to sell the land to the Sisters and subsequentl

executed an SPA in favor of Eufemia Cañete, giving her the

special authority to sell, transfer and convey the land fo

P200/m2. Tan went to see Eduardo to claim broker’s fee but h

refused alleging that another group of agents, Pacana, wa

responsible for the sale to the Sisters. Court held that, Tan et a

were brokers which entitled them to a commission regardlesof whether the sale was concluded through their effort

because it is sufficient that they “set the sale in motion.” Tan e

al., were brokers given that they were authorized by th

spouses to negotiate the sale of their land within one month

At the very least, Tan et al. set the sale in motion. They wer

not able to participate in its consummation only because the

were prevented from doing so. Therefore, as brokers, Tan e

al., should be entitled to the commission whether or not the

sale of the property was concluded through their efforts.

DOCTRINE: Brokers are entitled to commission regardless o

whether the sale was concluded through their efforts as long athey set the sale in motion.

In Philippine Health-Care Providers, Inc. (Maxicare) v. Estrad

(2008): Maxicare allegedly contracted the services of Carmel

Estrada to promote and sell a health care delivery program

called “Maxicare Plan” with the position of Independen

Account Executive. Estrada submitted proposals and mad

rticle 1875. Agency is presumed to be for a compensation,

unless there is proof to the contrary. (n)

rticle 1909. The agent is responsible not only for fraud, but

also for negligence, which shall be judged with more or less

rigor by the courts, according to whether the agency was or

was not for a compensation. (1726)





2

representations to Meralco regarding the Maxicare Plan.

However, when Meralco decided to subscribe, Maxicare

directly negotiated with it and left Estrada out of the discussion

of the terms and conditions of the agreement. Meralco

eventually subscribed to Maxicare and signed a Service

Agreement directly with it. Estrada demanded from Maxicare

her commission for the Meralco account which the latter

denied. Court held that, Estrada penetrated the Meralcomarket and laid down the groundwork for a business

relationship. The only reason she was not able to participate in

the collection and remittance of premium dues was because

she was prevented from doing so by Maxicare. Estrada was

instrumental in the sale of the Maxicare plan to Meralco.

Without her intervention, no sale could have been

consummated.

DOCTRINE: To be regarded as the “procuring cause” of a sale

as to be entitled to a commission, a broker’s efforts must have

been the foundation on which the negotiations resulting in a

sale began.

C SIS: In this case, it seems to have been established a

different standard for determining whether a broker is a

procuring cause of a sale.

- It is sufficient that the broker set in motion a series of

events which produced a buyer wiling and able to buy

on the seller’s terms.

- The broker’s efforts must be the foundation of the

negotiations.

While it seems that Tan v. Gullas and Philippine Health-Care

Providers v. Estrada appear to lower the requirements in the

case of brokers, note that in both a sale was consummated.- Theoretically, even if the brokers in these cases were

considered agents, they would have also been

entitled to commissions.

In Sanchez v. Medicard (2005): Medicard appointed Carlos

Sanchez as its special corporate agent. Through his efforts,

Medicard and Unilab executed a Health Cate Program

Contract, pursuant to which the latter paid the former a fixed

monthly premium for the health insurance of its personnel. This

contract was renewed for another year also through Sanchez’s

initiative. Prior expiration, Sanchez proposed to Unilab an

increase of the premium for the next year. This was rejected forthe reason that it was too high. President of Medicard, Dr.

Montoya, requested Sanchez to reduce his commission, but

the latter refused. Unilab negotiated directly with Dr. Montoya

and other officers to discuss ways to continue insurance

coverage of those personnel. Unilab and Medicard entered

into a new agreement. Sanchez filed a complaint for his

commission under the new agreement. Court held that, for an

agent to be entitled to a commission, he must be th

procuring cause of the sale. The measures he employed and

the efforts he exerted must result in a sale. An agent receive

commission only upon the successful conclusion of a sale

Sanchez did not render services to Medicard to entitle him to

commission.

DOCTRINE: For an agent to be entitled to a commission, hmust be the procuring cause of the sale. The measures he

employed and the efforts he exerted must result in a sale. An

agent receives commission only upon the successfu

conclusion of a sale.

C SIS: Notwithstanding this ruling, the agent who is

procuring cause of the sale may be entitled to commission

even if the sale was concluded after the termination of th

agency relationship under certain conditions.

In Infante v. Cunanan (1953): Consejo Infante contracted Jos

Cunanan and Juan Mijares to sell her property. Consejo also

agreed to pay 5% commission of the purchase price plu

whatever overprice they may obtain for the property. When Pio

(purchaser) was introduced to Consejo, the latter said that sh

was no longer willing to sell the property. Consejo also made

Jose and Juan sign a document stating that the writte

authority she had given them was cancelled. However, Consejo

dealt directly with Pio and sold the property to him. Jose and

Juan demanded payment of their commission, but Consejo

refused. Court held that, Consejo took advantage of th

services rendered by Jose and Juan, but believing that sh

could evade payment of their commission, she made use of

ruse by inducing them to sign the deed of cancellation. Thi

act of bad faith cannot sanctioned and cannot serve as basi

for Consejo to escape payment of the commission agreeupon. The agent may be entitled to commission even if th

sale is consummated after the revocation of his authority, i

such was done in bad faith by the principal to avoid paymen

of commission.

DOCTRINE: The agent may be entitled to commission even

the sale is consummated after the revocation of his authority, i

such was done in bad faith by the principal to avoid paymen

of commission.

In Lim v. Saban (2004): Eduardo Ybañez issued an instrument to

Florencio Saban, authorizing the latter to look for a buyer othe former’s 1K m2 lot in Cebu. Through Saban’s efforts

Ybañez was able to sell the lot to Genevieve Lim and the

spouses Benjamin and Lourdes Lim. After the sale, Lim paid

Saban the taxes due on the transaction and broker’

commissioin. He also issued four postdated checks

Subsequently, Ybañez sent a letter to Lim asking him to cance

all the checks issued to Saban and extend another partia





2

payment for the lot in his favor. Saban filed a complaint for

collection of sum of money and damages against Ybañez and

Lim. Court held that, att the time Ybañez requested Lim to

cancel the checks issued to Saban, Saban had already

performed his obligation as Ybañez’s agent: through his efforts,

a deed of sale was executed. To deprive Saban of his

commission subsequent to the sale which was consummated

through his efforts would be a breach of the contract of agency.

DOCTRINE: An agent is entitled to commission when he is the

procuring cause of the sale even if the agency is subsequently

revoked. Provided that a sale is consummated between his

principal and the buyer he produced.

b. Prats Doctrine andManotok Test

R: In case of a sale, an agent must be the procuring cause in

order to be entitled to compensation.

XPN: Certain cases provide in jurisprudence (e.g. Prats and

Manotok ).

In Prats v. CA (1978): Alfonso Doronila offered his 300-hectare

property to the SSS at P4/m2. SSS counter offer was P3.25/m2

which Doronila accepted. Nothing happened to this

transaction so in the following year, Doronila granted Antonio

Prats authority to sell the same property in 60 days. Prats

began communicating with SSS. After the end of 60 days, he

was given an extension of 45 days but Doronila received no

offer of purchase. Later, Doronila again offered the property to

SSS for P4/m2. SSS gave a counter offer of P3.25/m2 which

Doronila accepted. Doronila agreed and a Deed of Absolute

Sale was executed. Prats filed an action for a sum of money to

recover his commission. Court held that Prats was not the

efficient procuring cause in bringing about the saleprescinding from the fact of expiration of his exclusive

authority. However, Prats is still awarded P100K on the basis of

equity as he diligently took steps to bring back together

Doronila and SSS for the consummation of their transaction.

DOCTRINE: An agent who was not the procuring cause of the

sale may nevertheless be awarded a sum of money if he were

somehow instrumental in bringing the parties together again

and finally consummating the transaction.

In Manotok Brothers v. CA (1993): Manotok Brothers, Inc.

authorized Salvador Saligumba in writing to negotiate with theCity of Manila the sale of its property. Manotok agreed to pay

Saligumba a 5% commission in the event the sale is finally

consummated and paid. Finally, the City passed an ordinance

appropriating P410,816 for the purchase of the property.

Saligumba did not receive his commission so he filed a

complaint against Manotok. Court held that Saligumba was the

efficient procuring cause so he is entitled to his commission

even if the sale was consummated after his authority’

expiration. The Court did not merely rely on the Prats doctrin

and created a new test to determine if an agent is entitled to

commission:

- When there is a close, proximate and causal connection

between the agent’s efforts and the principal’s sale o

his

property, the agent is entitled to commission.

DOCTRINE: When there is a close, proximate and causa

connection between the agent’s efforts and the principal’s sal

of his property, the agent is entitled to commission

C SIS: Manotok is the proper test in determining if an agent i

entitled to commission. The characterization of the agent a

procuring cause of the sale should be based on the effect o

the agent’s efforts on the sale, not on whether the sale i

consummated within the period of authority of the agent.

In Uniland Resources v. DBP (1991): Marinduque Mining

Corporation (MMC) obtained a loan from DBP and mortgaged

certain properties including two lots. The lots were previousl

mortgaged to Caltex. The one in favor of DBP was entered a

a second mortgage. Eventually, DBP approved the sale of the

warehouse lot to Clarges. The office building lot was later sold

by DBP in a negotiated sale to the Bank of P.I. as trustee fo

the “Perpetual Care Fund of the Manila Memorial Park.” DBP

admittedly paid the 5% broker’s fee on this sale to the DBP

Management Corporation, which acted as broker for sai

negotiated sale. After the sale, Uniland Resources asked fo

the payment of its broker’s fee in instrumenting the sale of its

warehouse lot to Clarges which was denied. Court held that fo

equity considerations, not because of the existence of aagency relationship. Uniland from the very beginning knew

that it had no express authority from DBP to find buyers of it

properties however, it was the one which advised Glaxo

Philippines of the availability of the warehouse lot and aroused

its interest over the same. DBP was directly informed of the

existence of an interested buyer. Uniland’s persistence i

communicating with DBP reinforced the seriousness of th

offer. In equity, the Court recognizes the efforts of Uniland in

bringing together DBP and an interested and financially-abl

buyer.

DOCTRINE: Although circumstances do not meet theminimum legal standards required for the existence of a

agency relationship, commission/fee may be collected based

on equity considerations.







2

behalf without authority and he fails to repudiate the said

acts, then an implied agency may be established. Act of

the substitute will not be void.

If the principal was not aware of the acts of the substitute

or once aware of them, he repudiates them, then the third

person’s recourse may be against the agent and/or the

substitute.

If the principal expressly gives the agent the power toappoint a substitute, then the acts of the substitute are

valid and binding on the principal.

d. Substitute gent: lternate Not Delegate

What Art. 1892 allows is a substitute to the agent. Therefore,

the substitute is an agent of the principal, not an agent of

the agent. (Clarified in Baltazar v Ombudsman )

In Baltazar v Ombudsman (2006): Paciencia Regala owned a

fishpond. Lapid is the leasee while Lopez is a sub-leasee.

Lapid hired Ernesto Salenga as fishpond watchman and Lopez

re-hired Salenga. Salenga sent a demand letter to Lopez and

Lourdes Lapid for unpaid salaries and non-payment of the 10%

share in the harvest. Salenga filed a Complaint before the

Provincial Agrarian Reform Adjudication Board. While the

agrarian case was pending, Antonio Baltazar, an alleged

nephew of Mercado filed a Complaint-Affidavit with the Office

of the Ombudsman against Eulogio Mariano, Jose Jimenez, Jr.

(Legal Officer of DAR – Reg III), Toribio Ilao, Jr. (Provincial

Adjudicator of DARAB) and Salenga for violation of RA 3019.

Court held that Baltazar does not have the authority to file a

case before the Ombudsman. The SPA was not sufficient

authorization. Baltazar’s principal, Mercado, is an agent himself

and as such cannot further delegate his agency to another.While the legal maxim potestas delegate non delegare potest

is applied primarily in political law to the exercise of legislative

power, it is a principle of agency.

Why is there a confusion regarding the term “sub-agent”?

Because of the improper application of the US common law

concept of “sub agent”4

4 American Jurisprudence: A subagent is a person employed by the

agent to assist him or her in conducting the principal’s affairs.

Once a third party is validly appointed as subagent, the principal isliable for the subagent’s actions. The agent’s authority to appoint a

subagent may be inferred from those powers, customs, and usages

positively established, but if the agent has no authority, express or

implied, to make the person so appointed the agent of the principal,

that person is simply the agent of the agent, and not of the principal.

Also, if an agent, who has undertaken to do the business of the

principal, employs another person on the agent’s own account to assist

Under US law, a sub-agent can either be the agent of the

principal of just the agent of the agent. Difference lies i

whether the agent was authorized to appoint a sub-agent.

Sub-agent may be a functional equivalent of the substitut

agent under CC provided that what is referred to is not

delegation of the agency. Appointment of a substitute i

more akin to the designation of an alternate agent rathe

than a delegation of the agency. In Serona v People , the Court employed the term “sub

agent” when referring to the “substitute” under Art. 1892.

In Serona v People (2002): Leonida Quilatan delivered piece

of jewelry to Virgie Serona to be sold on commission basis

Because of Serona’s failure to pay, Quilatan required her to

execute an acknowledgment receipt indicating the

agreement and the total amount due. Unknown to Quilatan

Serona had earlier entrusted the jewelry to Marichu Labrado

for the latter to sell on commission basis. Serona failed to pa

her obligation to Quilatan because the former was not able to

collect payment from Labrador. An Information for estaf

under Art. 315, par 1(B) of the RPC was then filed agains

Serona. Court held that Serona is acquitted because th

second element of misappropriation or conversion appeared

to be lacking. Serona did not ipso facto commit estafa throug

conversion or misappropriation by delivering the jewelry to

sub-agent for sale on commission basis. The law on agency in

our jurisdiction allows the appointment by an agent of

substitute or sub-agent in the absence of an expres

agreement to the contrary between the agent and th

principal. The appointment of Labrador as Serona’s sub-agen

was not expressly prohibited by Quilatan. Neither does

appear that Serona was verbally forbidden by Quilatan from

passing on the jewelry to another person. The present casemust be distinguished from People v Flores and US v Pane

(cases cited by LCs to justify the conviction).

In Flores , the accused received a ring to sell under the

condition that she would return it the following day if no

sold and without authority to retain the ring or to give it to

a sub-agent.

In Panes , the accused was obliged to return the jewelry eh

received upon demand, but passed on the same to a sub

agent even after demand for its return had already been

made.

C SIS: The agreement between Serona and Labrador can beinterpreted as Serona designating an alternate and no

delegation of the agency.

While the practical effect of designating an alternate agen

in the agent’s undertakings, the person so appointed is an agent of the

agent.





2

and delegating the agency might be the same (both the

designee and the delegate are authorized to act as the

agent acted), the distinction is important at least as far as

privity of contract is concerned.

4. Retain in Pledge Objects of gency

rt. 1912. The principal must advance to the agent, should thelatter so request, the sums necessary for the execution of the

agency.

Should the agent have advanced them, the principal must

reimburse him therefor, even if the business or undertaking

was not successful, provided the agent is free from all fault.

The reimbursement shall include interest on the sums

advanced, from the day on which the advance was made.

(1728)

rt. 1913. The principal must also indemnify the agent for allthe damages which the execution of the agency may have

caused the latter, without fault or negligence on his part. (1729)

rt. 1914. The agent may retain in pledge the things which are

the object of the agency until the principal effects the

reimbursement and pays the indemnity set forth in the two

preceding articles. (1730)

Two grounds by which an agent may lawfully retain in pledge

the objects of the agency until the principal reimburses funds

advanced or pays indemnity:

1. If the agent advances funds for the execution of theagency; or

2. If the agent has suffered injury caused by the

execution of the agency.

B. Obligations of gent

1. ct Within Scope of uthority

rt. 1879. A special power to sell excludes the power to

mortgage; and a special power to mortgage does not include

the power to sell.

rt. 1880. A special power to compromise does not authorize

submission to arbitration.

rt. 1881. The agent must act within the scope of his authority.

He may do such acts as may be conducive to the

accomplishment of the purpose of the agency.

rt. 1882. The limits of the agent’s authority shall not b

considered exceeded should it have been performed in

manner more advantageous to the principal than that specified

by him.

rt. 1887. In the execution of the agency, the agent shall act i

accordance with the instructions of the principal.

In default thereof, he shall do all that a good father of a familwould do, as required by the nature of the business.

a. In eneral

An agency is established so that an agent may act on beha

of a principal. But the agent’s ability to bind his principal i

limited by the authority granted to him.

Art. 1881, CC provides that the agent must act within the

scope of his authority and that he may do such acts as may

be conducive to the accomplishment of the purpose of th

agency.

Woodchild v Roxas demonstrates a strict application of th

rule that the agent must act within the scope of his authority.

In Woodchild v Roxas (2004): The agent was authorized by hi

principal to sell a lot “at a price and under such terms and

conditions which he deemed most reasonable and

advantageous” to his principal. Principal denied authorizin

the agent to grant the right of way and the option to purchase

in the board resolution in favor of the agent. Court held tha

the agent was not specifically authorized to grant a right o

way or to agree to sell to a portion thereof. The authority o

the agent, under the resolution, did not include the authorit

to sell a portion of the adjacent lot, or to create or convey rea

rights thereon. 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.” If the act of the agent is one which require

authority in writing, those dealing with him are charged with

notice of that fact.

Par 12, rt 1878, CC requires a SPA to convey real right

over immovable property

rt 1358, CC requires that contracts which have for the

object the creation of real rights over immovable propert

must appear in a public document

“Powers of attorney are generally construed strictly and court

will not infer or presume broad powers from deeds which do

not sufficiently include property or subject under which thagent is to deal. The general rule is that the power of attorne

must be pursued within legal strictures, and the agent ca

neither go beyond it; nor beside it. The act done must be

legally identical with that authorized to be done.”

i. Conducive cts

Pursuant to Art 1881, it is not necessary that the power o





3

attorney granted to the agent specifically describe the act

performed. The article considers acts “conducive to the

accomplishment of the purpose of the agency” as falling

within the scope of the agent’s authority.

As long as the acts meet the standard of “conduciveness”,

these acts will be considered as performed within the scope

of the agent’s authority.

ii. dvantageous cts

Art 1882 considers it within the scope of the agent’s

authority to perform acts more advantageous to the

principal than what is indicated in the power of attorney.

Note:

Despite the foregoing, the allowance for conducive and

advantageous act must not be considered as plenary

authority on the part of the agent to perform any act for as

long as it is conducive to the purposes of the establishment

of the agency or that it is more advantageous to the

principal.

Arts 1881 and 1882 must be read together with other

provisions, which prescribe limits to the agent’s authority.

Woodchild v Roxas demonstrated that a transaction

requiring a SPA under Art 1878 may not be performed

without the relevant specific authority being granted on

the grounds that it is conducive to the accomplishment of

the purpose of the agency or that it is more advantageous

to the principal.

In addition to conducive and advantageous acts, there is

authority for the view that certain collateral acts are impliedly

within the authority of the agent

In Guinhawa v People (2005 ): Case law has it that wherever the

doing of a certain act or the transaction of a given affair, or theperformance of certain business is confided to an agent, the

authority to so act will, in accordance with a general rule often

referred to, carry with it by implication the authority to do all of

the collateral acts which are the natural and ordinary incidents

of the main act or business authorized.

As with conducive and advantageous acts, the validity of

collateral acts is without prejudice to the specific

requirements for particular transactions

b. s Regards Third Persons

rt. 1900. So far as third persons are concerned, an act isdeemed to have been performed within the scope of the

agent’s authority, if such act is within the terms of the power of

attorney, as written, even if the agent has in fact exceeded the


the principal and the agent. (n)

Art 1900 contemplates a situation wherein the principal

provided limitations to the authority of the agent orally or in

some other document apart from the written power o

attorney.

c. uthority of CorporateOfficers

In Board of Liquidators v Heirs of Maximo Kalaw (1967)

Maximo Kalaw was the general manager and board chairmanof the National Coconut Corporation (NACOCO). Due t

several devastating typhoons, NACOCO was deterred from

fulfilling the said contracts. When it became clear that th

contracts would be unprofitable, Kalaw submitted th

contracts to NACOCO’s board for approval. NACOCO

approved the contracts. NACOCO was only able to partiall

comply with its contracts; one of the buyers sued. Suit ended

in an out-of-court settlement. NACOCO then filed suit to

recover from Kalaw and the directors the sum equivalent to

what it paid for the settlement. Court held that Kalaw ha

authority. When, in the usual course of business of a

corporation, an officer has been allowed in his official capacit

to manage its affairs, his authority may be implied from the

manner in which he has been permitted by the directors to

manage its business.

Rule: a corporate officer “intrusted with the genera

management and control of its business, has implied

authority to make any contract or do any other act which i

necessary or appropriate to the conduct of the ordinar

business of the corporation.”

As such officer, “he may, without any special authority from

the Board of Directors, perform all acts of an ordinary nature

which by usage or necessity are incident to his office, and

may bind the corporation by contracts in matters arising in

the usual course of business.” Also, settled jurisprudence has it that where similar acts hav

been approved by the directors as a matter of genera

practice, custom, and policy, the general manager may bind

the company without formal authorization of the board o

directors

Existence of authority is established 1) by proof of th

course of business, 2) the usages and practices of th

company and 3) by the knowledge which the board o

directors has, or must be presumed to have, of acts and

doings of its subordinates

Authority to act for and bind a corporation may b

presumed from acts of recognition in other instancewhere the power was in fact exercised

C SIS: A problem arises when the by-laws of the corporation

require prior board approval for such acts. Should genera

practice supersede the written by-laws?

In Board of Liquidators , the answer was in the affirmative

because in that case, the by-laws limited the authority of the





3

corporate officer “(b) To perform or execute on behalf of the

Corporation upon prior approval of the Board, all contracts

necessary and essential to the proper accomplishment for

which the Corporation was organized.”

In said case, the Court made much of the fact that the board

of directors was fully aware of what its corporate officer was

doing. There was no finding of ratification on the part of the

corporation.

In San Juan v CA (1998): San Juan Structural and Steel

Fabricators entered into an agreement with Motorich Sales

Corporation allegedly represented by its treasurer Nenita Lee

Gruenberg for purchase of a parcel of land. San Juan paid the

P100K downpayment with the balance to be paid on or before

3/2/89. On that date, San Juan was ready with the amount but

Gruenberg did not appear. San Juan filed a complaint for

damages. Court held that ruenberg does not have authority.

There was nothing in the articles of incorporation, bylaws or

board resolutions, which would indicate that the treasurer had

the authority. lso, selling is obviously foreign to a corporate

treasurer’s function.

Because the corporation has a separate juridical

personality distinct from its stockholders, the property of

the corporation is not the property of the stockholders

and may not be sold without express authorization from

the board of directors.

Sec 23, Corporation Code. The Board of Directors or

Trustees. – Unless otherwise provided in this Code, the

corporate powers of all corporations formed under this

Code shall be exercised, all business conducted and all

property of such corporations controlled and held by the

board of directors or trustees to be elected from among

the holders of stocks, or where there is no stock, fromamong the members of the corporation, who shall hold

office for one year and until their successors are elected

and qualified.

A corporation may act only through its board of directors

or, when authorized either by its bylaws or by its board

resolution, through its officers or agents in the normal

course of business.

In AF Realty v Dieselman (2002): A member of the board of

directors of the corporation issued a letter authorizing a real

estate broker to look for buyers and negotiate the sale of a

parcel of land owned by the corporation.

DOCTRINE: The director had no written authority from the

board to sell to negotiate the sale of the lot much less to

appoint other persons for the same purpose. Absent a valid

delegation/authorization, the rule is that the declarations of an

individual director relating to the affairs of the corporation, but

not in the course of, or connected with, the performance of

authorized duties of such director, are held not binding on th

corporation.

In Francisco v GSIS (1963): Trinidad Francisco, in consideratio

of a P400K loan, mortgaged in favor of GSIS a parcel of land

payable within 10 years. GSIS extrajudicially foreclosed th

mortgage. Trinidad’s father sent a letter to the genera

manager of GSIS, offering to pay P30K in consideration osetting aside the foreclosure. He then received a telegram

from general manager of GSIS, stating that the GSIS Board

approved the former’s request. He then remitted a check fo

P30K; GSIS received the amount and issued an official receipt

subsequent payments were made to GSIS. GSIS sent thre

letters to Trinidad, asking for a proposal for the payment of he

indebtedness because the one-year period for redemptio

had expired. The father protested and invited attention to th

concluded contract generated by his offer and its acceptance

by telegram, as well as the compliance of the terms of the offe

Francisco filed suit for specific performance and damages

Court held that SIS was bound by the acceptance. There wa

nothing in the telegram that hinted at any anomaly, or gave

ground to suspect its veracity, and the plaintiff, therefore

cannot be blamed for relying upon it. There is no denying tha

the telegram was within Andal’s (aforementioned corporat

officer) apparent authority.

Ramirez v Orientalist Co.: If a corporation knowingly permit

one if its officers, or any other agent, to do acts within the

scope of an apparent authority, and thus holds him out to

the public as possessing power to do those acts, th

corporation will, as against anyone who has in good fait

dealt with the corporation through such agent, be estopped

from denying his authority.

2. ct in ccordancewith Instructions

rt. 1887. In the execution of the agency, the agent shall act i


In default thereof, he shall do all that a good father of a famil

would do, as required by the nature of the business. (1719)

The principal may indicate to his agent the way he wants hi

transactions handled.

If the principal does not provide instructions, the rule is tha

the diligence of a good father of a family is expected andsuch diligence is determined by the nature of the business

The same diligence is required in cases where the person

who was supposed to be the agent refuses the agency.

Note, however, that the owner of the goods must as soo

as practicable either appoint an agent or take charge o

the goods.

Under Art. 1899, if the agent acts in accordance with the







3

4. dvance funds

The rule therefore is that the agent is only obligated to

advance funds for the agency if two conditions are met:

1. There must be a stipulation that the agent must

advance funds; and,

2. The principal is solvent.

The first condition seems to imply that there must be a

written power of attorney. But it is entirely possible for a

stipulation to be made orally as well.

The problem is in cases where the authorization or

appointment of the agent is required to be in written form.

If it is proven that such stipulation was in fact made when it

should be binding on the agent whether or not such

stipulation was made in writing or not.o But in order to constitute notice to third persons,

the latter must be made in the written power of

attorney or such third person must be aware of

such the stipulation if made orally.

5. Prefer interest of principal over personal interest (Loyalty)

a. In general

The reason behind Art. 1889 is that an agency is a fiduciary

relationship.

The article does not state that the agency is dissolved or

the contract is invalidated if the agent prefers his own

interest.

Art. 1890. If the agent has been empowered to borrow money,

he may himself be the lender at the current rate of interest. If

he has been authorized to lend money at interest, he cannot

borrow it without the consent of the principal.

Art. 1491. The following persons cannot acquire by purchase,

even at a public or judicial auction, either in person or through

the mediation of another:

1. The guardian, the property of the person or persons

who may be under his guardianship;

2. Agents, the property whose administration or sal

may have been entrusted to them, unless the

consent of the principal has been given;

xxx xxx xxxx

b. Property administered

In Araneta, Inc. v. De Paterno (1952) : “The agent’s incapacit

to buy his principal’s property rests in the fact that the agen

and the principal form one juridical person. In this connection

Scaevola observes that the fear that greed might get th

better of the sentiments of loyalty and disinterestedness whic

should animate an administrator or agent, is the reaso

underlying the various classes of incapacity enumerated in Art

1459. And as American courts commenting on simila

prohibition at common law put it, the law does not trust huma

nature to resist the temptations likely to arise out o

antagonism between the interest of the seller and the buyer.”

c. Double sales

Art. 1916. When two persons contract with regard to the

same thing, one of them with the agent and the other with

the principal, and the two contracts are incompatible witheach other, that of prior date shall be preferred, without

prejudice to the provisions of article 1544.

The situation contemplated by the provisions above involves

case where the principal and agent contract with differen

persons for the same thing and the contracts are incompatible.

The rule is that the contract “of prior date” will prevail. Bu

this is subject to the provisions of Art. 1544.

The rule on Art. 1916 will only apply in the following cases:

1. None of the buyers had obtained possessioover the movable; or

2. None of the buyers had recorded, possessed o

has title over the immovable.

If the agent was in good faith in entering into his contrac

with a third person, the principal is liable for damages to

the person whose contract would have to be rejected

based on the said rules.

Art. 1886. Should there be a stipulation that the agent shall

advance the necessary funds, he shall bound to do so

except when the principal is insolvent.

Art. 1889. The agent shall be liable for damages if, there

being a conflict between his interests and those of the

principal, he should prefer his own.

Art. 1917. In the case referred to in the preceding article, if

the agent has acted in good faith, the principal shall be

liable in damages to the third person whose contract must

be rejected. If the agent acted in bad faith, he alone shall

be responsible.





3

If the agent was in bad faith, he will be liable for damages

to such third person . Under Art. 1889, he would also be

liable to the principal for damages.

6. Diligence

rt. 1885. In case a person declines an agency, he is bound to

observe the diligence of a good father of the family in thecustody and preservation of the goods forwarded to him by

the owner until the latter should appoint an agent. The owner

shall as soon as practicable either appoint an agent or take

charge of the goods.

rt. 1887. In the execution of the agency, the agent shall act in


In default thereof, he shall do all that a good father of a family

would do, as required by the nature of the business.

rt. 1909. The agent is responsible not only for fraud, but also

for negligence, which shall be judged with more or less rigorby the courts, according to whether the agency was or was not

for a compensation.

7. Render ccount/Deliver

If an agent receives a gift from a client he must report it

and deliver it to his principal.

This discourages agents from soliciting or accepting gifts

from third persons he deals with on behalf of the principal

because he is bound to turn this over to the principal.

In Murao v. People (2005): Pablito Murao, the sole owner of

Lorna Murao Industrial Commercial Enterprises (LMICE)

entered into a Dealership Agreement with Chito Federico forthe marketing, distribution and refilling of fire extinguishers.

Federico facilitated a transaction with the City Government of

Puerto Princesa for the refill of 202 fire extinguishers. City

Government requested that the transaction be split into two

purchase orders. When Federico was refused his commission,

he filed a complaint for estafa against Murao and Huertazuela.

Court held that M and H are not guilty because two essentia

elements of estafa by misappropriation/conversion are no

missing. Federico’s right to commission does not make him a

joint owner of the money paid to LMICE, but merel

establishes a relation of agent and principal. All profits made

and any advantage gained by an agent in the execution of his

agency should belong to the principal. Federico may claim

commission (allegedly 50% of the payment) based on his righto just compensation under his agency contract, but NOT as

an automatic owner of such 50% portion.

C SIS’ comments:

What the Court is saying here is that because “all profit

made and any advantage gained by an agent in the

execution of his agency should belong to the principal

the principal was entitled even to the portion of th

payment of the client which would have comprised the

agent’s commission.

There was no estafa because the funds belonged to the

principal and there was therefore no conversion o

misappropriation.

8. Solidary liability

rt. 1894. The responsibility of two or more agents, eve

though they have been appointed simultaneously, is no

solidary, if solidarity has not been expressly stipulated.

rt. 1895. If solidarity has been agreed upon, each of th

agents is responsible for the non-fulfillment of the agency, and

for the fault or negligence of his fellow agents, except in the

latter case when the fellow agents acted beyond the scope o

their authority.

9. Pay Interest

Obligation to pay interest pertains to funds the agen

applied to personal use.

This may seem to imply that the agent from time to tim

use agency funds for personal purposes, but thes

transactions are considered loans for which he must pa

interest.

Art. 1890 provides that an agent is only entitled to borrow

funds from the agency if the agent is authorized to lend

money at interest.

Art. 1891. Every agent is bound to render an account of his

transactions and to deliver to the principal whatever he

may have received by virtue of the agency, even though it

may not be owing to the principal.

Every stipulation exempting the agent from the obligation

to render an account shall be void.

Art. 1896. The agent owes interest on the sums he has

applied to his own use from the day on which he did so,

and on those which he still owes after the extinguishment

of the agency.





3

But if the agent does use agency funds for personal use,

there is no reason why the agent should not be required

to pay interest apart from other penalties arising from

using agency funds despite lack of authorization.

10. Responsible for fraud or negligence

In Metropolitan Bank v. CA (1991): Eduardo Gomez opened an

account with Golden Savings and Loan Association and

deposited over a period of two months 38 treasury

warrants.They were then sent for clearing by the branch office

to the principal office of Metrobank, which forwarded them to

the Bureau of Treasury. Castillo went to the Calapan branch

several times to ask whether the warrants had been cleared,and was told to wait. Later, Metrobank finally decided to allow

Golden to withdraw from the proceeds of the warrant. Golden

allowed Gomez to make withdrawals from his own account.

After all withdrawals had been made, Metrobank informed

Golden that 32 of the warrants had been dishonoured by the

Bureau and demanded the refund by Golden. Court held that

Metrobank was negligent in giving Golden the impression that

the treasury warrants had been cleared or else Golden would

not have allowed the withdrawals. Golden relied on Metrobank

to determine the validity of the warrants because Golden has

no clearing facilities of its own. It was only when Metrobank

gave the go-signal that Gomez was finally allowed by GoldenSavings to withdraw them from his own account. It is clear that

Golden acted with due care and diligence and cannot be

faulted for the withdrawals it allowed Gomez to make.

Metrobank exhibited extraordinary carelessness . The Court

rejected Metrobank’s argument that “being a mere collecting

agent it cannot be liable to its principal citing Art. 1909.

C SIS’ comments: The Court applied Art. 1909 where the

agent’s own negligence caused damage to itself. The

application of Art. 1909 in this case was to prevent recovery by

the agent from his principal.

Art. 1909 also provides that the agent’s liability for fraud or

negligence shall be judged with more or less rigor by thecourts, according to whether the agency was or was not

for compensation.

o Implies that if the agent was compensated for his

services, the amount of damages he is liable for

in case of fraud or negligence may be more as

compared to if he rendered his services

gratuitously.

The provision may also be interpreted to mean that th

agent who is paid is required to exercise a higher degree

of diligence than an agent who is not.

11. Specific obligations of commission agents

Art. 1903. The commission agent shall be responsible for thegoods received by him in the terms and conditions and a

described in the consignment, unless upon receiving them he

should make a written statement of the damage and

deterioration suffered by the same.

Art. 1904. The commission agent who handles goods of the

same kind and mark, which belong to different owners, sha

distinguish them by counter-marks, and designate th

merchandise respectively belonging to each principal.

Art. 1905. The commission agent cannot, without the expres

or implied consent of the principal, sell on credit. Should he doso, the principal may demand from him payment in cash, bu

the commission agent shall be entitled to any interest o

benefit, which may result from such sale.

Art. 1906. Should the commission agent, with authority of the

principal, sell on credit, he shall so inform the principal, with a

statement of the names of the buyers. Should he fail to do so

the sale shall be deemed to have been made for cash insofa

as the principal is concerned.

Art. 1907. Should the commission agent receive on a sale, in

addition to the ordinary commission, another called

guarantee commission, he shall bear the risk of collection and

shall pay the principal the proceeds of the sale on the same

terms agreed upon with the purchaser.

Art. 1908. The commission agent who does not collect th

credits of his principal at the time when they become due and

demandable shall be liable for damages, unless he proves tha

he exercised due diligence for that purpose.

Commission agent (aka “factor”) – an agent entitled to

the possession of the goods of the principal.

o Mechem : A factor is one whose business it is to

receive and sell goods for a commission. He ioften called a commission merchant. If h

guarantees payment for the goods he sells, he is

said to act under a del credere commission

When authorize to sell a cargo which h

accompanies on the voyage, he is called a super

cargo.

Art. 1909. The agent is responsible not only for fraud, but

also for negligence, which shall be judged with more or

less rigor by the courts, according to whether the agency

was or was not for a compensation.





3

In Lindstrom v. Baybank (1993):

SC of Massachusetts defined factor as “a commercial

agent, employed by a principal to sell merchandise

consigned to him for that purpose, for and in behalf of the

principal, but usually in his own name, being entrusted

with the possession and control of the goods and being

remunerated by a commission, commonly calledfactorage.”

Thus a commission agent is one who receives goods from

his principal, for sale to third persons. For this service the

agent is entitled to commission for goods sold.

Obligations of commission agents

1. They are responsible for the goods received in the terms

and conditions and as described in the consignment, unless

upon receiving them they should make a written statement of

the damage and deterioration suffered by the same. (Art. 1903)

The agent is estopped from claiming that the goods he

received were not as described in the consignment.

If there is damage or deterioration, the agent should have

made a written statement of the same. If he does not, he

cannot later on return the goods to his principal on the

ground of such defect or damage.

Agent’s failure to issue the written statement may give rise

to a presumption that the goods deteriorated or were

damaged while under the agent’s custody.

The rule may be applied to a case where a third party

returns the goods on the ground of deterioration or

damage through no fault of the third party. The agent may

have to bear the loss.

The rule was adopted from Art. 265 of the Code of Commerce: “The agent shall be liable for the goods and

merchandise he may receive, in the terms and with the

conditions and descriptions he has been informed of in

the consignments, unless he proves, in receiving the same,

the averages and deterioration it has suffered, comparing

its condition with the contents of the bill of lading or

charter or of the instructions received from the principal.”

2. If handling goods of the same kind and mark, which belong

to different owners the commission agent must:

1. distinguish them by countermarks, and

2. designate the merchandise respectivelybelonging to each principal. (Art. 1904)

The commission agent is prohibited from commingling

goods belonging to different owners.

That the goods be “of the same kind and mark” implies

that the rule applies when the goods appear to be

identical although belonging to different owners.

This rule was adopted from Art. 268 of the Code of

Commerce: “Agents cannot handle goods of the sam

kind belonging to different parties, bearing the same mar

without distinguishing them by a countermark, in order to

avoid confusion and for the purpose of designating th

respective property of each principal.”

3. The commission agent cannot sell on credit without th

consent of the principal. If he sells on credit without consentthe principal may demand from him payment in cash, but the

commission agent shall be entitled to any interest or benefit

which may result from such sale. (Art. 1905)

There must be an express authority form the principal fo

the commission agent to sell on credit.

This rule was adopted from Art. 270 of the Code o

Commerce: “An agent cannot, without authority from the

principal, loan or sell on credit or on time, the principa

being permitted in such cases to require cash payment o

the agent, leaving him any interest, profit, or advantag

which may arise form said credit on time.”

4. If he sells on credit with the authority of the principal he sha

so inform the principal, with a statement of the names of the

buyers. If he does not inform the principal, the sale shall be

deemed to have been made for cash insofar as the principal i

concerned. (Art. 1906)

The rule is adopted from Art. 271 of the Code o

Commerce: “If an agent, with the due authority, sells on

time, he must so state it in the account or in th

communication to the principal, informing him of th

names of the purchasers; and should he not do so, the

sale shall be considered as made for cash, in so far as the

principal is concerned.”

5. If the commission agent receives on a sale, in addition to the

ordinary commission, a guarantee commission, he shall:

1. bear the risk of collection; and

2. pay the principal the proceeds of the sale on the

same terms agreed upon with the purchaser.

The additional commission justifies the additional risk o

the part of the commission agent.

Agent becomes a guarantor of the payment of debts o

purchasers.

The rule implies that ordinarily, a commission agent doe

not guaranty such debts. This rule is adopted from Art. 272 of the Code o

Commerce: “If an agent receives for a sale, besides the

ordinary commission, another one called a guarant

commission, the risks of the collection shall be for hi

account, being obliged to pay the principal the proceed

of the sale at the same periods as agreed upon with the

purchaser.”





3

6. If the commission agent does not collect the credits of his

principal at the time when they become due and demandable

he is liable for damages except when he proves that he

exercised due diligence for that purpose. (Art. 1908)

The commission agent has a duty to collect credits

when they become due.

This rule is adopted from Art. 273 of the Code of Commerce: “An agent who does not make the

collection of the credits of his principal at the period

they are demandable, shall be liable for the losses

arising from his negligence or delay unless he proves

that he at the proper time made use of the legal

remedies to recover the payment.”





3

VIII. RESPONSIBILITY FOR CTS

OF SUBSTITUTE

R: If the agent validly appoints a substitute, the principal

will be responsible for the substitute’s acts. Substitute

becomes the agent of the principal.

EX: Two scenarios where it is the agent, and not the

principal, who is responsible for the acts of the substitute:

When the agent appoints a substitute although “he was not

given the power to appoint one”

Interpretation #1: The agent becomes responsible for

the acts of the substitute when he appoints one despite

the prohibition of the principal.

Interpretation #2: The agent becomes responsible for

the acts of the substitute when he appoints one without

express authority of the principal.

Casis:Two considerations support Interpretation #2.

1. The first scenario pertains to a situation where there is

no express power given to the agent.

2. Interpreting the first scenario as covering a situation

where an agent did not have express authority to

appoint a substitute, protects the principal from the

possible harmful effects of an appointment without his

knowledge.

When the agent is given the power to appoint a substitute,

without designating the person who he can appoint, yet he

appoints as substitute someone who is notoriously

incompetent or insolvent Requisites:

1. The agents is given power to appoint “but without

designating the person to appoint”; and

2. The agent appoints as substitute someone who is

notoriously incompetent or insolvent.

Cases:

ustria v. C (1971)

Brief facts: Abad received a pendant with diamonds from

Austria to be sold on commission basis or to be returned on

demand (consignment of goods for sale). The pendant was

taken from Abad when she fell victim to a robbery. Austria

sued for the return of the pendant or its value. Abad’s defense

was one for fortuitous event.

Doctrine: The emphasis of Art. 1174 is on the EVENTS, and not

on the agents or factors responsible for them. To avail of the

exemption, it is not necessary that the persons responsible fo

the occurrence should be found or punished. It would only b

sufficient that the unforeseeable event (robbery) did take place

without any concurrent/contributory fault/negligence on the

debtor’s part which can be proven by preponderance. This i

apparent in the language of Art. 1170.

PNB v. Manila Surety (1965)

Brief facts: PNB extended a credit to ATACO which wa

secured by Manila Surety. As additional security to the loan

ATACO constituted PNB as its assignee and attorney-in-fact to

collect from the Bureau of Public Works the amoun

receivables by ATACO. PNB collected from the Bureau fo

some time but eventually stopped in its collection. PNB found

that there was still balance on the debt of ATACO, so th

former demanded from ATACO and Manila Surety its paymen

Doctrine: An agent is required to act with the care of a good

father of a family (Art. 1887 CC) and becomes liable for the

damages which the principal may suffer through his non

performance (Art. 1884 CC)

Domingo v. Domingo (1971)

Brief facts: Vicente authorized Gregorio to sell his land fo

P2/sqm. A buyer (Oscar) gifted Gregorio P1,000 to sell to him

at a lower price. Gregorio accepted the gift without knowledge

of his principal and convinced his principal to sell at onl

P1.20/sqm.

Doctrine: The law imposes upon the agent the absolute

obligation to make a full disclosure to his principal of all hitransactions and other material facts relevant to the agency. A

agent who takes a secret profit in the nature of a bonus from

the vendee, without revealing the same to his principal, i

guilty of a breach of his loyalty and forfeits his right to collec

the commission from his principal. The rule is to prevent th

possibility of any wrong, not to remedy or repair an actua

damage.

Severino v. Severino (1923)

Brief facts: Guillermo (brother of Melecio) is the administrato

of Melecio’s property. Melecio died. Guillermo continued tobe in possession of Melecio’s property. Cadastral proceeding

took place that ended with Guillermo obtaining legal title to

the said property. The Administratrix of Melecio’s propert

now goes to court asking that the said land be reverted bac

to Melecio’s estate.

Doctrine: The relations of an agent to his principal ar





3

fiduciary. An agent is not only estopped from denying his

principal's title to the property, but he is also disabled from

acquiring interests therein adverse to those of his principal

during the term of the agency. His position is analogous to that

of a trustee and he cannot consistently, with the principle of

good faith, be allowed to create in himself an interest in

opposition to that of his principal or cestui que trust

(beneficiary of a trust).

reen Valley Poultry v. I C (1984)

Brief facts: A contract was entered into between Squibb and

Green Valley, the latter being awarded non-exclusive

distributorship. When Green Valley failed to pay for products

bought, Squibb filed a collection case.

Doctrine: If it is an agency to sell, then it is liable because it

sold on credit without authority from the principal, as provided

under Art 1905 NCC.

Municipal Council of Iloilo v. Evangelista (1930)

Brief Facts: Tan Ong filed a case to recover sums from the

Municipality of Iloilo and the TC recognized that there has

been an assignment of the sums to be recovered to Atty.

Soriano by Tan Ong’s agent Tan Boon Tiong.

Doctrine: The power of an agent to employ counsel for the

principal necessarily implies the authority to pay for the

professional services thus engaged

bacus Securities v. mpil (2006)

Brief Facts: Ampil opened a regular account with Abacus to

buy and sell securities. Petitioner bought and sold securities

and advanced sums for Ampil. Ampil subsequently demanded

the proceeds o said stock transactions.

Doctrine: Brokers have the obligation to advance payments for

the trades of its principal and thus have a right to be

reimbursed for sums advanced by them with the express or

implied authorization of the principal

Del Rosario v. La Badenia (1916)

Brief Facts: La Badenia assigned Aragon as its agent to assist

in an extensive sale campaign. Aragon sought the assistance of

the petitioners in selling the goods. After all of the transactions

have finished, the petitioners were entitled to a balance. The

company refused to pay them on asserting that they were

independent merchants.

Doctrine: An agent who is not given any limitations as to his

power, may employ other persons to aid him to fulfill th

purpose given to the agent by his principal. In line with this

any liability admitted by the general agent would be binding

on the principal.

International Films v. Lyric Film Exchange (1936)

Brief Facts: International, thru Gabelman, leased a film to Lyri

where Lyric is to be responsible for the loss of the film for any

cause. After the period of the lease has elapsed, the film wa

offered to be returned but Gabelman entered into a verba

contract for Lyric where Lyric would continue to show the film

and Gabelman to be responsible for it. Gabelman's successo

agreed to let Lyric to continually use the film. Lyric's bodeg

burned down along with the film.

Doctrine: A subagent is not obliged to fulfill more than th

contents of the mandate and to answer for the damage

caused to the principal by his failure to do so





4

IX. WH T RE THE OBLI TIONS

ND LI BILITIES OF ENTS TO

THIRD P RTIES?

Liability of gents

An agent should not be personally liable for acts he

performed agent since he is merely representing his

principal.

. gent acting within the scope of authority

Art. 1883. If an agent acts in his own name, the principal has no

right of action against the persons with whom the agent has

contracted; neither have such persons against the principal.

In such case, the agent is the one directly bound in favour of

the person with whom he has contracted, as if the transaction

were his own, except when the contract involves things

belonging to the principal.

The provisions of this article shall be understood to be without

prejudice to the actions between the principal and agent.

Art. 1897. The agent who acts as such is not personally liable to

the party with whom he contracts, unless he expressly binds

himself or exceeds the limits of his authority without giving

such party sufficient notice of his powers.

Art. 1899. If a duly authorized agent acts in accordance withthe orders of the principal, the latter cannot set up the

ignorance of the agents as to circumstances whereof he

himself was, or ought to have been, aware.

B. gent acting outside of authority


the party with whom he contracts, unless he expressly binds



Art. 1898. If the agent contracts in the name of the principal,

exceeding the scope of his authority, and the principal does


the agent contracted is aware of the limits of the powers



Art. 1911. Even when the agent has exceeded his authority, th

principal is solidarily liable with the agent if the former allowe

the latter to act as though he had full powers.

Instances when an agent becomes liable:

1. When solidary

The simultaneous appointment of agents is similar to th

appointment of joint agents under US Law.

o AmJur: “An agency conferred on two or mor

persons by a single act of authorization i

presumptively joint , in the absence of a clea

showing of a contrary intent, and must bexercised only by the unanimous action of th

designated agents. In such case, the principal i

deemed to have bargained for and desired the

combined personal ability, experience, judgmen

integrity, and other personal qualities of the

agents. However, the presumption will give way

to a clearly expressed intention that the agent

will have the power to act severally. Moreover

one of two or more joints may be delegated the

task of conducting the formalities or ministeria

acts in connection with the duties of the agency.”

Thus, if there is a joint agency , agency acts are performedby unanimous action by the designated agents unles

otherwise stipulated.

o There is no such requirement for agent

appointed simultaneously under the code.

2. When personally liable

. Expressly bound or in excess of authority


the party with whom he contracts, unless he expressly bind



Art. 1898. If the agent contracts in the name of the principa

exceeding the scope of his authority, and the principal doe


the agent contracted is aware of the limits of the power

Art. 1894. The responsibility of two or more agents, even

though they have been appointed simultaneously, is not

solidary, if solidarity has not been expressly stipulated.

Art. 1895. If solidarity has been agreed upon, each of the

agents is responsible for the non-fulfilment of the agency,

and for the fault or negligence of his fellow agents, except

in the latter case when the fellow agents acted beyond the

scope of their authority.





4



R: When the agent transacts as an agent, he is not personally

liable for the obligation entered into.

XPN: An agent can be held liable for obligations he entered

into as an agent in the following cases:1. When the agent expressly binds himself;

2. When the agent exceeds the limits of his authority

without giving the person he is transacting with

sufficient notice of his powers;

3. When the following elements are present:

a. The person transacting with the agent is

aware of the limits of the agent’s authority;

b. The agent exceeded the scope of his

authority;

c. The agent undertook to secure the

principal’s ratification; and,

d. The principal does not ratify the contract.

In Eurotech v. Cuizon (2007): The Court said (explaining Art.

1897): “Art. 1897 reinforces the familiar doctrine that an agent,

who acts as such, is not personally liable to the party with

whom he contracts. The same provision, however, presents

two instances when an agent becomes personally liable to a

third person. The first is when he expressly binds himself to the

obligation, and the second is when he exceeds his authority. In

the last instance, the agent can be held liable if he does not

give the third party sufficient notice of his powers.”The Court

ruled here that the agent in this case acted within his authority,

which made Art. 1897 inapplicable. The Court said: “The first

part of Art. 1897 declares that the principal is liable in caseswhen the agent acted within the bounds of his authority. Under

this, the agent is completely absolved of any liability. The

second part of the said provision presents the situations when

the agent himself becomes liable to a third party when he

expressly binds himself or he exceeds the limits of his authority

without giving notice of his powers to the third person.

However it must be pointed out that in case of excess of

authority by the agent, the law does not say that a third person

can recover from both the principal and the agent.”

In DBP v. CA (1994): Juan Dans, 76 years old, applied for a loan

with the DBP. He was advised by DBP to obtain a mortgage

redemption insurance (MRI) with the DBP MRI Pool. The MRI

Premium of Dans, less the service fee of 10% was credited to

the savings account of the DBP MRI Pool. The DBP MRI Pool

was advised of the credit. Dans died of cardiac arrest. DBP MRI

Pool notified DBP that Dans was not eligible for MRI coverage,

being over the acceptance age limit of 60 years at the time of

application. Dans’ estate filed a complaint against DBP and the

insurance pool for collection of sum of money with damages

The Court ruled against DBP. In dealing with Dans, DBP wa

wearing two legal hats: as lender, and as an insurance agent

Art. 1897 was applicable. Knowing all the while that Dans wa

ineligible for MRI coverage, DBP exceeded the scope of it

authority when in accepted Dans’ application for MRI b

collecting the insurance premium, and deducting its agent’

commission and service fee. The liability of an agent whexceeds the scope of his authority depends upon whether the

third person is aware of the limits of the agent’s powers. Th

rule that the agent is liable when he acts without authority is

founded upon the supposition that there has been som

wrong or omission on his part either in misrepresenting, or i

affirming, or concealing the authority under which he assume

to act.

a) With notice to third parties

rt. 1901. A third person cannot set up the fact that the agen

has exceeded his powers, if the principal has ratified, or ha

signified is willingness to ratify the agent’s acts.

b) Without notice to third parties

C. gent acting in his own name; exception

Art. 1883. If an agent acts in his own name, the principal

has no right of action against the persons with whom the

agent has contracted; neither have such persons against

the principal.

In such case, the agent is the one directly bound in favour

of the person with whom he has contracted, as if the

transaction were his own, except when the contract

involves things belonging to the principal.

The provisions of this article shall be understood to be

without prejudice to the actions between the principal and

agent.

An agent “acts in his own name” when he enters into

contract covering the subject matter of the agency withou

notice to the third party that he was acting as an agent.

o The third person believes in good faith that he idealing with the agent only.

o Often referred to as an agency with an

undisclosed principal.

o Agent is directly bound as a party to the contract

o The principal and the contracting party have no

right of action against each other because the







4

Tuason v. Orozco (1906)

Brief facts: Vargas executed power of attorney to authorize

Enrique to take out a loan on his behalf and mortgage his

property. Enrique and Dolores, wife of Vargas, obtained a loan

from Tuason and the property was mortgaged as a security. In

the instrument, Enrique stated that he assume the entire

liability. Tuason instituted the case to foreclose the mortgagedproperty as payment for the debt against Dolores.

Doctrine: Under the provisions of article 1727 of the Civil Code

the principal is directly liable to the creditor for the payment of

a debt incurred by his agent acting within the scope of his

authority. Irrespective of such liability on the part of the

principal, the agent may bind himself personally to the

payment of the debt incurred for the benefit and in behalf of

his principal. In such a case the liability expressly incurred by

the agent does not preclude the personal liability of the

principal but constitutes a further security in favor of the

creditor. Where a debt is secured by a mortgage upon

property belonging to the principal, duly recorded in the

Registry of Property, the creditor may bring his action directly

against the mortgaged property, notwithstanding the liability

personally incurred by the agent and the fact the agent

delivered to the creditor certain shares of stock as security for

the liability incurred by himself. A mortgage directly subjects

the encumbered property, whoever its possessor may be, to

the fulfillment of the obligation for the security of which it was

created.

Cervantes v. C (1999)

Brief facts: Philippine Air Lines, Inc. (PAL) issued to NicholasCervantes a round trip plane ticket for Manila-Honolulu-Los

Angeles-Honolulu-Manila, which ticket expressly provided an

expiry date of one year from issuance (Mar 27, 1990). On March

23, 1990, the petitioner used it. Upon his arrival in Los Angeles

on the same day, he immediately booked his Los Angeles-

Manila return ticket with the PAL office, and it was confirmed

for the April 2, 1990 flight. However, upon learning that the

same PAL plane would make a stop-over in San Francisco, and

considering that he would be there on April 2, 1990, petitioner

made arrangements with PAL for him to board the flight in San

Francisco instead of boarding in Los Angeles. When the

petitioner checked in at the PAL counter in San Francisco, hewas not allowed to board by the PAL personnel due to the

expiration of validity of his ticket. Thus, Cervantes filed a

Complaint for Damages for breach of contract of carriage. He

claimed that the act of the PAL agents in confirming his ticket

extended its period of validity.

Doctrine: Under Article 1898, the acts of an agent beyond the

scope of his authority do not bind the principal, unless the

latter ratifies the same expressly or impliedly. Furthermore

when the third person knows that the agent was acting beyond

his power or authority, the principal cannot be held liable fo

the acts of the agent. If the said third person is aware of suc

limits of authority, he is to blame, and is not entitled to recove

damages from the agent, unless the latter undertook to secure

the principal's ratification.

Smith Bell v Sotelo (1922)

Brief Facts: During the world war, Smith sold to Sotelo tanks

expellers and motors. When the goods arrived, Sotelo refused

to receive it. Smith sued Sotelo and Sotelo answered alleging

that it entered the contract as a manager of Manila Oil and

because of this, Manila Oil suffered damages.

Doctrine: When an agent (Sotelo) acts in his own name, the

principal (Manila Oil) has no right of action against the person

with whom the agent has contracted (Smith), or such person

against the principal. In such case, the agent is directly liable t

the person with whom he has contracted, as if the transactio

were his own.

Rural Bank of Bombom v C (1992)

Brief Facts: Gallardo executed an SPA in favor of Aquino

Aquino mortgaged Gallardo’s properties to the bank. Ban

wishes to foreclose the properties but Gallardo alleges that th

property was mortgaged to pay personal loans obtained b

Aquino from the Bank solely for his personal use and benefit.

Doctrine: In order to bind the principal by a mortgage on reaproperty executed by an agent, it must upon its face purpor

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

otherwise, it will bind the agent only.

Sy Juco v Sy Juco (1920)

Brief Facts: Parents sued their son who acted as the

administrator. Son does not want to return the launch, casco

and automobile because he bought them for himself and wit

his own money.

Doctrine:1. By virtue of the agency, agent is bound to transfer t

principal all the rights which he received from the

vendor, and principal has the right to be subrogated

in all the effects of the sale.

2. Applying the exception (when things belonging to th

principal are dealt with) in Art 1717, the agent'

apparent representation yields to the principal's tru





4

representation and that, in reality and in effect, the

contract must be considered as entered into between

the principal and the third person.

NF v I C (1990)

Brief Facts: Medalla entered into contract of shipment with

NFA. Superior, the principal, asks NFA to be the one to receivethe payment but NFA paid Medalla instead because Superior

was an undisclosed principal and NFA did not know about the

agency between them.

Doctrine: Agent's apparent representation yields to the

principal's true representation and that, in reality and in effect,

the contract must be considered as entered into between the

principal and the third person. Corollarily, if the principal can

be obliged to perform his duties under the contract, then it

can also demand the enforcement of its rights arising from the

contract.

old Star Mining v Lim Jimenez (1968)

Brief Facts: Lincallo leased his and Jimena’s mining claims to

Gold Star. Gold Star refused to give royalties to Jimena

because there was no privity of contract between Gold Star

and Jimena as Lincallo was the only one who transacted.

Doctrine: Principal (Jimena) may sue the person (Gold Star)

with whom the agent (Lincallo) dealt with in his agent's name,

when the transaction "involves things belonging to the

principal."





4

X. WH T RE THE OBLI TIONS

ND LI BILITIES OF PRINCIP LS

TO ENTS?

OBLI TIONS OF THE PRINCIP L

1. Comply with obligations

a. cts within the scope of authority

The following acts are deemed within the scope of agent’s

authority:

1. Conducive acts (Art. 1881)

2. Advantageous acts (Art. 1882)

3. Collateral acts which are natural and ordinary

incidents of the main act or business authorized

(Guinhawa v. People)

The fact that the agent’s acts are conducive o

advantageous will not cure the defect if the law require

that the authority for such be expressly or specificall

conferred.

b. Ratified acts

The principal can bind the third person to the

unauthorized act of his agent by simply signifying hi

willingness to ratify, without actually ratifying it.

Art. 1901 gives binding effect to the unauthorized act eve

prior to actual ratification.

If a principal’s willingness to ratify the unauthorized ac

binds a third person, certainly it should bind him as well.

Ratification in agency is the adoption or confirmation bone person of an act performed on his behalf by anothe

without authority.

In Filipinas Life v. Pedroso (2008): Teresita Pedroso was a polic

holder of a 20-year endowment life insurance issued b

Filipinas Life Assurance Company. Since 1972, Renato Vall

was the insurance agent who collected her monthly premiums

Valle told her that Filipinas Life Escolta Office was holding

promotional investment program offering 8% prepaid interes

a month for certain amounts deposited on a monthly basis

Pedroso invested. Pedroso confirmed the existence of th

promotion with the branch manager Angel Apetrior. Apetrio

confirmed that there was such promotion. Pedroso’investment of P10,000 was returned to her after she made

written request for its refund. She made 7-8 more investments

totalling P37,000 but at a lower rate of 5% prepaid interest

month. When Pedroso tried to withdraw her investment, Valle

did not want to return some P17,000 worth of it. Palaci

(another insured) also tried to withdraw hers but FL despite

demands refused to return her money. Pedroso et al filed an

action for the recovery of a sum of money. FL claimed that the

investment scheme offered by its agents was outside th

scope of their authority. Court held that FL ratified the acts o

its agent by benefitting from the alleged unauthorized

investments. Valle’s authority to solicit and receive investmentwas established by the parties. When Pedroso sough

confirmation, Alcantara, holding supervisory position, an

Apetrior, the branch manager, confirmed that Valle ha

authority. FL, as the principal, is liable for obligation

contracted by its agent Valle.

The general rule is that the principal is responsible for th

acts of its agent done within the scope of its authority

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.

Art. 1881. The agent must act within the scope of his

authority. He may do such acts as may be conducive to the

accomplishment of the purpose of the agency.

Art. 1882. The limits of the agent’s authority shall not be

considered exceeded should it have been performed in a

manner more advantageous to the principal than thatspecified by him.

Art. 1900. So far as third persons are concerned, an act is

deemed to have been performed within the scope of the

agent’s authority, if such act is within the terms of the

power of attorney, as written, even if the agent has in fact

exceeded the limits of his authority according to an

understanding between the principal and the agent.

Art. 1901. A third person cannot set up the fact that theagent has exceeded his powers, if the principal has ratified,

or has signified his willingness to ratify the agent’s acts.





4

When the agent exceeds his authority the agent becomes

personally liable for the damage.

But even when the agent exceeds his authority, the

principal is still solidarily liable together with the agent if

the principal allowed the agent to act as though the agent

had full powers.

The acts of an agent beyond the scope of his authority do

not bind the principal, unless the principal ratifies them,expressly or impliedly.

Ratification in agency is the adoption or confirmation by

one person of an act performed on his behalf by another

without authority.

Qui per alium facit per seipsum facere videtur. “He who

does a thing by an agent is considered as doing it

himself.”

In Francisco v. GSIS (1963): The corporate principal wanted to

invalidate the agent’s acceptance of an offer of compromise by

alleging that the telegram wherein the acceptance was made

was sent not by the agent but by his secretary and that there

was a mistake in couching the correct wording. Court held that

here was nothing in the telegram that hinted at any anomaly or

gave ground to suspect its veracity. The third person should

not be blamed for relying on it. The principal accepted the

remitted amount from the third person and kept silent about

the telegram not being in accordance with the true facts as it

later alleged in court. “This silence, taken together with the

unconditional acceptance of three other subsequent

remittances from plaintiff, constitutes in itself a binding

ratification of the original agreement.”

- In some cases, the Court considered the mere acceptance of

benefits from a disputed contract as NOT sufficient basis forratification.

In Manila Memorial v. Linsangan (2004): Florencia Baluyot

offered Atty. Pedro Linsangan a lot at the Holy Cross Memorial

Park owned by Manila Memorial Park Cemetery Inc. Linsangan

agreed and gave Baluyot the amount to be reimbursed to the

original buyer and to complete the down payment. Later

Baluyot verbally advised Linsangan that the contract was

cancelled for reasons the former could not explain, and

presented him another proposal for the purchase of an

equivalent property. Atty. Linsangan filed a complaint for

Breach of Contract and Damages against Manila Memorial.Court held that the contract entered into by Linsangan and

Baluyot is outside of the latter’s authority. Manila Memorial’s

acts of accepting and encashing the checks as well as allowing

Baluyot to receive checks drawn in the name of Manila

Memorial DO NOT confirm and ratify the contract of agency.

The principal must have full knowledge at the time of

ratification of all the material facts and circumstances

relating to the unauthorized act of the person wh

assumed to act as agent.

If material facts are suppressed or unknown, there can b

no valid ratification.

This principle does not apply if the principal’s ignorance o

the material facts and circumstances was willful, or that th

principal chooses to act in ignorance of the facts.

But in the absence of circumstances putting a reasonablprudent man on inquiry, ratification cannot be implied a

against the principal who is ignorant of the facts.

In Woodchild v. Roxas (2004): The principal questioned th

validity of terms and conditions included in a Deed of Absolut

Sale over a lot executed by its agent by arguing that the agen

was not specifically authorized to agree to such terms. Th

controversial provisions involved the grant of a right of wa

and sale of a portion of another lot should the right of way no

be sufficient. The Court ruled in favour of the principal pointing

out that the agent was not specifically authorized to agree to

the controverted terms nor could such authority be implied

from the authority granted to the agent to sell the lot “on such

terms and conditions which he deems most reasonable and

advantageous.” The controversial terms involved real right

over immovable property which under Art. 1878 requires SPA

The third person cannot feign ignorance of the need fo

specific authorization on the part of the agent because “the

rule is that if the act of the agent is one which require

authority in writing, those dealing with him are charged with

notice of that fact.” Absent estoppel or ratification, apparen

authority cannot remedy the lack of written power.

“For an act of the principal to be considered as a

implied ratification of an unauthorized act of an agent

such act must be inconsistent with any other hypothesithan that he approved and intended to adopt what had

been done in his name.”

“Ratification cannot be inferred from acts that a principa

has a right to do independently of the unauthorized act o

the agent.”

“If a writing is required to grant an authority to do

particular act, ratification of that act must also be i

writing.”

C SIS’ comments:

There may have been ratification in this case.

o

The principal was not forced to accept the Deeof Absolute Sale or to receive payment. It could

have at any time rejected the provision

regarding the right of way and the option t

purchase.

o The DOAS was not the first time the said

provisions were brought to the attention of the

principal. The third person sent a letter offering





4

to purchase the said property which included the

terms in question.

o The rule that “notice to the agent is notice to the

principal” should not be overlooked. But despite

the knowledge of these provisions the principal

allowed the agent to execute the contract.

The Court argued that there was a sale and the principal

had the right to retain the purchase price because thebuyer took possession.

o But the question arises: Is the principal’s right to

retain independent of the act of agent?

o Isn’t it precisely because there was a sale that the

seller had the right to payment and the buyer,

the right to the property under the terms and

conditions set for in the DOAS? The “sale”

involved not merely the transfer of ownership

over the lot but also the terms and conditions set

forth in the contract.

The buyer was made to believe that the principal agreed

to everything in the DOAS. At no point prior to the

acceptance of the payment did the seller object to the

questioned provisions.

o To belatedly inform the buyer that the seller does

not intend to honor the entire contract is bad

faith on the part of the principal.

The Court required that the acceptance and retention of

purchase price be inconsistent with any other hypothesis

than the intention to ratify. But what is the other possible

valid reason for the acceptance and retention if not

acceptance of the terms of the DOAS?

o The court simply said that the land was sold and

the buyer had taken possession of the property.

As such the seller had the right to retain thepurchase price of the property.

If the amount accepted by the principal is not in the

concept of payment and therefore acceptance of the

terms of the Deed of Sale, why was it accepted ?

o The only other possibility was that it was some

form of security for the principal because the

buyer was given possession over the lot.

o If that was the case then the Court should have

ordered the buyer to return the lot and the

principal to return the purchase price. But it

would not be just for the seller to reap the

benefits of the sale and not honor his obligationsto the buyer.

c. When Estopped

rt. 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. (n)

In this case, there is an actual agency relationship excep

that the power exercised by the agent is in excess of his

authority.

Not a case of agency by estoppel because there is an

actual agency.

The agency is not necessarily implied because the rule wi

apply even with an express agency in place. What the rule covers is not the existence of an agency bu

the absence of express authority. Despite the absence o

express authority, the principal is solidarily liable because h

allowed the agent to act as if he had authority.

Act of the principal may be characterized as a failure to

repudiate which indicates an implied authority.

In Rural Bank of Milaor v. Ocfemia (2000): Felicisimo and

Juanita Ocfemia mortgaged 7 parcels of land to the bank

They were unable to redeem the properties. Mortgage wa

foreclosed and ownership transferred to the bank. The ban

sold 5 parcels of land to Renato and Juanita Ocfemia. The

Deed of Sale named Fe Tena (the bank manager) as the

representative of the bank. To register the transfer, th

Ocfemias needed a board resolution. The bank refused to

issue a board resolution. Ocfemias filed an action fo

mandamus and damages. Court held that Tena was authorized

to enter into the contract of sale. In failing to file its answe

specifically denying under oath the Deed of Sale, the ban

admitted the due execution of the said contract. Suc

admission means that it acknowledged that Tena wa

authorized to sign the Deed of Sale on its behalf. The ban

acknowledged, by its own acts or failure to act, the authority o

Tena to enter into binding contracts.

DOCTRINE: A bank is liable to innocent third persons where

representation is made in the course of its normal business by

an agent, even though such agent is abusing her authority.

Board o f L iquidato rs v Kalaw: When, in the usual course o

business of a corporation, an officer has been allowed in hi

official capacity to manage its affairs, his authority t

represent the corporation may be implied from the manne

in which he has been permitted by the directors to manage

its business.

Francisco v SIS, citing Ram irez v Orientalist Co.: I f

corporation knowingly permits one of its officers, or another agent, to do acts within the scope of an apparen

authority, and thus holds him out to the public as possessing

power to do those acts, the corporation will, as agains

anyone who has in good faith dealt with the corporatio

through such agent, be estopped from denying his authority

The bank is now estopped from questioning the authority o

the bank manager to enter into the contract of sale.





4

C SIS:

The transaction involved is a sale of a parcel of land.

Pursuant to Art. 1874, when a sale of a piece of land or any

interest therein is through an agent, the authority of the

agent must be in writing.

While the bank may be estopped to deny the apparent

authority it granted to its agent, there is no escaping theclear requirement under the Civil Code.

It would be a different matter if the Article and By-Laws of

the bank or a previous board resolution authorized the bank

manager to execute deeds of sale of land owned by the

bank.

In Cuison v CA (1993): Kae Cuison was a sole proprietorship

with stores in Baesa, QC and Sto. Cristo, Binondo. Valiant

Investment Associates delivered various kinds of paper

products to Lilian Tan of LT trading allegedly pursuant to

orders made by Tiu Huy Tiac who was employed in the Sto.

Cristo branch of Cuison. In payment, Tiac issued checks which

were later dishonored. Valiant demanded payment from

Cuison who denied involvement in the transaction. Court held

that Tiu Huy Tiac had the authority to enter into the

transaction because of Cuison’s representations. Cuison is

estopped from disclaiming liability for the transaction entered

into by Tiac on his behalf. Cuison held out Tiu Huy Tiac to the

public as the manager of his store in Sto. Cristo, Binondo. It

did not matter whether the representations were intentional or

merely negligent so long as innocent third persons relied upon

such representations in good faith and for value. By Cuison’s

own representations and manifestations, Tiu Huy Tiac became

an agent of the former by estoppel. Cuison is liable for the

transaction entered into by Tiu Huy Tiac on his behalf.1. 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.

DOCTRINE: 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.

Rationale behind Art. 1911 according to Manila Remnant Co.,Inc. v C : It is intended to protect the rights of innocent

persons. In such a situation, both the principal and the agent

may be considered as joint tort feasors whose liability is joint

and solidary.

C SIS: Two observations may be made about this case:

1. Court’s discussion focused on the existence of an agency

relationship between Cuison and Tiu Huy Tiac which i

different from the existence of authority on the part of the

latter to enter into the transaction.

Tiu Huy Tiac may be the agent of Cuison but it did no

necessarily follow that his agency involved the transaction

in question.

2. The Court characterized the relationship between Cuiso

and Tiu Huy Tiac as an agency by estoppel. While the facts as found by the Court may support th

existence of an agency by estoppel, there appears to b

an implied agency and not merely an agency by estoppel.

Agency may be implied from the principal’s silence, lac

of action or failure to repudiate the agency knowing tha

another rperson is acting on his behalf without authority

Agency may also be implied from the acts of the agen

which carry out the agency. Both are present in this case.

SPECIFIC OBLI TIONS (IN CIVIL CODE)

. dvance/ Reimburse

rt. 1912. The principal must advance to the agent, should the

latter request, the sums necessary for the execution of th

agency.

Should the agent have advanced them, the principal mus

reimburse him therefor, even if the business or undertaking

was not successful, provided the agent is free from all fault.

The reimbursement shall include interest on the sum

advanced, from the day on which the advance was made.

rt. 1914. The agent may retain in pledge the things which ar

the object of the agency until the principal effects threimbursement and pays the indemnity set forth in the two

preceding articles.

rt. 1918. The principal is not liable for the expenses incurred

by the agent in the following cases:

1. If the agent acted in contravention of the principal’

instructions, unless the latter should wish to avail himself of the

benefits derived from the contract;

2. When the expenses were due to the fault of the agent;

3. When the agent incurred them with knowledge that a

unfavorable result would ensue, if the principal was not aware

thereof;

4. When it was stipulated that the expenses would be borne b

the agent, or that the latter would be allowed only a certain

sum.

Item 4) should not mean that the principal is exempt from

reimbursement in all cases where there is a stipulation tha

the agent is only allowed a certain sum for expenses. A





4

reasonable interpretation of the provision is that the

principal is exempted from reimbursing expenses beyond

the stipulated amount.

B. Indemnify

rt. 1913. The principal must also indemnify the agent for all

the damages which the executive of the agency may havecaused the latter, without fault or negligence on his part.

The provision appears to contemplate a situation where the

agent suffered damage as a result of performing his duties

as an agent. Damage must not be the result of the agent’s

fault or negligence.

Two questions can arise from the application of this

provision:

1. Should the damage be a direct consequence of the

execution of the agency or is it sufficient that such

damage is incurred during the execution of the agency?

Casis: Equity would seem to dictate that the latter

should be the rule provided that the damage would not

have arisen had the agent not been performing his

duties.

2. If the damage is caused by fault or negligence of a third

person, can the principal refuse to indemnify?

Casis: The use of the term “must” seems to imply that

this refusal would not be valid.

C. Solidary liability

rt. 1915. If two or more persons have appointed an agent for

a common transaction or undertaking, they shall be solidarilyliable to the agent for all the consequences of the agency.

D. Compensation

rt. 1875. Agency is presumed to be for a compensation,

unless there is proof to the contrary.

- The principal has the obligation to compensate the agent

even if not specified in the power of attorney because under

the CC, agency is presumed to be for compensation.

- Rules on circumstances for agent to be entitled to

compensation (according to jurisprudence):o Determine whether person is an agent or a

broker

In sales, an agent is generally required to be

the procuring agent while the broker is generally

required only to bring the parties together.

o If the person is an agent, it must be determined if

he has completed the task required of him.

There are cases where the Court granted a

agent compensation even if transaction was no

completed within the period of agency.

Also even where an agent’s authority ha

expired, the agent is granted his commission

there is a close, proximate connection betwee

the agent’s efforts and the sale.

E. gent’s lien

rt. 1914. The agent may retain in pledge the things which ar

the object of the agency until the principal effects th

reimbursement and pays the indemnity set forth in the two

preceding articles.

Cases:

Dela Cruz v. Northern Theatrical Enterprises Inc (1954)

Brief Facts: The guard employed by Northern Theatrica

figured in a shooting incident and incurred expenses during

the litigation filed against him. The employee wants to recove

from the employer invoking the concept of agency.

Doctrine: the relationship between the movie corporation and

the guard was not that of principal and agent because th

principle of representation was in no way involved.

Macondray v Sellner (1916)

Brief Facts: Macondray wished to sell its land through SellnerSellner found a buyer, Barretto, but Macondray gave

deadline for the sale. If the confirmation of the sale wen

beyond the deadline, it would be considered cancelled

Macondray filed an action to recover damages from Sellne

because it sold the property even after the authority had bee

revoked from it.

Doctrine: There can be no question as to the liability of the

principal to the agent for the amount of the commission whic

it agreed to pay him should he find a purchaser for the land a

the price agreed upon in his agency contract.

Danon v Brim (1921)

Brief Facts: Brimo employed Danon to look for a buyer of it

factory. Brimo sold it to the buyer of another agent, Sellner. LC

awarded Danon the value of his services as a broker for Brimo.





5

Doctrine: The principal violates no right of the broker by selling

to the first party who offers the price asked, and it matters not

that sale is to the very party with whom the broker had been

negotiating. He failed to find or produce a purchaser upon the

terms prescribed in his employment, and the principal was

under no obligation to wait longer that he might make further

efforts.

Rocha v. Prats (1922)

Brief Facts: Rocha, as the agent of Prats & Co, negotiated with

madrigal to sell a building and lot owned by the company.

Rocha was authorized in writing to sell the property for

P165,000. P100,000 was to be paid within a year, provided that

it is secured by a bank credit. Rocha alleged that Brimo waived

the security condition. The sale did not push through because

Brimo insisted that the condition be complied with.

Doctrine: Agent cannot recover compensation if he did not

succeed in bringing the minds of the buyer and seller to an

agreement as to the price and terms.

Inland Realty Investment Service, Inc. v. C (1997)

Brief Facts: Gregorio Araneta gave Inland the authority to sell

its shares for P1,500/share. Inland negotiated with Stanford but

failed to consume the sale because Stanford insisted on

buying at the price of P1,000/share. 1 year and 5 months after

the expiration of Inland’s authority to sell, Gregorio Araneta

finally sold the shares to Stanford. Inland’s claiming for broker’s

commission but Gregorio declined.

Doctrine: Where the agent is not the the efficient procuringcause in bringing about the sale in question, it is therefore, not

entitled to the stipulated broker's commission.

Infante v. Cunanan (1953)

Brief facts: Cunanan and Mijares were authorized by Infante to

find a buyer for her property. Infante would pay them 5%

commission. The two eventually found a buyer, Pio Noche.

Infante then said that she was no longer interested to push

through with the sale and made the two execute a deed of

cancellation of authority to find a buyer. Later on, Infante sold

the property to Noche. Cunanan and Mijares now demandpayment of their commission.

Doctrine: If the principal changes his mind on selling a certain

property after the agent has found a buyer for it, the principal

would not be forced to sell his property or give the agent his

commission. But if the principal cancels the sale in bad faith,

then the principal would not be allowed to evade payment of

the commission agreed upon.

Prats v. C (1978)

Brief facts: Doronila was owner of a 300 hectare lot. He offered

to sell it to SSS but upon failure of negotiations, he gav

exclusive authority to negotiate its sale to Prats. The latter trie

to bring Doronila and SSS together, however, the acceptanceof the offer to sell was done after the expiration of suc

authority.

Doctrine: The principal has the obligation to pay commission

to his agent, subject to the limitations of the stipulations in the

agency. Based on equity, in this case, it is but proper to give

compensation to the efforts of the agent which wa

instrumental in bringing the parties back together t

consummate a contract of sale.

Uniland Resources v. DBP (1991)

Brief Facts: Marinduque mortgaged its real properties t

Caltex then to DBP. Caltex then proceeded to foreclose the

property which DBP redeemed by virtue of its acquisition o

Marinduque's right to redemption. DBP then decided to rese

the properties and Uniland requested accredition from DBP to

act as its broker and volunteered Glaxo as a buyer.

Doctrine: An entity which acts as a broker without an

authoruty from the principal is not entitled to broker's fees

However, for equity considerations, the Court may gran

minimal fees to compensate the broker if indeed the broke

was instrumental in bringing together the parties to th

contract.

Domingo v. Domingo (1971)

Brief facts: Vicente authorized Gregorio to sell his land fo

P2/sqm. A buyer (Oscar) gifted Gregorio P1,000 to sell to him

at a lower price. Gregorio accepted the gift without knowledge

of his principal and convinced his principal to sell at onl

P1.20/sqm.

Doctrine: The law imposes upon the agent the absolute

obligation to make a full disclosure to his principal of all hi

transactions and other material facts relevant to the agency. Aagent who takes a secret profit in the nature of a bonus from

the vendee, without revealing the same to his principal, i

guilty of a breach of his loyalty and forfeits his right to collec

the commission from his principal. The rule is to prevent th

possibility of any wrong, not to remedy or repair an actua

damage.





5

XI. WH T RE THE OBLI TIONS

OF PRINCIP LS TO THIRD

P RTIES?

LI BILITIES OF THE PRINCIP L

- Principal is liable for the valid acts of the agent, including:

o Acts within the scope of the latter’s authority

o Those he ratified

o Those he is estopped to deny

- CC provides for specific rules on the nature and scope of

the principal’s liability in relation to his agent.

1. Be Solidarily Liable

rt. 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. (n)

- Principal can be held solidarily liable with the agent in

cases where the agent has exceeded his authority if the

former allowed the latter to act as if he had full powers.

o This may appear to be a form of implied agency.

However, in an implied agency, the principal is liable

for the contract and not the agent.

o Under this provision, the provision, the principal is

solidarily liable with his agent.

rt. 1915. If two or more persons have appointed an agent for

a common transaction or undertaking, they shall be solidarilyliable to the agent for all the consequences of the agency.

(1731)

- Principal may be solidarily liable with another or others as

principals if they appointed the agent for a common

transaction or undertaking.

In De Castro v. CA (2002): One of the four co-owners issued to

the agent a handwritten note authorizing him to sell the

properties. The agent sued only two co-owners of a parcel of

land to recover his unpaid commission for the sale of two

parcels of land. The defendants argued that the complaintshould have been dismissed for failure to implead the other

co-owners of the lots. The Court held that the defendants

could not seek the dismissal for failure to implead the other

principals as indispensable parties. The co-owners admitted

that they were solidarily liable. The co-owner signed the note

as owner and as representative of the other co-owners. This

means that that all the four were the agent’s principals.

DOCTRINE: In a case where the undertaking is the sale of

parcel of land owned in common by several individuals, only

those who authorize the agent to sell can be solidarily liable

under Art. 1915.

The Court cited Tolentino who wrote that (obiter):

- Article 1915 applies even when the appointments wermade by the principals in separate acts, provided that the

are for the same transaction.

- Rules as to the manner of appointment required by Art

1915.

o Solidarity arises from the common interest of th

principals, not from the act of constituting the agency

o If the undertaking is one in which several ar

interested, but only some create the agency, only the

latter are solidarily liable.

2. Contract Involves Things Belonging to Principal

rt. 1883. If an agent acts in his own name, the principal has

no right of action against the persons with whom the agent

has contracted; neither have such persons against the

principal.

In such case the agent is the one directly bound in favor of

the person with whom he has contracted, as if the transaction

were his own, except when the contract involves things

belonging to the principal.

The provisions of this article shall be understood to be

without prejudice to the actions between the principal and

agent. (1717)

R: The principal is not bound when the agent acts in his own

name.

XPN: Agency with an undisclosed principal (Art. 1883)

- This is not an exception to the liability of agents but to the

non-liability of principals for contracts entered into b

agents in their own name.

Rules regarding this exception (according to jurisprudence)

1. Principal and third persons have a right of action agains

each other.

o Principal is considered a party to the contrac

even if agent entered into it in his own name.

o Principal can enforce rights under the contracthough he is not a party.

o Principal is entitled to the benefit of the

transaction.

In Syjuco v. Syjuco (1920): The agent was the administrator o

the properties of his principals and used their funds to acquir

property in his own name. Court held that the agent mus





5

transfer ownership over the property to his principals. Under

the exception “the agent is bound to the principal although he

does not assume the character of an agent and appears acting

in his own name.” The agent’s apparent representation yields

to the principal’s true representation and that, in reality and in

effect, the contract must be considered as entered into

between the principal and the third person.

In Gold Star Mining v. Lim-Jimena (1968): Ananias Lincallo

bound himself to turn over to Victor Jimena ½ of the proceeds

from all mining claims that he would purchase with the money

to be advanced by the latter. Instead of turning over part of

the claims to Jimena, Lincallo assigned mining rights over part

of the claims to Gold Star Mining Co., Inc. Subsequently, the

mining claims in question were made subject matter of

contracts entered into by Lincallo in his own name and for his

benefit alone without any intimation of Jimena’s interests.

Jimena repeatedly apprised Gold Star and Marinduque of his

interests over the mining claims and demanded recognition

and payment of his ½ share in all the royalties allocated and

paid and thereafter be paid. Jimena commenced a suit against

Lincallo for recovery of his advances and his ½ share in the

royalties. Court ruled that Lincallo, in transferring the mining

claims to Gold Star, acted as Jimena’s agent with respect to

Jimena’s share of the claims. Under such condition, Jimena has

an action against Gold Star pursuant to Article 1883 which

provides that the principal may sue the person with whom the

agent dealt with in his (agent’s) own name when the

transaction ‘involves things belonging to the principal.’

2. The principal is not bound by the contract if the act is

beyond the scope of an agent’s authority.

The exception under Article 1883 does not apply in allcases involving the property of the principal but only if

the act of agent is within the scope of his authority.

In PNB v. Agudelo (1933): Two principals executed special

powers of attorney on two different occasions to authorize the

agent to sell, alienate, and mortgage all their real estate.

Nothing in the powers expressly authorized the agent to

contract any loan nor to constitute a mortgage on the

principal’s properties to secure his obligations. The agent, on

two separate occasions executed in favor of PNB mortgages

on the lot in the name of the principals to secure the payment

of credits, loans, commercial overdrafts, which he might obtain.The mortgage deeds and promissory notes were executed in

the agent’s own name and signed by him in his personal

capacity. Court ruled that the agent executed the promissory

notes under his own signature without authority from his

principals, and therefore not binding upon the latter. There

was nothing to show that he executed the promissory notes for

the account and at the request of his principals. The exception

only applied if the agent acted within the scope of authority. In

this case, the agent was not authorized to execute promissor

notes even in the name of his principal nor to constitute

mortgage on the real properties to secure such promissor

notes.

DOCTRINE: The exception only applied if the agent acted

within the scope of authority.

C SIS: In this case, the court carved out an exception to the

exception or provided a condition for the application of the

exception. The Court is saying that even if property of th

principal is involved, the contract entered into by the agent in

his own name will not bind the principal if the agent exceeded

the scope of his authority.

SPECIFIC OBLI TIONS (IN CIVIL CODE)

. gent acting within the scope of authority

rt. 1883. If an agent acts in his own name, the principal has no

right of action against the persons with whom the agent ha

contracted; neither have such persons against the principal.

rt. 1910. The principal must comply with all the obligation

which the agent may have contracted within the scope of hi

authority.

As for any obligation wherein the agent has exceeded hi

power, the principal is not bound except when he ratifies i

expressly or tacitly.

rt. 1917. In the case referred to in the preceding article, if thagent has acted in good faith, the principal shall be liable i

damages to the third person whose contract must be rejected

If the agent acted in bad faith, he alone shall be responsible.

rt. 1916. When two persons contract with regard to the sam

thing, one of them with the agent and the other with th

principal, and the two contracts are incompatible with eac

other, that of prior date shall be preferred, without prejudic

to the provisions of Article 1544.

rt. 1544. If the same thing should have been sold to differen

vendees, the ownership shall be transferred to the person who

may have first taken possession thereof in good faith, if

should be movable property.

Should it be immovable property, the ownership shall belong

to the person acquiring it who in good faith first recorded it i

the Registry of Property.

Should there be no inscription, the ownership shall pertain to

the person who in good faith was first in the possession; and





5

in the absence thereof, to the person who presents the oldest

title, provided there is good faith.

B. gent acting outside the scope of authority

rt. 1900. So far as third persons are concerned, an act is

deemed to have been performed within the scope of agent’s

authority, if such act is within the terms of the power of

attorney, as written, even if the agent has n fact exceeded the


the principal and the agent.

rt. 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.

rt. 1916. When two persons contract with regard to the same

thing, one of them with the agent and the other with the

principal, and the two contracts are incompatible with each

other, that of prior date shall be preferred, without prejudiceto the provisions of Article 1544.

rt. 1917. In the case referred to in the preceding article, if the

agent has acted in good faith, the principal shall be liable in

damages to the third person whose contract must be rejected.

If the agent acted in bad faith, he alone shall be responsible.

C. For crimes; for torts

Cases:

onzales and omez v. Haberer (1925)

Brief Facts: Gomez, as agent of his wife Gonzales sold a parcel

of land to Haberer with a duty of the former to place the latter

in possession. Haberer was not able to take possession.

Gomez and Gonzales sued Haberer to claim the unpaid

balance of the purchase price.

Doctrine: The principal, having accepted the benefits of the

misrepresentations of her agent, is deemed to be liable for

such misrepresentations.

Tuason v. Orozco (1906)

Brief facts: Vargas executed power of attorney to authorize

Enrique to take out a loan on his behalf and mortgage his

property. Enrique and Dolores, wife of Vargas, obtained a loan

from Tuason and the property was mortgaged as a security. In

the instrument, Enrique stated that he assume the entire

liability. Tuason instituted the case to foreclose the mortgaged

property as payment for the debt against Dolores.

Doctrine: Under the provisions of article 1727 of the Civil Cod

the principal is directly liable to the creditor for the payment o

a debt incurred by his agent acting within the scope of his

authority. Irrespective of such liability on the part of th

principal, the agent may bind himself personally to th

payment of the debt incurred for the benefit and in behalf ohis principal. In such a case the liability expressly incurred by

the agent does not preclude the personal liability of th

principal but constitutes a further security in favor of th

creditor. Where a debt is secured by a mortgage upo

property belonging to the principal, duly recorded in th

Registry of Property, the creditor may bring his action directl

against the mortgaged property, notwithstanding the liabilit

personally incurred by the agent and the fact the agen

delivered to the creditor certain shares of stock as security fo

the liability incurred by himself. A mortgage directly subject

the encumbered property, whoever its possessor may be, t

the fulfillment of the obligation for the security of which it wa

created.







5

rule that “every person dealing with an agent is put upon

inquiry and must discover upon his peril the authority of the

agent” would only apply if the principal is sought to be held

liable on the contract entered into by the agent. In this case, it

was the gaent who was sought to be liable. Agent who

exceeded its authority cannot escape liability.

c. Burden of Proof - the third party dealing with such agent has

the burden of proving such nature and extentof authority BUTgeneral rule is still that the burden of proving the existence of

an agency relationship rests on the person making the

allegation.

d. Standard of care - Act with ordinary prudence and

reasonable diligence.

Third party cannot claim protection when:

1. Suggestions of probable limitations be of such

clear and reasonable quality; or

2. The character assumed by the agent is of such a

suspicious or unreasonable nature; or

3. The authority which he seeks to exercise is of

such an unusual or improbable character, as

would suffice to put an ordinarily prudent man

upon his guard.

JURISPRUDENCE:

In pex Min ing Co. Inc. v . Sou theast M indanao o ld Min ing

Corp. (2006), court held “the existence of the elements of

agency is a factual matter that needs to be established or

proven by evidence. The burden of proving that agency is

extant in a certain case rests in the party who sets forth such

allegation. This is based on the principle that he who alleges a

fat has the burden of proving it. The evidence to prove this factmust be clear, positive and convincing.”

In San Juan Structura l v. C ( 1998 ), the Court held that the

buyer had the burden of proving that the corporate officer

involved was in fact authorized. The fact that the agent was a

treasurer of the corporation does not free the buyer from the

responsibility of ascertaining her authority to represent the

corporation. The buyer could not assume that the agent by

virtue of her position had authority to sell since selling is

foreign to the corporate treasurer’s function.

In Bacaltos Coa l M ines v . C (1995)

, court held that had thethird party dealing with the agent exercised due diligence and

prudence, it should have known that there is nothing on the

face of the documents that confers upon the agent the

authority to enter into a Trip Charter Party. Because the powers

granted to the agent under the power of attorney was based

on another contract, the third party should have required its

presentation to determine what it is and how it may be used by

the agent. The third party was negligent in its failure to verify

the principal owned a vessel. It should have required th

presentation of documentary proof of ownership of the vesse

to be chartered. Mere opinion of an agent as to the extent o

his powers, or his mere assumption of authority without th

foundation, will NOT bind the principal; and a third perso

dealing with a known agent must bear the burden o

determining for himself, by the exercise of reasonabldiligence and prudence, the existence of agent’s authority to

act in the premises. Whether the agency is general or specia

the third person is bound to ascertain not only the fact o

agency, but the nature and extent of authority.

In Eterni t v . L iton jua (2006), A person dealing with a know

agent is not authorized, under any circumstances, to blindly

trust the agents. In this case, petitioners failed to discharge

their burden; hence petitioners are not entitled to damage

from Eternit.





5

XIII. HOW IS ENCY

EXTIN UISHED?

. Revocation; agency coupled with an interest

rt. 1873. If a person specially informs another or states by

public advertisement that he has given a power of attorney to

a third person, the latter thereby becomes a duly authorized

agent, in the former case with respect to the person who

received the special information, and in the latter case with

regard to any person.

The power shall continue to be in full force until the notice is

rescinded in the same manner in which it was given.

rt. 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.

rt. 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.

rt. 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.

rt. 1922. If the agent had general powers, revocation of the

agency does not prejudice third persons who acted in good

faith and without knowledge of the revocation. Notice of the

revocation in a newspaper of general circulation is a sufficient

warning to third persons.

rt. 1923. The appointment of a new agent for the same

business or transaction revokes the previous agency from theday on which the notice thereof was given to the former agent,

without prejudice to the provisions of the two preceding

articles.

rt. 1924. The agency is revoked if the principal directly

manages the business entrusted to the agent, dealing directly

with third persons.

rt. 1925. When two or more principals have granted a powe

of attorney for a common transaction, any one of them ma

revoke the same without the consent of the others.

rt. 1926. A general power of attorney is revoked by a specia

one granted to another agent, as regards the special matteinvolved in the latter.

rt. 1927. An agency cannot be revoked if a bilateral contrac

depends upon it, or if it is the means of fulfilling an obligation

already contracted, or if a partner is appointed manager of a

partnership and his removal from the management i

unjustifiable.

The modes of extinguishment may be classified into three:

(1) By agreement (Nos. 5 and 6);

(2) By subsequent acts of the parties:

(a) By the act of both parties or by mutual consent; or(b) By the unilateral act of one of them (Nos. 1 and 2);

(3) By operation of law (Nos. 3 and 4).

In eneral

Revocation may be availed of even if the period fixed i

the contract of agency has not yet expired.

Since the principal has an absolute right to revoke th

agency, the agent cannot object or claim damages arising

from such revocation unless it is shown that such was done i

order to evade the payment of agent’s commission.

The return of the written power of attorney is no

required for the revocation to become effective.

If there is more than one principal, any one of them ma

revoke the agency without consent of the others.

EX MPLESOF IMPLIEDREVOC TION:

1. ppointment of New gent -=does not take effect upon the

appointment of the new agent but upon notification of the ol

agent.

2. Direct Management by the Principal- Accdg. To Prof Casis

the mere act of a principal dealing with customers does no

directly constitute a revocation because the same act ma

simply be interpreted as the principal engaging in his ow

business.Requisites:

1. Principal believes that the agent is in breach of its contrac

of agency

2. as a result of which decides to deal with customers directly

3. Instituting suit against the agent





5

4 WhenNot Binding on Third Persons

a. When Notice is Required

In addition to revocation, there must be notice to third

persons for whom the agency was established in the first

place.

In Lustan v C (1997 ), “Special Powers of Attorney are a

continuing one and absent a valid revocation duly furnished tothe mortgagee, the same continues to have force and effect as

against third persons who had no knowledge of such lack of

authority.”

b. Third Person in ood Faith without Knowledge of

Revocation

The meaning of an “agent with general powers” can be

construed in a number of ways but according to Prof Casis, it

is most probable that the intention of the framers would be

for it to mean as an agent authorized to transact with the

general public, considering Art 1921 and 1922.

Cases:

Barretto v. Sta. Marina (1913)

Brief facts: Barretto (agent) filed a suit against Sta. Marina

(principal) for allegedly violating their contract of agency by

summarily and arbitrarily dispensing with his services and

refusing to pay his compensation. He was praying for the

award of damages which the lower court denied. Evidence

showed that he exceeded his authority, was negligent in his

duties, and actually resigned.

Doctrine: The contract of agency can subsist only so long as

the principal has confidence in his agent, because, from themoment such confidence disappears and although there be a

fixed period for the excercise of the office of agent, a

circumstance that does not appear in the present case the

principal has a perfect right to revoke the power that he had

conferred upon the agent owing to the confidence he had in

him and which for sound reasons had ceased to exist.

Diolosa v. C (1984)

Brief facts: Baterna is a licensed real estate broker and was

under the agreement to sell, transfer and convey certain lots

owned by the spouses Diolosa. It was stated in the contractthat the petitioner is engaged as an agent until all the subject

property as subdivided is fully disposed of. The spouses then

rescinded the agency contract because it wanted to reserve

the remaining unsold lots for their six grandchildren.

Doctrine: A valid contract of agency can be rescinded for

grounds specified in Articles 1381 and 1382 of the Civil Code.

New Manila Lumber Company, Inc. v. Republic of the

Philippines (1960)

Brief facts: The contractor made New Manila its agent for th

collection of the amounts due to the contractor for th

construction of school buildings from the Republic. However

the Republic dealt directly with the contractor. New Manil

sued the Republic.

Doctrine: A contract of agency is deemed revoked if th

principal deals directly with the third person to whom th

agent was supposed to deal with under the said contract.

Dy Buncio v Ong uan (1934)

Brief Facts: Dy Buncio claims the rice mill and camarin i

owned by OGC so these are subject to the execution whic

had been levied by Dy Buncio as creditor of OGC. Juan Tong

claims that he is the owner because it was sold to him by

OGC’s agent, OGCJr.

Doctrine: The making and accepting of a new power o

attorney, whether it enlarges or decreases the power of the

agent under a prior power of attorney, must be held t

supplant and revoke the prior power when the two ar

inconsistent.

arcia v De Manzano (1919)

Brief Facts: Narciso gave 2 general powers of atty to his so

and his wife. Son sold father’s interest on the vessel Sa

Nicolas to Juan Garcia. Wife, as administratrix of the estate o

Narciso, is suing for the return of the interest on the vessel athe power of atty of the son was revoked because of he

appointment as the new agent.

Doctrine: A second power of attorney revokes the first on

only after notice given to first agent.

Rallos v Yangco (1911)

Brief Facts: Yangco wrote to Rallos and invited him to d

business with him. He introduced his agent, Collantes. Rallo

sent bundles of tobacco to Collantes to be sold o

commission but the money received was appropriated bCollantes. Rallos seeks to recover from the principal, Yangco

Yangco terminated his agency relationship with Collantes a

that time.

Doctrine: The general rule is that, when the relationship o

principal and agent is established, and the principal give

notice of the agency and holds out the agent as his authorized





5

representative, upon the termination of the agency, it is the

duty of the principal to give due and timely notice thereof,

otherwise, he will be held liable to third parties acting in good

faith and properly relying upon such agency.

La Compañia eneral De Tabacos De Filipinas v. Diaba (1911)

Brief Facts: La Campania sold goods to Diaba through itsagent, Gutierrez. When asked to pay, Gutierrez refused

claiming that he sold abaca and other agricultural materials to

Gutierrez amounting to P1,308.80 (invoking legal

compensation), and in fact there is still a balance due him. La

Campania alleged that it already revoked Gutierrez’ authority

hence it cannot be asked to pay for the abaca nor apply the

concept of legal compensation.

Doctrine: Revocation of the authority vested in the agent must

be sufficiently proven in order that the principal may avoid

liability arising from the alleged acts of the agent in

representation of the principal.

Coleongco v. Claparols (1964)

Brief Facts: Claparols executed a POA in favor of Coleongco.

However, Coleongco committed acts of disloyalty. He was

dismissed as assistant manager and the POA was revoked.

Coleongco claims that the POA cannot be revoked because it

was coupled with interest.

Doctrine: A POA is not deemed coupled with interest if the

agent’s interest is already protected under a different

instrument. A POA coupled with an interest can be made

irrevocable only in the sense that the principal may not recall itat his pleasure. It can be revoked for a just cause regardless of

whether it was coupled with an interest or not. Irrevocability

may not be used to shield the perpetration of acts in bad faith,

breach of confidence, or betrayal of trust by the agent for this

would amount to a waiver of future fraud, which is prohibited

by the Civil Code.

In CMS Logging v C (1992), “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 has not yet expired. As the principal has

this absolute right to revoke the agency, the agent can notobject 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. There is implied

revocation when the principal sold its logs directly to several

Japanese firms.

5. Special uthority Revokes eneral uthority in Part

The general agency is not completely revoked but onl

the part that is now covered by the special agency.

“general power of attorney” and “special power o

attorney” in Art. 1926 refers to “general agency” an

“special agency”.

This rule has no application with an agency couched igeneral terms and a subsequent SPA as there is no authority

in the agency couched in general terms which conflicts with

the SPA.

An agency couched in general terms covers only acts o

administration while a special power of attorney cover

acts of strict dominion.

It is however possible to apply the rule in a certain cas

involving a general agency and a special power of attorney.

If the general agency granted to the first agent included

acts of strict dominion, then a special power of attorne

granted to another agent covering the same acts wi

revoke the prior authority given to the first agent.

However, in this case, there actually two SPAS. The firs

SPA was granted to the first agent as part of his genera

agency and the second SPA was given to another agent

→ not squarely the case contemplated by Art. 1926.

It is more reasonable to interpret Art. 1926 as referring t

a situation where there is a general agency created by

principal followed by a special agency created by the same

principal.

6. When gency Cannot be Revoked


after the death of the principal, if it has been constituted in thcommon interest of the latter and of the agent, or in th


his favor. (n)

Jurisprudence refers to both provisions as defining a

agency coupled with an interest .

Based on Lim v Saban (2004):

1. An agency coupled with an interest is one where there

mutual benefit on the part of:

a. The principal and agent; or

b. The principal and third persons.2. The agency coupled with an interest cannot be revoked

for as long as the interest of the agent or third person exists.

3. The agent’s interest “must be in the subject matter of th

power conferred and not merely an interest in the exercis

of the power because it entitles him to compensation.”

4. If the agent’s interest is confined to compensation then

is not an agency coupled with an interest.





5

In Valenzuela v C (1990), Court held that once the agency

coupled with an interest, it should not be freely revocable at

the unilateral will of the principal. In this case, the agent 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 factthat by the very acts of the principal, he was made liable to

them in the event the insured fail to pay the premiums due.

In Repub lic v Evangelista (2005), the treasure that may be

found in the land is the subject matter of the agency and that

under the SPA, Gutierrez can enter into contract for the legal

services of Atty/ Adaza. 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. The court held that

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.

C SIS: Both agent and lawyer would be entitled to a

percentage of such treasures as part of their compensation. It

does not appear to be an interest apart from compensation. As

discussed in Lim v Saban , an agent’s interest “must be in the

subject matter of the power conferred and not merely an

interest in the exercise of the power because it entitles him to

compensation.”

B. Withdrawal




(3) By the death, civil interdiction, insanity or insolvency of the


(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 wasconstituted.

rt. 1928. The agent may withdraw from the agency by giving

due notice to the principal. If the latter should suffer any

damage by reason of the withdrawal, the agent must indemnify

him therefor, unless the agent should base his withdrawal upon

the impossibility of continuing the performance of the agenc

without grave detriment to himself.

rt. 1929. The agent, even if he should withdraw from th

agency for a valid reason, must continue to act until th

principal has had reasonable opportunity to take the necessar

steps to meet the situation.

If the principal can revoke the agency, the agent ca

withdraw from the agency.

C. Death; agency coupled with an interest




(3) By the death, civil interdiction, insanity or insolvency of th


(4) By the dissolution of the firm or corporation which entruste

or accepted the agency;(5) By the accomplishment of the object or purpose of th

agency;

(6) By the expiration of the period for which the agency wa

constituted.


after the death of the principal, if it has been constituted in th

common interest of the latter and of the agent, or in th


his favor.

rt. 1931. Anything done by the agent, without knowledge othe death of the principal or of any other cause whic

extinguishes the agency, is valid and shall be fully effectiv

with respect to third persons who may have contracted with

him in good faith.

rt. 1932. If the agent dies, his heirs must notify the principa

thereof, and in the meantime adopt such measures as th

circumstances may demand in the interest of the latter.

1. gency Coupled with an Interest

R:: Death extinguishes agency.XPNs::

(1) The agency remains in full force and effect even after th

death of the principal, if it has been constituted:

(a) In the common interest of the principal and agent; or

(b) In the interest of a third person who has accepted th

stipulation in his favor [Art. 1930 ].






prayed for the recovery of the sums.

Doctrine: A contract of agency is terminated with the death of

the principal, hence any acts of the agent after the death of

such principal can be assailed.

Herrera v. Luy Kim uan(1961)

Brief Facts: Herrera, the owner of 3 lots, before going to China

executed a power of atty. in favor of Luy Kim. Luy Kim

subsequently sold these properties which ended in the

possession of himself, Lino Bangayan and Carlos Eijansantos.

Natividad filed a case to recover the 3 lots.

Doctrine: The acts of an agent before the death of his principal

are valid even assuming that the principal died before such

acts as long as the agent had no knowledge of his principal's

death.

Rallos v. Felix (1978)

Brief Facts: Simeon, the attorney-in-fact of his sisters

Concepcion and Gerundia, sold the parcel of land he was

previously authorized to sell despite knowing that Concepcion

already died. Concepcion’s administrator went to court to have

the sale declared unenforceable and to recover the disposed

share. The trial court granted the relief prayed for, but on

appeal, the Court of Appeals upheld the validity of the sale

and dismissed the complaint.

Doctrine: The sale was null and void because, although the

buyer may have been a purchaser in good faith, said sale was

made with the agent's knowledge of his principal's death. Thegeneral rule is that death of the principal or the agent

extinguishes the agency and this case does not fall under any

of the exceptions to the general rule.

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