MODULE 1: Agency: Nature, Form and Kinds

#1
Rallos vs. Felix Go Chan & Sons Realty Corp.
G.R. No. L-24332 | January 31, 1978 | 171 PHIL 222-236

DOCTRINE:
● Agency is a relationship between two parties whereby one party, called the principal, authorizes
another, called the agent, to act for and in his behalf on transactions with third persons.
● By reason of the very nature of the relationship between principal and agent, agency is
extinguished by the death of the principal or of the agent and any act of an agent after the death
of his principal is void ab initio, except as explicitly provided for in the New Civil Code: (1) when
the agency is coupled with an interest (Art. 1930); and (2) when the agent performed an act for
the principal without knowledge of the principal's death and the third person who contracted with
him acted in good faith. (Art. 1931)

FACTS:
Concepcion and Gerundia both surnamed Rallos were sisters and registered co-owners of a
parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by TCT No. 11118 of the
Registry of Cebu. The sisters executed a special power of attorney in favor of their brother, Simeon
Rallos, authorizing him to sell for and in their behalf the said lot. After a year, Concepcion died.
Thereafter, Simeon sold the undivided shares of his sisters to Felix Go Chan & Sons Realty Corporation
for the sum of P10,686.90. The deed of sale was registered and a new TCT was issued in the name of
Felix Go Chan & Sons Realty Corp.
The administrator of the Intestate Estate of Concepcion Rallos, Ramon Rallos filed a complaint in
the CFI of Cebu praying that: (1) that the sale of the undivided share of the deceased Concepcion Rallos
be declared unenforceable, and said share be reconveyed to her estate; (2) that the Certificate of Title
issued in the name of Felix Go Chan & Sons Realty Corporation be cancelled and another title be issued
in the names of the corporation and the "Intestate estate of Concepcion Rallos" in equal undivided
shares; and (3) that plaintiff be indemnified by way of attorney's fees and payment of costs of suit. Named
party defendants were Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the Register of
Deeds of Cebu, but subsequently, the latter dropped from the complaint. While the case was pending in
the trial court, both Simeon and his sister Gerundia died and they were substituted by the respective
administrators of their estates.
The CFI rendered a judgment in favor of Ramon Rallos. Felix Go Chan & Sons Realty appealed
to the CA. CA ruled in favor of the respondent corporation and sustained the sale. Ramon Rallos now
moved for reconsideration but was denied. In sustaining the validity of the sale, the CA reasoned out that
there is no provision in the Code which provides that whatever is done by an agent having knowledge of
the death of his principal is void even with respect to third persons who may have contracted with him in
good faith and without knowledge of the death of the principal. CA also mentioned that the vendee acting
in good faith relied on the power of attorney which was duly registered on the original certificate of title
recorded in the Register of Deeds of the Province of Cebu, that no notice of the death was ever annotated
on said certificate of title by the heirs of the principal and accordingly they must suffer the consequences
of such omission. Hence, the petition for review on Certiorari to the Supreme Court.

ISSUE/S:
Whether or not the sale of the undivided share of Concepcion Rallos is valid although it was
executed by the agent (Simeon) after the death of his principal (Concepcion).

RULING/HELD:
No. The sale was invalid.
The Court briefly restated the certain principles of law relevant in this case. First, that it is a basic
axiom in civil law that no one may contract in the name of another without being authorized by the
latter, or unless he has by law, a right to represent him. A contract entered into in the name of
another by one who has no authority or legal representation, or who has acted beyond his powers, shall
be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been
executed, before it is revoked by the other contracting party. Article 1403 (1) of the same also provides
"The following contracts are unenforceable, unless they are justified: (1) Those entered into in the name
of another person by one who has been given no authority or legal representation or who has acted
beyond his powers; . . . ." Out of the above given principles, sprung the creation an acceptance of the
relationship of agency whereby one party, called the principal (mandante), authorizes another, called the
agent (mandatario), to act for find in his behalf in transactions with third persons. The essential elements
of agency are: (1) there is consent, express or implied, of the parties to establish the relationship;
(2) the object is the execution of a juridical act in relation to a third person; (3) the agents acts as a
representative and not for himself; and (4) the agent acts within the scope of his authority. Agency
is basically personal, representative, and derivative in nature. The authority of the agent to act
emanates from the powers granted to him by his principal; his act is the act of the principal if
done within the scope of the authority. Qui facit per alium facit per se. "He who acts through another
acts himself."
Second, there are various ways of extinguishing agency and under Paragraph 3 of Art. 1919 of
the Civil Code: "ART. 1919. Agency is extinguished: 3. By the death, civil interdiction, insanity or
insolvency of the principal or of the agent; . . . ." By reason of the very nature of the relationship between
principal and agent, agency is extinguished by the death of the principal or the agent.
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the
law is found in the juridical basis of agency which is representation. There being an integration of the
personality of the principal into that of the agent it is not possible for the representation to continue to exist
once the death of either is establish. Pothier agrees with Manresa that by reason of the nature of agency,
death is a necessary cause for its extinction. Laurent says that the juridical tie between the principal and
the agent is severed ipso jure upon the death of either without necessity for the heirs of the principal to
notify the agent of the fact of death of the former.
Third, the above-stated way of extinguishment has an exception. Articles 1930 and 1931 of the
Civil Code provide the exceptions to the general rule aforementioned: “ART. 1930. The agency shall
remain in full force and effect even after the death of the principal, if it has been constituted in the
common interest of the latter and of the agent, or in the interest of a third person who has accepted the
stipulation in his favor. ART. 1931. Anything done by the agent, without knowledge the death of the
principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with
respect to third persons who may have contracted with him in good faith.”
In this case, Art. 1930 is not involved because admittedly the special power of attorney executed
in favor of Simeon was not coupled with an interest. What is applicable is Art. 1931. Under this provision,
an act done by the agent after the death of his principal is valid and effective only under two conditions,
viz: (1) that the agent acted without knowledge of the death of the principal, and (2) that the third person
who contracted with the agent himself acted in good faith. Good faith here means that the third son was
not aware of the death of the principal at the time he contracted with said agent. These two requisites
must concur: the absence of one will render the act of the agent invalid unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon, knew of the death of his
principal at the time he sold the latter's share to respondent corporation. The knowledge of the death is
clearly to be inferred from the pleadings filed by Simeon Rallos before the trial court. Simeon knew of the
death of his sister Concepcion is also a finding of fact of the court and of respondent appellate court when
the latter stated that Simeon "must have known of the death of his sister, and yet he proceeded with the
sale of the lot in the name of both his sisters Concepcion and Gerundia without informing the realty
corporation of the death of the former." Because of the established knowledge of Simeon Rallos
concerning the death of his principal, Article 1931 of the Civil Code is inapplicable. The law expressly
requires for its application lack of knowledge on the part of the agent of the death of his principal; it is not
enough that the third person acted in good faith. Article 1931, being an exception to the general rule, is to
be strictly construed; it is not to be given an interpretation or application beyond the clear import of its
terms for otherwise the courts will be involved in a process of legislation outside of their judicial function.
Lastly, as to the contention that the vendee is in good faith, and was not notified, the Civil Code
does not impose a duty on the heirs to notify the agent of the death of the principal. What the Code
provides in Article 1932 is that, if the agent dies, his heirs must notify the principal thereof, and in the
meantime adopt such measures as the circumstances may demand in the interest of the latter. Hence,
the fact that no notice of the death of the principal was registered on the certificate of title of the property
in the Office of the Register of Deeds, is not fatal to the cause of the estate of the principal.
 IN VIEW OF ALL THE FOREGOING, We set aside the decision of respondent-appellate court,
and We affirm en toto the judgment rendered by then Hon. Amador E. Gomez of the Court of First
Instance of Cebu, quoted in pages 2 and 3 of this Opinion, with costs against respondent realty
corporation at all instances.
#2
Orient Air Services & Hotel Representatives v. Court of Appeals
G.R. No. 76931, 76933 | May 29, 1991

DOCTRINE:
(1) It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be
taken into consideration to ascertain the meaning of its provisions.
(2) Any ambiguity in this "contract of adhesion" is to be construed against the party who caused the
ambiguity and could have avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil
Code provides that the interpretation of obscure words or stipulations in a contract shall not favor the
party who caused the obscurity.

FACTS:
On January 15, 1977, American Airlines, Inc. (American Air), an air carrier offering passenger and
air cargo transportation in the Philippines, and Orient Air Services and Hotel Representatives (Orient Air),
entered into a General Sales Agency Agreement whereby the former authorized the latter to act as its
exclusive general sales agent within the Philippines for the sale of air passenger transportation. As the
exclusive General Sales Agent within the Philippines, the agreement requires Orient Air to “remit in United
States dollars to American the ticket stock or exchange orders, less commissions to which Orient Air
Services is entitled hereunder, not less frequently than semi-monthly, on the 15th and last days of each
month for sales made during the preceding half month. All monies collected by Orient Air Services for
transportation sold hereunder on American’s ticket stock or on exchange orders, less applicable
commissions to which Orient Air Services is entitled hereunder, are the property of American and shall be
held in trust by Orient Air Services until satisfactorily accounted for to American.” The agreement also
provides that “American may terminate the Agreement on two days’ notice in the event Orient Air
Services is unable to transfer to the United States the funds payable by Orient Air Services to American
under this Agreement. Either party may terminate the Agreement without cause by giving the other 30
days’ notice by letter, telegram or cable.”

On May 11, 1981, alleging that Orient Air had reneged on its obligations under the Agreement by
failing to promptly remit the net proceeds of sales for the months of January to March 1981 in the amount
of US $254,400.40, American Air by itself undertook the collection of the proceeds of tickets sold
originally by Orient Air and terminated the Agreement in accordance with provision on termination. Days
later, American Air instituted suit against Orient Air for Accounting averring the aforesaid basis for the
termination of the Agreement as well as therein defendant’s previous record of failures "to promptly settle
past outstanding refunds of which there were available funds in the possession of the defendant, . . . to
the damage and prejudice of plaintiff.” Orient Air filed a counterclaim contending that after application
thereof to the commissions due it under the Agreement, plaintiff in fact still owed Orient Air a balance in
unpaid overriding commissions. Further, the defendant contended that the actions taken by American Air
in the course of terminating the Agreement as well as the termination itself were untenable, Orient Air
claiming that American Air’s precipitous conduct had occasioned prejudice to its business interests. The
trial court rendered in Orient Air’s favor and ordered the plaintiff to reinstate defendant as its
general sales agent for passenger transportation in the Philippines in accordance with said GSA
agreement; to pay Orient Air the balance of the overriding commission on total flown revenue covering
the period from March 16, 1977 to December 31, 1980 plus the additional amount of US$8,000.00 by way
of proper 3% overriding commission per month commencing from January 1, 1981 until such
reinstatement or said amounts in its Philippine peso equivalent legally prevailing at the time of payment
plus legal interest to commence from the filing of the counterclaim up to the time of payment ; and to pay
exemplary damages. On appeal, the CA affirmed the trial court’s findings but modified it with respect to
the monetary awards granted.

ISSUES:
Whether or not the Court of Appeals erred in affirming the rest of the decision of the trial court particularly
its decision ordering American Air to "reinstate defendant as its general sales agent for passenger
transportation in the Philippines in accordance with said GSA Agreement."

HELD:
YES. By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air
to extend its personality to Orient Air. Such would be violative of the principles and essence of agency,
defined by law as a contract whereby "a person binds himself to render some service or to do something
in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER." In
an agent-principal relationship, the personality of the principal is extended through the facility of the agent.
In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the
latter would have him do. Such a relationship can only be effected with the consent of the principal, which
must not, in any way, be compelled by law or by any court. The Agreement itself between the parties
states that "either party may terminate the Agreement without cause by giving the other 30 days’ notice
by letter, telegram or cable." The Court, therefore, set aside the portion of the ruling of the respondent
appellate court reinstating Orient Air as general sales agent of American Air.

WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision and resolution of the
respondent Court of Appeals, dated 27 January 1986 and 17 December 1986, respectively. Costs against
petitioner American Air.
#3
Tan vs. Spouses Gulla
G.R. No.143978 | December 3, 2002 | 441 PHIL 622-634

DOCTRINE:
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. An agent receives a commission upon the
successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer
and the seller together, even if no sale is eventually made.

FACTS:
Private respondents, Spouses Eduardo R. Gullas and Norma S. Gullas, were the registered owners of a
parcel of land in the Municipality of Minglanilla, Province of Cebu. On June 29, 1992, they executed a
special power of attorney authorizing petitioners Manuel B. Tan, a licensed real estate broker, and his
associates Gregg M. Tecson and Alexander Saldaña, to negotiate for the sale of the land P550.00 per
square meter, at a commission of 3% of the gross price. The power of attorney was non-exclusive and
effective for one month from June 29, 1992. Petitioner Tan contacted Engineer Edsel Ledesma,
construction manager of the Sisters of Mary of Banneaux, Inc., a religious organization interested in
acquiring a property in the Minglanilla area. Thereafter, the two men accompanied Sisters Michaela Kim
and Azucena Gaviola, representing the Sisters of Mary, to see private respondent Eduardo Gullas in his
office at the University of Visayas. They requested that the selling price be reduced to P530.00 per
square meter instead of P550.00 per square meter. Private respondent Eduardo Gullas referred the
prospective buyers to his wife. On July 3, 1992, private respondents agreed to sell the property to the
Sisters of Mary, and subsequently executed a special power of attorney in favor of Eufemia Cañete,
giving her the special authority to sell, transfer and convey the land at a fixed price of P200.00 per square
meter. On July 17, 1992, attorney-in-fact Eufemia Cañete executed a deed of sale in favor of the Sisters
of Mary for the price of P20,822.800.00, or at the rate of P200.00 per square meter. Petitioners went to
see private respondent Eduardo Gullas to claim their commission, but the latter told them that he and his
wife have already agreed to sell the property to the Sisters of Mary. Private respondents refused to pay
the broker’s fee and alleged that another group of agents was responsible for the sale of land to the
Sisters of Mary.

On August 28, 1992, petitioners filed a complaint against the defendants for recovery of their broker’s fee
in the sum of P1,655,412.60, as well as moral and exemplary damages and attorney’s fees. They alleged
that they were the efficient procuring cause in bringing about the sale of the property to the Sisters of
Mary, but that their efforts in consummating the sale were frustrated by the private respondents who, in
evident bad faith, malice and in order to evade payment of broker’s fee, dealt directly with the buyer
whom petitioners introduced to them. They further pointed out that the deed of sale was undervalued
obviously to evade payment of the correct amount of capital gains tax, documentary stamps and other
internal revenue taxes. private respondents countered that, contrary to petitioners’ claim, they were not
the efficient procuring cause in bringing about the consummation of the sale because another broker,
Roberto Pacana, introduced the property to the Sisters of Mary ahead of the petitioners. In their reply and
answer to counterclaim, petitioners alleged that although the Sisters of Mary knew that the subject land
was for sale through various agents, it was petitioners who introduced them to the owners thereof. After
trial, the lower court rendered judgment in favor of petitioners.

Both parties appealed to the Court of Appeals. Private respondents argued that the lower court committed
errors of fact and law in holding that it was petitioners’ efforts which brought about the sale of the property
and disregarding the previous negotiations between private respondent Norma Gullas and the Sisters of
Mary and Pacana. Petitioners, for their part, assailed the lower court’s basis of the award of broker’s fee
given to them. They contended that their 3% commission for the sale of the property should be based on
the price of P55,180.420.00, or at P530.00 per square meter as agreed upon and not on the alleged
actual selling price of P20,822,800.00 or at P200.00 per square meter, since the actual purchase price
was undervalued for taxation purposes. The Court of Appeals reversed and set aside the lower court’s
decision and rendered another judgment dismissing the complaint.
ISSUE:
Whether or not the appellate court grossly erred in their finding that the petitioners are not entitled to the
brokerage commission. – YES

HELD:
The records show that petitioner Manuel B. Tan is a licensed real estate broker, and petitioners Gregg M.
Tecson and Alexander Saldaña are his associates. In Schmid and Oberly v. RJL Martinez Fishing
Corporation, we defined a "broker" as "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." Petitioners, as brokers, were authorized by private respondents to negotiate
for the sale of their land within a period of one month reckoned from June 29, 1992. The authority given
to petitioners was non-exclusive, which meant that private respondents were not precluded from
granting the same authority to other agents with respect to the sale of the same property. In fact,
private respondent authorized another agent in the person of Mr. Bobby Pacana to sell the same
property. There was nothing illegal or amiss in this arrangement, per se, considering the non-exclusivity of
petitioners’ authority to sell. The problem arose when it eventually turned out that these agents were
entertaining one and the same buyer, the Sisters of Mary.

The argument of the private respondents that Pacana was the one entitled to the stipulated 3%
commission is untenable, considering that it was the petitioners who were responsible for the introduction
of the representatives of the Sisters of Mary to private respondent Eduardo Gullas. Private respondents
failed to prove their contention that Pacana began negotiations with private respondent Norma
Gullas way ahead of petitioners. They failed to present witnesses to substantiate this claim. It is curious
that Mrs. Gullas herself was not presented in court to testify about her dealings with Pacana. Neither was
Atty. Nachura who was supposedly the one actively negotiating on behalf of the Sisters of Mary, ever
presented in court. Private respondents’ contention that Pacana was the one responsible for the sale of
the land is also unsubstantiated. There was nothing on record which established the existence of a
previous negotiation among Pacana, Mrs. Gullas and the Sisters of Mary. The only piece of
evidence that the private respondents were able to present is an undated and unnotarized Special Power
of Attorney in favor of Pacana. While the lack of a date and an oath do not necessarily render said
Special Power of Attorney invalid, it should be borne in mind that the contract involves a considerable
amount of money. Hence, it is inconsistent with sound business practice that the authority to sell is
contained in an undated and unnotarized Special Power of Attorney. Petitioners, on the other hand,
were given the written authority to sell by the private respondents.

Indeed, it is readily apparent that private respondents are trying to evade payment of the commission
which rightfully belong to petitioners as brokers with respect to the sale. There was no dispute as to the
role that petitioners played in the transaction. At the very least, petitioners set the sale in motion. They
were not able to participate in its consummation only because they were prevented from doing so by the
acts of the private respondents. In the case of Alfred Hahn v. Court of Appeals and Bayerische Motoren
Werke Aktiengesellschaft (BMW), "an agent receives a commission upon the successful conclusion
of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller
together, even if no sale is eventually made." Clearly, therefore, petitioners, as brokers, should be
entitled to the commission whether or not the sale of the property subject matter of the contract was
concluded through their efforts.

Following the stipulation in the Special Power of Attorney, petitioners are entitled to 3% commission for
the sale of the land in question. Petitioners maintain that their commission should be based on the price
at which the land was offered for sale, i.e., P530.00 per square meter. However, the actual purchase price
for which the land was sold was only P200.00 per square meter. Therefore, equity considerations
dictate that petitioners’ commission must be based on this price. To rule otherwise would constitute
unjust enrichment on the part of petitioners as brokers.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The May 29, 2000 decision of the
Court of Appeals is REVERSED and SET ASIDE. The decision of the Regional Trial Court of Cebu City,
Branch 22, in Civil Case No. CEB-12740 ordering private respondents Eduardo Gullas and Norma S.
Gullas to pay jointly and severally petitioners Manuel B. Tan, Gregg Tecson and Alexander Saldaña the
sum of Six Hundred Twenty-Four Thousand and Six Hundred Eighty-Four Pesos (P624,684.00) as
broker’s fee with legal interest at the rate of 6% per annum from the filing of the complaint; and the sum of
Fifty Thousand Pesos (P50,000.00) as attorney’s fees and costs of litigation, is REINSTATED.
SO ORDERED.
#4
Manotok Brothers, Inc. vs. Court Of Appeals
G.R. No. 94753 | April 7, 1993

DOCTRINE: Agent’s Commission - Where there is a close, proximate and causal connection between the
agent’s efforts and labor the principal’s sale of his property, the agent is entitled to a commission even if
the agent’s authority had already expired. In the case at bar, respondent is the efficient procuring cause
for without his efforts, the municipality would not have anything to pass and the Mayor would not have
anything to approve.

FACTS: Petitioner herein is the owner of a certain parcel of land and building which were formerly leased
by the City of Manila and used by the Claro M. Recto High School. Petitioner authorized private
respondent Saligumba to negotiate with City of Manila the sale of the said property and agreed to pay 5%
commission in the event the sale is finally consummated and paid.
Petitioner issued letters of extension of authority to negotiate to private respondent Saligumba
and in total respondent was authorized from July 5,1966 to May 14, 1968.
However, the Municipal Board of the City of Manila eventually on April 26, 1968 passed the
Ordinance appropriating the sum of P410k for the purchase of the property and was signed by the City
Mayor only on May 17, 1968, - 3 days after respondent’s authorization had expired.
Respondent never received any commission due to the refusal of petitioner to pay private
respondent. Respondent filed a complaint claiming that he is entitled a commission since it was because
of his efforts that he sale was eventually effected because:
1. Transaction began with a meeting with Respondent Saligumba, Petitioner Manotok and the
School Principal.
2. Respondent went to Councilor Magsalin, the author of the ordinance which appropriated the
money, to present the project.
3. Respondent went to the Assessor’s office for appraisal of the value of the property.
4. Respondent went to the Mayor’s Office which indorsed the matter to the Superintendent of
Schools of Manila which was approved.
5. He returned to the Mayor’s Office with the approved report which thereafter was indorsed to the
Municipal Board for appropriation of the sum.
RTC favored respondent Saligumba, CA affirmed, hence this petition.

ISSUE: Whether or not private respondent Saligumba is entitled to the 5% Agent’s Commission even if
his authority to negotiate was already expired 3 days. - YES. Short Answer -> See Doctrine above.

HELD: We rule in favor of Private Respondent.

Petitioner’s argument is that when the Deed of Sale was finally executed, Respondent’s extended
authority had already expired. The established principle is that a broker or agent is not entitled to a
commission until he has successfully done the job given to him.
The case at bar falls within the coverage of the exception rather than the general rule. In the
case of Prats v CA - court ruled in favor of claimant-agent despite the expiration of his authority, when the
sale was finally consummated. In the case at bar, respondent is the efficient procuring cause for without
his efforts, the municipality would not have anything to pass and the Mayor would not have anything to
approve. This court ruled that when there is a close, proximate and causal connection between the
agent’s efforts and labor and the principal’s sale of his property, the agent is entitled to a
commission.
We agree that the City of Manila ultimately became the purchaser of the property mainly through
the efforts of the respondent.
Wherefore, the decision of the CA is hereby affirmed.
#5
Inland Realty Investment Service, Inc. vs. Court of Appeals
G.R. No. 76969 | June 9, 1997 | 339 PHIL 275-283

DOCTRINE:
When the lapse of the period of more than one (1) year and five (5) months between the
expiration of petitioners' authority to sell and the consummation of the sale, is viewed in the context of the
utter lack of evidence of petitioners' involvement in the negotiations between Araneta, Inc. and Stanford
during that period and in the subsequent processing of the documents pertinent to said sale, it becomes
undeniable that the respondent Court of Appeals did not at all err in affirming the trial court's dismissal of
petitioners' claim for unpaid brokerage commission.

FACTS:
On September 16, 1975, defendant corporation thru its co-defendant Assistant General Manager
J. Armando Eduque, granted to plaintiffs a 30-day authority to sell its 9,800 shares of stock in Architects'
Bldg., Inc. Plaintiff Inland Realty Investment Service, Inc. planned their sales campaign, sending proposal
letters to prospective buyers. One such prospective buyer to whom a proposal letter was sent to was
Stanford Microsystems, Inc. that counter-proposed to buy 9,800 shares offered at P1,000.00 per share or
for a total of P9,800,000.00, P4,900,000.00 payable in five years at 12% per annum interest until fully
paid. Upon plaintiffs' receipt of the said counter-proposal, it immediately wrote defendant a letter to
register Stanford Microsystems, Inc. as one of its prospective buyers. Defendant Araneta, Inc. replied that
the price offered by Stanford was too low and suggested that plaintiffs see if the price and terms of
payment can be improved upon by Stanford. The authority to sell given to plaintiffs by defendants was
extended several times: the first being on October 2, 1975, for 30 days from said date, the second on
October 28, 1975 for 30 days from said date and on December 2, 1975 for 30 days from said date.

The trial court ruled that after Inland Realty’s authority to sell expired thirty (30) days from
December 2, 1975, or on January 1, 1976, petitioners abandoned the sales transaction and were no
longer privy to the consummation and documentation thereof. The appellate court affirmed the ruling of
the trial court on the ground that there was no longer any agency after the last extension. The length of
time which had transpired from the date of last extension of authority to the final consummation of the
sale with Stanford of about one (1) year and five (5) months without any communication at all from
plaintiffs to defendants with respect to the suggestion of defendants that Stanford's offer was too low and
suggested if plaintiffs may make it better.

ISSUE:
Whether or not petitioners are automatically entitled to their broker's commission merely upon
securing for and introducing to private respondent Araneta, Inc. the buyer in the person of Stanford which
ultimately acquired ownership over Araneta, Inc.'s 9,800 shares in Architects' regardless of whether or not
their agency contract and authority to sell had expired.

RULING:
No, the Court held that petitioners are not automatically entitled to their broker's
commission merely upon securing for and introducing to private respondent Araneta, Inc. the
buyer in the person of Stanford.
Petitioners did not succeed in outrightly selling said shares under the predetermined terms and
conditions set out by Araneta, Inc., e.g., that the price per share is P1,500.00. From September 16, 1975
to January 1, 1976, when petitioners' authority to sell was subsisting, if at all, petitioners had nothing to
show that they actively served their principal's interests, pursued to sell the shares in accordance with
their principal's terms and conditions, and performed substantial acts that proximately and causatively led
to the consummation of the sale to Stanford of Araneta, Inc.'s 9,800 shares in Architects'.
The Court of Appeals cannot be faulted for emphasizing the lapse of more than one (1) year and
five (5) months between the expiration of petitioners' authority to sell and the consummation of the sale to
Stanford, to be a significant index of petitioners' non- participation in the really critical events leading to
the consummation of said sale, i.e., the negotiations to convince Stanford to sell at Araneta, Inc.'s asking
price, the finalization of the terms and conditions of the sale, the drafting of the deed of sale, the
processing of pertinent documents, and the delivery of the shares of stock to Stanford. Certainly, when
the lapse of the period of more than one (1) year and five (5) months between the expiration of
petitioners' authority to sell and the consummation of the sale, is viewed in the context of the utter lack of
evidence of petitioners' involvement in the negotiations between Araneta, Inc. and Stanford during that
period and in the subsequent processing of the documents pertinent to said sale, it becomes undeniable
that the respondent Court of Appeals did not at all err in affirming the trial court's dismissal of petitioners'
claim for unpaid brokerage commission.
Petitioners were not the efficient procuring cause in bringing about the sale in question on July 8, 1977
and are, therefore, not entitled to the stipulated broker's commission of "5% on the total price.”
WHEREFORE, the instant petition is HEREBY DISMISSED.
#6
Ticong vs. Malim
G.R. Nos.220785 & 222887 | March 1,2017 | 806 PHIL 635-648

DOCTRINE: The term "procuring cause," in describing a broker's activity, refers to a cause originating a
series of events which, without break in their continuity, results in the accomplishment of the prime
objective of employing the broker — to produce a purchaser ready, willing and able to buy real estate on
the owner's terms. To be regarded as the procuring cause of a sale, a broker's efforts must have been the
foundation of the negotiations which subsequently resulted in a sale.

FACTS:
These consolidated cases originated from a complaint filed before the RTC for collection of sum of
money, damages and attorney's fees by Manuel A. Malim (Malim), Minda Abangan (Abangan) and May
Macal (Macal) against Lorenzo Ticong, Patrocinio Ticong and Wilma Ticong Lao (Ticongs). The complaint
alleged that Malim was a realty broker/dealer while Abangan and Macal were his associates; that the
Ticongs were the registered owners of several parcels of land located in Digos, Davao del Sur (subject
properties); that on February 5, 2000, Malim, presenting himself as the authorized representative of the
Ticongs, sent a letter of "formal intent to sell" to Jainus C. Perez (Perez), the real estate field supervisor of
the Church of Jesus Christ of Latter-Day Saints(Buyer), offering to sell the subject properties for
P2,000.00 per square meter. Malim, Abangan and Macal (Malim, et al.) further averred that on February
11, 2000, they signed the Memorandum of Agreement (MOA) authorizing them to "look, negotiate, and
sell to any prospective buyer" for their properties on a commission basis; that they were also authorized
by the Ticongs to charge an "overprice" on top of the P900.00 per square meter price; that the subject
properties were eventually sold at P1,460.00 per square meter or for the total amount of P7,300,000.00;
that the sale was made possible due to their efforts which should entitle them to an overprice commission
of P2,800,000.00 based on the P560.00 per square meter overprice; and that the Ticongs, however, paid
them only P50,000.00 and refused to pay the remaining balance despite demands.

The Ticongs, on the other hand, stressed that Malim, et al. were not entitled to the overprice commission;
that the sale of their properties prospered through their own active, direct and personal efforts and was
eventually attained when they sued the Buyer; and that Malim, et al. had received not only the amount of
P50,000.00 but a total of P225,000.00. The Ticongs denied that Malim, et al. offered to sell their
properties to the Buyer. They pointed out that Malim, et al. were not even licensed realty brokers and
considering the questionable and anomalous nature of the MOA, the provision therein with respect to the
overprice commission and 5% finders' fee were not valid, binding and enforceable against them.

The RTC rendered a decision upholding the validity of the MOA as the parties' expression of their
intention to enter into a real estate brokerage. The CA in upholding the judgment of the RTC, wrote:
Malim, et al. were entitled to their commission because they were the procuring cause of the sale of the
subject properties to the Buyer and, without their intervention, the sale would not have been
consummated.

Petitioner: Petitioner Ma. Lorena argues that Malim, et al. were not the efficient procuring cause in the
consummation of the sale. She stated that although it was admitted that the respondents were the ones
who introduced and brought the parties together for negotiations, their meager efforts did not contribute to
the conclusion of the transaction.

ISSUE: Whether CA committed serious and reversible error ruling that Malim was the efficient procuring
cause in the consummation of the sale. -- NO

RULING:
The term "procuring cause," in describing a broker's activity, refers to a cause originating a series of
events which, without break in their continuity, results in the accomplishment of the prime objective of
employing the broker — to produce a purchaser ready, willing and able to buy real estate on the owner's
terms. To be regarded as the procuring cause of a sale, a broker's efforts must have been the foundation
of the negotiations which subsequently resulted in a sale. "The broker must be the efficient agent or the
procuring cause of the sale. The means employed by him and his efforts must result in the sale. He must
find the purchaser, and the sale must proceed from his efforts acting as broker."

In this case, the role of the respondents in the successful consummation of the sale transaction is
undisputed. Indeed, the evidence on record shows that the respondents were instrumental in the sale of
the properties of the Ticongs. Without their intervention, no sale would have been consummated. They
were the ones who set the sale of the said lots in motion. If not for the respondents, the Buyer would not
have known about the lots being sold by the Ticongs. As correctly observed by the CA, the respondents
were the procuring cause of the sale as shown by the following: a) on February 5, 2000, Malim, with the
conformity of Lorenzo Ticong, sent a formal letter of intent informing the representative of the Buyer
regarding the availability for sale of the Ticongs' properties; b) in a letter, dated April 15, 2000, the
Ticongs expressly recognized the respondents as their sole agents and middlemen with respect to the
sale transaction and that the latter were in constant communication with the Buyer and the Ticongs; c)
Javier Alvero, an employee of the Ticongs, testified that the respondents were the agents who negotiated
the sale of the subject lots with the Buyer; d) the Ticongs gave the respondents P50,000.00 as partial
payment of their commission as stated in the acknowledgment receipt, dated March 30, 2001, which
implied that they recognized the respondents as the procuring cause of the sale; and e) the testimony of
Malim clearly proved the efforts exerted by the respondents to bring about the consummation of the sale
through constant follow-ups with the Buyer by letters and telephone calls.

All these circumstances led the Court to conclude that the respondents' actions indeed constituted the
procuring cause of the sale. When there is a close, proximate and causal connection between the agent's
efforts and the sale of the property, the agents are entitled to their commission. The Ticongs, having
freely and willingly entered into a contract by executing the MOA, cannot renege on their obligation to pay
the overprice commission on the flimsy excuse that the respondents were not licensed brokers who did
not spend much money in partially negotiating with the Buyer.

Accordingly, the Court finds no reversible error in the findings of the CA and the RTC that the Ticongs
were liable to pay the overprice commission to the respondents pursuant to the MOA. The Court sees no
cogent reason to grant the consolidated petitions.

WHEREFORE, the consolidated petitions are DENIED.

#7
Lim vs. Court of Appeals
G.R.No. 102784 | February 28,1996 | 324 PHIL 400-415
DOCTRINE:
There are some provisions of the law which require certain formalities for particular contracts. The
first is when the form is required for the validity of the contract; the second is when it is required to make
the contract effective as against the third parties such as those mentioned in Articles 1357 and 1358; and
the third is when the form is required for the purpose of proving the existence of the contract, such as
those provided in the Statute of Frauds in Article 1403. A contract of agency to sell on commission basis
does not belong to any of these three categories, hence, it is valid and enforceable in whatever form it
may be entered into.

FACTS:

ALLEGED BY THE PROSECUTION

On or about October 8, 1987, petitioner Rosa Lim who had come from Cebu received from
private respondent Victoria Suarez the following two pieces of jewelry: one (l) 3.35 carat diamond ring
worth P169,000.00 and one (1) bracelet worth P170,000.00, to be sold on commission basis. The
agreement was reflected in a receipt marked as Exhibit "A" 6 for the prosecution. The transaction took
place at the Sir Williams Apartelle in Timog Avenue, Quezon City, where Rosa Lim was temporarily
billeted.

On December 15, 1987, petitioner returned the bracelet to Vicky Suarez, but failed to return the
diamond ring or to turn over the proceeds thereof if sold. As a result, private complainant, aside from
making verbal demands, wrote a demand letter 7 to petitioner asking for the return of said ring or the
proceeds of the sale thereof In response, Petitioner, thru counsel, wrote a letter 8 to private respondent’s
counsel alleging that Rosa Lim had returned both ring and bracelet to Vicky Suarez sometime in
September, 1987, for which reason, petitioner had no longer any liability to Mrs. Suarez insofar as the
pieces of jewelry were concerned. Irked, Vicky Suarez filed a complaint for estafa under Article 315, par
l(b) of the Revised Penal Code for which the petitioner herein stands convicted.

ALLEGED BY THE PETITIONER

Rosa Lim admitted in court that she arrived in Manila from Cebu sometime in October 1987,
together with one Aurelia Nadera, who introduced petitioner to private respondent, and that they were
lodged at the Williams Apartelle in Timog, Quezon City. Petitioner denied that the transaction was for her
to sell the two pieces of jewelry on commission basis. She told Mrs. Suarez that she would consider
buying the pieces of jewelry for her own use and that she would inform the private complainant of such
decision before she goes back to Cebu. Thereafter, the petitioner took the pieces of jewelry and told Mrs.
Suarez to prepare the "necessary paper for me to sign because I was not yet prepare (d) to buy it." 9
After the document was prepared, petitioner signed it. To prove that she did not agree to the terms of the
receipt regarding the sale on commission basis, petitioner insists that she signed the aforesaid document
on the upper portion thereof and not at the bottom where a space is provided for the signature of the
person(s) receiving the jewelry. 10

On October 12, 1987 before departing for Cebu, petitioner called up Mrs. Suarez by telephone in
order to inform her that she was no longer interested in the ring and bracelet. Mrs. Suarez replied that she
was busy at the time and so, she instructed the petitioner to give the pieces of jewelry to Aurelia Nadera
who would in turn give them back to the private complainant. The petitioner did as she was told and gave
the two pieces of jewelry to Nadera as evidenced by a handwritten receipt, dated October 12, 1987.

ISSUE:
Whether or not the transaction between Lim and Suarez is a contract of agency to sell on
commission basis as set out in the receipt or a sale on credit.

HELD:
 The transaction between Lim and Suarez is a contract of agency to sell on commission
basis.
The receipt marked as Exhibit "A" which establishes a contract of agency to sell on commission
basis between Vicky Suarez and Rosa Lim is herein reproduced in order to come to a proper perspective:

"THIS IS TO CERTIFY, that I received from Vicky Suarez PINATUTUNAYAN KO na aking tinanggap kay
____________ the following jewelries: ang mga alahas na sumusunod:

Description Price

Mga Uri Halaga

1 ring 3.35 dolo P169.000.00

1 bracelet 70.000.00

total Kabuuan P339.000.00

in good condition, to be sold in CASH ONLY within . . . days from date of signing this receipt na nasa
mabuting kalagayan upang ipagbili ng KALIWAAN (ALCONTADO) lamang sa loob ng . . . araw mula ng
ating pagkalagdaan:

if I could not sell, I shall return all the jewelry within the period mentioned above, if I would be able to sell,
I shall immediately deliver and account the whole proceeds of sale thereof to the owner of the jewelries at
his/her residence; my compensation or commission shall be the over-price on the value of each jewelry
quoted above. I am prohibited to sell any jewelry on credit or by installment, deposit, give for safekeeping;
lend, pledge or give as security or guaranty under any circumstance or manner, any jewelry to other
person or persons.’

kung hindi ko maipagbili ay isasauli ko ang lahat ng alahas sa loob ng taning na panahong nakatala sa
itaas; kung maipagbili ko naman ay dagli kong isusulit at ibibigay ang buong pinagbilhan sa may-ari ng
mga alahas sa kanyang bahay tahanan; ang aking gantimpala ay ang mapapahigit na halaga sa
nakatakdang halaga sa itaas ng bawat alahas HINDI ko ipinahihintulutang ipa-u-u-tang o ibibigay na
hulugan ang alin mang alahas, ilalagak, ipagkakatiwala, ipahihiram; isasangla o ipananagot kahit sa
anong paraan ang alin mang alahas sa ibang mga tao o tao.’

I sign my name this . . . day of . . . 19 . . . at Maynila. NILALAGDAAN ko ang kasunduang ito ngayong
ika____ ng dito sa Maynila.

___________________

Signature of Persons who received jewelries (Lagda ng Tumanggap ng mga Alahas)

Address: . . . . . . . . . . . ."

Rosa Lim’s signature indeed appears on the upper portion of the receipt immediately below the
description of the items taken. We find that this fact does not have the effect of altering the terms of the
transaction from a contract of agency to sell on commission basis to a contract of sale. Neither does it
indicate absence or vitiation of consent thereto on the pan of Rosa Lim which would make the contract
void or voidable. The moment she affixed her signature thereon, petitioner became bound by all the terms
stipulated in the receipt. She, thus, opened herself to all the legal obligations that may arise from their
breach. This is clear from Article 1356 of the New Civil Code which provides:

"Contracts shall be obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present.." . ."
 However, there are some provisions of the law which require certain formalities for particular
contracts. The first is when the form is required for the validity of the contract; the second is when it is
required to make the contract effective as against third parties such as those mentioned in Articles 1357
and 1358; and the third is when the form is required for the purpose of proving the existence of the
contract, such as those provided in the Statute of Frauds in article 1403. 13 A contract of agency to sell
on commission basis does not belong to any of these three categories, hence it is valid and enforceable
in whatever form it may be entered into.

Furthermore, there is only one type of legal instrument where the law strictly prescribes the
location of the signature of the parties thereto. This is in the case of notarial wills found in Article 805 of
the Civil Code, to wit:

"Every will, other than a holographic will, must be subscribed at the end thereof by the testator himself . . .

The testator or the person requested by him to write his name and the instrumental witnesses of
the will, shall also sign, as aforesaid, each and every page thereof, except the last, on the left margin . . ."

In the case before us, the parties did not execute a notarial will but a simple contract of agency to
sell on commission basis, thus making the position of petitioner’s signature thereto immaterial.
#8
Bordador vs. Luz
G.R. No.130148 | December 15, 1997 | 347 PHIL 654-667

DOCTRINE:

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

FACTS:

Petitioners Jose and Lydia Bordador were engaged in the business of purchase and sale of
jewelry and respondent Brigida D. Luz, also known as Aida D. Luz, was their regular customer. On
several occasions during the period from April 27, 1987 to September 4, 1987, respondent Narciso
Deganos, the brother of Brigida D. Luz, received several pieces of gold and jewelry from petitioners
amounting to P382,816.00. These items and their prices were indicated in seventeen receipts covering
the same. Eleven of the receipts stated that they were received for a certain Evelyn Aquino, a niece of
Deganos, and the remaining six indicated that they were received for Brigida D. Luz.

Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and return the
unsold items to petitioners. Deganos remitted only the sum of P53,207.00. He neither paid the balance of
the sales proceeds, nor did he return any unsold item to petitioners. By January 1990, the total of his
unpaid account to petitioners, including interest, reached the sum of P725,463.98. Petitioners eventually
filed a complaint in the barangay court against Deganos to recover said amount.

In the barangay proceedings, the Spouses Luz, together with Deganos, signed a compromise agreement
with petitioners wherein the former obligated himself to pay petitioners, on installment basis, the balance
of his account plus interest thereon. However, he failed to comply with his aforestated undertakings.

Thereafter, in 1990, petitioners instituted a Civil Case in the RTC of Malolos, Bulacan against Deganos
and Brigida D. Luz for recovery of a sum of money and damages, with an application for preliminary
attachment. Four years later, Deganos and Brigida were charged with estafa. During the trial of the civil
case, petitioners claimed that Deganos acted as the agent of Brigida D. Luz when he received the subject
items of jewelry and, because he failed to pay for the same, Brigida, as principal, and her spouse are
solidarily liable with him therefor.

On the other hand, while Deganos admitted that he had an unpaid obligation to petitioners, he claimed
that the same was only in the sum of P382,816.00 and not P725,463.98. He further asserted that it was
he alone who was involved in the transaction with the petitioners; that he neither acted as agent for nor
was he authorized to act as an agent by Brigida D. Luz, notwithstanding the fact that six of the receipts
indicated that the items were received by him for the latter. He further claimed that he never delivered any
of the items he received from petitioners to Brigida.

Brigida, on her part, denied that she had anything to do with the transactions between petitioners and
Deganos. She claimed that she never authorized Deganos to receive any item of jewelry in her behalf
and, for that matter, neither did she actually receive any of the articles in question.

The RTC held that only Deganos was liable to petitioners for the amount and damages claimed. The RTC
ruled that it was petitioner Lydia Bordador who indicated in the receipts that the items were received by
Deganos for Evelyn Aquino and Brigida D. Luz. Said court was persuaded that Brigida D. Luz was behind
Deganos, but because there was no memorandum to this effect, the agreement between the parties was
unenforceable under the Statute of Frauds. Absent the required memorandum or any written document
connecting the respondent Luz spouses with the subject receipts, or authorizing Deganos to act on their
behalf, the alleged agreement between petitioners and Brigida D. Luz was unenforceable. The CA
affirmed the RTC’s decision, although the CA recognized that Deganos was agent of spouses Luz.
ISSUE:

Whether or not Deganos is an agent of herein respondent spouses Luz, thereby making the latter liable to
petitioners for the latter’s claim for money and damages in the sum of P725,463.98, plus interests and
attorney’s fees.

HELD:

NO. The evidence does not support the theory of petitioners that Deganos was an agent of Brigida D. Luz
and that the latter should consequently be held solidarily liable with Deganos in his obligation to
petitioners. While the quoted statement in the findings of fact of the assailed appellate decision mentioned
that Deganos ostensibly acted as an agent of Brigida, the actual conclusion and ruling of the Court of
Appeals categorically stated that, “Brigida Luz never authorized her brother Deganos to act for and in her
behalf in any transaction with Petitioners.” It is clear, therefore, that even assuming arguendo that
Deganos acted as an agent of Brigida, the latter never authorized him to act on her behalf with regard to
the transactions subject of this case.

The Civil Code provides:

Art. 1868. By the contract of agency a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter.

The basis for agency is representation. Here, there is no showing that Brigida consented to the acts of
Deganos or authorized him to act on her behalf, much less with respect to the particular transactions
involved. Petitioners attempt to foist liability on respondent spouses through the supposed agency relation
with Deganos is groundless and ill-advised.

Besides, it was grossly and inexcusably negligent of petitioners to entrust to Deganos, not once or twice
but on at least six occasions as evidenced by six receipts, several pieces of jewelry of substantial value
without requiring a written authorization from his alleged principal. A person dealing with an agent is put
upon inquiry and must discover upon his peril the authority of the agent.

The records show that neither an express nor an implied agency was proven to have existed between
Deganos and Brigida D. Luz. Evidently, Petitioners, who were negligent in their transactions with
Deganos, cannot seek relief from the effects of their negligence by conjuring a supposed agency relation
between the two respondents where no evidence supports such claim.

Lastly, petitioners fault the trial courts holding that whatever contract of agency was established between
Brigida D. Luz and Narciso Deganos is unenforceable under the Statute of Frauds as that aspect of this
case allegedly is not covered thereby. They proceed on the premise that the Statute of Frauds applies
only to executory contracts and not to executed or to partially executed ones. From there, they move on
to claim that the contract involved in this case was an executed contract as the items had already been
delivered by petitioners to Brigida D. Luz, hence, such delivery resulted in the execution of the contract
and removed the same from the coverage of the Statute of Frauds.

Petitioners claim is speciously unmeritorious. It should be emphasized that neither the trial court nor the
appellate court categorically stated that there was such a contractual relation between these two
respondents. The trial court merely said that if there was such an agency existing between them, the
same is unenforceable as the contract would fall under the Statute of Frauds which requires the
presentation of a note or memorandum thereof in order to be enforceable in court. That was merely a
preparatory statement of a principle of law. What was finally proven as a matter of fact is that there was
no such contract between Brigida D. Luz and Narciso Deganos, executed or partially executed, and no
delivery of any of the items subject of this case was ever made to the former.
#9
Spouses Salvador vs. Spouses Rabaja
G.R. No. 199990 | February 4, 2015 | 753 PHIL 175-200)

DOCTRINE:

According to Article 1990 of the New Civil Code, insofar 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.

FACTS:

Spouses Rogelio and Elizabeth Rabaja (Spouses Rabaja) learned that spouses Rolando and
Herminia Salvador (Spouses Salvador) were looking for a buyer of a parcel of land in Mandaluyong City
(subject property) registered in the names of Spouses Salvador. From 1994 until 2002, Spouses Rabaja
were leasing an apartment in the subject property. Petitioner Herminia Salvador (Herminia) personally
introduced Rosario Gonzales (Gonzales), the sellers’ agent, to them as the administrator of the said
property. Spouses Rabaja made an initial payment of ₱48,000.00 to Gonzales in the presence of
Herminia. Gonzales then presented the Special Power of Attorney (SPA), executed by Rolando Salvador
(Rolando). On the same day, the parties executed the Contract to Sell which stipulated that for a
consideration of ₱5,000,000.00, Spouses Salvador sold, transferred and conveyed in favor of
Spouses Rabaja the subject property. Spouses Rabaja made several payments totalling ₱950,000.00,
which were received by Gonzales pursuant to the SPA provided earlier as evidenced by the check
vouchers signed by Gonzales and the improvised receipts signed by Herminia.

Later, Spouses Salvador complained to Spouses Rabaja that they did not receive any payment
from Gonzales. This prompted Spouses Rabaja to suspend further payment of the purchase price; and as
a consequence, they received a notice to vacate the subject property from Spouses Salvador for non-
payment of rentals. Thereafter, Spouses Salvador instituted an action for ejectment against
Spouses Rabaja. In turn, Spouses Rabaja filed an action for rescission of contract against
Spouses Salvador and Gonzales, the subject matter of the present petition.

In the action for ejectment, the MeTC ruled in favor of Spouses Salvador finding that valid
grounds existed for the eviction of Spouses Rabaja from the subject property and ordering them to pay
back rentals. Spouses Salvador were able to garnish the amount of ₱593,400.00 from Spouses Rabaja’s
time deposit account pursuant to a writ of execution issued by the MeTC. The RTC reversed the MeTC
ruling but the CA reinstated the MeTC ruling ejecting Spouses Rabaja. Meanwhile, in the rescission case
filed by Spouses Rabaja against Spouses Salvador and Gonzales, Spouses Rabaja demanded the
rescission of the contract to sell praying that the amount of ₱950,000.00 they previously paid to Spouses
Salvador be returned to them. Spouses Salvador filed their answer with counterclaim and cross-claim
contending that there was no meeting of the minds between the parties and that the SPA in favor of
Gonzales was falsified.

The RTC in favor of Spouses Rabaja. It held that the signature of Spouses Salvador affixed in the
contract to sell appeared to be authentic. It also held that the contract, although denominated as "contract
to sell," was actually a contract of sale because Spouses Salvador, as vendors, did not reserve their title
to the property until the vendees had fully paid the purchase price. Thus, it could be validly rescinded by
Spouses Rabaja, and in the process, they could recover the amount of ₱950,000.00 jointly and severally
from Spouses Salvador and Gonzales. The CA affirmed the RTC ruling with modifications and held
that Gonzales was not solidarily liable with Spouses Salvador. The agent must expressly bind
himself or exceed the limit of his authority in order to be solidarily liable. It was not shown that
Gonzales as agent of Spouses Salvador exceeded her authority or expressly bound herself to be
solidarily liable.

ISSUE:
 Whether or not Gonzales, as agent of Spouses Salvador, could validly receive the payments of
Spouses Rabaja – YES

HELD:

The contract entered into by the parties was essentially a contract of sale which could be validly
rescinded. Spouses Salvador insist that they did not receive the payments made by Spouses Rabaja from
Gonzales which totalled ₱950,000.00 and that Gonzales was not their duly authorized agent. These
contentions, however, must fail in light of the applicable provisions of the New Civil Code which state:

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. 1902. A third person with whom the agent wishes to contract on behalf of the principal may require
the presentation of the power of attorney, or the instructions as regards the agency. Private or secret
orders and instructions of the principal do not prejudice third persons who have relied upon the power of
attorney or instructions shown them.

Art. 1910. The principal must comply with all the obligations which the agent may have contracted within
the scope of his authority.

Persons dealing with an agent must ascertain not only the fact of agency, but also the nature and
extent of the agent’s authority. According to Article 1990 of the New Civil Code, insofar 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. In this case, Spouses Rabaja did not recklessly
enter into a contract to sell with Gonzales. They required her presentation of the power of attorney before
they transacted with her principal. And when Gonzales presented the SPA to Spouses Rabaja, the latter
had no reason not to rely on it.

The law mandates an agent to act within the scope of his authority which what appears in the
written terms of the power of attorney granted upon him. The Court holds that, indeed, Gonzales acted
within the scope of her authority. The SPA precisely stated that she could administer the property,
negotiate the sale and collect any document and all payments related to the subject property. As the
agent acted within the scope of his authority, the principal must comply with all the obligations. As
correctly held by the CA, considering that it was not shown that Gonzales exceeded her authority or that
she expressly bound herself to be liable, then she could not be considered personally and solidarily liable
with the principal, Spouses Salvador.

Perhaps the most significant point which defeats the petition would be the fact that it was
Herminia herself who personally introduced Gonzalez to Spouses Rabaja as the administrator of the
subject property. By their own ostensible acts, Spouses Salvador made third persons believe that
Gonzales was duly authorized to administer, negotiate and sell the subject property. This fact was even
affirmed by Spouses Salvador themselves in their petition where they stated that they had authorized
Gonzales to look for a buyer of their property. It is already too late in the day for Spouses Salvador to
retract the representation to unjustifiably escape their principal obligation.

As correctly held by the CA and the RTC, considering that there was a valid SPA, then Spouses
Rabaja properly made payments to Gonzales, as agent of Spouses Salvador; and it was as if they paid to
Spouses Salvador. It is of no moment, insofar as Spouses Rabaja are concerned, whether or not the
payments were actually remitted to Spouses Salvador. Any internal matter, arrangement, grievance or
strife between the principal and the agent is theirs alone and should not affect third persons. If Spouses
Salvador did not receive the payments or they wish to specifically revoke the SPA, then their recourse is
to institute a separate action against Gonzales. Such action, however, is not any more covered by the
present proceeding.
#10
Country Bankers Insurance Corp. vs. Keppel Cebu Shipyard
G.R. No. 166044 | June 18, 2012 | 688 PHIL 78-104

DOCTRINE: [T]he ignorance of a person dealing with an agent as to the scope of the latter’s authority is
no excuse to such person and the fault cannot be thrown upon the principal. A person dealing with an
agent assumes the risk of lack of authority in the agent. He cannot charge the principal by relying upon
the agent’s assumption of authority that proves to be unfounded. The principal, on the other hand, may
act on the presumption that third persons dealing with his agent will not be negligent in failing to ascertain
the extent of his authority as well as the existence of his agency.

FACTS:
On January 27, 1992, Unimarine Shipping Lines, Inc. (Unimarine), a corporation engaged in the shipping
industry, contracted the services of Keppel Cebu Shipyard, formerly known as Cebu Shipyard and
Engineering Works, Inc. (Cebu Shipyard), for dry docking and ship repair works on its vessel, the M/V
Pacific Fortune.

On February 14, 1992, Cebu Shipyard issued Bill No. 26035 to Unimarine in consideration for its services,
which amounted to ₱4,486,052.00. Negotiations between Cebu Shipyard and Unimarine led to the
reduction of this amount to ₱3,850,000.00. The terms of this agreement were embodied in Cebu
Shipyard’s February 18, 1992 letter to the President/General Manager of Unimarine, Paul Rodriguez, who
signed his conformity to said letter. In compliance with the agreement, Unimarine, through Paul
Rodriguez, secured from Country Bankers Insurance Corp. (CBIC), through the latter’s agent, Bethoven
Quinain (Quinain), CBIC Surety Bond No. G (16) 294198 (the surety bond) on January 15, 1992 in the
amount of ₱3,000,000.00. The expiration of this surety bond was extended to January 15, 1993, through
Endorsement No. 331529 (the endorsement), which was later on attached to and formed part of the
surety bond. In addition to this, Unimarine, on February 19, 1992, obtained another bond from Plaridel
Surety and Insurance Co. (Plaridel), PSIC Bond No. G (16)-0036510 in the amount of ₱1,620,000.00.

On February 17, 1992, Unimarine executed a Contract of Undertaking in favor of Cebu Shipyard.
Because Unimarine failed to remit the first installment when it became due on May 30, 1992, Cebu
Shipyard was constrained to deposit the peso check corresponding to the initial installment of
₱2,350,000.00. The check, however, was dishonored by the bank due to insufficient funds. Cebu
Shipyard faxed a message to Unimarine, informing it of the situation, and reminding it to settle its account
immediately. On June 24, 1992, Cebu Shipyard again faxed a message to Unimarine, to confirm Paul
Rodriguez’s promise that Unimarine will pay in full the ₱3,850,000.00, in US Dollars on July 1, 1992.

Since Unimarine failed to deliver on the above promise, Cebu Shipyard, on July 2, 1992, through a faxed
letter, asked Unimarine if the payment could be picked up the next day. On November 18, 1992, Cebu
Shipyard, through its counsel, sent Unimarine a letter, demanding payment, within seven days from
receipt of the letter. However, even the sureties failed to discharge their obligations, and so Cebu
Shipyard filed a Complaint dated January 8, 1993, before the RTC, Branch 18 of Cebu City, against
Unimarine, CBIC, and Plaridel.

As for Quinain, CBIC alleged that he exceeded his authority as stated in the Special Power of Attorney,
wherein he was authorized to solicit business and issue surety bonds not exceeding ₱500,000.00 but only
in favor of the Department of Public Works and Highways, National Power Corporation, and other
government agencies.

CBIC avers that the Court of Appeals erred in interpreting and applying the rules governing the contract of
agency. It argued that the Special Power of Attorney granted to Quinain clearly set forth the extent and
limits of his authority with regard to businesses he can transact for and in behalf of CBIC. CBIC added
that it was incumbent upon Cebu Shipyard to inquire and look into the power of authority conferred to
Quinain.

ISSUE/S
Whether or not the Court of Appeals erred in interpreting and applying the rules governing the contract of
agency.

RULING/HELD:
The RTC applied Articles 1900 and 1911 of the Civil Code in holding CBIC liable for the surety bond. It
held that CBIC could not be allowed to disclaim liability because Quinain’s actions were within the terms
of the special power of attorney given to him. The Court of Appeals agreed that CBIC could not be
permitted to abandon its obligation especially since third persons had relied on Quinain’s representations.
It based its decision on Article 1911 of the Civil Code and found CBIC to have been negligent and less
than prudent in conducting its insurance business for its failure to supervise and monitor the acts of its
agents, to regulate the distribution of its insurance forms, and to devise schemes to prevent fraudulent
misrepresentations of its agents.

This Court does not agree. Our law mandates an agent to act within the scope of his authority. The scope
of an agent’s authority is what appears in the written terms of the power of attorney granted upon him.
Under Article 1878(11) of the Civil Code, a special power of attorney is necessary to obligate the principal
as a guarantor or surety.

In the case at bar, CBIC could be held liable even if Quinain exceeded the scope of his authority only if
Quinain’s act of issuing Surety Bond No. G (16) 29419 is deemed to have been performed within the
written terms of the power of attorney he was granted.

However, contrary to what the RTC held, the Special Power of Attorney accorded to Quinain clearly
states the limits of his authority and particularly provides that in case of surety bonds, it can only be
issued in favor of the Department of Public Works and Highways, the National Power Corporation, and
other government agencies; furthermore, the amount of the surety bond is limited to ₱500,000.00.

Under Articles 1898 and 1910, an agent’s act, even if done beyond the scope of his authority, may bind
the principal if he ratifies them, whether expressly or tacitly. It must be stressed though that only the
principal, and not the agent, can ratify the unauthorized acts, which the principal must have knowledge of.
Neither Unimarine nor Cebu Shipyard was able to repudiate CBIC’s testimony that it was unaware of the
existence of Surety Bond No. G (16) 29419 and Endorsement No. 33152. There were no allegations
either that CBIC should have been put on alert with regard to Quinain’s business transactions done on its
behalf. It is clear, and undisputed therefore, that there can be no ratification in this case, whether express
or implied.

[T]he ignorance of a person dealing with an agent as to the scope of the latter’s authority is no excuse to
such person and the fault cannot be thrown upon the principal. A person dealing with an agent assumes
the risk of lack of authority in the agent. He cannot charge the principal by relying upon the agent’s
assumption of authority that proves to be unfounded. The principal, on the other hand, may act on the
presumption that third persons dealing with his agent will not be negligent in failing to ascertain the extent
of his authority as well as the existence of his agency.

Unimarine undoubtedly failed to establish that it even bothered to inquire if Quinain was authorized to
agree to terms beyond the limits indicated in his special power of attorney. While Paul Rodriguez stated
that he has done business with Quinain more than once, he was not able to show that he was misled by
CBIC as to the extent of authority it granted Quinain. Paul Rodriguez did not even allege that he asked for
documents to prove Quinain’s authority to contract business for CBIC, such as their contract of agency
and power of attorney. It is also worthy to note that even with the Indemnity Agreement, Paul Rodriguez
signed it on Quinain’s mere assurance and without truly understanding the consequences of the terms of
the said agreement. Moreover, both Unimarine and Paul Rodriguez could have inquired directly from
CBIC to verify the validity and effectivity of the surety bond and endorsement; but, instead, they blindly
relied on the representations of Quinain. In light of the foregoing, this Court is constrained to release
CBIC from its liability on Surety Bond No. G (16) 29419 and Endorsement No. 33152.
#11
Republic vs. Bañez
G.R. No. 169442 | October 14, 2015

DOCTRINE:

In a contract of agency, the agent acts for and in behalf of the principal on matters within the scope of the
authority conferred upon him, such that, the acts of the agent have the same legal effect as if they were
personally done by the principal.

FACTS:

In 1976, Antonio V. Bañez, Luisita Bañez Valera, and Nena Bañez Hojilla offered for sale a parcel of land,
with an area of 20,000 sq m in Barangay Calaba, Bangued, Abra to Cellophil Resources Corporation.
Pursuant to the offer to sell on 7 December 1981, respondents executed a Letter Agreement irrevocably
giving CRC the option to purchase the subject property, which CRC accepted.

Respondents asked for several cash advances which reached the total amount of, more or less
P217,000.00, to be deducted from the purchase price of ₱400,000.00. After paying cash advances to
respondents, CRC constructed staff houses and introduced improvements on the subject property. As
respondents would be staying abroad for a time, they executed a Special Power of Attorney (SPA) in
favor of Edgardo B. Hojilla.

Hereby granting and giving the attorney full power and authority whatsoever requisite or necessary or
proper to be done in or about the premises as fully to all intents and purposes as we might or could
lawfully do if personally present (with power of substitution and revocation), and hereby ratifying and
confirming all that our said attorney shall do or cause to be done under and by virtue of these presents.

However, CRC stopped its operation. The Development Bank of the Philippines and National
Development Company took over CRC’s operation and turned over CRC’s equity to Asset Privatization
Trust (APT).

As alleged by petitioner, respondents declared afterwards the subject property as Urbano Bañez property,
rented out to third parties the staff houses petitioner constructed, and ordered its guards to prohibit the
petitioner from entering the compound, which impelled petitioner to file a complaint for specific
performance, recovery of possession, and damages against respondents, including Hojilla. Among
others, the complaint prayed for respondents to surrender and deliver the title of the subject property, and
execute a deed of absolute sale in favor of the petitioner upon full payment.

ISSUE:
Whether or not the Hojilla's actions bind the respondents

HELD:

YES. When respondents went abroad pending the performance of their obligations in the Contract, they
authorized Hojilla to register the subject property— a single obligation in the whole range of obligations in
the Contract. The SPA appeared to have left no representative to fulfill respondents’ obligations in the
Contract on their behalf except for Hojilla’s authority to register the subject property.

This strict construction of the tenor of the SPA will render the obligatory force of the Contract ineffective.
Construction is not a tool to prejudice or commit fraud or to obstruct, but to attain justice. Ea Est
Accipienda Interpretatio Quae Vitio Caret. To favor the lower court’s interpretation of the scope of Hojilla’s
power is to defeat the juridical tie of the Contract—the vinculum juris of the parties. As no one was
authorized to represent respondents in the Contract, then petitioner cannot enforce the Contract, as it
were. This is an absurd interpretation of the SPA. It renders the Contract ineffective for lack of a party to
execute the Contract.
Contrary to the findings of the lower court, the present case is a case of an express agency, where,
Hojilla, the agent, binds himself to represent another, the principal, who are herein respondents, with the
latter’s express consent or authority.19 In a contract of agency, the agent acts for and in behalf of the
principal on matters within the scope of the authority conferred upon him, such that, the acts of the agent
have the same legal effect as if they were personally done by the principal. Because there is an express
authority granted upon Hojilla to represent the respondents as evidenced by the SPA, Hojilla’s actions
bind the respondents.

As an agent, the representations and guarantees of Hojilla are considered representations and
guarantees of the principal. This is the principle of agency by promissory estoppel. The Supreme Court
refers to the evidence on record. It was Hojilla who administered and/or managed the subject property.

Assuming further that Hojilla exceeded his authority, the respondents are still solidarily liable because
they allowed Hojilla to act as though he had full powers by impliedly ratifying Hojilla’s actions—through
action by omission. This is the import of the principle of agency by estoppel or the doctrine of apparent
authority.

In an agency by estoppel or apparent authority, "[t]he principal is bound by the acts of his agent with the
apparent authority which he knowingly permits the agent to assume, or which he holds the agent out to
the public as possessing."

The respondents’ acquiescence of Hojilla’s acts was made when they failed to repudiate the latter’s acts.
They knowingly permitted Hojilla to represent them and petitioners were clearly misled into believing
Hojilla’s authority. Thus, the respondents are now estopped from repudiating Hojilla’s authority, and
Hojilla’s actions are binding upon the respondents.
#12
Dominion Insurance Corp. vs. Court of Appeals
G.R. No. 129919 | February 6, 2002 | 426 PHIL 620-631

DOCTRINE
The basis for agency is representation; There must be an actual intention by the principal to appoint and
on the part of the agent an intention to accept the appointment and act on it, otherwise there is generally
no agency.

PETITIONER: DOMINION INSURANCE CORPORATION

RESPONDENT:
1. COURT OF APPEALS
2. RODOLFO S. GUEVARRA
3. FERNANDO AUSTRIA

NATURE: PETITION for review on certiorari of a decision of the Court of Appeals.

FACTS:
1. Plaintiff Guevarra (respondent herein) instituted a Civil Case for sum of money against defendant
Dominion Insurance Corporation (petitioner herein).
a. Guevarra seeks to recover P156,473.90 which he claimed to have advanced in
his capacity as manager of defendant to satisfy certain claims filed by defendant’s clients.
2. Dominion, however, denied the liability and asserted a counterclaim for P249,672.53, representing
premiums that plaintiff allegedly failed to remit. Dominion also filed a third-party complaint against
Fernando Austria, who, at the time relevant to the case, was its Regional Manager for Central Luzon
area.
3. During pre-trial, only Guevarra and his counsel appeared. As such, Dominion was declared in default.
4. Later, the court a quo rendered judgment wherein Dominion should pay Guevarra P156,473.90 for the
claims.
5. Dominion appealed the decision to the Court of Appeals. It was denied. Hence, this appeal.

ISSUES
1. Whether respondent Guevarra acted within his authority as agent for petitioner—NO
2. Whether respondent Guevarra is entitled to reimbursement of amounts he paid out of his
personal money in settling the claims of several insured—NOT UNDER AGENCY BUT YES UNDER
OBLIGATIONS AND CONTRACTS

RULING
1. NO, respondent Guevarra did not act within his authority.

By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. The basis for agency is
representation. On the part of the principal, there must be an actual intention to appoint or an
intention naturally inferable from his words or actions; and on the part of the agent, there must be
an intention to accept the appointment and act on it, and in the absence of such intent, there is
generally no agency.

A perusal of the Special Power of Attorney would show that petitioner (represented by third-party
defendant Austria) and respondent Guevarra intended to enter into a principal-agent relationship. Despite
the word “special” in the title of the document, the contents reveal that what was constituted was actually
a general agency.

The agency comprises all the business of the principal, but, couched in general terms, it is limited only
to acts of administration. A general power permits the agent to do all acts for which the law does not
require a special power. Thus, the acts enumerated in or similar to those enumerated in the Special
Power of Attorney do not require a special power of attorney. (Refer to Article 1878, Civil Code for
instances when a special power of attorney is required.)

The payment of claims is not an act of administration. The settlement of claims is not included among
the acts enumerated in the Special Power of Attorney, neither is it of a character similar to the acts
enumerated therein. A special power of attorney is required before respondent Guevarra could settle the
insurance claims of the insured.

Respondent Guevarra’s authority to settle claims is embodied in the Memorandum of Management

Agreement which enumerates the scope of respondent Guevarra’s duties and responsibilities as agency
manager. It provides:
“1. You are hereby given authority to settle and dispose of all motor car claims in the amount of
P5,000.00 with prior approval of the Regional Office.
“2. Full authority is given you on TPPI claims settlement.

Respondent Guevarra’s authority is further limited by the written standard authority to pay, which states
that the payment shall come from respondent Guevarra’s revolving fund or collection. The instruction of
petitioner as the principal could not be any clearer. Respondent Guevarra was authorized to pay the
claim of the insured, but the payment shall come from the revolving fund or collection in his
possession.

2. Having deviated from the instructions of the principal, the expenses that respondent Guevarra incurred
in the settlement of the claims of the insured may not be reimbursed from petitioner Dominion. This
conclusion is in accord with Article 1918, Civil Code which provides:
“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’s instructions, unless the latter should wish
to avail himself of the benefits derived from the contract;

HOWEVER, while the law on agency prohibits respondent Guevarra from obtaining
reimbursement, his right to recover may still be justified under the general law on obligations and
contracts. This is in accordance with the second paragraph of Article 1236 of the Civil Code.

In this case, when the risk insured against occurred, petitioner’s liability as insurer arose. This obligation
was extinguished when respondent Guevarra paid the claims and obtained Release of Claim Loss and
Subrogation Receipts from the insured who were paid. Thus, to the extent that the obligation of the
petitioner has been extinguished, respondent Guevarra may demand for reimbursement from his
principal. To rule otherwise would result in unjust enrichment of petitioner.

Under the Release of Claim Loss and Subrogation Receipts, the extent to which petitioner was benefited
by the settlement of the insurance claims was P116,276.95. Meanwhile, the amount of the revolving
fund/collection that was then in the possession of respondent Guevarra. This has to be subtracted.

The outstanding balance and the production/remittance for the period corresponding to the claims was
P3,604.84. Deducting this from P116,276.95, we get P112,672.11. This is the amount that may be
reimbursed to respondent Guevarra.

IN VIEW WHEREOF, we DENY the petition.

NOTES
1. Article 1878. Special powers of attorney are necessary in the following cases:
(1) To make such payments as are not usually considered as acts of administration;
(15) Any other act of strict dominion.
2. Article 1236, second paragraph, Civil Code, provides: “Whoever pays for another may demand
from the debtor what he has paid, except that if he paid without the knowledge or against the will of the
debtor, he can recover only insofar as the payment has been beneficial to the debtor.”
3. The terms of the agreement herein read:
“That we, FIRST CONTINENTAL ASSURANCE COMPANY,INC., a corporation duly organized
and existing under and by virtue of the laws of the Republic of the Philippines, x x x represented
by the undersigned as Regional Manager, x x x do hereby appoint RSG Guevarra Insurance
Services represented by Mr. Rodolfo Guevarra x x x to be our Agency Manager in San Fdo.,for
our place and stead, to do and perform the following acts and things:
“1. To conduct, sign, manager (sic), carry on and transact Bonding and Insurance business as
usually pertain to a Agency Office, or FIRE, MARINE,MOTOR CAR, PERSONAL ACCIDENT,
and BONDING with the right, upon our prior written consent, to appoint agents and sub-agents.
To accept, underwrite and subscribed (sic) cover notes or Policies of Insurance and Bonds for
and on our behalf.

“2. To accept, underwrite and subscribed (sic) cover notes or Policies of Insurance and Bonds for
and on our behalf.

“3. To demand, sue, for (sic) collect, deposit, enforce payment, deliver and transfer for and
receive and give effectual receipts and discharge for all money to which the FIRST
CONTINENTAL ASSURANCE COMPANY, INC., may hereafter become due, owing payable or
transferable to said Corporation by reason of or in connection with the above-mentioned
appointment.

“4.To receive notices, summons, and legal processes for and in behalf of the FIRST
CONTINENTAL ASSURANCE COMPANY, INC., in connection with actions and all legal
proceedings against the said Corporation.”
#13
Patrimonio vs. Gutierrez
G.R. No. 187769 |June 4,2014 | 735 PHIL 146-166

DOCTRINE

We unequivocably declared in Lim Pin v. Liao Tian, et al., that the requirement under Article 1878 of the
Civil Code refers to the nature of the authorization and not to its form. Be that as it may, the authority
must be duly established by competent and convincing evidence other than the self serving assertion of
the party claiming that such authority was verbally given.

FACTS

The petitioner, a professional basketball player, and the respondent Napoleon Gutierrez , a well know
sports columnist, entered into a business venture under the name of Slam Dunk Corporation, a
production outfit that produced mini-concerts and shows related to basketball.

In the course of their business, the petitioner pre-signed several checks to answer for the expenses of
Slam Dunk. Although signed, these checks had no payee’s name, date or amount. The blank checks
were entrusted to Gutierrez with the specific instruction not to fill them out without previous notification to
and approval by the petitioner. According to the petitioner, the arrangement was made so that he could
verify the validity of the payment and make the proper arrangements to fund the account.

Without the petitioner’s knowledge and consent, Gutierrez went to Marasigan (the petitioner’s former
teammate), to secure a loan in the amount of ₱200,000.00 on the excuse that the petitioner needed the
money for the construction of his house. In addition to the payment of the principal, Gutierrez assured
Marasigan that he would be paid an interest of 5% per month from March to May 1994.

After much contemplation and taking into account his relationship with the petitioner and Gutierrez,
Marasigan acceded to Gutierrez’ request and gave him ₱200,000.00. Gutierrez simultaneously delivered
to Marasigan one of the blank checks the petitioner pre-signed. Marasigan deposited the check but it was
dishonored for the reason "ACCOUNT CLOSED."

ISSUE

Whether the contract of loan in the amount of ₱200,000.00 granted by respondent Marasigan to
petitioner, through respondent Gutierrez, may be nullified for being void - YES

HELD

The petitioner seeks to nullify the contract of loan on the ground that he never authorized the borrowing of
money. He points to Article 1878, paragraph 7 of the Civil Code, which explicitly requires a written
authority when the loan is contracted through an agent. The petitioner contends that absent such
authority in writing, he should not be held liable for the face value of the check because he was not a
party or privy to the agreement.

Article 1868 of the Civil Code defines a contract of agency as a contract whereby a person "binds himself
to render some service or to do something in representation or on behalf of another, with the consent or
authority of the latter." 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.

As a general rule, a contract of agency may be oral. However, it must be written when the law requires a
specific form, for example, in a sale of a piece of land or any interest therein through an agent.

Article 1878 paragraph 7 of the Civil Code expressly requires a special power of authority before an agent
can loan or borrow money in behalf of the principal, to wit:

Art. 1878. Special powers of attorney are necessary in the following cases:

xxxx

(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the
things which are under administration. (emphasis supplied)

Article 1878 does not state that the authority be in writing. As long as the mandate is express, such
authority may be either oral or written. We unequivocably declared in Lim Pin v. Liao Tian, et al., that the
requirement under Article 1878 of the Civil Code refers to the nature of the authorization and not to its
form. Be that as it may, the authority must be duly established by competent and convincing evidence
other than the self serving assertion of the party claiming that such authority was verbally given.

A review of the records reveals that Gutierrez did not have any authority to borrow money in behalf of the
petitioner. Records do not show that the petitioner executed any special power of attorney (SPA) in favor
of Gutierrez. In fact, the petitioner’s testimony confirmed that he never authorized Gutierrez (or anyone for
that matter), whether verbally or in writing, to borrow money in his behalf, nor was he aware of any such
transaction.

In the absence of any authorization, Gutierrez could not enter into a contract of loan in behalf of the
petitioner.

In the absence of any showing of any agency relations or special authority to act for and in behalf of the
petitioner, the loan agreement Gutierrez entered into with Marasigan is null and void. Thus, the petitioner
is not bound by the parties’ loan agreement.

Furthermore, that the petitioner entrusted the blank pre-signed checks to Gutierrez is not legally sufficient
because the authority to enter into a loan can never be presumed. The contract of agency and the special
fiduciary relationship inherent in this contract must exist as a matter of fact. The person alleging it has the
burden of proof to show, not only the fact of agency, but also its nature and extent.

The records show that Marasigan merely relied on the words of Gutierrez without securing a copy of the
SPA in favor of the latter and without verifying from the petitioner whether he had authorized the
borrowing of money or release of the check. He was thus bound by the risk accompanying his trust on the
mere assurances of Gutierrez.
#14
Virata vs. Ng Wee
G.R. Nos. 220926, 221058, 221109, 221135 & 221218 | July 5, 2017 | 813 PHIL 252-355

DOCTRINE:
Of the established rules under the code, one cannot be more basic than the obligation of the agent to
carry out the purpose of the agency within the bounds of his authority. Though he may perform acts in a
manner more advantageous to the principal than that specified by him, in no case shall the agent carry
out the agency if its execution would manifestly result or damage to the principal.

FACTS:
Ng Wee was a valued client of Westmont Bank. Sometime in 1998, he was enticed by the bank manager
to make money placements with Westmont Investment Corporation (Wincorp). Offered to him were “ sans
recourse” transactions with the following mechanics: “xxx The agreement stipulates that Wincorp shall
extend a credit facility on “best effort” basis and that every drawdown by the accredited borrower shall be
evidenced by a promissory note executed in favor of Wincorp and/or the investor/s who has/have agreed
to extend the credit facility. Wincorp then scouts for investors willing to provide the funds needed by the
accredited borrower. An investor who provides the fund is issued a Confirmation Advice which indicates
the amount of his investment, the due date, the term, the yield, the maturity and the name of the
borrower. xxx”

Lured by representations that the “sans recourse” transactions are safe, stable, high-yielding, and involve
little to no risk, Ng Wee, placed investments thereon under accounts in his own name, or in those of his
trustees. In exchange, Wincorp issued Ng Wee and his trustees Confirmation Advices. The contents of a
Confirmation Advice are typically as follows: “xxx. This is to confirm that pursuant to your authority, we
have acted in your behalf and/or for your benefit, risk or account without recourse or liability, real or
contingent, to Westmont Investment Corporation in respect of the loan granted to the Borrower named
and under the terms specified hereunder. xxx For your convenience but without any obligation on our
part, we may act as your collecting and paying agent for this transaction. Kindly note that your receipt
hereof is an indication of your conformity to the foregoing terms and conditions of the transaction.”

Special Power of Attorneys (SPAs) are also prepared for the signature of the lender investor. The SPAs
uniformly provide: “xxx HEREBY GIVING AND GRANTING unto said Attorney-in-Fact [Wincorp] power
and authority to do and perform all and every act and thing whatsoever requisite or necessary to be done
in and about the premises, HEREBY RATIFYING AND CONFIRMING all that said Attorney-in-Fact shall
lawfully do or cause to be done by virtue of these presents”

Ng Wee’s initial investments were matched with Hottick Holdings Corporation (Hottick). Hottick was
extended a credit facility in consideration of the following securities it issued in favor of Wincorp: (1) a
Suretyship Agreement executed by petitioner Luis Juan Virata (Virata); (2) a Suretyship Agreement
executed by Halim Saad; and (3) a Third Party Real Estate Mortgage executed by National Steel
Corporation (NSC). Hottick fully availed of the loan facility extended by Wincorp, but it defaulted in paying
its outstanding obligations. Wincorp filed a collection suit against Hottick, Halim Saad, and NSC for the
repayment of the loan and related costs. Alarmed by the news of Hottick’s default, Ng Wee confronted
Wincorp. Wincorp assured him that the losses from the Hottick account will be absorbed by the company.
In view of these representations, Ng Wee continued making money placements, and even increased his
stakes in the new borrower account — Power Merge Corporation (Power Merge). Petitioner Virata is the
majority stockholder of the corporation. Barely a month later, Wincorp increased Power Merge’s
maximum credit limit from 1,300,000,000.00 to P2,500,000,000.00. After receiving the promissory notes
from Power Merge, Wincorp, in turn, issued Confirmation Advices to Ng Wee and his trustees. Unknown
to Ng Wee, however, was that additional contracts (Side Agreements) were likewise executed by the two
corporations absolving Power Merge of liability as regards the Promissory Notes it issued.

Despite repeated demands, Ng Wee was not able to collect Power Merge’s outstanding obligation under
the Confirmation Advices. This prompted Ng Wee to institute a Complaint for Sum of Money with
Damages with prayer for the issuance of a Writ of Preliminary Attachment before the Regional Trial Court,
Branch 39 of Manila (RTC).

Ng Wee claimed that he fell prey to the intricate scheme of fraud and deceit that was hatched by Wincorp
and Power Merge. As he later discovered, Power Merge’s default was inevitable from the very start since
it only had subscribed capital in the amount of P37,500,000.00, of which only P9,375,000.00 is actually
paid up. RTC and CA ruled in favor of Ng Wee, ordering Virata, Wincorp, among others to pay Ng Wee.

In the present petition, Wincorp claims that it merely performed its normal function as an investment
house by matching and marrying corporate borrowers with investors. Wincorp relies on the text of the
Confirmation Advices issued to Ng Wee to advance this point. Based on the language of the Confirmation
Advices, Ng Wee knew of and approved the transactions that Wincorp entered into with Power Merge as
his agent; that Ng Wee’s conformity in the series of Confirmation Advices issued in his favor, and his
execution of the corresponding SPAs thereafter, allegedly ratified Wincorp’s acts of agency in the
execution of the loan agreement; and that Ng Wee had been renewing and rolling over his initial
placement, despite knowledge of this setup.

ISSUE: Whether Wincorp can be held liable as an agent

RULING:
Yes. The argument that Wincorp is a mere agent that could not be held liable for Power Merge’s unpaid
loan is unavailing. Even if the Court were to accede to the argument and undercut the significance of
Wincorp’s participation from vendor of securities to purely attorney-in-fact, the investment house would
still not be immune. Agency, in Wincorp’s case, is not a veritable defense.

Through the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. There is no dearth of
statutory provisions in the New Civil Code that aim to preserve the fiduciary character of the relationship
between principal and agent. Of the established rules under the code, one cannot be more basic than the
obligation of the agent to carry out the purpose of the agency within the bounds of his authority. Though
he may perform acts in a manner more advantageous to the principal than that specified by him, in no
case shall the agent carry out the agency if its execution would manifestly result or damage to the
principal.

In this case, the SPAs executed by Ng Wee constituted Wincorp as agent relative to the borrowings of
Power Merge, allegedly without risk of liability on the part of Wincorp. However, the SPAs, as couched, do
not specifically include a provision empowering Wincorp to excuse Power Merge from repaying the
amounts it had drawn from its credit line via the Side Agreements. They merely authorize Wincorp “to
agree, deliver, sign, execute loan documents” relative to the borrowing of a corporate borrower.
Otherwise stated, Wincorp had no authority to absolve Power Merge from the latter’s indebtedness to its
lenders. Doing so therefore violated the express terms of the SPAs that limited Wincorp’s authority to
contracting the loan. In no way can the execution of the Side Agreements be considered as part and
parcel of Wincorp’s authority since it was not mentioned with specificity in the SPAs. As far as the
investors are concerned, the Side Agreements amounted to a gratuitous waiver of Power Merge’s
obligation, which authority is required under the law to be contained in an SPA for its accomplishment.

Finally, the benefit from the Side Agreements, if any, redounded instead to the agent itself, Wincorp,
which was able to hold Power Merge papers that are more valuable than the outstanding Hottick
obligations that it exchanged. In discharging its duties as an alleged agent, Wincorp then elected to put
primacy over its own interest than that of its principal, in clear contravention of the law. And when Wincorp
thereafter concealed from the investors the existence of the Side Agreements, the company became
liable for fraud even as an agent.

WHEREFORE, premises considered, the Court resolves: To DENY the Petition for Review on Certiorari
of Westmont Investment Corporation, docketed as G.R. No. 221058
#15
Yoshizaki vs. Joy Training Center of Aurora | Inc.
G.R. No. 174978 | July 31, 2013 | 715 PHIL 609-624

Doctrine: The special power of attorney mandated by law must be one that expressly mentions a sale or
that includes a sale as a necessary ingredient of the authorized act. We unequivocally declared in Cosmic
Lumber Corporation v. Court of Appeals states that a special power of attorney must express the powers
of the agent in clear and unmistakable language for the principal to confer the right upon an agent to sell
real estate. When there is any reasonable doubt that the language so used conveys such power, no such
construction shall be given to the document.

Facts:

1. Respondent Joy Training Center of Aurora, Inc. (Joy Training) is a non-stock, non-profit religious
educational institution. It was the registered owner of a parcel of land and the building thereon
(real properties) located in San Luis Extension, Purok No. 1, Barangay Buhangin, Baler, Aurora.
The parcel of land was designated as Lot No. 125-L and was covered by Transfer Certificate of
Title (TCT) No. T-25334.
2. On November 10, 1998, the spouses Richard and Linda Johnson sold the real properties, a
Wrangler jeep, and other personal properties in favor of the spouses Sally and Yoshio Yoshizaki.
On the same date, a Deed of Absolute Sale and a Deed of Sale of Motor Vehicle were executed
in favor of the spouses of Yoshizaki. The spouses Johnson were members of Joy Training's
board of trustees at the time of sale.
3. On December 7, 1998, TCT No. T-25334 was cancelled and TCT No. T-26052 7 was issued in
the name of the spouses Yoshizaki.
4. On December 8, 1998, Joy Training, represented by its Acting Chairperson Reuben V. Rubio,
filed an action for the Cancellation of Sales and Damages with prayer for the issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction against the spouses Yoshizaki
and the spouses Johnson before the Regional Trial Court of Baler, Aurora (RTC).
5. The RTC granted the motion on the same date. They then filed an amended complaint
alleging that the spouses Johnson sold its properties without the requisite authority from
the board of directors. It assailed the validity of a board resolution dated September 1, 1998 11
which purportedly granted the spouses Johnson the authority to sell its real properties. It averred
that only a minority of the board, composed of the spouses Johnson and Alexander Abadayan,
authorized the sale through the resolution. It highlighted that the Articles of Incorporation provides
that the board of trustees consists of seven members, namely: the spouses Johnson, Reuben,
Carmencita Isip, Dominador Isip, Miraflor Bolante, and Abelardo Aquino.
6. Yoshizaki filed a counterclaim, arguing that the Joy Training authorizes the spouses to sell the
parcel of land, evidenced by a certification authorizing spouses to act on behalf of Joy’s Training

RTC Ruling → In favor of Yoshizaki. The sale was valid because of the authorization. It held that there were only 5
members of the board of trustees this a majority of the board validly authorizes the sale. Same with the jeep because
they were registered in the Spouses name.

CA→ Resolution is void because it was not approved by the majority of the board of trustees. Under the
Corporation Code, th basis for the determination of the majority of the board of trustees is the fixed list in the article
of incorporation.
The certification has no probative value. It failed to indicate the names of the trustees present in the
meeting and no minutes were presented.

Issue:
1. Whether or not there was a contract of agency to sell the real properties between Joy Training
and the spouses Johnson.

Ruling:
 1. There is no contract of agency between Joy Training and the spouses Johnson to sell the parcel
of land with its improvements

Article 1868 of the Civil Code defines a contract of agency as a contract whereby a person "binds
himself to render some service or to do something in representation or on behalf of another, with the
consent or authority of the latter." It may be expressed, 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.
As a general rule, a contract of agency may be oral. However, it must be written when the law
requires a specific form. Specifcally, Article 1874 of the Civil Code provides that the contract of agency
must be written for the validity of the sale of a piece of land or any interest therein. Otherwise, the sale
shall be void. A related provision, Article 1878 of the Civil Code, states that special powers of attorney are
necessary to convey real rights over immovable properties
The special power of attorney mandated by law must be one that expressly mentions a sale or
that includes a sale as a necessary ingredient of the authorized act. We unequivocally declared in Cosmic
Lumber Corporation v. Court of Appeals states that a special power of attorney must express the powers
of the agent in clear and unmistakable language for the principal to confer the right upon an agent to sell
real estate. When there is any reasonable doubt that the language so used conveys such power, no such
construction shall be given to the document. The purpose of the law in requiring a special power of
attorney in the disposition of immovable property is to protect the interest of an unsuspecting
owner from being prejudiced by the unwarranted act of another and to caution the buyer to assure
himself of the specific authorization of the putative agent.
The documents presented (certification) do not convince the Court of the existence of the contract
of agency to sell the property. The resolution which purportedly grants the spouses Johnson a special
power of attorney is negated by the phrase "land and building owned by spouses Richard A. and Linda
J[.] Johnson." Even if the Court disregards such phrases, the resolution must be given scant
consideration. We adhere to the CA's position that the basis for determining the board of trustees'
composition is the trustees as fixed in the articles of incorporation and not the actual members of the
board. The second paragraph of Section 25 of the Corporation Code expressly provides that a majority of
the number of trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction
of corporate business. Moreover, the certification is a mere general power of attorney which comprises all
of Joy Training's business. Article 1877 of the Civil Code clearly states that "[a]n agency couched in
general terms comprises only 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 authorize a general and unlimited management."

WHEREFORE, premises considered, the assailed Decision dated February 14, 2006 and Resolution
dated October 3, 2006 of the Court of Appeals are hereby AFFIRMED and the petition is hereby DENIED
for lack of merit.